Simpson Manufacturing (SSD) Q1 2022 Earnings Call Transcript

Simpson Manufacturing (SSD 0.59%)
Q1 2022 Earnings Call
Apr 25, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to Simpson Manufacturing Co., Inc. first quarter 2022 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kim Orlando with ADDO investor relations.

Please go ahead.

Kim Orlando -- Investor Relations

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's first quarter 2022 earnings conference call. Any statements made on this call that are not statements of historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements.

We encourage you to read the risks described in the company's public filings and reports, which are available on the SEC's or the company's corporate website. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today, whether as a result of new information, future events or otherwise. Please note that the company's earnings press release was issued today at approximately 4:15 p.m. Eastern Time.

The earnings press release is available on the Investor Relations page of the company's website at ir.simpsonmfg.com. Today's call is being webcast, and a replay will also be available on the investor relations page of the company's website. Now, I would like to turn the conference over to Karen Colonias, Simpson's chief executive officer.

Karen Colonias -- Chief Executive Officer

Thanks, Kim, and good afternoon, everyone, and thank you for joining us today. I'll begin with an overview of our first quarter financial results and performance drivers before turning to an update on our key growth initiatives and capital allocation priorities. Brian will walk you through our financials and updated fiscal 2022 business outlook in greater detail. We delivered strong financial and operational performance in the first quarter.

Net sales of $493.6 million, increased 42% over the prior year period. Sales growth was primarily driven by the four product price increases we implemented in April, June, August and October of 2021 to offset rising raw material costs. The price increases range from mid-single digits to mid-teens depending on the product mix of our wood connectors, fasteners and concrete products in The United States. While our sales benefited from higher volumes in our home center channel, which includes both our home center and co-op customers and is where we see much of our repair, remodel and DIY business, this was offset by softer volumes through our other distribution channels.

As such, volume was flat year over year. Our consolidated net sales in Europe for the first quarter grew 16.2% year over year, also due primarily to product price increases in response to rising material costs through 2021. Our consolidated gross margin supported by our product price increases, grew 130 basis points to 48% compared to 46.7% in the year ago period. As a result, we grew our income from operations to $124.4 million and generated strong earnings per diluted share of $2.18.

Brian will elaborate further on our margin expectations for the remainder of the year. I'd like to thank our entire Simpson Strong-Tie team for their solid operational execution. We appreciate your dedication to serving our customers and remaining on track with our company ambitions. Those ambitions being to strengthen our values-based culture, be the partner of choice, be the innovation leader in the markets we operate, continue our above-market growth relative to US housing starts, expand our operating income margin to remain within the top quartile of our proxy peers, and expand our return on invested capital to remain within the top quartile of our proxy peers.

Overall, we are confident that we remain on track to achieve our company ambitions. Now, more specifically, I'd like to discuss our progress regarding ambition No. 4, continuing our track record of above-market growth relative to US housing starts. To achieve this, we are focused on growing in the OEM, R&R DIY space and mass timber markets, where we are striving to be a leader in engineered load-rated construction fastening solutions given that each of these markets have a broader product opportunity for fastening solutions.

We are also focused on building our presence in concrete construction, as well as solutions for structural steel construction, a new market for Simpson. And finally, we're working to become a leader in building technology space, which supports all of our key growth initiatives. We made significant progress over the past year to support these different end users and distribution channels. Included in our efforts was a realignment of our sales teams to more specifically focus on the five end-use markets: residential, commercial, OEM, national retail, and building technology, which has led to new customer and project wins within each of our five key growth initiatives.

I'd like to provide just a few examples of these developments during the first quarter of 2022. Within national retail market, our focus on growing in the R&R and DIY space, combined with our ongoing efforts to continually improve execution with our retail customers, drove the reset of certain of our fastener sets with one of our key customers. The new fastener sets will include products such as our Quik Drive Auto Feed Driving System and our outdoor accents, promoting further visibility of the breadth of line of Simpson products. Within the commercial market, we're continuing to expand our offerings, including the expansion of our structural steel product line.

We had some notable wins and progress pertaining to structural steel. Our structural steel solutions are being used in the construction of 10 recreational and amusement locations in The United States, two of which have already been delivered. Additionally, our structural steel solutions are being used in the construction of 50 electric vehicle charging stations throughout The United States. I'd like to reiterate that these are just a few select examples of our progress on our growth initiatives in Q1 within our five end-use markets.

