Building Products of Canada Corp. (SGO) Earnings Call Transcript & Summary

Good evening. This is the conference operator. Welcome, and thank you for joining the Saint-Gobain conference call. [Operator Instructions] Today's call will be hosted by Mr. Bazin, CEO of Saint-Gobain; Mr. Sreedhar, CFO of Saint-Gobain, and Mr. Rayfield, CEO of Saint-Gobain, North America. At this time, I would like to turn the conference over to Mr. Bazin. Please go ahead, sir.

Thank you very much. Hello, and 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. So I'm happy to be here with Sreedhar, our CFO, and Mark Rayfield, our CEO 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 respective 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, the priority for growth and capital allocation in the last 4 years. I move to Slide 2. So strategic rationale for the acquisition. It's the right company. 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 growth and profitabilty. So this move is fully aligned with the rebalancing of our geographic footprint, which is part of our Growth and Impact strategic plan. We made last year, remember already 30% of our pro forma operating profit in North America. Specifically, we will expand our position in Roofing in Canada, which is highly attractive market under our country-based local organization, this is a very logical step to enrich our offering 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'll turn to Slide 3. So 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 #4, this acquisition builds on our very strong transition 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 will be 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 4 years and margin enhancement 20% EBITDA margin. This was, of course, enhanced with further successful integration of Continental Building Products where we created value in year 2. And most recent integration 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 owners, the decision makes in Exterior Solutions. And so 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 strength 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 needed 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 in evidence. I think just the last 2 years, 2021 and 2022, that was the highest level of new immigrants since 1913 in absolute terms. And the Canadian government aims to further increase immigration to 455,000 in '23, 485,000 in '24 and 500,000 in 2025. So altogether, the Canadian population is projected to grow by more than 10% by 2030 and the annual population growth is 3x higher than the OECD average. So that's on the new build. On renovation, we can say that the renovation market is supported by the aging housing stock with 75% of Canada single-family houses that are more than 20 years old and will need increased repair and remodeling. So for all these reasons, Canada is a key growth market for our solutions on light and sustainable construction. In Canada, on Slide #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 solution 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 product has allowed the Canadian organization to produce exceptional results, CAD 1.4 billion benefiting from the Kaycan acquisition mid-2022, 25% annual sale growth since 2018 and 18% EBITDA margin in 2022. So 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 rhetorical 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. So moving to Slide 7, the 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 1 of only 2 roofing manufacturers established domestically with manufacturing facilities in Canada. So roofing that makes up 80% for 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. We have a strong connection with contractors, home center retailers and specialty distribution. They plan to 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. So 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've spoken several times over the last days. And I'm extremely pleased and excited to welcome them in the Saint-Gobain family in the near future. So before I turn to Mark, I would like just to turn 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 are 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. So we have already executed this kind of strategy successfully in the U.S., where actually, the situation was the opposite. We -- historically, we had a strong position, stronger position in Exterior Solutions and we've complemented it with the acquisition of Building Products in gypsum on the interior side. But 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. So I leave now the floor to you, Mark. Mark is our CEO for North America, who has done a terrific job to lead our North American successfully and will drive through more dive into more insights in the next minutes. Mark?

Thank you very much, Benoit, and I'm very happy to join this call from Montreal, and 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 pathways that is 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. In the West out of the Edmonton, into the East out of Montreal. I was lucky enough to visit them personally. They are the manufacturing experts, and I can say they are well maintained and use much of the same equipment and raw material as the 17 U.S. plants. I was very happy to meet the employees and the management of these plants. 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. We say a picture is worth a thousand words. And 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 to the 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 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 marches. This growth is resilient due to the high percentage 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 or 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 choice in North America for residential roofing due to the industry-leading installed costs. There are static 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 architecture 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 U.S. markets. In the U.S., 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 U.S., we have achieved many benefits. Benefits in the back office and 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 5 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 expand that experience into Canada with Kaycan and Building Products of Canada. I have every confidence that we will achieve similar results in the Canadian market. Slide 14. When we 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 is recognized for the quality of their products and services. We will use this opportunity to enhance innovation through our product offering, our shingle technologies, our best-in-class GCP underlayments, and building integrated solar shingles. Product performance through our collaboration with Adfors on next-generation binders and glass fibers. We can bring significant improvements to shingle weight reduction and durability and its sustainability. We will leverage our commitment to circular economy and the know-how with the partnership with Asphaltica to recycle building product shingles, to leverage Saint-Gobain's expertise and plant decarbonization, such as the Montreal plant that I'm sitting here today. As a conclusion, before I hand it over to Sreedhar, this is why I'm so personally confident together with a fantastic Building Products of Canada teams, which have had the pleasure to work with in the past weeks in this process. We have delivered 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 altering the plants are impressive. They are well aligned with our values, our culture, our innovative spirit, and our growth ambition that my team has demonstrated tirelessly in Saint-Gobain in North America. So as you can tell, my excitement is very real. I'd like to now hand it over to Sreedhar.

