ITT
#Thanks, <UNK>.
Okay.
In terms of ICS and margins we are very happy with what we see ---+ the increase that we saw from Q1 to Q2.
We do expect to improve as we go throughout the year.
The thing to recognize with ICS is, you know, they've also had a strong oil and gas business that has been impacted by what's been happening with oil price.
So we've seen a decline in that business for them from where they were in 2014 to where we are today and we continue to see declines in that business.
That is our highest margin product line within ICS.
So when that goes down that really impacts the kind of margins that we have in ICS.
So we were happy to see the improvement in Q2 because that was, despite the decline that we've seen in oil and gas revenues, and its associated with the fact that we've had a relatively good business in our transportation and industrial segment in ICS and then we've been seeing these improvements in our aerospace and defense business with what's been happening in Nogales.
From an operational perspective in Nogales we have been seeing increasing weekly production rates as things get better as we go forward.
In terms of on-time delivery we are still working through some of those challenges that we have there but we been able to effectively lower some of the overhead costs and really working hard on some of those inefficiencies that we've had in that operation.
So it is going to be gradual increases associated with that as we continue to chip away at some of these issues that we've had and the teams have been working very hard in addressing those.
Yes, <UNK> ---+ (multiple speakers) Sorry.
Just quick.
A couple of steps labor productivity in Nogales has been trending up significantly from Q1.
We have also seen a nice improvement in our overall utilization rates and machine efficiency is certainly going in the right direction.
So we have some good underlying performance results that we track with the team on a regular basis and I think there's kind of two sides.
We are seeing really good improvement in the throughput and the scheduling and the planning.
We have new leadership in place that is really driving some of these actions and I think the other big category that <UNK> was touching on too, is that we have a much tighter control of our costs and spending particularly in the overhead freight and other categories where we've had some inefficiencies that have piled up over the year.
So we are working through those pretty well.
They are going well for us, particularly with the new awards that we are winning there and we are happy to see that they are ahead of schedule from what we had even anticipated.
You know this is very similar to what happened to us in Wuxi.
When we started building that facility there and it was really local for our customer base.
We started out slow you know you only build as you see the volumes coming in as you see the awards coming through.
This initial buildout for phase 1 is about 8 million break pads.
And then we will just continue to increment up from there and, you know, when we see that we need more capacity we will do what we did with Wuxi and will get approval for that and put that into place so that we can make sure that we hit the ramp up that is necessary.
We decided to put this facility in place now because we saw that there were going to be many new platforms in 2018 and 2019 that were going to be coming through.
And so we needed to start building the facility now and winning the awards now because it typically takes that period of time before you actually are going to start seeing the production happening through that facility.
So, you know what's nice about it is these are share gain opportunities that we are going after here.
We only have a 10% market share today in North America, in China only 13% and so this is not based on market growth in North America.
This is based on market share gains which we have been gaining market share in Europe and in China and we expect to do it in North America that's at the rate of three or four times the market growth and so we expect to continue to do that in North America.
Thanks, <UNK>.
Hi, <UNK>.
You know we were hopeful at the last earnings call that we would see some improvement in the aftermarket and the baseline, you know, short cycle business as we went throughout year.
Unfortunately we're not seeing that.
And we're not seeing it in the order rates and so we decided to forecast that there will be no improvement as we go in the back half of the year.
In fact, when you look at the second half versus the first half we expect our short cycle business in this forecast to be down about 6%.
Where our backend ---+ after the first earnings call we actually expected to see some improvement as we went through the back half the year.
And this is really predicated on looking at where order rates are, thinking again about what is happening from a macroeconomic perspective.
That we just think it's prudent to be able to forecast it this way.
And you know, if it turns out better that's great but we just think things are going to stay pretty low from what we've been seeing in the marketplace today.
Pricing in the short cycle is pretty consistent.
Haven't seen any real major changes with that.
Projects out of the business as we came into this year we indicated that we were going to have some price pressures from where we were in 2015.
Those price pressures continue.
It is really very much project specific but when you've got the kind of situation that is out there today with projects and not many projects being awarded, it is pretty competitive and we are seeing a little bit more pricing pressure on the project side than we expected, let's say six months ago.
That is as we work through some of the backlog that we have, the new backlog coming in will reflect those lower prices.
As part of that we are also improving from an operational perspective and we are working on our cost structure so that are able to get these products out in a very cost efficient way which is part of the restructuring that we've been doing and the new organizational structure that we have put into place.
And that should help us from a margin perspective to partially offset some of the price pressures we are seeing from a customer perspective.
You know not much on the independent aftermarket.
There is again just some timing associated with the independent aftermarket.
Where we have seen improvement is more on the dealer service activity which is the OES business and that's because we been winning so many new platforms that we are beginning to see that dealer service cycle beginning to kick in and that's where we are seeing the real benefits from an aftermarket perspective is really in that dealer service cycle.
Thanks, <UNK>.
Good morning, <UNK>.
Yes, you know, <UNK>, we, as <UNK> mentioned, we are ahead of schedule on the 25% particularly at Industrial Process that we had identified.
So we are happy about that.
We are also managing headcount through attrition and other activities.
So, net positive to where we expected to be, which I think is a good indicator.
Based on what you are seeing as projected in the second half of the year, you know, we are continuing to look for other actions as we kind of go through this reset.
None of which are kind of factored in yet but we are certainly continuing to evaluate incremental actions as we go through the back half of the year.
No, with Brexit our revenues in Europe are minimal to us.
They are only about $35 million or so.
And part of that is across all value centers, about 40% of that is on the automotive side but we are not seeing any impact associated with that really again, it is so insignificant to us that it is not impacting our results at all.
Yes, you know, <UNK>, I think it is the intersection of the two.
