Good evening. This is the conference operator. Welcome, and thank you for joining the Saint-Gobain conference call. After the presentation, there will be an opportunity to ask questions by pressing star one at any time. Today's call will be hosted by Mr. Bazin, Chief Executive Officer of Saint-Gobain, Mr. Sreedhar, Chief Financial Officer of Saint-Gobain, and Mr. Rayfield, Chief Executive Officer of Saint-Gobain North A merica. At this time, I would like to turn the conference over to Mr. Bazin. Please go ahead, sir.
Chief Executive Officer Thank you very much. Hello, welcome, everyone. Sorry for the short notice. Welcome to our analyst and investor call on the acquisition of Building Products of Canada. I guess you have received the slides, otherwise they are posted on our website. I'm happy to be with Srdhar, our Chief Financial Officer, and Mark Rayfield, our Chief Executive Officerr for North America. I'm very pleased to announce the acquisition of Building Products of Canada, and I look forward to soon welcoming into our group the Building Products of Canada teams, who over the years have built a very attractive, highly respected, and renowned position in Canada. It's a decisive step for Saint-Gobain to further reinforce our position in North America, which has been, as you know, a priority for growth and capital allocation in the last four years. I move to slide two. The strategic rationale for the acquisition is very compelling.
Of course, it's fully aligned with our worldwide leadership in light and sustainable construction. In terms of geography, Building Products of Canada will allow us to further increase our presence in North America, a key market for us in terms of both growth and profitability. This move is fully aligned with the rebalancing of our geographic footprint, which is part of our Grow and Impact strategic plan we made last year. Remember, already 30% of our pro forma OP, operating profit, in North America. Specifically, we will expand our position in roofing in Canada, which is a highly attractive market, and there are country-based local organizations. This is a very logical step to enrich our offer in the country after the acquisition of Kaycan in siding last year, and all this will benefit Saint-Gobain customers in Canada.
Finally, it is truly a growth-driven acquisition, and I'm very confident it will create high value for Saint-Gobain shareholders. I turn to slide 3. It's one with our worldwide leadership in light and sustainable construction, bringing both sustainability and performance to our customers. Together, Saint-Gobain and Building Products of Canada will be a strong competitor in roofing, both in the U.S. and in Canada. In terms of overall solutions, Building Products of Canada will enrich our offer for exterior solutions, roofing of course, but also with complementary solutions, notably wood fiber insulation panels. On slide number 4, this acquisition builds on our very strong foundation of success in North America, which has been driven by our highly skilled and engaged local teams under the leadership of Mark.
As you know, CertainTeed is the only North American manufacturer that offers such a wide breadth of solutions for both residential and commercial markets, and covering both interior and exterior solutions. The strength of the offer and of the teams are demonstrated by strong results, both in top line, 16% average annual growth rate over the last four years, and margin enhancement, 20% EBITDA margin. This was, of course, enhanced with, third, the successful integration of Continental Building Products, where we created value in year two, and the most recent integrations of Kaycan and GCP, enriching our portfolio of solutions for light and sustainable construction. Another important point is that CertainTeed is the preferred brand for exterior solutions in North America for contractors and homeowners, and these are the homeowners, the decision makers in exterior solutions.
As we add to this portfolio, we will build deeper connectivity with this audience. Finally, after Transform and Grow, we have created a strong local organization in North America, in the U.S. and in Canada, which capitalizes on our strengths across interior solutions and exterior solutions to drive a clear market of performance. I move now specifically to slide 5 and Canada. Canada is a key growth market for Saint-Gobain. It's a fast-growing market with significant structural housing needs. The Canada Mortgage and Housing Corporation estimate that 5.8 million new homes need to be built by 2030, which would imply more than doubling of the current rates of new construction. One of the strong drivers that support the Canadian new build market is its dynamic demography. Canada has a strong population growth driven by immigration....
with more than 400,000 people immigrating to Canada each year, on a total population of 38 million inhabitants. I think just the last 2 years, 2021 and 2022, that was the highest level of new immigrants since 1913 in absolute terms. The Canadian government aims to further increase immigration to 465,000 in 2023, 485,000 in 2024, and 500,000 in 2025. Altogether, the Canadian population is projected to grow by more than 10% by 2030, and the annual population growth is 3 times higher than the OECD average. That's on the new build.
On renovation, we can say that the renovation market is supported by the aging housing stock, with 30, 75% of Canada single-family housing that are more than 20 years old, and will need increased repair and remodeling. For all these reasons, Canada is a key growth market for our solutions on light and sustainable construction. In Canada, on slide number 6, you know that we already are a leader in light and sustainable solutions. We have achieved this by being customer-centric, local in Canada, of course, and delivering innovative products, solutions, and services. The solutions we offer allow for our customers to build faster, in a more sustainable manner, and that has driven deep partnerships across all the leading channel partners. The quality of our teams and depth of our products has allowed the Canadian organization to produce exceptional results.
CAD 1.4 billion, benefiting from the Kaycan acquisition mid-2022, 25% annual sales growth since 2018, and 18% EBITDA margin in 2022. While we have, you can see that on the right side of the slide. While we have a leading position in interior solutions, that was the historical strength of Saint-Gobain, and more recently in the siding segment with the acquisition of Kaycan last year, we have lacked a complete exterior solution until now, with a limited presence in roofing. We were exporting roofing products from the U.S. for about CAD 80 million. Moving to slide 7, presentation on Building Products of Canada, which is a perfect, ideal fit for Saint-Gobain in Canada. They are a leading roofing player in Canada, being just one of only two roofing manufacturers established domestically with manufacturing facilities in Canada.
