Saint-Gobain Regional CEO Buoyed by ‘Very Strong Forecast’
A strengthening homebuilding market should give the North American operations of global construction and industrial materials manufacturer Saint-Gobain the chance to add to its growth run of recent years, North American CEO Mark Rayfield said recently.
Globally, Saint-Gobain on Feb. 24 reported recurring net income, which excludes the impact of divestitures and various one-time items, of more than $3.2 billion on record sales of $50.2 billion. Like-for-like sales from the Paris-based company’s operations in 75 countries were up 18% from 2020 (and about 14% from 2019) as leaders rolled out their three-year Grow & Impact strategic plan. North America outpaced that number and finished 2021 up nearly 22% from 2019. (That 22% number doesn’t include the North American portion of Saint-Gobain’s High Performance Solutions group.)
The strong growth is thanks in part to the $1.4 billion purchase two years ago of Continental Building Products, which boosted Saint-Gobain’s plasterboard presence and, officials said, has opened new sales channels for the company’s other brands such as CertainTeed. In addition, the team led by Rayfield managed to avoid the worst of the past year’s supply chain stresses while also being able to raise prices.
On the heels of Saint-Gobain’s earnings report, IndustryWeek had a chance to chat with Rayfield, who has led the company’s North American division since late 2019, about his team’s investment plans – Rayfield announced late last year the company will spend $400 million to grow its plasterboard, roofing and insulation operations—as well as the state of the U.S. construction market and what he has learned about leading today. Here are some lightly edited excerpts.
As you look to this year and beyond—with as much visibility as you can have these days—what are the things you’re paying attention to most?
It’s a good question. With the way the world has been the last few years, I don’t like the predict very far into the future anymore. But the reality is that the No. 1 thing we have to get right is our people. When you look at the transformation [and] the three-year journey, it’s not only divestitures and investments but it’s been about getting the right teams in places across the different regions and businesses. We have a great team—it’s what delivered these great results we shared—so [it’s about] maintaining the vitality of that team, the diversity of that team and their energy and making sure, in this strange environment, we have the right work environment where they want to stay and grow with us.
No. 2, we live in the most volatile supply chain/raw material/transportation environment that I’ve ever had in my business. For me, that’s an opportunity to outperform the other markets by being at resolving that issue. And that’s what we did in the past years. We look at all the areas that could be disruptors in the business, that could be fluxes up or down, and we constantly are planning around, "What do we do if it goes here? What do we do if it goes there?"
What are you seeing in the labor market? Are things settling down?
We haven’t seen it really settle down yet. We see a few things: Employees now want to be part of a company that has a great purpose and resonates with them at a personal level—which is different than my generation, when you came into a job and wanted to learn accounting or sales and you went forward. Now it’s about, “I want to be part of a business that is decarbonizing the construction industry. I want to make the world a better home.” So, the first thing with talent is that we find we have to really lean into our purpose because it helps attract and retain our talent.
We have a very broad business so people can move a lot. We’re able to take jobs and have people do this lattice job: "I start in marketing and go to product management and move left and right." That has allowed us to retract and retain talent. Having said that, if I just look at Massachusetts and our big hubs here in Philadelphia and in Ohio, we probably have 200 open jobs. We’re always looking for good talent. It’s still a challenge.
You mentioned the supply chain earlier, the fact that it’s still pretty messed up. I’ll give you the opportunity to be the first person to tell me exactly when it’ll clear up.
August 13th!
From what I hear and see, we think it’ll be constrained and challenging for most of this year like it was in ’21. There are people talking about it loosening up a bit in the second half but then you have the [Russian invasion of Ukraine]. I have, based on two years of COVID and the Texas freeze and everything else, pivoted myself to not knowing when things are going to change or not change but making sure that we are looking at ways to succeed in either direction—to be agile and control what we can control and let’s not spend a lot of meetings trying to decide where it’s going to go.
