Welcome everybody to Crane's 2023 Investor Day event. I'm Jason Feldman, Vice President of Investor Relations. Before we begin, I'd like you to direct you to the disclaimers regarding forward-looking statements that are posted both in our 10-K and 10-Qs, as well as in today's presentation materials, which are available on our website. Just a reminder that we will be citing non-GAAP measures throughout the day. Those measures and their associated reconciliations to reported results can be found in our non-GAAP reconciliations in the appendix, the materials that we provided today. A few brief comments on logistics for today. We expect the event to end around 11:30 A.M. Eastern time. We'll have Q&A sessions after each of the business presentations, with an additional general Q&A session at the end.
For those listening to the webcast, slides are available for download in the investor relations section of our website. To start this morning, our first presenter is Max Mitchell, Crane CEO.
Thank you, Jason. Good morning, everyone. Thank you for being here today in person and those listening on the web as well. Very, very excited to present you all today. More importantly, to have you hear from my team representing the 7,000 associates that after separation, will continue with Crane Company, a new Crane, with renewed focus and capacity to accelerate growth and drive shareholder value. First off, I must say that the separation process is absolutely living up to my expectations. Never in the history of my tenure at Crane has investor interest been this high. The feedback has been extremely positive, and many investors who have not looked at us for years for a variety of reasons are doing their work, triggered by the separation announcement. Actually are so excited about both Crane and Crane NXT that they're taking positions even pre-separation.
An incredibly exciting story for both entities. Aaron Saak is sharing his message at 1:00 P.M. this afternoon at this same venue. I hope you'll listen in there as well as he paints a fantastic future for Crane NXT as a provider of differentiated proven technology solutions to secure, detect, and authenticate what matters most to its customers. Very, very exciting. This morning, however, we will focus on Crane Company. Let me give you a few quick thoughts on Crane NXT. No question, Aaron is the right leader to embrace the best of Crane's culture and the Crane Business System while moving NXT strategically in new directions. After having the opportunity to work with Aaron over the last three months, I'm even more confident and excited that he is absolutely the ideal leader for NXT in this next chapter.
We've spent much of the last 2 months traveling together, visiting nearly all of NXT sites, and his excitement, passion, insights, strategic observations are all very, very impressive. I've also been impressed with the work Aaron has done to date, refining the future business and capital allocation strategy for Crane NXT, leveraging the best of Crane NXT's technology and capabilities while expanding into new growth areas. A great story, and it will be extremely fun for me to watch as it unfolds. For the balance of this morning, we will focus on post-separation Crane Company and our continued value creation thesis. We are very well- positioned. Two attractive strategic growth platforms, Aerospace & Electronics and Process Flow Technologies, both outstanding businesses that have been performing very well with strong results last year, and with deep and defensible technology differentiation we will describe to you again today.
Throughout the morning, you will hear how we are driving accelerating growth across the portfolio. We are confident that we can deliver 4% to 6% annual average core growth over the course of this decade. We have proven credibility of executing well through all types of operating environments. We will continue to deliver 35% to 40% operating leverage that will drive core profit growth at twice the rate of core sales growth. On top of that operating performance, we have an extremely strong balance sheet, which supports substantial upside from capital deployment. Our disciplined track record is proven in this regard. This morning I'll kick off with a quick summary again of the strategic rationale for the separation and what differentiates Crane.
Our CFO, Rich Maue, will provide some financial highlights and our outlook, as well as a discussion of our capital allocation strategy, followed by Jason, who will review our view on valuation warranted by our financial profile. The most exciting part of the day, hearing from our two senior leaders of the Process Flow Technologies, Alex Alcala, and Aerospace Electronics, Jay Higgs. A quick reminder of why we are separating. Two companies, each with the scale and great position in their large and attractive end markets. We will create two pure-play companies, each better positioned to deliver long-term growth and value creation for all stakeholders. The separation will provide better operating and financial flexibility to pursue growth opportunities, both organic and inorganic, and will remove the portfolio balance considerations that we have today.
That means that we will focus solely on the strategic and financial merits of each potential investment and acquisitions target, rather than whether it will skew the portfolio too far towards one segment or another. Optimizing capital allocation strategies to our company's business strategies, market specifics, and outlook. Perhaps most important, we believe that respective financial profiles and end- market exposures of these great businesses appeal to fundamentally different shareholder bases. After separation, each company will be able to better align their unique value proposition with their natural shareholder base, creating substantial value. Lastly, having separate equity for each company will give both companies the potential to pursue acquisitions with a competitive equity currency that reflects the strength of their respective businesses. The rationale for this separation is very strong and reading through already, as evidenced by the number of investors interested in both companies.
The separation was also about how our present structure was viewed and valued by investors. This is the same chart I showed last year. Despite having delivered consistent, differentiated execution, really stellar performance over a very long period, we were simply not getting credit in the public equity markets. No credit for the quality of the underlying businesses, the differentiation provided by the Crane Business System, and the best-in-class execution delivered by our strong and deep management team. That was reflected by our discount to peers, which widened over the last few years. We believe that disconnect was driven partly by the increasing preference in the equity markets for simple, pure-play assets, which permit investors to tailor their exposure to specific trends.
That discount was compounded by what we believe are misperceptions among a portion of our investor base about the trends in some of our end markets, as well as where we play in those end markets. We pursued this separation because we firmly believed that a structural solution was necessary to unlock value and eliminate our discount compared to peers. I would say early investor reaction is validating our direction. This is the right time to pursue this separation. We're stronger than ever coming off record 2022 results, and with more exciting growth opportunities directly in our line of sight across all of our businesses than we've ever had before. Those opportunities are a direct result of our consistent investment in technology, new products, and innovation.
We also have the scale and balance sheet strength so that both companies will be well-capitalized with the flexibility to pursue all of their growth initiatives. The balance sheet strength and flexibility was further enhanced last year when we defeased our asbestos liability. We are seeing consolidation across our end markets accelerate. As separate focused companies, each will be in a better position to participate in that consolidation. This transaction is right for our shareholders, and the timing is perfect. Let's talk about the new Crane. Crane is a leading global provider of highly engineered products and solutions with differentiated technology, highly respected brands, and leadership positions in its markets. We provide mission-critical products for applications with a high cost of failure, which drives significant recurring sales, and with about 40% of revenue from the aftermarket.
Many of these products are specified into highly regulated end markets, further driving long-term customer attachment. It is well-positioned for accelerating growth in its large and attractive end markets with favorable secular trends, continued investment in new products and solutions, and commercial excellence. Our exceptional results are driven by outstanding strategy development, focused deployment, and ongoing refinement of multi-year technology roadmaps across the business, supporting long-term differentiated products and solutions that solve our customers' problems. The value we bring not only drives market outgrowth but also margin expansion. What separates Crane, even through periods of uncertainty or market downturn, is that we have consistently invested in engineering and new product development activities, always ensuring we are positioned stronger than our competitors.
By way of example, while all companies needed to execute on cost reduction activities during COVID, in our Aerospace & Electronics business, we maintained a $100 million gross engineering investment profile throughout the pandemic, ensuring we maintained our focus on the long term. Those continued investments have proven incredibly important, as evidenced by the numerous program wins over the last few years, and which supports our 7%-9% growth rate in that business moving forward. The story is no different at Process Flow Technologies, where we've continued to invest for the future with new product introductions being released at a record pace and with significantly higher margins. Alex will share again how our new product vitality metrics continue to improve year after year and where we'll be in the next three years.
Jay Higgs will share more about our Aerospace & Electronics business. It's an incredible platform with highly differentiated and unique technology, substantial sourced content on virtually every major commercial and military aerospace platform. We are executing on a technology roadmap that aligns the business with accelerating trends and most notably, electrification. Confident in the 7%-9% CAGR through at least the end of the decade with substantial margin upside. Jay will also share more in a bit about the commercial markets that are still recovering from COVID, and how we are well-positioned to benefit. Beyond the recovery is additional growth from the numerous defense programs we've already won that aren't dependent on air traffic. Our strong position on the prototype and demonstrator programs that will lead to next- generation aircraft and other military programs. Really, a secular growth and investment story.
Alex Alcala will highlight our outstanding process flow technology segment, which has an extremely strong position in its core target markets of chemical, pharmaceuticals, water, wastewater, and industrial automation. Those key markets now comprise nearly two-thirds of the business. He will share more on our accelerating new product development with focused exposure to those target markets, and our confidence in the 3%-5% growth profile through the cycle, and the substantial opportunity to further expand margins well beyond the record 17% we guided to for 2023. Alex will also share more about a secular growth story benefiting from years of investment underpinned by a strong sustainability profile. How we operate is just as important as what we own. Everything we do at Crane starts with our operating philosophy and disciplined cadence, as well as our firm commitment to ethics.
Crane's strong foundation is based on our culture and is a critical driver of value creation. A distinctive high-performance culture grounded in ethics and integrity, combined with our approach and commitment to philanthropy, sustainability, and equality, all underpinned by the cadence and discipline of the Crane Business System. More than 100 years of philanthropy, nearly $19 million donated to charitable organizations and financially burdened former associates last year, collectively from the Crane charitable funds. A commitment to volunteerism, where our associates participated in nearly 1,000 events in 21 countries last year. A focus on sustainability, where we continue to make progress towards our 2030 targets to reduce carbon emissions, electricity usage, water intensity, and reduce solid waste. Continuing to reinforce equality across the world in how we conduct ourselves and treat one another throughout the organization.
A culture that fosters trust and mutual respect at all levels of the organization. Let me take a moment to emphasize our very long-standing ethical culture, summed up in the R.T. Crane Resolution, written 167 years ago. "I'm resolved to conduct my business in the strictest honesty and fairness, to avoid all deception and trickery, to deal fairly with both customers and competitors, to be liberal and just towards employees, and to put my whole mind on the business." These powerful words continue to guide us today, speaking to ethics and integrity in how we conduct ourselves and our business for all stakeholders with a passion for the business. A resolution we will continue to honor and carry on in the years ahead. The Crane Business System.
Some of you may know our history of having a bit of fun on quarterly calls of recognizing someone who has unfortunately died within the quarter and quoting them in relation to our theme of the quarter. We are now at 30 quotes over the past 8 years. Some fun for us and some recognition for those who have left us. One of those quotes was from Jerry Lewis when he said, "For those who understand, no explanation is necessary. For those who don't, no explanation will suffice." This is a bit of how I feel about CBS. So many companies claim the numerous buzzwords of continuous improvement approaches that in the cacophony of investor noise, it all sounds the same. Honestly, it's why I don't speak about it too much beyond a high level. We will let the results continue to speak for themselves.
Investors should appreciate that there is a disciplined management system that underpins it all, driven directly by myself and my leadership team, from the top down to bottom up and in every lateral direction. CBS is a differentiator. I spoke to this incredible culture and our core growth opportunities. Let's move now to our proven outstanding track record of inorganic growth and value creation. We will treat both PFT and A&E equally for capital deployment because both platforms have similar potential for high- return acquisitions. You will hear more from Alex and Jay regarding the core markets where we play today, as well as near adjacent markets where we have the right to win, like hydrogen and process flow technologies and thermal management for more electric solutions in aerospace and electronics.
Importantly, markets remain fragmented within many targets in our funnels sourced from either the private sector or private equity, and increasingly from larger organizations where attractive assets are coming to market through their own portfolio activities. We will remain disciplined in our approach and ensure returns meet or exceed our 10% Return on Invested Capital expectations by year 5. Leveraging our very strong balance sheet with $1 billion of M&A capacity today and growing to $4 billion by 2028, I'm excited by the opportunities to drive substantial shareholder value upside in the years ahead. We have a long-proven track record of success with portfolio moves and as a disciplined and effective acquirer that spans decades. Since 2010, we have deployed more than $2 billion on 9 acquisitions across aerospace, electronics, and process flow technologies, as well as many of the businesses that will become Crane NXT.