Thank you, Mark. Slide #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 market, particularly in line with the 3 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 Kaycan, 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 #16. The acquisitions of Building Products of Canada is value created, supported by the synergy of CAD 50 million with approximately 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 economies 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 8x bigger than the Canada building costs. Maximizing efficiencies, liberating Saint-Gobain's world-class manufacturing program, we clearly see the benefit that we could get in terms of field, line speed, material management, et cetera and the logistics optimization. CertainTeed's U.S. roofing plants 10% efficient, and so we clearly see a hope to make even the efficiency improvement savings here. SG&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 Ice & Water Shield underlayment or CertainTeed's, the premium shingles and leveraging a cost saving opportunities with Kaycan siding product. In short, these synergies are clearly identified, and we are very confident to secure them quickly. Now let's move to the Slide #17, where you see the details of the transaction. Our offer price in price and enterprise value of CAD 1.335 billion, representing 11.9x the 2022 EBITDA multiple. The full synergies multiple will be -- were 8.2x. The transaction value will create -- this transaction will create the value in year 3. The transaction will be fully financed in cash, and we 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 remark.

Thank you, Mark. Thank you, Sreedhar. So 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's 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 a 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 roofing in the U.S, EU, in Canada are highly committed to the flawless execution of integrating building products in Saint-Gobain and the value creation as they have demonstrated in other transactions. I can tell you the spirit also from the teams and the CEO of Building Products of Canada is excellent. So I'm very enthusiastic, very positive, very confident about this strong combination and eager to welcome all Building Products teams within Saint-Gobain before the end of the year. Thank you. And we are now happy to take your questions, both, Sreedhar, Mark and myself.

[Operator Instructions] The first question is from Paul Roger of BNP Paribas Exane.

Obviously, it's just still digesting things, but I'll have to 3 please. Firstly, can you talk a bit about how you manage integration risk. And I'm really asked that because, obviously, this deal comes a very quick asset Kaycan. So I'm just wondering if there's any list that list management led quite thinly? Secondly, can you comment about whether the 25% EBITDA margin in 2022 is a good indication of the business' profitability over time. I don't know if it's possible, for example, to say what it was 2019. And then finally, you've talked a lot in this presentation about the benefits of completing the building envelope. You sit now in North America, but clearly, there is still a gap in Europe where you don't have the roofing business. So I wonder if it may strategic sense also to add roofing Europe as well.

Thank you very much, Paul, for your questions. So I will take the third question and the second, and Mark will take the first, because Mark in -- on the forefront of the integration, of course. So 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 growth in exterior and interior. But that's specific to the U.S. and Canada, which are very close to each other. So there is no intention to go to roofing products by themselves in Europe. That being said, look, we have a lot of applications in terms of membranes, in terms of waterproofing. So it's more on the accessories on the complimentary 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 few years. It has 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 not a good start. They are ahead of plan, above last year in terms of EBITDA and profit margin. So it's actually a line, Sreedhar will give you our own Canadian figures year-to-date, but '23 is also a good start, and I'm very confident about the '23 and beyond figures of Canada. So it's a business which is well consolidated in Canada. Remember that there are only 2, 3 years of roofing, I got the family business. Second generation is already there and this business. So clearly, when we are there, we locally manufactured it's of course, highly effective business. And I think also, we start to see some of the big U.S. distributors coming into Canada. I mean some of them have made some acquisition recently. So I think the structure of the market in Canada in the coming years will be quite moving and overall good, sustained profitability and business going forward, both in terms of top line. I mentioned the growth in the market and profitability. Sreedhar, you want to comment on our Canadian figures?

No. In Canada, when you look at last 5 months, we actually have a double-digit growth. And Canada has been actually consistently doing well year-after-year. And we said we covered in the presentation too that their compounded annual growth in the last 4 years has been 25%. So it's clearly, we are very strong. We have a very good team. I think there's no organization by country has also enabled us to bring a lot of focus on providing solutions to the market.

