Hello, this is Nimesh Patel, Group Chief Executive of Spirax Group, and welcome to this conference call for our 10-month trading update released this morning. I am also joined by our CFO, Louisa Burdett. You will have read our statement this morning, which I hope you found to be clear and self-explanatory, so I will just recap quickly before we move to Q&A. I am really pleased with the performance of the Group in the four months to October, which has been in line with our expectations and ahead of the first half.
We see good momentum in both sales growth and margin for the balance of the year. In STS, we are seeing the anticipated step-up in second-half sales growth, supported by shipments from our higher order book at the end of June and continued momentum in new order intake.
This second-half growth also supports improved margin and underpins our confidence for the full year, delivering low single-digit organic sales growth and a margin broadly in line with 2025. ETS has sustained the strong growth we saw in the first half, building on our performance in 2024 and 2025. Semicon demand remains strong, but importantly, even without Semicon, ETS is growing above our mid-single-digit medium-term target. Despite the strong comparator from the second half of last year, we are on track to deliver high single-digit growth and margin progress for the full year.
In Watson-Marlow, Biopharm orders remain ahead of sales, supported by end-user and consumable sales. We also continue to see strong organic sales growth in Process Industries as we gain market share. Therefore, we expect to deliver second-half organic sales growth and margin both ahead of the first half.
To conclude, as we said in August, we are on track to deliver full-year results in line with the guidance we set in March, and we remain on track to meet the medium-term targets that we set out in 2024. With each successive reporting period, we are establishing our track record of delivering consistent organic sales growth. With that, we are happy to take your questions.
Thank you. To ask a question, you will need to press star, one, and one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. We will now take our first question from the line of Andrew Douglas from Jefferies. Please go ahead.
Good morning, both. Thank you for your time. The standard three questions, please, if I may. Firstly, can you just give us a bit more flavor on what you are seeing on the expansion-related sales, which I am assuming is OE, in Watson-Marlow? I know it is slower than the consumable sales growth, but just kind of interested on what trends you are seeing there. Secondly, you talk about the Together for Growth strategy.
Are you able to just expand a little bit on that, on what specifically you are seeing at this kind of point of the year? Clearly, we are 10 months in. I am just interested as to kind of what bits of that strategy are actually kind of particularly working. Then last but by no means least, on STS China, can you just give us a flavor, please, for kind of rough MRO growth year-to-date? Thank you.
Thanks, Andy. Okay, so I will take those questions in the order you asked them. Starting with Watson-Marlow and the sales that are linked to expansion of customers' capacity, we are continuing to see sequential improvements in that expansion level demand. Remember, it is always going to be a little bit lumpy because we are talking about the larger projects. Also, it tends to be more focused around the larger end-user accounts because that is where the larger expansion projects sit.
Yeah.
There is a concentration of those, or has historically been a concentration of those projects also in our EMEA business. As we said at the half-year results, the trend has been quite strongly to thinking about moving a number of those projects to other geographies. So, we have seen projects moved from Europe to the Americas, and we have seen a number move to China. That does not concern us because of our global footprint, because we are working with those large accounts across all of our markets, and because of our position and our long history, we win those orders even when they move. But it does result in a bit of a timing delay.
Sure.
That phenomenon that we called out at the first half has not particularly changed. That is still at play. But overall, the Biopharm market's underlying trajectory is very much in line with our expectations. Let me come to your second question, which is around strategy. I mean, fundamentally, as a group, we are application engineers focused on optimizing customers' mission-critical processes, and we do that across flow control and thermal energy. The strategy's principal objective is to extract the value from that proposition. So, there are three buckets, as you know, we focus on.
On the commercial excellence side, we have invested in direct sales engineers, and we see the benefit of that. We are going to continue to see the benefit of that coming through. Then we focused on maximizing the value of the deployment of our sales model across our large install base.
