Eagle Materials [EXP] Conference call transcript for 2021 q3
2021-10-28 13:27:12
Fiscal: 2022 q2
Operator: Good day, everyone. And welcome to Eagle Materials’ Second Quarter of Fiscal 2022 Earnings Conference Call. This call is being recorded. At this time, I would like to turn the call over to Eagle’s President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir.
Michael Haack: Thank you. Good morning. Welcome to Eagle Materials conference call for our second quarter for fiscal 2022. This is Michael Haack. Joining me today are Craig Kesler, our Chief Financial Officer; and Bob Stewart, Executive Vice President of Strategy, Corporate Development and Communications. We are glad you could be with us today. There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast. While you’re accessing the slides, please note the first slide covers our cautionary disclosure regarding forward-looking statements made during the call. These statements are subjects to risks and uncertainties that could cause the results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release. Let me start my comments today by stating that this was another very good quarter for Eagle Materials. From a market perspective, we are well positioned U.S. heartland cementitious materials producer and we are a national scale U.S. gypsum wallboard producer. From the people perspective, we have a talented team that understands their markets and make great decisions. Simply put, this is a very good time to be in each of our businesses. This is not just due to current conditions, but because the outlook for both businesses looks favorable. I’ll spend some time today on the macro backdrop as it provides some context to our favorable outlook. COVID vaccination hesitancy, lingering supply chain issues and federal budget uncertainties, have weighed on economic momentum. Offsetting these issues are job growth and consumer spending. In 2021, we’re seeing some of the strongest job creation in U.S. history and strong consumer spending growth. Supply side headwinds are likely to pose less of a challenge in 2022, allowing for healthy industrial production growth, as a monumental backlog of orders are gradually cleared. Housing construction, which is an important driver for both of our businesses, and especially for wallboard, continues to enjoy strong demand. With healthy household balance sheets, low interest rates and relative affordability by historical standards, we see good headroom for continued trend growth. In this regard, it should be noted that housing activity is especially strong in the Southern U.S. This is important for Eagle as this is where most of our plants reside and this region represents more housing starts than all other regions in the U.S. combined over this past year. There is a positive knock on effect from robust housing demand for repair and remodeling, which we expect will continue to grow at a mid-to-high single-digit pace through 2022. In cement, the key wildcard remains infrastructure spend. Most of the funding today comes from the states. The states in our footprint generally have healthy balance sheets driven by increased receipts from property and sales taxes. The national discussion has focused on federal infrastructure spend. Federal infrastructure funding will happen someday and is certainly necessary. When it does happen, it will intensify the supply demand dynamics of cement. Commercial construction activity looks promising for pickup and again regional strength and leading indicators favor the Midwest and the South, aligned with our U.S. heartland footprint. It is also worth noting that the U.S. shift towards renewables is very constructive for Eagle. Wind farm construction is concrete intensive. If you look at the map of planned wind projects in advanced development or projects under construction, it aligns well with our cement plants. Cement imports will be increasingly required this cycle to meet demand as strong market conditions are leading to very high effective rates of capacity utilization in domestic plants. These imports will come at a cost in both their higher intensity carbon footprint and in price as the Baltic Dry Index is up 135% from a year ago and is at a 10-year high. Now let me speak to volume, pricing and cost trends for each of our two businesses. First, let’s discuss volume. Fortunately, we still have some capacity headroom in wallboard. However, the recent supply chain disruptions experienced by homebuilders, there is no doubt delaying the construction of some homes and pushing the demand out to the right. Once these logjams clear, we expect to be even busier. Our high cement utilization has been well chronicled. We are virtually sold out and operating full tilt. We are working closely with customers to meet their needs. As demand increases, there are limits to how much more volume growth we can squeeze out of our cement system, unless of course, we can expand our system through acquisitions. Quality U.S. cement plants that meet our strategic criteria are admittedly hard to come by and we are patient investors, which is why balanced approach to share repurchases when quality assets are not available, makes so much sense for a company like Eagle. You can see in this quarter, we purchased approximately $185 million of Eagle stock. We know our assets and know their value. To reduce our carbon intensity at cementitious product level and to service our customers with additional volume, it is our ambition to ramp up our milestone cement product offerings. Over time, this has the potential of literally creating another cement plant worth of product for sale for us when fully implemented across our system. Some aspects in real life in this ambition are not within our