Steady profitability. So Mark, maybe you take the first question because indeed, it's part of our equation, but I'm confident that you can handle all this.

No, it's an excellent question. I mean I think the first part of a successful integration is that the cultures and the team's match, and as it was in Continental and the other acquisitions, we have an extremely talented team in Building Products of Canada, extremely talented team certainty in Canada. We work the same way with agility, with trust, with empowerment and collaboration. And so 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, but we have the muscle memory built into our region for the previous acquisitions. We have a very talented integration managers, who are already assigned to this. We manage those work streams, and we make sure in the process building up to this that we've reinforced those teams in HR and purchasing and IT and other areas in preparation for this growth. So we are well staffed. It will not dilute our efforts on Kaycan, the team will be communicating together, but we'll have dedicated teams on both of them, and we are continuing to reinforce those teams going forward. But I reiterate that when the culture is right and the people are 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.

And one interesting point that, of course, the U.S. roofing manufacturing experts are there, actually some of them have visited the plants more than 23, 24 years ago. So they knew the plant. They have seen how [ moderate ] they have been over the last 20 years. And of course, they will -- they are the strong support on the manufacturing side. All this is well prepared from marketing.

And it's important to keep in mind, we're talking about integrating only 3 industrial sites as compared to 17 that we have in the U.S., and there's no carve-out or any such complexity in this integration.

Sorry, I just have a quick follow-up. You mentioned there it's 1 of 2 large players. And obviously, with this it had some overlap with CertainTeed. Is there any antitrust issues to be aware of? Or is that all been [indiscernible]?

So we have, of course, analyzed that. So IQ 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 over the years, 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 in Canada, whether it's gas, whether it's on coming, whether it's minority of the world and of course, CertainTeed in the past, so it will not fundamentally change the structure of the market. And 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, which I can servicing into that.

The next question is from Yves Bromehead of Societe Generale.

I'll have 2, if I may. The first one, I just wanted to come back on the synergies. You've clearly identified CAD 50 million synergies here. But you're also mentioning one that you're exporting, and I think, correct me if I'm wrong, but I've heard 80 million of Canadian or U.S. dollar coming from the U.S. into Canada. I think Sreedhar you said, there's a 10% efficiency gap. And you've also clearly stated the CertainTeed scale in procurement is humungous. And I think if I remember correctly, Kaycan also have its own distribution channel. So I'm just trying to think and reflect a bit on that CAD 50 million and whether or not 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 didn't come down significantly? So that's question number one. Question number two. On the wood fiber, I'm 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 still in Europe over in Canada?

Thank you, Yves. So 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 USD 2.7 billion of roofing business in the U.S., and we would add a more than CAD 400 million. So CAD 50 million as a percentage of sale, sometimes you want to make the check and balance on that is clearly within reach. On the processing side, yes, we have identified several categories and it was a big part of the equation like Sreedhar mentioned. One also, which is significant and to your point on the CAD 80 million, we were exporting from the U.S., mostly from the plant in Ecuador [indiscernible] and Norwood out of Boston. Of course, you will save on logistics from some there is roughly 1.5% gap in percentage of sales between what we experience in U.S. and what we experience in Canada on logistics. Logistics cost was a very significant part of savings for Continental Building Products. So there are many aspects of the synergies, and we feel good about that. Now the more important point of this acquisition is truly a growth driven acquisition. We are there in Canada because we strongly believe in Canada. And the population, in Canada, I think has been underestimated by many. I give you some better points. If you take the G7 countries, the average. dwelling per head per habitant in Canada, we lack 1.8 million dwellings just to get on the average of the G7 and Canada is above average in terms of rate versus the G7. Plus you would add all the immigration, which is accelerating in Canada. So this is why fundamentally, yes, there will be cost synergies, logistics, procurement, manufacturing excellence, et cetera, et cetera. When we have projected that will help the being product plans to debottleneck, increase their capacity and capture growth. But fundamentally keep in mind because I understand that you want us to overshoot, but we want to deliver. We are sure that we have been very committed to deliver on the synergies and the value creation in all the acquisitions we made in last 4 years, whether it's Chryso, whether it's GCP, whether it's Kaycan, whether it's Continental, we are committed to make fantastic value creation this one, plus capture the net detail of growth in Canada. Now on wood fiber, as you know, we have a 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. And of course, with the French and the French-Canadian team, at least they will find easy to communicate on the language. And that's a growing area. If I think just France, as an example, I would say the biosourced insulating materials they are captured the 3%, 4% of the market, 5% in Central Europe. So I don't expect that to be a revolution in the Canadian market, but clearly, having such a large portion of roof construction in Canada, wood insulating fiber is an attractive complimentary offer.

