DCI - Earnings call transcript Q4 2019 | Donaldson Company, Inc.

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Operator

Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Donaldson's Fiscal 2019 Q4 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank

of Director you begin may Brad Investor conference. your Pogalz, Relations,

Brad Pogalz

for today we for morning. fourth earnings an fourth me Robinson, Chairman, Chief Good Tod and Denise. our This Scott of joining are and conference year. Tod of the President CEO overview Thank With Financial XXXX Thanks, of Scott new year will and you Donaldson's fiscal provide quarter Donaldson; summary Carpenter, planning performance full quarter call. what morning, Officer. are and and a

today's we adjusted During call, metrics will such earnings. reference as non-GAAP

You and metrics made remind statements can morning's which our in uncertainties, everyone attached and find press a the this risks forward-looking any during reconciliation are filings. of described this GAAP to to release to that press within call non-GAAP release. are SEC want I to schedules subject

With Carpenter. now Tod call Tod? over that, to turn I'll the

Tod Carpenter

Good Thanks, our of year's and an we the We $XXX in reached new several Sales $X.XX record adjusted Brad. BOFA. per XXXX. CapEx of million billion, million acquisition high with $XXX morning, fiscal in for above billion last everyone. $X.XX invested were XX.X% earnings time records all future and set expenditures of of $X.XX share

continued to dividends to thank future, our the returned top investing to Donaldson want world. for I was for stated commitment of and a Company. our advancing measures, On filtration for a employees and By XXXX their nearly shareholders $XXX these we purpose repurchase. million cleaner through share solid contribution of year for

first, XXXX, fourth thoughts I'll talk a I later. plan quarter But will on for have and some Scott strong We sales. which share about

the a projections below highlighted increase. Engine sales from our X% slightly down while million slightly and the were quarter and sales year. the from and while headwind X% offset recognition slightly Total sales projections ahead environment, uneven with accounting of demand gains were revenue Pricing of up currency forecast a added $XXX line in industrial last in with X%, BOFA Results X%. were of

up came In quarter Engine, favorability the first-fit with forecast were driving growth. from and orders Defense. X% last Sales Aerospace the

growth which years On-Road moderated in of China. expected, As X% nearly last the follows U.S. significant two to and growth quarter,

peak, sales U.S. at While heavy is a were at robust truck grew in fourth XX%. In sales quarter production rate the likely increase down XXX% lapped we our year. last of duty China, a as

Western discussed, our are previously have with more programs have we China that As their local in counterparts. new order volatility manufacturers than

China. be of natural So we growing expect our fluctuations of demand part share our a will in -- growing

uneven of down reflective better sales than our lows. destocking from at be of a Innovative XX% products part remain flat to continued in hovered benefits Off-Road significantly natural within last related year, the with the and to last Engine technology. little quarter have large including of with world, Off-Road will customers Sales of razor-to-sell were legacy mitigate Europe appeared forecast Also, stronger U.S., In orders cyclicality changes. backlog the sales were the other a is we pre-buys performance and of parts regulatory quarter, fourth of an than and how core demand two-year razor been products as markets. blade were upcoming which environment. strongest,

last Aftermarket sales year Fourth another about in quarter were constant is factor. flat up mitigating currency. or X.X%

the company. total were markets at Aftermarket a facing low quarter which make sales consistently stabilizer see of The up than increase macro making products, were and innovative an about by a for important legacy construction, OE lower continue pressures. agriculture large grow customers the They Aftermarket. faster products, them single-digit We for added of and gas and destocking evidence in to oil offset demand headwinds

last for last quarter. miss the Solutions currency. headwind benefit of Turning X.X% from X.X% in Sales X% segment. within Filtration up to currency. and increase the below constant translates Industrial or or grew sales driving from This Sales X% quarter BOFA quarter an exclude Industrial the to dust the when new IFS segment, of fourth expectations, were you were collectors