Those acquisitions strengthened our businesses, making them more competitive in their core markets and creating new opportunities for adjacent, organic and inorganic growth. We have generated strong returns on acquisitions. In fact, over the last 10 years, the cumulative return on invested capital by year five was approximately 12.5% for Crane. The combination of our capital structure with its very strong balance sheet, together with our strong earnings and free cash flow profile, supports a substantial amount of potential capital deployment. Through 2028, we believe we have the capacity to deploy as much as $4 billion on acquisitions. Of course, the timing of acquisitions isn't predictable, and both actionability and market conditions can change quickly.
Given our robust pipeline of potential opportunities along with our solid organic growth profile, our internal goal would roughly double the size of our growth platforms over the next 5 years. That's our vision and what we will be working towards with a focus on high- return acquisitions that create value for our shareholders, improve the strength of our strategic growth platforms, and give us optionality for the future. Our teams are motivated and re-energized by our future post-separation, and we look forward to delivering on this vision. Of course, we will pursue this vision with the same discipline that we always have. Acquisitions that make us stronger, never bigger for the sake of size, and always focused on shareholder returns. Crane, you will hear these consistent messages throughout the day. We have two very strong global strategic growth platforms. They operate in large, attractive, and growing end markets.
We're growing faster than those end markets. Overall, expect solid mid-single-digit average annual core sales growth. That growth, along with our consistent execution, will drive strong operating leverage and profit growth at 2x the rate of sales growth. We have additional upside from capital deployment using the strength and flexibility of our balance sheet. New Crane, all the best of our incredible history and legacy, now relaunched from a position of strength with enhanced focus, and drive, and passion, quite honestly, to deliver on our expectations. New Crane, half the calories, 2x the flavor. Nathan, that's your tagline. You're right. All right, let's move this along. Rich will now take you through the details of the separation as well as our capital allocation strategy moving forward. Rich?
Thank you, Max. That's a new one. I think I prefer, now, New Crane now with enhanced earnings power. That would be my tagline, Nathan. Good morning, everybody. Such an exciting story we have here at Crane Company as well as Crane NXT. It's not surprising that we see so many of you here today, in the audience. I look forward to catching up with many of you at the conclusion of today's presentation. I will get right into it this morning, starting with the separation details themselves. Since we announced the separation in March of last year, we have remained consistently on track with our original timeline. The organizational design for the post-separation companies was completed early last year, and we have been executing against that in a Crane-like fashion ever since.
My personal thanks to the entire corporate team who have been working incredibly hard to make this separation a reality. We have made excellent progress on hiring key corporate roles at both companies with very few open roles remaining and coverage plans in place for all. I'll review our final capital structure in a few minutes, but we have all the financing commitments in place today with our bank partners, many who are here today, and our thanks for your support. Very robust balance sheets at both companies at time of separation. The Form 10 registration statement was declared effective last month, two weeks ahead of our planned schedule that we set in March of last year.
On track with no issues expected over the next few weeks. Key dates ahead as we approach the separation, all of which are included in the press releases that we issued last night. The record date is set for March 23rd, and we expect, when issued, trading to start on or about March 29th. The distribution and separation itself will be on April 3rd, and the first day of official trading for Crane Company, as well as Crane NXT, will be on April 4th. As previously announced, Crane Company will assume the ticker symbol of CR, and Crane NXT will trade under the symbol CXT. I would be remiss if I did not spend a few minutes on our incredible performance and a few quick highlights from last year. We reported an extremely strong Q4 in January.
Adjusted EPS of $2.13 a share, an increase of 63% compared to last year's Q4 . We had broad-based, strong operational execution with core sales up 11%, and we drove adjusted operating margin up 660 basis points to a record 18.6%, accompanied by record quarterly adjusted free cash flow of $220 million. Above our expectations and positioning us very well for our separation, particularly the cash flow results for the quarter. Our order book and backlog continued to grow across all businesses, giving us even greater confidence in our outlook. Those Q4 results capped off an outstanding full-year performance.
Record adjusted EPS of $7.88, up 15% compared to 2021, driven by 6.4% core sales growth and 220 basis points of margin expansion to a record full- year adjusted operating margin of 17.7%. This is incredible performance, again, above our expectations and our initial guidance that we set in January of last year. We achieved those results despite record levels of inflation, significant supply chain constraints, labor availability challenges, and $0.25 of divested EPS associated with our strategic decision to sell our Canadian distribution business. Our performance demonstrates our ability to deliver consistent, differentiated, best-in-class execution enabled by the cadence and discipline of the Crane Business System and our strong, unique culture. What we achieved in 2022 is nothing new.
Our teams are simply getting better and better year after year, and you'll have even more confidence after you hear the specifics from our leaders today, Alex Alcala and Jay Higgs. Our outlook for 2023 is just as strong. Hey, for those of you who haven't, I would go ahead and get the transcript from our January call or listen to the call. We provided a significant amount of detail in Crane fashion, supporting our outlook and guidance for 2023. Something not too many companies provide at that level of detail. I would tell you, I've never seen that level of detail for a separation or spin transaction, and that is something that I'm particularly proud of.
At a high level, for 2023, Crane Company will be a $2 billion business with just under 20% pre-corporate adjusted EBITDA, and with corporate costs expected at $65 million or just over 3%, but declining over time as a percentage of sales. A strong business mix that will drive both strong core sales and continued margin expansion in the years ahead. These next two slides are pulled right from our January materials. I'm not gonna take the time today to discuss the Q1 or inter-quarter trends, but to reassure you, there is no change to our adjusted EPS guidance, and we are solidly on track and working to over-deliver. As a reminder, for segment results, reporting throughout the year is gonna be very straightforward. There's no change to our segment composition post-separation.
This guidance assumes that the overall economy is a bit slower, with only gradual improvement in the supply chain. We are very well- positioned to ramp output if macroeconomic conditions or the supply chain conditions permit. For Aerospace and Electronics, we are guiding to 10% core sales growth, supported by a very strong backlog with 35% operating leverage, which should bring margins to just under 20% for 2023. This is the guidance where we have direct line of sight and what we are confident that we can deliver for 2023. Not included in the 10% sales growth is approximately $50 million of cumulative demand in backlog that's related to supply chain constraints. How much of that $50 million gets delivered this year versus 2024 will depend on how quickly the supply chain improves.
The longer-term message for this segment remains unchanged. We expect 7%-9% long-term annual sales growth, plus $50 million catch-up sales in the next 2 years with strong operating leverage in the 35%-40% range. A really fantastic position to be in. At Process Flow Technologies in 2023, we expect 4% core growth with 2% unfavorable foreign exchange for total sales of 2%. The core growth will leverage at 35%, driving nearly 10% segment operating profit improvement with guidance for margins up another 100 basis points to what will be a record of just over 17% for the segment. We have a very strong backlog at Process Flow Technologies as well. Recent order activity has been strong.
However, given broader macroeconomic trends, our guidance does assume that we will see slowing in short- cycle activity and decelerating order rates through 2023. Long- term, we believe this is a 3%-5% core growth business through the cycle, reflecting a combination of market growth along with our continued growth through share gains and new product introductions, and likely improving over time as our end- market mix continues to improve. We expect to deliver consistent leverage in the 35% range. In total for Crane Company, operationally core growth of about 4% driving 8% segment operating profit growth, and with total segment margins increasing 80 basis points to 17.4%, which would be another record.
Specific to below segment operating profit, again, I don't intend to go through all the painstaking detail that we did in January. In summary, a post-separation annualized run rate basis includes non-operating expense, which is interest expense related to financing at $16 million. A normal post-separation adjusted tax rate of 23% and 2023 diluted shares of 57.3 million. Layering these items together with the corporate costs on the operational guidance results in expected 2023 EBITDA of $321 million with an EBITDA margin of 16.2%. For adjusted EPS on a pro forma basis, our guidance is in a range of $3.40-$3.70.
We aren't guiding to specific free cash flow number for 2023 because of the complexities associated with allocating the Q1 cash to either business, Crane Company and Crane NXT. Free cash flow conversion or adjusted free cash flow divided by adjusted net income should be approaching 100% in 2024 and beyond. Our post-separation capital structure is exactly as we described in January. At separation, Crane Company's only debt will be a $300 million term loan. The proceeds from that term loan will be used as a source to pay a dividend to Crane NXT, and we expect the initial interest rate on this term loan to approximate 6%. The term loan is variable and it is pre-payable.
We will also have a new five-year, $500 million revolving credit facility undrawn at the time of separation, and about $150 million-$200 million of cash, likely towards the upper end of that range. That implies net debt of $100 million-$150 million, and a net debt to EBITDA ratio of less than 0.5 times. With that balance sheet and cash generation profile, we comfortably have more than $1 billion in M&A capacity at the time of separation and $2 billion-$2.5 billion in capacity over the next three years, with reasonable projections reaching as much as $4 billion by 2028. A very strong and flexible balance sheet, which will support a capital allocation strategy that we believe will create substantial shareholder value. That's where we've been.
How do I think about where we're going? I've been with Crane for 15 years now, and I'm more excited than I've ever been. It's been a fun and rewarding journey. Crane has continued to evolve over that time. We always appreciate and respect the legacy of our history while not being bound by our past. Much of the outstanding portfolio that we have today was shaped by our previous Chairman and long- tenured CEO, Shell Evans. I joined Crane under Eric Fast's leadership when we began moving from a holding company to an integrated operating company. We were driving internal synergies. We were pruning assets and making acquisitions across several segments.
Don't get me wrong, we have always been very good at Crane, but I am proud of my contributions and our leadership team and just how high- performing a culture that we continue to drive across Crane. Now we come to an inflection point in Crane's history, one that I personally am very eager to focus on, doubling our revenues with Max and the team as we move forward. Which leads me to our go- forward capital allocation strategy. As we move forward, I can assure investors we use a rigorous and analytical approach to optimize our capital deployment in a manner that maximizes returns for our shareholders. Our priorities always start with internal investments to drive organic growth.
These investments have the highest returns, and our processes for evaluating internal investments, whether it's CapEx or operating expense, are just as rigorous as our process for evaluating acquisitions and returns of cash to shareholders. You'll hear many of these opportunities of on investments during Alex and Jay's presentations on our strategic growth platforms, where we continue to invest aggressively in research and development, new product development, and commercial excellence to again drive growth. We are typically a CapEx- light business with CapEx generally in the 2%-2.5% range. Those capital investments are heavily focused on supporting growth. After internal investments, we intend to pursue value accretive acquisitions, both bolt-ons as well as near adjacencies. We also have a commitment to return cash to our shareholders.
As outlined in our press release last night, our initial dividend for Crane Company will be $0.72 per share annually or $0.18 per share quarterly, which reflects a dividend payout ratio approximately 20%. We do expect to grow the dividend in line with earnings. We believe that at this level of dividend, it provides a stable and attractive return to our shareholders while ensuring that we have the capital flexibility to continue our internal investments and pursue acquisitions. We have a strong preference for acquisitions because we believe that's the method of deploying capital that'll generate the highest returns, and our disciplined track record demonstrates that. We will always weigh, and assess, and evaluate the uses of cash against one another.
As an example, in October of 2021, we announced the largest repurchase program in our history, specifically citing high valuations and for acquisitions and a limited near-term pipeline of actionable targets. That history shows how we think about alternative uses of our capital. Looking more closely at our capital deployment potential, again, we believe that we have about $3 -$4 billion of capital available for acquisitions through 2028. The lower end, if more heavily weighted towards repurchases, around $4 billion for acquisitions when we get the benefit of the acquired EBITDA. That's after paying a competitive dividend and making necessary and appropriate internal investments.
This estimate is based on a long-term net debt to EBITDA target of 2-3 times, a level we are very comfortable operating with the flexibility to move above that range for a short period of time following an acquisition, as long as we return to that same level within 12-18 months. A lot of flexibility starting at 0.5 times leverage on April third. We have a robust acquisition pipeline in both of our strategic platforms. We've been acquiring in these businesses for decades, and we continue to refine our target list to ensure it's aligned with our business strategy. Our areas of focus are directly linked to targeted growth areas, as you can see on this slide. You will hear more about these focus areas later from both Alex and Jay.