We believe advancements in these end markets and growth initiatives will contribute to our above-market growth in fiscal 2022 and beyond. Our future growth and diversification efforts were further supported by the acquisition of the Etanco Group, a leader in fixing and fastening solutions, primarily for commercial building construction market throughout Europe, which closed on April 1, 2022. We are very pleased to officially welcome the Etanco employees to the Simpson family. Over the past few months, our team has been working closely with many of the Etanco's managers and leaders as they engage in pre-closing activities, including integration and planning for synergies and detailed initiatives.

Our cultures, both built on high-quality products and customer service, have fostered strong teamwork and collaboration. We believe Etanco's extensive and complementary product offering will strengthen our overall product portfolio in Europe, enabling us to deliver even more value to our customers. Importantly, the acquisition further diversifies our business away from US housing starts. While we continue to benefit from solid ongoing demand for US housing, we now believe approximately 50% of our business is reliant on US housing starts compared to approximately 60% pre-acquisition, which helps further balance and diversify our business to be more resilient throughout industry cycles.

One important item to note is that we have suspended all business activity within Russia and Belarus by halting all product sales and shipments. We estimate the revenue impact will be less than $5 million. Additionally, we have donated $100,000 to the International Rescue Committee, which is currently in Poland, supporting displaced children and families. Our thoughts are with the people of the Ukraine, and everyone affected by the war.

Now, turning to capital allocation. Our priorities in 2022 are centered on organic growth, returning value to our stockholders in the form of quarterly dividends and selectively repurchasing of our shares, while focusing on repaying the debt we incurred to finance the acquisition of Etanco. In regard to growth, we remain dual focused on both organic growth and M&A opportunities. We are investing in areas such as engineering, marketing, sales personnel and testing capabilities across many areas of our business.

We also plan to invest in facility expansions to support our growth. While we are primarily concentrated on the integration of Etanco, we may also consider opportunities that would promote product line expansion in order to develop complete solutions for the markets in which we operate, as well as opportunities in areas that support our key growth initiatives. In summary, we are extremely pleased with our first quarter solid results. And while we continue to experience headwinds from continued increases in raw material costs, as well as impacts to our customers from tightening labor and supply chain conditions, we believe the underlying demand in our key markets and regions should remain strong throughout 2022.

I would like to once again thank and acknowledge all the Simpson Strong-Tie employees for their commitment to health and safety and outstanding customer service as we work toward our mission of providing the highest quality solution sets to build safer, stronger structures. I would also like to thank our customers, suppliers and stockholders for your continued support of Simpson. Now, I'll turn the call over to Brian, who will discuss our first quarter financial results and our 2022 outlook in a greater detail.

Brian Magstadt -- Chief Financial Officer

Thank you, Karen, and good afternoon, everyone. I'm pleased to discuss our first quarter financial results with you today. Before I begin, I'd like to mention that unless otherwise stated, all financial measures discussed in my prepared remarks today refer to the first quarter of 2022 and all comparisons will be year-over-year comparisons versus the first quarter of 2021. Now, turning to our first quarter results.

As Karen highlighted, our consolidated net sales increased 42% to $493.6 million. Within the North America segment, net sales increased 46% to $438.7 million, primarily due to the four price increases we implemented in 2021 to offset rising raw material costs. In Canada, our net sales also increased due to product price increases and were partially offset by lower sales volumes. In Europe, net sales increased 16.2% to $51.5 million, primarily due to product price increases, which were partially offset by the negative effect of $3.7 million in foreign currency translation related to Europe's currencies weakening against The United States' dollar.

Wood construction products represented 88% of total sales compared to 87% and concrete construction products represented 12% of total sales compared to 13%. Consolidated gross profit increased by 45.9% to $236.8 million, which resulted in another strong gross margin quarter at 48%. When compared to the first and fourth quarters of 2021, our gross margin expanded by 130 basis points and 60 basis points, respectively. On a segment basis, our gross margin in North America increased to 49.7% compared to 48.5%, primarily due to the continued benefit of the aforementioned price increases, which contributed to lower overhead and labor costs as a percent of sales, partially offset by higher raw material costs as a percent of sales.