Quoting macro uncertainty. given activity reluctant in but customers to seem new stable, invest is systems

dust We more are, however, replacement XX%. China sales collection where last strongest still region parts. the were generating growth with year, up was than

customers on that's XX% the with quarter Although and initiative last the demand IFS, We're like in new is and small, process still up there Blue business food filtration year. the sales gaining within top with and rapidly our force is increase it's manufacturers sales generating Sky our Also, world. fourth industry, expanded China's for agreements new XX% things products. were growing create of around beverage traction a and about

growth momentum, Based in strong another XXXX. see this we of year on

expected, few an easy comparison fourth in driven turbine done past greater the increase Their approach excellent large GTS this up last focus gas rightsizing or X% turned The They've were want more I with sales to a due systems pause driving GTS year. an growth and by projects business As business in here from quarter prior in stable potential. team. and the job recognize years. profitable turbine was on into part margin to proactive GTS year. the over

market in with We managing in advancements special but that customers can Drive quarter, capabilities Disk in technical be last leveraged how in pleased our standards are Drive drove high spurs Disk with the are X% the company. business. also Secular applications elsewhere our we that pressures decline

our want approach innovation Sharing highlight a our strategic few our year. I managing by of company to a portfolio. from across last to complemented successes is

First, combined fast Accelerate company. and our portfolio grew as twice Advance as the

of critical as mitigating markets we are of cyclicality the more the parts the above to serve. Second, total replacement parts were than XX% average also replacement sales company

of XXXX driver both were parts. products and about XX%. for new equipment replacement more XX% Third, a these products Engine up innovative up Sales and in collectors were flow remain growth dust than in

efficiency Our gains parts that by in strength company. supported in further leverage of we our XXXX. diverse portfolio growth to and We make a other the core businesses, is will in investments plan

costs for reduce structure to is are In is work our which addition what control in actively XXXX. and opportunities will us. other gains, for we standard optimize This looking to those we

the to Investors Day. markets, have which five attention changed our in the We are since paying also months close

At will of global that supported levels investment, X% between rates. currency today's industrial and likely estimates, production single-digit exchange time, production equipment growth estimated be down on commodity prices to the will more low hard challenging and X% market the cautiousness driven has end to It's prior but range, is the versus by is we than much currency come environment expect Based mid by real prior year. stable change anything we in stable. demand down be of say estimate and our to of the how erosion, but do low

low of in a XXXX, sales the XXXX projecting sales we factors are provided be we Day. to increase end our means these Investors With that mind, closer likely in modest which the at range also will

XXXX now in I'll the turn to Scott? what's on call our plans. for included Scott more details

Scott Robinson

supporting year, quick uneven morning, we focused on our global margin some customers, of navigating recap and driving growth. focus XXXX about In XXXX. after Thanks, is foundation thoughts everyone. our Tod. demand share improvement. XXXX, environment processes and a an Good our gross our strengthening future enhancing This for I'll

EPS to in $X.XX $X.XX sales the our a to some $X.XX the Tax regulations related in line we in were sales have Overall, both GAAP was of year-over-year $X.XX and forecast. currency, change that and versus XXXX. A year. also quarter had were restructuring and we're constant with last a with up In quarter XXXX had largely We delivered X.X% due reform. The last EPS benefit strategic entities. of portion charge tax charge fourth for pleased was final Act, to legal compared

match easily With to the flexibility needs. cash enabled operating reform, we tax by more global our simplified with structure

Please last note year charge non-operating the with compared in year. that expense restructuring resulted this income

to points or without contributed basis fourth items, was incentive partially points change. audit expected led expense better revenue offset margin offset a tax down rate, non-recurring a gross the than margin. EPS $X.XX Lower settlement quarter, decline. Operating to a than was grew to Excluding compensation last quarter which by lower and margin recognition adjusted XX expected X% rate, basis favorable which the XX

offset we that our lower transfers had within another projects margin have from process as and level manufacturing costs level pressure also thing the mix one came which back. was like expected. Market key Pricing in initiatives, margin good gross gross was the In performance pre-buy strengthening a held ups in profitability. we on At progress large to our on products much line Uneven we make in part still turbine demand high we headwind. best but margin our didn't do level, or emission cases, some higher Off-Road about, take work as including feel quarter, GTS.

quarter is modest every demand cases, in a we other what suddenly cases, demand changed stabilized In a afterwards. where dramatically. some which period rebound, and in fact, happened had July. had In In XXXX

in shortfall margin the offset margin our was the encouraged strongest to enough wasn't quarter, July of in as news trend were good last July performances While we year. one the gross by

statement, showed fourth cash sheet basis. our improvement range Moving last working in off conversion balance and the in is The more an ratio adjusted target was quarter. XXX% leverage quarter our right on than income capital

the $XXX million. full returned totaled in the investments For shareholders year cash and business to

generated ROIC the Excluding tax more a charges, strong we of XX%. than

this of we proud to this build on are plan success. performance We and

sales our fiscal increase. X% to our a a forecast 'XX now decline are and outlook, between Turning X%

a Engine and decline X% benefit X% pricing a We and projected X%. are expect of a of between sales headwinds to from X% currency X% increase.

