Compagnie de Saint-Gobain S.A. (SGO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Saint-Gobain conference call. I now hand over to Mr. Benoit Bazin, CEO; Mr. Sreedhar, CFO; and Mark Rayfield, CEO of North America. Gentlemen, please go ahead.

Thank you. Hello, and welcome to our analyst and investor call on the acquisition of Kaycan. Thank you again for joining on such a short notice. You have the presentation on the website, so we'll go slide-by-slide. I'm extremely happy to announce this acquisition. I have with me Sreedhar, our CFO; and Mark Rayfield, our CEO for North America. Today is a decisive step for Saint-Gobain to reinforce our leadership position in North America and in light and sustainable construction. This acquisition of Kaycan has been managed as a bilateral discussion with the family that owns the business, so without auction but bilateral, according to the relationship that has been built over the time between both teams. I now go to Slide #2. Kaycan is indeed a compelling strategic acquisition. The strategic rationale is very strong. This is fully in line with our vision to be the leader in light and sustainable construction in the plan, Grow & Impact, that we presented to you last October during our Capital Market Day. In terms of geography, Kaycan will allow us to increase our presence in North America. Also, the priority highlighted during our Capital Market Day, since North America, you have seen it, has been and is for us the growing and profitable region. Thanks to this move, we will specifically gain a leading position, the #1 position in siding in Canada, which is also a highly attractive market and country for us. You know the new country-based organization that we have developed over the last 3 years. Canada is part of our top 15 countries and a successful organization over there. Kaycan will allow us to broaden our light and sustainable construction also in this country. In terms of solutions, Kaycan will enrich our offer for exterior facade solutions overall in North America, not only in vinyl siding that we have already in the U.S. but not in Canada, but also complementary solutions, including notably aluminum and engineered wood siding. All this will be for the great benefit of Saint-Gobain customers. So it is truly a growth-driven acquisition, which will bring a positive impact to our customers and will create high value for Saint-Gobain shareholders. I turn now to Slide 3. This is totally in line with our vision, be the worldwide leader in light and sustainable construction, bringing two big attributes to our customers: sustainability and performance. Together, Saint-Gobain and Kaycan will be a leader in exterior siding both in the U.S. and in Canada and will be able to offer an extremely broad portfolio of solutions for building facade. I'm now on Slide #4. Remember the slide we shared with you at the time of our Capital Market Day last October? This is the exact, same strategic rationale. First, North America is a fast-growing market with deep structural housing needs, 3.8 million housing unit deficit in the U.S., 1.8 million housing deficit in Canada alone. This growth is supported by a robust demography, new building usage, low construction in the past decade. In Canada alone, population growth is driven by a strong immigration. In '21, more than 400,000 people emigrated to Canada for a total population of 38 million inhabitants. On top of that, I would say Canadian economy is doing well. When you think of the commodity prices, whether it's for mining, agriculture, oil, all this bodes well for Canada going forward. Second, North America market is also facing labor shortages, which means the easiness to install, the time saving for the installers, the solutions that we can provide to them are needed more than ever. The structural housing deficit, labor shortage, all that are strong drivers to further increase the penetration of light construction, which already represents 45% of construction products spent in North America. So for all these reasons, North America is clearly a key growth and highly profitable market for our solutions on light and sustainable construction. I now turn to you, Mark, on Slide #5.

