Q4 2022 Carlisle Companies Inc Earnings Call
Good afternoon. My name is Hannah and I will be your conference operator today at this time I would like to welcome everyone to the Carlisle companies fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks.
We will conduct a question and answer session I would now like to turn the call over to MS. Jenna curves. Mr. Jin Jiang occurs Carlyle's Vice President of Investor Relations. Jim. Please go ahead.
Thank you.
Good afternoon, everyone and welcome to Carlyle's fourth quarter 2022 earnings Conference call.
We released our fourth quarter financial results. After the market closed today and you can find both our press release and earnings call Slide presentation in the Investor Relations section of our website Carlisle Dot com on the call with me today are Chris Koch Chair, President and Chief Executive Officer.
Kevin Zimmerman, our Chief Financial Officer, and Dave Smith, Carlyle's, Vice President of sustainability.
Today's call will begin with Chris, giving an update on our progress in achieving our strategic plan vision 2025.
Highlights of our fourth quarter and full year results and a discussion of our current business outlook.
With our recently announced commitment to achieving net zero emissions by 2050.
Dave will elaborate on our commitment to this pledge and provide a general update on our sustainability progress and Kevin will discuss additional financial details and our outlook for 2023.
Following our prepared remarks, we will open up the line for questions.
Before we begin please refer to slide two of our presentation, where we note that comments today will include forward looking statements based on current expectations actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings as Carlisle provides non-GAAP financial information we've provided reconciliations between.
GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website with that I will turn the call over to Chris.
Thank you Jim Good afternoon, everyone and thank you for joining us on our fourth quarter 2022 earnings call.
Please turn to slide three.
Let me begin my commentary by complementing the entire Carlyle team on the sales and earnings records set in the fourth quarter and the full year of 2022.
2022 truly was an exceptional year.
In addition to delivering record fourth quarter sales of $1.5 billion. We also delivered record annual sales of $6.6 billion, surpassing both the five and 6 billion dollar marks in sales for the first time in Carlyle's 105 year history.
We further delivered a record adjusted diluted EPS of $3.92 in the quarter, an increase of 34% year over year.
2022 also marked a key milestone in our vision 'twenty twenty-five journey as we delivered $17.58 of GAAP EPS for the year exceeding our primary vision 2025 goal of generating $15 of GAAP EPS for our shareholders.
Exceeding this goal three years early is a testament to the hard work and dedication of all of Carlyle's employees and their commitment to the work of vision 2025.
These record results are even more remarkable given the extremely challenging operating environment of the past few years of the many challenges we faced over this period I would say navigating the COVID-19 pandemic was the most unexpected challenge for.
For so many people the pandemic was a traumatic experience in their lives from a health and welfare social and economic perspective.
I'm grateful for the significant actions Carlisle employees took to keep us all as safe as possible, while navigating COVID-19 in their personal life as well.
In addition, we also experienced significant supply chain disruptions and inflationary environment and labor and material shortages are record results would not have been possible without the clarity of mission and vision 2025 has provided us since its launch in 2018 and the unwavering commitment of our teams.
<unk>.
<unk> by vision 2025, our teams remained unified and stayed the course for the past five years diligently overcoming the challenges we faced.
Please turn to slide four.
Our record results continue to demonstrate that vision 2025 has been the right strategy for Carlyle and addition to our world class teams and proven business model. We've benefited from a strong balance sheet and excellent cash flow generation to provide both financial and strategic flexibility to execute and achieve our ambitious goals.
A significant portion of our success has been driven by the multi year process of reshaping our portfolio to pivot from a diversified industrial products company to a higher returning building products portfolio of businesses.
This transformation sets the stage for a more focused simplified and better understood path for future sustainable value creation at Carlisle.
The pillars of vision 'twenty twenty-five remain core to our strategy going forward.
Carlisle operating system or C O S to drive continuous improvement.
We use C O S to consistently drive efficiencies and enhance operating leverage for the full year 20, twenty-two adjusted EBITDA margin expanded nicely and C. O S contributed to that we continue to target cof's savings of 1% to 2% of annual sales.
Third build scale with synergistic accretive acquisitions under vision 2025, we have streamlined and optimized our portfolio through acquisitions and divestitures to build scale in our highest returning building products businesses and to broaden our suite of energy efficient solutions.
Through 2022, we have invested over $3 billion in accretive acquisitions.
And fourth Ah returns focused capital allocation strategy that includes deploying over $3 billion into capital expenditures.
Share repurchases and dividends.
Since the launch of vision 2025, we have invested over $3 billion into these areas of capital allocation. [noise] also three years ahead of our original plan and 20 twenty-two we made capital investments of over $184 million into our businesses to drive innovation increase operational efficiencies and enhance the carwash.
