Q2 2022 Simpson Manufacturing Co Inc Earnings Call
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Please note, this conference is being recorded.
I will now turn the conference over to your host, Kim Orlando with Atto Investor Relations. You may begin.
Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's second quarter, 2022 earnings conference call. Any statements made on this call that are not statements of historical fact are forward-looking statements.
Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements. Actual future results may vary materially from those expressed or implied by the forward-looking statements. Actual future results may vary materially from those expressed or implied
We encourage you to read the risk described in the company's public filings and reports which are available on the SEC's or the company's corporate website. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today, whether as a result of new information, future events, or otherwise.
Please note that the company's earnings press release was issued today at approximately 4.15 PM Eastern Time.
The earnings press release is available on the Investor Relations page of the company's website at ir.simpsonfng.com.
Today's call is being webcast and a replay will also be available on the investor relations page of the company's website.
Now I would like to turn the conference over to Karen Colonius, Simpson's Chief Executive Officer.
Thanks, Kim, and good afternoon everyone. Thank you for joining us today.
I'll begin with an overview of our second quarter financial results and performance drivers before turning to an update on our key growth initiatives and capital allocation priorities.
Brian will then walk you through our financials in fiscal 2022 business outlook in greater detail. Gold
As many of you already know, we completed our acquisition of Atanko, a leader in fixing and fasting solutions, primarily for commercial building construction markets throughout Europe , on April 1st. We have completed our acquisition of Atanko, a leader in fasting solutions, primarily for commercial building construction markets, on April 1st.
Since we announced the transaction back in late December , planning for and initiating the integration of a TANCO has been our primary focus and it has been progressing according to plan.
We pulled together a project management office that includes a leading, globally recognized, external advisory consulting group.
together with a multidisciplinary team of team management from both Simpson and Atanco.
Because of our complementary cultures and values, our combined team has been working extremely well together as we develop detailed plans for each of our specific integration tracks.
Our approach has continued to high employee retention rate throughout the transition.
After several months of hard work, we are very pleased to have found no material adjustments to our previous, the identified synergy opportunities. So, our previous, the identified synergy opportunities.
Although the realization of the full amount is subject to change based on current environment in Europe
With the groundwork we've laid so far, we believe we are still well positioned to capture meaningful benefits from those synergies in the coming years.
We delivered strong financial and operational performance in the second quarter. Net sales of $593.2 million increased 44.6% year-over-year.
Our sales growth was primarily attributed to our acquisition of a Tonko, which contributed 80.3 million in sales.
Our sales further benefited from product price increases we implemented throughout 2021 with offset rising raw material costs.
Volume in North America was relatively flat and was mixed across all of our distribution channels. And was mixed across all of our distribution channels.
Notably, volume in our home center channel, which includes both our home center and co-op customers, and is where we see much of our repair, remodel, and DIY business was up slightly during the quarter. And DIY business was up slightly during the quarter.
Software volumes from our contractor distributor customers offset this increase.
Our consolidated net sales in Europe for the second quarter were $133.2 million, an increase of 136.1% year over year, due primarily to the contribution from Otanko, as well as product price increases in response to regular material costs.
which were offset by significantly lower volume over all and the negative effect from a strengthening US dollar. And the negative effect from a strengthening US dollar.
Our second quarter consolidated gross margin was 43.7% compared to 47.9% in the year-ago period.
Attonco contributed $19.2 million to our gross profit on its $80.3 million of sales net of 9.2 million in purchase accounting adjustments.
which reduced our second quarter gross margin by just under 160 basis points.
Compared to the prior year and before considering the addition of a Tonco, our gross margin declined as expected as our average raw material costs began to catch up with some of our price increases.
Ryan will elaborate on the key drivers of our performance as well as our margin expectations for the remainder of the year. As well as our margin expectations for the remainder of the year.
I now like to turn the discussion on our five key growth initiatives.
As previously discussed earlier this year, we re-aligned our sales team to more specifically concentrate on five end use markets.
Residential, commercial, OEM, National Retail, and Building Technology.
This neurofocus has enabled various new customer and project wins within each of our five growth initiatives. And project wins within each of our five growth initiatives.
