By coinnews 
00:00 Speaker A
Saint-Gobain shares rising today after the French supplier of construction materials posted better than expected revenue for the first quarter. It also reaffirmed guidance amid tariff concerns. For more, we’ve got Mark Rayfield, Saint-Gobain North America CEO. Mark, it’s good to see you again. Thanks a lot for being here.
00:15 Mark Rayfield
Nice to see you as well. Thanks for having me.
00:17 Speaker A
So, as we’ve talked about before, but just to reiterate here for our viewers, you guys are not very exposed to tariffs because the construction materials you’re selling in the US, roofing, drywall, etc., is pretty much made in the US, right? Talk me through, um, you know, kind of the the flow of your supply chain just briefly for for people who aren’t familiar.
00:35 Mark Rayfield
Sure. I love to. So we have about 60 plants in the US and 30 plants in Canada to service those local markets. We manufacture the roofing and gypsum very local to where they’re supplied. So we have plants in Florida for the Southeast and New England for the Northeast. They’re very heavy products. The raw materials are local, the customers are local. So we’re not very heavily impacted by tariffs at all. There’s some very minor raw materials that may cross the border here or there, but really we’re a local business for local customers.
01:11 Speaker B
So have a question for you, Julian and I were here discussing right before you came on just what’s next for the housing markets, right? We see this kind of conflicting data that’s an uncertain path. Who better to ask than someone that serves that directly with supplies? I mean, how do you make sense of the fact that we have more finished homes right now in the US than we did right around, you know, pandemic levels, right? The last crisis. Um, and pri- is it a pricing issue? Is it interest rates? Is it a supply, you know, inflation? Where do you come down on that? And what what is the the the factor that breaks the levy so that housing really, uh, rekindles its growth?
02:14 Mark Rayfield
Yeah, I’ll give you an opinion. I think the answers are very difficult to answer and I probably don’t have the correct one. I mean, the reality is there’s so many different indicators going forward. What we look at is the basic fundamentals of housing are strong, the family creation, the underbuilt concept of about 2 to 3 million in the US and almost 2 million in Canada of underbuilt homes. So there is a demand there, there’s a need there for housing in the short, mid, and long term. You have lots of different numbers coming out. So you have the very low new or existing home sales number that just came out this week. When you look at that, it’s okay, this is the end of the world. If you look at the other side of that, you could say, okay, inventories now are building up to a normal level of homes for sale. That’s bringing prices down below inflation, which is making affordability, which has been one of the bigger issues off the table to some degree. So I think when interest rates get to 6% or so, you have a releasing of a lot of activity and then you have a consumer confidence issue that kind of touches on everything in that perspective. Having said that, a lot of our business and a lot of business in the building materials business is renovation and remodeling. And you can take the same both sides of the coin view there that when you sell a house, you remodel it before you sell it, when you buy it, you remodel it so it fits what you want. By the same token, if you stay in it longer, decide not to sell because you were couldn’t find the right house, you again remodel there like we saw in COVID. So each indicator that we look at has kind of a counterbalance to it. And what gives us comfort is our great results in the first quarter and the fact that over two thirds of our business is renovation remodeling, and a good portion of that is non-discretionary. Your roof leaks, you replace your roof. Your siding’s damaged, you replace your siding.
05:00 Speaker A
And and so Mark, is that the case even if there were to be a recession? And I want to ask this question not just for the United States, but for Canada, which is a big market for you guys as well, and which is definitely at risk from tariffs. So when you start to see even if it’s just a mild recession, say, if you do see any economic pullback, we already know that consumer sentiment is lousy. Um, how do you expect all of that to affect spending on your products in this market and in our, uh, northern neighbor?
05:41 Mark Rayfield
Well, I think, you know, what we’re seeing in Canada today is actually kind of surprising. We’re seeing an uptick in housing right now there. So they’re actually having a good swing up off of a low base. But but if there’s a recession, it would probably impact everybody. But again, it doesn’t impact renovation and remodeling anywhere near the level it does new house building, and it doesn’t impact non-discretionary spending, which most of your roofing, a good portion of your siding is in that non-discretionary side of the business. And a lot of your commercial projects where your gypsum and insulation go into are long-term projects that are started. So, I mean, you’re always looking at the economy, looking at risk going forward, but but in essence, I I do the same thing you do. Look at all the reports coming out every day and, you know, part of your body goes, oh my god, this could be really bad here, then you go back and look at the counter side of it, and then you look what we’re seeing in the market, which is still good demand. Some of our businesses are still sold out and we’re still seeing good pull through under distribution and into the marketplace.
07:20 Speaker B
Yeah, I I think I guess what are the negative potential risk for the business because I sit here not very accustomed with your company, and now I am intrigued because you’re essentially a consumer staple in the real estate market, right? For non-discretionary spending, you’re not exposed to tariffs, which is a complete rarity today. Um, is there a valuation concern? What do you see as potential risks that could change the business for you?
08:02 Mark Rayfield
I think they they evolve. I mean there was a risk when interest rates were going up that people were waiting for lower interest rates. I think that’s settled a little bit. I think now people might be thinking, you know, six on the interest rate versus a three is a good interest rate, so we’re closer to that number going forward. You have an affordability index. So again, the the number of homes that are on the market now increasing, while it could be viewed as a negative as far as month on month sales, actually is bringing deflation into the marketplace, making it more affordable from that perspective. And then there’s always, on a good market, the challenge we look at is labor, making sure there’s enough labor to build and renovate homes going forward. And that’s always kind of has been the the point of, of, you know, inflection, so to speak, on when the housing market picks up that can slow us down.