Thank you, Benoit, and good afternoon, good evening. As Benoit said, this acquisition builds on the strong foundation of success in North America, driven by our exceptionally qualified and focused teams. This foundation was demonstrated and strengthened with the successful integration of Continental Building Products, which created value in 2 years and really strengthened our light and sustainable construction offer. As you know, CertainTeed is the only North American manufacturer that offers such a wide breadth of solutions for both residential and commercial, covering both exteriors and interiors. The strength of the offer and of the teams can be demonstrated by the strong results, both in top line and margin enhancement in the past years with sales of approximately USD 6 billion in 2021, 19% EBITDA margin and 12% compounded annual growth. And this offer and this strength will only be further strengthened with the addition of Kaycan as well as the addition of GCP after regulatory approval to the portfolio. Another important point is that CertainTeed is the preferred brand of exterior solutions for the North American contractors and homeowners. And these are the decision-makers in exterior solutions. As we add to this portfolio, we build deeper connectivity with this audience. To Slide 6, please. Siding inside the exterior solutions portfolio is a key component to residential light construction. The market is made of many materials, wood, metal, vinyl, engineered wood, though vinyl being the largest segment. In the vinyl segment, we are the #2 player in the U.S. with over USD 600 million in sales. We are, as mentioned before, the leading brand with the decision-makers in exterior solutions, the one -- we are the one with the broadest offering and able to cross-sell between roofing and siding in these territories, which is why the expansion of range that Kaycan offers is so exciting. Our focus on operational excellence, customer-centricity and security of supply has allowed us to grow at nearly 2x the market in the past 3 years with a 14% compounded annual growth. In short, we're gaining traction in an attractive and important market in North America through the portfolio and the skills and the strengths of our teams. Slide 7. In Canada, we are already the undisputed leader in light and sustainable solutions. The strength and the strength of our teams in Canada has delivered a very strong track record as well on growth with sales of CAD 750 million and 17.6% EBITDA margin. It is supported with extremely deep partnerships with leading distribution channels as well as key contractors. You see the list here of Lowe's, TIMBER MART, RONA, Home Depot and Home Hardware. We also have the leading position in wallboard and interior solutions, which allows the strong position with -- in interior solutions in gypsum, insulation and ceilings, which offers us a full portfolio coast-to-coast for our customers in Canada. We are smaller in Canada, as mentioned by Benoit, in exterior solutions, which is why this addition is so exciting. Slide 8. Kaycan is the perfect fit for this business. And I'd like to say at the start, I've had the pleasure in the past month-plus to travel with Lionel, Andrew, Philip and Tammy and see many of the sites and employees of Kaycan in the past month. I've been so impressed not only with their business, which we've talked about and we'll talk more about, but the culture and the people and the incredible innovation and customer-centricity that they have within the business. The more we got to know the family and the business, the more impressed Joe Bondi, who runs our siding products business, and I were with the teams in the company. I just wanted to make sure before I got into the details, I was very clear on how exciting this company is and how excited we are about this company. They are the leader in siding in Canada, where we presently do not have a meaningful position. They bring a more diversified offering, as Benoit shared, with a deep offering in growth categories of metal and engineered wood, where we do not have a position in North America. With 12 manufacturing plants, they have unrivaled coverage and service across North America. And they, too, rely on extremely strong connection with contractors, builders and big-box retail, which is all critical in the long-term growth that they've shown in the past. Slide 9. These strength, as I mentioned as the critical legs to their growth history, can be seen here in this slide, where you see compounded annual revenue growth of 11% between 2018 and 2021/'22 and EBITDA growth of 23% compounded over that same period of time, so again, a very strong company with extremely strong legs of growth, which has demonstrated strong top line and bottom line growth. Slide 10. With the addition of Kaycan, we bring the leadership position in siding and a broad portfolio of other exterior solutions. It's the perfect fit of the business, as I mentioned before. They're the leader in siding, where we don't have a meaningful position. They bring the diversified offering of aluminum and engineered wood to have the broad access to distributors and a broad manufacturing portfolio. And I think when you take a look at the chart on the right, they say more than I could, showing clearly the impact this acquisition has on the mix in Canada, to bring a solid foundation of exterior solutions and complement our leadership position in internal solutions, giving a much more balanced portfolio and allowing us to grow even more solution-based sales in the Canadian market. Slide 11, I'm sorry. Kaycan has a tailored approach in Canada that allows it to grow and maximize its reach. This is both through an integrated as well as retail distribution and fully aligns to the channels to market for these products in Canada. This leading manufacturer and distribution network maintains close contact with contractors and homeowners. And as you'll note on the bottom of the slide, the top 4 players in the Canadian market are also vertically integrated as this is the way to market these products. But Kaycan is by far the strong leader. In the U.S., Kaycan has a fantastic distribution network for their products. However, this integrated distribution is only a small fraction of the sales with a much larger presence in one-step, two-step and retail channels, meaning they primarily sell through one-step in retail distribution in the U.S. And although it's a great and successful business, it's a small player in the U.S. market with USD 70 million in sales and USD 10 million in EBITDA. The U.S. entity is completely separate as an entity and will be divested in the near term upon closure of this deal. Slide 12. From a product mix and a market solution standpoint, I think this chart also shows you really how strong this portfolio is when it all comes together. It allows us to really build solutions-based exterior cladding solutions. A combination of GCP, when the acquisition is approved, as well as Kaycan gives you a full system in roofing with roof membranes and roofing products and shingles, waterproofing and air vapor membranes for the siding, along with vinyl siding, shakes and stone from CertainTeed and then wood, aluminum and rainwear from Kaycan, giving you a complete offer for both residential and light commercial opportunities. Next slide, Slide 13. I'm also very, very excited on how this expansion advances our sustainability position in the region. Kaycan has a very exciting program called R3V: reclaim, regrind and repurpose. The program closes the loop by recycling vinyl siding from their branches back into the product going forward, has a take-back program for post-consumer waste across the distribution network. They also use 100% of the waste generated in the production line from vinyl and aluminum and reuse it within the product, making sure 100% is reused. And all of their building products are sustainably engineered to contribute to green building certification programs and obtain LEED points. In short, a very sustainable product with a common culture of minimizing our footprint while we maximize our growth. In conclusion, this is why I'm personally confident that, together with the Kaycan sales teams, we can deliver strong synergies that Sreedhar will describe to you in a minute, both on an operational efficiency perspective in our combined business as well as enriched teams of expertise in terms of cross-selling opportunities, whether in the U.S. or Canada, and make sure that we're using the best routes to market in a large product line. I'm truly excited about bringing these benefits together in terms of service and products. I know it will create a lot of opportunities for both the Kaycan teams and the CertainTeed teams with such a great platform to offer and great knowledge in the teams. As I mentioned before, the teams I have met, the leadership I have met in the recent weeks are so impressive, and it's so important that they're very aligned with our values, our culture and our innovation spirit and the growth ambition that we have across globally the Saint-Gobain business. I now would like to hand over to Sreedhar to tell you some more details on the deal.