Here's just a couple of examples of what happened in the second quarter of 2022.
In the OAM market, we were recently awarded the opportunity to supply our complete wood solutions, including specialty fasteners and other products for the construction of custom wood-based crates.
Since the crates will be utilized for shipping high value technology products, the structural integrity of the crates is highly important and is in direct alignment with our value proposition.
We accomplished some key project wins within the mass timber space.
Our solutions are now being specified to construct mock-up structures from coast to coast to serve as mass timber training course for Union carpenters.
In addition, our mass timber solutions are being utilized in the construction of a new home office for a large US-based company.
Similar to the prior example, we were able to showcase our unique testing capabilities through our State of the Art Test Lab to demonstrate to the engineers that our products were suitable for their structural designs.
We're also continuing to expand our offering in the commercial space.
Our concrete solutions are being used in the construction of new graduate housing in Utah, as well as for our hotel in Florida.
Our Simpson and Atonco teams also work together to sell products into a currently under construction venue related to the upcoming Olympic Games in Paris.
Within the national retail market, we made strides in our RNR and DIY initiative as it pertains to the outdoor access. As it pertains to the outdoor access.
We now have several stores equipped with pergola displays with support from both the Home Depot and Lowe's.
In addition, based on point of sale activity, we've been pleased to see our customers continue to add inventory on our top 25 R&R and DIY products. The next step is to add inventory on our top 25 R&R and DIY products.
As we continue to make progress on our growth initiatives, we are confident we can continue our above market growth relative to US housing starts in fiscal 2022 and beyond.
These select key examples further emulate our founder, Berkeley Simpson's nine principles of doing business.
And more specifically, the focus and obsession on customers and users.
It's through these principles that Barks Legacy continues to live throughout our company each and every day.
I'll now turn to capital allocation.
Our priorities will continue to focus on both stream our organic growth and returning value to our stockholders through quarterly dividends and selected opportunistic refurchases of our shares. and selected opportunistic refurchases of our shares.
As recently announced, we updated our capital return target to 35% of free cash flow versus 50% historically, as we focus on repayment of the debt we incurred to finance the acquisition of a tonco.
Key areas of reinvestment into the business will be supporting facility expansion to meet our growth targets, as well as in areas of engineering, marketing, sales personnel, and testing capabilities across the company.
Throughout 2022, we have been reviewing the footprint for our US operations with assistance from another globally recognized third party.
in conjunction with the integration of Tonto in Europe .
As a result, we identified facility expansions in the US that will improve our overall service. That will improve our overall service.
production efficiencies, and safety in the workplace.
as well as reduce our reliance on certain outsourced, finished goods, and component products.
and continue to ensure we have ample capacity to meet our customer needs.
These investments reinforce our core business model differentiators to remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service.
Investments in these expansions have already started this year and will continue into 2024.
Brian will elaborate on our capital expenditure forecast shortly.
Lastly, while the integration of a TomCoat remains paramount, we are always evaluating potential M&A opportunities that would enable us to better provide complete solutions for the markets in which we operate through complementary products.
especially in the areas that support our key growth initiatives.
Before I conclude, I wanted to reiterate that all business activity in Russia and Belarus was suspended by holding all product sales and shipments to the region.
We continue to estimate the revenue impact will be less than $5 million.
The current energy situation in Europe adds a layer of uncertainty.
At this point in time, we believe we will be able to secure access to the energy we need to run our operations.
Our thoughts remain with all of those that have been affected by this war.
In summary, we're very pleased with the significant progress we made integrating the Tonko as well as advancing our key growth initiatives.
Our excellent operational execution produced strong financial results.
while the rapidly changing macroeconomic environment, including rising interest rates, inflation, and other factors continue to impact the industry at large.
We believe Simpson is uniquely positioned to perform, giving our diversification strategy and strong brand reputation that we've cultivated over the past 66 years.
We are optimistic we will achieve our company ambitions as outlined in our March 2021 Annas investor day by 2025.
Thank you to all of our employees for your dedication and commitment to superior levels of customer service and most importantly to working safely every day. I'm most importantly to working safely every day.
