Todd Fister: Thanks, Keith. I’ll take that one today. So yes, I mean, if you look at what we’ve done over time in our insulation business, last few years we’ve really been focused on how do we build the right network for that business that’s lean, that’s more flexible, that’s in the right locations to really serve our customers effectively. We’ve made a lot of investments to unlock as you indicated, both productivity and throughput and those existing assets. And those are really cost and capital efficient projects that we’ve done to date. We’re also always looking at the supply demand balance in the industry and evaluating opportunities to add capacity and drive productivity at the same time, again, to better serve our customers in the market.
So right now, I mean, we are evaluating capital and cost efficient options that we’ve got to really support the market strength that we would expect to see in the coming years in North America housing. There’s some more to come here in in coming quarters as we finalize our thinking.
Operator: The next question comes from Garik Shmois of Loop Capital.
Garik Shmois: Oh, hi, thank you. Just wanted to ask about composites pricing and just get a little more clarity on how you’re thinking about it in the second quarter. I think you mentioned overall pricing to be down but similar to 1Q does that mean that pricing is effectively flat sequentially or is it down similar degree as 1Q was and maybe if you can speak to what you’re seeing on the spot market in particular.
Brian Chambers: Sure. Thanks Garik. Yes, overall, I’d say our composites team did very well. The business performed well in first quarter in some pretty tough economic conditions but the positives and the bright spots I think we’re starting to see is a couple of points. One is we are seeing some demand stabilization and that’s really broadly across all the regions we operate in so that’s good that we’ve seen that kind of Q4, Q1 stabilization from a demand front and then that’s we expect that to continue here into Q2. So I think that’s now leading to some pricing stability to your question in the spot market that we’ve seen. We started to see that firm up and again broadly speaking across all the regions so that’s helping to see kind of we might be at a trough here where we see the opportunity as demand conditions improve as we go through the back half of ‘24 into ’25, we get better volume growth, we can limit the amount of production curtailments that’s also impacting the profitability of the business, we can start to run more assets and produce more and then we see that as a positive on future pricing as we go forward on that piece.
So to your question on kind of how the pricing is rolling through the P&L now, you’re absolutely correct. So we’re seeing pricing declines on a year-over-year basis driven by both the contract work we’ve reset. So again, as a reminder, about two-thirds of the business is contract, about a third spot. So all the contracts that we’ve put in place now by the end of the year and in the first quarter, those have reset, and that was contributing to lower year-on-year. And then we did see a spot price step down as well on a year-over-year basis. So sequentially, we’re seeing stability on a year-over-year basis down. And you’re right, pricing was down Q1 over all, about 4%. And so we’re expecting that that kind of trend continues here very similar in terms of Q2.
So again, spot price stability, that’s good. We’re still going to see the year-over-year, but it gives us some green shoots of some potential opportunities as we move in the back half of the year and into ’24 to see that demand environment start to improve and potentially that spot pricing environment improved with better economic conditions.
Operator: Our next question comes from Rafe Jadrosich of Bank of America. Please go ahead.
Rafe Jadrosich: Hi, good morning. Thanks for taking my question. So, Home Depot announced the potential acquisition of SRS. Both are large customers for you. I just wanted to ask, how do you guys think about the potential consolidation of those two customers and then broadly longer term if consolidation continues on the distribution channel? What does that mean for you? How does that impact Owen Corning? How could that potentially impact Masonite?
Brian Chambers: Yes, thanks for the question there. Yes, certainly a big move by Home Depot to solidify their position in servicing the pro-contractor. But in terms of your question on consolidation, within the building material distribution space, consolidation is not a new theme. This is something we’ve seen for the past several years. A lot of consolidation, big consolidation on the one step side. If you look at the number of distributors on the one step distribution side a decade ago today, very consolidated, very concentrated. We’ve talked about that a lot. We’ve seen that in lumber dealers on the two step side. So the consolidation is not new in the space. And so part of our distribution strategy has been that we’re one of the few manufacturers that actually play in all four of the big channels of distribution.
So as you said, both Home Depot and SRS are big customers and great customers. We’ve got a long history with both and a great partnership. So we don’t see this acquisition or this consolidation impacting our strategy in the business, which is we’re going to continue to keep a broad distribution strategy with servicing distributors across the channels. We think that gives our contractors the broadest opportunity to buy our products and get service through our products. And our focus and what’s really been driving our roofing performance has been our contractor engagement model, where our commercial efforts are primarily focused on how we can help contractors win and grow in the market with our products, our brand, our commercial resources. So that model has really been a key driver of our performance.