[noise] experience.
We also returned over $500 million to shareholders with share repurchases totaling $400 million and $134 million paid in dividends and 20 twenty-two.
And of course, none of this would be possible without continuing to invest in and develop exceptional talent.
[noise] through the accelerated execution of vision 2025, Carlisle has built a solid foundation leveraging a diversified workplace decentralized management style entrepreneurial spirit and a culture of continuous improvement, which will continue to guide her value creation journey and 20 twenty-three and be.
Yard.
Turning to slide five and.
I would like to highlight some of the many accomplishments in the fourth quarter.
First collectively our building products segment now constituting over 80% of Carlisle total sales [noise] delivered record fourth quarter sales and adjusted EBITDA.
Second we are pleased with the ongoing integration efforts that our newest segment CWT.
The team continues to effectively capture the projected synergies from the Henry acquisition of $30 million, while focusing on delivering excellent customer service and a challenging environment.
This commitment to our channel partners and customers was recognize when Henry was awarded the home depots building materials vendor of the year Award in October .
Third we continued the introduction of our innovative labor saving 16 foot T. P O product to the market, which is manufactured on the industry's latest and most technologically advanced T. P. L line, [noise] and Carlisle, Pennsylvania.
As a reminder, we began shipping this product in the third quarter of 2022.
Additionally, construction of our state of the art Palio. So facility in Sikeston, Missouri is on track for completion in the second quarter and on track to achieve LEED platinum certification [noise], the highest level of commercial building energy efficient standards.
Fourth pricing remained and continues to be positive across all segments as we continue to demonstrate our value to our customers.
Fifth supply chain and material availability returned to a more normal state. This return to normal has enabled our channel partners to settle back into more of a historical buying cadence.
And finally global aerospace markets continue their recovery driving strong sales and backlogs at C. I T and increased profitability on the back of the significant restructuring actions taken by the C. I T team over the past few years.
And with that I'll turn it over to Dave Smith, or Vice President of sustainability for an update on R. E. S. G progress Dave.
Thanks, Chris and good afternoon, everyone.
Police turn to slide six.
I'd like to begin by reiterating the Carlisle has had a century long legacy of responsible stewardship and stakeholder focus all driven by our core cultural value of continuous improvement.
We believe that creating a more sustainable environment is also productive for our shareholders.
As an organization Carla was committed to being a responsible environmental stakeholder with our three pillars of environmental sustainability.
First develop energy efficient products and solutions to reduce the greenhouse gas or G. H G emissions from building operations and help lower operating costs for our customers.
And 20 twenty-two Carlisle sold $3.5 billion of LEED certified products and solutions up from $2.5 billion in 2021.
Second reduced material waste going into landfills.
Our history of recycling began in at 19 twenties, when we incorporated scrap rubber into our inner tube production. Today, we continue that tradition by upcycling Paulites a waste into water filtration products. Carlisle has had a century long commitment to reduce material waste and continually improve our processes to deliver shareholder value while imp.
Proving the environment for the communities in which we operate.
And third a focus on lowering the G. H G emissions of our operations in manufacturing processes with the implementation of enhanced energy conservation measures such as converting our factory forklift fleet from propane to electric.
During the fourth quarter of 20 twenty-two Carlo proudly took a significant step to achieving net Sarah G. H G emissions in our value chain by 2050.
To accomplish this net zero state we proposed near term GHT reduction targets through the science based targets initiative.
Besides based targets initiative is an independent body based in the UK that works in conjunction with United Nations to help guide companies to establish emission reduction initiatives using science based targets.
Our near term 2030, GHT reduction targets are first to reduce scope, one and scope two emissions by 38%.
And second reduced scope three G. H G emissions by 48% per pound produced while our focus on emissions waste reduction and sustainable products are a key part of our sustainability efforts. We also made a significant commitment to the social component of our ESG progress.
On October 17th of 20, twenty-two, we proudly announced a special stock option grant to all eligible U S employees and a cash award to all eligible employees outside the U S.
These awards are designed to allow all Carlisle employees to participate in Carlisle success as stakeholders.
Previous grants issued in 2009 and 2018 genera.
Generated significant returns for our employees based in no small part.
Their contribution to increasing shareholder value.
[noise]. Additionally, our paths of zero program, which represents carlyle's commitment to creating the safest possible work environment continues to be a source of pride for our organization.
And 20 twenty-two carla's Osha incident rate was a remarkable 0.67.
Significantly below the industry average of over three and that represents a 69% decline in workplace incidents since 2014.
And with that I'll turn it over to Kevin to provide additional financial details as well as our 20 twenty-three outlook.