Now I'd like to turn the call over to Brian . We'll discuss our second quarter financial results and our 2022 Outlook in Greater Detail. The first quarter financial results are in the state of the state of the state. We'll discuss the second quarter financial results We'll discuss the second quarter financial results
Thank you, Karen, and good afternoon, everyone. I'm pleased to discuss our second quarter financial results with you today.
Before I begin, I'd like to mention that, unless otherwise stated, all financial measures discussed in my prepared remarks.
today refer to the second quarter of 2022, and all comparisons will be year-over-year comparisons versus the second quarter of 2021.
Now, turning to our second quarter results.
As Karen highlighted, our consolidated net sales increased 44.6% to $593.2 million.
Within the North America segment, net sales increased 30.2% on relatively flat volumes
to $456.4 million, primarily due to the price increases we implemented in 2021 to offset rising raw material costs, which was partly offset by foreign currency translations. Translations
In Europe , net sales increased 136.1% to 133.2 million dollars, primarily from Otanko, which contributed $80.3 million in net sales, and to a lesser extent, price increases intended to offset higher material costs abroad.
As Karen shared earlier, Europe's volumes without a tonko were down compared to the prior year quarter.
Europe sales were negatively affected by $6.9 million in foreign currency translation related to Europe's currencies we can need against the United States dollar.
Would construction products remain consistent at 87% of total sales?
and concrete construction products.
also remain consistent at 13% of total sales.
Consolidated gross profit increased by 32% to $259.3 million, which resulted in a gross margin of 43.7% compared to 47.9%.
On a segment basis, our gross margin in North America decreased to 48% compared to 49.9%. Primarily due to higher material costs as a percentage of net sales.
which were partially offset by the product price increases and we enacted throughout 2021.
Our gross profit dollars in Europe totaled $39 million and included $19.2 million from a taco.
which is net of $9.2 million in fair value adjustments.
for acquired finished goods as a result of purchase accounting.
This adjustment is the primary factor as to why gross margins declined in Europe to 29.3% from 36%. This is a 29.3% from 36%.
The non-cash purchase accounting adjustment is effectively non-recurring for the balance of 2022 with only a nominal amount more expected in the third quarter. The non-cash purchase accounting adjustment is in the third quarter. The non-cash purchase accounting adjustment is in the third quarter.
Resulting in a total charge of $10.5 million based on our preliminary purchase accounting, which is subject to change.
From a product perspective, our second quarter-grace margin on wood products.
was 43.7% compared to 47.4% in the prior year quarter.
was 43.2% for concrete products compared to 47.5% in the prior year quarter.
Now, turning to our second quarter cost and operating expenses.
Total operating expenses were $120.4 million, an increase of $25.7 million, or approximately 27.1%.
Operating expenses included $14.9 million, attributable to a tonco, and reflect $4.2 million of non-cash, recurring, amortization expense.
on the estimated fair value of acquired intangible assets, which is also subject to change as we finalize our purchase accounting over the course of the year.
At a percentage of net sales, total operating expenses were 20.3% and improvement of approximately 280 basis points compared to 23.1%.
The second quarter, research and development and engineering expenses increased 19.6% to $16.9 million primarily due to a taco.
Selling expenses increased 35.9% to $45.1 million due to a taco as well as personnel in travel-related expenses.
On a segment basis, selling expenses in North America were up 10.6% and in Europe , they were up approximately 119%. In the West, business alrededor 1 km and 30 km on the Gospels have been back economy over a couple single shifts in data recovery of the pandemic. Thank you.
General and administrative expenses increased 23.2% to $58.4 million.
primarily due to a taco, including amortization.
and personnel and professional fees for the company overall.
As a result, our consolidated income from operations totaled $133.1 million, an increase of 30.8% from $101.7 million due to higher consolidated gross profit, partly offset by our operating expenses.
and an additional $5.9 million spent on acquisitions.
specific integration costs for Itonco.
In North America, income from operations increased 35.8% to $137.4 million, primarily due to higher gross profit, which was partially offset by higher operating expenses, including travel and entertainment and personnel costs.
In Europe , income from operations decreased 5.3% to 5.6 million dollars.
and is net of a $1.6 million loss from operations for Utanko.