control, such as DOT approvals, but we are seeing good progress here and are encouraged. Over the next three years we expect to move the needle meaningfully on this initiative. Moving on to pricing, cement prices have not yet recovered as much as most of other building materials in this cycle. We have announced double-digit cement price increases effective January 1 across the majority of our network. As for wallboard, pricing is most strongly driven by demand and demand has been strong, as evidenced by our 33% year-on-year increase in wallboard prices. I suspect it may raise the question in some people’s minds as to whether we are nearing the peak for this cycle. If our demand outlook is correct, I think, we are not. Now to cost, there has been a lot of discussion about cost headwinds, in many cases, it’s exaggerated by supply chain disruption. Let me put this in perspective for Eagle, we own and control virtually all of our raw material. In some sense, one might say we already purchased the raw material with our investments and reserve decades ago, and by doing so, I’ve mitigated a supply chain issue concerning raw material. Energy inputs are important. We often get asked about hedging. We are currently hedged for approximately 50% of our natural gas needs through the remainder of our fiscal year at slightly under $4 per million, which should help us manage our costs swings. Natural gas is the primary fuel used in our wallboard business. The spike in OCC costs this summer were material this last quarter. But as we’ve said many times, pricing mechanisms and our sales contracts allow us to pass on higher OCC prices, albeit on a lag of one to two quarters. Outbound freight in wallboard is also important and we saw a 14% increase in freight costs this quarter. However, the good news is that freight costs seem to have plateaued during the summer. Let me close my remarks with an update we are proud to share as an alliance with our Environmental and Social Disclosure Report we published on our website. It is a recent noteworthy development on one of our long-term initiatives that has to do with carbon capture. We were notified on October 7th that Chart Industries, a technology development leader in this area has received a significant funding award from the U.S. Department of Energy to conduct an engineering scale test to advance point source carbon capture with the specific mandate to conduct this research at our Sugar Creek cement plant. Chart Industries Cryogenic Carbon Capture Technology was recognized by researchers at MIT and Exxon as the most cost competitive among highly effective carbon capture systems. Our role in this endeavor is to provide technical support and operational data during the development and execution of the project. I want to emphasize that even with successful outcome there are many other gates and hurdles to ultimate adoption, including transport and storage. But this is an important and significant step on the path to net carbon zero future. And with that, let me now turn it over to Craig for the financial results.
Craig Kesler: Thank you, Michael. Second quarter revenue was a record $510 million, an increase of 14% from the prior year. The increase reflects higher sales prices and sales volume across each business unit. Second quarter diluted earnings per share from continue operations was $2.46, a 14% increase from the prior year and adjusting for our refinancing actions during the quarter, adjusted EPS was $2.73, a 26% improvement. Turning now to our segment performance. This next slide shows the results in a Heavy Materials sector, which includes our Cement and Concrete and Aggregates segments. Revenue in the sector increased 5%, driven by the increase in cement sales prices and sales volume. The price increases range from $6 to $8 per ton and were effective in most markets in early April. Operating earnings increase 13%, reflecting higher cement prices and sales volume, as well as reduced maintenance costs. Consistent with the comments we made in the first quarter and because we shifted all of our planned cement maintenance outages to the first quarter, our second quarter maintenance costs were about $4 million less than what they were in the prior year. Moving to the Light Materials sector on the next slide, revenue in our Light Materials sector increased 28%, reflecting higher wallboard sales volume and prices. Operating earnings in the sector increased 39% to $67 million, reflecting higher net sales prices, which helped offset higher input costs, namely recycled fiber costs and energy. Looking now at our cash flow, which remains strong. During the first six months of the year, operating cash flow was $262 million, 20 7% year-on-year decrease reflects the receipt of our IRS refund and other tax benefits in the prior year. Capital spending declined to $27 million. And as Michael mentioned, we restarted our share repurchase program and our quarterly cash dividend this year and returned $259 million to shareholders during the first half of the year. We repurchased approximately 1.7 million shares or 4% of our outstanding. At the end of the quarter, 5.6 million shares were available for repurchase under the current authorization. Finally, a look at our capital structure. Eagle maintains a strong balance sheet, access to liquidity and a well-structured debt maturity profile. During this quarter, we completed the refinancing of our capital structure, which included issuing $750 million of 10-year senior notes with an interest rate of 2.5%. We extended our bank credit facility to five-years, paid off our bank term loan and retired our 2026 senior notes. Thank you for attending today’s call. We’ll now move to the question-and-answer session. Josh?
