26.6% EBITDA margins in a 'commodity' business? Here's how.

How one company sold a $2B division and doubled down on "boring" building materials

Author

Nick Horob
July 11, 2025

Good morning,

Day 2 of Nerd Out on Business. Let’s go!

We're all wired to think that business growth means adding more: more products, more customers, more markets. But what if the smartest path to becoming a powerhouse is actually... subtraction?

This week, we're breaking down a company that has done exactly that: Carlisle Companies (CSL).

On the surface, they make high-performance building materials. The kind of stuff that keeps massive commercial roofs from leaking and makes buildings super energy-efficient. Important, but maybe not the sexiest business, right?

Wrong.

Here's why this matters for your business: Carlisle just pulled off one of the cleanest strategic pivots I've seen. They sold their aerospace division for $2B in 2024 and went all-in on building envelope products (think commercial roofing, waterproofing, insulation). The result? Record 26.6% EBITDA margins and a credible plan to hit $40+ earnings per share by 2030 (approx. 2.5x from today).

The big lesson? Sometimes the best growth strategy is subtraction, not addition.

While most companies chase "diversification," Carlisle did the opposite. They got laser-focused on one thing they could dominate. Their portfolio pruning turned them from a scattered conglomerate into a margin-rich specialist.

In today's company breakdown, we dig into:

  • Their "Carlisle Operating System" that drives $70M+ in annual cost savings

  • Why their "service differentiation" approach works even in commodity markets

  • The Vision 2030 strategy that actually has teeth (specific targets, credible roadmap)

  • Five tactical takeaways you can steal for your own business

It's a masterclass in how an "unsexy" B2B company can build serious competitive advantages through focus and execution. While most of us aren't in construction materials, the lessons translate. Check it out and let me know what you think. Always curious which insights hit for you.

If you enjoy the newsletter, share it with someone else you think might like it.

-Nick

The 30,000-Foot View

Business model. Carlisle sells systems that seal a building from roof to foundation. Core lines include single-ply roofing (EPDM, TPO, PVC), polyiso insulation, air-barrier wraps, waterproof coatings, and sealants; backed by 20- to 30-year warranties.

Revenue mix (FY 2024).

  • CCM: Carlisle Construction Materials. This is the core commercial-roofing and insulation division (EPDM, TPO, PVC membranes, polyiso boards, etc.) - 73%

  • CWT: Carlisle Weatherproofing Technologies. This houses the Henry acquisition and other building-envelope products such as air and vapor barriers, sealants, coatings, and below-grade waterproofing - 27%

Vital stats.

  • Market cap: ~$17 B

  • TTM revenue: ~$5.0 B

  • Gross margin: ~37%

  • Operating margin: ~22%

  • Employees: ~5,500

  • Industry: Industrials – Building Products

Company History

  • 1917 – Founding: Carlisle Tire & Rubber starts in Carlisle, PA, making bicycle inner tubes.

  • 1960s – Roofing breakthrough: Launches Sure-Seal EPDM single-ply membranes; begins pivot from tires to construction.

  • 1980s–2000s – Conglomerate era: Adds brakes, fluid-handling, food-service, and other industrial lines via acquisitions.

  • 2016–18 – Vision 2025: CEO Chris Koch targets > 20 % margins and $15 EPS; rolls out the lean Carlisle Operating System and plans to shed non-core units.

  • 2018 – First big divestiture: Sells Food-Service Products for $750 M; accelerates focus on building products.

  • 2021 – Waterproofing scale-up: Buys Henry Company for $1.6 B; sells Brake & Friction business.

  • 2022 – Record year: Hits $6.6 B sales post-COVID construction boom; > 80 % of revenue now building materials.

  • 2023 – Fluid exit: Off-loads Fluid Technologies; aerospace-cable unit marked for sale.

  • 2024 – Pure-play achieved: Sells Interconnect Technologies for $2 B; acquires MTL Holdings, Plasti-Fab, and ThermaFoam; unveils “Vision 2030” targeting $40 EPS.

Show Me the Money

  • Free-cash-flow engine: ~100% conversion of net income; FCF margins hover near 19 %.

  • Pricing power: More than ten price hikes between 2020-22 offset petrochemical spikes without killing demand.