Roofing, that makes 80% of their business. For the remaining 20%, they are pioneer in introducing sustainable wood fiber insulation in the Canadian market, which is a growing market, and also very complementary to Saint-Gobain solutions in the market. They have a strong connection with contractors, home center retailers, and specialty distribution. Their clients cover all the country, we'll come back to that later, and they have demonstrated a strong track record of profitable growth, with an EBITDA margin at 25% in 2022. I can tell you, I have a very high respect for what the Building Products of Canada teams have developed over the years, under the leadership of Yves Gosselin, with whom I have spoken several times over the last days. I'm extremely pleased and excited to welcome them in the Saint-Gobain family in the near future.
Before I turn to Mark, I would like just to wrap up with, on slide 8, this chart, which illustrates very clearly the logic of our profitable growth strategy. We are very methodical. In Canada, we have now a comprehensive offer, expanding from our historical strong position in interior solutions. On the left side of the slide, first, with the successful acquisition of Kaycan, GCP, and now Building Products of Canada. In just 18 months, we have doubled in size, and we now have more than 2,500 employees and 24 manufacturing facilities dedicated to bringing a complete solution for light and sustainable construction for our Canadian customers, with a well-balanced portfolio of interior and exterior solutions. We have already executed this kind of strategy successfully in the U.S., where actually the situation was the opposite.
We historically had a strong position, stronger position in exterior solutions, we complemented it with the acquisition of Building Products in Gypsum on the interior side. Fundamentally, this is the logic that we follow in each country, thanks to our country-based organization, to see how we can best complete our offering in each country to respond to customer needs. I leave now the floor to you, Mark. Mark is our Chief Executive Officer for North America, who has done a terrific job to lead our North American success here, will drive you through more insights in the next minutes. Mark?
Thank you very much, Benoit, and I'm very happy to join this call from Montreal. I'm sitting in our gypsum plant, which we're working on a big capital project now to be the first carbon-neutral plant for gypsum in North America, following the pathway that was done in Norway by Saint-Gobain. As Benoit said, this acquisition is a perfect fit for Saint-Gobain in Canada. Building Products of Canada manufacturing locations are well positioned to serve all the major markets in Canada, from the west out of Edmonton and to the east out of Montreal. I was lucky enough to visit them personally with their manufacturing experts, and I can say they are well-maintained and use much of the same equipment and raw material as our 17 U.S. plants. I was very happy to meet the employees and the management at each plant.
BP also has a more diversified offering as a leader in wood fiber industry, serving a growing need for sustainable and lightweight insulation solutions that will partner excellent with our interior solutions. We now move to slide 10. They say a picture is worth 1,000 words. As you can see here, with these solutions, we can truly help our customers build and remodel in a light and sustainable manner, providing comfort, aesthetics, and lower ongoing costs due to having complete solutions. In addition to the roofing products to Canada, that fills an important void in the market, this leading portfolio allows us to move even further into value-added systems for our customers. You can see from this picture, we're covering every part of the home from a residential construction perspective. Moving to slide 11.
As Benoit mentioned, this acquisition will reinforce our strong track record of growth in North America, driven by our exceptional teams. As you know, we are a significant and successful player in the U.S. roofing space. Specific to that business in roofing, since 2018, we have sustained double-digit growth while maintaining a leading position in driving industry-leading margins. This growth is resilient due to the high % of renovation and remodeling in the market, which continues to be the case even after COVID, as roofing is a must-have rather than a nice-to-have. Our relationships, that Benoit mentioned, with contractors and homeowners, who are the decision-makers for exterior products, enhances this growth trajectory, both for roofing and siding, where we're able to give an aesthetic appearance, matching our siding colors with our roofing aesthetics.
These trends are mirrored in Canada, which is why this addition to our Canadian portfolio is so exciting. We have also demonstrated in previous acquisitions that leverage that comes with our focus on operational excellence, customer centricity, and innovation brings great value to the company and our customers. On slide 12. Shingles are the material of choice in North America for residential roofing due to the industry-leading installed costs, their aesthetic properties that we've talked about, and the resilience in all types of weather. While this may not always be obvious, they also have one of the lowest carbon footprints of all the available options of light and sustainable roofing. We are extremely confident that we'll be able to leverage our recent acquisition of Asphaltica and the planned opening of our glass mat facility in North Carolina to even further reduce the impact, thanks to lighter and stronger shingles.
Moving to slide 13. This acquisition will allow us to further expand our successful commercial models throughout North America. We have had a comprehensive architectural and interior sales organization in Canada for years. This organization has provided our customers with innovative and sustainable science-based solutions over this time. It was so successful, we recently replicated this organization in our US markets. In the US, we've had the same success with our exterior product sales organization, providing our residential customers with a single point of contact for the solution. Leveraging one single commercial team for residential exterior solutions in the US, we have achieved many benefits. Benefits in the back office through scale and greater ease to do business with, much improved sales coverage and customer territory management, leading to a better customer experience and more contact points, and an enhanced competitive positioning, thanks to cross-selling opportunities across siding and roofing.
As a result of this organization, over the past five years, we have been able to improve our competitive position in siding and grow our exterior products group sales by a compounded annual growth rate of 11%. We'll now be able to expand that experience into Canada with Kaycan and Building Products of Canada. I have every confidence that we'll achieve similar results in the Canadian market. Slide 14. When you put it all together, we have a very compelling full-range offer for our customers in Canada, and the opportunity to build upon our reputation as a trusted player who's recognized for the quality of their products and service. We will use this opportunity to enhance innovation through our product offering, led to our solar shingle technologies, our best-in-class GCP underlayments, and our building-integrated solar shingles.
Product performance, through our collaboration with Agfa, our next-generation binders and glass fibers, we can bring significant improvements to shingle weight reduction and durability. Its sustainability, where we'll leverage our commitment to a circular economy and the know-how with the partnership with Asphaltica to recycle building product shingles. We'll leverage Saint-Gobain's expertise in plant decarbonization, such as the Mont-Royal plant that I'm sitting in today. As a conclusion, before I hand it over to Sreedhar, this is why I am so personally confident, together with the fantastic Building Products of Canada teams, which I've had the pleasure to work with in the past weeks in this process, we'll deliver the strong synergies that Sreedhar will describe to you in a minute. By delivering to our customers a best-in-class offer in both interior and exterior solutions, supported by the best teams on both sides.