You mentioned, and I will come back to in a second, MRO in China, but we are seeing strong growth there. We have adapted our model around distribution in the U.S., and we are seeing strong growth there. We are also getting after new applications of our products, and often in new sectors. If you look at Watson-Marlow Process Industries, we are growing at a faster rate because of that focus on driving the application of peristaltic pumps in processes where perhaps previously solenoid diaphragm pumps were being used. We have broken into the data center sector, and we are making sales in that space. Then finally, of course, we are leveraging the investments that we have made both in digital and decarbonization.
At the half year, we talked about over 2,000 connected customers in digital, up from zero at the end of 2023, and that is helping drive growth, and our PoweringZero orders growing strongly in the first half, and that has continued. On the second pillar of the strategy, which is operational excellence, the best evidence that you can see there of that working is in ETS, where we are driving that sales growth from a very strong order book. Remember, the challenge for us historically in ETS had not been the demand picture. It had been our ability to deliver against that demand. We have cleared the backlog.
We are delivering against the new orders we are taking, and we are doing it at a much stronger margin, supported by the efficiency moves that we have made, not just actually in ETS, but across all three businesses, where we have looked at our footprint, we have driven continuous improvement in our factories, and we have saved money from procurement. Then finally, on the organizational side, and sometimes I think this can be overlooked, but it has been one of the most powerful enablers of the growth, the sectorization of the Watson-Marlow sales force, allowing us to get after, in particular, that Process Industries growth, which we talked about in 2025, has been hugely powerful.
The consolidation of some of our smaller steam OpCos to create scale and leverage shared resources more powerfully, for example, to drive sales with a sustainability lens or to drive digital, that again, has been very, very powerful.
I think those are the things in the strategy that we have called out that are working, that are helping us drive growth. We recognize that it takes time to deliver against a strategy like this. The challenge is not in how clever the strategy is. The challenge is in how we execute it and how we phase that over time. We know how to drive the growth.
We saw the likely pace of change, and we called that out in the forecast that we shared with all of you and the market. I think, last point I will make on that is, we stand back and look at the growth that we have driven against what is continuing to be a challenging economic or market backdrop, then this is more, you will see, this is more than a cyclical improvement.
Yes, our Biopharm, Semicon, and even our China markets are inflecting, and that's good news going forward. This is more than that, and positions us well for today, but even more strongly as those trends move in our favor. I think that's my view on strategy and where we are, and how we look forward. Then finally, on your question around China, we're continuing to see strong growth in MRO in China. That's really pleasing, double-digit growth.
Then, in terms of the large projects, and this is also helpful, we're seeing exactly what we thought we'd see, which is the moderating decline in those large projects, and even a return to getting back to return to stability in those large projects. We've talked about that being driven principally by industries which are focused on domestic Chinese consumption.
I think we'll continue to see that trend. Hopefully that answers your three questions. Thank you, Andy.
Yeah, perfect. I've heard it all. Thank you very much. Thank you.
Thank you. We will now take the next question from the line of Max Yates from Morgan Stanley. Please go ahead.
Thank you. Good morning. I guess, look, the first question is just maybe looking at, trying to start thinking about 2027. I guess particularly when we look at your steam business, clearly there is a lot of uncertainty out there when it comes to kind of the broader environment and cycle. I guess I was thinking through, what would it take for the business to grow kind of mid-single digit in 2027? Would you need more cyclical help? I guess I am thinking through, China maybe returning to small growth as it should be in the second half, continued focus on energy efficiency from the customers and some of your initiatives that you have reinvested in the business.
Just thinking through, would you still need a sort of cyclical upturn to hit those kind of growth rates, or are there enough commercial initiatives, less drags, to maybe make that possible in 2027?
Yeah. Thanks, Max Yates. When we set our medium-term targets, which I guess increasingly are starting to become more shorter term in nature, and we are delivering against those, we always said that our ambition for the business goes beyond that. If we look in particular at the steam business, I think I have been consistent in saying I believe that this business is capable of growing again at the mid-single-digit mark. What are we seeing in STS?
Well, we are seeing that good momentum in new order intake outside China, and we have talked about that in 2024, 2025, first half of 2026, as being in the sort of 3%-4% region. In China, we have always said that we expected sales to stabilize either in the second half of this year or first half of next year.