However, in Europe, our gross margin declined slightly to 33.9% from 34.4%, primarily due to higher factory and tooling costs. While our inventory levels at March 31 were relatively flat in terms of pounds on hand compared to March 31 last year, the dollar value of our inventory is approximately 50% higher, which will be reflected in our cost of goods sold in the coming quarters. From a product perspective, our first quarter gross margin on wood products was 48.1% compared to 46.6% in the prior year quarter and was 46.9% for concrete products compared to 42.5% in the prior year quarter. Now, turning to our first quarter costs and operating expenses.

Total operating expenses were $106.5 million, an increase of $12.5 million or approximately 13.3%. As a percentage of net sales, total operating expenses were 21.6%, an improvement of approximately 540 basis points compared to 27%, primarily due to the increased spend relative to the price increase revenues. Our first quarter research and development and engineering expenses increased 8.7% to $15.9 million, primarily due to personnel and compensation-related costs, including investments related to our growth initiatives. Selling expenses increased 19.5% to $36.8 million due to expenses associated with personnel compensation, travel and trade shows.

On a segment basis, selling expenses in North America were up 22.5%. And in Europe, they were up 5.1%. General and administrative expenses increased 10.7% to $53.8 million, primarily due to personnel, legal and professional fees not associated with the acquisition of Etanco. Ongoing strength in our top line and gross margin fueled an 86.2% increase in consolidated income from operations to $124.4 million from $68.4 million.

In North America, income from operations increased 85.9% to $135.7 million, primarily due to higher gross profit, which was partially offset by higher operating expenses and cash profit sharing, mainly for favorable operating performance. Europe reported a loss from operations of $1.4 million compared to income from operations of $2.3 million, primarily due to professional fees of $7 million associated with the Etanco transaction, offset by a $1.1 million gain on the sale of a property. On a consolidated basis, our operating income margin of 25.2%, increased by approximately 550 basis points from 19.7%. I will discuss our operating margin outlook for the remainder of fiscal 2022 shortly.

Our effective tax rate decreased to 23.7% from 24.3%, primarily due to a higher windfall tax benefit on the vesting of restricted stock units during the first quarter of 2022 compared to 2021. Accordingly, net income totaled $94.6 million or $2.18 per fully diluted share compared to $50.4 million or $1.16 per fully diluted share. Now, turning to our balance sheet and cash flow. Our balance sheet remained healthy.

At March 31, 2022, cash and cash equivalents totaled $984.4 million. The significant increase in cash was a result of our amended and restated credit agreement with our bank group for approximately $700 million in borrowings to finance a significant portion of the purchase price of the Etanco acquisition. The amended and restated credit agreement provides for $250 million in borrowings from our revolving credit facility and $450 million from our term loan. And as of March 31, 2022, $200 million on our primary credit line was available for borrowing.

For the fiscal year ending December 31, 2022, we anticipate our interest expense on the outstanding loans will be approximately $11 million after giving effect to interest hedges and amortization of bank fees. Our inventory position at March 31 was $443.4 million, which was relatively flat compared to our balance at December 31, 2021, as the effect of higher-priced inventory, was offset by reduced inventory pounds on hand, primarily in North America. We continue to be diligent in regard to our inventory purchases through careful management and purchasing practices, while striving to maintain high levels of customer service and on-time delivery standards, which are key tenets of our value proposition. We generated strong cash flow from operations of $44.7 million for the first quarter of 2022 compared to $17.8 million.

As Karen highlighted, we remain dedicated to supporting the growth of our business, as well as providing strong capital returns to our stockholders through both dividends and share repurchases, while focusing on repaying the debt we incurred to finance the acquisition of Etanco. During the first quarter, we invested $17.8 million for capital expenditures and paid $10.8 million in dividends. Additionally, we repurchased 194,745 shares of our common stock at an average price of $109.28 per share for a total of $21.3 million. As of March 31, 2022, we had approximately $78.7 million available under our $100 million share repurchase authorization, which remains in effect through the end of 2022.

Next, I'd like to discuss some updates to our 2022 financial outlook. Our latest outlook reflects the acquisition of Etanco, which closed on April 1, 2022, one-quarter of our actual results and our latest expectations regarding demand trends, raw material input costs and operating expenses. Based on business trends and conditions as of today, April 25, we are revising our guidance for the full year ending December 31, 2022. we now expect our operating margin to be in the range of 19% to 20% compared to our previous estimate of 17.5% to 19%, which did not include the acquisition of Etanco.