I also know that this will create a lot of opportunities for both Building Products and CertainTeed teams with such a great platform of offer and knowledge. The teams I have met while touring the plants are impressive. They are well aligned with our values, our culture, our innovative spirit, and our growth ambition that my teams have demonstrated tirelessly in Saint-Gobain in North America. As you can tell, my excitement is very real. I'd like to now hand it over to Sreedhar.
Thank you, Mark. Slide number 15. As Benoit and Mark said, with the Building Products of Canada acquisition, we are continuing on a very successful growth and profitability trajectory in North American markets, particularly in line with the three significant acquisitions made in the recent years, where we have a proven track record of integration and exceeding the synergies. With Continental Building Products, as you remember, we created value in the year 2, 1 year ahead of the plan, with a very successful integration and synergies exceeding the initial plan. With Tytan, the synergies are ahead of plan, with notably very strong purchasing savings on PVC raw materials. Finally, with GCP, the synergies are also ahead of plan.
In North America, in particular, we have a strong supply chain and manufacturing efficiencies with an increase of more than 20% in the waterproofing membrane capacity by using Saint-Gobain's world-class manufacturing methodology. All of this is driven by a highly experienced local team under the leadership of Mark, who is committed to delivering value creation even from this acquisition. Slide number 16. The acquisitions of Building Products of Canada is value creative, supported by the synergy of CAD 50 million, with the cost synergy equivalent to CAD 40 million and an additional CAD 10 million of EBITDA impact through opportunities to increase sales throughout our organization. These amounts are expected to be secured in year 3.
Cost synergies, which represent 80% of the total synergies, are expected to be captured through purchasing savings, through economics of scale in alignment of key inputs and indirect spend. It's important to keep in mind that our roofing business in the U.S. is eight times bigger than the Building Products of Canada. Maximizing efficiencies, leveraging Saint-Gobain's world-class manufacturing program, we clearly see the benefits that we could get in terms of yield, line speed, material management, et cetera, and the logistic optimization. CertainTeed's U.S. roofing plants are 10% more efficient, and so we clearly see a scope to make even the efficiency improvement savings here. G&A reduction through scale effects, leveraging our Canadian organization.
In addition, we expect synergies with an EBITDA on impact on EBITDA of around CAD 10 million, only taking into account low-hanging fruits from enriching building products offered with Saint-Gobain products, such as GCP's Grace Ice & Water Shield underlayment or CertainTeed's premium shingles, and leveraging across selling opportunities with Tytan Siding products. In short, these synergies are clearly identified, and we are very confident to secure them quickly. Let's move to the slide number 17, where you see the details of the transaction. Our offer price implies an enterprise value of CAD 1.335 billion, representing 11.9 times the 2022 EBITDA multiple. The post synergies multiple will be 8.2 times. The transaction value will create...
This transaction will create the value in year three. The transaction will be fully financed in cash and will have a very limited impact on our leverage ratio. In terms of the transaction process, the share price purchase agreement has been signed, and the management team will stay with us to facilitate the integration. The closing of the transaction is subject to customary closing conditions. It is expected to close by year end 2023. I will now pass on the floor to Benoit to make the concluding remarks.
Thank you, Mark. Thank you, Sreedhar. This move is another logical step for Saint-Gobain in our profitable growth trajectory in North America with a strong value creation. We are establishing a leading position in roofing Canada and reinforcing our position in exterior solutions. This acquisition will also enhance Saint-Gobain position overall in the North American market as a leader in light and sustainable construction. I'm confident that this growth driven acquisition will certainly create high value for both our shareholders and our customers. I'm very fortunate to have a solid leadership team by my side, Mark and his team, whether working in the U.S., CEO in Canada, are highly committed to the flawless execution of integrating Building Products in Saint-Gobain, and value creation, as they have demonstrated in other transactions.
I can tell you the spirit also from the teams and the Chief Executive Officer i f Building Products of Canada is excellent. I'm very enthusiastic, very positive, very confident about this strong combination, eager to welcome all Building Products teams within Saint-Gobain before the end of the year. Thank you. We are now happy to take your questions, both Spreedhar, Mark, and myself.
Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question is from Paul Roger of BNP Paribas, please go ahead.
Yeah, good evening, everyone. Thanks for taking the questions. Obviously, it's just still digesting things, but I'll have three, please. Firstly, can you talk a bit about how you manage integration risk? I really ask that because obviously this deal comes very quickly after Kaycan. I'm just wondering if there's any risk that management spread quite thinly. Secondly, can you comment about whether the 25% EBITDA margin in 2022 is a good indication of the business's profitability over time? I don't know if it's possible, for example, to say what it was in 2019. Finally, you've talked a lot in this presentations about the benefits of completing the building envelope.
You've done that in North America, clearly there is still a gap in Europe where you don't have the roofing business. I wonder if it makes strategic sense also to add roofing in Europe as well?
Thank you. Thank you very much, Paul, for your questions. I will take the third question, and the second, and Mark will take the first, because Mark is on the forefront of the integration of course. You know, we have a strategy which is local by country, so it's very important for us to look at the market potential, the growth, the profitability potential by country. Clearly, in North America, when you think of the residential market, we are happy to have both exterior and interior, but that's specific to the U.S. and Canada, which are very close to each other. There is no intention to go to roofing products by themselves in Europe.