Actually, with this update, we have revealed our hand, as it were, to bring that to the front end of that range, the earlier end of that range, and I think that is good news. But of course, you are right. China being flat is not where we want to end. We want to see China get back to growth. We believe it will, and it needs to be growing in line, at least, with the rest of the world. But we recognize, therefore, that there is a bit more time to go before it gets back there.
Comes back to my point when I was answering Andy's question of sometimes these things take time because once you have got the strategy, you have got to implement it. People got to buy into it. You got to build momentum. So we are well on that path. So, I recognize this. We have made progress.
I recognize that this is a business that is capable of mid-single digit, and I recognize that there is more to do to get it to that point. The other bit that I am excited about in steam, which we talked about the half-year results, is the contribution of digital. This year in particular, that is starting to make a bigger contribution to overall steam growth as we scale up our number of connections, as we become more mature with how we serve customers with our connected products, and then the services on the back of that. That will continue to add to the growth of steam going forward. I can see what the drivers are.
Now, interestingly, even in China, where the growth is driven by our focus on our installed base and that of the industry, where we are driving MRO growth, I am not really talking about markets helping us drive our growth. I am talking about how we drive our growth ourselves. There is also an upside, I think, here as industrial production continues to improve or starts to improve. I mean, this year, again, it is forecast at less than 2%. The latest CHR report, I think, is about 1.5% for global IP in 2026. This will be, what, the third year that we will have operated in a sub-2% IP world, which, for those of you who have been following us for a long time, know is unusual.
If we are able to deliver these kinds of growth rates in this world, I think there is also upside for us as that IP comes back to being above 2%, potentially 2%-3%. That is something I think that is very supportive for our longer-term view of growth rates as well. But I answered your question there, Max.
Yeah. You have. Yeah, that is helpful. Maybe just a very quick follow-up, and I appreciate you sort of alluded to some of these points in your answer just now, but obviously, you have been through the sort of cost reduction plan. You have reinvested in the steam business and the rest of the group. Could you maybe just talk through, maybe outside of digital, if there was one other kind of initiative, whether it is sort of investing in the sales force, new product development, that is really going to kind of allow steam its best possible chance of outgrowing the underlying market? What would be the one thing that you would highlight that you really see taking hold in the business since you started that reinvestment process? Thank you.
Yeah. So, outside of digital, the next biggest impact is going to be the investment we are making in the sales engineers and how we are supporting those sales engineers with better infrastructure and better tools. Some of this is going to sound a little bit boring, but it is the basics of running a business like ours, and there is work that we are doing and have been doing over the past two years to strengthen those basics, to strengthen the foundation. First of all, really understanding market by market where our opportunity is and where we get good returns from adding to our headcount, recognizing that for sales engineers we add, often it can take two years plus to bring them up to speed.
We have added sales engineers, as we said at the first half, a sort of 3% increase in headcount in steam over the past 12 months in a number of geographies around the world. The second thing is, in terms of supporting them with tools, we have invested in our CRM, which helps us with the more targeted work locally to figure out which accounts to get after, how to get after them, how to track the delivery against those accounts.
We have invested in giving them support of a technical nature, whether that is around digital sales, sustainability sales, or some of our larger project packages in STS, so the sales engineers can focus on what they do best, and they have got a team behind them to support them on the more technical aspects of the sale where they need it.
We have supported them with inside sales engineers who can take some of the more administrative tasks away from them. We have supported them with the AI tool we have invested in, MiM, which helps them be faster in the way that they solve customer problems, identify what the right solution is, and then turn that into a quote and ultimately into an order. These are all things that are helping us get more from our sales force. Fundamentally, coming back to what I was saying to Andy, we are application engineers focused on optimizing customers' mission-critical processes. These basics are how we do that even better than we have always done it. How do we do better what we have always done well? That is what I am really pleased about.
A really good example of that is probably in the U.S., where we had this very clear focus on we are going to change the way we serve our distributors and our end customers, and we are going to do it by deploying that expertise in partnership to get a better outcome for our end users, to get a better outcome for our distributors, and to get a better outcome for ourselves.