China. the combined for The the On-Road customers both pressure maturing decline and On-Road environment. be is projected also will most planning anticipated. dynamic that primarily On-Road the down of in their where about order driven process in First-fit mid-teens. is optimistic widely long-term, U.S., with still volatility but duty is lower under our Off-Road with makes by the these We're relationships a sales with production We're truck heavy down in

and expected decline. from in comparisons pre-buys the end strong in Off-Road, driving In key are XXXX markets softness

for driven Aftermarket share innovative in from expect a to stability utilization full-year provide single-digits. gains with increase XXXX estimates products. our the equipment That's in We above low-to-mid by

and aerospace up Defense Sales ground projected and growth up portfolio. mid-single-digits, growth is strong commercial Industrial are for of which our and mixed are X% in reflecting sales defense. in between the planned X%, Aerospace

secular low-single-digit offset. trend, driven while a We expect provides partial Venting by a growth decline Special Applications, the Drive in Solutions Disk

BOFA. we GTS, expect from than should less year large parts small forecasting replacement strong in benefit headwinds which XX% low-single-digit Share sales projects, increase and are in represent with we a of a easily replacement year gains up offset sales. parts Strong year. For of partial mid-to-high turbine single-digits, Sales should than Process planned collection GTS contraction dust are further this equipment, for IFS of with Filtration. new offset the another market-related including also more

LifeTec offering and expand food new is than to with customers. sales beverage our larger and continue relationships We team building our ever

and and XX year. to the key expect basis from XX enhancing up full-year margin, is which to reductions resetting The we For supply margin XXXX part last from operating improvement and before, points comes level the mentioned a points XX.X%, relate chain, between I activities profitability. rate cost aggressively gross what XX.X% basis pursuing

portion higher and our businesses. $XX gross incentive the which annual and expenses a to improvement. adds in margin of expense the the R&D expect We Resetting biggest offset of invest continue about plans headwind, we'll will is growth million

We in are cost the profit these through areas. investments planning other of to impact reductions minimize

Beyond what's plan, and in around continue harvest identify to additional will we savings the company.

planned expense metrics, income to we $X tax rate and $XX and $XX other interest of For million million, $X other between million million XX% a of XX%. to operating

as taxes. audit year's from This from a up settlements. benefit don't rate last expect comment or year much on Just options is stock quick we

driven projects. million, capital $XXX expenditures capacity remain at in-flight by We $XXX to expect primarily to elevated million

We year. XX% to and shares planning also XX% between conversion to of cash repurchase GAAP $X.XX expect X% we're $X.XX. EPS and this again Altogether, of

our the to generate said, there half. Overall, are sales, should half the we we first guidance which in and detailed want that expect the XXXX, help I one in higher is EPS with mind request. keep margin limit that full in some but modeling, That have so the nuances, typical year. Please for means second seasonality to practice

high So stay my a will at comments level.

of forecast driven performance XX initiatives, FY With to in be the from by tougher pace XX that's margin, combined comps XXXX. in first a certain for the basis ramp-up points will half points full-year For half. translates basis to sales, operating down of 'XX second growth with the

the first quarter. things kicks few The headwind going over from in incentive comps, and compensation margin the year build half right the a away it, against in tougher improvement has first that initiatives

segments. modeling. about the of into expense the $XX unallocated and headwind with compensation split will go About more balance corporate One line, the the between from million point half

demand I year to As mission and is uneven improvement. said earlier, this environment drive an our gross margin navigate

choices Our and plans to investments. XXXX deliberate reflect related growth

our with with the and For Advance a engine expense profitability challenged first-fit growth. Conversely, example, being business the highest environment. investment Accelerate areas tasked and are investment like capacity the businesses in and enhanced savings receiving creating most are

further are targets only that the ourselves Day. great several us reason future. We Investor there and to make low of me the provided in Looking see see our fiscal 'XX, we of market in front at are conditions the towards we ahead end opportunities things confident

the We right have strategy.

have one and long-term work powerful We to our portfolio, employees Donaldson the we last a want a approach have did they disciplined that thank base for to of in and and role the managing committed as are play I the acting employees team. year our they'll success. a

back Tod. to I'll now turn the call

Tod?