Thank you, Benoit. Any time I just -- sorry if I didn't catch this. But is the management of BP saying as this was part of the success of the other deal that you've made in Europe and in the U.S. recently?

Yes, Mark will jump on this because Mark met with all of them. I will speak to several times to even go on the [indiscernible] Mark, you have a better in sight of all the document.

Yes. Yes. The management is staying on to the integration and transition, and we hope for a long time there afterwards. So extremely talented, commercial managers, production managers, obviously, Yves is a very gifted CEO for the business. So we've been very impressed with everyone we've met and very excited to welcome to the teams that we did with Continental.

We are not moving. There is no restructuring to be made. It's plenty of growth opportunities to capture our material products and manufacturing jobs to fit also, it's a fantastic growth avenue and development for everyone. We'll go to the next question?

The next question is from Arnaud Lehmann of Bank of America.

Three questions, if I may, hopefully. They're quite short. See, 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 [indiscernible] located DCC as a region which is typically a bit less dynamic economically, and also can you comment on the trend in housing activity, obviously, housing is down in the U.S. in the last 6 months. Could we have some updates on that for Canada as well? Secondly, could Sreedhar give us the EBIT margin of the business as well. So we could have an idea of the capital intensity? Is it similar broadly to certainty. And lastly, no disrespect to Mark, indeed doing a great job in North America, but Canada is not getting larger in the portfolio. Does that mean you're going to need a French speaking CEO, soon?

Good question, Arnaud, because indeed, I -- I mark is fantastic. The highest score of Mark is not exactly yet on a French language skill. So we are right to help me. But Mark has already French-speaking CEO in Canada. So that's indeed something that you need in Canada, both in English and French.

It's one of the few exceptions that falls into that 10%. Otherwise, 90% is frankly overrated.

So yes, we have what we need in terms of sales, in terms of English and France 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 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., had a lack of labor, some shortages of materials in the last 18 to 24 months. So it's clearly and we have that in other parts of the world. But versus prior times in the history, we have a bit of a disconnect between completion activity, which is what these matters for manufacturers versus staff or permits. So the amount of staff but not completed permit, but not started is very high, and that keeps us busy. 1 of our 2 statistics, which are interesting, existing home sales in Canada have increased over the last 3 months by 11% and that will alone, and the real estate prices have started to recover over the last 2 months. So I think we are there in terms of -- and the increase of the completion has been less than half of the increase of permits and staff if you take the last 3 years. So clearly, we have this strong momentum if I look at the high-level strategic, but really not -- you can be specific that how in U.S. and Canada because in the U.S., I think we have a kind of plateau with ups and down, but what do you think?

Yes, I agree. I mean I think 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 well as increases have settled in, you see low availability 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. And you still have, again, 80% to 85% of your business in the roofing market being driven by renovation and remodeling. And so we're going to have an older housing stock as we do in the U.S. that means with a large number of homes built in the 2000 and 2008 period that are now coming up into that renovation and repair and the same situation in Canada. And from a regional perspective, you might say that Ontario was a more robust or market at times, but the Eastern Canada is still a very robust market. We have excellent market share to BP of Canada in this area and a significant area for renovation and remodeling repair is needed to some severe weather both in temperature and storms. Every hurricane that comes across the U.S. tends to hit that coast of Canada and Edmonton is a very growing region in Western Canada, again, with a very high degree of renovation and remodeling. So while a lot of the -- maybe press out there is talking about new housing and interest rates. I can tell you from our experience in the U.S. and in Canada, we have an extremely robust business in 2023 with a good growth and good visibility for the coming quarters.

Now your question on capital intensity. It is -- the CapEx is the below group average, so 3.5% to 4.5%. It's actually not capital-intensive. And the depreciation, if you see is around 2%. So it's very -- the EBIT margin is very, very attractive.

As percentage of sales.

Yes.

The next question is from Elodie Rall of JPMorgan.