Our revised guidance is mostly attributable to an improved outlook for the overall market and Simpson. In addition, our guidance includes projected results for Etanco, including approximately $15 million to $17 million in integration and transaction costs.  We are reiterating our 2022 effective tax rate estimate to now include Etanco of 25.5% to 26.5%, including both federal and state income tax rates and assuming no tax law changes are enacted. And we continue to expect capital expenditures to be in the range of $65 million to $70 million.

With integration activities well underway, we're in the process of assessing Etanco's capex needs in support of its operations and will provide additional detail in the coming quarters. We continue to estimate roughly 20% of our capex will be dedicated to maintenance, with the remainder focused on growth to maximize efficiencies, expand our manufacturing footprint and invest in our key growth initiatives. Before we conclude, I'd like to provide some additional color on our increased 2022 operating margin outlook. Raw material prices have continued to rise even following the pullback we saw toward the end of last year.

As discussed earlier, we implemented four product price increases in 2021 in an effort to offset these costs. And as a result, we estimate the cumulative top line impact from these price increases will be approximately $300 million in 2022. As a reminder, the impact from averaging raw material costs typically lags our price increases. While we continue to expect our cost of goods sold will increase significantly as we work through our on-hand inventory and by raw material prices higher than our historical averages, we believe this impact will become much more apparent in the second half of 2022.

In addition, as mentioned earlier, we anticipate we'll incur approximately $15 million to $17 million in integration and transaction costs related to the Etanco acquisition, of which $8 million to $10 million are incremental expenses. In summary, we were very pleased to start 2022 off strong with solid first quarter financial results and a successful acquisition of Etanco earlier this month. We remain very excited about our expanded product breadth and service offerings and the associated prospects for incremental growth. Our industry-leading position, geographic reach and diverse product offerings, combined with our strong balance sheet, gives us confidence in our ability to maintain operational excellence.

With that, I'd like to turn the call over to the operator to begin the Q&A session. Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Daniel Moore with CJS Securities. Please proceed with your question.

Daniel Moore -- CJS Securities -- Analyst

Thank you. Good afternoon, Karen and Brian. Thanks for taking questions and congrats on, obviously, exceptional results. The first is on the guide, the revised '22 operating income margin guide.

If we excluded Etanco, would it still be generally in that 19% to 20% range, higher or lower?

Brian Magstadt -- Chief Financial Officer

Yes, Dan, it would be in that same ballpark range.

Daniel Moore -- CJS Securities -- Analyst

Got it. And you tried to give some color, and it's appreciated. I'm just trying to understand the difference between the view now and kind of two months ago or so. What's different in the macro environment or the environment for Simpson? Or is it more just a function of kind of initial conservatism?

Brian Magstadt -- Chief Financial Officer

Well, I think a couple of things. One was, obviously, a little more line of sight into the year and seen the demand trends that came through in Q1. And then, our continued work on our forecasting and modeling within our business, but largely due to the forecast that we're seeing based on talking with customers and vendors throughout the year. Q1 was a little better than planned as well.

Daniel Moore -- CJS Securities -- Analyst

OK. And maybe one or two more. I'll shift gears to Etanco. How would you describe the environment in Europe and specifically Italy, France, their core markets today compared to maybe last summer when you announced the deal or demand levels, higher or lower? Just any changes in the operating environment there to speak off?

Karen Colonias -- Chief Executive Officer

Yeah, I'll take that one. We are still seeing some pretty nice demand in Europe. Obviously, a little bit of choppiness based on what's going on in the -- with Russia and the Ukraine, but we still based on the forecasting information that we get from industry, in the European market, it's still looking like there's some strong demand in our residential and also some pretty good demand in the commercial market, which is where Etanco is.

Daniel Moore -- CJS Securities -- Analyst

Got it. And lastly, again, related to Etanco, if not sort of a volume growth projection, you've given us good color on pricing here in North America. How do we think about the pricing that's come through in their business, either in the back half of '22 or into -- back half of '21 into '22, what type of uplift should we expect from Etanco year over year from price? Thanks again.