About 40% of your sales in the Americas are for new construction projects. Has that number moved much over time and is where would you like it to be long-term, given some of the challenges in the labor market?
It hasn’t moved a ton and the two are amazingly linked. When people buy a new home, they renovate it. And when they’re selling a home, they renovate it. And when people decide not to buy a new home, they renovate. So our mix is about the same. New construction has become quite robust now so it has ticked up probably a little bit in percentage points. I don’t have a preferred mix because the market will ebb and flow.
Right now, we are 3 million homes underbuilt in North America from the decades of underbuilding. Combine that with the changing demographics: Maybe you and I bought our homes when we were in our mid-20s but our kids are buying their homes in their mid-30s—and they’re coming into their mid-30s now. So that wave is coming into that level where they’re moving out of the city and starting a family a little later than our generation did. All that, combined with the 3 million underbuilt homes, gives us a very strong forecast.
It may be helped a bit by labor in the sense that you won’t get a bubble. If you can’t get labor, you won’t get a bubble. Unconstrained, we might have hit 2.3 million homes this year if you had endless labor. But you don’t so we’re talking about 1.7 or 1.8 million. That gives you a more smooth trajectory for growth.
To that point: It seems like we’re extending the business cycle in many ways, that we’re creating demand for longer—but maybe more predictably because the labor market is suppressing what we can put out today. Does that idea resonate with you?
I would agree with that. The demand is there and the dips you’ll have based on personal finances and interest rates and everything else will have less of an impact than the cliffs we’ve had before. And labor will constrain it and people will eventually equalize to what the price of the house is and adapt to where they are.
I’m an optimist that we’ll have a decent-length growth trajectory going with consistent desire for products. And what I’m really excited about is the desire for more sustainable products: solar-reflective shingles, insulating boards, soundproofing boards… People want a house that has a better footprint.
How does that big picture shape your investment plans?
We have a new roofing plant scheduled for the Southeast, a new gypsum plant scheduled for the Southeast, a new insulation plant line scheduled for the Southeast. So you can see that they’re moving to that side of the country. We have an expansion of our siding business here in the Maryland area. We just did a stone plant. It’s a well played-out plan to get us production capacity to meet customers’ needs in the locations that we’ll need it.
Do you expect they’ll be greenfield projects or adjacent to existing sites?
It’ll be a mix. It depends on land, on customers, on supplies and what have you. The difference here is that we want to be carbon-neutral by 2050. When you build a roofing or gypsum plant, they’re 20- or 30-year plants, which means I’ve got to build a plant that, if it’s not carbon-neutral, can be carbon-neutral. It has the ability to run a furnace on green energy. It has the ability to have solar panels and other things. So that’s exciting because we are building plants and we will likely electrify one plant in North America that we haven’t announced yet with 100% green energy.
That’s fun for the engineers.
It’s great fun for the engineers. You have to hold them back a little bit on cost but it also challenges them. They have to think completely differently: "We could never do that. We could never do that." Well, guess what? Will you do it in 30 years? "Yeah, we can do it."
Taking into account all this: How has your job changed—not just in the last two years but versus what it would have been a decade ago? How do you think about the work that you need to do personally?
Your job is much more a people manager. The amount of time spent talking, interacting at all levels of the organization, listening and ensuring you have a welcoming workplace, the drive toward more diversity and inclusion. Maybe 10 years ago, I spent more time in an office on a spreadsheet or doing this or that. Now, the reality is that you’re face to face with your colleagues day in and day out and listening, listening, listening. And you’d better be adapting to what they’re telling you. If you’re not, they’re going to vote with their feet.
I find it invigorating. I’m not a young man but you get this energy and this feedback from people and you realize that, by empowering them and listening to them and opening up a little bit, you get this amazing energy and performance out of the team. Ten years from now, I will probably not be here. But whoever is here is going to have be doing that even more and understanding that the job is about nine-tenths ears and one-tenth talking.
