Brian Chambers: Yes. Thanks, Matt, and I appreciate you calling out the strength of the margins that we are seeing. And I guess I’d answer it this way. I mean, when we look at what’s driving the margin performance in the business, I’d say we are very focused on what we have done and are doing to the business to drive incrementally higher margins. It is around our product mix and more laminates versus strips. It is around our components growth and the actions we are taking there to expand the product line that also generates very strong margins. We are getting great manufacturing performance. We are getting good price realization for the value of the products we are bringing to our customers and how they’re growing. So all those are things that we control in terms of our investments in commercial tools and digital tools and innovation and new products and helping our customers in the market.
So we think those are sustainable in terms of margin performance in the business in the space. I think we are benefiting this year with some deflation, particularly in asphalt. That is always kind of moves around in terms of inflation and deflationary environments, but we’ve got a great track record of managing the performance of the business through those dynamics. But that’s always going to be something that fluctuates margins as we go forward in terms of input cost materials primarily in asphalt and then overall volume in terms of the demand environment. So those are all the factors that kind of go into the margins. And certainly, we’re seeing a lot of those swing towards a very positive away here in the last couple of quarters in terms of not just great operational performance by our team but then the price/cost dynamics and some very strong volumes that are playing in.
But as we go forward, I think we continue to look at what is that right long-term performance that we should expect, accounting for some of the market dynamics around inflationary pressures or volumes. And I think we’ll be prepared to talk more about that as we move into next year, but we feel really good about how the business is positioned to finish this year strong, start next year strong and continue to deliver very high margins.
Operator: Thank you. Our next question today is from Keith Hughes from Truist. Keith, please go ahead. Your line is open.
Keith Hughes: Thank you. A question on residential insulation down, as you mentioned in the prepared segment. Can you talk about how much of a sell-through or was there an inventory adjustments on any of the channels in that product?
Todd Fister: Thanks, Keith. Good morning. Really, we are not seeing a lot of inventory adjustments in the channel right now. We’ve seen relatively normal inventory levels in the channel this year. So a lot of what we’re seeing is sell-through. And as we shared, we’re starting to see demand track a little closer to lagged housing starts as we work through a bit of the backlog in starts earlier this year. And so really it’s more of a sell-through story than it is an inventory adjustment story.
Operator: Thank you. Our next question is from Phil Ng from Jefferies. Phil, please go ahead. Your line is open.
Phil Ng: Hey, guys. My question is on Insulation. I just want to get a sense how much line of sight do you have? And how should we think about the volume cadence progressing in that business in the next few quarters with interest rates approaching 8%. Brian, you sounded pretty optimistic on the new construction piece. Certainly, the public builders are calling for growth in 2024, but multifamily looks a little softer. And then Todd, you highlighted how you’re upbeat on the commercial industrial side in the U.S. So kind of help us unpack all those components, how we should think about the volume cadence, call it, the next 6 to 12 months in your Insulation business?
Todd Fister: Sure. Thanks, Phil. I’d be happy to give a bit of context here. So let me start with what’s really happened this year is we’ve seen mortgage rates increase through the year. I think it had a bit of a surprising impact on the market, which is the resale — the availability of resale homes is so limited now that is actually pushing demand towards new residential construction. And I think the builders have done a great job in a 7% to 8% mortgage rate environment of finding ways to get homeowners into new homes. As we see mortgage rates continue to increase around this 8% range, again, it makes it even more difficult for existing homeowners to leave really low rate mortgages and move and have those existing homes on the market.
So as we look at — our single best number would be the starts and permitting activity that we saw last month, which incorporates a lot of this new news around interest rates and mortgage rates. Starts activity remained pretty solid at about 1.35 million starts. In permitting activity, as you’ve commented on, was a bit above that. We actually benefit as well from the shift to single-family. So when you look at take per unit for Insulation, it’s structurally higher on single-family properties than it is on multifamily properties. So this mix shift as well within the starts number towards single-family ultimately is a net positive for us. So we’ve guided to relatively stable demand in the fourth quarter. We’ll know more as we get into next year on starts through the next quarter.
But certainly, we’ve seen the builders and new construction be more resilient than I think a lot of folks expected coming into 2023.
Operator: Thank you. Our next question today is from Truman Patterson from Wolfe Research. Truman, please go ahead. Your line is open.
Truman Patterson: Hey, good morning, everyone. Thanks for taking my question. Could you talk about the success you’ve had so far in your — both your August roofing price increase as well as your fall insulation price increase? I’m just trying to understand what assumptions you made in regard to both of those in your fourth quarter guidance?
Brian Chambers: Thanks, Truman. Yes, in terms of the roofing price increase, and I’ll have Todd comment on insulation. But on the roofing side, we announced that early August and we’re seeing good realization on that, and I put that into the guide in terms of the expectation in Q4 to close out the year. So we’ve seen good demand in the market for the products. And I think part of this is also we’re seeing asphalt deflation, but asphalt costs have been running pretty stable. And normally, we’d expect to see a little bit of a decrease even in Q4. We are not seeing that. I think that’s tied a little bit to WTI oil prices moving up a little bit, and I think that’s creating some uncertainty as we go into next year in terms of oil cost, asphalt costs. So overall, we are seeing good realization of that August increase.