As a result of that, we have seen really good growth in the U.S., and I would say for the first time in my time that I have been with this group, which has been six years. The challenge for us now is to make sure that we sustain that. But because we have built the foundations, I believe we can. Thank you, Max.
Thanks, Nimesh. Thank you. Cheers.
Thank you. We will now take the next question from the line of Jonathan Hurn from Barclays. Please go ahead.
Good morning, Nimesh. Might, just have three quick questions, please. Firstly, just coming back to steam, I wonder if you could just touch a little bit on what you are seeing in Europe and has performance improved through the four months period there? That was the first one. The second one was just on ETS. Obviously, you have talked about improving efficiencies. Obviously, there is more capacity that is going into that plant in Alton. Can you just tell us what the drag for that will be for 2026, and does that fall out of the margin in 2027?
That was the second one. And the third one, again, on ETS, just looking to 2027, and just sort of taking Max's question and applying it to ETS. How do we think about that going into next year?
Obviously, the comps are tougher, but you have got some real strong dynamics in some of the underlying markets there. How do we think about growth there for ETS in 2027, please?
Okay. Sorry, Jonathan, I did not quite catch all of the first two questions because the line was not entirely clear. Did you say steam growth in Europe for the first question?
Sorry, yes. Sorry about that if the line is not clear.
That is all right.
The first question, yeah, it was just, yeah, Steam in Europe and how that has been trending, and have you seen any improvement coming through in the four-month period?
Yeah. Actually, I want to give particular credit, actually, to the leadership of our business in Steam in Europe, because in some senses, I mean, we've talked about China and the headwinds in China and how we're getting after that, and the team's done a phenomenal job. I've always said, our STS China OpCo is probably our best OpCo and our strongest team anywhere in the world across our Group.
In Europe, the team there have been struggling with some real headwinds. If you look at industrial production growth, France is 0.5%, Germany is - 1.2%. What's that, third year in a row of industrial recession in Germany? Italy is flat. A number of our larger markets in Europe have been really, really challenged. Despite that, we have driven growth, we've driven volume growth in Europe against that tough environment.
In part because in 2025, we undertook that restructuring, which obviously saved money, but it wasn't really about saving money. It was about reorganizing ourselves, as I was describing earlier, to really leverage what we can do in direct sales. That's been really well executed, designed and executed by the team. We are therefore finding these additional opportunities that perhaps before we weren't getting after in the way we could have, because they were falling between different operating companies, or they sat in a particular operating company, but they didn't have the resources to get after it. Through the restructure, we've been able to unlock a lot of that opportunity, and they are leading the way in a number of areas.
Sustainability-driven sales, and when we talk about sustainability-driven sales, that includes something as kind of obvious as we want to bring down our energy costs, because energy costs are high. Come in and show us how we can do that. That, for us, that sits within sustainability-driven sales. Getting after that in Europe, driving the digital agenda in Europe, these are all things that are working really well. Pleased with growth there, and I think the team are doing a very strong job of implementing our strategy. The second question was around Watson-Marlow, but I lost the back end of that.
Sorry. It was around ETS. Sorry if that didn't come across clearly. Basically, that was just asking about, obviously, you talked about increasing efficiencies in that business, but I think one of the factors there is obviously you've put increased capacity into that Alton facility. It has been a drag, you've needed to fill it. It was just trying to sort of quantify what that drag has been, and does that start to fall out of the margin in 2027?
Jonathan, maybe I can pick up that, and then Nimesh can add if he wants to. We have been consistent that there is a depreciation drag, for want of a better word, in 2026, which will moderate in 2027. But actually, if you look at the overall performance of the ETS team, we have guided sequential margin improvement versus H1 and year-on-year, and you can see the confidence in the tone of the statement for ETS. The team are dealing with it with manufacturing efficiency and cost improvements.
We said at the half year that we had seen one month of ETS delivering over 20% margin, and actually, we have seen that continue for two months in the four since we last reported. I am not dismissing the fact that the team are carrying that depreciation overhead, but I think they are delivering really, really well despite that.