Karen Colonias -- Chief Executive Officer

So from a pricing perspective, they tend to put price increases in place. In Europe, I think you're aware, you can only do it a couple of times a year. And certainly, as we've looked and worked with them last year, those prices were put in place to cover their rising material costs also. So they would continue or we would continue that process now as we see any material fluctuations.

But again, pretty limited in the European market to two times a year to being able to put any pricing increase in place.

Brian Magstadt -- Chief Financial Officer

Yes. And some of the countries do allow a little more frequent there, but they've got a very complex SKU mix and different pricing approach. They do a lot of coding for particular commercial jobs and applications to contractors that they sell to. But they definitely try to capture rising material costs into their selling prices as well.

Daniel Moore -- CJS Securities -- Analyst

OK. That's helpful. I'll circle back with any follow-ups. Thank you.

Brian Magstadt -- Chief Financial Officer

Thanks, Dan.

Operator

Your next question comes from Tim Wojs with Baird. Please proceed with your question.

Tim Wojs -- Robert W. Baird and Company -- Analyst

Hey. Good afternoon, everyone.

Brian Magstadt -- Chief Financial Officer

Hey, Tim.

Tim Wojs -- Robert W. Baird and Company -- Analyst

Hello. Maybe just -- maybe starting on just kind of price cost, I just want to make sure I understand. Is there an underlying improvement kind of baked into your outlook? Or is there some sort of kind of shift that maybe some of the timing impacts from normalization actually kind of fall in '23? Just want to make sure that -- just kind of clarify that.

Brian Magstadt -- Chief Financial Officer

Well, Q1, as mentioned a moment ago, Q1 was a little better from a volume perspective than what we had thought hitting -- coming out of last year. One of the interesting things that we're seeing is due to various factors influencing construction such as lack of labor, the continued supply chain efforts, it seems like seasonality is less impactful than it had been to our business in prior years. One, our dependence on housing, as we've noted, has been decreasing, but also just builders being very fully booked, maybe that's not the right way to say it. But they're often commenting to us that they're sold through their 2022 releases, and they're just building them.

So it feels like there's a little less seasonality built into that. And as we think about our business going forward, again, that's a little better than Q1 versus last year. And then, just the continued complexity in our business around our SKUs, the steel that we use, some steel -- some products were turning a lot faster than others. So it creates the -- that dynamic of trying to pinpoint when that gross margin cost of sales impact would be.

So just a little better view now versus four, five months ago or a few months ago, coupled with just that is a little -- a little less seasonality in our business, which helps overhead absorption in the factories.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK. Good. That's really helpful. And I guess if volume growth was better in the first quarter than maybe you thought, I mean what's kind of baked in now to your outlook for volume growth for '22?

Brian Magstadt -- Chief Financial Officer

It's still mid- to high-single digits from a volume perspective. We are seeing, though, April, this is a little softer than what we thought. But as we look at the balance of the year and remember, last year, we had some interesting volume running through due to buying patterns of some of our customers. The comparative will be a little more interesting.

But just from a fiscal year 2022, that mid- to low -- mid- to high single digits is where we're expecting.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK, OK. Good. And then, I guess on Etanco, just kind of two clarification questions. So is Etanco being reported on a GAAP basis? And if it is, what's the intangible amortization number that we should think about being included in the operating margin guidance?

Brian Magstadt -- Chief Financial Officer

So the only numbers right now that we -- so obviously, Etanco, there's zero. Other than the transaction fees that we called out separate on the operating expense line, there's no Etanco impact in the P&L, revenue expenses because the acquisition was April 1. On a go-forward basis, the operating margin guidance assumes right now a very high-level estimate for intangible amortization that we are spending I don't know, the next couple of quarters fine-tuning the fair value, purchase price allocation valuation to really fine-tune that. So right now, we just have some high-level estimates baked into that operating margin guide that we provided.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK.

Brian Magstadt -- Chief Financial Officer

So I can tell you an estimate, but it's going to change. It's in the tens of millions for intangible amortization. We just -- there's a lot of assets the value, whether it be purchased intangibles, step-up in fair value in other assets that would roll through. So it's a very high-level estimate at this point.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK. OK. No, that's fine. I mean, but the 19% to 20% includes the charges that include the intangible amortization for Etanco, at least what you're estimating to be.