<unk>.
Thank you Dave before turning to segment result, let's turn to our overall 20 twenty-two [noise] Fourthquarter result on slide seven the.
The fourth quarter played out much as we anticipated and communicated on our less earnings call [noise] as Chris mentioned that Carla team delivered a very strong fourth quarter. Despite the many challenges we faced fourth quarter revenues increased 6.6% organically driven primarily by positive pricing.
Cross all segments.
Fourth quarter, adjusted EBITDA margin and proved 280 basis points driven by efficiencies gained through C. O S [noise] and our ability to price to value.
Revenues adjusted EBITDA and E. P. S were all Fourthquarter records for Carlisle.
Four segment highlights please turn to slide eight CCM delivered revenues of $800 million up 3% organically. This performance was driven by positive price more than offsetting year over year volume declined given current normalization of buying patterns by our customers in severe <unk>.
Whether in December and much of the U S adjust.
Adjusted EBITDA margin of 28.5% a record performance in the fourth quarter by our CCM team [noise] was driven by price and C. O S and partially offset by raw material and labor inflation unfavorable mix and a reduction in volume move.
Moving to slide nine sales at Carlisle weather Proofing technologies increased 5.5% organically.
This growth was achieved despite ongoing supply constraints and softness in residential demand.
Adjusted EBITDA margin was 12.8% [noise]. The team continues the focus on the integration of Henry.
The $30 million have stated synergies from the acquisition and rolling out C. O S throughout CWT to drive greater efficiencies in our operations.
Moving the slide 10, [noise] C. I T revenue increased 22% organically in the fourth quarter of 2022, [noise] with balanced growth in our commercial aerospace and medical technology platforms [noise].
We continue to see domestic travel approach pre pandemic levels, [noise] strong backlogs and girls and our medical new product pipeline.
As a result C I T as well positioned for continued revenue growth and EBITDA margin expansion and Twain twenty-three.
Turning to C F T and slide 11.
C F T generated organic revenue growth of 11.3% driven by positive pricing and favorable volume [noise], partially offset by a 7% year over year foreign exchange headwind.
Adjusted EBITDA margin expanded more than 400 basis points of 22.1% [noise] driven by favorable volume price and efficiencies gained from C. O S.
[noise] Slights 12, and 13 provide details of our record the fourth quarter consolidated results for revenue and adjusted E. P. S.
Moving to slides 14 and 15.
Carlisle ended a fourth quarter of 2022 with $400 million of cash on hand, and $1 billion availability under a revolving credit facility.
We generated cash flow from continuing operations of $418 million, bringing our full year 2022 total to $1 billion.
Turning decides 16, we have our 20 twenty-three financial outlook. Despite a challenging first quarter [noise], we expect to deliver another record year in 2023, [noise] with full year consolidated revenue up low single digits.
The first quarter will be a challenge as a result of tough comps for CCM [noise]. The weather disruptions that we have already seen as well as the continued normalization of buying patterns and the channel.
[noise] residential exposure represents a significant headwind for CWT in 2023, [noise] also weighing on our consolidated revenue growth outlook.
While smaller contributors to consolidated results healthy backlogs in both C. I T N C F T give us confidence in their ability to each grow revenue high single digits in 2023.
Given our focus on discipline pricing operational efficiency and managing costs through our continuous improvement efforts [noise], we expect consolidated adjusted EBITDA margins to expand 100 basis points year over year.
In November we gave a preliminary view a twain twenty-three, stating we expect to drive adjust that E. P. S growth this year.
With nonresidential re roofing demand remaining strong continued pricing discipline and an unending focus on manufacturing efficiencies. We reiterate this view and are driving towards another record year for Carlo would that I turn it over to Chris for closing remarks.
Thanks, Kevin.
In closing I once again would like to express my thanks, and appreciation for the hard work and perseverance of all of car allows employees.
The accomplishments the team has achieved since the launch of vision 2025, a remarkable and we're done under some of the most challenging conditions industry is faced in over a decade.
I think we can all look back on 20 twenty-two and be proud of an outstanding year.
As we move through 20, twenty-three and with vision 2025 objectives, well ingrained throughout Carlisle [noise] I am optimistic for the year ahead, we will take actions to navigate this complex operating environment deliver the Carlisle experience to our customers drive earnings growth for our shareholders and strive to deliver another record year.
And that will conclude our formal comments operator, we are now ready for questions.
Amy.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question.
Cause her briefly as questions I registered.
So first question is from the lineup, Brian Blair with Oppenheimer Police prescient.
Thanks happening yes.
Hey, good afternoon, Brian .
There's been a lot of focus I think understandably so on on the weather Ccm's Q for volume compression.