That being said, you know, we have a lot of applications in terms of membranes, in terms of waterproofing, so it's more on the accessories, on the complementary offer that we target things in Europe, but to go directly into ceramic tiles or other things in Europe, the answer is no. On your second question, Paul, the business did grow over the last years. They've been a very profitable business over the years, well established. What I can tell you, because I like to look at the future versus the past, is that 23 is off a good start.
They are ahead of plan, above last year in terms of EBITDA and profit margin. In fact, I will give you our own Canadian figures year to date, but 2023 is off a good start, and I'm very confident about the 2023 and beyond figures of Canada. It's in a business which is well consolidated in Canada. Remember that there are only 2 players of roofing, IKO, a family business, second generation is already there, and this business. Clearly, when you are there, locally manufactured, it's of course, highly attractive business. I think also we start to see some of the big US distributors coming into Canada, and some of them have made some acquisition recently.
I think the structure of the market in Canada in the coming years will be quite, you know, moving and overall, a good sustain, you know, profitability and business going forward, both in terms of top line, I mentioned the growth in the market, and profitability. But maybe, Sreedhar, you want to comment on our Canadian figures?
You know, in Canada, when you look at, in the last 5 months, we actually have a double-digit growth. Canada has been actually consistently doing well year-after-year.
We said we covered in the presentation, too, that their compounded annual growth in the last 4 years has been 25%. It's clearly, we are very strong. We have a very good team. I think their local organization by country has also enabled us to bring a lot of focus on providing solutions to the market and a steady profitability. Mark, maybe you take the first question, because, indeed, it's part of our equation, but I'm confident that you can handle this.
Yes, no, it's an excellent question. I mean, I think the first part of a successful integration is that the cultures and the teams match, and as it was in Continental and the other acquisitions, we have an extremely talented team with Building Products of Canada, extremely talented team in CertainTeed Canada, who work the same way with agility, with trust, with empowerment and collaboration. You have a cultural fit, which makes any integration easier. Yes, there's a significant work stream across purchasing, IT, and all the other areas. We have the muscle memory built into our region from the previous acquisitions, with very talented integration managers who are already assigned to this.
We manage those work streams, and we've made sure in the process building up to this, that we've reinforced those teams in HR, in purchasing, in IT, and other areas, in preparation for this growth. We are well-staffed. It will not dilute our efforts on Kaycan. The team could be communicating together, but we'll have dedicated teams on both of them. We are continuing to reinforce those teams going forward. I reiterate that where the culture is right and the people are as talented as they are on both sides, that is normally the largest hurdle we would face in integration, and we really have a great fit here.
You then tell us, Mark, and I know one interesting point that, of course, the U.S. roofing manufacturing experts are there. They actually, some of them have visited the plants more than 23, 24 years ago, so they knew the plant. They have seen how modernized they have been over the last 20 years, and of course, they will there, they are the strong support on the manufacturing side. All this is well prepared from Mark team.
It's important to keep in mind, we're talking of integrating only 3 industrial sites, as compared to 17 that we have in the US, and there is no carve-out or any such complexity in this integration.
Yeah, that's great. Can I just have a quick follow-up? You mentioned that it's one of two large players, obviously this has some overlap with CertainTeed. Is there any antitrust issues to be aware of, or is that all been understood?
We have, of course, analyzed that. IKO is the other manufacturing player in Canada. Building Products of Canada, they are between 25% and 30% market share. With all the data analysis that we have done with internal reviewers, we feel confident. Of course, we have to file with the antitrust authority, but we feel confident that the structure of the market will not fundamentally change. We have all the big U.S. players servicing Canada, whether it's GAF, whether it's Owens Corning, whether it's Malarkey of the world, and of course, CertainTeed in the past, which will not fundamentally change the structure of the market. On top of that, CertainTeed will bring innovation, broader portfolio, so a lot of benefits for the customers in Canada that are also asking innovation, sustainability, recycling services, et cetera.
That's great. Thank you very much.
The next question is from Yves Romherd of Societe Generale. Please go ahead.
Good evening. Thank you for taking my questions. I'll have 2, if I may. The first one, I just wanted to come back on the synergies. You've clearly identified the CAD 50 million synergies here, but you're also mentioning one that you're exporting, I think, correct me if I'm wrong, but I've heard CAD 80 million or US dollar coming from the US into Canada. I think, Sreedhar, you said that there's a 10% efficiency gap, and you've also clearly stated that CertainTeed's scale in procurement is humongous. I think, if I remember correctly, Kaycan also has its own distribution channel.
I'm just trying to think and reflect a bit on that EUR 50 million, and whether or not, you know, this could be quite an underpromise and could clearly overshoot that amount, and what would be sort of a rational number for us to think about? Could you actually hit a triple digit synergy in the next 3 years if the market doesn't come down significantly? That's question number 1. Question number 2, on the wood fiber, just trying to understand what you've been seeing in Canada in terms of market share gains. Is there anything similar to the quite strong momentum we've seen in Europe over in Canada? Thank you very much.
Thank you, Yves. First on the synergies, we feel good about the amount that we have put together. Keep in mind that it's not only on roofing Canada. We have $2.7 billion of roofing business in the U.S., and we would add a bit more than CAD 400 million. 50 million CAD, as a percentage of sales, sometimes some of you want to make the check and balance on that, is clearly within reach. On the purchasing side, yes, we have identified several categories, and it was a big part of the equation, like Shradda mentioned. One, also, which is significant, and to your point, on 18 million CAD, we were exporting from the U.S., mostly from the plant in Minnesota, Shakopee, and Norwood, out of Boston.
Of course, you will save on logistics. From some, very roughly 1.5% gap in percentage of sales between what we experience in the U.S. and what we extend in Canada on logistics. Logistics cost was a very significant part of savings for Continental Building Products. There are many aspects of the synergies, and we feel good about that. The more important point of this acquisition, it's truly a growth driven acquisition. We are there in Canada because we strongly believe in Canada, and the population growth in Canada, I think, has been underestimated by many. I give you some data points. If you take the G7 countries, the average of dwellings per head, per habitant, in Canada, we lack 1.8 million dwellings just to get on the average of the G7.
