Good morning, and welcome to Dover's 4th Quarter 2019 Earnings Conference Call. Speaking today are Richard Shea Tobin, President and Chief Executive Officer Brad Sarapac, Senior Vice President and Chief Financial Officer and Amr Galliot, Vice President of Corporate Development and Investor Relations. After the speakers' remarks, there will be a question and answer period. As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. Thank you.
I would now like to hand the call over to Mr. Andre Galyot. Please go ahead, sir.
Thanks, Nicole. Good morning, and welcome to Dover's Q4 2019 earnings call. This call will be available for playback through February 20, and the audio portion of this call will be archived on our website for 3 months. Dollar provides non GAAP information, and reconciliations between GAAP and adjusted measures are included in our investor supplement and presentation materials, which are available on our website. Our comments today may contain forward looking statements.
We caution everyone to be guided in their analysis of Dover by referring to our Form 10 ks for a list of factors that could cause our results to differ from those anticipated in any forward looking statement. We undertake no obligation to publicly update or revise any forward looking statements, except as required by law. With that, I will turn this call over to Rich.
Thanks, Andre. Good morning, everyone, and thanks for joining us on this morning's conference call. Let's get started on Slide 3 with key highlights for the Q4 and the full year of 2019. Q4 revenue declined 1 percent organically due to a tough revenue comp with Q4 of 2018 that we've been highlighting throughout the year. Overall, 2019 revenue growth was solid, up 4% at the high end of our initial annual guidance as 4 of our 5 segments delivered robust growth despite uncertain industrial macro environment in some of our end markets and operating geographies.
Bookings in the quarter were approximately flat year over year, posting a solid book to bill of 1.04. We are encouraged with the strength of our backlog, which stands at 8% higher than at the beginning of 2019 and is up in 4 out of our 5 segments, which we'll cover later in the presentation. Despite posting lower revenue, our earnings from continuous operations increased with margins in Q4 expanding 140 basis points, giving us confidence about our margin aspirations in 2020. We are forging ahead with our productivity and margin improvement efforts as outlined in our investor presentation in September. Adjusted Q4 earnings were up 7%, and for the full year, our earnings grew 15%.
Adjusted diluted EPS was $1.54 a share for Q4 $5.93 for the full year, which represents a 19% increase year over year. Summing up, 2019 was another year of strong performance. For Dover, we delivered industry leading organic growth rates at the top line, expanded margins materially, improved our cash flow conversion metrics and continue to enhance the quality of the Dover portfolio through organic investments and 4 bolt on acquisitions. On the back of a solid order backlog and continued momentum in execution of our margin improvement plans, we are announcing the full year adjusted EPS guidance of $6.20 to $6.40 a share. Let's move on to Slide 4 for more detail on the segment performance.
Engineered Products segment had a solid finish to a strong year. Q4 growth was 3% and full year 5%. Top line grew in the quarter on continued strong demand for our refuse collection vehicles as well as a continued double digit growth in associated software. Our vehicle service business saw improvement in its European and OEM businesses, and we also introduced a new ADAS calibration digital offering, and we are excited about its growth prospects. Our MPG business grew in high single digits as it began shipping against a strong backlog built earlier in the year.
Demand in our industrial winch and industrial automation businesses remain subdued as a result of cyclical weakness in industrial goods and automotive. Segment bookings in the 4th quarter were solid at a book to bill of 1.08 and resulting backlog higher than at the beginning of 2019. Our Q4 adjusted segment margin expanded 200 basis points on solid volume product mix and productivity measures. Fueling Solutions finished strong and delivered a year of exemplary results. Full year growth was broad based at 11% and the segment delivered 320 basis point margin improvement with the above ground businesses exiting the year well into the target range of 15% to 17% that we had set for it in 2018.
Demand remained healthy in Q4 yielding 5% growth for the segment and was particularly strong where EMV compliance demand appears to be gaining momentum. Bookings in the segment were up 11% organically in Q4, providing a solid base for 2020. We have completed the integration of Bellinger into our vehicle wash platform and the business is on pace to meet or exceed our return on invested capital hurdle. Imaging and Identification declined 2% in the quarter and ended the year with 1% organic growth. Marketing and coding activity was slow in Asia throughout the year, including in Q4, while other regions performed as expected.
As you know, our digital textile printing business can be lumpy on the timing of orders and shipments and impacted by tariffs and financing availability in the Asian textile producing markets. Combination of these factors contributed to a slower Q4 in the textile industry activity, but we continue to work with a solid pipeline of prospective orders. Also, our digital printing workflow software is showing very good momentum with double digit growth. Backlog for the segment is up 7% year over year. This segment expanded margin by 2 70 basis points in Q4 and by 2 60 basis points for the full year despite slower top line, exemplifying our commitment to improve productivity, cost control and pricing discipline.
Lastly, we recently closed the previously announced acquisition of CisTek, a leading provider of traceability and brand protection software solutions, primarily pharmaceutical manufacturers. This offering fits logically into our marketing and coding portfolio and expands the share of software and service revenue within MarketMimage to over 15%. We are excited about the prospects of driving growth by expanding this offering into our high value fast moving consumer goods customer portfolio. Pumps and Processes Solutions posted an 8 percent decline as the segment faced a tough comparable in Q4 as a result of industrial pump market where distributors were actively managing down inventory levels. Within the Bio Form a pump and connectors business, revenue continued its strong double digit growth and carries a very strong backlog into the New Year.
