MTD
#Maybe to add to <UNK>'s comments probably to Brazil and Russia we would both say the impact of energy prices has probably been as big on purchasing behavior as the impact of the currencies themselves.
Actually, we are working already on additional plans, but of course we will see a little bit how things will play out in the coming weeks and months.
But I'm actually optimistic that we are going to implement as we were actually planning.
We have really great ideas.
The teams have further expanded their analysis to identify new opportunities and I have multiple projects that were already submitted and I'm excited in that context.
Maybe also want to say that the ones that we initiated late last year are progressing very well.
The big majority have been recruited and are on boarded and now in training mode.
I'm actually optimistic that we are going to see a good impact from it and in that sense if things don't change, we would go in another way.
China is disproportionate and Russia are both disproportionately low on service.
So our service growth is basically the same assumption that we started the year with which is kind of a mid single-digit kind of number and we would expect no reason to change that number.
Maybe I think you were just asking about geographic differentiation.
We did see some improved growth in the ---+ there was better growth maybe in the Western part of the country, but still proportionately that's a smaller piece compared to the traditional, the manufacturing markets of China, Shanghai for example.
We opened up our Chengdu plant this quarter.
That certainly is a nice addition but still proportionally the west is relatively small compared to those traditional areas, but there was better growth to your question.
Okay.
So our Japan business was up let's call it low single digits.
But I wanted to highlight that against plus mid teens number a year ago because of a project, so I would expect that number to be modestly improving as the year progressed.
That's okay.
We can hear you.
And just to be clear, <UNK>, you're referring to China.
I want to highlight maybe that we need to have continuous product innovation and come up with new products in all the different product categories.
They are important to expand our lead versus competition and it's critical also to drive the replacement business.
But typically when we introduce a new product it benefits the product category, but for the whole group it is not so important.
It doesn't really move the needle that much.
I am excited about the two products that I just mentioned on the call, no question.
But they are not going to make a huge difference, but they are important for the next couple of years.
So I think every time on every quarter's call I highlight two or three product innovations that we have to show to you guys how broad our innovation is and we are going to continue.
Actually for the full year we have a very nice product pipeline pretty much across all the different businesses and.
Yes, I feel good.
For example, just remember last year we talked about product inspection products that we launched and we're talking about earlier this week how that had really an impact, these product launches.
I would have a hard time to single out one product for you here.
No, we are really being steady.
We are in the market every day.
We don't try to time the market at all.
It is really ---+ <UNK> has the program where she basically buys every day and we have in that sense a very consistent policy.
I think we have accepted currency volatility is probably something we're going to face also for the future.
We have significant ones in the recent past, particularly around the Swiss franc, but of course the dollar appreciation is also very real and we expect that to go on.
The key measures that we take against it is first on the pricing side.
We always look what kind of opportunities this offers and how this relates to competition, but also can we adjust and also we sometimes do very targeted mid year price increases to mitigate a currency impact.
And then currency changes can also have an impact on where we locate resources and we take measures around that one.
This typically not quick hit, but things that we do all the time we have had, for example, in recent years programs in Switzerland to address things.
We have, for example, built up low cost country service organizations and these are certainly things that we will continue to do in the coming years
I think <UNK> and I will take this when maybe together.
I think the first one we will probably on the industrial side say it's the smallest one.
We do see that lead times on bigger projects that the government is behind directly or through state-owned companies maybe take a little bit longer.
But it is not ---+ I don't think of that as the biggest one and probably the other two ---+
Actually, we see some delays but this can also be related to the leadership.
The new leadership team really putting in place all their people around the different decision-making bodies and that probably slows down things.
We certainly have concrete examples if that's the case, but otherwise I wouldn't connect it to your first point.
The second two probably ---+ it's tough to judge.
Maybe I would lean to the second one being a little bit more because of what I commented on with regard to the replacement cycle, but it would be tough to quantify it.
If I take early indicators like leads, (inaudible) I don't see supporting points.