Ytanko's operating results included $9.2 million for the fair value adjustment of acquired finished goods.
$4.2 million of the amortization expense on acquired and tangible assets. $4.2 million of the amortization expense on acquired and tangible assets. assets.
and $5.9 million for integration costs for a total of $19.3 million.
Please note that the purchase accounting adjustments are preliminary and subject to change as we finalize our purchase accounting during 2022.
As we continue to integrate a Tonko into our European operations, we expect to incur additional costs over the second half of 2022.
On a consolidated basis, our operating income margin was 22.4%, a decrease of approximately 240 basis points from 24.8%. A decrease of approximately 240 basis points from 24.8%.
I will discuss our updated operating margin outlook for the remainder of fiscal 2022 shortly.
Our effective tax rate decreased slightly from 26.9% to 26.8%.
Accordingly, net income totaled $93.6 million or $2.16 per fully diluted share compared to $72.5 million.
or $1.66 per fully deleted chair.
Now, turning to our ballot sheet in cash flow.
Our balance sheet remained healthy. At June 30, 2022, cash and cash equivalents totaled $246.1 million.
As of June 30th, 2022, total debt was $694 million, and just under $200 million remained available for borrowing on our primary land of credit.
Our inventory position at June 30th was $539.8 million.
which was an increase of $96.4 million compared to our balance at March 31, 2022, primarily attributable to a taco.
As always, we will remain diligent in managing our inventory purchases through careful purchasing practices as we continue to ensure strong levels of customer service and on-time delivery standards.
As Karen highlighted, we remain dedicated to supporting the growth of our business as well as providing strong capital returns to our stockholders through both dividends and share repurchases while focusing on repaying the debt we incurred to finance the acquisition of a Tonko. We are committed to supporting the growth of our business as well as providing strong capital returns to our stockholders through both dividends and share repaying the debt we incurred to finance the acquisition of a Tonko.
During the second quarter, we invested $12.5 million for capital expenditures and paid $806.6 million for the acquisition of a taco.
We also paid $10.8 million in dividends to our stockholders during the quarter. Thanks to our stockholders during the quarter.
Additionally, we repurchased approximately 260,000 shares of our common stock at an average price of $96.5 per share for a total of nearly $25 million.
As of June 30th, 2022, we had approximately $53.7 million available under our $100 million share repurchase authorization, which remains in effect through the end of 2022. Chad Gerber.
Next, I'd like to discuss our 2022 financial outlook, which includes the acquisition of a taco. Two quarters of actual results.
and our latest expectations regarding demand trends, raw material input costs, and operating expenses.
Based on business trends and conditions as of today, July 25th, we are slightly revising our guidance for the full year ending December 31, 2022.
We now expect our operating margin to be in the range of 19% to 21% compared to our previous estimate of 19% to 20%.
which included projected results for a taco.
Our revised guidance is attributable to better visibility on material costs and expected results from a TONCO along with approximately $20 to $25 million in integration and transaction costs for the acquisition.
Further, we continue to estimate the cumulative top-line impact from the product price increases. We implemented throughout 2021 will be approximately 300 million in 2022 versus 2021.
We also expect our total cost of goods sold will continue to increase as a percentage of net sales as we work through our on-hand inventory through the balance of 2022.
Next we expect interest expense on the outstanding $250 million.
Revolving credit facility and term loans, which had initial borrowings of $450 million to be approximately $10.4 million.
including the benefit from interest rate and cross-currency swaps, mitigating substantially all of the volatility from changes in interest rates.
We are reiterating our 2022 effective tax estimate, which includes a taco of 25.5% to 26.5%, including both federal and state income tax rates. We are assuming no tax lot changes are enacted. We are assuming no tax lot changes are enacted.
And now we expect capital expenditures spend, we'll be in the range of $80 million to $90 million compared to our previous estimate of $65 million to $70 million, primarily due to the addition of the taco, which has an annual run rate of approximately $10 million. And now we expect capital expenditures spend, and we expect capital expenditures spend,
as well as
The facility expansions Karen highlighted earlier.
