Mark Rayfield Talks US Economy

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Let's hear from someone who participates in this economy every day. Saint Goban designs, manufactures, and distributes building materials for commercial and residential construction, obviously a huge part of the economy. The company's results last week showed that it's North American business continues to lead the way for the group is North America CEO Mark Rayfield joins us.

Now, Mark, thanks so much for your time.

Let me get first off, your take on the economy, on supply chains, on inflation. You know this has been a real focus out of the pandemic.

How does it look to you right now?

Well, first off, thanks for having me this morning. I think the economy has been very strong, as you mentioned, and we are continue to see a relatively robust housing environment.

We've been saying for some time now that the housing.

Stock is underbuilt in North America, and we see that the general even with interest rates at a higher level, the building continues to go at a steady state in North America, as well as remodeling renovation. So so, supply chains have loosened up, inflation has settled down. We don't see as much inflation right now, but we still see very strong demand in both new build and renovation.

So what's your revenue breakdown look like? Then?

In terms of commercial real estate you're putting up versus.

Say, residential and multi family homes, we're.

Certainly much heavier residential, so we're over two thirds and residential in North America versus commercial in North America. In that, you know, the single family multi family were much more again, probably two thirds on single family versus multi family there, and then if you take it one step further, we're probably two thirds in renovation and remodel versus new builds, so very diversified across the network.

Mark what would a single rate cut begin to unlock and where would the most opportunity be.

It's a great question.

I mean, I think we've been talking about rates going up and down for some period of time. We've seen that housing because of it, underlying fundamental need for housing has stayed relatively resistant. I think there's some with rate cuts coming down one or two cuts, I.

Think you'll see some people start to leave their homes. Right now.

They're locked in their homes with very low interest rates, and in doing so, they're unwilling to sell their home and go to another house, and that's kind of kept the constraint of houses rotating. Hasn't stopped new build, but's kept the houses rotating, which has kept prices up on housing overall.

Well, that's kind of what I've been wondering about, the fact that you don't see people moving around, that this housing market has been kind of frozen, if you want to call it that.

When it comes to the.

Sort of breakdown that you have between new build versus renovations, I'm wondering if it's more tilted to renovations right now, given just people aren't really moving and we have this under supply of housing.

It is, you know, I think renovation goes up and down a bit. You saw the huge surge in COVID that's obviously calmed down a little bit. Renovation actually happens a lot when you start rotating homes because when people are getting ready to sell a home, they renovate it to sell. People generally don't get exactly the house they want when they buy one, so after they buy it, about twelve to eighteen months after purchasing it, there's another

Mark, I do understand this inclination to rotate. You think that those higher income customers could get a more expensive home, but with the weaknesses you're seeing in the lower to middle end consumer, there's skepticism here that those customers can upgrade into a new home at this juncture as well. Even if rates come down, prices are still relatively high given the lack of supply. How much certainty do you have in that rotation, you.

Know, I think I have certainty because there's always been that issue around when you upgrade from one house to another. So I think there's always that challenge when you go through that for all of us as we went through that process, so I think that still takes place. I think you've got a lot of homes rotating with people are kind of leaving and going to a single home in the southeast or southwest retiring, so to speak.

And that's what we've seen for movement.

And houses now is kind of cash buyers cashing out of the house and then going down and buying homes there. I think is we'll see the new people entering the homes with a slight rate cut.

Mark.

Let's go back to your business though, because North America it's not just the United States, it also includes Canada. And when it comes to Canada, you've made a lot of recent acquisitions over the past couple of years, and I'm curious what the strategy looks like going forward. Are you looking to potentially acquire more businesses. Are you happy with the portfolio as it stands.

Well, We're very happy with the portfolio that we have.

I mean, we've done there's say, a lot of expansion, with almost six billion invested in North America, in about half of that in Canada the last couple of years.

What are you seeing in terms of, as I said at the top, supply chain and inflation, especially the latter, you know, as the Fed moves to decide well on Wednesday and then again in September, is inflation still sticky for you?

Supply chain has stayed relatively steady, so products are available, but again as high demand and certain certain of our categories, so a few of our categories are hold out and on allocation, so a little tight in supply chain, but able to meet in the marketplace. Inflation has tempered, I would say, so there's not as much price pressure.

On raw materials.

There's still some labor price pressure and therefore prices going out the door have also moderated, haven't gone down, but just stayed relatively steady.

In terms of you've been the CEO of the North American Division here since the Trump administration, And I wonder about your experience under these two different administrations, Trump and Biden. Is there a difference in you know, the operational, everyday business under each of those administrations.

Not really.

You know, we're fortunate to be in the housing and renovation remodeling markets. So people need homes, it's a fundamental need. We kind of service the sustainability side of that market, making sure we can make products that are sustainable, lower CO two footprint, lower energy costs for the homeowner. And that pretty much is universe flow across I hope all political parties.

So we have not seen a big change.

We we focus on the end customer, We focus on our employees and try to keep that consistent regardless of who's in power.

Mark, we thank you so very much for your time. Of course, that is Mark Rayfield, CEO San Goban, North America. Big look here at that housing market and what it takes to build