Tod Carpenter

Scott. Thanks,

think gross clear, and margin. but is just focus navigating reiterate, to demand improving year our I this it's uneven

will in strategic place also this mission is to team That's achieve tactical we aligned our drive plan. our global Our around this But each result. has plans. area and plans

is that profitable committed long-term returns-focused company are We to growth. a

of So few I'll examples progress. a our share

story R&D These the opportunity this integrity Material of LifeTec leverage applied customers The million Filtration. under developing biggest spend That's the beverage X% are advanced science with another cared their new products, to an research As capabilities construction. areas and XXXX always, plan about like We on in up for facility technologies Process further and and of can Donaldson's $XX us, the in industry which deeply breakthrough innovation. the year. our is filters. from many begins to food year creates technology. for us opportunity be

ahead. a again Process and up Filtration year long planned of runway we Sales are this see

recently the which and devices this is Venting And see business future. high-tech We vent our new Donaldson point, protects vehicles. battery is Solutions. in that of place automotive also where the These a opportunity sensitive We in about launched role and targeting in excited that a packs, Venting critically protect this are important we the we one industry. big space electric in parts. leverage at To are products new technology we

sensing, Connected is highly with partner. customer-focused provide Solutions further about Based offering this another and an their is we users unique our can innovative collector performance. With support information brand dust for remote actionable research, our of end us. on real-time valuable, as level solidifying

launched launch, innovating are hundreds again sessions should we we have been more through transactions. e-commerce, customers way doing millions this which the we nearly and that million world and There Since sales years invoiced through of are We than of around from also we've two grow of in year. sell figures $XXX ago. thousands the those

innovation it can receive We couldn't we and earlier principle core the company. drive appreciate processing business, gives better an Engine benefit. on savings to speed turned Aftermarket us appreciate added one e-commerce incremental orders. in is we at and and the serve from to with existing guest year, Industrial customers the with Donaldson They in For the orders from opportunity the this that The customers. serve Cultivating efficiency a efficiently ability past. the the see is revenue customers, true same and cost we our everywhere

employees, for our to create I our in ability approach stakeholders. to all strategic clear With investing, long-term confident more than am disciplined value ever excellent focus, our and

Denise turn lines for Now, the to to questions. I'll call Denise? open back the

Operator

[Operator Instructions].

from with Your Jones first comes question Nathan Stifel.

open. is line Your

Nathan Jones

like part to just in the that and I'd of off IFS, start guidance.

from environment. X BOFA, points of X here guys pretty in macro strong growth on have got by in You point to probably of in X kind points single-digit mid-to-high to like this point the looks headwind. looks surface It X offset XXXX, IFS currency which

production in would've -- flattish. organic Industrial down still Industrial XXXX, you're is new probably at in CapEx So range. that looking growth CapEx I is Industrial probably thought

you in that's strong that not what's there growth how could an -- get strong? bridge just us, for you that maybe pretty environment So gap to

Tod Carpenter

Tod. is this Sure,

our frankly, you BOFA call I some model the $XX or that which CapEx will portfolio, have Sky in for our in our share accurate. Advance high-single-digits a in Nathan business, what's Accelerate and at brand will -- $X numbers years. Blue taking And think initiatives in our in of million collection portion dust portfolio add dust your the that based face the China growth. built been IFS, that comprehensive business, is in collection And growing, there business have number headwinds. that consider IFS good while we to really that portion likely then Torit, we million there. we of So, opportunities when we upon we've of Aftermarket Also of is of

good have We momentum in Europe.

years We the been we we've have strong Americas. growth. IFS at don't across Process multiple business, Filtration double-digits carries opportunities multiple for And for also our year another which growth then look forget that and growing of

some that 'XX. has all IFS fiscal we for and in roll So us really opportunities strong together

