Frank Sullivan: Could you repeat that? I’m not sure I understand the question, Ghansham.
Ghansham Panjabi: Yes. So the margin improvement in CPG, I think, was up 310 basis points year-over-year. Just the main drivers as it relates to that.
Frank Sullivan: So I think the main drivers are MAP ’25 initiatives where we’re seeing improvement in conversion costs. I mentioned this, what we call D3 initiative at RPM. It’s data-driven decision-making. So we are much better today at driving mix on a going-forward basis, and that’s helping us. We are benefiting in the quarter from the commodity cycle disinflation that we’re starting to benefit in a few places, construction products is certainly one of those. And then it really is very focused efforts in strategic initiatives around repair and maintenance. So we’re seeing real strong results in our core roofing business. All of that is – we’re 95% reroofing and repair on existing roofs, not new construction. Pure Air has been very strong, and we expect that to continue.
We’ll see tens of millions of dollars of new volume from that initiative. Panelization is something we’ve been working on for the last three years or four years. We just added a significant piece of that with this Texas acquisition we announced in this past week. So it’s really focusing on the things that we can control that tend to be in the large repair and maintenance areas. The last comment I’ll make is that hospitals have been a significant market for us, and we had some booming business there during and coming out of COVID. Last year was not a good spending year for that sector. And so that weighed on our performance in fiscal ’23, and we’re seeing some pickup on a relative basis there and also some pickup on Nudura, which had a challenge ’23 because of what’s happening in the residential market.
But again, a very focused effort on expanding the understanding and the specifications for the Nudura ICF system. So again, it’s a lot of self-help and a lot of very deliberate spending into specific initiatives across RPM, and you’re seeing the results of that spending best impacting our Construction Products Group as we sit here today.
Ghansham Panjabi: Yes. Perfect. Thank you for that, Frank. And then just in terms of the balance sheet, what do you expect the balance sheet to sort of end up at the end of fiscal year ’24 on a net debt to EBITDA basis? And just related to that, how are you thinking about capital allocation in terms of – in context of where interest rates are and all the macroeconomic uncertainty? And I guess I’m referring specifically to your appetite for incremental acquisitions.
Frank Sullivan: Sure. Great question. And – so let me step back, big picture, and kind of just address simply, what are we trying to do with this MAP program and it’s really two things. We’re trying to significantly improve our cash conversion cycle and it’s working. And we’re trying to be more data-driven in our decision-making with a real focus on investing in specific organic growth initiatives, and you’re seeing that work, particularly in our Construction Products Group. And so what that looks like is a record first – record fourth quarter cash from operations, followed by record first quarter cash from operations, notwithstanding a handful of acquisitions and maybe $25 million or so of what did we acquire Rusty last year in share repurchases?
Rusty Gordon: I mean, last year, we did $50 million.
Frank Sullivan: $50 million in share repurchases. Year-over-year, we’ve reduced debt by $332 million. And so that focus on cash conversion is really working. We expect that those improvements to continue. And so that’s big picture of what we’re trying to do. The volatility that we’ve all experienced over the last few years is continuing. And so, as we work with our Board, I think we’ll have a better answer in the coming quarters, Ghansham, about how we think about capital allocation. But as we sit here today, the M&A market is relatively slow. We will continue to execute on good strategic small- to medium-sized deals. But the days of huge multiples, in my opinion, are over, if not forever, at least temporarily. We went through a period of time where incremental cost of capital was almost zero.