On the contrary, I would say overall it continues to be healthy and, yes.
And our second quarter looks good which is the place where we had the most visibility.
Sure.
Yes, probably mostly the former.
Initially, we were seeing this January/February thing and we were kind of explaining it with that, but when we had actual results of March and visibility also about Q2 we wouldn't connect it to that.
I think no, that's not the explanation.
I think it's very broad-based.
I really feel that way.
Of course the European numbers are so strong, particularly if I look on a two-year base that I feel in particular confident about that one.
But actually also the US numbers and for emerging markets like southeast Asia, India and so on have also very high confidence.
For some of the other markets it may be a little more difficult because I have less data points from competitors to really compare.
But honestly it's really broad-based across the different business lines and across the geography.
So, out of the program that we initiated last year, we're talking about roughly 200 resources that we added throughout the world.
Most of these resources as we've mentioned before are hired, onboarded, and now kind of in training.
So you can imagine that the start now to have some impact, but it takes time until they really have an impact that is significant to us.
Typically, it takes six to nine months to cover the cost and from then on actually we start to have a good payback.
It increases actually more on a linear base than exponentially and I would typically expect four to five years until additional sales person plateaus in terms of a sales cost.
I think that's an indication so it is a pre-investment which is to break even rapidly and actually a better contribution particularly in the second year.
I might add, <UNK>, that as a reminder we had a smaller field turbo program including in Europe in 2013 and clearly we think part of our success in Europe and in the Americas, but particularly Europe, is partly related to that.
Yes, there's nothing special there.
(Inaudible) interest rate analysis for you, but we're cash flow kind of ---+ you know our full-year number and you know that the first quarter is typically a period of time where we're more of a net borrower ---+ we're anyway for a full year a net borrower because of the extra repurchases, but in the first quarter is the weakest quarter cash flow wise.
So, with regard to its relationship to interest expense, I can't think of anything that's changing or that has changed.
You've seen what we have done debt issuance wise.
So we did 190 bps in the first quarter and if we can say somewhere in the 1.75 to 2 range I think that's a realistic expectation.
Our view on M&A really remains unchanged in the sense that M&A is part of our strategy.
I'd like to do M&A cases, but they need to strategically really fit into the franchise.
If they are close adjacencies, if they add from a technology standpoint or gives us an opportunity to consolidate our market position in certain country, we are going to pursue it.
It's actually much less financially driven in the sense that I say foremost strategy needs to be right and then the financials need to be right in terms of business case and we remain very disciplined on that one.
I do not foresee a change in that one even with what you alluded to about the nicely improved profitability.
I think the nicely improved profitability gives us the opportunity to further invest in organic growth and the field turbo is a good example of that.
So, I don't expect a change in the strategy, but I want to reinforce even that we have wanted on very few M&A's in the recent quarters that we are very committed to it and we are actually constantly working on cases.
We have a good pipeline and (inaudible) screen kind of cases that we try to nurture.
Also, we are now in an environment where people are willing to pay premiums for acquisitions and here we stay disciplined and so we will see how it plays.
Jon, <UNK> and I both continue to believe that in the medium term we can't off of let's call it mid single-digit organic growth or currency growth deliver mid teens EPS growth in a constant currency environment.
And while the absolute margins are getting higher, we have one of our biggest programs that we've invested in to drive margin enhancement with the Blue Ocean program being an enabler.
We're only roughly halfway done with that so there is more to come in terms of that.
And then of course we're saying that knowing that the amortization is kicking in on that intangible asset and that will mean even better free cash flow yield in terms of our EPS numbers as well.
So we think the organic ---+ there will be nice acquisition opportunities, but we believe that the organic financial story has many years to run.
Your numbers are high.
And the way I want you to look at it is the field turbos are part of us to achieve the mid single-digit growth that we are always talking to you guys.
So we are not suggesting here with field turbos that we got to accelerate our growth and you're going to suddenly see higher growth rates.
