馬斯科 (MAS) 2024 Q3 法說會逐字稿

Number. Okay. I mean, no back in. Yes, good morning, ladies and gentlemen. Welcome to Masco Corporation's Third Quarter 2024 conference call. My name is Lori, and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. To ask a question, please press the star followed by the number one on your telephone keypad. To withdraw your question, please press the star followed by the number two. I will now turn the call over to Robin Sander van Vice President, Investor Relations and FP&A, Masco core, you may begin.

Thank you, operator, and good morning, everyone. Welcome to Masco Corporation's 2024 for third quarter conference call. With me today are Keith Allman, President and CEO of Masco, and request timber Masco's Vice President and Chief Financial Officer. Our third quarter earnings release and presentation slides are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If we can't take your question now, please call me directly at three one three seven nine two five five zero zero. Our statements today will include our views about our future performance, which constitute forward looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements we've described. These risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. References to operating profit and earnings per share will be as adjusted unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides are available on our website under Investor Relations. With that, I will now turn the call over to Keith.

Thank you, Robin. Good morning, everyone, and thank you for joining us today. Please turn to Slide 5. For the third quarter, we delivered strong operating results as we focused on driving the full potential of our portfolio through believing variable cost service. That sales were in line with the prior year as we saw demand continues to stabilize, most notably at our plumbing segment. Our gross profit margin rose by 90 basis points to 36.7% as a result of our ongoing initiatives to drive operational efficiencies and achieve cost savings. Our solid execution resulted in operating profit of 360 million, an increase of 12 million or 3% over the prior year. Our operating profit margin expanded 60 basis points to 18.2%, marking the sixth consecutive quarter of year-over-year margin expansion. In addition, our earnings per share grew 8% to $1.8 per share. Moving to our segments. Plumbing sales increased 2% overall and 1% excluding the impacts of acquisitions and currency in local currency, North American plumbing sales increased 2% overall and 1% excluding the impact of acquisitions and international plumbing sales increased 3%. Local currency led by growth in our key markets of Europe and China. Operating profit for the segment was up 17 million to 242 million. Operating margin expanded 100 basis points to 19.9%, driven by higher volumes at our continued focus on productivity, efficiency and cost savings initiatives. Additionally, we continue to demonstrate our leadership in water quality and innovation through new product launches that leverage our channels and brands. We launched tankless reverse osmosis water filtration system this quarter across our Delta and Brizo brands. The system is certified to filter out more than 90 contaminant drinking water and as both easy to install and maintain. At Hondros, we launched the powder spray Fossil, where microfiber water cascades from beneath the faucet spoke for easier washing of foods like fruits and vegetables at a lower flow rate for water conservation unless cleanup how is growing also received a super brand Germany award in the quarter. This prestigious award recognized Hondros dedication to excellence, quality and service to our customers. Finally, we reached the one-year anniversary of our acquisition of Santa three 60 during the quarter. We are proud of the work our team has done to successfully integrate this business, which includes the recent launch of Cielo branded Sonos into our existing Watkins dealer network. Moving to our Decorative Architectural segment, we announced earlier this quarter the completion of the sale of Kichler Lighting. We are confident that the transaction to further streamline our portfolio drive greater value for Masco shareholders as we focus on the strategic initiatives of our core plumbing and decorative architectural businesses, sales in the Decorative Architectural segment decreased 3% in the quarter or 1%, excluding the impact of currency and divestitures. Overall paint sales were down low single digits. The IY. paint sales remain challenged, decreasing mid single digits, while propane sales continued to show strength growing high single digits. Operating profit for the segment decreased 6 million to 138 million, while operating margin remained strong at 18.1%. We were pleased once again this quarter with our performance and propane. We're proud of our continued sales growth with the pro painter, and we are continuing to invest to drive additional growth going forward. We have an incredibly strong relationship with The Home Depot, which dates back over 40 years for multiple decades. We have partnered with The Home Depot to distribute our products and their over 23 hundred stores. We continue to partner with them as strategic initiatives centered on the strength of our brand, our unmatched service and the award-winning quality of our products to drive share gains in both DIY and Pro paint categories. Turning to capital allocation. We continue to generate strong free cash flow during the quarter and maintained a solid balance sheet. As a result, we executed on our capital deployment strategy and returned 255 million to shareholders through dividends and share repurchases. We plan to deploy the net cash proceeds from the sale of Kichler Lighting, consistent with our capital allocation framework. Therefore, we now expect to allocate approximately 750 million in total share repurchases or acquisitions in 2024. Now a few comments on our full year outlook. Overall sales for the total Company were within our expected range for the first three quarters of the year. However, the divestiture of Kichler will impact the remainder of the year and the DIY paint market remains challenged. Therefore, we now anticipate that sales for the full year will be down low single digits compared to our previous expectations of plus or minus low single digits. However, due to the strength of our operational performance year to date, we now expect that our full year operating margin will be approximately 17.5%. We guided range of 17% to 17.5%. We now anticipate adjusted earnings per share for 2024 to be in the range of $4.05 to $4.15 per share compared to our previous expectations of $4.05 to $4.20 per share. We continue to believe that the long-term fundamentals of our repair and remodel markets are strong and that struck excuse me, ladies and gentlemen, please standby, your conference will resume momentarily. Thank you.