Thank you, Mark. And good evening, everybody. This transaction is clearly value-creative supported by synergies, of which the vast majority are cost synergies. From the total synergy of $30 million, the cost synergies are around $23 million. And $7 million is the synergy coming from the revenue synergy. These amounts are expected to be secured in year 3. Cost synergies, which represent nearly 80% of the total synergies, are expected to be captured through SG&A reduction, through rationalization of commercial and back-office functions and reduction of Kaycan corporate costs. Maximizing efficiencies, leveraging Saint-Gobain's world-class manufacturing program, which is very successful, and also have -- look for logistic optimization. And then we have purchasing savings through economies of scales in alignment of key inputs and indirect spend. These cost synergies are clearly identified, and we are highly confident that we will be able to secure them very quickly. In addition, we have also taken into account only low-hanging sales synergies with an impact on EBITDA of around $7 million. And a large part of these synergies are coming from cross-selling between CertainTeed and Kaycan. In short, these synergies are clearly identified and achievable. Now Slide #15. With the Kaycan acquisition, we are continuing on a very successful growth and profitability path in North America in line with the two significant acquisitions made in recent years: Continental Building Products, which has been highly value-creative, as Mark outlined already, you know that we created value within the second year; and more recently now, we have announced the acquisition of GCP, where the acquisition is in progress. Starting from $6.5 billion in 2018, we expect to reach more than $10 billion of sales on a pro forma basis in 2022, coming both from the very strong organic growth and then three major acquisitions. And profitability more than doubled in the same time frame, as you can see with the EBITDA growing from less than $900 million to around $2 billion. On Slide #16, let's move to the transaction overview. Our offer price implies an enterprise value of $928 million, representing 11.2x EBITDA multiple for the fiscal year 2021, ending at the end of July 2022. The net enterprise value post U.S. distribution divestiture, assuming similar pre-synergy multiple, will be approximately $820 million and the post-synergies multiple will be around 8x. The transaction value will be clearly creative -- value-creative by year 3. 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 family ownership has approved transaction and will aid the transition. Closing of this transaction is subject to antitrust approvals and satisfaction of other customary closing conditions and it is expected to close by year-end 2022. Now I will pass on the floor back to Benoit to make the concluding remarks.