We do expect deals to become actionable in the quarters and years ahead, and would remind you that we have completed $2 billion of successful acquisitions in the last decade, and again, with very strong returns, allowing us to ultimately reach the scale where we are today to separate and drive value creation, I must say. That disciplined approach to acquisitions expands beyond mere financial discipline. We are just as disciplined strategically. We have a rigorous process of evaluating both bolt-ons and adjacencies focused on factors including end- market attractiveness, fit with our existing capabilities, and the longer-term view on which end markets have options for extendability. Our track record speaks for itself. Historically, our acquisition synergy realization is one and a half to two times our original forecast and the level required for us to hit our required return. Any acquisition must meet our strategic requirements.
From a financial criteria perspective, our approach is quite simple. We require a 10% return on invested capital by year five. To summarize, targets must meet all strategic and financial criteria. In addition to market attractiveness and extendability, the critical strategic criteria is alignment with our capabilities and existing businesses, and whether we are a better or advantaged owner of an asset. That means highly engineered, technology differentiated, manufacturing businesses and markets we know and understand. We are looking at near adjacencies, but only when we are able to directly leverage our existing capabilities. From a financial perspective, as I just said, we keep it simple, 10% ROIC by year five. New Crane. All the best elements of our culture and cadence with a renewed focus on accelerated growth and earnings leverage. Like I said at the beginning, New Crane, now with enhanced earnings power.
We have a compelling value creation story and are extremely excited about the future of our two at-attractive strategic growth platforms of Crane Aerospace & Electronics and process flow technologies. Alex Alcala and Jay Higgs will convincingly share with you how we are accelerating growth across the platform, 4%-6% on a combined basis. Our execution is undisputable. Record margins today and leveraging future growth at 35%-40%. They will continue to expand, even in the face of events outside our control. The Crane Business System is a clear differentiator. Our very strong balance sheet out of the gate, coupled with strong free cash flow position, positions us to supplement all of our organic initiatives with disciplined M&A that will drive further earnings growth and total shareholder value.
With a balance sheet poised to deploy capital smartly and without asbestos, I can promise you it will continue to be exciting as we deliver on our objectives. Let me now ask Jason to come up and discuss his views on valuation. Jason?
Thanks, Rich. About a year ago, March of last year, I presented at our separation announcement to talk about valuation. I thought I made a pretty compelling case back then, at least in my opinion, for what we thought would occur with the separation. It's been playing out pretty much as we expected. This slide here was one of Max's last slides, it really does effectively summarize the basic story. New Crane has two highly attractive, enviable, and sought after strategic growth platforms, Aerospace and Electronics and Process Flow Technologies. Both of these businesses serve mission-critical applications with proprietary and differentiated products, innovative technology with resilience and durability given their sole source content, specifications, and significant aftermarket revenue. They should deliver solid mid-single-digit core growth.
With our consistent execution and strong operating leverage, that's inherent in these businesses, operating profits should grow at 2x the rate of sales. That should deliver double-digit EPS growth with additional upside from capital deployment with rich cash cover. Whether acquisitions, where we've got a great track record or returns to shareholders through our purchases, if the right deals aren't actionable or appropriate, valuations. It's an exciting story in many ways and, and actually pretty straightforward. I was a sell-side analyst for about a decade before joining Crane, and I know where I'd have questions here and where we're getting some degree of possible skepticism. Those are the same areas, you know, we're talking about with a lot of you today.
You know, the first of those is that true re-rating stories are relatively uncommon, and there's often a lot of inertia around historic valuation. Why do we believe that a stock that's historically traded at 9 to 10 times EBITDA should trade in the mid-teens going forward? Second, why are we so confident in those sales growth rates when historically core growth has been lower? I'm gonna spend the next 10 minutes giving you my perspective on these two topics and why, as an insider who gets to see almost everything that goes on at Crane, I'm personally so confident about our prospects and why I'm so excited to be here at Crane, entering my 10th year at the company next week. When we look ahead, the story is actually a lot different than at any point in Crane's recent history.
I'm gonna start highlighting what's changed and why I believe these changes are so critically important and why they should give you confidence that things are going to be different as we move forward. First is the obvious simplification of the story post-separation, and there are two aspects to this. First is it helps broaden our appeal to a wider base of potential investors. Both aerospace and electronics process flow technologies, they're both long, late- cycle businesses. Both end markets commonly appreciated by most general industrial investors and with a very clear peer set. Great businesses, standouts in their category, but stories that appeal to a certain group of investors. Crane NXT is also a great business. You'll hear a lot more about that this afternoon. I hope you stick around for it. A phenomenal financial profile, incredible technology, but just a fundamentally different story.
It has a very strong appeal, but usually to a very different group of investors. The overlap is limited. Both sets of businesses together in a single company were simply too complicated for most, particularly given our size, and possibly lack of clarity as to exactly what theme or cycle anyone investing was actually buying. I can tell you, we've seen the results already in the unprecedented level of investor interest and activity over the last couple of months. Last six months, investor interactions have been about three times our average level, and in many cases, people looking at both for the post, potentially for the post-separation, where previously they hadn't really looked at either, right. Really great traction on that front. The other part of this is beyond broadening the investor base.
Internally, the simpler and more focused portfolio helps with M&A as well. Greater clarity and focus, an end to competition for capital across the platforms. We made a really big investment over the last decade in Crane NXT, about $1.8 billion in sales. That's capital that simply wasn't available for Aerospace & Electronics and Process Flow Technologies. In recent years, we've then held NXT back, given some of the portfolio balance considerations, prevented them from pursuing certain acquisitions that made sense for them. Simplification isn't just from an investor perspective, it's also internally how we allocate capital, and I think it'll enable both businesses to be more effective in the way that they do that. The second major difference is asbestos. This was really a big deal.
It not only by removing the liability, again increased the opportunity set for investors. You know, last September, we had the busiest month of conferences and investor interaction of the last decade. Fully a third of the investors that we met with told us that they had not looked at Crane since the early 2000s because either they or their portfolio manager simply couldn't get comfortable with asbestos, right? They were just starting their work. Some of them have bought, some of them may not. The point is that potential opportunity set expanded dramatically when we were able to resolve asbestos. Again, just like the dynamics I was talking about with simplification, the impact internally is probably even more significant. For nearly 20 years, asbestos was an overhang on every single major decision at Crane.
Capital structure, capital deployment, risk tolerance, acquisitions, divestiture. Every strategic action had to be evaluated not only on its own merits, but based on the impact that that decision would have on our ability to manage that asbestos liability, both at the time and depending on whether or not in the future it got better or worse. Not to mention the management time and distraction. Days and days and days on reviews and handling and managing that liability. I, I think internally, the having the removal of asbestos is gonna have a much bigger impact than people outside realize. The third is what Rich talked about. We have the strongest balance sheet in more than 20 years. Of course, part of that's due to the defeasance of asbestos.
Post-separation at about 0.5 times net debt to EBITDA provides an enormous amount of capital to create value for shareholders, hopefully through acquisitions where we have a great track record, but we'll remain disciplined as we always have, pursue the highest returns of cash. Fourth, we have a more streamlined and focused portfolio with greater exposure to higher- growth markets. Alex and Jay are gonna cover this in much more detail. Part of this is through active portfolio management. Again, related to asbestos and other reasons, we've been more active on this lately. We divested Crane Supply last year. Good business, not the same growth profile that we would have liked. Then there was another attempted divestiture that was blocked by the DOJ.
Both of those examples highlight how we've become more active in managing the portfolio as we've had more flexibility. You'll also hear about more of this from Alex in the next presentation, where some of our historically lower growth markets have simply shrunk to the point where they're now immaterial. Energy, conventional power, oil and gas were a big drag on the growth rate over the last 10 years. At this point, they're small enough that it really shouldn't have an impact going forward. Part of it has been a very active effort to drive growth in our target markets, which are inherently higher growth. Pharmaceuticals, water wastewater, advanced chemical solutions, and process flow technologies. From Jay, you'll hear about the next generation technologies, including electrification at Aerospace and Electronics.
The end- market mix across our portfolio within the strategic growth platforms is simply better than it has been at any point in the recent past. At Aerospace & Electronics, we're in the early innings of benefiting from changes in our strategy and R&D approach that we started many years ago. Jay will cover this in more detail, but it's still not fully understood or appreciated when we're talking to investors. Aerospace is just an incredibly long- cycle business, right? I had the pleasure of watching this play out personally in my tenure at Crane when in the mid-2010s, we shifted to a longer-term horizon strategic technology readiness model rather than application-specific development, getting ourselves ready for the next technologies based on roadmaps aligned with our customers' roadmaps for 10 years out and beyond.
That start years ago led to engagement on new projects and platforms that eventually led to wins that we're just now beginning to see ramp up over the course of the next two years. You know, it took almost a decade to really see this come to fruition. Now that we're down that path and starting to see the benefits, it's going to accelerate over time. That fundamental shift, you know, is really changing the direction and the pace of how this business is growing. Very differentiated from our peers, many of whom rely on the content they have on the current generation of platforms without investing for the future. In contrast, we're getting more excited about what's coming next. Visibility of 79% core sales growth and great traction in these new areas.
Then at process flow technologies, it's also about structural changes that have occurred in the business, not just in the footprint on the manufacturing side, but in the way that we're pursuing growth. Improvement has really been across functions. Over the many years since the early 2000s under our craft leadership, it was heavily focused on financial and operational consistency, safety, quality, delivery, and then cost. Exiting foundries, realigning the footprint, structurally improving the capabilities and the cost structure of the business. Over the last decade, progressive improvement in new product development and commercialization, which is a capability learned over time.
Starting years ago, initially with value analysis, value engineering, basically redesigning existing products to improve their operating characteristics, reducing cost, years of refining that process, cutting the time from concept to final product, increasing the magnitude of the improvement that we could drive in each iteration building those capabilities and skill sets took time to do successfully. After that, it was moving a little bit more aggressively into product line extensions, new variants of our existing products, extending the size range, pressure ranges, certifications, applying CBS to improve those processes as well. A much more complex set of capabilities in VAVE, that then again, took time to refine and improve. Only after that was there really this focus on breakthrough innovation, new to the world products like FK Triax.
Yet another set of capabilities, not just iterative engineering, making it a little bit better each time, but true breakthrough innovation. Now you'll hear from Alex talking about building entirely new businesses within process flow technologies like liquid hydrogen, with dedicated facilities, dedicated engineering teams, focused efforts to build a truly entrepreneurial spirit. It's a sequential process as we built those capabilities, but with more capabilities today than we've had at any point over the last 10 years. Those are the things that I think are really different, some of which I think many of you have heard before, some of which we hope to engage with you on and focus a little bit more. We also do want to focus on what's gonna stay the same, right?
The best of what Crane has always done and ensuring that those aspects of the culture, you know, continue forward. The rigorous cadence and discipline of CBS, strong and unique high-performance culture. What does this really mean? Right? When I joined Crane, I was amazed at the level of detail that Max and Rich dove into within each of the businesses, whether the monthly reviews, annual operating plans, annual strategy plans, and their critical, incredible command of every business and functional area across the company. While it was surprising at the time, I just assumed that was the difference between corporate, the corporate world and Wall Street. Speaking to my peers over the years, others in investor relations roles, other corporate functions elsewhere, it's clear to me that we really do things differently at Crane.
We pride ourselves on a cadence of activities focused on continuous improvement and it yields exceptional results, whether that's strategy, and strategy deployment for commercial development, operational execution, a cadence of financial reviews, or cadence that drives our intellectual capital and HR processes. It's a consistency and the discipline to understand the details of customer-focused execution every day. It's in a culture that firmly embraces the concept that every day, if you're not improving, you're backsliding. Non-stop pursuit of improvement. Not necessarily always fun every day, I can tell you, but always a challenge, and knowing that no matter how well we do, Max Mitchell and our leadership team is going to expect it to be done even better the next time around. That leads to some self-selection. One of the things that's so enjoyable to me about Crane Company is.