Okay. Look our book book. No, no, in No. And in and in in in in none of them. Thanks to the Presenters, you may continue. Okay. I apologize for that interruption. I know that we're all very busy today. There's a lot of calls the GDP answer. My apologies.

As always, talking with respect to the long-term fundamentals of our repair and remodel markets, we believe they're strong and that structural factors such as the age of housing stock consumers staying in their homes longer, higher home equity levels and household formations for millennials will drive increased repair and remodel activity in the mid to long term. We believe we're well positioned to capitalize on future volume as our capacity efficiency, productivity and cost structures are set up to drive favorable incremental benefits from additional volume. With these favorable fundamentals. The continued successful execution of our strategic initiatives across our portfolio and our disciplined capital deployment. We are well positioned to outperform the competition and deliver double digit EPS growth through cycles for our investors. Now I'll turn the call over to Rick to go over our third quarter results in 2024 outlook in more detail. Rick. Thank you.

Keith, and good morning, everyone. Thank you for joining. As Robin mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization charges and other one-time items. Turning to Slide 7. Sales in the quarter were in line with the prior year and increased 1% excluding the unfavorable impact of currency. Our acquisition of Santa three 60 in the third quarter of last year, added 1% of growth to our third quarter results. However, this was offset by the impact of our kids sort of local currency. North American sales were in line with the prior year, while international sales increased 3% in local currency despite relatively flat sales. Overall, our initiatives to drive operational efficiencies contributed to another quarter of strong gross margin performance at 36.7%, an expansion of 90 basis points year over year. Sg&a as a percent of sales was 18.6% and was impacted by the timing of marketing spend in our Decorative Architectural segment. As mentioned during our second quarter call, overall, our operating profit grew 12 million to 360 million in the quarter. In our margin was strong at 18.2%. Our margin performance was primarily driven by are executing on our cost-savings initiatives. We also grew EPS during the quarter by 8% to $1.8 per share. Turning to slide 8, plumbing sales increased 2% in the third quarter. Currency had a minimum impact on the results. Volume in our plumbing segment drove an increase in sales of 2%, and acquisitions and acquisitions contributed 1% growth year over year. This was partially offset by unfavorable mix, which reduced sales by 1%. North American plumbing sales increased 2%, driven by our acquisition and solid performance in the retail and e-commerce channels. In local currency. International implements sales increased 3%, driven by favorable volume and pricing actions, partially offset by unfavorable mix. It continues to show signs of stabilization in Europe. And while the China market remains challenged, we benefited from our pipeline of projects in the quarter. Segment. Operating profit in the third quarter was $242 million, up 17 million or 8% year over year, and operating margin was 19.9%, up 100 basis points. Operating profit performance was driven primarily by cost savings initiatives and higher volumes, partially offset by unfavorable mix and higher commodity and freight costs. Turning to slide 9, decorative architectural sales decreased 3% in the third quarter currency and the divestiture of Kichler lowered by 1% each in the quarter. Total paint sales decreased low single digits. Propane sales were up high-single digits and DIY paint sales decreased mid-single digits. The DIY paint market remains soft and we now anticipate our full year DIY paint business to be down high single digits versus our previous expectation of down mid-single digits. In our propane business. However, we continue to expect sales