Thank you, Sreedhar. Thank you, Mark. As you have seen, this move is a very important step for Saint-Gobain. We are clearly establishing the leading position in siding in Canada and, at the same time, reinforcing our position in exterior solutions in the U.S. We will strengthen Saint-Gobain presence overall on the growing North American market. You have seen the journey over the last 3 years. North America will be not far from 20% of our total sales on a pro forma basis by the end of 2022. Clearly, a growing path also as the leader in light and sustainable construction. It will enhance our solutions portfolio, notably into engineered wood, aluminum siding. I'm very confident that this growth-driven acquisition will certainly create a high value for both our shareholders and our customers. I'm extremely fortunate and proud to have a solid leadership team by my side. Mark and his team are committed to the flawless execution of integrating Kaycan and Saint-Gobain and value creation as they have been already very successful with Continental. Finally, I'm extremely enthusiastic and eager to warmly welcome all Kaycan teams within Saint-Gobain in some months and to provide very attractive development opportunities for both Kaycan and Saint-Gobain teams going forward. Thank you for your time. We are now happy, Mark, Sreedhar and myself, to take any of your questions.

[Operator Instructions] The first question comes from Yves Bromehead from Exane BNP Paribas.

I'll have three. Number one, I just wanted to come back as this is a vinyl siding acquisition. And just looking a bit at the market share for the external in the U.S., vinyl siding has been actually losing share to substitute materials, like fiber cement and stucco in the U.S. at least. So could you maybe give us a view as to maybe what you have seen in Canada? Is there anything different here? And do you think you can actually inverse the curve with this acquisition? My second question is can you specify what's the split between the new -- well, exposure to new housing and RMI for this business? And maybe what is your view? I mean, you do talk about the undersupply in the U.S. But the recent leading indicators are weakening. So in terms of the timing of the deal, what's your view there? Do you think there's a bit of a risk that there's a pullback or even a recession in the U.S.? And finally, maybe for Sreedhar, can you specify what are the full implementation costs of the synergies?

Thank you, Yves. So I will maybe highlight some comments on question number three and then I will give the floor to Mark on question number one and number two. Frankly, we shared [indiscernible] on our Q1 dynamic what we see on the ground in North America. And I can tell you, we see no change. So it is a robust market. We are still mostly on allocation for most of our product lines. We are still battling and I think doing a fine job on overcoming the supply chain disruption, which have caused a bit of delay in some of the job sites. You have seen the statistics. We are strong in the U.S., the underbuild, I mentioned it, so it bodes well going forward. Same in Canada. Canada has a growing population. I mentioned that, 1.8 million and a bit in the last 10 years. I happen to be in Davos early last week and sitting next to the former head or Governor of the Bank of Canada. And when you talk to him, when you think of the oil price, the commodity prices, on agriculture, on mining, he was super positive about the Canadian economy going forward on top of the strong housing momentum. So I can tell you that no change on the dynamic we see in North America, whether it's on volume and pricing. We have already announced some additional pricing actions for beginning of July in several product lines, whether it's roofing, gypsum, et cetera. So that's what I would mention. But Mark, I turn back to you on the siding, maybe if you could highlight our market share on vinyl in the U.S. plus the other product lines.

Yes, I'd be happy to. So it's a great question. I mean, first off, siding is a very diverse marketplace. So I agree with that comment. Vinyl siding is still the #1 siding in terms of share within the vinyl siding category, making just about 1/3 of the siding category going forward. Other sidings that we are acquiring with us, being engineered wood and metal, are broadening our portfolio. We also have stone also in our portfolio. So vinyl is still and will remain probably the largest segment of siding. So we believe it's an important place to have a leadership position as well as expanding the portfolio going further out. And I think, as we showed earlier, our growth rate within the siding market is 2x the rate of the market. So our diversity of products and our quality of our teams and our products as well as the alignment between our exterior product selling team means we're gaining share in that category going forward as well. I believe the second question was residential versus multifamily. Kaycan is about 40% new construction, 60% renovation, so again renovation being the more resilient of the markets through the cycles.

In terms of implementation cost, it's very limited. The synergy, what I have announced, $30 million, is basically the net of that. So it's already included. So it's very, very limited.

Next question from Elodie Rall from JPMorgan.

So I'll have three as well. First of all, just like in terms of the capacity of the group to absorb this acquisition, how do you view this in terms of stretching management bandwidth with regard to GCP that still has to close and how this will close like broadly at the same time? Is this something you are comfortable doing like altogether knowing that GCP is still coming? Second, why this specific market and why not strengthening actually on the construction chemical side, especially with GCP, but also with -- we know that some admixture businesses might be for sale as well in the U.S. And lastly, why would you divest the U.S. distribution side and keep the Canadian distribution?