It attracts highly motivated, disciplined, and ambitious talent, the type that are never satisfied. When you're surrounded by that type of group of people, it's energizing, all working towards a common goal to drive further improvement and results. Foundational to that approach is that it's also forward-looking. It isn't only about looking at what's happened in the past, rather where we're going. With that forward look, we like to develop roadmaps that guide us in the direction where we're headed to track against, whether it's sales and customer roadmaps, new technology roadmaps, product development roadmaps, information technology roadmaps, or manufacturing facility roadmaps, or even for corporate functions like Investor Relations, how we're gonna progress over time. It's not just about the plans, but it's about the actions to support successful implementation and execution of those plans.
Hard to appreciate from the outside, but the culture and approach is integral to our success historically, and it absolutely will be going forward as well. Tangibly, it's responsible for our execution and margin performance and the improvement in our growth profile, and the rigor and discipline around capital deployment. From this reformed sell- side analyst watching and contributing to this transformation taking place firsthand, I hope this added perspective on value creation was helpful. This slide is an even simpler approach. If you just take a step back, look at our peers with similar end- market mix, similar growth rates, similar margin profiles, and similar cash flow profiles, the valuation is pretty evident.
Companies with our profile today trade in the mid-teen EBITDA range. We don't see any reason why Crane should be any different, and, you know, considering that we're higher quality assets in many regards. Incredibly strong and attractive assets that I'm confident the public markets will value appropriately over time. Thank you. On that note, we're gonna take about a 15-minute break, after which you'll hear from those that matter most in our business other than our customers, of course, our operational leadership, Alex Alcala, Executive Vice President of Crane, who will discuss process flow technologies, and Jay Higgs, President of Crane Aerospace & Electronics. We'll see you in about 15 minutes.
Okay. All right. Wow, a lot to digest during that break for sure. Tough act to follow. I'll assure you it was worth the wait. Good morning. I'm Alex Alcala, Executive Vice President of Crane Company. I'm responsible for all segments existing under New Crane. Today, I'll provide an update on our $1 billion revenue process flow technology business before handing off to my colleague, Jay Higgs. Over the next 30 minutes, I would like to cover three key topics which are the most important to be able to understand what's happening in our business. First, we have continued to transform the PFT portfolio to serve higher- growth markets, and we are outgrowing these markets through new product development and commercial excellence initiatives. We've made significant progress and the results are reading through. Second, this transformation is also driving significant margin expansion.
This too is evident in our results. This is a deliberate strategy to redefine our margin profile. Looking ahead, I will explain why margin expansion and growth will continue and where our strongest world opportunities exist. A short introduction to PFT. We are a world-class provider of flow products that help solve our customers' toughest problems in the most critical applications. These products are in demand and continuously evolving, which create the opportunity to continue to grow share. What you see on this slide is $1 billion revenue split three different ways: by product, by end- market, and by region. We provide differentiated and highly engineered flow equipment products utilizing proprietary technology to address our customers' most challenging applications. This allows us to create significant value for our customers and maintain strong pricing power.
With many decades of installed base, we generate a strong and resilient aftermarket revenue stream that makes up around 50% of our sales. On the bottom of the slide, you can see some of our key brands. These brands have an incredible legacy. They've been trusted by customers for over 100 years, and as we continue to introduce new products, we become even more important to our customers. It's a virtuous circle that steadily expands our total available market. Our business has been transformed over many years and the results are showing. Not aspirational growth, but real tangible results. We are proud of our track record of performance, driving growth and expanding margin at an average of 100 basis points over the last five years. This resulted in a record margin in 2022 despite the COVID downturn, incredible inflation and supply chain constraints.
As a result of our portfolio transformation, our business today is positioned to grow at 3% to 5% CAGR through the cycle. As you can see, we're expecting strong performance in 2023 as well, notwithstanding the uncertain macroeconomic conditions. More importantly, our transformation will continue to strengthen our underlying growth rates and expand our margins. We have our sights set on achieving 20% operating profit in the midterm, which would represent yet another tier of margin performance. Our transformation strategy has been to intentionally shift our portfolio to serve higher- growth markets. We have made important progress over the last five years, and this slide tries to show that. On the left side, you see 2017 sales, with the green bar showing our increased presence in the higher- growth markets we serve. Blue markets are slower growth, and yellow markets are declining.
I will draw your attention to the top green portion, where we have grown from 36% of sales in 2017 to 60% of sales in 2022. With that portion of the business growing at 7% CAGR while improving margins at the same time. This is a result of strategically targeting and investing in these key growth markets. During this time, we've also divested non-core businesses, including Crane Supply, which reduced our non-residential construction exposure. By doing this, we structurally change our future growth rates. This is the crux of our transformation strategy. We want to keep increasing our participation in these growth markets, we're doing it with three main drivers: innovation, execution, and portfolio mix improving our margin. Let me walk you through each of those. Margin expansion is the most obvious result of our transformation.
We have gone from 11 to 16% margin in just the last five years. Our growth markets now contribute 60% of sales. What is also important to understand is that this segment alone achieves a higher than average operating profit, approximately 22%. This margin is because we have the best solutions for our customers' toughest problems, and we continue to innovate. This differentiation drives pricing power. As we grow these businesses at an enhanced pace, it mixes us up driving margin expansion for the whole PFT business. Our strategy is working. We are seeing the results read through today. A big part of this transformation has been driven by share gains through new product development. We're focused on new product innovations in the key markets shown on the left side of the slide.
As you can see from the graph in the center, our new product sales are increasing year-over-year and projected to continue to increase going forward. This speaks to our ability to innovate, our strong customer relationships, and the strength of our organization. Result, PFT has been able to consistently outgrow the market roughly at 2x. These new product solutions are accretive to our portfolio from a margin perspective. This is an additional positive force on margin expansion for the business. I came to Crane 10 years ago from another company that is also very well-run. What impressed me the most, or maybe better said, challenged me the most in joining Crane, was embracing excellence at an entirely different level, holistically and with a very long-term view.
It's been an honor to lead this team over the continued transformation. I can tell you we're incredibly excited to accelerate growth and continue record results. CBS is a holistic business system that makes the customer the focus of everything we do. We think of CBS as an engine of growth and margin expansion. It really does permeate through everything we do at Crane. It drives our business in so many ways. I'll illustrate just four examples on this slide. Our CBS marketing and sales processes are helping us achieve extraordinary growth rates with new products. Commercialization, as you can see on the left side of the slide. Over the last many years, we have leveraged CBS tools and culture to significantly reduce the time from ideation to launch for new products. Speed has improved anywhere from two to four times, depending on the business.
As you can imagine, this increases the number of solutions that we can introduce to the market, fueling further growth. On the operational side, we continue to focus on waste elimination, productivity improvement, making the work easier for our associates. In turn, this increases customer satisfaction. We are not perfect by any stretch, but that is what's unique. In our eyes, we see it and we strive for it. Our factories are in constant pursuit of excellence, and I'm always impressed at the improvements from one visit to the next. Never satisfied, always improving. This is all enabled by an incredible culture that we call Being Crane. It's built on our history, our legacy of philanthropy, our spirit of innovation, our focus on continuous improvement, and our passion for talent development. I know that the Crane Business System is a competitive advantage.
We've always been good, but we continue to get better. Our journey to record profitability is not only based on fundamental CBS execution, but also the result of a number of intentional decisions we made over the past several years. There are four major elements to this plan. I'd like to summarize them for you. We set a strategy to focus on and invest in key growth markets where we can win, markets that are growing. This focus continues. Almost a decade ago, we made the decision to focus our resources and investments to increase the rate of innovation. These investments have accelerated results I've been reading through over the last few years, and this will continue in the future. We also consolidated our energy business, taking significant costs out of the ongoing operation. Finally, we divested Crane Supply, reducing our exposure to slower-growing non-residential construction.
We are proud of our accomplishments, but most importantly, today, PFT is positioned for further growth and margin expansion. We look forward to 2023, we're positioned to continue to drive growth through the cycle. Despite the uncertainty in the economic environment, we're anticipating modest to strong growth across most of our businesses. You can see this in our directional 2023 outlook. We are still seeing solid demand in most markets, we also expect to continue to see some supply chain constraints. We have another reason to be confident. Our record backlog and high demand puts us in a strong position to execute. You can see on this slide, our backlog has grown to historic levels on an FX- neutral basis. Another reference point is how our backlog has grown relative to pre-pandemic levels of 2019.
This backlog is driven by strong demand in our key focus markets of chemical solutions, pharma, water and wastewater, and industrial automation. The backlog is impacted by market and price, but also amplified by our consistent ability to gain share and outgrow the market. In our outlook, we're assuming modest improvement in supply chain dynamics, though we expect continued constraints throughout the year. We feel certain that we will deliver strong results in 2023 and beyond. Beyond 2023, we are confident that our focus markets will continue to grow because of two megatrends: the drive for a more sustainable future and the increase in global population and life expectancy. We believe that both trends will increase demand for industries and products that we know best. In addition to the 4 focus markets we have already introduced, we are introducing a 5th focus market for PFT, hydrogen.
We will talk further about our hydrogen initiatives in the slides ahead. Certainly strong markets to play for in the long term. In the next few slides, I would like to talk about our five most important growth initiatives. On the left side of the slide, you can see the five focus areas. You also see the total available market and projected market growth rates. Of course, there are different views on the expected market growth rates. However, it's important to note that we have a track record of outgrowing the market, and we expect to continue to do so at a rate of two times through our share gain initiatives. As we continue to execute our strategy, this will further strengthen the portfolio. This means that we'll keep growing in our targeted focus markets. This is the green portion of the graph.
While these target markets are higher growth, there are also markets where we have the strongest positions with capabilities to science and technology that differentiate us from our peers. Our growth initiatives are built on our existing capabilities to further extend our lead versus competitors. I will walk you in more detail through each of these initiatives. Hydrogen is PFT's new focus growth market, and we're building a new business around it. We are big believers in hydrogen's future and think it will play a big role in the journey to reduce carbon emissions. Why do we believe this? Costs continue to come down, and it's exciting to see the increasing number of applications where hydrogen is becoming a cost-competitive, low-carbon solution. Examples are long-distance transportation, regional trains, and material handling applications.
Also, demand for hydrogen is expected to increase in applications that are difficult or resist electrification, but still require low-carbon solutions like combined cycle turbines for power generation, steel production, and high-grade heating for various industrial processes. Because of these strong growth projections, we're doing more than just adding new products. We are building an entire new business around it, a new and dedicated team, a new dedicated facility, a new and separate P&L, and an incentive structure designed to create an entrepreneurial environment to build a strong and profitable business. While separate, the key products all leverage our existing capabilities and technologies. We are building a whole new product line of cryogenic and high-pressure solutions, including valves, specialty fittings, vacuum-jacketed pipe, and custom pressure sensors. One of the toughest problems to solve in this space is heat transfer.
Hydrogen is stored at very high pressure or in liquid form at very low temperatures. When heat transfer occurs, it causes liquid hydrogen to vaporize and drives losses, which are quite expensive for customers. We have specific innovative solutions for this and other cryogenic challenges. We expect to generate $100 million of new revenue in this space by 2030, and we are well on track towards that goal. The second growth area I wanna talk about is related to chemical solutions, our largest market at $1.8 billion. We're already highly successful in this market with a leading valve and specialty pipe portfolio, and we see many opportunities to drive significant growth in this space. There are very interesting dynamics in this market. The entire chemical industry is pursuing sustainable solutions to help the world reduce CO2 equivalent emissions and advance decarbonization.