Operator: Thank you. Our first question comes from Trey Grooms with Stephens. You may proceed with your question.
Trey Grooms: Hey. Good morning, Michael and Craig, and nice results in the quarter. So, Michael…
Michael Haack: Thanks.
Trey Grooms: Sure. Thanks. So, Michael, you mentioned, in your prepared remarks, a ramp up in the cement product offering, cements out of the business and I think you noted another cement plant worth of materials that could come out of this in a three-year kind of timeframe. Can you talk a little bit more about this, to the extent you can maybe the magnitude of the capacity picked up, sounds very meaningful. But as far as, like, maybe more details around the mechanics behind the capacity expansions within existing plants and what plants could lend themselves to this, so where this may be taking place? And then any ideas or color around the capital required for these expansions would be helpful?
Michael Haack: Yeah. No. Trey appreciate the question on it. What we’re talking about here is PLC cement, which is a limestone addition to cement, which is an approved product with it. Depending on the plant and the location and other factors that go in with the -- when you look at the quality of a cement product, it will increase the cement limestone addition by 10% to 15% at max. So, basically, this is effective for all of our facilities and it is something that we’ve been looking at for quite a while. We still have DOTD approvals to go through in some states with it. The timeline is dependent -- is really -- each plant has a slightly different timeline depending on the capital investment. That’s why we said over the three-year window with some of the investments we have to make at some of the plant. The investments really are not real material at the plants. So it is really just adding limestone to the product and inner grinding that limestone with the product. So just to have the capital in place that is why we’re given that three-year window. We will have a little bit of that this next year, some more the year after and the final implementation in year three.
Trey Grooms: Got it. Okay. Thanks for the detail. But in effect, though, you are actually, it is, I guess, could be considered an actual increase in capacity or maybe your capacity just goes further, might be another way to look at it. You’re talking about somewhere in the 10% to 15% range?
Michael Haack: Yeah. So what you do is you put limestone in with your clinker, so you could extend your clinker further. So…
Trey Grooms: Yeah.
Michael Haack: … if you look at our capacity across the system, you configure in that, right around that 10% area is where your grind product see a increase in product for sale…
Trey Grooms: Yeah.
Michael Haack: … across our entire network.
Trey Grooms: Got it. Perfect. That’s super helpful. And then switching gears, the -- I guess one thing to note is the cost inflation, you talked about it briefly. It’s something that most of the world is facing in a pretty big way right now and you call it out energy and paper, obviously, shouldn’t be a surprise given the swings we’ve seen there. But really my question is more around how we should be thinking about the cadence of the margins across your business segments, given the timing of pricing as it flows through the timing of when costs flow through. So, I mean, I know there’s a timing aspect, which he called out a little bit, particularly in wallboard and paperboard for that matter. But so I also wanted to ask about the outlook, though, for this cement side of the business and cement costs and any potential inflation you might be seeing there?
Craig Kesler: Yeah. Trey, this is Craig. On the pricing front, as Michael mentioned, we did announce price increases across the majority of our cement network. They were double-digit increases, $10 a ton to $12 a ton or more across our markets. And that is effective January 1, which is three months ahead of our typical cadence for cement pricing. Most of our energy contracts in the cement market are on an annual basis, which is throughout the end of our fiscal year. So it really be starting fiscal 2023, where we would see some of those energy impact starts to come through. But in other cases, we also had two-year agreements in place. So we’re going through that process right now. On the wallboard side, that’s going to be, again, a natural gas. As Michael mentioned, we’ve pre-purchased effectively, forward purchase contracts for more than 50% of our gas needs within the wallboard business. So we’ve mitigated some of the uptick in natural gas prices there. And then on paper, you obviously saw this quarter the profitability in the paper mill down and that’s just a function of the mechanisms that for pricing, we pass-through the majority of our raw material input increases. It just happens over a one quarter to two quarter lag and so you’ll see the majority of that come back to us and what would be our Q4. Now there’ll be a little bit of it here in Q3. But then we’ll see the full benefit in Q4. And all of that relative to what OCC prices do. We’re expecting them to plateau here a little bit as we left the summer. So that’s been good to see.
Trey Grooms: Perfect. That’s it for me. I’ll pass it on. Thanks again for taking my questions and best of luck and take care. Thank you.
Operator: Thank you. Our next question comes from Brent Thielman with D.A. Davidson. You may proceed with your question.