Thank you, Elodie. So I'll take those different questions. First, I'm not worried at all about our capacity to integrate. Continental is done. Continental was done between Jay Bachmann, former CEO of Continental, and Mark Rayfield. Second, on GCP, keep in mind that there will be a small portion of GCP, the waterproofing business, which goes hand-in-hand with our roofing business, which will go under the North American region and the leadership from Mark with one head managing roofing. So that will be an easy integration, waterproofing totally linked to our roofing regional business in North America. The rest of GCP will be integrated by Thierry Bernard, the CEO of Chryso. So this is Thierry, David Molho, the Head of High Performance Solutions, who are working on that. They have a weekly, if not more, calls to prepare the integration. It's moving well on GCP. We have made good progress on the different antitrust reviews. We still expect that to arrive in our books in the second half of 2022. So no worry, you are right, it's an important question and something that I pay super high attention to. I'm extremely comfortable with the team that we have in North America. Joe Bondi is the manager of siding that Mark Rayfield highlighted, a very seasoned manager that has been around Saint-Gobain for many, many years, very successful on siding, and the leadership of Mark, which has already proven a lot, notably with Continental. Second, construction chemicals. Yes, we want to continue to grow the construction chemicals, admixtures. We are actually working on some smaller deals that will complement Chryso and GCP. And as we speak today, we have to close GCP. So we are not going to make a significant move that could complexify the antitrust regulatory approval regarding GCP. We have made good progress in Europe. We are making very good progress in North America. We are also finalizing and in the review of the U.K. But we are not going to make a significant move that could complexify or delay the closing of GCP, notably in the U.S. Based on the market share that GCP has on admixtures, we cannot be the buyer of MBCC if Sika has to resell MBCC in the U.S. So that's not something we can even look at for antitrust reasons. So we are not giving up on an opportunity like that because of this additional acquisition in North America. Finally, on U.S. distribution, it's a very minor portion. And as Mark highlighted, Canada is a special market where Kaycan has a #1 position. And Canada, as a market, is used to kind of integrated distribution with a very large presence. They have 30, if not more, locations across all Canada. And we are going to leverage those distributor locations to actually sell more of Saint-Gobain Canadian products. In the U.S. when you have only 20 locations across all the U.S., you don't have any critical size. So we prefer to go, and this is also a good portion of the existing sales of Kaycan in the U.S., that go to what we call the first -- the one-step distributor, the big distributor of Saint-Gobain. They are, by the way, the largest customers of Saint-Gobain worldwide. Mark knows them extremely well. And we are confident that it will be a smooth partnership, divesting the small U.S. distribution business to our existing distribution partners in the U.S. specifically. So two sets of picture between Canada and the U.S.

I think it just reinforces that the approach we have taken is by country. Because you need to look at the strengths of each country. And then based on the strengths, you can decide to keep or not keep any portfolio. It's not just distribution. Anything for that matter is what Saint-Gobain has been doing for the last 3 years.

Next question from Arnaud Lehmann from Bank of America.

Three quick questions on my side, please. Firstly, I think you gave the split between new construction and renovation. Would you mind giving an idea between residential and nonresidential exposure for Kaycan, please? Secondly, have you already identified a potential buyer for the U.S. distribution business of Kaycan? You sound pretty confident that you can sell it at similar multiples to your acquisition price. And lastly, could you give us an indication of the performance of Kaycan in the last couple of years? You gave some useful data relative to 2017/'18. But I guess, I'm interested to see if Kaycan have enough pricing power in the last 12, 18 months to cover cost inflation.

I think, Mark, most of those questions are for you, so on residential and nonresidential?

Yes, I can address those. I mean, on residential and nonresidential, we don't have strong visibility to the breakdown of residential and nonresidential. From what we know of the products and from our tours and business meetings, we believe it's more residential and multifamily residential and smaller in the commercial light construction side of it.

So kind of 90-10 type of ratio between residential and nonresidential. And when it's not residential, I know it's light nonresidential, it's small restaurants, small [indiscernible], not super high commercial buildings.

On the second item, I think what I mentioned earlier, it's a very good building distribution business. So the fact that it's small and doesn't have the scale that we think is appropriate in the U.S. doesn't mean it's not a great business. There's been lots of acquisitive activity with distribution in the U.S. So we feel very confident. We aren't announcing that we have a partner for that. We're very confident that the asset will be very appealing in the marketplace. And we're very confident of closing that. And from offsetting inflation, they've done a very good job of getting better price than cost of factors. And we've seen improvement in the results from when we started this process to where we are now. So we see that trend continue.