The impact is everywhere. On the left side of the slide, you can see an example of a home showing many different sustainable products, from the next generation of fuel cell membranes to circular plastics and special materials to help unlock clean energy solutions. These are just some examples of the industry's impact on the world sustainability journey. These innovations drive chemical investment and demand for our products. We are in great position to benefit from. How should you think about the innovation we drive? Let's think about a simple example. Your faucet sinks, opens and closes when you turn a handle. No one likes it when their faucet leaks. No customer is happy when the handle is difficult to open or close.
Think of that same pipe carrying liquid sulfur at high temperatures and pressures, or chlorine gas, that if it leaks at all, it could be lethal in a factory. Rather than water, think about the material containing sand or sludge that at a high flow and pressure can literally eat away the internals of a valve. Our innovation differentiates ourselves from competitors in these areas described in terms of sealing technology to ensure leak-free operation, the torque required to operate the valve, which impacts the total cost of ownership, and the material science to withstand erosive and corrosive applications, as well as the ease of maintenance to maintain the valve over time. The innovation you see being introduced in these new products on this slide always solves a very unique solution related to sealing, torque, life cycle, and maintainability.
These are unique and proprietary innovations to Crane, technology that our competitors don't have. This is a space that's growing and where we already have success. We expect our chemical solutions business to grow from roughly $350 million in 2022 to over $430 million by 2025, adding another $80 million in this period. An important and exciting space for us. Let me turn to the wastewater sector, the third focus growth area. This is a $1.4 billion industry where we continue to win and grow at a very fast pace. It's not easy. We compete against large players. We win with our very focused approach. Simply put, we solve the toughest problem in the waste stream. Let me expand on that. On the left you see the applications where we play.
More and more solids are entering the waste stream, which is increasing the number of clogging issues. This translates into operational costs for our customers. We've set out to create solutions that deal with clogging, and you can see those on the right side of the slide. The technology that differentiates us is the proprietary design of the impeller and cutting mechanism to handle the most challenging environments. Continued advancements in efficiency and life are unique innovations as well. Many new products are already launched, and they are growing at 50% CAGR in this space. Our wastewater business will continue to grow at a rapid pace from approximately $110 million to $150 million by 2025. A great business for us, a fantastic team, having fun and driving customer satisfaction.
As the fourth area of innovation driving growth, I wanna turn to the pharma valve market. We're already the number two player in winning, but we see further opportunity to grow by expanding our served market beyond the process side into the steam sterilization section of the applications. In this market, there are two broad types of applications. First, you have the aseptic space, where one cultivates, grows, purifies bacterial, viral, and other cells. This is represented by the green section on the process diagram in the middle of the slide. It's critical to avoid leaks that could contaminate the batch and render it useless.
Innovation and differentiation in the space is working in stainless steel alloys that again revolve around unique sealing designs and expertise we bring at Crane, as well as the science of flow path and the need to ensure no internal area can trap fluid that could contaminate a very expensive batch. To expand our ship set, we are entering the peripheral hydronic space represented by the blue section on the diagram. This part of the process controls the supply of steam, clean gases, and chemicals not directly in contact with the cell cultures. These peripheral processes areas use high-temperature steam which make it a tough environment. Our proprietary diaphragm materials ensure long-term reliability at these temperatures, which gives us a great differentiation and the ability to win.
We are launching new products to service this space in 2023. Pharma continues to be a focus market where we are growing at high single digits. Our final growth focus area is the industrial automation space. Here we are solving our customers' efficiency and reliability challenges in niche but critical applications. As most of you know, customers are searching for solutions to increase efficiency, support sustainability targets, and lower operational costs. Of note, we have the leading position in process valve controls. We provide custom engineering sensor solutions in the mobility and other OEM markets. On the right side of the slide, you see a few examples of our new products, including the Westlock smart positioners. Our technology makes these the most efficient valve positioner products in the market, significantly reducing operating costs for our customers. You also see the BOT pressure transducer family.
This is a high-pressure, high-accuracy transmitter that is unique in its ability to customize for optimal performance for critical industrial applications, substantially reducing installation and maintenance costs. This is an increasingly important space for us and is growing at double digits. I just covered some of the highlights of the five key focus areas. We are already delivering strong results, and we are projecting this strength to continue, as you can see on the slide. Most importantly, as I've described throughout the presentation, our underlying growth rates have structurally improved as a result of our strategy execution. We have momentum. This gives us confidence in our ability to keep driving growth and reach a new tier of margin performance. We expect to keep delivering 100 basis points of margin expansion on average per year.
Beyond our organic strategy, and now with the separation into new Crane Company, we are committed to drive accelerated growth through inorganic acquisitions. These inorganic actions will continue to strengthen our portfolio and generate upside to our growth projections. We are focused both on bolt-on, where we can build on current capabilities, as well as near adjacencies, which can give us broader access to these markets. As was highlighted earlier, our inorganic capital deployment starts with strategic assessment of attractiveness and extendability. We ensure that any target can deliver a minimum of 10% ROIC by year 5. Our current market priorities are shown on the left part of the slide, we're always evaluating and adjusting. In our assessment, we're focused on identifying attractive spaces, markets that align with our profitable growth ambitions, also spaces that are extendable or a higher number of targets.
Within each of our 5 focus areas, we go a level deeper. Our approach is rigorous, disciplined, and is constantly generating new targets to assess and cultivate. We prioritize these targets based on attractive market dynamics, our ability to differentiate based on technology and innovation, strategic alignment with our core businesses, and the potential for future extendability. Our acquisition target funnel is quite healthy as we go into the separation. PFT is a key platform for organic as well as inorganic growth, and we are thrilled with our prospects for both. As I mentioned before, this is my 10th year at Crane Company. Now, with Crane Company less than a month away, my teams and I are ready to continue to drive the organic and inorganic growth that will unlock further value for our shareholders. As you heard today, we're clearly winning and growing in our key focus areas.
I want to leave you with four key takeaways. Our portfolio has structurally improved and continues to improve. We are at record margins today, but our future performance will be even stronger. Our growth and operational excellence efforts have helped us migrate the business to mid-high teens of profitability, and we are well underway to achieve a whole new tier of operating margin in the midterm. In addition to organic growth success, we will deploy accelerated growth through inorganic acquisitions and drive better than expected ROIC targets through the maniacal application of the Crane Business System. I hope you have seen why we're so excited about what's happening in our business and our future. Happy to take questions. Thank you very much for your time.
At this time, we're going to have this focused on process flow technologies for Alex. As a reminder, we'll open it up for Jay to ask some questions specifically about aerospace and electronics after his presentation, then I'll open it up for any general questions before we close the day. Just raise your hand. Nathan will get a microphone over to you.
Good morning, everyone. I want to ask a question on the outgrowth relative to the markets slide that you had up there. You're obviously, you know, looking to position in higher- growth markets, but I think you were 1.5x-3x targeted growth in those markets. Can you talk a little bit about, you know, the strategies you're gonna use to get there? You know, I'm sure your customers are looking to innovate into those kinds of things as well. Are you moving into adjacencies where you don't play so it's all market share gain? Just any more color you can give us on that, please.
Yeah, thank you for the question. I think what we've been able to get momentum over the last few years is delivering at about 2 times, not 1.5, about 2 times. The different markets that you saw, some are more than 2 times, some are less. Our main driver is really innovative new products. These products are entering new adjacencies in some cases, like hydrogen, but also solving, in some cases, problems that are legacy problems that have never been able to have been solved by us or competitors. Create a brand new solution for customers that increase adoption. In 1 of the slides, I mentioned that these new products are having tremendous success. We're seeing about 50% growth on the new product side year-over-year, so we're quite confident on driving that. That's the main driver, and then there's other commercial initiatives as well.
Maybe my follow-up on capital deployment within PFT. Sounds like Max and Rich are gonna give you guys a fair amount of money to invest in PFT. Primary areas of focus in terms of, you know, products, markets, adjacencies to where you are now versus current markets.
Yeah, good question. We'd like to keep building, number one, on these key focus markets that we talked about of chemical, water, wastewater, hydrogen, industrial automation and pharma. We have capabilities there that we can expand on, give us access to new technologies, similar products that we have. We're also looking at new adjacencies, where new products would come in, expand our total available market with focus in these markets as well.
Other questions?
I guess just to follow up on that line of questioning. When you look at the historical M&A, how much would you say it applied to, like, acquiring a product due to the patent versus acquiring a team that had particular capability versus just more like acquiring a marketing channel and some, you know, historical success with a particular customer base? Thank you.
Yeah, I think, if you think about historically what we've done in PFT, in most cases, we've acquired new products that expand our total available market, that give us entries to new spaces, gives us new capabilities. Along with that, sometimes there's improved channel and of course, new intellectual capital or team capabilities, but primarily around technology that solves problems for our customers.
On the M&A side, just to pick up on this and just add a couple of comments on process flow technologies, and I'm sure we'll get some of the questions on aerospace and electronics. Still a highly fragmented marketplace on a global basis. Everything from in private equity, a large number of private family-owned entities, as well as multinationals that have rolled up the space that what they thought was strategic historically is no longer strategic. There's a whole host of opportunities that we continue to look at in our funnel and will be continue to prioritize. Specifically focused on those end markets that Alex talked about. They tend to be even in this space, there's very specialized niche solutions. Whether it's the chemical industry, hydrogen, pharma, they tend to solve very specific problems.
Anything from a small $30 million-$50 million revenue entities to a $couple hundred million entities to larger. We will stick within the isolation as well as control valve space for sure. We will look at continued adjacencies in very specific, unique pumping and pump solutions. As we look at the flow loop and we think about sensing capabilities, which we have a smaller presence on within Crane, we will certainly continue to think about the right strategic bolt-ons and adjacencies that would strengthen our position with our existing end customers and those target end markets. It's quite a broad, even in this frame-up, it's quite a broad target list, but very focused in how we're thinking about it, but a very, very wide list of opportunities.
This is why we're so optimistic in terms of the opportunities that we see moving forward. Other questions? Damian?
Morning. You laid out the 60% part of the, part of the portfolio that you're focused on growth there. If you kinda just do the math on sort of mid-single-digit is the target CAGR, and then sort of 7% or so, blended on the, on that 60%, gets you to the other 40% of the portfolio, just up modestly, perhaps.
Right.
Could you maybe tell us a little bit about how you're thinking about strategically that 40% of the portfolio and how you're gonna manage those assets going forward?
Yeah, good question. The 40% of portfolio are still great businesses, well run, profitable, but they play in markets that are slower growing. You're right, about that 1% or 2%. We keep focusing on selling that value, improving margin, showing our leveraging our pricing power, taking costs out. We expect to keep seeing those business improve on a margin, less so on the top line, but still continue to improve over time.
Hi. I had a quick question on the higher- growth portfolio. When you look at the aftermarket mix in the higher- growth portfolio, is it any different from the overall PFT business of 50/50? Secondly, can you also talk a little bit about aftermarket retention? You know, retention for your same products when it's sold in the OE. Also, probably a third question is the margin differential between the aftermarket and OE, if there is any.
Yeah, great questions on aftermarket. That growth business does have a high content of aftermarket. Close to that 50%, maybe a little bit higher in some of those, like chemical markets, for example. The question on retention, it's quite sticky business. If it works in a particular application, it's been proving, there are a lot of hesitations from the engineers and the customers to switch, as long as you continue to do a good job servicing. We're able to retain quite a bit of our aftermarket normally. Now, with our new products, we've also been successful in gaining share through aftermarket, replacing some of our competitors products and valves and pumps as well. You know, it's a space that we focus on a lot, the aftermarket portion, and continues to grow. The margins, of course, are a little bit higher than the project-based piece of the business.
One quick follow-up. What's the typical shelf life of your products and or the replacement cycle in these high growth segments?
It's a very interesting question because depending on the application, right? If it's a steam or water type application, it's longer. If it's a chemical application, it's shorter. You have the variable of some customers have a replacement cycle where because the process is so critical that even if the product is functioning X amount of time, they'll replace it. It varies quite a bit. Now, we have more than 100 years of installed base, we have a lot of that revenue coming in at, you know, huge range of replacement periods.