Canada is above average in terms of wealth versus the G7. Plus, you will add all the immigration, which is accelerating in Canada. This is why, fundamentally, yes, there will be cost synergies, logistics, procurement, manufacturing excellence, et cetera, et cetera. When we have a, you know, productivity gap, we will help the Building Products plants to de-bottleneck, increase their capacity, and capture growth. Fundamentally, keep in mind, because I, you know, I understand that you want us to overshoot, but we want to deliver. We have shown that we have been very committed to deliver on the synergy and the value creation in all the acquisitions we made in the last 4 years, whether it's Chryso, whether GCP, whether it's Kaycan, whether it's Continental.
We are committed to make a fantastic value creation on this one, plus capture the next detail of growth in Canada. On wood fiber, as you know, we have small but similar business in France on wood fiber insulation. It's a bit early to say and tell what is the market share gain that we could expect, but it's clearly a complementary product line and will benefit. Of course, mix the French and the French Canadian teams, at least they will find easy to communicate on the language. That's a growing area. If I take just France as an example, I would say the bio-source insulating material, they have captured 3%-4% of the market, 5% in, you know, in Central Europe.
I don't expect that to be a revolution in the Canadian market, but clearly, having such a large portion of wood construction in Canada, wood insulating fiber is an attractive complementary offer.
Thank you, Benoit. Any time, I just, sorry if I didn't catch this, but, is the management of, BP staying, as this was part of the success of the, of the deals that you've made, in Europe and the US recently?
Mark will jump on this, because Mark met with all of them. I did speak several times to Yves Grosclaude, the Chief Executive Officer of Chauvanot too, but Mark, you have a better insight of all the team.
Yes, thank you. Yes, the management is staying on for the integration and transition, and we hope for a long time there afterwards. Extremely talented commercial managers, production managers, obviously, Yves is a very gifted Chief Executive Officer for the business. We've been very impressed with everyone we've met, and very excited to welcome the teams, like we did with Continental.
Great. Thank you very much.
We are not in warring. There is no restructuring to be made. It's plenty of growth opportunities to capture on material products, on the manufacturing jobs, et cetera. It's a fantastic growth avenue and development for everyone.
Thank you to all of you.
Question?
The next question is from Arnaud Lehmann of Bank of America. Please go ahead.
Thank you very much. Good evening, gentlemen. Three questions, if I may. Hopefully, they're quite short. I'd like to come back on the attractiveness of Canada relative to the U.S., I guess especially Eastern Canada, where I think the majority of the plants are, of the new plants are located. This is seen as a region which is typically a bit less dynamic economically, and also, can you comment on the trend in housing activity? Obviously, new housing is down in the U.S. in the last six months. Could you, could we have some update on that for Canada as well?
Could give you us the EBIT margin of the business as well, so we could have an idea of the capital intensity, is it similar broadly to CertainTeed? Lastly, no disrespect to Mark, who's indeed doing a great job in North America, but Canada is now getting larger in the portfolio. Does that mean you're gonna need a French-speaking Chief Executive Officer soon?
Good, good question, Arnaud, because indeed, Mark is fantastic. The highest score of Mark is not exactly yet on his French language skills, you are right to help me. Mark has already a French-speaking Chief Executive Officer in Canada, that's indeed something that you need in Canada, both in English and French. Thank you. It's one of the few exceptions that falls into that 10%, otherwise, you know, 90% is overage. Yes, we have what we need in terms of sales, in terms of English and French speaking. I will turn to Mark on the Eastern Canada and also housing in the U.S.
What I can tell you, which is interesting, is that, you know, there is a very large amount of completion to be done in Canada. Keeping in mind that Canada, a bit like in the U.S., we had a lack of labor, some shortages of materials in the last 18 to 24 months. It's clearly, and we have that in other parts of the world, but versus prior times in history, we have a bit of a disconnect between completion activity, which is what matters for manufacturers versus starts or permits. The amount of starts, but not completed, permits but not started, is very high, and that keeps us busy.
1 or 2 statistics which are interesting, you know, existing home sales in Canada have increased over the last 3 months by 11% in April alone, and the related parties are starting to recover over the last 2 months. I think we are there in terms of. The increase of the completion has been less than half of the increase of permits and starts, if you take the last 3 years. Clearly we have this strong momentum if I look at the high level statistics, but maybe Mark Rayfield, you can be more specific about how in U.S. and Canada, because how in U.S., I think we have a kind of plateau with the ups and downs. What do you think?
Yes, I agree. I mean, I think, you know, fundamentally, the housing market in the U.S. and in Canada is very, very strong, and long term, even stronger. We see, as Benoit said, significant homes under construction, which have carried good demand through the trough of some of the interest rates increase. As those increases have settled in, you see low availability of homes, and now people going back into the market relatively aggressively, which is supporting price, but also supporting builders building more homes, certainly in the U.S. and in Canada. You still have, again, 80%-85% of your business in the roofing market being driven by renovation and remodeling.
When you have an older housing stock, as you do in the U.S., the large number of homes built in the 2000s and 2008 period, that are now coming up into that renovation repair, in the same situation in Canada. From a regional perspective, yes, you might say that Ontario is a more robust or market at times, but Eastern Canada is still a very robust market. We have excellent market share through BP of Canada in this area, and a significant area where renovation and remodeling repair is needed due to some severe weather, both in temperature and storms. Every hurricane that comes across the U.S. tends to hit that coast of Canada. Edmonton is a very growing region in Western Canada, again, with a very high degree of renovation and remodeling.
While a lot of the, maybe, press out there is talking about, you know, housing and interest rates, I can tell you from our experience in the US and in Canada, we have an extremely robust business in 2023, with good growth and good visibility for the coming quarters.