He was simply need a normalization of patterns and then channel reset.
Are indicative of.
[noise] line demand destruction and it sounds like some of the.
Channel Recalibration is is continuing interview ended the first quarter.
That in mind, I think it'd be helpful. If you if you walk us through Hell, you know order space for Q for what you're saying and Q1 relative to to.
Q for rates, and where you see Q1 revenues shaking out relatives, okay for a level.
Alright, Brian Ethics, [noise], a there's a lot in there. So let me just first say that we do see some of the inventory normalization.
Going into Q1, when we had originally thought it would probably be done by the end of the year [noise]. Some of that has to do with whether some of that has to do with economic impact interest rates and things like that [noise], but overall as we go into the year, we still see commercial roofing Ah strong we think it's going to be a good year in 2023.
Three [noise].
We do have some you know cops in Q1 that are.
I would say a fairly large [noise], but nothing really happening there on the on the demand side re roofing continues to be strong [noise] seeing some modulation I think in the future maybe on new construction, but [noise].
We've been out talking to a lot of contractors, a lotta distributors, we do see for sure. It's real this this inventory normalization, we see a continuing I think people have edited that [noise], but the underlying demand is is still good an alternate to gym just to give you a little more granularity on.
On the demand and the the order.
Yeah, So <unk>.
Extension of what we saw in what we communicated all through for a few Brian we're seeing just because you know we are in our seasonally softest period [noise].
That you know that.
The channel or a recalibration of inventory levels et cetera.
It's taken us through the winter months right and so you could you could see an extension of of of those trends certainly through most of of one Q and then that should probably take you to normal nor approaching normal seasonal pattern that you would typically see as one can you being our seasonally soft this period.
Okay I appreciate the teller and I I guess just to follow up on that and and let all set so if we.
You know take our staff.
Where in the low single digit branch CCM revenue checks.
Checks out for the year, you're you're saying that it's fair to assume you know more of a normalized seasonal pattern to revenue with.
Significant step up Q2 Q3.
Right. This is Kevin and yeah and that piece of the revenue throughout the year, we don't break it down too much by quarter, but we would say their first quarter typically is about 20% of our full year revenue for CCM. This year based on our low single digit guide [noise], We would say R Q1 would be high team.
And as a percent of the total year.
Okay. That's helpful.
And.
I think about second margin four for the area of the hundred basis point consolidated margin expansion guide.
That seems to necessitate that corsi is higher year on year [noise].
How should we think about the other platforms you have pretty good momentum C. I T C F T.
You've spoken to expansion there can you quantify that further or at a bit more detail and in terms of CCM and CWT.
Am I correct that core CCM should be higher year on year, and you know how should we think of it the.
Volume versus a synergy and C O S based offset with GWG.
Yeah, we don't get into too much Ana segments, I'm breaking down exactly what the components are at the margin, but I would say so we have said that over all consolidated will be up 100 basis points on margin and we do see all four segments, having year over year improvement in March and.
So each of us so CCM to your point definitely we are seeing March an improvement or expecting merchant improvement ear over here.
Okay understood Mexican yes.
Thank you Brian .
Thank you Mr Blair.
The next question is from the line up Tim loads with a bird please per theater.
Yeah, Hey, guys.
Maybe just on the pricing.
I think there's just some interest in this.
Investors that.
Kind of normalization period.
It's gonna create.
Pricing competition so.
Kind of what you see.
The fourth quarter around price realisation or at least.
The price of it.
What were you gonna say.
Oh.
Yeah, Tim we pricing is remaining firm you know I think we we talked about it at your conference we continue to see [noise].
Great stability in the industry.
People pricing the value [noise].
No degradation, we talked about I think earlier about how the price increases that we put in the latter half of 2022 would continue on into twenty-three and be accretive in twenty-three and we're seeing that happen just as we expected [noise] now or derail deviation there [noise] there have been some.
And see how we know from from people out right hands for questions from people, but we're really not seeing it fourthquarter was [noise] was consistent on what we expect of a price no degradation going into the year, we don't see that and we really don't see any motivation [noise] coming from either contractors or distributors.
To to participate in that they're still a premium on a delivery, we still have labor constraints [noise] and so as we go into 2000 twenty-three we would expect.
Pricing due to be accretive in to have a game based upon that lapping of the price increases that we put later in 22, so nothing's changed.
Okay. Okay. That's good and then I guess, just just from our raw materials standpoint, I mean is there a way to just conceptualize what you're seeing in the raw material basket from a price standpoint, and kind of what may be embedded in a in a total company.
100 basis.
Yeah, and the raw materials as we look at it throughout the year.