And Arnaud, taking back a bit of history, remember some of the decisions we took on our overall businesses in the U.S., when we bought years ago Norandex? We have kept siding of Norandex. And we grew it very nicely within CertainTeed as a second brand and a profitable brand. And we sold the Norandex distribution arm. So this is the kind of operation that Mark has been able to execute. And we feel very confident with the intimate partnership we have with some big names in the U.S. to do that on a smooth way.

And you just have to keep in mind, it is very small. So it's not going to make any difference to the overall multiple of the transaction.

Right. So you're not changing your strategy on distribution in North America, I guess, was the broader question, considering, as you said, you sold Norandex a few years back.

No, we don't change it. But in Canada, it makes a lot of sense. As Sreedhar said, we are super fragmented country-by-country on how we develop our routes to market. In Canada, it makes sense to have distribution. They have a strong foothold across all Canada. And this is a route to market that we are going to leverage. And the Canadian market is very much used to that, as highlighted by Mark in one of the slides. So U.S. is different. So we are taking a pragmatic approach in the U.S. It's small and we sell it. In Canada, it's strong. This is the way the market is organized. This is on Slide #11. And it makes full sense for us to use it, leverage it, and, for instance, sell very quickly through Kaycan distribution outlets, the roofing products of CertainTeed, which they don't have today. So that will be part of the growth development.

And next question is from Tobias Woerner from Stifel.

Three, if I may. Number one, the transaction, was it a process, i.e., an auction? Or was it a one-on-one situation? You alluded quickly to the fact that you've known the company for a long time. The second question relates to Slide 10, which I find quite intriguing in as far as you showed before/after and you show the revenues relating to Kaycan, which seems to point to some good potential here, i.e., the revenue per plant seems to be much lower and the employees -- the plant also seems to be much higher. Maybe you can give us some sense there. And then just lastly for Sreedhar if I may, the depreciation, the D&A has the potential of sales for Kaycan itself and maybe also for a wider North American business once you achieve all these or close all these acquisitions.

Thank you, Tobias. So I will answer the first, Sreedhar, the third, and Mark will take the second one because you have toured a lot of those facilities. As I mentioned in the introduction, it has not been adoption. It's bilateral, one-to-one discussion that we have had and that our teams in Canada and in the U.S. under the leadership of Mark had over the last 4, 5 months. Clearly, they sold to CertainTeed and Saint-Gobain because of the value that we -- the value that we share, the customer approach, the innovation, the brand we made of Saint-Gobain. Mark has been highly involved in the discussion. I talked to the owner of this business, which was created in 1974. And he told me again, "I would never have sold this business to any other player. I was approached 50 times by private equity competitors. I did choose Saint-Gobain/CertainTeed." So I think it's -- I say that because Mark will be too humble to say it. But it's a big tribute to our teams in North America, how attractive we have been also for things like Continental. Competitors, customers, distributors, they watch us, what we have done with Continental Building Products, what we have moved also making this acquisition on Grace. All this, I think, is a strong pillar to build upon. So I'm happy that it's the second big move in 1 year. Like Chryso, it was a one-to-one discussion for myself and Thierry Bernard and the private equity. I think those deals are sometimes and very often the best ones because you know exactly where you want to land and you agree and you move on. But it's again a high tribute to the image of Saint-Gobain and the position in North America. Mark, you take the second one on the...

Yes. So I think the question you were asking is based on the size of the sales and revenue per plant and per employees. I'd say it's not a -- there's a number of different answers for that. But the first thing from touring the plants as we do when we look at all these, what we learned there are some very exciting things they do that we do not do. And we take a lot of learnings, where we can cross across our network. And we see things that we do that they don't do back and forth. So we see great operational excellence and world-class manufacturing synergies through the organization. And that's what we think going forward in a market that's very constrained. They have multiple product offerings, so they have engineered wood, they have metal, they have vinyl siding and shakes. So there's diversity across the plants from that perspective. And then there is some based on the channel to the market and how they spread across the region. So my answer is we think there's efficiencies. We don't -- we think that every efficiency we can draw out of the business that's a synergy will help us grow further because we think there's constraint in the marketplace right now across North America. And this will allow us to fill it further.