I know your question on capital intensity, it is the CapEx is below group average of, 3.5%-400%, so it's actually not capital intensive. The depreciation, if you see, it's around 2%, so it's very, the EBIT margin is very attractive.
% of sales.
Yeah.
Excellent. Thank you so much. Thank you.
The next question is from Elodie Rall of JP Morgan. Please go ahead.
Hi, good afternoon. Just as a few follow-ups. First of all, I don't think you gave the exact split of Building Products of Canada in terms of renovation and new build. I mean, you've talked about the market generally being 85% renovation, but is that the case for these companies specifically as well? Then with regard to growth rate, you seem very confident about 23 double-digit growth rate year to date. Would you be able to give us a split between volume and pricing? Historically, it'd be interesting to have a little bit more color about the historic growth in terms of top line and EBITDA and where we are versus historically and how much this has grown year to date. Thanks a lot.
Thank you, Elodie. Overall, renovation is roughly 70%, 7 0, for Building Products of Canada. That's what we have been told, and it's very consistent to what we experience in our own sales activity in Canada. On the 2023.
I mean, as Benoit has already said, that, you know, the current trading is clearly better than the last year. We remain confident that we're delivering a good number as compared to what you have seen in 2022. Volume price is again, it's one of the, you know, contributor to this growth, clearly. We are also doing a good job of price/cost spread.
I think the question also was.
For us also, it's like the, you know, we have a volume is slightly positive, and when we said the double-digit growth, you know, it's a large part is coming from price, and the volume is also positive.
We are there, you know, with a solid business. You know, when we compare, because I think it's important to compare, this business has been very resilient, you know, over the last years. Every year, like we see now, U.S. roofing, you could have a bit of more storms. You know, I think I mentioned end of Q1 to some of you that we have a strong Q2 in roofing because of the storm. Sometimes you have a bit of up and down because of storms in the roofing business. That's the same picture in Canada. Historically, that has been a very resilient business, both in terms of top line and margin. Mirror of what we know and we experience in our own roofing activity.
2023 will be a good year, a good start. We don't expect a big jump, you know, because we are on a plateau with a bit of ups and downs of completion, housing starts, et cetera. The good thing is that, you know, the mortgage rates in Canada are starting to stabilize. They are, you know, at an inflation of 4.4% in Canada, if I'm correct, so mortgage rates are there. Again, the economy is doing well, unemployment is low, so we don't expect 2023 to be a jump in sales and profit, but to stabilize at a high level of margin and sales that we have seen in recent years.
Thanks, historically, in term of growth rate, can we assume it's been similar to the numbers that you gave us on slide six for the Canadian market, or we have a bit more?
Yes, they had the good growth in sales, you know, over the last years. If I take the, you know, the last three, four years, of course, 2020 was a bit impacted because of Covid, but they had a good run in the last years. In the U.S., we told you we had a double-digit growth in products of Canada were slightly below that, but it's in the last years.
Great. Thanks very much.
The next question is from Tobias Woerner of Stifel. Please go ahead.
Yes, good afternoon, and congrats on building such a sizable business in Canada, and I'm sure it will be delivering good returns. A couple questions from me. Number one, just tell us who's actually the shareholder of this private company, and how did you come across this transaction? Was it an auction, or was it a one-to-one situation? That's my first question. Secondly, just following up on the split between volumes and pricing. I mean, Elodie just mentioned slide 6, 25% here includes, it seems to me, also the Kaycan and GCP acquisition, and then further down the presentation, you talk about a compound annual growth rate of 11%.
I'm just trying to get my head around what is price, what is volume, and what is organic, what is acquisition driven? Because when you look at, and that's my last question, if you look at the latest asphalt prices or shingle prices in the U.S., they're strong, they have been strong since 2018, up 38%, and they're actually up again in April. It'd also good to know whether that increase is being maintained. Thank you very much.
Thank you, Tobias. I will take the first, and sreedhar will answer to you on the second, knowing that, of course, the volume and price, even though it's not the same in scope, it will be related to our figures, not the Building Products of Canada figures, because they don't have such a detailed segmentation of volume and price. To your first question, this business has been for many, many years, decades, within the Colburn family, so it has been owned by a family. We happened to have contact with them almost 25 years ago, and some of our people visiting their plant. They decided a month ago to launch a process, to launch an auction, so started in early May.
Recently, after of course, the comfort of the quality of the business and the visit of the plants, we decided with Mark to engage deeper with them. I think very quickly we came to the conclusion that there was a very strong strategic fit in terms of alignment on light and sustainable construction. Second, in terms of alignment on the country-based organization in Canada, that could bring a lot of career development benefits to the customers. As Mark mentioned, in terms of values between the teams and the discussions I could have with Nicholas Flynn, that Mark had also with him and the team. Over the last days, because then, as you all know, when we want to move, we are able to move fast, to be decisive, straight to the point, and execute well.
After this, I would say first month of information back and forth from the, and discussions, we decided to accelerate, and then, there was a bilateral discussion, and we have been happy to conclude that over the last week, and to have this business join Saint-Gobain for the benefits of both teams and the benefit of Canada. That's a bit the history of this long-standing family business, and I think the selling saw a strategic and value fit with Saint-Gobain, and a very good personal contact for Mark, myself, and the stock managers.
Coming to Tobias, coming to the, again, you know, the growth, you are right on the slide number 6, this 25%, it includes the, in, you know, acquisition of Kaycan and GCP. It's a real growth, it's not just an organic growth. What we said is organic growth was around double digits, and it's a combination of both the price and volume. We have seen growth in both terms in both the Canada and the U.S. market.
... Okay. Just lastly, following up, I mean, and this is slightly outside the remit here, but is wood-based insulation something you'd look at in terms of potential acquisitions in Europe as well?