Early in the year first quarter, we're not going to see much of the benefit but as we get into the summer months, we expect to have some tailwinds there on the raw material costs and throughout the balance of the year.
Okay and then the last one for me just just a Henry.
Or down double digit how do we think about the EBITDA margin.
But how do we think about the EBITDA margin.
Yeah, what kind of decor detrimental I guess that does it.
Volume declined.
Are there any potential Oscar.
Yeah, the the margins incremental detrimental margins are right around 30% [noise].
And again, we expect to see year over year margin improvement in this segment.
Despite is that the oh double digit decline in revenue.
Okay, Okay great.
Yep.
Thank you Mr odds.
Question is from the line of <unk>.
With live Capitol police birthday.
Oh, hi, thanks.
A follow up on appointment with.
With respect to I'm expecting some modulation in new commercial construction and I was just wondering if you could maybe speak to that a little bit more you know maybe speak to backlogs or any <unk>.
Conversations that you might be having with their customers with respect to the timing of that.
[noise] Yeah, you know, we we still see I think 2023 is a is a strong year there may be a little modulation in new [noise]. We did have a really strong I would say bias to new construction. When we were in 22 and coming out of Covid [noise] Garrick and I think what's happening is you know we're seeing the re roofing [noise].
Pick up as a as a larger part of the sales [noise].
2023, and we would have expected that I think Jim may have indicated that in previous quarters. How [noise] is that may modulate it a little bit re roofing would pick up because of the backlog there and I think we've shared our church with you about how we see roofing playing out over the next five to seven years. So as we came out of Covid and the [noise] the delay on new construction there I think.
New picked up and obviously, it's easier I think to delay re roofing a little bit than it is to delay a new project that [noise] that was under way in Covid, an experienced delays due to the government restrictions on the job sites and things that were happening back then so [noise] still see a positive you're still see a good scenario for new and then I think really.
What starts to happen as as we get through twenty-three [noise]. We're gonna have to look at what happens from the fed what happens with Ah you know other things in the economy on a macro level to really start wondering if if it's going to have a dramatic change into twenty-four it now through that whole thing, we still see underlying demand is [noise].
As positive for re roofing and other things so.
Yeah twenty-three should should still remain good.
Okay, Great wonderful up just on the mix impact in <unk> and CWT in the fourth quarter and how you anticipate mixed to evolve in twenty-three if at all.
Well, we don't normally get to that granularity on the call around mix I would say when we look at.
CCM across the board you know a P. D M. T V O PVC apologize, so really [noise] Ah with the exception of the the last year, where we've seen you know the raw material availability and then the supply availability in some different ordering patterns for the most part they have been very stable <unk>.
<unk> has been a steady low single digit [noise] grow or T. P. O continues to be a product that gains momentum and obviously poly I. So with the [noise] E. S. G inefficiencies that are.
Becoming now regulations and people on a higher our values on their roof. We're seeing a paw. So continue as it has through the years to to gain as a percentage of the job site. We're still putting on may be a square of T. P O, but underneath that we could be now putting on 234 layers apologize so and I think that will continue to gain momentum and then on the PVC.
Our team has done a great job on PVC, we think it's a nice product [noise], it's been relatively new to Carlisle you know a few years ago. We we opened up our plan Greenville, and so polyester or a PVC has continued to [noise] to gain some market share and had you know again good growth in the fourth quarter [noise] and in 22 overall.
Also you know I don't really think the mix will change much when you look at our metals business.
Pretty consistent their Peterson and Drexel the two acquisitions continue to grow at an expected right [noise].
And remain about the same percentage [noise] CWT gets a little bit different because the business is get a little bit smaller, but we continue to see nice improvement with Henry [noise]. They continue to have pretty good success in the retail channels and R&R, we think R&R should pick up in 2023.
And then spray foam through the cellar acquisition that had a few years ago, there was a little bit lower mix [noise], but we've done some nice things there with that group to continue to drive [noise], but I would say market or above rates and there was some you know I think when we did that deal we were talking about 8% as a market growth right there and so they continue to grow up but then you get into some.
Smaller businesses and as you saw with the public announcement on Dell folks out of a rubber business [noise], we did exit that and so obviously that changed it a little bit of a mixed but it's not much. So [noise] tried to give you some granularity there, but overall mixed pretty much stays the same for the company and.
Hopefully that helps you.
No. Thanks for all of that and I appreciate it and best of luck.
Thanks Carrick.
Thank you Mister Smith.
The next question is suntan Oppenheim with credit Suisse.
And you May proceed.
Thanks, very much was wondering if you can talk a little bit about CCM when in terms of the low single digit revenue. There for 2023, you've talked about pricing in terms of still handsome benefit there so given the impact on volume here and one Q.