Got it. You said the replacement attach rate is 90-plus %?
Yeah, I would say it's very high, more than 90%.
Thank you.
No other questions? Damian.
Thanks. Just a quick question, you, 'cause you had the slide laying out sort of, you know, changes to chemicals and carbon emissions. Something that comes up kind of in the HVAC world is this refrigerant, you know, transition that's taking place basically starting now through 2025. Is that something that impacts your business at all? Just generally, more broadly speaking here, looking at the, you know, all these, chemical compounds that are changing. Like, From a product standpoint, are you actually having to modify and change your product, or are you sort of just kind of highlighting this as, you know, an opportunity to penetrate a, you know, further penetrate the market?
Great question. Yeah, definitely refrigerants, plastic, all the materials are being changed, right? All our customers in the chemical market are looking for more sustainable solutions. Just to be clear on what that means for us specifically, we are seeing more growth rate than the average chemical demand because of that, right? There's chemical demand, and then you have this investment to change on sustainability. That's quite important. A lot of our products are designed for these most critical applications already, and our new products are focused on these as well. It fits quite well in this changing environment that require new technologies, higher pressure, higher temperature, more corrosive, abrasive to solve these problems. Both our current and our new products fit well in these changes.
Any other questions? Doug.
Hi, good morning.
Good morning.
Could you just comment on how the corporate change will affect your job versus authority, responsibility, reporting, compensation, all those things, just from your standpoint?
Well, I mean, if you think about the split, right, and what's happened, I think two ways. If you look at practically from a day-to-day operations, our job is really not changing from the business unit level. We're pretty independently executing. I think from a strategic standpoint, we feel it gives us obviously like the team has talked about, more focus, more opportunities for M&A. We think that will bring more changes into our business. Overall, on the day-to-day and how we run the business has been pretty consistent.
I wanna add that Alex's role will be to continue to ensure incredible execution and allow Rich and myself to free more time on M&A. That's how I think about it as well, although we'll be working closely with our presidents also. Alex is my interface with our business unit presidents, more on the immediate long execution within the year as we continue to work with the businesses on the funnels and cultivating those M&A opportunities.
Good. Thank you.
Mm-hmm. No other questions. Super. Alex, thank you very much.
Thank you.
Turn it over to Jay Higgs.
All right. Good morning, everyone. Very pleased to be wrapping this up, at least for our first half today. I can purposely tell you that we have saved the best for last year. A little friendly competition between me and Alex, but we have two great businesses here. Certainly, you know, what Alex has done with that business in 8 years has just been amazing for Crane Co. I hope to follow that approach here with the aerospace business. Again, my name is Jay Higgs. I'm the president of the Aerospace and Electronic business, and I have the very distinct honor today to be walking you through our business.
When I listen to the others talk about the transformation of Crane over the time and being at this exciting juncture before us, I really feel like the seasoned veteran of the group, having been with Crane for 32 years. My team has incredible pride in this business, and we think about the business every single day. But I can tell you, as someone who has personally watched, participated, driven, and is now leading this continued business evolution, it's truly a remarkable time for us. For many years, we've been executing our strategy to grow our existing core businesses while extending our core product capabilities to new applications. All the while, we have continued to develop exciting new technology platforms that will allow us to support emerging market growth opportunities that continue to develop across the aerospace, defense, and space sectors.
Today, I'm going to share with you the progress we are making on our strategy, some exciting wins that we have resulted from these technology platform investments, and the power of the Crane Business System, which allows us to execute on the new business we are capturing. To start, there are three key messages you're going to hear today. First, we are confident in our ability to deliver 7% to 9% sales growth as a CAGR over the next decade. This is based on our strong presence on virtually all key commercial aircraft platforms that position us well post-COVID recovery. Further fueling our growth are significant content wins on new platforms, particularly on the military side of our business, that will continue to ramp up over the next several years.
Second, we had a clear path back to mid-20s margin by delivering 35%-40% operating leverage on that 7%-9% sales growth. Operating profit should grow at nearly twice the rate of the sales growth. Thirdly, we are also positioned for growth over the long term with strong capabilities and cutting-edge technology aligned with future growth trends, most notably electrification. This slide provides a snapshot of our business today. Crane Aerospace & Electronics is made up of approximately 2,300 employees working out of eight manufacturing sites in the U.S., Europe, and Asia. We have unique technology and capabilities, which includes high-accuracy sensing, a wide range of power conversion products, microwave signal processing assemblies, fluid management products, and brake control systems.
Our capabilities allow us to create product solutions that are highly valued by our customers and critical to the success of their end applications. We market our capabilities within five market-leading business solutions, most of which hold a number one, two, or three position in their respective market segments. While each of these five solutions operate within the framework of Crane Aerospace & Electronics, each has a compelling value proposition and a growth strategy tailored to their unique end-market customers, built upon nine trusted and respected brands. They represent a good balance between commercial and military sales, with more than a quarter of the sales from aftermarket, all sold into large, growing, attractive end markets. Strong margins with upside, despite very significant R&D and engineering investments in primarily sole-source proprietary products for large and growing markets.
I will talk more about our inorganic opportunities moving forward. Crane Aerospace & Electronics has created, through the acquisition of industry-leading businesses with niche, highly engineered product pedigrees. The roots of A&E were established in 1951 with the acquisition of the Hydro-Aire Brake Control business in Burbank, California. Since that time, we have acquired eight additional aerospace, defense, and space businesses consistent with our strategy of developing specialized equipment with unique technologies, which once designed and certified into a customer's system, exhibit the prohibitive cost of replacement. Given these dynamics, each of our businesses enjoy strong customer loyalty, very long life cycles through their products, and significant aftermarket opportunities. Each of our brands has core capabilities that are highly valued by our customers. Those capabilities include a wide range of power conversion devices with growing capability in ultra-high power for emerging ground vehicle applications.
Sensing and control systems, which include condition and position sensors, pressure, and flow measurement with ever-increasing precision and long-range wireless communication that permits sensors to work without aircraft power or wiring. We also have extensive fluid and thermal management system capability, which provides high reliability within designs that reduce size and weight while having the capability for increasingly challenging pressure and temperature conditions. Brake control systems with anti-skid capabilities based on our industry-leading dynamic modeling and simulation capability, as well as proprietary algorithms that are continuously refined to maximize efficiency. Last, our microwave signal processing, which provide high frequency integrated microwave assemblies with industry-leading package size and ultra-low noise designs. Our capabilities continue to improve, centered around the same core companies we have built upon for decades. These capabilities lead to the development of highly differentiated technologies that underpin our products. I can't stress that enough.
In our fluid management business, vane-type pump technology is optimal for today's high bypass geared turbofan engine designs. It provides size and weight advantages unmatched by any competing technology. Within our sensing business, our long-range wireless technology allows pressure and proximity sensors to communicate to a remote data concentrator or a central computer on an aircraft without wiring or even power in some cases. Within our power businesses, our magnetic package density drives a higher power content in a very small package with high efficiency and reduced weight. Our brake control simulation capability allows us to provide the most efficient anti-skid brake control algorithm in the industry, and we continually refine our algorithms in real time to ensure the most efficient, high-performance brake system available on the market today, whether it's hydraulic or electric brakes.
Within our defense power business, our bi-directional power converter technology offers the same type of power control and management seen in commercial hybrids and electric vehicles, but with battlefield hardening and reliability demanded by military customers. Finally, our multi-mix microwave circuitry combines a unique design and highly specialized manufacturing processes to fabricate electronics in a form factor and density that is not available anywhere else in the market. This allows for much smaller microwave assemblies as compared to competitor designs. Our solutions serve highly attractive end markets with strong fundamentals that value our unique technology and product offerings. On a normalized basis, Crane A&E's product position is roughly a 50/50 split between commercial aerospace and defense markets, with space exposure across both markets.
We are positioned with a broad portfolio of product, a record level of backlog, and positions on long-running programs, all which contribute to our resilient, sustainable business model. We expect commercial aviation capacity to grow strongly over the next 20 years, with an anticipated 44,000 new aircraft entering service and 4% traffic growth over that time frame. Key drivers include demographic trends such as global middle- class disposable income growth, the need for replacement large legacy fleets, the desire to harness a new generation of aircraft and engine technology to address increasing concerns around carbon emissions, and just the basic pent-up demand for travel in a post-COVID environment. On the defense side, within the $750 billion 222 DoD budget, $112 billion, a 4.6% increase, was earmarked for research, development, test, and evaluation.
We expect this trend to continue. In 2023, the DoD budget is expected to be in a range of $770 billion-$780 billion. We will continue to outgrow these markets given our strong positions on platforms today, as well as our new platform wins I'll discuss shortly. Our OEM customers are the leading aerospace, defense, and space manufacturers, and most of their Tier One suppliers. We are not only a supplier, but a leading technology collaborator, which ensures alignment across our respective technology roadmaps to enable advancements in our customers' products. In the aftermarket, we also have strong relationships with all major airlines, the armed services, and their procurement groups.
In the past few years, we have placed an even greater focus on emerging customers supporting Space 2.0, all around aerospace and defense propulsion, hybrid electric and pure electric aircraft, as well as advanced air mobility. This all leads to confidence in our growth profile. Over the past 2 years, and as presented at several investor events, we have highlighted our post-COVID sales recovery success. We have also discussed our enviable positions on high-growth commercial and military platforms, which, combined with innovation and technology development, give us confidence we can double the sales of the business over the next 10 years, and again, as I said, delivering consistent 7%-9% growth. Today, I'm going to show you how we're delivering on that plan.
Many of the products we are developing during the past several years and the ones we commented on during Investor Days in the past have completed demonstrator phases successfully or are in early production. We have many exciting wins that continue to expand our market share. As I mentioned, we are forecasting that 7% to 9% growth over the next decade, nearly double the market growth of 5% over that same period. There are three major drivers to that growth. First, we have an excellent base of business with reliable products, unique technology, great customer relationships, which provide stable position as the market continues to recover and grow. This is shown in dark blue on this slide.
Each of our products provides critical functions with very high switching costs, resulting in recurring relationships for the life of the program. We have substantial content on virtually every major commercial and military aerospace program, which supports a large, high-margin annuity-like revenue stream that includes spares to replace our sole source content as it wears out and need to be replaced. A consistent revenue stream for repair services based on flight hours and opportunities for growth with modernization and upgrade projects across entire fleets. Secondly, we see regular opportunities to capture new business within core businesses as new aircraft are introduced, new defense systems are installed, and occasionally, if one of our competitors falters. This represents our second-largest near-term growth opportunity, as indicated in green on your slides. I'll discuss some of the many wins we've had in this space here shortly.
Our final, most exciting growth driver is the breakthrough innovation that our R&D teams are pursuing. This innovation will position us to win as the military converts to more electric systems and vehicles such as aircraft electrification proliferates, and as our core customers pivot to the technology of tomorrow. These are the critical investments we are making today, but they require significant long-term investment. Shown in light blue on the slide, this investment matures in the second half of the decade and beyond and becomes the core of our future in the decades ahead. For 2023, we have line of sight to 10% growth, driven by the strength of the commercial markets in both OE and aftermarket segments. Defense will decline slightly in 2023 as some key military retrofit programs are phased out and new programs begin to ramp up.
Overall, we expect sales of $735 million or basically a 10% overall growth compared to last year. We continue to see strong recovery following the global pandemic. 2023 will approach 94% of our 2019 sales, our previous peak year. We enter 2023 with a record backlog, the opportunity exists to perform much better than even these numbers. As discussed on our last earnings call, our 10% sales growth guidance for 2023 assumes that we still have approximately $50 million of unmet demand due to supply chain constraints. We expect to deliver that amount over and above our guidance on growth in 2023 to 7%-9% through the period of 2023 and 2024, as supply chain constraints ease over the next several quarters. Historically, A&E has been a highly profitable business, reaching 24% margins pre-COVID.