I think that might lead into a good segue for Nimesh to comment on the ETS 2027 trends.
Yeah. You are right, Jonathan. There are some tough comps coming up for ETS. A couple of things continue to give me confidence around the ETS growth trajectory. I am not giving guidance for 2027, so no surprise there. You would not expect me to. Of course, our Capital Markets Day targets for ETS were to grow above mid-single digit, right? That kind of gives you your range of where we expect to sit. A couple of things that are working in our favor.
Semicon demand growth is still coming through. I know there has been a bit of a wobble around potential AI data center demand. We will see how that plays through, whether it is through to cooling solutions and therefore the impact there on our business, or how it flows through into Semicon. Difficult to tell at the moment.
But remember, the advantage that we also have is these are not a high proportion of our group sales. Our strength is our diversification, and our other strength is that as a result of being diversified, we are in all the sectors, the high-growth sectors, as well as the sectors where we are taking market share, and we talked about how that supports our growth at the half-year results. But as we sit here today, our customers are still feeling bullish about demand in those sectors.
We are seeing strong demand for decarbonization solutions in ETS through PoweringZero. This is the replacement of the direct burning of fossil fuels through electrified solutions using our resistance heating technology, particularly medium voltage, but also low voltage. We are continuing to see good growth in nuclear and aerospace and defense.
When you add all of these things up, the trajectory remains positive for us in the ETS business. The comps will be tougher, but there's a lot to take comfort from.
Great. Thank you, very helpful. Thank you.
Thanks.
Thank you. We will now take the next question from the line of Tore Fangmann from Bank of America. Please go ahead.
Good morning. Thank you for taking my question. Just one left from my side. I was wondering if we look into the broader end markets, you have quite a high consumer exposure or to consumer end markets, and we are right now seeing increasing inflation, energy inflation, a couple of things that could put pressure on fundamental consumer demand into coming months and into 2027. Is there any indication as of now that you could give into 2027 or things that you see from your own customers that could impact demand going forward? Thank you.
Okay. Given the nature of our business, when we see inflation in energy costs, there are two factors. One is actually a very positive factor, because customers bring us in to help us manage their thermal energy more efficiently with the express intent of reducing their operating costs. For our Steam business and for our Electric Thermal Solutions business, that is a strong driver or pull from customers for our solutions and for our insights. That is a positive for us. The flip side of it is, of course, that puts pressure, the higher inflation puts pressure on our customers' operating budgets as they try to protect their margins.
The best proxy for that is you often see that resulting in lower industrial production growth as well. That holds back demand because they are looking to defer non-essential maintenance.
They are not expanding their production capacity, and therefore some of the solutions we offer are less in demand than they otherwise would be. In some senses, we have been living with that world for the last three years. As I was saying earlier, industrial production growth has been south of 2%. In some ways, 2026 is probably the weakest of those three years, give or take a small amount. I think we have become resilient in this space to dealing with that lower IP environment. We are finding the ways to get in front of our customers and make sure we drive growth. We were talking earlier about our particular success in Europe, in steam, in one of the weakest IP environments for doing that.
We have also talked about the growth that we are delivering in the U.S., and by the way, also in Canada, very strongly, despite the fact that IP there is also less than 2%. We are finding the ways to drive growth. Am I concerned about increasing energy inflation and the impact on our growth? No, not concerned, but I am aware of it, and we are thinking about how we continue to deploy our strategy to make sure that we drive growth even in that environment.
Appreciate it. Thanks.
Thank you. We will now take the next question from the line of Chitrita Sinha from JP Morgan. Please go ahead.
Good morning, Nimesh and Louisa. I have two questions, please. Firstly, on Watson-Marlow. You've nudged up your H2 margin expectations versus what you communicated at the H1. Maybe you could just touch on some of the developments there and then maybe how we should think about 2027 in this context. My second question is just regarding cash. Any color in the four months since the H1? Obviously, you've reiterated 90% cash conversion, but any color would be appreciated.