With inventory and such are you essentially assuming sort of some slight benefit from pricing and volumes flat to downer slightly there is another way to think about it.
Dan I think we don't want it you know obviously, we don't make sure too much because of competition, but to try to give it a little color I think if we look at that that number [noise], we'd split it we'd probably say of the list you know single digits, we take half in price in half in volume. So you know that could fluctuate a little bit I I happen to think.
We're seeing a little bit better start to the year. So you know could see a little bit more volume, but I think it's a good place. This just say.
Split it 50 50 and also this gym, just said I mean, one Q, obviously as our toughest comp we have our easiest comp and four Q right and so that that will tend to bounce out your model Dan to getting to the those singles on average for the year.
Great and then I guess second thing in terms of repurchase activity increasing their in the fourth quarter. How do you think about that in terms of planning for 2023 should expect more once you get past the short term challenges and one Q.
No I I think we've been pretty consistent about you know our allocation of capital, especially into [noise].
Share repurchases and and you know we still.
[noise] tend to look at our intrinsic value and then we do some work around that to see [noise], you know, where we ended up and then we compare it to other.
Places, where you can allocate capital and [noise] I'd say, we you know.
We should be in that same level for 2023, [noise] that we were for 20 twenty-two when you. When you look at the years a whole obviously, it's gonna maybe vary by quarter, but I think what we did in 22 is probably a good starting point for what we're doing and twenty-three.
Great. Thank you.
Thank you Mister on the line.
From the line of sorry, Laura that's P with Jefferys. Please proceed.
Thanks for taking my question, so just piling up and I feel the team I can commentary just give them a volley in the class. He S walk us through the assets that let you expand matches for the for Ya.
Yeah, we as far as I mean, the biggest one will be price cough. There's you look at that one we're seeing that to be a benefit in our business for 2023 at CWT. That's been historically, what we've seen in other cycles like this as you look back whether it.
Was [noise] financial crisis or back and early two thousands very similar that we didn't own the business at the time, the Henry business, but that's they saw similar to what we saw in our core roofing business with those being talent.
I would also say Chris here that.
We buy an organization, especially the magnitude of Henry.
And we were all C O S out it typically tends to be very very well received and I think Frank ready and the team at Henry I have embraced C. O. S is so we think we've got some upside there because they're in the early innings of that link Sigma rollout, so that should help [noise] and.
And then obviously, we are applying with a longer term view.
The Carlisle has were applying a little bit more focus on automation and capital investment in our factory. So we should get some efficiency. There and then we also had some portfolio.
Action in there and we talked about their rubber business, which actually was [noise] was taking away from margin in 2022 and with that out of the mix that'll that'll boost that that margin of so when you look at those things altogether [noise]. It gives us quite a few factors to work on it also see some nice.
[noise] returned.
Great and then you had a competitor announces banker last.
Paul Kissed talk about any impact the competitive environment, if they continue to make acquisitions in the face.
Yeah. It's it's it's for US it's an interesting situation I believe they bought malarkey earlier and you know that's a residential shingle [noise] organization doesn't affect us too much I mean, I can't really think that impacts our commercial roofing business or or CWT business [noise] and.
And now this acquisition of girl asked [noise] great.
Great Company, you know, we know durrell as very well they have a great product, but they're really not a competitor to us in our commercial roofing space [noise]. They really deal I would say in a kind of a smaller square foot you know.
[noise] size and may be in some different segments of then we compete and so you know.
That's a that's a great business great family businesses. So.
I'm sure they'll do well with that [noise], but the impact on there should be minimal I think going forward [noise]. We would you know obviously their stated they want a grown North America, and obviously Carla wants to grow grow North America and [noise].
Work with it and they want to be acquisitive. So I I would imagine we will run into that team again as assets come up on the on the horizon.
Okay, Thanks for calling Gotcha Carter.
Very much.
Thank you Ms <unk> at school.
The next question is from David Mcgregor with Walter Research Christine.
Yeah, good afternoon everybody.
To go back to CCM, and you know fourth quarter, I think a normal seasonality there is being cut down 15% sequentially versus.
Just the third quarter, you were down kind of two times that it looks like there was obviously more than seasonality here, Kevin reference to snow storms in the in the U S. Maybe for starters can you just quantify the impact that some of these other things beyond seasonality might've might've had there.
Helps break this down a little bit.
Right. The biggest piece I mean, the weather was there but it is also just how we've talked about it and the last earnings calling this one this normalization of the buying patterns that what we had throughout 20 twenty-two [noise] folks were on allocation and being an allocation people are buying what they could get their hands on and they.