for the year to increase low single digits. Operating profit was $138 million in operating margin was 18.1%. Operating profit was down 6 million year over year, impacted by the timing of marketing spend and unfavorable price cost relationship and lower volume, partially offset by cost savings initiatives. Turning to Slide 10. Our balance sheet remains strong with gross debt to EBITDA at two times at quarter end. We ended the quarter with 1.6 billion of liquidity, including cash and availability under our revolving credit facility. Working capital as a percent of sales was 16.4% and reflects the impact of the divestiture of Kichler as well as our continued discipline with regards to our working capital levels. As a result of the divestiture of impact, we now anticipate our working capital as a percent of sales to be approximately 16% at year end versus our previous guidance of 16.5%. During the third quarter, we repurchased 2.5 million shares for 192 million and paid a dividend of $63 million to shareholders. As Keith mentioned, we plan to deploy the net proceeds from the sale of Kichler, consistent with our capital allocation framework. As a result, we now expect to deploy approximately 750 million, up from 600 million during the year for share repurchases or acquisitions. Now let's turn to slide 11 and review our outlook for 2024. For total Masco, our year to date top line has largely been in line with expectations. Last quarter, we updated our second half expectations to roughly flat as market conditions remain challenging. The fourth quarter, however, will also now be impacted by our could our divestiture of Kichler. As a result, we currently anticipate full-year sales to be down low single digits versus our previous guidance of plus or minus low single digits. Despite this change with our strong execution and operating margin performance year to date, we now expect full year operating margin to be approximately 17.5%, which is at the high end of our previous guidance of approximately 17% to 17.5%. In our plumbing segment, we are maintaining our top line expectation of full year 2024 for sales to be plus or minus low single digits versus prior year, and our expected full-year operating margin to be approximately 19%. In our Decorative Architectural segment, we are lowering our 2024 for sales expectation to be down mid-single digits year over year versus our previous guidance of down low single digits. Primarily due to our divestiture. In addition, the DIY paint market remains soft and has not shown signs of a material rebound. However, despite lower expected sales, we are maintaining our anticipated full-year operating margin of approximately 18%. Finally, as Keith mentioned earlier, we are updating our 2024 EPS. estimate to be in the range of $4.5 to $4.15 per share. This assumes a 219 million average diluted share count for the year in a 24.5% effective tax rate. As mentioned, there continues to be choppiness in the overall market. That said, we are focused on execution and controlling what we can control to deliver results within this range. Lastly, Additional financial assumptions for 2024 can be found on Slide 14 of our earnings deck. With that, I would like to open up the call for questions. Operator?

The new in order to ensure that everyone has a chance to participate even like to request that you limit yourself to asking one question and one follow-up question during the Q&A session. To ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press the star followed by the number. You once again, please limit yourself to one question and one follow-up.

Your first question comes from the line of Susan Maklari with Goldman Sachs. Please go ahead.

Thank you. Good morning, everyone. Slide 4, and a great question is focusing in on the DIY. weakness that you highlighted in Decorative Architectural. Can you just talk a bit about on how the game applications that perhaps the election and the broader macro uncertainty? And as we get past some of that, how you think things there could come back as we look over the next couple of quarters?