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 deals, and you've talked about the market generally being 85% renovation, but is that the case for these companies specifically as well? And then with regard to growth rates, so you seem very confident about '23 double-digit growth rate year-to-date. Is it -- would you be able to give us a split between volume and pricing? And historically, interesting to have a little bit more color about the historic growth in term of top line and EBITDA and where we are versus history and how much this [indiscernible] grown in [ GCP ]?

Thank you, Elodie. Overall, renovation is roughly 70% for Building Products of Canada. So -- and that's what have been told, and it's very consistent to what we face in our own sales activity in Canada. On the 2023...

I mean, as Benoit has already said that the current trading is clearly better than the last year, and we remain confident that we're delivering a good number as what -- as compared to what you have seen in 2022. One in prices, again, that prices it's one of the contributor to this growth, clearly, and they are also doing a good job of price cost spread. I think the question also was [indiscernible]. For us also, it's like the -- we have volume is slightly positive. And when we said double-digit growth, okay, last part is coming from price and the volume is also positive.

So we are there with the solid business and when we compare because I think it's important to compare this business has been very resilient over the last years. Every year, like we see in our U.S. roofing, you could have a bit of more storms. I think I mentioned end of Q1 to some already that we have a strong Q2 in roofing because of the storms. So sometimes you have a bit of up and down because of storms in the roofing business. And that's the same picture in Canada, historically, but there's been a very resilient business, both in terms of top line and margin. So -- of what we know and the experience in our own roofing activity. And '23 will be a good year, a good start. We don't expect a big jump because we are on the plateau with a bit of ups and downs of completion, housing start, et cetera. The good thing that the mortgage rates in Canada are starting to stabilize. There are an inflation of 4.4% in Canada if I'm correct. So mortgage rates are there. So when the economy is doing well. Unemployment is low. So we don't expect '23 to be a jump in sales and profit, but to stabilize at the high level of margin and sales that we have seen in recent years.

And historically, in terms of growth rates, can we assume it's been similar to the numbers that you gave us on Slide 6 for the Canadian market, or we have big profits?

Yes, they had good growth in sales over the last year. If I take the last 3, 4 years, of course, 2020 was a bit impacted because of COVID, but they have a good run overall in the last years. And in the U.S., we told you we had a double-digit growth Building Products of Canada were slightly below that, but it's [indiscernible] over the last years.

The next question is from Tobias Woerner of Stifel.

Yes. Congrats on building such a sizable business in Canada, and I'm sure it will be delivering good returns. A couple of questions from me. Number one, just tell us who is actually the shareholder of this private company. And how big you come across this transaction, was it an auction? Or was it a one situation? That's my first question. And secondly, just following up on the split between volumes and pricing. You just mentioned Slide 6. The 25% here includes it seems to me also the Kaycan and GCP acquisition and then further down the presentation, you talked about a compound annual growth rate of 11%. So I was just trying to get my head around what is price, what is volume and what is organic, what it was -- 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 actually up again in April, and also good whether that increase is being maintained?

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 school, it will be related to our figures, not Building Products of Canada figure because we don't have such a detailed segmentation of volume and price. So to your first question business, this business has been for many, many years, details within the family. So it has been owned by the Colburn family. So it has been owned by the family. And we happen to have a contact with them almost 25 years ago and some of our people visiting their on that plant. They decided a month ago to launch, to launch an auction. So started in early May. And 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 would bring a lot of career development benefits to the customers. And as Mark mentioned, in terms of values between the teams and the discussions I could have with Yves Gosselin, that Mark had also with him and the team. So over the last day because then, as you all know, when we want to move, we are able to move fast to be decisive and straight to the point and execute well. And so after this first month of information back and forth from 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 the business joining Saint-Gobain for the benefits of both teams and the benefit of Canada. So that's a big history of this long-standing family business. And I think we clearly saw a strategic and value fit with Saint-Gobain and very good customer contact for Mark, myself and the investor managers.

Coming to -- Tobias, coming to the growth, you're right on the Slide #6, the 25% it includes the acquisition of Kaycan and GCP. So it's a real growth. It's not just an organic growth. But what we said is organic growth was around double digit. And it's a combination of both the price and volumes. So we have seen growth in both plants in both Canada and the U.S. market.

Okay. And then just lastly, following up in the slightly outside the remit here, but is wood-based insulation something you look at in terms of potential acquisitions in Europe as well?