Basically bought a head in the first part of 2022, [noise] and that was really the biggest reason why in the fourth quarter as [noise].
Customers bra inventory levels down that impact that that piece. So we would not say 22 was a normal year of seasonality and think we even pray and had to go back pre COVID-19 [noise] and look at how those years broke out as far as quarter by quarter [noise] like you're looking to do from Q3 to queue for cause as we get back to <unk>.
Normal a lot of that will be in play and you can look at it that way [noise] I pointed out what Q1 would be not normal this year, but then once we get that Q2 and the balance of the year, we think that will be more normal [noise] and as a result of what happened in 22 that the fourth quarter is going to be an easy cop for 20 twenty-three.
Three.
Yeah, I think excluding that.
Sorry go ahead.
Right there.
No I was just gonna ask if do you think explaining that that that sort of the reconciliation of the pre by and and the weather.
You were closer to that kind of 15 per cent down sequential pattern that would be sort of the typical seasonality or.
You know I'm gonna disqualify some of them yeah, David I'm Gonna jump in there just because they can with Kevin said is important and I I just wanted to make sure. We recognize you know we look at what CCM organic growth was probably prior to 2020, which was in Covid hit right 20th February 20, I'd say March of 20.
We've been tracking of that mid to high single digits and it had been [noise].
Go in there and I think we'd always said [noise] you know a new construction and the 234 and re roofing and the 456 or something like that seven [noise] and it held pretty much there and I'm talking to organic 2020, we were down 7.5% and then 21 [noise], we were up almost 22% and then [noise] twenty-two up 37%.
Organic gross so I think when we look at those numbers [noise] you know, we we kind of know if the longterm trend in these underlying fundamentals, which are superstrong. It have been very consistent with CCM for a long time [noise].
[noise] you know are going to.
Kind of repeat themselves there had to be some I guess, a reversion to the mean and I think that's where it was working it out in queue for and I think that's why Kevin made that statement of what's normal and I don't really know that we're gonna be able to pick a park Q4 with what I, just told you and make any real sense of it because when you think of how many contra.
Reactors and distributors that we interface with and you think of of what the variability might be in each region and in each location with what they could carry on inventory and how quick they are going to get out of that it just gets super complicated. So I know that doesn't help you [noise], but I think like with Jim and Kevin or try to say you know is just as we move into 2000.
Three were getting back to that pre COVID-19 [noise] cadence, it's a strong cadence that's got great growth on the underlying demand with leverage.
And you know really just I just think as we come out of that we just have to.
Take it with these three years has been which is just a a very much an anomaly and I and I think when you look at what the team did to manage through it great job, but trying to parse out apart.
I I I don't think we can do it.
Yeah, Okay I appreciate that thanks, Chris Yeah, Uhm, if it just as a follow up I guess within the guidance you've got sikeston wrapping here in the second quarter is that gonna be a temporary dragged the P&L and if so how should we phased out over the quarters in our models.
Simply yeah, no it shouldn't be a relative to how we set expectations both the for top line and for and for the margin progression for this year.
David <unk> I will say, though just given the the correction that's taken place in the marketplace or ability to produce.
If we think that the demand is going to be as strong as if if the demand is as strong as we believe that will be [noise], our ability to serve as that demand only increases in the spring summer selling season with that would that facility fired up so we see it more as opportunity not something that you should be modeling or hindering your your <unk>.
[noise] progression.
And David I think Jim brings up an interesting point, which is the the timing of this inventory, let's call a correction of normalization is going to be interesting you know usually back in pre 20, [noise] 20, we'd see an inventory load into distribution.
In the in the April March April timeframe [vocalized-noise] as we began the bulk of the North American construction season.
And we think about this inventory normalization, probably wrapping up in the in the first quarter [noise] <unk>.
You know you have to ask yourself. The question will that might mean that there is going to be less inventory in the channel going into the construction season, where the high demand is there and if we're right which we from.
Every indication we have this is going to be another good year [noise] in the commercial roofing space than you think we start to think about how there might be some pressure [noise].
For for product and around availability, which obviously Carlisle with sikeston with the new 16 foot T. P. O line in this kind of stuff. We think we're prepared to flex with that [noise], but that does have some implications for [noise] pricing for sure that that creates a very nice support for the pricing question asked earlier so [noise].
You know again early days Q1 really never tells US is certainly January much about [noise], how the whole year is going to go but at this point you know things do you look positive.
Got it thank you very much for the details.
Yeah of course.
Thank you Mr Mcgregor.
The next question is from the line of Adam Palm Garden with Salmon Police Christine.
Hey, everybody and just starting with <unk>.
What are you thinking in terms of and market demand across the various for <unk> R for river, new commercial roofing demanded new as in <unk>.
