The operator introduces the Masco Corporation's First Quarter 2024 Conference Call and turns it over to the President and CEO, Keith Allman, and the Vice President and Chief Financial Officer, Rick Westenberg. The call will include forward-looking statements and non-GAAP financial metrics. The company's risk factors and disclosures can be found in their Form 10-K and 10-Q. Keith Allman begins by thanking everyone for joining and directs them to turn to Slide 5.

The company had a successful start to the year with increased operating profit margin and EPS growth. This was driven by improved operational efficiencies, strong execution, and a strong product portfolio. While top line and volume decreased, this was offset by pricing actions and the impact of an acquisition. The Plumbing segment saw a decline in sales, but operating profit and margin increased due to cost savings initiatives and a focus on developing innovative products.

Delta Faucet and Hansgrohe AXOR showcased new and award-winning products at recent industry shows, including steam showers, water filtration systems, and bathroom collections. Watkins Wellness also launched a smart monitoring system for spas. The Plumbing segment is expected to continue gaining global market share. In the Decorative Architectural segment, sales declined but the company remains focused on driving share gains with their partner, the Home Depot.

During the quarter, Behr invested in services for PRO painters, expanded their sales force, and received top ratings in quality studies. They also returned $212 million to shareholders and anticipate a flat top line for the year, but expect cost savings initiatives and operational efficiencies to drive earnings per share growth. They remain cautiously optimistic for the remainder of the year and believe favorable market fundamentals and their focus on operational excellence and capital allocation will continue to create value for shareholders.

In the first quarter, sales for the company decreased by 3%, with a 2% decrease in North America and a 5% decrease in international markets. However, efforts to drive operational efficiencies and a favorable price-cost relationship led to a 210 basis point increase in gross margin and a 3% increase in operating profit. Plumbing sales decreased by 2%, with lower volume and mix offset by favorable pricing and acquisitions. North American Plumbing sales decreased by 1%, while international sales decreased by 5% due to weak demand in key markets.

In the first quarter, segment operating profit for Masco increased by $26 million or 13%, with operating margin expanding by 260 basis points. This was driven by cost savings and favorable price/cost relationship, partially offset by lower volume and mix. Decorative Architectural sales decreased by 3%, with paint sales remaining flat. The balance sheet remains strong with $1.3 billion in liquidity and working capital levels staying disciplined. In the first quarter, Masco repurchased 2.1 million shares and paid a dividend of $64 million. The company anticipates deploying $600 million towards share repurchases or acquisitions in 2024. The full year outlook for 2024 includes flat sales and an operating margin of approximately 17%, with minimal impact from currency.

The company anticipates a slight decrease in sales in the first half of the year, followed by modest growth in the second half. Operating margin is expected to remain flat in the first half and expand in the second half. In the Plumbing segment, sales are expected to be around the same as the previous year, with an increase in operating margin due to pricing discipline and cost savings initiatives. Similarly, in the Decorative Architectural segment, sales are expected to be around the same as the previous year, with an increase in operating margin due to cost savings initiatives. The company is maintaining its EPS estimate for the year and expects a 24.5% effective tax rate. During the question-and-answer session, a question was asked about the acceleration of DIY paint sales in the first quarter compared to the previous quarter, and the company's response was not clear.

The executives from Masco discuss the decline in volume of DIY paint and the flat performance of DIY and PRO sales in the first quarter. They also mention that DIY is expected to be down low single digits and PRO to be up low single digits for the year. Additionally, they explain that the deceleration in plumbing sales is primarily due to weaker performance in international markets.

The company's Plumbing business has stabilized in North America and is expected to see an uptick in the second half of the year. However, there is still some variability in international markets, particularly in China. The company's outlook for repair and remodel remains flat to slightly down, but they are still holding their guidance and believe there will be an uptick in the second half of the year. There have been no major changes in consumer behavior.

The speaker states that there is still volatility in the market and they are expecting flat sales with low single digits. The market is influenced by consumer confidence, interest rates, and geopolitical events. The first quarter results were as expected. DIY and PRO paint sales were flat, while Kichler and hardware sales were down slightly due to restructuring and portfolio changes. The company expects these businesses to align with the rest of the industry in the future. The speaker also mentions that total company operating margins were flat in the first half, with a significant increase in Q1.

The speaker is asking about the expected margins for the second quarter and how they compare to the first quarter. The response is that while there may be a slight decrease in margins in the second quarter, overall margins are expected to increase for the year. The focus is on the Plumbing segment and the speaker asks about the impact of price and cost on margins, to which the response is that there was not a significant impact in the first quarter and the margin performance was satisfactory. The full-year guidance for the Plumbing segment remains unchanged.

The team has successfully implemented productivity initiatives and expects to continue seeing margin increases in the Plumbing business. They have a medium-term guide that is higher than the current 18.5% and are confident in their ability to manage commodity changes and potential headwinds such as freight costs and labor negotiations.