Okay. Do you want to take those two, Louisa? Watson-Marlow, second half margin, and cash?
Absolutely. Yeah. Chit, you're right. We have slightly nudged up our guidance for Watson-Marlow in the second half. We talked about margin being similar in the second half to the first half, and we are indicating we'll be slightly ahead in the second half, driven by the drivers that we've talked about in the statement, with orders remaining above sales for Watson-Marlow and our Biopharm sales being stronger in the first four months of the second half versus the half year, and Process Industries remaining strong.
As you know, we have good drop-through in that business, and we have a well-invested base. The team there, again, are doing what we expected them to do. The margin progression in 2026 is in line with the step-up that we are expecting over 2026 and 2027 to get to 30%.
We're not commenting in detail on 2027 guidance, but growth will continue to come through that Biopharm recovery and Process Industries continuing to perform well. Nimesh talked about the commercial excellence drivers of the strategy, where we've consistently said that some of the internal changes to the sales team in Watson-Marlow has allowed that focus on Process Industries. We continue to see that path to 30% over the next two years in line with that medium-term guidance.
Can I add one thing to the answer there, Louisa? The other thing just we are keeping an eye on as well is obviously with the changes in the tariff regime in the U.S., we've got the ability to seek rebates on some tariffs that have been paid. The timing of tariff rebates is something that we are thinking about, which we think could be a bit of a tailwind for this year as well. Just I'll plant that seed with you. We'll talk more about that when we get to the end of the year.
Look, on cash, our cash conversion percentage has improved in the four months to October, as we expected. Chit, as you said, our full-year guidance has not changed. We still expect to end the year at around 90% cash conversion, which is in line with last year. The first half did reflect our usual seasonality, but we did call out some stock builds, particularly in steam, in light of the Middle East. The team have really mobilized, and we are continuing to get back to a normalized level of inventory. All of that is being enacted as part of that return to 90% cash conversion, obviously alongside the other levers on working capital. Yes, just to reiterate, our cash conversion percentage has improved in the four months to October.
Thanks, Louisa. Thanks, Chit. Next question.
Thank you. We will now take our next question from the line of Martin Wilkie from Citi. Please go ahead.
Thank you. Yeah, good morning. It's Martin from Citi. I just wanted to come back to the point you highlighted earlier about sustainability or energy savings being a driver of customer demand. Could you talk a little bit about how much that's changed year on year? Because obviously, we've seen a spike in lots of energy costs, whether it's gas, diesel, electricity, and whether that comment was really just around the STS business, or are you seeing that as a driver in ETS as well, in terms of how these higher energy costs can be an incremental driver of demand? Thank you.
Okay. Thanks, Martin. There's two parts to this, actually. I think there's energy costs, and I think there's energy security. And in particular, energy costs have a positive impact, principally within our STS business, but also, probably to a smaller degree, in our ETS business. But energy security often has a bigger impact on our ETS business. Okay? Can we measure very accurately exactly how much demand is coming from seeking to reduce energy costs? No, not precisely. And the reason for that is the solutions we deliver often result in a series of benefits, one of which might be energy saving, one of which might be stability in the delivery of steam to a critical process, reduction of scrap. Quite often, it can be driven also by reduction in carbon emissions.
There's usually a whole combination of factors that make one of our solutions attractive. So, it's difficult to break it out entirely. But having said that, there is no doubt in our minds that we are seeing an increased pull from customers to say, "Look, come and help me think through how I can bring down my energy costs." So, year on year, that is ticking up again. And of course, that is a trend that started way back to the conflict in Ukraine. And it's a strength of our business, and I think one of the markers of the resilience of our business.
In ETS, in particular, we have seen, I think, energy security as well as decarbonisation be an important driver of the electrification, replacing the burning of fossil fuels, typically natural gas, but not only, in order to generate heat for a variety of different applications, including things like drying, and we've talked about the tissue paper manufacturer in the past. But there are many, many examples of that. Milk powder is another one. There's a whole list of them. Hopefully that answers your question. But yes, those trends are helping us in those two businesses, and we see that as continuing.