Susan, Escape and warnings that as you know, we really don't break down inside the quarter month to month of performances as it can be quite variable, depending particularly in year over year. And what happened with regards to new product launches in full of relevant of stock, et cetera. So I would tell you you that it's been fairly consistent through the quarter and that there wasn't any particular notable change within the quarter. So I'll speak to that in that fashion. And with regards to the election, we don't really view it is the election or the rule called the results go specifically as it relates to DIY. pain. We think of it more holistically about what that means for our overall business. And fundamentally, I think like so many issues that we face in a volatile environment like we have now, it really puts a premium on the ability to respond, both in terms of our supply chains and our commercial teams, the ability for us to get price, if you needed, based on the strength of our innovation pipeline and the strength of our brands and how we are doing with regards to overall shelf space, some market share. So it's really for us. It's a in terms of the election, a question of how well we're able to respond. And I think if you look at the various challenges that we've experienced with our team and our operating systems over the course of the last several years, where they look to the capacity issues and paint that we faced a couple of years ago, when you look to the tariff situation that we faced and how we've gotten our margin up above pre tariff levels where we sit today, I think all those things point to the fact that our portfolio of small ticket on all of it, more resilient, less volatile products together with our team and our operating system has put us in a position we're able to respond. So we're really looking at the election of as just being on off at a high alert and being ready to respond to the challenges that may or may not come our way.

Okay. That's helpful color. Thank you. And then turning to the margin. Despite all the uncertainty that's out there, it's impressive to see the consolidated expectations at the higher end of the guide. Can you just talk to some of those factors that you I noted around the company-specific initiatives and how we should be thinking about those continuing to come through as we think about year end and maybe even into next year?

Sure. And we're definitely pleased with our margin performance. It's come in as expected, and this was our sixth, as we said in the prepared remarks, this was our sixth consecutive quarter of margin expansion, and it has been executed in a volatile environment. So I think again, there that goes back to what we intended when we designed our portfolio to be less resilient or excuse me, more resilient, less cyclical, higher margin. So it's that combination of a robust portfolio, the operating system and our teams, we got a particularly strong gross margin performance. And of course, that really from our focus on operational excellence, cost savings initiatives. And yes, 17, five strong for us, and it's at the top end of our range, Tom, we expect the full year margins to expand and for the entire company and for both our Plumbing and Decorative segments, and we certainly will carry that momentum into next year.

Okay. Thank you for the color and good luck with everything axis.

Your next question comes from the line of Michael Rehaut with JPMorgan. Please go home.

Hi, everyone. Thanks for taking all these six OpEx. Is that kind of still the right way to think about it and maybe at a high level, you know, maybe if we can get your thoughts on the repair and remodel end market for next year?

Sure. Thanks, Michael. And we are a bit when you think about that more normalized 3% to 5% growth rate for on and off, we have not changed that. That is our expectation of what a quote unquote, normal or historical growth rates for all scenarios. And we still expect that certainly when this market turns to that normal rate of growth is up for debate and our crystal ball is no clearer than anyone's what else. And that, as I said earlier, today, puts a premium on our ability to respond quickly, and we've demonstrated that we have that capability. So we you haven't changed our expectations of what the R&R market is. We think the fundamentals are very strong. When you look at a mid to long term of what drives our it's about home equity is about home price appreciation. It's about consumer confidence. And so when those things start to turn, and we think when you when you see the reduction, the rates and yields, you think about the underbuilt or the deferred R&R spend and the deferral state that will happen, we're poised in the mid to long term, which is just unpredictable one that will turn. We're not changing our 2026 expectations or oil guys, if you will.

Thank you. Appreciate that color. And then maybe in terms of the propane business, is nice to see it being pretty resilient. Obviously, the from the past few quarters, can you kind of review will move into the current size of the business and how we should think about the growth opportunity going forward?

We're very pleased with the growth in propane and our ability to gain share and to hold that share. And that goes back to the strength of the beer brand, the strength of our deep relationship with our great channel partner in Home Depot and a 40 years that we've been working together, as we mentioned, certainly our innovation pipeline, the quality and McCann and how well recognize that is and when we gained share and we look at the net promoter score of our new customers and the pro side are customers who have increased their share of our by the Net Promoter Scores are fantastic.

So trials, you like a sort of thing and that's really what's happening. So we're very happy with the firm, our performance in propane. And what was the second part of your question? I suppose, kind of like the size of the business and how we should think about the growth opportunity, maybe even alongside DIY. going forward? Right. It's approximately $900 million. And in terms of the size of our pro paint market, and we expect to continue to grow above market and gain share going forward.

Bob, is that both on the above market growth, is that kind of on the DIY and Pro or just on the Pro?