The company is uncertain about potential headwinds in the market, but they have a plan in place to manage them through productivity and cost-cutting measures. They are also keeping an eye on overall volume and are prepared to adjust accordingly. The company's capital allocation strategy remains the same, with a focus on bolt-on acquisitions in their paint and plumbing business. They have around $600 million available for acquisitions or buyback and will manage it consistently to create value for shareholders.

The speaker, Keith Allman, is discussing the company's performance and initiatives during the first quarter of the year. He mentions that the deal flow is slightly up, but there have been no changes in their capital allocation strategy. He also mentions that they are looking at potential opportunities, specifically in their paint business, but it is too early to discuss. Allman emphasizes that the company's strategy has been successful in generating shareholder value and there are no changes to their timeline or progress. He concludes by stating that they are pleased with their first quarter performance and are on track to reach their 2026 margin guidance.

The company is aware of the volatile environment and is focused on being flexible and reactive. They had a good start to the year and are on track to meet their 2026 targets. There is no change in their outlook for the year and they are managing their growth and SG&A spending. They have been successful in improving efficiency and working capital, which they plan to maintain throughout the year. They expect working capital to follow a traditional seasonal trend and end the year at a similar level to 2023.

In response to a question from Adam Baumgarten, Rick Westenberg of the plumbing company provides insight into the company's performance in the first quarter and expectations for the rest of the year. He mentions a low single-digit price tailwind for the year and potential variability in commodity and freight markets. There was a slight mix headwind in the international market, but it did not significantly impact the overall business. In response to a question from Philip Ng, Keith reiterates that the company's performance is in line with expectations and there have been no noticeable trends in the quarter or in April.

The company's channel partners have not changed their behavior in managing inventory and there have been no significant improvements. The company is considering the potential impact of a larger paint asset being put on strategic review by Home Depot, which has a strong focus on the professional market. The company's focus on the professional market has led to a 60% increase in PRO paint sales. The company is open to considering various options for the paint asset, which could take any form.

The speaker states that it is too early to discuss any potential deals or acquisitions, but they will consider all aspects and be consistent with their capital allocation and M&A strategy. They cannot provide specifics at this time. The speaker then addresses a question about the International Plumbing market, stating that it is expected to show low to mid-single-digit declines, but they are outperforming their competition and gaining market share. They also mention that Germany and Central Europe are showing more stability than China. In terms of commodity volatility, they will continue to monitor and adjust pricing as needed throughout the year.

The company has implemented price increases in the Plumbing business due to a mix of factors, including increased container costs and volatility in copper and zinc prices. These increases will take about six months to be reflected in the company's financials. In the Paint business, there was some favorability in commodity prices in the first quarter, but no significant impact is expected for the rest of the year. However, there may be potential upward pressure later in the year due to increases in oil prices and TiO2. The company is closely monitoring the situation.

The company's pricing strategy for Plumbing is based on the strength of their brands and their ability to drive cost improvements. There is no difference in pricing strategy across different channels, and the company has a continuous improvement culture that allows them to maintain margins even in the face of challenging volume.

The speaker discusses pricing strategies and their desire to gain market share. They mention their strong relationship with Home Depot and their focus on DIY paint, PRO, and Plumbing. They also mention efforts to drive solutions for consumers and gain share in both shelf space and volume. In terms of cost savings, they mention a strong margin increase in North America Plumbing and a decrease in International margins due to volume. They do not mention any specific cost saving programs, but they mention general efforts to address input costs. The speaker is asked about specific cost saving programs in North America Plumbing and they mention ongoing efforts but do not provide specifics.

The company is implementing various initiatives to improve efficiency and reduce costs, including purchasing consolidation, value engineering, and optimizing their operating system. They are also focused on driving variable cost productivity, managing new assets, and continuously improving through their "Masco operating system." The leadership team is committed to maintaining momentum and managing pipelines of cost reduction projects.

The company is expecting margin enhancements in Plumbing, with a goal of 18.5% margins in a flat to down year. This is due to a combination of managing human capital, implementing technology improvements, and utilizing their operating system. The company is confident in achieving their goals.

Keith Allman discusses the difficulty in determining price elasticity in the current market, with variations based on technology, price point, and country. He notes that there is more elasticity in China and in lower price point products, but the company has worked to reduce the margin gap between higher and lower end products. He also mentions that mix has not had a significant impact on the company's performance. Eric Bosshard asks about Delta's growth in a down market, which Allman confirms to be around 2-3%.

The speaker is discussing the sustainable growth of their business in a down market and the specific factors that contributed to growth in the first quarter. They mention that their guidance for the year is for low single-digit growth in the plumbing sector, with North America performing stronger than international markets. They also mention that their margins have remained strong despite declining volumes, and they expect them to remain consistent if volumes turn positive.

Masco's decrementals have been managed well, with the teams handling volatility effectively. There has been no significant change in the drop down on incremental volume. On the Dec-Arch side, volume is now below 2019 levels and remains soft. Masco works closely with channel partners to drive demand through various initiatives such as cost reduction, innovation, and targeting both DIY and PRO markets. The call concludes with thanks to participants.

This summary was generated with AI and may contain some inaccuracies.