We are evaluating specific facility expansions, and as of now, we're moving forward with the expansion of our co-hio manufacturer and the distribution facility, with spend estimated at $10 million in 2022, and $50 million estimated in 2023. The expansion of the co-hio manufacturer is estimated at $10 million in 2022, and $10 million estimated in 2020.
In summary, we're very pleased with our second quarter financial results and the ongoing integration efforts of the TACO. We look forward to continuing to execute against our strategic, operational, and financial initiatives in the coming quarters.
With that, I'd like to turn the call over to the operator to begin the Q&A session.
Actually, before I do that, just one clarification earlier, I mentioned selling expenses. So on a segment basis. So on a segment basis. So on a segment basis.
I said selling expenses in North America were up 10.6%. I need to correct that. They were up 18.8%.
And I mentioned Europe was up 119 percent that that is unchanged.
Now I'd like to turn it over to the operator for Q&A.
At this time, we'll be conducting a question and answer session.
If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Our first question is from Daniel Moore with CJS Securities. Please proceed with your question. Please proceed with your question.
Thank you and good afternoon, Karen and Brian . It will start with North America. You continue to generate really exceptional growth given pricing actions above our expectations. Give us an updated view on, you're updated view on overall housing growth, what that implies for volume growth as well as an overall revenue growth as we think about the remainder of fiscal 2022 compared to the back half of 21.
Yeah, that's a great question, Dan, and I'm sure you've seen that the housing start numbers are coming down a bit.
I think that builders are not quite as optimistic as they were in the first quarter.
And so we're starting to see a little bit of...
those numbers come down also. One of the things I would just keep in mind when you look at the Housing Start numbers is...
If the residential starts are down, which is what we're seeing, but the multifamily starts are up. So I would just reiterate, we put a lot of content pretty much in anything built out of wood. So we certainly will have content in those multifamily.
And the other thing I would just mention is as we look at our much more balanced portfolio than we had in sort of the last choppiness of the residential housing starts, again, much more balanced when we look at.
about 50% of our revenue being tied to US housing starts where about three years ago we would have said 60% of our revenue would have been tied to US housing starts. But certainly seeing with the rise in interest rates.
The builders are seen, it's definitely a little less optimistic about the back half of 2022.
Very helpful. Maybe trying to break that down a little bit more pricing. I think previously you said be about a $300 million benefit in fiscal 22, is that still the right kind of overall level of benefit, has that increased at all.
with continued rising mineral material and machinery pressures.
I don't know what we're still can...
comfortable with that approximate $300 million incremental.
impact of pricing in this year versus last year.
Very helpful. Maybe switching gears sounds like that the Atonco integration is going great, but timing, obviously a little bit dependent on what's going on with the macro, which is uncertain. Can you elaborate or quantify, you know, elaborate at all or quantify what you're seeing in terms of maybe the shifts and timing of realizations of some of those synergy targets at Atonco. Thanks.
Yeah, so...
Remember the 30 million synergies that we had listed, about half of those were defensive synergies and half were offensive synergies.
So we certainly think that the economic conditions we're seeing in Europe might push our offensive synergies out a bit, but we believe we remain on track as far as our timing at the end of 2025 for those defensive centers.
Got it, that's very helpful. Lastly, just to elaborate on the facility expansions. You talked about the Ohio project. Maybe what that entails, you gave us the capex numbers, you don't have to go through those again. What incremental capacity do you expect to be able to generate once that's all said and done? That's it for me.
It certainly adds additional …
footprint there for expanding our warehouse. What that also allows us to do is to be...
rearrange and make our manufacturing operations in that facility very optimal from an efficiency perspective. So as we look at...
additional capacities you can imagine over time. We just have to add additional square footage in...
So, at least we've done them in other locations over the years. And this one is just a game. And this one is just a game.
for sure that we've evaluated the...
the metrics and the growth plans that we've got. So being able to...
Bill, we continue to serve our customers, fish and financial products.
close to our customers.
And
by adding on to the warehouse again. Thanks.
overall operation there.
that much more efficient as we grow into our current plans.
Very helpful, thank you.
Our next question is from Tim Weiss with Robert W. Baird. Please proceed with your question.
Hey, everybody. Good afternoon.
maybe just on the on the back half of 22, any any kind of thoughts or you know kind of modeling considerations around volume in the second half and then I think.