Brent Thielman: Hi. Thank you. Good morning. Great quarter as well. I guess first questions on the cement JV. You had a relatively modest decline in sales. Volume was down a little harder and that’s totally surprising. The profit dollars declined, I guess, more than I would have expected from last year, anything in particular to be aware of that business?
Michael Haack: Yeah. When you look at that business, you can see, the volume metrics side, is really, if you strip it back between manufacture product and purchase product, we were pretty flat on the manufacturer product side. So it’s really on what we could go out in the market and purchase and resell on that side. That was the biggest impact on there. We also did have an additional outage down at that facility this year. So that’s what the majority of the cost side was in. So this last quarter we had an outage in that area.
Brent Thielman: Okay. All right. Sounds like fairly transitory things. And then, obviously, great incredible pricing traction in wallboard this quarter. I guess my question is, is some of the challenges the builders are experiencing, whether that’s labor, whether it’s sort of supply chain related issues, just in terms of moving their jobs forward? I guess, Michael, I would be curious of your thoughts, is that hindering yours or the industry’s ability to recognize even more pricing than what we’re seeing in the business today?
Michael Haack: Wallboard is really driven by -- has everything with supply and demand on the side. And when this does get pushed out a little bit, there was a little bit less demand in the last month with it. We expect that’s just a transitory temporary item with it. The backlog for builders is very strong and we have headroom capacity at our facilities to supply that. And so we really think as this supply chain gets back in order and builders get back into their construction process and don’t have these supply chain interruptions, that demand will be busy -- busier than it was even than we are today, which is very busy.
Brent Thielman: And are you seeing any sort of improved momentum in volume in that business versus what you’ve reported in the quarter?
Michael Haack: We’ve been pretty consistent with what we’ve been doing these last months with it. So it’s been consistent.
Brent Thielman: Okay. I appreciate you taking the questions. I’ll pass it on.
Operator: Thank you. Our next question comes from Anthony Pettinari with Citi. You may proceed with your question.
Anthony Pettinari: Good morning. On cement…
Michael Haack: Good morning.
Anthony Pettinari: Hey. On cement, understanding that you’re sold out, can you talk a little bit about what you’re seeing in terms of underlying demand and understanding that you don’t necessarily have full visibility in terms of where your cements ultimately going. Just any thoughts on sort of public versus private demand, and specifically, if you’re seeing any kind of pickup in private, non-residential or commercial activity, which is maybe been a little bit softer for the industry this year?
Michael Haack: Yeah. Where our cement plants are located and everything we’ve seen a pretty consistent demand profile across all of the -- our end markets with it. Some are stronger than others, but it’s been a very consistent demand profile. You can see in the notes that we said, in my comments that we’re working with our customers to satisfy all their demand in areas with it, because we are at or near sold out capacity or actually at or sold that capacity across our facilities with it. And the demand is, like I said, is consistent across residential and commercial is starting to pick up more and more, and so we see a very favorable demand profile across all aspects.
Anthony Pettinari: Okay. That’s very helpful. And then just on wallboard, in terms of, the delays that homebuilders are seeing and kind of this monumental backlog of orders that needs to be cleared? Is your expectation that we’d see that kind of volume pick up in -- as we normally would in calendar 1Q with the spring season or is there any reason that you might think it would be maybe pushed out a little bit? And can you just talk a bit about sort of the normal seasonality with wallboard volumes versus what we might be seeing in the current environment?
Michael Haack: Yeah. Look, Anthony, I think we would say that, it’s probably a little too early and a little too difficult to speculate on when that logjam clears. There’s lots of pieces that go into that. But there’s no doubt, as you said, the logjam just continues to build and there is a lot of pent-up demand for these homes and so we are expecting to be have a very busy next year when that does release.
Anthony Pettinari: Okay. That’s helpful. I’ll turn it over.
Operator: Thank you. Our next question comes from Jerry Revich with Goldman Sachs. You may proceed with your question.
Jatin Khanna: Hi. Good morning, everyone. This is Jatin Khanna on behalf of Jerry Revich. Could you provide some color on the capital deployment opportunities and how would you characterize the M&A pipeline and the opportunity set from here? Thanks.