Nathan Jones

cash the question maybe on just Second conversion. here

year, You update maybe is year a of that last on guys the on strategic normalized give this this us return targets heavily the are and conversion cash coming initiatives. CapEx? long-term should you spending are? we free this long of to how kind level, we should Can flow When level year, or pretty expect what an more what

Scott Robinson

Yes.

this So Nathan, hey is Scott. --

what -- consistent Day. we So it's it's with at Investor said consistent still

on target CapEx. So this and at expecting and ended And the year, Day last our year. this we year million Investor in of levels investment past, that higher said $XXX we right of we of were

of that we million to the year, purpose continued this finish And $XXX is $XXX for for we that projects elevated in-flight. have million. the to So levels have

and returns margin to we've So we grab been help significant capacity and adding need these the to with projects improvement. amounts of finish the

this down. about with the complete feel at. and So We're Longer we line to those. where have on spending come term, we're projects good we right will

of CapEx $XXX $XXX more of range XX% be said that's year, X% is conversion cash will normal We million XX% average to or revenues. with million. our expect We and a this to

a sales. of we improve expect normalized more we X% over will CapEx that come as spending to time back So of

that slightly at as the elevated we improve with still and will lower CapEx conversion So cash bring spending. spending down we're

Nathan Jones

And would in $XXX conversion? long-term anticipate million you of plus terms

Scott Robinson

million what growth mean, million, But we're to I things Yes, other doing. $XXX that's $XX on revenue a the range. depending and reasonable

Nathan Jones

And then gross on margins. just

XXXX. information out that growing you're will improvement? called margin to of improvement? gross talk points margins And the what's basis got, of price of gross clearly, margins outside guys initiatives us going margin maybe XX And any you'd that margin cost that on just big leverage. the biggest on assume about be have you in any basis What are terms of XX to You as volume I Can of kind points driver that expansion. here drive tailwinds? give looking in fiscal at that driving guys you can be you

Scott Robinson

Yes.

mean wanted the I said, in we I So, that's projects not year. that to. this disappointed bit our short. we up to, why did our CapEx But accomplish were in-flight and as We and that's improvement that what relates a ended margin are margins for everything

So, those. is, returns number projects drive complete that have we of expected one in-flight the we out the and

As on and will and those normalize freight improve teams complete projects, a lot inbound and to we raw supply to regaining time we allow our spend our with begin efficiencies on cost materials. takeout focus more our chain more

improve with a our year to to to for level with of associated low position. to on have drive neutral work And -- raw a products increase material any product increases this costs X% that more We going will pricing margin we're had we parts. pricing

are margins And That's to summary reasons on our In projects to and going prices to why of the to slight continue kind are to gross that are all things that that's have believe terms the have overall impacts. media, and costs we going increases raw to improve of increase our material we into the of media those one we a offset opportunities margin, forward. drive this in expecting completion. we going great we year,

Tod Carpenter

area. This the problem focused. focused focal bit just operational here, the an understand of one color corporation has little maybe every really from this overall that They number our a to is standpoint Nathan, and And is is on really, organization is view, of the region across specific targets, every is entire add business leadership. the in

Operator

question comes Brian Blair. Drab Your next William with from

open. line Your is

Brian Drab

$XXX cutting today I'm Meeting, just At clearly And forward, accelerate million, of on this but are the around where -- the schedule discussion this of have somewhat? for the cutting it's only the guess, too. program more Day, that little and Analyst maybe point? urgency maybe in million you cost pull I we since cost so call wondering, on $XXX far about about at that $XXX target months a that Analyst five you talked do that million some

Tod Carpenter

Brian. is This Tod. Sure,

We $XXX So we strongly challenge. still million target. feel that embrace proper is that a

operations plans specific have We across teams. our

time lead some those the at $XXX relative the Day projects, had Investor to Now, we of urgency million. of even

in-flight really to that on order target from that that. are what opportunity the being do accelerate really to the really but on, hard we I opportunity multiple it's we're still it's still is we forward. that accelerate not projects so, there. pressing had And that not These have quarter we bring see covered, thought executed projects But to in