Within North America, I think the last two quarters have seen kind of slatish volume to kind of start the year. So at this point, would you kind of have us model volumes down in the back half of the year, or do you think that's too onerous at this point?
Lavish, two
Maybe down just a little bit.
Okay.
Okay. How do you feel about the inventory levels at some of your customers at this point? I guess I'm trying to understand if you guys have any kind of destocking, if you've seen any destocking, there's a risk around destocking if starts start to decline more meaningfully.
Yeah, that's a really great question. And obviously, you know, we have a lot of salespeople that are out with our customers every day and we're not seeing any concerns about customers having a de-stocking situation in their inventory. So, yeah, that's a really great question.
As we mentioned, we're seeing a little bit of increase from a home center standpoint on some of those key things that they've brought in, obviously, for their big selling season, but we haven't seen anything with our other distributors.
from a desocking standpoint on their inventory.
Okay, okay, good. And then I guess just from a margin perspective, Brian , in the back half, I mean,
Think, you know, year to date, you're doing like, you know, just over almost 23 and a half, 24% operating margins and you're going to 19 to 21. Is it kind of glide down in terms of the cadence? I mean, is Q3 better than Q4 or how do you kind of think of the cadence of the margins in the back half of the year and into next year? I guess when you see kind of the best pressure from raw material normalization?
So, glide down is a term that we would use as well through the second half of the year.
It's interesting this year, it seems like volumes, so volumes impact overhead absorption, and of course overhead absorption.
traditional diese
Simpson Q2, Q3 this year, we would absorb more, have a better margin profile. It seems that's less of an impact.
just because
That seasonality has been...
Less of a
function, but still part of the business, but to a lesser degree. But that being said, came three margins.
better than Q4 margins gliding down. And then as we look at 2020,
Three, as we all evaluate.
Hello, the general operating margin getting back into
All right.
middle higher part of the current range.
You know, certainly seeing Q3 gliding down to Q4 as we wrap up the year.
Okay, so it's fair that Q4 might be kind of the peak kind of normalization for margins, kind of the peak impact.
Correct. Based on a current. Based on a current. Directed by David
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Okay, good. And then the integration in transaction costs, so I think you took the guidance up by five to eight million there from what it was last quarter. Against what exactly is going up on the integration cost? Against what exactly is going up on the integration cost?
Well, right now we see the first half of the year, we're in Q2, continue to work with consultants and our teams to formalize many, many tracks within our...
Integration plan to capture those synergies. Looking at if there were any one time costs.
associated with any kind of severance or things like that. That would be...
potentially part of.
That would be the bulk of that.
Okay. And does that 20 to 25 million go away next year?
For the most part.
Yeah.
And the 20 to 25 million, is that inclusive of the inventory stuff up or not?
Not. That inventory step up all up in that cost of sale line. This is just, yeah, total separate. So as we tried to call out the various elements associated with inventory step up or the intangible amortization, the integration costs are separate and distinct from those other two.
Gotcha, okay, okay, good. That's what I had, so thanks for the time and good luck on the back half of the year, everybody.
Thank you.
Our next question is from Julio Romero with Sedotti and Co. Please recuse your questions. Thanks for your question. Thanks for your question.
Hey, good afternoon, Karen Brine.
Thank you.
So I kind of wanted to start on pricing a little bit. You've got my Mac about 60 million of price remaining.
on the top line in 22 versus 21. Can you just maybe talk about how we should think about the
Maybe the K-10 to the impact being felt in 3Q versus 4Q, should we expect anything at all in 4Q in terms of top line price?
Mostly all of that Q3, Julio.
Got it. OK. And then maybe thinking about a Tonko.
The margins look pretty impressive at first glance. 35% gross margins and...
22% out margin after adjusting for kind of transaction costs and all that. And that's better than the historical margin that you purchased at, if I recall. So, was this in line with your expectations and how do you see those margins trending as we progressed throughout the year?
Generally in line and obviously we're monitoring those very closely with the operating environment in Europe and very challenging now.
We
So working very closely with not only the integration team, but their management team. So working very closely with their management team.