As our volume recovers, we should drive 35% to 40% operating leverage and quickly get back into the mid-20s and potentially beyond. Over the past few years, despite lower volumes due to COVID, we were very careful and intentional with our cost actions. We have a very skilled workforce, from engineering to manufacturing, and confidence in the long-term outlook of this business. In true Crane fashion and in the testament to the leadership of this company, we took the long-term shareholder view and maintained all growth investments through this period. Given that cost structure, we have high confidence in our ability to deliver strong operating leverage in the years to come. Underscoring the quality of our backlog, our base commercial business is built around strong positions on high-volume programs. Here you see some of the aircraft platforms we support.
As I mentioned, we have substantial content on virtually every major commercial aircraft, including out-of-production aircraft like Boeing 737 NG, which will continue to drive aftermarket sales for more than a decade. We have an even stronger position on the current generation of in-production aircraft, driving revenue today and creating an aftermarket stream for the years ahead. With a particularly heavy level of content on the single-aisle aircraft that represent over 70% of all aircraft produced on an annual basis. As an example, we have substantially more content on Boeing's 737 MAX than on the generation prior. We have nearly double the content on Airbus A320neo than we had on the prior generation of A320s. We have a strong content position on virtually every major aircraft platform, from Boeing to Airbus and Embraer.
We also have very high content on COMAC C919, including brake control system, door sensing system, flight control power conversion, and we look forward to seeing production of this aircraft ramp up over the course of this decade. Our installed position ensures that our commercial business will benefit as aircraft production continues to rebound, with the new plane generating revenue today and growing our installed base for a long tail of aftermarket activity over the next few decades. Our backlog position is equally robust in the defense market. Aircraft here by volume Or the market here by volume is currently dominated by the F-35 F-35 Strike Fighter. The F-35 utilize a derivative of our proven landing gear braking control system on each of the global fleet of 700 aircraft, as well as our various fluid management products.
In the space market, we are extremely excited we have received the first orders for a power conversion on the SDA Tranche 1. This program is a critical element to the nation's long-term defense strategy and is also one of the largest space programs over the next few years. Being selected to be part of this franchise program is another recognition of our reliability and credibility. On the ground, our defense power and microwave businesses have new products which support platforms such as the Lower Tier Air and Missile Defense Sensor, otherwise known as LTAMDS, and the TPY-4 radar. Nearly every new radar system developed in the past five years includes our integrated microwave assemblies and our high-power converters. In short, like the commercial aircraft market, we have substantial content on virtually every major military platform. A growing presence on ground-based radars and new space programs.
Our strong positioning across the commercial, defense, and space sectors positions us to capitalize on significant growth in the new commercial aircraft deliveries and increased DoD investment in research, development, test, and evaluation. These are markets growing solidly in the mid-single digit range, we are well-positioned to outgrow those markets. You heard earlier that a key part of why I'm so bullish on our future started nearly a decade ago when in a strategy development session, we reevaluated the timeframe of to understand what technology we need to develop and how we would strategically position ourselves for growth. I can still remember the meeting and planning session with a cross-functional team of aerospace executives, along with the corporate team here today.
Personally, it was one of the most exciting days of visioning in my 32 years with the business. We have continued to build on that ideation every year since. You see, historically, Crane A&E was heavily focused on winning the next major OE platform. We would focus our entire engineering effort on securing positions on the next new aircraft and developing one-of-a-kind products for specific customer needs. This strategy supported our customers very well and provided strong returns. There was very little technology reuse. Our business was highly cyclical. Following the termination of the Boeing NMA program, we launched a new approach to strategic planning and R&D focused on future technology readiness, scalable technology platforms, and a building block approach to design and manufacturing.
We pushed ourselves much harder to understand the voice of the customer and find future gaps in technology needs that align to our expertise. We then set lofty targets to develop technology that filled those market gaps in ways that were scalable to multiple platforms and multiple customers. The result is a broad technology and portfolio that can be adapted to many different application types with far less additional engineering investment per aircraft, missile, land vehicle, or weapon system type. This gives us significant competitive advantage now and in the future. When we look at expanding with our core markets, we are focused on capturing positions on the next generation of aircraft, land vehicles, radars, satellites, and weapon systems. In the commercial aerospace market, we continue to see opportunities from engine and airframers looking to create solutions to reduce carbon emissions.
We have been working with many of these customers for years, and our support of their development and demonstrator programs is starting to convert to important production opportunities. In defense, the Army is looking to replace traditional vehicles with hybrid and electric ground vehicles. We expect to see increased demand for both unidirectional and bidirectional power conversion and thermal management systems. The military is also transforming their radar capabilities, developing a new arsenal of electronic warfare devices, and developing a new and improved 6th-gen fighter jet. All these developments are forecasting significant production volumes for which our products are currently on the demonstrators and virtually designed in. Finally, additional growth comes from commercial space, where companies like Blue Origin, SpaceX, and many others are creating new markets for low cost, shorter lifecycle, low orbit satellites in quantities order of magnitude greater than traditional space customers.
Our microwave and modular power teams have developed technologies which are directly aimed at unique requirements of this new market. A key piece of developing our strategy is understanding the future needs of our customers and the prime contractors. We work with these teams early and often to ensure our technology will be at a maturity level when they need it. Across all major developments, from the government's desire to upgrade the fighter jet fleet to their goals for creating entirely new technology to support ground forces and the many commercial ventures working to provide more accessible air travel and improve sustainability. The requirement expectations have common themes that are materially unchanged since many of our businesses started over 100 years ago.
Specific to power conversion, our customers want to build revolutionary products with partners who can offer a step change improvement in size, weight, and performance, and are able to develop products quickly with the agility to support evolving top-level design requirements. They value the exceptional product reliability required to meet the rigor of modern-day systems. For the start-ups, our experience and reputation provide immense value to design and certifying new aircraft types. We have significant wins in this space on several AESA radar platforms, and we are very well- positioned for the next generation of hybrid electric combat vehicles. We also have a compelling story in our fluid management business. Over the past few years, we've discussed investments to support demonstrators for next generation engine and propulsion systems.
These technology investments have paid off. We recently completed critical demonstrator programs with our lube and scavenge pumps on next-gen engines for major OEMs like Rolls-Royce, Pratt & Whitney, and GE. These demonstrator programs should directly lead to content on the next-generation aircraft platforms, both commercial and military, as they are launched. Our sensing team is also well ahead of schedule in executing to their strategy. Our tire pressure indication system is catching on with both commercial and military applications. Many A320 and A321 operators have already installed our tire pressure indication system. Domestically, we offer a retrofit for the military C-130 as well.
In developing our rapidly configurable switch, we built in the capability to customize our products to support a wider range of customer requirements without a complete redesign. This capability is particularly desirable to many of the new start-ups and innovators in the aerospace industry. Last, an exciting recent innovation is our work to develop the ability to connect sensors to computers and user applications wirelessly, eliminating the need and weight of wiring around the aircraft. Beyond our laboratory testing, this product will be flying on Boeing's triple-s even Echo demonstrator aircraft this year, proving our capability in logging valuable test flight hours. We are very excited about the pace of development and upgrades for the military fixed-wing and rotorcraft fleet.
We have great content on current workhorse programs like the Black Hawk, the F-35 fighter jet, the B-2 bomber. We recently won the privilege to replace the brake control system on the entire fleet of the F-16. We see programs such as sixth- Gen- Fighter or Next Generation Air Dominance, the FLRAA Apache replacement, the FARA Black Hawk replacement, as well as the B-21 bomber, as opportunities to significantly increase our ship set content. Each of these aircraft will require brake controls, fuel pumps, oil pumps, thermal management systems, sensors, and power conversion products. We provide all of those. Almost all the demonstrator versions of these aircraft are using our equipment right now. Executing on this strategy and continued wins like those I just discussed,and will deliver growth more than twice the overall aerospace, defense, and space market.
As I said, by 2032, we expect to more than double our annual sales between $1.3 billion and $1.6 billion. Again, a 7%-9% CAGR solely from organic growth. We will grow faster than the overall market and expand our market share versus our competitors. Looking strictly at our core products in the niche markets we serve, the current total market for that is about $7 billion per year today, growing to approximately $9 billion by 2033. We currently capture around 10% of that market. By executing our strategy of developing technology required by customers, building aircraft currently in our core market, and expanding to similar adjacent markets, we expect to grow our market share to 15% over the next decade. On the inorganic side, we also see significant opportunity to strengthen our core businesses.
For any potential acquisition, it starts with an assessment and analysis of strategic fit, followed by clearly understanding attractiveness in terms of revenue impact, technology differentiation, and future growth trends. We also want to understand extendability, where it is desirable to have many actionable targets to build on in a market space. Of course, overall, we need to ensure any target deal meets our return on invested capital hurdle. Our focus presently is on our core markets of aerospace, defense, and space. Primary areas of prior-prioritization include sensing, power, thermal management, and electromechanical equipment. These are all areas for which we currently have significant technical competency, and therefore, acquisitions in this space are complementary.
However, we are also open to more opportunistic bolt-ons and adjacencies, which align with our strategy of having differentiated product technology that once designed in and certified for customer system, has a prohibitive cost of replacement and a solid aftermarket revenue stream. In the past 18 months alone, we have screened hundreds of targets and have a robust set of exciting opportunities we are exploring. We expect that acquisitions will provide meaningful upside to the 7%-9% organic growth we expect to achieve over the next decade. While aerospace, defense, and space will clearly be our priority, we see opportunities to utilize the same technology in very closely aligned and naturally adjacent markets.
Markets such as specialized industrial automation and medical devices like our current markets, which place a high value on similar traits such as being highly engineered, harsh environment compatible, highly reliable in stringent certification, and in many cases, regulatory requirements. Here we see opportunity to leverage our M&A capacity to significantly expand our market and offerings. Many of the targets in our M&A funnel, while primarily solving problems in aerospace and defense, also have end- market solutions in these adjacencies for the reasons I just described. As you can see, I am highly confident in being able to double the size of this business in the coming decade, and investors should take comfort in knowing that this growth comes from with proven execution through the Crane Business System. Look, I've been in Crane for 32 years. What does CBS mean to me?
I know what it was like in a more traditional business environment. Remember, this has always been a great business, I watched as we has transformed the business over the past 20 years into the quality asset it is today. I don't expect it to make me an expert, The results speak for themselves. You heard others describe it. For someone who lives and breathes CBS with my team every single day, it is our way of thinking and behaving. The words I use to describe it are foundational, instructive, intentional, and focused. Based on our culture of continuous improvement, the Crane Business System drives growth alongside improvement in safety, quality, delivery, and cost.
By utilizing a data-driven and highly visible metrics environment, we hold all team members accountable, from our business unit general managers to our operations leadership to every contributor in between, delivering results and driving improvement. As an example of CBS in action, last year in Crane Aerospace & Electronics, we held 122 kaizen events and trained 34 new kaizen tool champions to lead future kaizens. The tool champion is a challenging accomplishment, recognizing significant dedication and continuously seeding our organization with continuous improvement leaders. 2022 represented the third year in a row that we broke our previous record. As another example, these efforts and those of our team members drove a 5% year-over-year improvement in sales per associate in 2022. CBS is holistic, driving results on the factory floor, the engineering labs, in the back office. It's a real differentiator.
As president, I know of no other way to operate. To wrap it up, as I started, saving the best for last. Crane Aerospace & Electronics provides an enviable level of technology excellence to leading platforms in a very strong industry. We are proud of our products and proud of the customers we support. Our customers will continue to see strong fundamentals from increasing air travel demand, consistent defense spending, and an evolving space market. Our core-based business will continue to grow with this market. We see continued growth from selling similar technology with our core markets to new and emerging customers. We have a long history of success, and we'll continue to grow with new customers and new platforms as our industry evolves. Crane Aerospace & Electronics business development team is relentless and will continue to win in the market.