It's something we look at in terms of complementary products. Now, you know, we are on insulation, we are strong on stone wool, on glass wool, of course, it's our number 1 product line, and this is what we sell in the U.S. and Canada. In Canada, we have 2 glass wool insulating plants. Overall, you know, when you look at all the merits and benefits of glass wool, in terms of performance, acoustic and thermal, it is the best product. In terms of life cycle analysis and full impact on the environment, it is the best product. In Ottawa, where we have a glass wool plant, we recycle 88% raw material. We are very confident about the merits and the benefits of those 2 product lines, stone wool and glass wool.
That being said, in some countries, for some customers, when you build with a wood frame, when you are with wood specialized distributors, they like to have a complementary product line based on wood fiber insulation. We have it, with Isover in France, where we are doubling our capacity. Again, it's something that we look at both from a, you know, offering to our customers, organic growth, in terms of being totally convinced of the merits of the product line, it's not so obvious. We are happy with what we have. I know there are, you know, many players on the market, new capacity coming, we'll see how the market develops, it's not a must-have. For us, the must is to continue to grow the superb merits of glass wool insulation, both for new construction and renovation.
This is our main focus going forward, but sometimes it's nice to have the addition like we had in the past. How do you say?
Wool from sheep.
Wool from sheep. sometimes you need some complementary products, but we look at that, you know, wood fiber will grow, and we'll take this step in Canada. I said, the demand over there.
Mm-hmm. Then just, lastly, though, the question on the asphalt shingle pricing in the U.S., does that maintain the pace we've seen before?
Yes, it's good. Good. We did announce the price in mid-May. The market also after a few weeks, we saw the other players also followed us in a way. It is supportive. The market is supportive on price.
Yeah, we have a good momentum, a very good momentum. You know, remember we discussed that the activity that Mark and the team had in Q1, was to be very vigilant on our pricing actions momentum, so that we could reduce a bit of inventory in Q1. Maybe sell a bit less than others, in terms of sell out, but we have been able to service the customers and the strong demand as of late March.
Thank you so much.
Thank you, Tobias.
The next question is from Manfredi Bizzarri of Morgan Stanley. Please go ahead.
Hi, good afternoon, gentlemen. Just 1 question from me in terms of the market share and the solution addressed in the acquisition. What was that before the acquisition, and what will be the market share post acquisition in these solutions? Thanks.
Well, it's a bit more black and white than that, because on exterior products, we had siding with the acquisition of Kaycan. After that, just on the roofing segment of exterior, we had 80, 70-80 Canadian, CAD million. You would say we will multiply that by six times. And so we have the, you know, 5-ish type of market share on roofing in Canada being serviced from the U.S. For me, I don't even compare. When you are a local producer in Edmonton, in Montreal, you are Canadian for Canada, and you have all the French-speaking, English-speaking sales people on the ground selling. I don't even compare, but just we have a small presence of roofing sales in Canada. Your ability to serve the customers significantly goes up when you're present locally.
If I may, Benoit, as well, we participate in different segments of the Canadian market, so we are different regions in the market, and we also have different products that are very complementary as far as channels that we participate in, and really not significant overlap there. Really a benefit to the market overall.
Thank you, Mark.
Another question?
The next question is from Cedar Ekblom of Morgan Stanley. Please go ahead.
Thanks very much, gentlemen. Please excuse the background noise, I'm stuck on the tarmac on an airplane. One question, can you quantify what the blue sky scenario is for your revenue synergy number? I'm surprised that the number you've given is only EUR 10 million, about 2% revenues of the business. In the slides, it looks like there's a very complementary overlap with your existing offerings in the market. What do we think about from an upside perspective on the revenue line? Thank you.
Thank you, Cedar. I will pass the blue sky scenario to Mark, so that I can put that in his budget and bonus for next year. Mark, no pressure.
Well, thank you very much. I think you know that when you talk about the sales synergy scenario, I think the best example I could give, which is hard to, you know, document in this kind of an area, is what we've succeeded with in the U.S. in our exterior product sales organization, where we far outperformed the growth of the market in both businesses, but really in siding, on leveraging the new organization's combined talents to go from the number 2 position to now the number 1 position in siding through share gains and new customer introductions. That's something that was expected to happen and did happen, but it was very quick in the impact.
I think there's significant upside in providing a single face to our customers with full ability to sell solutions, where we'll see opportunities with large siding customers who then get into roofing, and large roofing customers that get into siding. I think those synergies play off between both Kaycan and Building Products of Canada perspective. We have a number of products in the U.S. that are not sold here in Canada, some solar products and some higher end laminate products, which then again, can go through that same channel. I know you're looking for a firm number. I would say only that there is a significant upside, but because it would be across all the different channels, hard to put into one business or the other.
we have a track record that has been very well proven in both businesses in the U.S.
Thank you, Mark. Cedar , keep in mind that we know you don't always put the top line synergies in the bank when you communicate, so for us, it's very important also to show that we will create value just based on the cost synergy. The rest will come on a large cherry on the cake. If I take another example in Canada that Mark Rayfield has been able to deliver, that when we had the Transform and Grow organization, you know, we did put together what was just interior at that point, plasterboard and insulation. Insulation is smaller, but in insulation, we doubled our market share in Canada over four years, benefiting from the strength and the pool of cross-selling in gypsum. Yes, there will be some good momentum on the top line.
The next question is from John Fraser-Andrews of HSBC. Please go ahead.
Thank you, good evening. 3 quick ones for me, please. Firstly, could you just say how the shingle roofing market share has evolved in Canada in recent years? Second one is the 1,200 points of sale that the products are sold through. How much crossover is there with the existing operations in Canada? Therefore, how much scope is there for selling additional products into those points of sale? Finally, the Canada residential market, Benoit, I sort of read from your comments, you're expecting it, I think, to be stable this year. Can you confirm that, or is this one of the markets where you're expecting a moderate decline in volumes? Thank you.