And Tobias, one point also because we cannot compare, I would say, apples and oranges in the 11 manufacturing plants that we show on Slide #10 for Canada, keep in mind that you have big plants of gypsum and two big plants of insulation. So these plants, they are capital-intensive. And therefore, they develop a huge turnover per plant. On the other side, the siding plant, they are low capital-intensive businesses. It's extrusion lines, very flexible, low CapEx, so at the end, smaller size. Therefore, you cannot make a pure ratio in terms of sales per head related to each plant because we are not talking about the same process and the same products.

So coming to your third question, Tobias, EBITDA is $83 million. So EBIT is $80 million. So depreciation is very limited. And again, it reinforces Benoit's point, the siding business is low capital-intensive.

And for the entire group, i.e., $10 billion of revenues at the end and the $2 billion of EBITDA, what sort of EBIT should we -- sorry, what sort of D&A should we be thinking of in percentage of sales, if possible, please, for that?

For the whole group, in terms of -- I mean, it is -- we're talking about 16% versus 19% now. So it's around 3 to 4 -- 3%, 3 points that you can take approximately.

And next question is from John Fraser-Andrews from HSBC.

I'll have a couple around the rollout potential of the products, the siding, vinyl and aluminum products. I appreciate that you're divesting the U.S. distribution. But is there any scope to take product from Canada into any part of the U.S. or the technology into the U.S.? Is that the plan? And what's in the $7 million of sales synergy? Is that just synergies within Canada or -- because it doesn't sound like a great significant amount in terms of potential rollout further afield.

So Mark, you take that question on the overall product portfolio in both Canada and U.S., yes?

Yes. So the rollout -- so the portfolio already is sold pretty broadly and widely. So their engineered wood is actually sold not only in Canada and the U.S. but also even in parts of Europe. And from a metal perspective, they're manufacturing both in the U.S. and Canada and sell the products on both sides. However, certainly a huge opportunity to expand both those products that are primarily in Canada down into the U.S. from a rollout of product lines. And that's one of the exciting parts of the acquisition. From a sales synergy perspective, most of what's captured in there is cross-selling opportunities in their existing branches in Canada, where we can sell more CertainTeed products going forward and a very small portion of what you would consider rollout. That is a large upside going forward. But we're really focused, on a synergy perspective, on the hard cost synergies because that's really what I think people look at when they look at these acquisitions. So these are the simple layups of what's shown there, the simple layups of adding our products that are just distributor locations or replacing competitive products in the distributor locations.

It's indeed actually a very, very low-hanging sales that we have not taken into account. And honestly, in my view, the potential is much bigger. But I really prefer to emphasize more on cost synergies. And if it is something which is clearly identified, we take it.

Sure. Just a follow-up in the sales, the $472 million in revenue, how much of that then is in the U.S.?

Speaking of that $7 million, we are talking of maybe $3 million would be in the U.S. and $4 million will be in the Canada.

No, I think the question is on the $472 million, how much is in Canada? The majority is in Canada, more than 50% is in Canada and around 47%, 48% is in the U.S. And where we think, with Mark and Sreedhar, that the top line synergies is rather conservative that in order to deliver $7 million of additional EBITDA, we will need $20 million in sales. When you combine the $600 million of siding we have in the U.S. plus the $472 million we have across Canada and the U.S., adding $20 million on a $1 billion-plus is something really achievable. So I feel confident. And I'm actually eager that Mark will deliver more. I'm sure he will deliver more. But that is clearly within reach and just broadening the -- when I see what Mark and the team have done in terms of cross-selling between roofing and siding, for instance, before the new organization of Saint-Gobain, we were selling a lot of roofing west of Mississippi and our siding business was more east of Mississippi. But we leveraged cross-selling opportunities, salespeople covering one territory with both roofing and siding for the exterior product distributor. And we gained a lot of share with siding just by cross-selling roofing and siding west of Mississippi. So if you think of what we can grow together with Kaycan on complementary product lines, I'm quite confident we'll get there.

Next question is from Mr. Lefèvre-Moulenq from CIC.

I have two questions, mainly the others have already been addressed. First one, performance of Kaycan versus CertainTeed in -- focusing on siding. Siding margin of Kaycan is close to 17.5%. Could we have, please, more color on that of CertainTeed, specifically to the siding? And secondly, regarding your Slide Page 15, first consolidation of GCP. It is not in 2022, it should be in 2023 after the authorization of the competition watchdogs.