OK. Got you. And then, what would you think the revenue contribution for tax should be per quarter?

Brian Magstadt -- Chief Financial Officer

Per quarter, we're still dialing that in. But for the balance of 2022, it's to be about -- it should be a little north of $220 million for the balance for the second, third, fourth quarters of the year.

Tim Wojs -- Robert W. Baird and Company -- Analyst

OK. Good. Great. Well, thanks for the time, guys, and good luck on everything.

Karen Colonias -- Chief Executive Officer

Thanks.

Brian Magstadt -- Chief Financial Officer

Thanks, Tim.

Operator

Our next question comes from Kurt Yinger with D.A. Davidson. Please proceed with your question.

Kurt Yinger -- D.A. Davidson -- Analyst

Great. Thanks and good afternoon,  everyone.

Karen Colonias -- Chief Executive Officer

Hi, Kurt.

Brian Magstadt -- Chief Financial Officer

Hi, Kurt.

Kurt Yinger -- D.A. Davidson -- Analyst

Hi. I just wanted to unpack the comments, I guess, on the volume side first. And hoping you could maybe provide a bit more color on the demand trends between distribution and kind of the dealer channel, as well as the home center customers. And Karen, if I heard you right, I thought you said that volumes were kind of flat year over year.

And relative to expectations, it sounded like that was better. So I just wanted to understand whether that was kind of a specific comp issue related to some home center strength in Q1 of last year? Or kind of what to make of that flat volume?

Karen Colonias -- Chief Executive Officer

Yeah, Kurt. I think it has to do quite a bit with what was happening this time last year, right? We had announced an April price increase. So I think we had some pre-buying that went in a little bit of pre-buying to help offset that price increase in 2021. We also had quite a bit of concerns about supply chains.

And I think a lot of customers were just basically making sure they had product available. So it's pretty choppy for us based on, again, the price increases and all the things that were going on with supply chain to get a really nice quarter over -- quarter over year-over-year view. We did see a little bit of increase in our home center volume. But as we had said in the third quarter of last year, that volume had decreased.

So we see home centers kind of trying to do a little bit of an increase in their volume before any spring or summer business that comes in and basically a little bit down in our other distribution channels.

Kurt Yinger -- D.A. Davidson -- Analyst

Got it. OK. And then, Brian, you had kind of touched on maybe a bit softer than expected, April. I mean, was that primarily on the home center side, maybe with a little bit of a delay in spring in certain geographies? Or is that on some of those channels that would serve the new construction market as well?

Brian Magstadt -- Chief Financial Officer

Kurt, that was just total, not broken down by channel in that regard. So we look at our daily sales trends in total, and that was where that comment came from. So not specific to any particular channel at this point.

Kurt Yinger -- D.A. Davidson -- Analyst

OK. Got it. And then, just last one. I know it's still early on, but relative to the 500 basis points of European kind of operating expansion you kind of expect with Etanco, any sense of kind of what the baseline to build that off of this?

Brian Magstadt -- Chief Financial Officer

So when we were commenting on that late last year, it was around a high single-digit Simpson European business through, I believe, it was we were analyzing those forecasts during the fourth quarter last year. So kind of that high single digit was the base that we were looking out there.

Kurt Yinger -- D.A. Davidson -- Analyst

OK. All right. Great. Well, appreciate all the color and I'll turn it over.

Karen Colonias -- Chief Executive Officer

Thanks, Kurt.

Brian Magstadt -- Chief Financial Officer

Thanks, Kurt.

Operator

Our next question comes from Julio Romero with Sidoti. Please proceed with your question.

Julio Romero -- Sidoti and Company -- Analyst

Hey. Good afternoon, Karen and Brian.

Karen Colonias -- Chief Executive Officer

Hi, Julio.

Brian Magstadt -- Chief Financial Officer

Hi, Julio.

Julio Romero -- Sidoti and Company -- Analyst

So you had mentioned raw materials continue to rise in the quarter. Are you considering or expecting any additional price increases? And if so, what's your sense of how willing the market is going to be able to absorb additional price increases?

Karen Colonias -- Chief Executive Officer

Yes, that's a great question. We certainly saw steel start to come down a little bit at the end of the fourth quarter and maybe even slightly early into January. And then, as things kind of changed in Russia and Ukraine, we've actually seen it tick back up again. But as we've always stated, we need to ensure that whatever those price changes are sustainable before we go to the effort of making significant changes in our price structure and certainly creating a lot of that work for our customers.