Brian Drab

is And we given top few then change the what huge the over reducing next in versus that change, but in given change trajectory? -- line for Day change expansion years, not plans the in any trajectory Analyst discussed your potentially, or capacity capacity in the there a at

Tod Carpenter

Yes. again. Brian, Tod

as we in this is So talked Day well. Investor what about

within as in we we years pulled did many to within And when the year, sometimes we is We year capacity. those expanded capacity plan that by have are five-year teams. multiple of in much expand a forward five year, three ahead operations years, order our plan what two as

consequently, to execute plans is we that's we're at for so focus customer we'll feel really base. just are. today. plan. So our what that we our really that are And good And capacity internal with begin We're to comfortable about normalizing chain really supply with, and where and hard continue on were our us work just we our allows frankly, what where now to executing

Brian Drab

lines. kind the just along And then of one last same one,

getting and these offset medical, chemical, some these least things end these there talked of electronics, about wondering, at the pharmaceuticals, is that the you challenged up some them pressure? can accelerate some moment to at Day markets of end are, markets of at the or running, as Analyst of Just are any new way especially many you that

Tod Carpenter

highlighted Process pressing we talked at clearly in validation, year have the Filtration, about cycle and the also markets with often we're we multiple those, in are this as Day sales but So, well. The that hard of order Investor type that we on activities.

hard. much in-flight, we're we're years Filtration as quite to already, have some the as We cycle are nice two reason people three into momentum pressing job. a well doing seeing But years is that Process why and which

still time. The to And you if so. remember, and to others are need take still that on we'll continue some going advance to whole science medical we opportunities opportunity, material our do

we one other so talk is about our our Venting in The detailed didn't Investor Day product.

is why supporting automotive, and we're my in reason is vehicles Venting. pressing I remarks, about really so opportunities that, electric-based hard on And in a highlighted the prepared which within Venting our good in opportunity

be So quickly that's pressing grow in harder that a good order we'll opportunity as to as possible.

Brian Drab

demand? guide quickly, And of terms overall versus can just you any Tod, on August what you in comment make

Tod Carpenter

into guidance Everything year. is we've baked the we gave in the August that experienced for full

Operator

with Richard from comes Baird. question next Your Eastman

Your open. is line

Richard Eastman

we could -- XX on some minute points. op improvement, guide XX basis If margin, can a for just I ask gross decent basis the from margin you a gave points on to just the circle back

could you just for lay beneficial What up gross much mix And for the will range? this be comp. You -- curious year. be that the should target maybe out? you how Would be basis some to -- be did improvement? margin target XXX be here, But I'm mention that what it incentive mainly OpEx would is would points the

Scott Robinson

higher Rick. that's something Yes, up to you And mean the this mix with right, products, and the be I which category. our always certainly our Accelerate working mix to guide in and and Scott, higher grow by -- We we margin factored Advance and we're to is we can products. Accelerate working going company Advance are into investing margin grow do

with So driving of that our margins up. mix, one ways the that's gross helps and we're

bit a up we've the gross a bit a to with of So expenses. mainly driven that's for said just most headwind part, and be from quite little our margin going in margin op we're by operating

we solely that other to regard all and this part our part the things of all really projects key be And margins. margins the So and are solely is script, mix the with those improve -- is from for we've I've improving gross about going referred and gross improvement coming to things comes our questions my comes margins. that to the finish from Nathan's improvement talked the on from year But with margins. gross driven it of by that improvements. margin to to operating And margin all and have

Richard Eastman

Okay.

So improvement, of might we expect XXX gross to points? margin basis XXX

Scott Robinson

Well, points It's gross that all from the of and improvement for midpoint is margin basis little it's -- from the XX operating expenses. margin. comes of a bit a headwind

of margin that operating through comes gross all So margin improvements.

Brad Pogalz

keep pull is Brad. that. to Rick, That's mind. Yes. this thing the on I in would

$XX million neighborhood gets that incentive compensation, the within you on the just the just If point, assume into the basis pick something the range for math points. of and exercise it's XX basis XX incremental

got So we've away. that right offset to

of you kind that's get where So to it.

we expect way end start above basis where certainly improvement. XXX a But the into You points, plus to just and we'd talking that's strong expect year.