Michael Haack: Yeah. Good -- great question. It’s really the most important question here at Eagle around capital allocation. We’ve said this for many years, it’s been very consistent. Our primary and first use of capital is to continue to maintain our assets and like new condition, so that we can continue to keep very high utilization rates. Closely followed by that is a desire to continue to grow Eagle. We’ve found many opportunities over the last decade to grow the business with very high return projects, predominantly on the heavy side of the business and we continue to explore those opportunities. But as we’ve also said, there is a high barrier at a strategic level, at a financial return level for those investments and we have not relaxed those standards. And so when those opportunities don’t meet our hurdle rates or strategic criteria, our next use of cash and we did that in a significant way this quarter is to return excess cash to shareholders and we generally do that through our share repurchase program. We do have a modest quarterly dividend and cash dividend that we pay, but that is consistent with what we’ve done for years. The pipeline of opportunities is good and it is -- there are things that we continue to explore and we hope to continue to find ways to grow Eagle.
Jatin Khanna: Thank you very much.
Operator: Thank you. Our next question comes from Adam Thalhimer with Thompson Davis. You may proceed with your question.
Adam Thalhimer: Hey. Good morning, guys. Sorry if I missed this, but can you give a little color on the quarter end wallboard price?
Craig Kesler: It was consistent with the quarterly average Adam, we…
Adam Thalhimer: Okay. And then on the cement side, really, I think, there was a record quarterly margin for you guys. I am just curious if there’s any maintenance you would call up for the back half and what’s your outlook is for cement margins?
Craig Kesler: The maintenance cadence should be very similar to what we experienced over the last 12 months or so. So, now with Cosmos being in the fold for a little over a year, I don’t see any major issues. But, yeah, look, I think, as we’ve been saying, we’ve been able to manage some of these inflationary pressures with the price increases. We’ve seen good margin expansion.
Adam Thalhimer: And then how will higher OCC impact gypsum margins?
Craig Kesler: We will start to see some of that flow through into the wallboard business in Q3 and into Q4, and it’s a function of the pricing mechanisms, we price internally at the same level that we do externally and so that’s just the way the cadence will fall. And then as we’ve been saying, really the opportunity to expand margins, there’s going to be demand driven as some of the supply chain disruptions going to wind.
Adam Thalhimer: Okay. Understood. And then on the M&A front. Craig, would you say that it’s -- are you not seeing any opportunities or are you just not happy with where the price is?
Michael Haack: No. What, Craig, was mentioning there with it is, we continuously look at the market for opportunities. We’re actively and aggressively looking for opportunities. They just need to make the strategic criteria that Craig mentioned there.
Adam Thalhimer: Understand. Thanks, guys.
Operator: Thank you. Our next question comes from Phil Ng with Jefferies. You may proceed with your question..
Phil Ng: Hey. Good morning, everyone. Given the well documented challenges in supply chain and logistics, how has that impacted your business? I know in the past, it perhaps limits distance you and your competitors may ship on wallboard and curious what you’re seeing on the import front for cement as well?
Michael Haack: Yeah. In the comments where I mentioned, Baltic Freight Dry Index is up 135%. There is going to be a supply dynamic -- demand dynamic that needs imported cement, but it’s going to come in at a more costly some then previous years with that freight costs being up. Other supply demand dynamics is what we talked about previous as we see on the wallboard side that demand being pushed to the right, but it’s been building, it’s not going away in our view, so that logjam will break at some time when the supply chain gets an order and we should see even busier demand on the wallboard side.
Phil Ng: That’s great. Did double-digit price increases for cement next year. That’s certainly very encouraging. That’s a nice step up. Have pretty much all your competitors in the market you compete in match that increase for January?
Michael Haack: Yeah. We don’t really track what our competitors do. We really look at supply demand dynamics and what we feel is right for our footprint and our company with it. So I’m not going to comment on what others are doing just where we stand.
Phil Ng: Got it. And Michael, you mentioned that you have some headroom still on capacity for wallboard. Can you give us a little color how quickly can you unlock some that capacity? Is that mostly from adding a shift and just given some of the labor challenges? I am just curious how quickly can you wrap that up?
Michael Haack: Yeah. One of the hallmarks at Eagle is we do a lot with less and really our facilities are set up where it is just a people addition more than anything else and it’s not a significant people add with it. So ramping up would be feasible depending on what the demand profile looks like and it should be fairly quickly if we decide to do that.
Phil Ng: Okay. Super. Appreciate it.
Operator: Thank you. Our next question comes from Kevin Hocevar with Northcoast Research. You may proceed with your question.