Great. Thank you. That's very helpful.
Thanks, Martin.
Thank you. We will now take our final question from the line of Emanuele Sartori from Kepler Cheuvreux. Please go ahead.
Hi. Yes. Good morning, both. Thank you for the time. I just have maybe two follow-ups. The first one being on the acceleration in steam. Could you help maybe quantify how much of the improvement reflects the conversion of previously delayed orders versus, let's say, an acceleration in underlying demand? Are there any key end markets here on the acceleration of demand? The second question would be just a follow-up on ETS, and let's say above mid-single digit excluding Semicon. Could you maybe provide a bit more detail on the growth differential between Process Heating and Heat Trace? Thank you.
Okay. Thank you. On the first one, the first question, which was around the acceleration in steam growth in the second half. Yes, we're seeing the acceleration in second half steam growth, as we said, we expected at the first half. What we'd said at the half-year results was order intake was strong. You recall we talked about it being north of 3%. We talked about the fact obviously sales were 1%, so you can see the difference there. Difference is kind of north of 2% between sales and order intake. That helps you quantify a little bit. On the first half numbers, that would be close to maybe about GBP 10 million of orders.
Without saying anything particularly new, I think you could use that as a sensible rule of thumb for the amount of orders we took in the first half that were then being shipped in the second half. When we stood up in August, we said we were starting to see that already in July, and then in our flash numbers for August. Hopefully that answers the first part of your question. I would say that that order intake momentum is continuing in the second half of the year in steam.
The second thing is around key markets. There isn't a specific key market as such that I would pull out in steam, other than the ones that we've talked about, which is to say, China getting to a point where we expect to be flat on sales this year is a real positive there.
The North American markets, and in particular in the U.S., which, for those of you who've been following us for 10 years plus, know has been a challenge for us in the past. That growth in U.S. in particular has been very supportive. Lest we forget, we have been battling with, in some senses, the loss of growth in the Middle East region, where it's not huge for us at a group level. We talked about 1%-2% of sales at a group level, but most of that was coming from steam. So it's a little bit bigger in steam.
So we're delivering these results despite the fact that that market hasn't come back to where we would like it to be. But it will, as soon as we can get access back to some of our customers' sites.
Those are some of the drivers that sit behind steam. The second question was about the difference in growth rates between Process Heating and Heat Trace, as I understood it. There are a few different drivers there. First of all, I think Process Heating used to be buried. Sorry, Heat Trace used to be buried within Process Heating. When we did our restructure in 2025, we identified that there was real growth potential in that space at attractive margins.
I mean, back to where application engineers that focus on mission-critical processes, that is exactly what the Heat Trace business is. Heat Trace was getting sold as what I would describe as a little bit more of an afterthought within Process Heating. Breaking that out with a dedicated sales force, giving them access to a broader addressable market has really helped us accelerate growth in that space.
Some of this is as simple as focus, right, and a little bit of investment. I do mean a little bit of investment. The second thing is we found additional applications of Heat Trace. It is one of the areas where data centers is helping drive demand. Again, linked to the infrastructure, the building out of the data center. Again, slightly bizarrely, because of course what we are doing is heating rather than cooling. That has helped our Heat Trace business. Process Heating has also seen some help from data centers. We have talked about how we are producing the screw plug heaters that help test liquid cooling solutions.
Do not underestimate the growth that we are seeing in our projects part of the Process Heating business, both as we reestablish our ability to deliver for our customers high quality, ahead of our competition, and we have got the medium voltage advantage, but also as the decarb trend pulls, and back to that energy security point I was talking about earlier, pulls on demand. Those are some of the contrasting drivers of demand across those two businesses.
I think that probably brings us to the end of our call today. I hope you found this useful. Of course, it is the first time we have done this. Our intention is to continue doing it. Thank you for joining us today, and I look forward to seeing you in the days ahead, if not in March. Thanks very much. Thank you, operator.
This concludes today's conference call. Thank you for participating. You may now disconnect.