So we have been working on the pipeline.
There have been some acquisitions that we have pursued that are close to core in our typical categories that we been looking at.
And we didn't see the right price opportunity there from a valuation perspective so we have exited some activities and remain disciplined through the cycle.
And based on, you know, the velocity that we have seen in the pipeline up to this point, as we said in the past if we don't see actionable M&A then we would want to return incremental capital to shareholders.
And that's why we felt, you know, it was the right time and certainly given our relative evaluation we thought it was the right time to do some additional share repurchases and that's what we announced today.
Thanks <UNK>.
Good morning, Shannon.
We think about two to three times the market growth, we should be able to continue to do that and again it's based on the awards that we've been winning; and it's also because we are able to go in where we might have a competitor that has won a platform and we come in we have better technology, we come up with a better solution and we are able to be able to get that business.
You know, it is really how MT operates in terms of the footprint that they have which is similar across the globe.
It is the R&D capabilities.
It's our ability to prototype.
It's our on-time delivery which is almost 100%.
It is our defect rate which is less than one ppm.
All those things really create this very powerful model that we have in MT where we are able to continue to outpace the market because we meet the customers needs that we have.
So we look about two to three times that we should be able to outpace the market growth and we continue to believe that going forward.
You know we look to ---+ when we look at acquisitions we just think about where we can add value in the portfolio.
And as you have seen the acquisitions that we have done, you know, we did one in IP a couple of years ago; we have done one in Aerospace; we did the Wolverine which was associated with the automotive business.
But we go across the different end markets that we have and we look at where we think we've got the biggest opportunities.
Now from a Motion Tech perspective and automotive perspective we ---+ our strategy there has been growing it organically because we have got such a powerful model in terms of how we can take ---+ how we operate today and just transplant it like we've done in China and like we are doing in North America.
So, we like from a brake pad perspective doing that from an organic perspective and that works well for us because we can replicate the model that we have today.
So, we go again we go across various end markets we will continue to do that; and our Motion Tech business is really a unique business.
It is not a typical automotive business.
And it needs to be valued and recognized that way in the marketplace.
Thank you.
Good morning, <UNK>.
Good morning.
We like to be able to beat some of the numbers that we put out there but I think if you just look at it over time, you know, two to three times is probably the right way to think about it.
The other thing to remember is Europe.
We are at a 50% market share and Europe maybe a little bit more than that, a little bit less than that.
So you know there's not as much opportunity in Europe as we see in China and in North America.
So we think two to three times is the right metric to think about it.
At any one point in time it could be more than that but that should be a good ballpark for you.
You know <UNK> if you look back through the trend rates on Europe even in tough markets you know we focused in on conquering share.
So we have been outgrowing Europe market rates 1.5 to 2 times on average based on our competitive positioning in Europe and in North America and China the rates of growth would be certainly in excess.
So we are looking at depending on where we are in the cycle three to five times growth in those regions in some cases.
You know our goal as we have been talking about for China and North America is to double our share in those regions over the next five years.
So we see the share wins that we have already generated and the opportunities that we have giving us the opportunity and the entitlement to go for that level growth.
You know we will do everything we can to position ourself that way but I think the opportunity set, the wins that we already have give us some good visibility into significant outgrowth in North America and China and, you know, above-average performance in Europe which is what we've been able to do over the years.
You know, IP is a great business.
It still remains a great business and we still see some longer-term trends that are really going to benefit us.
So you're going through a cycle right now with IP.
But in terms of the quality of the operation.
In terms of the brand name, the equity that we have, the position that we have, it's a very strong position for us.
And so, you know, we look at all the elements of our portfolio all the time and think about how do we feel about it, how does it look, how does it fit and we make assessments according to that.
But there's a lot of opportunity for IP out into the future.
And you know, we are in the process of restructuring that organization, putting in place the right leadership structure, the right cost structure, creating centers of excellence with our manufacturing footprint and really aggressively going after some of the aftermarket and some of those opportunities.
So you know, we have got a lot of work ahead of us there but there's just a lot of opportunity for us also.
Yes, I would just add to that, <UNK>, that our view is we would like to grow our Industrial Process business from an M&A perspective.
Right now it is important that we have clarity from a strategic perspective of where these end markets are going and how we are going to realign ourselves to be best positioned for those organically and I think it's a critical first step in rethinking through the M&A pipeline as well.
So we are making sure that the M&A pipeline that we are building for the future at IP aligns with where we think the businesses are going.
And then that will allow us to target some opportunities that we consider close to the core that we are establishing for the long-term.
But as you know right now in the space I think valuations are very complicated and it's very difficult to have meaningful conversations even on small targets that fit into some of the strategic areas of focus.
So for all those reasons we are still looking at IP as a way to grow our portfolio but we are going to do it with the right pacing and sequencing that makes sense for the creation of long-term value and we are kind of in the middle of that process right now, given all the market dynamics.
Hard to say, <UNK>.
They are not as big as some of the petrochemical projects was seen as far as the size of the orders but we did see a nice uptick.
I think some of that will fill into 2016 but we were expecting more to be coming through and given the nature that they are not as large ---+ you know, we ship them out the door this year it would benefit 2016 most likely more than carry into 2017.
But we are seeing, as we mentioned, some customer delays once we even have orders kind of on the books as to when they want ship dates.
So I wouldn't draw too much from it other than it's nice to see that there are some increased activities in petrochem and, you know, I think we are going to go through this cycle with hits and misses around the different end markets.
So a project here and there gives us a very nice variance but it doesn't necessarily mean that there is a dramatic change in where things are going.
But I would say what we are seeing in petrochem in particular this group is probably a 2016 shipment category more than a 2017.
Thanks, <UNK>.