I will answer the third, and Mark will take the first and the second. You know, in Canada, like in the U.S., we think we are not far from a plateau in terms of dynamics. Based on the fact that yes, even though starts have dropped from their peak of 12 or 18 months ago, but completions are very strong. We are in this dynamic, a Sreedhar said, you know, year to date, we have volumes for the existing Saint-Gobain business in Canada, our volumes are slightly up. They are not massively up, but they are not in the mid-single digit down that we guided as the overall macro assumption for Saint-Gobain worldwide. This is where we are for Canada and what I expect for Canada in 2023.
Mark, do you want to take the number one and number two?
Sure. I'll take number two first. Maybe I'll get clarification on number one. I mean, the crossover of channels is really quite interesting. I would say in the crossover overall, when you take a look at their high percentage of the home retail center and retail market, we have very high crossover with our IPGs, our interior solutions teams and products, where we have the same customer base and a very strong connection to it. There will be lots of good commercial connections there, system selling opportunities and relationships across those channel. When you take a look at the roofing products and the siding products we sell into the Canadian market, there, the crossover is not so large, where we are into a lot of specialty distribution and one-step distribution, they are more into the retail and home center.
It's really an ideal situation where we have common large customers, we are all in there with our large presence in IPG. For the product line itself, we're opening up channels that they did not have access to, and they're opening up channels that we did not have access to. That, I hope that answers that question, but it's quite good. The question is I guess, share evolution in Canada for shingles themselves, I mean, are they losing share or gaining share?
Yeah, shingle roofing. Just, supplementary to your last answer, Mark. This crossover, are you saying that you're mostly with, specialist, roofing, distributors and, this has scope for the siding products to go into those? Is that, is that the big opportunity?
A bit of both. It, we, in our roofing business, we have good relationships with specialty and roofing distributors, which we have then continued to sell siding through, to expand the siding relationship with. They have very strong relationships where we have strong interior relationships with the large national retailers and home centers. On both sides, we have the ability to get leverage relationships across the whole channel and share product expertise and product expansion across them. It really is, as I said earlier, from BlueStack perspective, very synergistic. As far as share of the overall roofing market for asphalt shingles, there has not been, like in the US, a significant movement of it.
It is still the most common, the easiest to install, and the most economical to install product for residential roofing. Where there is a slight 1% or 2% increase over the past number of years for some metal roofing products, they're more normally used as accents or in very regional areas.
70% of the market, Mark, which is on the roofing market, which is on asphalt shingles, if I'm correct.
Yeah.
Canada, and that's been steady over the years.
Perfect. Thank you.
The next question is from Harvey Roth of Davy. Please go ahead.
Thanks. One quick question from me. I just noticed in the presentation that you mentioned the ability to offer CertainTeed solar shingles with the Building Products of Canada. Just wondering what sort of penetration does that product currently have, and what is the scope of the opportunity there? Thank you.
Mark, this is for you.
Well, I think it's, you know, we have some very innovative solar products and even a more innovative one that's being launched later this year. I think in Canada, we have huge expansion. We're seeing it as being one of the leading lead generators in the US and probably one of the leading growth categories. Still small, I'll give you that, but growth categories and percentages in the US, and I think those trends follow into Canada. I think this access to this distribution and the connection to Building Products of Canada for that product line is huge.
Great, thanks. Just one quick follow-up. What is the distribution, the sales distribution mix between the retailers and specialty distribution channels?
I could take a look. I think it was like 60% home retailers, and the rest with the good majority on the other half of the Lambiat and the buying groups, distributors, and then the buying groups, I would say.
51 home centers, 31 specialty, the other 18, you know, other channels.
Okay. Thank you very much.
The next question is from Jean-Christophe Lefèvre-Moulenq of CIC. Please go ahead.
Yes, good evening, bonsoir. Two quick question from me. The first, Benoit mentioned market share for 25%. Could you maybe elaborate more? Is that the 25% market share of Building Products of Canada? Secondly, your competitor, Holcim, mentioned just talking over the first quarter for roofing products. Did you experience this same issue? Many thanks.
Jean-Christopher, you would appreciate that all the competitive data, we really file them with the antitrust authorities, so I'm not going to be very specific. I gave you the range of 25%-30% market share, and just for Building Products of Canada.
Okay
... the rest of the discussion will be with the authority. Regarding what others said, no, we didn't see that.
Very good time.
... We have been very disciplined, actually, with our distributors in the U.S. didn't go on the, you know, price exception for winter buys or things like that. It actually helped us to rebuild our own inventory, which was low by the end of the year, and therefore be ready for the season, and the season started strong end of March, early April. We are in full speed in terms of manufacturing and delivering also to our customers.
Excellent. Many thanks.
Sorry, for any further questions, please press star and one on your telephone. Gentlemen, there are no more questions registered at this time.
Thank you very much for your time, and again, sorry for the short notice. As you have heard from Mark, Sreedhar, and myself, we are very confident about the value creation of this great addition to Saint-Gobain worldwide leadership in light and sustainable construction, and Saint-Gobain addition in Canada. It's been in line with our winning spirit and increasing the share of wallet of our different customers. It will allow us to outperform in the Canadian market, like the teams of Mark have done successfully in Canada, but also on a larger scale in the US recently. You have seen our track record on many, you know, acquisitions in the past, so I'm confident that it's exactly what we like to do, having the full offer, being strong in a local country organization. I'm very excited.
I will be in U.S. and Canada on the 12th and 13th of July, so I'm very excited to meet, like Mark did already, all the teams of Building Products of Canada, and welcome them soon into Saint-Gobain once we have filed and closed all the antitrust matters. Thank you very much, and wish you a very good evening, and thank you, Mark, out of Montreal. Thank you.
Thank you. Take care.