  • After-market resilience: > 75% of revenue comes from re-roofing—steady even when new construction slumps.

  • Capital-allocation discipline: $1.6 B buyback in 2024 and 47 straight years of dividend hikes show ruthless focus on ROI.

Financial Data

Metric

2022

2023

2024

TTM

Revenue

$6.59 B

$4.59 B

$5.00 B

~$5.0 B

Gross Profit

$1.87 B

$1.63 B

$1.89 B

~$1.85 B

Gross Margin

28 %

35.6 %

37.7 %

~37 %

Ops Profit

$1.28 B

$0.98 B

$1.14 B

~$1.1 B

Ops Margin

19.3 %

21.4 %

22.8 %

~22 %

CapEx

$184 M

$111 M

$113 M

~$100 M

Net Debt

$1.88 B

$1.71 B

$1.14 B

~$1.3 B

The N.O.O.B. Nine — Competitive Powers

Power

Score

Rationale

Branding

4/5

Carlisle SynTec and Henry have decades-long reputations for reliability.

Data Flywheel

2/5

Growing IoT/QA data; loops still early.

Process Power

4/5

Lean COS saves > 3 % of sales each year—hard to mimic quickly.

Scale Economies

5/5

Largest U.S. single-ply roofing maker; bulk raw-material buys and dense plant network cut costs.

Switching Costs

3/5

20-year warranties + installer training create inertia, but specs can change project-by-project.

Cornered Resource

2/5

Patents and certifications help, but tech is replicable.

Network Economies

1/5

Physical goods offer no user-to-user network effects.

Counter-Positioning

1/5

Carlisle is the incumbent; no model rivals can’t copy.

Distribution Advantage

4/5

Deep ties to wholesalers + 10 k certified contractors secure shelf space and specs.

Average Score: 2.9/5 - Average of 9 competitive powers. Strong areas include powers scoring 4+ points, while areas scoring below 3 may need strategic attention.

Memorable Marketing

  • Overall approach: Sell through the channel—arm wholesalers, architects, and certified contractors with tech training, specs, and long warranties; minimal consumer spend.

  • Conference Consistency: They've attended the International Roofing Expo for 65+ straight years. Trade shows can be expensive but consistent attendance can be a key relationship building tool.

  • NVELOP (2022): Bundles roof, wall, and foundation products under one warranty → solves finger-pointing risk → drives cross-sell and larger average project value.

  • “Wider is Better” 16-ft TPO (2019-20): Promotes labor-saving wide rolls; “fewer seams, finish faster, make more money” → rapid contractor adoption, share gain in big-box roofs.

  • Carlisle Experience Award (2023): Publicly honors reps who saved customers during supply crunch → humanizes brand, deepens contractor loyalty.

  • LEED Platinum Plant Story (2023): Broadcasts new green factory → proves sustainability bona fides → boosts spec inclusion on LEED projects.

  • Founder tips: Bundle products + warranty; translate specs into dollar savings; turn ops wins into marketing assets; celebrate customer success to build evangelists.

AI Uses & Opportunities

  • Today: Predictive maintenance on plant equipment, ML demand forecasting for raw-material buys, vision-based QA on membranes.

  • Next moves: AI spec chatbot, ML-driven materials discovery, IoT smart-roof monitoring subscriptions, dynamic margin-based pricing.

Bumps in the Road

  • Cyclicality – High rates slowed 2023 builds; re-roofing cushioned the dip.

  • Raw-material volatility – Petrochemical swings squeeze margins before price hikes catch up.

  • Legal & labor issues – Patent fights and wage violations spotlight compliance risk.

  • Competitive heat – GAF, Johns Manville, Owens Corning racing on wide-sheet roofing and green tech; Carlisle must keep innovating.

  • Single-sector exposure – 90 %+ tied to construction; deep downturn or disruptive solar-roof tech could sting.

Your Swipe File

  1. Focus beats sprawl. Trimming non-core units doubled margins.

  2. Lean compounds. 1–3 % savings yearly builds a moat.

  3. Own the channel. Make partners richer and they’ll sell for you.

  4. Deploy capital surgically. High-return reinvestment + bold buybacks win.

  5. Surf megatrends. Align with energy codes and aging infrastructure, not against them.