We believe, and it's hard to it's hard to judge of particularly the DIY. market size from one quarter to quarter, as I've consistently said on these calls, but we believe we're holding our own and holding our share in the DIY market. Maybe gaining a little bit on the DIY market continues to be challenged.

Thank you very much. I really appreciate your time.

Your next question comes from the line of Stephen Kim with Evercore ISI. Please go ahead.

Hi, this is a team on for Steve. Thanks for taking my questions. So let's start with on. Within that argues mentioned the updated sales guidance primarily at Home was due to the divestiture of Kichler. But turning to the margin piece on how much of a benefit would you say to the current margin guidance is due to the divestiture of Kichler?

Yes, hi, it is a good morning and good morning, Rick. So with regards to you indicated the sale of Kichler translated into U.S. revising our guidance downward with regards to our top line down to mid-single digits for the Decorative Architectural Products segment as well as for a total Masco down low-single digits. We don't disclose individual profitability by business unit. We have indicated in the past that killers margin performance was below that of the segment and build out of mask overall. So the divestiture it is accretive. We haven't quantified it. But I would say that our increase in our margin expectations really for through the course of the year because as you may recall, we came into the year with an expectation of about 17% operating profit margin. We increased at a couple of times through the course of the year and now we're expecting 70.5% more operating profit margins for the year. And yes, Kichler as a contributing factor to that. But I would say equal or more than that is our operating performance across the business units and being able to continue to deliver the productivity and cost efficiencies that Keith alluded to, thrill to deliver operating profit margin expansion in the face of challenging market.

Great. That's some super helpful. one more on then to So much for the paint category? And specifically within the eye, why are you seeing any trade off or trade down trends within the category?

Thanks for that. Not really much and paints. We saw a little bit of mix impact in plumbing in the quarter. But I know in paint, we've worked really hard across our portfolio across the assortment, across our channels, et cetera, to work to reduce the variability in our margin there. Still some that exists, but we've done a particularly good job in paints and we really haven't seen them with our broad assortment. In terms of price point coverage, we really haven't seen a significant mix shift in coatings.

Great. Thank you.

Your next question comes from the line of David Adlington, David Wolf Research. Please go ahead.

Hey, good morning. Thank you for taking my questions. Are first one on DIYP. clearly had to face some headwinds over the last few years following some really strong performance during the pandemic. Do you think that market has reset to a point where moving forward you expect it will grow in line with the overall R&R market?

I don't know that I'd say that it will grow in line with the overall R&R market. But when you think about how in the past, it has been a declining subsegment for us in terms of DIY. I do believe that that's going to turn around and go to growth. And I think it's because of the fundamentals. When you look at the influx of millennials that are forming households and getting into the housing market, the healthy levels of home equity that continue to be a support investment in your home and the DLI. position, the fact that we know through our research that DI. that millennials are not only DI. liars, but their repeat DI. wires as we follow them over the last couple of years.

So we do think that there will be a return to growth in them. India. Why pain for the question is when right?

Yes, that makes sense. Okay. And then on Kichler clearly had an outsized from exposure to China inquiries for a relatively small size of the business. You gave a rough framework and your last call about your China important exposure. I would assume that that improves here with the Kichler divestiture.

Any way you can roughly frame your updated exposure to Chinese imports post the sale?

Yes. I would tell you that from a concentration perspective, as it relates to the revenue, Kichler had a higher concentration of Chinese imports than the other portions of our business. But it's relatively small when you look at the overall scheme of things. Yes, George, maybe just to dimension of it, I think you alluded to the fact that we commented in our Q2 earnings call that since the second through one tariffs were implemented in 2019, we've reduced our exposure as a total Masco enterprise by about 30% with the divestiture of Kichler. That takes us up close year to 40% in terms of reduction of our exposure. It's still still leaves a significant exposure, but we've done a lot of work and we've continued to do a lot of work in terms of our sourcing footprint to continue to mitigate and manage our exposure.

Okay. That's very helpful. Appreciate the color there.

And going forward. Thank you.

Your next question comes from the line of Jennifer Lowe with UBS. Please go ahead.

