We came into the year thinking low to mid-single-digits. It’s trended towards low-single-digits. We don’t see anything changing around that. And then, the outlook for our business in Europe is under pressure. And it’s weaker sitting here today than it was three months ago. I would view those as the two primary factors. As usual, volume in the North American residential business is a swing factor. If we have seen some incremental strengthening in volumes and any rows, I think is as many people brought across the industry were expecting just a few months ago that would have put us in a position to deliver more down the middle of the fairway with respect to EBITDA. But and it would have allowed us to offset those pressures that we’re seeing in material in Europe.
But in the absence of that, that’s what informed our view that we should call more towards the lower end for the EBITDA guide, while maintaining net sales probably down in the middle of Fairway.
Russ Tiejema: Thank you. That was really good color. I mean, I just wanted to ask also some of your peers have offered an outlook for R&R market next year maybe flat to slightly down. I was curious on your read and any color there?
Russ Tiejema : Yeah. Well, I’ll tell you what, if you don’t mind Andrew, let me clear the topic a little bit more broadly, because I think it’s a lot of folks are interested in and how people are thinking about ‘24? And again, I’m going to start by saying that just a few months ago the optimism that we were seeing potentially for the second half of 2023 was viewed as a natural tailwind going into 2024. Now in the absence of some of that macro strengthening that we hope that we might see by this point in the year, sitting here right now, we don’t necessarily see a big snapback on the horizon for 2024. So we’re not yet finalized with our planning assumptions for next year. But let me give a quick overview of how we’re thinking about the markets.
We are monitoring all the typical stats that everyone in our sector would be, right? So US housing starts, broadly speaking on the new construction side, which is just under half of our business here in North America. The forecasts are broadly flattish next year. But we are potentially seeing a bit more of a shift back to single-family that could offer a little bit of a modest volume and mixed tail wind for the door business. On the RRR side, what you have about specifically, this is an area where we still see a fair bit of uncertainty and it’s going to be dependent in large part on consumer confidence and existing home sales. As we sit here today, we’re expecting that we could see a little bit of further modest decline in the RRR market. And then, I’d just close off by saying with respect to input costs which is another area that folks are interested in understanding as we look ahead, commodities are likely to remain modestly deflationary, but we’re still seeing cost increases elsewhere.
So it’s not as if we’re expecting a broadly deflationary market to any significance in 2024. So I share all of those details just to kind of clear the deck right now and how we’re thinking about 2024 with a provider that’s, we’re still working through a bunch of planning assumptions. We’ll come back on the Q4 call and give more specificity about how we see those end-markets trending and how that’s going to form our results next year. At the end of the day, though, in the face of what’s a choppy end-market, we’re going to keep focusing on what we can control, right? That’s price cost discipline to preserve margins. It’s driving product mix and commercializing new products to activate our strategy and it’s focusing on working capital optimization to continue driving the really strong free cash flow generation you’ve seen from business this year.
Howard Heckes: And just one thing to add, Andrew, this is Howard. What we are trying to peg when this is going to start is the interesting part but we are so confident in the long term market fundamentals of the business. Housing is underbuilt, housing stock is aging. There’s incremental home equity. So, it’s going to turn and we feel very confident about that.
Unidentified Analyst : Okay. Thank you, Howard. Those were really great thoughts. Appreciate it.
Howard Heckes: Thanks, Andrew.
Operator: Thank you. The next question is coming from Mike Dahl of RBC Capital Markets. Please go ahead.
Unidentified Analyst: Hi, this is Chris on for Mike. Just following up on to ’24. Good morning. Just following up on the ‘24 comments, what is your expectation on margins looking to next year? I know you guys said potentially little more little less deflation, but just on a net price cost basis, are you assuming kind of net price cost expansion in ‘24? What you’re seeing today in potentially more challenged end-market backdrop?
Russ Tiejema : Too early to call that one, Chris. As I commented just a moment ago, we’re still finalizing planning assumptions for next year. And certainly, ahead of having those planning assumptions fully aligned, we’re not going to be in a position to guide sitting here today in early November what margins look like next year. But I wanted to at least give the investment community a little bit of perspective on how we’re thinking about end-market demand next year. We’ll come back in late February when we release our full year results, and give you a lot more perspective on the drivers of margin for our business next year. Again, I’ll come back to though that the comments I made earlier about the teams’ very intent focused right now is on what you’ve heard us call it coiling the spring, right.
It’s maintaining very disciplined approach to price cost management, executing the playbook, to flex cost out of the business while continuing to invest in some of the growth initiatives that really unlock a lot of long-term value that Howard just indicated for our category. But we’ll come back with more specifics on the near-term margin outlook for ‘24 in next quarter.