So at this point, we're obviously watching it. But we do not, at this point, have any thoughts of price increases going in place unless, of course, it really changes dramatically. But currently, it looks like we'll stay status quo as where we are right now.

Brian Magstadt -- Chief Financial Officer

Yeah. There could be a little bit of pricing in Europe. Markets are a little bit different there. So Karen, I think you're mostly talking about North America?

Karen Colonias -- Chief Executive Officer

Correct.

Brian Magstadt -- Chief Financial Officer

And there may be some --

Julio Romero -- Sidoti and Company -- Analyst

OK. I appreciate --

Brian Magstadt -- Chief Financial Officer

OK. Julio, sorry, one last thing on that. There may be small slices of our business, a particular product category that we might need a little bit of price increase on, but nothing significant on the -- in the US

Julio Romero -- Sidoti and Company -- Analyst

OK. No, I appreciate the color there. And it makes sense that you guys are being thoughtful about everything there. Can you maybe speak to what you're hearing from your customers and just a sentiment in regards to the outlook for new single-family versus multifamily construction?

Karen Colonias -- Chief Executive Officer

Yes. I think, as Brian mentioned, many of our customers have already sold out their releases for the year. So there's still the demand. And there's the same elements that everyone is concerned about increasing interest rates, certainly what's going on in the overall economics.

But our customers are clearly saying they still have demand. And I think their sentiment is that they feel pretty good about both multifamily and single family as we go through the rest of 2022. As you know, Julio, for us, we put our products in both single-family and multifamily. So when we look at housing starts, even though we break it out by geography, because we've talked about the content we put in, multifamily starts are good for us also because we'll put quite a bit of content in those starts.

Julio Romero -- Sidoti and Company -- Analyst

Yes. Understood. And just over on Etanco, can you expand on your commentary with regards to the integration cost that you expect in the $8 million to $10 million of incremental expenses? I wasn't quite sure what are they incremental to it, are they incremental to your initial expectations? Just any clarification there.

Brian Magstadt -- Chief Financial Officer

Good point. So the $7 million that we booked in Q1 is incremental on that gets you to the $15 million to $17 million total for the year. So before I go into more detail, that one makes sense on that one?

Julio Romero -- Sidoti and Company -- Analyst

Yes.

Brian Magstadt -- Chief Financial Officer

OK. So working with consultants -- so part of that is the amount that we paid to our investment banker to -- on close of the deal. When the deal was closing there, lot of efforts around integration, consulting, there may be costs associated with some of the activities in the integration and then, as well as all the other costs that come with the added financial reporting requirements, additional audits, valuation work, some integration of systems to be able to provide each -- provide their locations, buying demands or what have you with their counterpart locations. So just general activities associated with the two organizations more closely together.

Julio Romero -- Sidoti and Company -- Analyst

Got it. That's really helpful. And one last one for me is, Karen, you spoke earlier about how the first quarter of last year, you had seen some pre-buying in advance of a price increase. Just remind us if what you had seen in the second quarter of last year, just as we come up on the quarterly comp if you saw any prebuying or abnormal volume activity as well in the prior year quarter?

Karen Colonias -- Chief Executive Officer

Yeah. I mean, as we've always talked about we need to give our customers somewhere between a 30 to 60-day notification of price increase. We always try and put things in place to stop prebuying, but of course, that's almost impossible to stop 100%. And we did have a price increase that we implemented in June.

So we would have had a little bit of pre-buying that also happened in the second quarter.

Julio Romero -- Sidoti and Company -- Analyst

Very helpful. Thanks very much for taking my questions.

Karen Colonias -- Chief Executive Officer

Yeah, thanks.

Operator

[Operator signoff]

Duration: 48 minutes

Call participants:

Kim Orlando -- Investor Relations

Karen Colonias -- Chief Executive Officer

Brian Magstadt -- Chief Financial Officer

Daniel Moore -- CJS Securities -- Analyst

Tim Wojs -- Robert W. Baird and Company -- Analyst

Kurt Yinger -- D.A. Davidson -- Analyst

Julio Romero -- Sidoti and Company -- Analyst

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