Hey, guys, good morning. This is actually Spencer on for John. Thank you for the questions. In the first one, you talked a fair amount about how DIY. pain market continues to be challenged and how much slower RDILIP. volumes today relative to 2019 levels?

Well, I don't have that number top of mind. I know they are slightly lower, but I don't have that actual number top of mind. I can get to that after the call.

Okay. No problem. And now that the PPG. has announced the sale of its architectural coatings business to AIP. and how closely the national look at these assets, JanSan, you engage in the bidding process and you can and can you talk a little bit about your decisions is not pursuing those assets and more aggressively? And I was there a conflict with the change in that Home Depot? Or how should we think about how this plays out?

Of course, we looked at as we looked at it, though, in data and we gave at ADM hard analytics, but.com, at the end of the day, we have to make decisions that we believe will be the long-term interests of our shareholder value. And this wasn't a fit for us is going to go into details. But beside that, beyond that, I'll tell you a view. We've competed against speed, DG. and others in the industry that a very strong and we're confident in our ability to continue to do so successfully. And I'm just just this acquisition just wasn't something that we are interested in.

Fair enough. Thank you.

Your next question comes from the line of Matthew Bouley with Barclays. Please go ahead.

Good morning, everyone. Thank you for taking the questions on. So the in plumbing, the good margin results despite the higher commodity and freight. I guess I'm curious if commodity and freight costs have, if they have indeed actually come in as a greater headwinds than what you initially thought. And as a result, if you've offset those by more either cost reductions or price price? And then specifically as we kind of get into 2025, is there some should should we think about any need for additional price to be taken in the plumbing segment? Thank you.

Sure this is Rick. And I guess you could provide a bit of a time line for for commodity and freight. Overall we came into the calendar year, not expecting it to be a significant headwind or tailwind. Obviously, as we all saw in Q2, the appreciation of commodity costs, namely copper and zinc, go up significantly. Actually copper is we may recall hit an all-time high in May at over $5 per pound. And that is when we commented in our Q2 call, that represented a headwind with regards to our second half results. And that's because, as we've commented before, it takes about six months between when we observe commodity costs in the market until they hit our P&L as they flow through the sourcing and inventory pipeline. And so we're seeing that headwind. And as we index stated, we are or were unfavorable from a price cost perspective in Q3, and we expect that to continue in Q4. And that is in line with our expectations as we came out of the Q2 call. I mean, that's pretty locked in right now in terms of our expectations, that's dialed into our guidance for the year. And despite those headwinds in terms of the commodity costs, we are we're actually through the cost initiatives and the pricing during the course of the year, able to offset that from an overall margin perspective. And thus, we're expanding our margins and plumbing 100 basis points in this quarter, and we would expect margin expansion in Q4 and for the calendar year in plumbing. Now, commodity costs have subsided a bit more recently, but they're still remain elevated. They remain elevated 2023, the remain elevated relative to historical levels. And so that's a factor as we go into 2025. And that will factor into our pricing strategy as we go into next year.

Okay. Thank you for that, Rick. That's very helpful color on. And then secondly, I think going back to a prior question to 5% longer term market growth. Um, I wanted to ask specifically on 2025 as we kind of sit here in Q3, I'm looking ahead and kind of given our exiting the year around DIY. and our overall on. Just any kind of initial thoughts on on what 2025 R&R could look like, what you're planning for and sort of any implications to how we're starting 2025 relative to how you're planning the year to shape up?

Thank you for appreciate the question. But we'll see talk about 2025 and our next call when work together. Next, I would leave you with the thought that I've been consistently talking about with regards to the fundamentals. And we think the fundamentals are strong and our industry, but we'll get to the specific 2025 and our next call.

Okay. Thanks, Keith, and good luck, guys. Thank you.

Your next question comes from the line of Jim Lane with Jefferies. Please go ahead.

Hey, guys, a key time when I look at your plumbing business and I think last quarter you were generally constructive on an inflection in North America and then B. But international is bottoming out a little bit, but that recovery feel a little slower. International was actually quite strong. It's can you talk about what are you seeing in both these markets? And obviously, no, it's got a crystal ball, but how do you kind of Citi the recovery in the pace and momentum in DC two subsegments within our plumbing?