Richard Eastman

to still would year out financial that driven the margin. the gross first half, out growth might the be kind across one half the in still when still and improvement should probably you're half? that really was maybe seeing comps, given deceleration first relative the be The -- P&L half, then of sales then down. going comps. of half to And we're some again, second one may second the against laying P&L down first out are that Is metric engine the is to lays the shake how the half full to this think We easier materializes for sure, the relative year -- see the expect in first how again, markets that revenue

Scott Robinson

margin think start expect take drive -- gross when Rick, would in-flight. They're especially to based that's to fair related, back-half our to are Yes, projects more those order that what a projects we I upon to look projects we place. characterization, at in up you have improvement finish

as we up that progress clearly yes, if correction, ramps it through will, So, the year. -- you

Brad Pogalz

touched is August mind, this headwind add day this. X, keep the fiscal to of But Scott Brad. in starts that. incentive the comp year. first I'll And on the

Richard Eastman

a And as then follow-up just here quick maybe.

the Industrial On business, equipment probably good little the risk of be being of see the it's We kind side based numbers. equipment the washed of zero. gas to out, probably it's the the of north presume is seems around that finally, side side there business up to of should a the But forecast low-single-digits. then turbine maybe big out

replacement about bottoming parts. gas Now kind we're here rearview finally -- maybe talking of risk kind of of that that in is Is turbine the the finally accurate mirror? there

Tod Carpenter

Yes, absolutely right. Rick, Hi Tod. that's

characterization turbine look Your as somewhere large projects We fair. being X%. at zero and our between is

So mid-single-digits best at this it'll year. be

washed quarters, So things projects yes, keep the small business strategy of grid. power our project that oil within the base And long-term also pipelines, in of in will that that base business, Aftermarket. rigs, offshore bulk and essentially we turbine out. to gains corporation the really couple But with it's that it's growth overall well risk aligns come less last and from saying of highlighting or to Aftermarket things share have an then whereby We've been as of it that. is gas we turbine as such call there, the oil for small like the mind making that we project opposed and -- our the a

Richard Eastman

low sales kind guide. the in kind for minus it this to test this the like the 'XX well revenue for fiscal sales concentrated summarize And of overall, year, you've full X% down your and in the end, maybe Can the fiscal Industrial for is I -- it stress guide early year the pretty maybe looks way? that risk. macro the Because risk with of the full

Tod Carpenter

more yes, risk uncertainties in the would up we're The to what's all I experiencing fair our macro to now, daily risk. I'd take yes, place. geopolitical going be, risks that wrap a of of think say, characterize lives that's as and and

Operator

comes Alexander question next from Laurence with Your Jefferies.

is line open. Your

Laurence Alexander

in both and Can opportunities, in seeing bit guess the or driver be speak how little that now before next evolved and I you could a business? Aftermarket the really two a side, over seeing about Chinese update current the year what the timeline might environment an M&A around there, more you're has kicks on Aftermarket the China your for valuations thinking you likely on And areas the your give ones. quick see if so as you the a growth as what continues? you're that

Tod Carpenter

Tod. is This Laurence. Hi,

first. the take me Let portion M&A

of So pipeline. would We to appreciably that M&A a as remain a changed suggest strategic. it market a base view. robust disciplined buyer. of our from part We our We It's still have strategy. very has processes. standpoint normal be Nothing long-term continues work we still part

Sky markets intact Longer point. at some have our appreciable the in have seen China to Aftermarket, Industrial in of all behaviors M&A particularly we our IFS-based So term China, Blue and this momentum, within the because overall initiative change the the remain for relative no side on we businesses.

received guide come is we of the portion would so a Aftermarket that that opportunity growth is into reasons one today. to good 'XX And have are our already and the through. IFS you fiscal see has And starting we that why suggest of baked our that

the already So we in that and quite China are we think some seeing with momentum happy really we're that that. Aftermarket, has

Operator

queue over back I'll this are turn call Tod time. the questions to And no remarks. closing there further at Carpenter in for

Tod Carpenter

Company. a want That in interest for and concludes I your time everyone today's bye. Have the listening week. of Good call. great Donaldson rest to thank

Operator

This concludes conference call. today’s

may disconnect. You now

Donaldson (DCI) 5 Sep 192019 Q4 Earnings call transcript