Yeah, and I'll start with the high level, Adam as far as.
New <unk>.
They'll start with CWT right each exposure repair model.
And new and both resin nonresident each about a quarter of of the exposure there.
Obviously on the new residential side, we have to think that 20% to 30% down as a as a potential.
Backdrop for demand in that and market on the on the repair remodel obviously, we have a mix of discretionary nondiscretionary. So it shouldn't be that bad at all it should be [noise] potentially flat to maybe slightly <unk>.
<unk> excuse me and then on the on the commercial side I would I would think just think low single digits. Both on the on the on the new and repair model commercial. We think is is going to be a strong and market for us. So that's the CWT.
Basket, if you will for CCM [noise].
Hard to have that discussion without pointing out that 70 per cent of what we sell CCM is is re roofing and that demand. We think we have tailwinds not only for twenty-three, but certainly for the next decade.
Got it okay. Thank you and then because maybe the.
Does that help in Capex, what's kind of driving that is its timing or is there something approximate businesses.
Nothing.
Certainly would Sykes then coming on and Ah 20, twenty-three that'll be a big piece of it.
And outside of that as you say, it's it's really a normal step up with growth of our business and continuing to invest organically into our businesses. That's been our highest roissy type investments.
Got it thank you.
Thank you Mr Baumgarten.
Our last question is from the lineup John Joyner with the ammo capital markets. Please proceed.
Hey, Thank you so I guess.
I don't know if you like.
<unk> has been an asked but.
So just look out in the second outlooks right I would've figured that the assumptions around CCM would've been closed for probably.
The single digit range and maybe following up on I believe it was Dan you've asked this question about.
The first quarter I mean based on the guidance for CCM.
Pretty clearly implies that the first quarter is down.
And with regard to yeah, well I guess the growth being half price half volume how does the significant amount of pricing that was put through.
Over the past year not carry over more than what is implied.
Yeah, it's gonna be under volume side, certainly the price will carry over [noise].
Into the first quarter and throughout the year, but the volume is a bigger chat lines and that's a few different pieces one the weather in the fourth quarter [noise] actually impacts the first quarter [noise] because the inventory didn't get out of the channel as we got to the end of 2022, we were expecting that to be L. [noise].
And not be an issue going into twenty-three, but whether slowed that down so that's going to impact the first quarter [noise] and then also with the the weather in January that's impacted volume in the first quarter fourth CCM as well as CWT CWT actually benefited from some of the rain and some of that piece.
In California, that's been a pick up there [noise], but sticking with CCM. The other piece that we discussed earlier and Nichol is the year over year Cop is a challenge because [noise] twenty-two was a much higher first quarter [noise] than the historical trend that we've been talking about.
Okay. Thank you and then.
Maybe just one more does it follow up on the door less so.
Which would no doubt have.
Or to.
A home run for Carlisle, Synergistically, but regardless of the competitive landscape you certainly know the company and presumably did the due diligence on it. So I guess, what do you think about the price is being paid by wholesome.
Well you know the first thing we you know.
Talk about prices can extract the value in every decision every company you know they have to make the decision for their company I don't know what their synergies were or how they're going to integrate how much they're going to integrate whether they keep the team alone whether they seek to get that or whether they even bring in things like pricing. So I can't really comment on whether the.
[noise] the pricing is good or not I mean, they'll have to decide that we will see that in their numbers like if we would've Carlisle [noise].
But what's good for I think the industry is it's.
Demonstrating that the companies in this space certainly Carlyle you you can see our margins summer [noise], our private Ah may have been undervalue. The last few years and it's a it's a very good space North America to begin with good underlying demand ESD trends are positive for all of US we have great products.
Many can be recycled and and and you know just great contribution we've got the [noise]. The I R. A act that came out in the biting administration, we've got reassuring and I think the price is being paid for things like Firestone of Malarkey and and now Durrell last reflect.
A lot of confidence by people in.
This.
This framework for the next five to 10 years and I think that's good for Carlisle I think that's also good for our investors. It sends a really good signal about that and I think you can look at multiples then and say are the publicly traded companies trading of those kind of multiples and if that they're probably trading at a discount based upon what we see in the market. So I think overall.
Okay excellent. Thank you, Chris and I appreciate it.
I bet, John Thank you Mr Toy night.
There are no additional questions wedding at this time, so I will turn the call over to the management team for any further remarks.
[noise] well. Thanks, Hannah This does conclude our fourth quarter 2002 earnings call appreciate everyone for the questions. Thanks for your participation and we look forward to speaking with your next earnings call.
Thanks.
That concludes today's call. Thank you for your participation you may now disconnect your lines.