So starting with international sale of pleased with the performance, we grew 3% in the third quarter in this kind of market environment that really speaks to our gearing and his team at Hodge growing and what they've been able to accomplish. I would characterize it as particularly in Europe, is showing signs of stability in our key markets, particularly in Germany. China is a bit more volatile. Um, you know, we were able to deliver growth in the quarter. And again, that speaks to the team and the ability to gain share and the strong pipeline of trade projects that we have that continue to flow through. So we expect international in aggregate to be down low to mid single digits for the full year. Um, that said, this is a good opportunity for us to outperform the market and gain share. And that's from what we plan on doing in the United States. Tom close to home here. We're seeing good e-commerce market. The market continues to do all, we believe grow a little bit there from a retail performance has been quite strong in the U.S. as well. A trade I would say is a little bit more challenged on, but fundamentally stable in North America.

Okay. Super on your pro side for repaying some great growth outperformed the market as you kind of work through a channel partner and any other growth initiatives that you have slated for perhaps next year, maybe more shelf space? And then just given some of the weakness you've seen in DIYDU. lines, have the ability to kind of swing production from DIY to do more propane just because you're seeing certainly for momentum there?

We do. And that's a key component of our whole strategy to be less cyclical, more resilient, higher margin that is to work on margin differentials across channels, to work on margin differentials across our assortment and to be able to flex our capacity, should the demand go from one type of channel or installation process to another. And yes, we absolutely have that flexibility. And we have a new plant coming online very nicely in the East, Ohio. So that's really what puts this portfolio in good shape. We have capacity to support our expected growth for several years. And even with that available capacity, we're able to produce very strong margins. So the when the turnaround in the market does occur, we're in a position to meet demand and also deliver some very nice drop downs on that incremental volume. So yes, we have the capacity to our capacity is flexible in terms of what we're doing to drive propane, RSPs, working and more pros that trial the proposed that like it and what we've shown that we're able to to maintain and have that share gain be sticky. So things like buy online, pickup in-store, expanding delivery options, expanding our outside sales force, enhancing loyalty programs. We're working very closely with our channel partners continued to grow this segment and we're doing the job at it.

I believe I appreciate all the great color.

Your next question comes from the line of Keith Hughes with Truist. Please go ahead.

Thank you on what the divesture of clips lower, though you still are looking for M&A was quoting the use of cash flow, but we continue to see more bolt-on transactions and plumbing products maybe playing or something like widen the recovering market, or would you just look something a little further? I feel in terms of future activity?

Yes. Good morning. It's Rick. So from our an M&A perspective, in our strategy is pretty consistent and clear. We are focused primarily on bolt-on acquisition opportunities, really within our plumbing coatings or wellness businesses. So that's really our focus. And we've demonstrated that with us, for example, the Santa Teresa transaction that we anniversaried this call after, but that's what you'd expect to see from us. We're not we're not averse to a bigger transaction, but that would be still within one of our core business segments. Okay. And one follow-up. Wondering Kichler close September 18th.

Okay. Thank you.

Sure. Next question comes from the line of Mike Dahl with RBC Capital. Please go ahead.

Hi, it's actually Chris Clark from Mike. I'm just a follow-up on the M&A on giving your pipeline today should visit. Is it safe to assume that most likely outcome for kits for proceeds will be will be share buybacks at this time?

We haven't we haven't announced any particular thing and from an M&A perspective, so So absent an announcement from our perspective, the U.S., we would follow our capital allocation framework and the proceeds would be allocated to share buybacks or the. Just to clarify, we had about 150 million of net price. So that increased our capacity for share buybacks or acquisitions from 600 million to 715 of the year. Got it. Understood.

And just shifting over to Tom safeguard and paint margins specifically, can you just kind of give us a bit more color on how our overall core paint margin performed relative to your expectations where we are in the price cost relationship in terms of the timing shift in marketing spending, cost savings? Is a bit more color on expectations for for next quarter and how trends to date and I compare relative to your expectations?