Yes. Okay. So let me just answer one. In terms of margin of siding of CertainTeed, it's more or less similar what you have in Kaycan. Coming to your point of the Slide #15, it is just a pro forma. It just gives you a broad idea. You are right that it depends on the closing. But we are expecting the closing by end of the year. So at this point of time, it's a pro forma. Just to give you a flavor of all this strategic move, which we're doing, basically it's going to double the profitability of North America for Saint-Gobain. So that's the message to be gained and not the nitty-gritty of the pie.

We wanted to highlight there, Jean-Christophe, that within our Capital Markets Day, in terms of capital allocation and balance of the geographic exposure of the group going forward. I had one slide where I said 2, 3 years ago, we had 65% in Europe, 15% North America, 20% Asia and emerging markets. Directionally, in the next years, and it could go a bit beyond the '25 period of Grow & Impact. I want to have more balance like 50% Europe, 25% North America, 25% Asia, emerging markets. What we show on this slide is that we have been very decisive, very disciplined on the capital allocation, agile in our moves, organically and externally. And we'll get close to 20% of our total sales in North America on a pro forma basis by 2022. So that's, I think, the spirit of moving from 15% to almost 20% in just 2, 3 years and committing ourselves to the rebalancing of the geographic exposure of the group.

Benoit, Sreedhar, I have a follow-up question regarding the market share. I don't -- I am not sure you quantified Kaycan market share in Canada and also CertainTeed market share in siding in U.S. Would it be possible? Or is that too difficult?

We are going to go through antitrust approval in the coming weeks. So that's a discussion that we will have with the relevant competition authorities. Again, we are not in siding in Canada. So there is no difficulty there to tell you. Our market share in siding in Canada will be the market share of Kaycan, which is the #1 player in Canada. And in the U.S., we are the #2. So that means we still have room to grow and also expand and enrich the offer across other product lines besides vinyl siding.

Yes. But Kaycan percentage is not possible to know.

Sorry, again the question?

Yes, Kaycan, #1, okay, I understood. But percentage of market share in Canada, it's not possible to have.

We have given to you some indication about the number of plants they have as compared to the top players in the market. We gave you a rough idea because all the numbers are not public information.

Again, it's something that we will define in terms of definition of the market in the next week. It's roughly 1/3. If you want to guesstimate, it's roughly 1/3 on the siding facade residential market in Canada. It's a meaningful -- I guess, that was the question. It's a meaningful #1 position. Like meaningful, we are #1 in gypsum plasterboard in Canada coast-to-coast, as Mark mentioned. So yes, we are building meaningful positions across Canada, which is part of the top 15 countries of Saint-Gobain.

We have a new question from Yves Bromehead from Exane BNP Paribas.

Just two quick follow-ups. One is if there is a Build Back Better and a focus on social housing, is actually vinyl siding one of the most advantageous and competitive products? And second, can you internalize some of the PVC costs with Chryso or there's no synergy on that front?

Yes. No, it's part of your question, which is very important. And I didn't want to add to that when you asked about the vinyl siding growth versus other materials. In the last years, is that vinyl is the best economic solution for facade on residential markets in North America. So there is -- as Mark mentioned, there is a geographic component in it in terms of what are the weather conditions where vinyl siding is more relevant than others. For instance, fiber cement is not good in the north part of the U.S. in cold weather, vinyl siding is much better. And second, vinyl siding is much more economical in terms of overall siding versus others. It's a factor of 1 to 3 when you take the most expensive solution versus vinyl siding.

Yes. And on the synergies on raw materials, yes, there are synergies on PVC purchases, if that was the question.

There was a question on Chryso. No, frankly, we don't see synergies with Chryso or GCP specifically for siding. Again, the waterproofing...

PVC.

Sorry, PVC. No specific on PVC.

We both use very common materials with common suppliers. And there would be significant synergies on the purchasing end of raw materials for vinyl.

Thank you. We have no more questions for the moment. [Operator Instructions]

Okay. If we don't have any other questions, thank you again for your time in a short notice. It's a major step for us in light and sustainable construction, totally aligned with our Grow & Impact strategy. Good growth in North America, you have seen the success both in top line and profitability that we have developed with Mark and his team over the last years. You know Mark well, he was there in Paris during our Capital Markets Day. So we are all committed to make the fantastic success for both Kaycan and Saint-Gobain/CertainTeed teams in North America and create a great level of value for Saint-Gobain shareholders. Thank you very much for your time, and have a good evening. Thank you. Thank you, Mark.

Thank you very much. Have a good day.

Thank you. Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.