Kevin Hocevar: Hey. Good morning, everybody. Hey, Craig, you mentioned that, the wallboard pricing exiting the quarter was similar to the quarter average. I think you guys had a price increase for mid-September in wallboard. So curious if that means that one didn’t necessarily gain a lot of traction or we’ve also heard that that’s been pushed back maybe October some, so maybe that’s just the sign of that. But curious if you just kind of comment on that most recent price increase?
Craig Kesler: Yeah. So, Kevin, consistent with what we’ve been saying is, as some of these supply chain issues at the homebuilders were being worked through that price increases, you said, well chronicle that it got moved out and so we’re still working through that. But pretty consistent with what you would have expected to see.
Kevin Hocevar: Okay. And then, you guys have talked about -- I know you’ve talked about this in the past, but on the synthetic gypsum side of things. That’s obviously a challenge for the wallboard industry, which I think you guys are pretty well immune to just given your -- you mind most of your own natural rock and have a favorable situation kind of where you do use synthetic gypsum. So I’m just wondering if you could just give us an update on how this has evolved, because I know, one of your competitors I believe is building an import terminal in Florida to bring in natural rock. So it seems like maybe it’s getting to the point where some others have to take action. So I guess, if you could just kind of update us on, is this getting worse just given demand getting better and coal keeps coming offline and it -- do you expect it to just keep getting worse for the industry and then it seems like you guys wouldn’t necessarily be effective and then you would benefit, I would imagine, as others are impacted. But I am curious if you just give maybe a little bit of color there?
Michael Haack: Yeah. When you look at synthetic gypsum, synthetic gypsum is generated really from plants burning coal. So, you’ll see some short-term noise potentially if gas prices spike and more coals burn with it, but over the mid-term and longer term horizon, the calculus is, as the U.S. goes to greener sources of power generation that less coal will be burned and less synthetic gypsum will be produced. And so, I’m not surprised with your comment that you said somebody is building an import terminal to bring in rock and to satisfy their facilities. Over time, you can see the power plants have decreased in their coal consumption and we expect that to continue, so that it’s just a straight supply and demand, there’ll be less supply of the product at some point in the future.
Kevin Hocevar: Okay. Thank you very much.
Operator: Thank you. Our next question comes from Josh Wilson with Raymond James. You may proceed with your question.
Josh Wilson: Yes. Good morning, Mike and Craig. Thanks for taking my question. Congrats on the quarter.
Craig Kesler: Thanks.
Josh Wilson: On the paperboard side, could you give us a sense of what the price was exiting the quarter in that business?
Craig Kesler: Yeah. Josh, again, that price is contractually developed and so it -- and its changes on a quarterly basis. So the average in the quarter is pretty consistent and it’ll change October 1, it’ll change January 1, based on the price of inputs. And so we’ll see a meaningful change in that price in Q3 and then another meaningful change in that price in Q4, consistent with the raw material inputs.
Josh Wilson: And were there any mix impacts on your pricing in any of those products?
Craig Kesler: No.
Josh Wilson: All right. Very good.
Operator: Thank you. Our next question comes from Dennis Clemente with Truist Securities. You may proceed with your question.
Unidentified Analyst: Hi. Good morning. This is Dennis Clemente calling in for Keith Hughes. Thanks for taking my questions. So just two brief ones, in terms of supply side headwinds, you mentioned that they are likely to pose less of a challenge going forward. Just generally, I wanted to touch briefly on labor and whether you anticipate or have been seen challenges in labor and to what extent that plays into the bigger supply chain challenge picture? And then just briefly just touch on paperboard, whether costs in this business, whether you anticipate that these costs are maybe peeking and that’s what extents that when that peak might come or when these cost might level off? Thank you.
Craig Kesler: Yeah. What I would tell you, the first question is, it’s not a labor intensive business generally across our footprint both in cement and wallboard. So it’s -- that’s not as big of an issue for us. And then on your last point, as we said earlier, we saw a significant increase in OCC prices through the summer, July, August and September. They seem to have plateaued here more recently. I don’t want to speculate too much. But the educated guess right now is that they remained in this range for a little bit until further notice.
Unidentified Analyst: Okay. Thank you.
Operator: Thank you. And I’m not showing any further questions at this time. I would now like to turn the call back over to Michael Haack for any further remarks.
Michael Haack: Thanks, Josh. We appreciate everybody calling in today and look forward to talking to you in the -- after the first of the year. Thank you.
Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.