We're getting out doing sales ride-alongs and just learning as much as we can about the business now that we're there.
It's really the volume.
that top-line volume story and paying very, very close attention and helping them. They do a really good job managing their pricing, their gross margins, but those are things that are very much.
front and center with us.
Okay, understood. And then just
Your prepared remarks sounded like on the investment side, there might be more to come beyond the Ohio expansion. Just what are the considerations and key objectives in play as you weigh additional expansion?
Oh, we like to...
Again, make sure our facilities support our growth initiatives are...
R&D testing initiatives.
the service that we...
delivered to the customers is
one of our value propositions and we want to make sure that is
Uh.
continued focus for us. How can we be more efficient with more volumes running through the facilities and at some point that fixed footprint we've got to just expand them at a certain tipping point. That's where we are with Ohio. So to the extent that we can, the annual manufacturer more product closer to our customers, we're always looking to be able to do that.
Don't have a lot of other details to share at this point, but it's really trying to highlight, or trying to focus on those areas where we can really add value to our customers and making sure we're doing, we're supporting our manufacturer and our warehousing and other operations with efficiency, safety and ultimately hungry.
Continue to translate that into a really good customer service.
Got it. Now that's a good color there. Thanks for taking the questions.
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Our next question is from Kurt Jinger with the A. Davidson. Please proceed with your question.
Great, thank you and good afternoon everyone.
I just wanted to, yeah, hey, just back on Etanko, I mean, can you just talk about what you're seeing there in terms of commercial kind of construction activity in France and Italy and, I mean, how you're just feeling about the revenue outlook for that business? I think last quarter you talked about maybe $220 million of sales this year. Do you think that's still achievable based on the book of business or maybe a little bit weaker than that?
Yeah, I think, you know, certainly if you think about in the Paris area they have in the Olympics in 2024, so a lot of construction going on, we mentioned a project that we worked on together with the Simpson team and the Azoco team to put some of our products on those, some of those particular projects that are going on for the Olympics. A lot of commercial business going on there.
I would say in general in Europe though, because of the uncertainty that's going on with the war, things are starting to slow down a bit both on the residential and the commercial side. But we still do estimate the $220 million approximate revenue.
I would say in general in Europe though because of the uncertainty that's going on with the war, things are starting to slow down a bit both on the residential and the commercial side. But we still do estimate the 220 million dollars approximate of revenue from the Otaku team.
Of course, with certain parts of Europe very much focused on energy efficiency, the products that Atalco brings to market from...
helping to put up the facades and cladding and the like are very much in line with some of what we think are some of the tail lens area in Europe but of course with the uncertainty.
The great amount of uncertainty in Europe in the region that seems to be just put in a bit of a...
a bit of a headwind there as well.
Okay.
That makes sense. And you talked about the home center business kind of outperforming expectations a bit again this quarter and some softness on the traditional distribution side. Was that pretty consistent from start to finish of the quarter or I guess any thoughts around how that dynamic may have shifted here early in Q3 if at all?
One of the things about, so let me talk about Q3 of July in particular. We're certainly seeing volumes are up a little bit compared to last year, but just a reminder, that's when we saw in I think July , August of Q3 2021, home centers doing some inventory de-stocking.
So it may be a bit of a...
Easier comp, so to speak, from that perspective. Just a lot of...
You know, lumpiness within that particular part of the business, what it goes to... What it goes to...
Inventories that are being brought in and when those orders are being placed. So...
brought in and when those orders are being placed.
So the comparable is...
Now, favorable now, but it would be awesome. They're pretty soft.
called from last year.
In general.
Yeah, no, that's a good reminder. And then just my last one, I know you kind of reconfirmed the $300 million of sales from price this year. And I didn't hear you talk about it, but have you guys taken additional pricing, I guess, actions on non-connector business in North America at all?
We've done a little bit of pricing in North America, mainly on some of our fast-knurs and some of our specialty products. Programs,
In Europe , they've done some pricing on the breadth of line of products, whether that be connectors, fasteners, or anchors. But in North America, really more of the faster market. In North America, really more of the faster market.
Okay, we'll appreciate all the color and good luck here in Q3.
Great, thanks for...
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