Sure. From a Decorative Architectural Products segment perspective, our expectation for the first of all, we delivered what we would consider strong margins in the quarter at 18.1%. And we reaffirmed our guidance in terms of margins for the year at 18%, fortunately, 18% effectively. What that is driven based off of is cost performance within within our businesses within the Decorative Architectural Products segment because we are facing a negative price cost relationship. So as we've mentioned before, pricing in our Decorative architect products segment is expected to be down low single digits. Our commodity dynamic is roughly flat. We are seeing some pressure from and resin for largely this year. Our expectation is flat. So therefore, our price cost expectation for the year and what we saw this quarter was down low-single digits. So for basically offsetting that headwind with regards with our cost-savings initiatives and expecting modest operating profit margin expansion this year versus last year, although it addresses your question. It does.

Thank you. Appreciate it.

Your next question comes from the line of Garik Shmois with Loop Capital. Please go ahead.

Hi, thanks. I wanted to ask on propane can follow up on your share gains. There are two or at least this year, are you gaining shelf space? And so, you know, the basis of your share gains there is the outperformance really coming against the broader market against the broader market?

I would say we've spent shelf space is really not that critical of an item. But when you're talking about the Flow segment, we've got sufficient and appropriate sells shelf space, no real change in it. It's more about our offering, our ease of doing business, the quality of the the installation, ease of installation and the customer and consumer poll that Thomas from that strong beer brand and our innovation. So those are all more of the determining factors in our sales force effectiveness costs than than shelf space percent.

Okay, thanks. And kind of ownership, you're seeing some of the company and smaller parts of your portfolio on the wellness side. I'm wondering what you're seeing there, considering it's a little bit more of a bigger ticket offering that you provided.

Yes, sure. It's rig. We are we are seeing relative stability of effectively we we don't disclose wellness performance in and of itself, but we're seeing stability in the performance has been in line with our overall Plumbing segment. So in Q2, we saw some growth in wellness as we disclosed in our prior call. I mean, we're seeing similar performance in Q3, largely, I would consider it flattish. Now. Keep in mind in our wellness business, we did acquire sanitary 60. So we're seeing the benefit inorganically in terms of growth year over year. But from an inorganic perspective, we're seeing a rough stability and improvement. So we're optimistic about the business, particularly going forward. I think the business is really well-positioned in terms of its product offering is complementary products now with the Sonos with the acquisition of on a 30 60, and we continued to gain share in the market. And so we're well positioned when when the market does turn around. But today I would characterize it as stable.

Great. Appreciate that. Thanks. Louis.

Your next question comes from the line of Anthony Pettinari with Citigroup. Please go ahead.

Hi, good morning. This is Gregory and frankly, this morning what's been discussed already, but maybe just one on Plumbing. I'm still thinking about plumbing volume used. You spoke about solid performance in retail and e-commerce channels. I'm wondering if you can kind of discuss what you've seen in wholesale and trade specifically where sentiment is arm and kind of your thoughts on inventories in that channel relative to historical norms for this time of the year. Inventories are really right where they typically would be certainly a q three is to generate a strong quarter for us in terms of that segment and the there are some inventory fluctuations associated with that.

So I would say inventories are where they need to be accounting for seasonal variation. No, no real change there. The trade segment was down a little bit. Some feeling a little bit of pressure on the sentiment, as I talk to our customers and trade is really it's the same sentiment that we all share across the whole portfolio, which is this is a volatile market. It's certainly stable and trade. There's nothing that particularly concerns the channel from from the folks that I talked to, other than the fact that it's unpredictable. And the question is when will this time there is very much optimism in terms of the overall fundamentals. And we're putting a premium have on having the inventories in the rights being able to then ready to respond with capacity. That's how I would characterize the trade channel. Understood. Thank you, Mr. on them. Mr. Oman's, my dad income and Kate, once again, if you would like to ask a question, simply press star followed by the number one on your telephone keypad.

And there are no further questions at this time.

I would like to turn it back to Robin. Sander van for closing remarks. We'd like to thank all of you for joining us on the call this morning and for your interest in Masco. Thank you and have a wonderful day. Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect. Okay.