Our R&D teams are hard at work developing the technology that will be required to win in the future. Our industry will see innovation as future commercial aircraft, engines, and defense systems move forward and evolve. We'll also have the unique opportunity to see transformative growth with the proliferation of more electric aircraft and military ground vehicles. We'll be ready with desired systems, be it high power conversion or capable heat dissipation or advanced sensing systems. Finally, the entire Crane A&E team practices the Crane Business System every day to reduce our cost basis and drive reliable results. This combination of technology and execution positions Crane Aerospace & Electronics for the 7%-9% sales growth, paired with substantial margin expansion. I'm very excited about our outlook and the results we are positioned to drive. Motivated like never before in a new Crane to over-deliver on our expectations.
Thank you all, and I will now open it up for questions.
Hi.
Hi.
If we think about the headwinds facing the OEM production expectations this year and going forward, how do you think about that from your perspective, and how do you forecast your own expectations?
Speaking to the how I feel about the OEMs?
Yeah, the headwinds that they're facing and to their production and then how that translates to your expectations.
Yeah. What's really interesting there is you are seeing some things on news about maybe those rates coming down a little bit, the Airbuses and Boeings. We have to realize there, in terms of our perspective, their safety stocks are depleted right now. They've pretty much burned through all that. We're not really seeing much of an impact from what they're communicating. There's small rate changes that are perhaps coming in the future, but, you know, our growth has been there. They wanna fill those safety stocks again, and we continue to feel really good as the supply chain improves for their ability to execute on what they're doing. They are getting better. I think the supply chain in general is getting better. We're starting to see some of that.
There's a lot of inventory that they actually wanna be able to carry, so they don't have disruption in their production system that we're in the process of delivering right now.
Thank you.
Obviously, a lot of difference in the visibility in this business to the previous one. I'm interested to hear, you talked a lot about demonstrator programs that you're on currently. And forgive my ignorance. Does that basically mean that when those things go into production, you are going to be the supplier to the OEMs on that? Are there competitive products on different demonstrator aircraft? Or just explain how that works.
A couple of things in that dynamic. There's a lot of competition that goes on just to get on the demonstrator programs, right? You know, primes to primes, at our level, we're competing as well. One of the things that's really cool about our business is that regardless of the primes that are competing for a particular aircraft platform, we've been able to secure kinda our content regardless of who's competing at the top level for an aircraft, right? Like 6th-gen fighter, for instance. Again, you know, once you get onto that platform, the thing is that the technologies that we're providing are relatively unique. They're not really. They're specific to the aircraft. They're unique. They're not gonna be able to be copied by someone else.
They're providing a competitive advantage, a value proposition, if you will. While it's not a perfect guarantee, we feel like very strongly that the next generation, when we actually put it in production, is gonna have our product on it. A for instance of that is, like, I won't go to the tell the specific name of the customer. There's a recent engine application where we were on the demonstrator. We won that. We performed flawlessly. They've already given us the RFQ. We've already bid on it. We're now gonna be on the next generation of that, which is probably gonna be the actual product that goes on the aircraft. That's just something that we're gonna be able to perpetuate with the technology advantage that we have.
If you're on the demonstrator, how often do you not win?
Almost never.
Okay.
Quite honestly. Yeah.
The 7%-9% or, you know, 300-500 basis points of outgrowth, I guess, relative to your market expectations over the next 10 years. Clearly, this is a long cycle, long visibility, kind of business. What of that do you already have from platforms that you've won that will ramp up later?
Yeah.
-versus what do you have to go and get?
Yeah, that's a great question. You know, really through the most of this decade. You know, if you go back to the last decade, what we did in our business is it wasn't just the technology, but like the A320 and 737 MAX, we significantly increased our content on those platforms.
Mm-hmm.
As those platforms are coming into, like, this higher rate production, all that business is locked for us, and then the compounding effect of the aftermarket on top of that. A lot of that base business I showed in the one graph is really what's pretty much has that trajectory, sorry, of the 7%-9% growth as we go through this period. There's not a lot of, like, I'd say, new programs we have to win, like, right now that are really in that growth trajectory. In our defense power business, I talked about AESA radars. You know, we've secured, I think, the last five AESA radars that have been developed. We have the power conversion on all of that.
These are franchise programs for us that are now just starting to get in the ordering cycle here right now that we'll start delivering over the next 5 years. Each program is worth between $60 million and $300 million in terms of overall program sales, and that's all in there as well. I think for the things that we've done over the last 10 years, to technology changes that we've made, we are super well- positioned to deliver that 7 to 9 just based on what we've secured already.
Questions for Jay?
Correct me if I'm wrong, but I think it's been a little over a decade since you guys have done any deals in aerospace. I was wondering your thoughts on your ability to get some deals done in what's a pretty competitive space. Just curious if, you know, there's been some deals out there that you've had to walk away from because you can't quite get to the financial criteria that you guys are very rigid on.
I'll take a stab at that, too. First of all, let Jay make some comments. I see a change in the marketplace in 2 things. With the higher interest rates right now, as well as some of our peers that have different profiles themselves, I think we're well- positioned. Where we're gonna come out of this with our debt-to-EBITDA level and our capability is gonna be very advantageous for us right now in this timeframe. The fact that there has been not a significant amount of activity close is no indicator of the amount of activity. I just wanna make sure investors understand that. The funnel has continued to be very, very rich, full. We've participated in many.
In some cases, we walked away as part of the due diligence process, part of that discipline that we've talked about. In some cases, we were outbid in levels that are. We wouldn't go that high, we remained disciplined. I think you're gonna see valuations become a little more realistic and opportunistic for us. I think you're seeing a lot of the, again, almost like I mentioned with Alex, we see a rich profile of still some interesting private, some in private equity that we're tracking that are absolutely gonna be coming out, as well as consolidation that's taking place at what was strategic for somebody a few years ago is no longer strategic. I see a different amount of activity level coming here that helps as well.
I don't know if you'd...
Yeah. Just, you know, not too much to add to that, but, you know, for our Aerospace business, I think we've screened, like, over 560 different opportunities here over the last 18 months alone. They're something that we got very close to, but, you know, again, Crane's very disciplined in the approach. It's gotta work for us. It's gotta have the return on investment. You can see every acquisition Crane has made in their history has pretty much yielded the type of results that you'd expect as a shareholder. But we do feel really good about our funnel, and there's some really unique opportunities out there, especially aligned with our, you know, technologies and power conversion, fluid management, things of that nature that we're pretty bullish on that we're working presently.
Thanks.
Thank you.
Yeah. Thanks for the time. Would be curious, when you have that chart that has the building of the revenue over the years. I was curious, one, it looks like there's a step-up in the RD one contracts that in 2025 and 2026.
Yeah. Yeah.
I'm curious, one, if you could touch on that.
Mm-hmm. Yeah.
The second is that I believe it has the base business, so excluding kind of new contract wins. It's just kind of flattish in 2023 and 2024, even when we're seeing this kind of aerospace uptick. I was curious why the base business should be flat, excluding the rest of those wins in those years.
Yeah, I don't know that I really saw the base business as flat, to answer your first question. That could be just how we're characterizing kind of the existing base platforms or some of the newer platforms as opposed to, like, the super growth platforms. I can talk to you about, you know, mid-decade, we have an F-16 retrofit that is a huge program for us. The domestic version of that alone is probably worth $100 million-$150 million for us over, you know, over a 5-10 year period, foreign military sales after that. In addition, all the AESA radar platforms that we talked about, they're going into rate production mid-decade as well. It's the combined effect that you see on top of that, plus just these...
Look, our aftermarket revenue cycle on the narrow bodies is about a 5-7 year window. You're starting to see that build upon itself mid-decade as well. It's really a combination of those three factors where you really start getting that growth inflection point in the growth in those out years.
I would just add that those AESA programs are similar size to the brake control upgrade program.
Yeah. Each one is, you know, between $100 million-$300 million life of program, type, program for us. Yeah.
Other questions for Jay? Super. Thank you.
All right. Thank you.
Appreciate it. Any other general questions on Crane more broadly that Rich or I can help with?
I imagine you set your 10% hurdle rate a few years back when interest rates were 0. Now that they're, I don't know, say, 5%, do you think that 10% hurdle rate is still appropriate?
For right now. We will always continue to look at the appropriate hurdle rate. Right now, that is the right rate for us at this point in time. We're watching carefully, and we'll continue to.
Okay
look at the math on that.
It'll always be a combination of we'll always be considering our WACC as well, right? When we're doing that. As that rises, we'll be looking at all of our hurdle rates.
Other questions? Damian?
Thanks. Obviously you've gone out of your way to not talk about Engineered Materials today. Maybe you could just give us an update on, you know, post-separation, how you're thinking about that fits in and plan of action, and whether or not that factored into your, you know, capacity?
Sure
... numbers that you put out there.
Engineered Materials manufacturing fiberglass reinforced panels for the recreational vehicle building products businesses for years. We've said it wasn't strategic. A great business that we love. A great team that continues to execute incredibly well, throws off significant free cash flow in the U.S. Has been a great business for us. Not strategic from a growth standpoint. We certainly are not looking at M&A opportunities to expand. We made the decision to seek alternatives and put it up for sale. As many of you know, there was a slight overlap in building products, and the DOJ had issues with it. It was unfortunate. We had a good buyer, would've been a great fit.
Through that whole process, you know, we missed a cycle and right now, again, it's a great business. Continues to be. We like it. It's not strategic. We're not focusing on it right now. Never say never, we put it up for sale again. I think our own team knows that that may be a part of a process down the road, I would not expect anything in 23 for sure. That's for sure. Thank you for asking that question.
To answer the second part, no, it was not included.
Thank you.
... in the, capacity or capacity question.
Thank you, Rich. Other questions?
Presumably the last year, a lot of your time and attention has been focused on the separation of the two businesses. Where do you expect to focus primarily once the separation is complete?
It'll be continuing our execution and then just looking at deploying that capital intelligently, clearly, without a doubt.
Jay and Alex both hope that we spend all our time with them.
Other questions? Well, super. Well, I can't thank you all enough. What a fantastic morning. I hope you share the excitement that we have as we move forward. Two phenomenal businesses. Thank you all for attending today, listening. Special shout out, Mario Gabelli, again, one of our longest and largest shareholders here in person. Very Crane-like fashion, doing the work, checking on his investment. I really thank you for being here, Mario. It's great seeing you.
Thanks, Mario.
Same as everyone here today. Thank you very much. For those listening today. Hey, I wanna extend my thanks to Rich, Alex, Jay, Jason for representing their teams, sharing their perspectives and knowledge about our business. I wish to thank our 11,000 associates globally who are working hard every day for our customers, our shareholders, and our communities, as well as our incredible customers who put their trust in us every day. We discussed that today. Our suppliers, who in this environment, we're all working very hard to partner with as our customers are looking to partner with us in this post-COVID environment to continue to recover and drive that partnership forward. In particular, the corporate team has mentioned the tremendous amount of work and effort to get us to this point. Again, in Crane fashion, on time, smoothly executed.
A lot of hard work and tireless effort to ensure the separation has progressed as smoothly as it has, incredibly proud of our team's accomplishments. You heard very consistent message throughout the day from each of us. The strong global strategic growth platforms, large, attractive and growing end markets, growing faster than those end markets. Overall expect solid mid-single digit annual core sales growth. That growth, along with our consistent execution, will drive strong operating leverage and profit growth at twice the rate of sales growth. We have additional upside from capital deployment using the strength and flexibility of our balance sheet. We've always been good. We keep getting better. You also heard why we are so confident that this separation is going to position us for even better growth and value creation in the years ahead.
Thank you all for taking the time to listen this morning. We look forward to your questions and meeting with many of you in the coming weeks. I also hope many of you stay tuned for Aaron Saak, delivering the exciting vision of Crane NXT at 1:00 P.M. in this same venue. Thank you all very much. Have a great day. Appreciate it.