No, it is something we look at in terms of complementary products. We are on insulation we are strong and on stone on glass wool. Of course, it's our #1 product line. And this is what we sell in the U.S. and in Canada. In Canada, we have a 2 glass wool into a theme plant. Overall, 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 glass wool plant. We recycled 88% raw material. So we are very confident about the merits and the benefits of those 2 product lines thermal and glass wool. That being said in some countries for some customers, when you build with a retrain, when you are with new specialized distributors, they like to have a complementary product line based on new insulation [indiscernible] insulation. We have it -- that in France, where we are doubling our capacity. Again, it's something that we look at both from offering to our customers organic growth in terms of being totally convinced of the merits of the product line. It's not so obvious. So we are clear with what we are. I know there are many players on the market new capacity coming. We'll see how the market develops, but it's not a must-have for us the most is to continue to grow the super merits of glass wool insulation, both for new construction and the -- and renovation. So 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, when we need to -- moving from [ chip ]. So sometimes you need some complementary products. But if we look at that wood fiber will grow, and we'll take this few step in Canada to see the -- an asset the demand over there.

And just lastly, there was a question on the asphalt shingle pricing in the U.S., does that maintain the pace we've seen before?

Yes, it's good and the...

We did announce a price in mid-May, and the market is also after a few weeks, we saw the other players also followed us in a way. So it is supportive -- the market is supportive on price.

We have good momentum, and remember, we discussed that the tactic that Mark and the team had in Q1 was to be very vigilant on our pricing actions momentum, so that we could release 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.

The next question is from [indiscernible] of Morgan Stanley.

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 and the solutions?

It's a bit more black and white than that because on [indiscernible] products, we had siding with the acquisition of Kaycan. So that's just on the Roofing segment of exterior, we had CAD 70 million to CAD 80 million, so you would say we will multiply that by [indiscernible] and so we have the 5-ish type of market share on Roofing in Canada being serviced from the U.S. So for me, I don't even compare when you are a local producer in Montreal, you are Canadian for Canada and you have all the French speaking and English speaking, salespeople on the ground selling. So I don't even compare. But just we have a small presence of roofing sales in Canada.

So your ability to serve the customer significantly goes up when your present local?

If I may Benoit, as well, we participate in different segments of the Canadian market. So we are in different regions in the market, and we also have different products with very complementary as far as channels that we participate in and really not seen to be an overlap there. Really the benefit to the market overall.

The next question is from Cedar Ekblom of Morgan Stanley.

Please excuse the background noise. I am stuck on the tarmac on the 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 CAD 10 million, about 2% revenues of the business. It looks like there's a very complementary overlap with your existing offering in the market. So what do we think from an upside perspective on the revenue line?

Thank you, Cedar. I will pass the blue sky scenario to Mark, so that I can put that in budget and volume for next year. Mark, more pressure.

Thank you very much. I think when you talk about the sales synergy scenario, I think the best example I could give which is hard to document in this kind of scenarios is what we succeeded with in the U.S. in our exterior product sales organization, where we far outperformed the growth of the market in both business, but really in siding, on leveraging the organization's combined talents. We have opened the #2 position and now the #1 position siding through share gains and new customer reductions. So that's something that was expected to happen and did happen, but it was very quick in the impact. So 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 the roofing and large roofing customers then get into siding. So I think synergies play off between both Kaycan and Building Products of Canada and perspective. And we have a number of products in the U.S. that are not sold here in Canada, some solar products and some higher and laminate products, which then again can go through that same channel. So 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 1 business or the other. But 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 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 right will come on a large sharing of the take and if I take another example, in Canada, that market has been able to deliver that when we have the transforming organization, 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 4 years, benefiting from the strength and improvement of cross-selling in gypsum. So yes, there will be some good momentum on the top line.

The next question is from John Fraser-Andrews of HSBC.

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? And therefore, how much scope is there for selling additional products into those points of sale? And then finally, the Canada residential market, Benoit, I sort of read from your comments, you're expecting it, I think, to be stable year. Can you confirm that? Or is this one of the markets where you're expecting a moderate decline in volumes?

So I will answer the third and Mark will take the first and the second. 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 the peak of 12 or 18 months ago, that completions are very strong. So we are in this dynamic, as Cedar said, year-to-date, we have volumes from 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. So this is where we are for Canada and what I said for Canada in 2023. Mark, do you want to take the number one and number two.

Sure. I'll take number 2 first, and then maybe I'll get clarification on number one. I mean the crossover of channels is really quite interesting. I would say in the cross 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 IPG, so our Interior Solutions teams and products where we have the same customer base and a very strong connection to it. So there will be lots of good commercial connections there and system selling opportunities and relationships across those channels. 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 specialty distribution and one-step distribution, and they are more into the retail home center. So it's really an ideal situation where we have common larger customers. We are all in there with our large presence in IPG. And for the product line itself, we're opening in channels that they did not have access to in their opening of channels that we didn't have access to. So that -- I hope maybe answers that question, but it's quite good. And the question is, I guess, share evolution in Kaycan of shingles themselves? I mean, are they loosing share or gaining share?

Yes, shingle roofing. And just a supplementary to your last answer, Mark is 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 the big opportunity?

A bit of both. Our roofing business, we have good relationships, especially with roofing distributors, which we have and continue to sell side and expand the siding relationship with. And they have very strong relationships where we had strong interior relationships with the large national retailers and home centers. So on both sides, we have the ability to get leverage relationships across all channel and share product expertise and product experiences across them. So it really is -- we said earlier from blue sky perspective, very synergistic. And as far as share of the overall roofing market for asphalt shingles, there has not been like in the U.S., a significant movement of it, it is Still the most common, the easiest to install, the most economical to install product of residential roofing. And so where there is a slight 1% or 2% increase over the past number of years for some metal roofing products and more normally uses accents or in very regional areas.

But hopefully 70% of the market, market is on the roofing market, which is on as far shingles, if I'm correct? Canada and it has been studied over the years.

The next question is from Harvey Ross of Davy.

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 do that product currently have? And what is the scope of the opportunity there?

Mark, this is for you?

Well, I think it's -- we have some very innovative solar products and even though more innovative one that's being launched later this year. So I think in Canada, we had a huge expansion. We're seeing it as being one of the leading lead generators in the U.S. and growth categories, still small. I'll give you that categories and percentages in the U.S., and probably leading growth categories, still small. I'll give you that, but both categories and percentage in the U.S., and I think those trends following the Canada. So I think this access to this distribution and the connection to Building Products of Canada for that product line is huge.

And just one quick follow-up. Just what is the distribution, the sales distribution mix between the retailers and specialty distribution channels?

I can take a look. I think it's -- I...

50% home retailers and direct with good majority on the other half of specialty.

[indiscernible] yards and buying ground distributors and the buying groups [indiscernible]

51 home centers, 31 specialty, the other 18, other channels.

The next question is from Jean-Christophe Lefevre-Moulenq of CIC.

2 quick questions for me. The first, Benoit, in the market share of 25%. Could you elaborate more? Is that the 25% market share of Building Products of Canada? And secondly, your competitor, we also mentioned destocking over the first quarter for roofing products? Did you explain this issue?

Jean-Christophe, you would appreciate that all the competitive data, we will file them with the antitrust authorities. So I'm not going to be very specific. I gave you the range of 25% to 30% market share just for Building Products of Canada, but then all the rest of the discussion will be with the authority. Regarding what others said, no, we didn't see that. We didn't see that. So we're seeing a very good time. We have been very disciplined, actually distributors in the U.S. we didn't go on the price exception for wind turbines or things like that. And it actually helps us to rebuild our own inventory, which was low by the end of the year and therefore, be ready for the season, which is starting strong end of March, early April. So we are in a full speed in terms of manufacturing and delivering also to our customers.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

So thank you very much for your time. And again, sorry for the short notice. As you have heard from Mark, Sreedhar, myself, we are very confident about the value creation of this great addition to Saint-Gobain, the worldwide leadership in light and sustainable construction and Saint-Gobain addition in Canada. It's then in line with our winning spirit and increasing the share of wallet of different customers. It will allow us to outperform in the Canadian markets like the teams of Mark have done successfully in Canada, but also on the larger scale in the U.S. recently, you have seen our track record on many acquisitions in the past. So I'm confident that it's exactly what we like to do, having the full offer, then strong in local country organization, and I'm very excited that we'll be in Canada on the 12 and 13th of July. So I'm very excited to meet like Mark did already. The teams of Building Products of Canada and welcome them soon into Saint-Gobain. Once we are filed and closed all the antitrust matters. Thank you very much, and I wish you a very good evening and thank you, Mark out of Montreal. Thank you.

Thank you. Take care.