We expect the Bio BioPharma business to continue its double digit trajectory into 2020. With respect to DPC, our Precision Components business, activity slowed in what appears to be a temporary low in the natural gas transportation infrastructure build out, but we remain confident about its long term attractiveness. Despite the aforementioned order timing differences, MOG ended the year well and carries a strong backlog into 2020. Summing up, all the business of this segment posted organic growth in 2019, yielding a segment growth rate of 4%. The segment delivered an outstanding 310 basis point margin improvement for the full year.
The segment is entering 2020 with a backlog that's 12% higher year over year, but we expect to get off to a slower start in industrial pumps and DPC in the first half. On Refrigeration and Food Equipment, it's been unmistakably tough year for the segment with new food retail store construction continuing to lag expectations and negatively impacting our systems and service businesses. This effect is partially offset by strong sales in the case product line that primarily serve store remodels, which continued to expand at a double digit rate year over year, including on revenue, bookings and backlog. We have not stood still during this period with site consolidations in unified brands and factory automation and case set to contribute positively to earnings in 2020. Despite a challenging demand environment in 2019, our can forming and heat exchanger businesses returned to growth in Q4.
Belvac's backlog has nearly doubled compared to start of 2019. Overall, the segment enters 2020 on a positive note with a 19% higher backlog year over year. Our operational and productivity initiatives remain on track to start delivering results primarily in the second half of twenty twenty. I'll pass it on to Brad here.
Thanks Rich. Good morning everyone. Let's start going through the details on Slide 5. Rich has provided color on the growth dynamics by segment. I will point out that on top of the 1% organic revenue decline, FX continued to be a headwind in Q4, reducing top line by 1% or $20,000,000 We expect FX headwinds to subside in 2020.
Acquisitions and dispositions, principally Bellinger and Finder, contributed a $5,000,000 net increase to revenue in the quarter. Bookings were flat organically and were similarly negative impacted by FX and positively supported by acquisitions. From a geographic perspective, the U. S, our largest market, grew 4% organically for the full year with all businesses except Refrigeration posting solid growth. Europe was up 6% where all five segments posted organic growth in 2019.
All of Asia grew 2% organically for the full year, while China posted 3% growth. Activity in Asia was mixed across our businesses. Strong regulatory and new build demand in the fueling and plastics and polymer markets were offset in part by slower demand in industrial heat exchangers and marking and coating. Latin America was slightly down for the year with a strong first half and a slower second half. Now to the earnings bridges on Slide 6.
Starting at the top, Engineered Products adjusted segment EBITDA improved $9,000,000 largely driven by volume and mix more than offsetting headwinds from FX. Fueling Solutions growth of $17,000,000 reflects a combination of robust growth, continued margin improvement in retail fueling, and in part, the acquisition of Bellinger. Imaging and identification grew $6,000,000 on strong expanded margin despite lower volumes. The 6,000,000 decline at pumps and process solutions was driven by lower comparable volumes and was partially offset by stronger margins. Lastly, the decline of 7,000,000 in refrigeration food equipment reflects lower volumes in the quarter.
Going to the bottom of the chart. Adjusted earnings from continuing operations improved 15,000,000 dollars or 7%, primarily driven by higher segment earnings and lower interest and tax expenses, partially offset by higher corporate costs. The effective tax rate, excluding discrete tax benefits, is approximately 22% for 2019. Discrete tax benefits in the quarter were approximately $0.06 per share. Rightsizing and other costs were $18,000,000 in the quarter or $14,000,000 after tax, providing confidence on further reducing costs and increasing margins in 2020.
In the quarter, we also refinanced debt due to mature in 2020 and in 2021, resulting in a $24,000,000 loss on extinguishment or $18,000,000 after tax. This loss is treated as an adjustment item to EPS in the quarter. The refinancing results in approximately $13,000,000 lower interest expense on long term debt in 2020. Now on Slide 7. We finished the year with very strong cash flow.
Free cash flow for the year was $758,000,000 or $140,000,000 over last year, including a $16,000,000 increase in capital expenditures. The free cash flow increase exceeded growth in earnings, reflecting improved working capital discipline and resulting in a more than 500 basis point improvement in cash flow conversion as a percent of adjusted earnings. As a percent of revenue, free cash flow was 10.6% for the year or 11.1% if we exclude cash restructuring expenses, both of which are above the midpoint of our annual guidance of 8% to 12%. Capital expenditures were $187,000,000 for the year, slightly increased compared to last year, but below our original plan. While our major expansion projects remain on pace with our plan, timing of payments related to several large projects will spill over into 2020.
Lastly, let's review Slide 8 with the EPS bridge. We finished the year with a strong 19% increase in earnings per share. This was driven by revenue growth conversion as well as margin improvement activities resulting in revenue conversion margin well in excess of 100%. As you can see on the chart, the strength of the dollar in 2019 resulted in a negative FX impact of approximately $0.13 of EPS, which we do not expect to reoccur in 2020. All in all, we can expect the same dynamic into 2020, a healthy conversion on revenue growth and operational savings driving year over year EPS accretion.
With that, I'll turn it back to Rich.
Thanks, Brad. Let's take a look at the outlooks on Slide 9. We're entering the year with encouraging backlog and a constructive demand environment across the majority of our markets, allowing us to forecast organic growth of 2% to 3%, which I'll cover in detail on the next slide. Adjusted EPS is forecasted to be $6.20 to $6.40 a share as a result of solid revenue conversion and our previously announced cost savings initiatives. We expect earnings growth to modestly levered in the second half as a result of seasonality and timing of productivity measures.
We expect another strong year of cash flow conversion of 85% to 90% of adjusted net earnings despite higher spending on capital investment. Engineered Products is expected to grow 3% to 5% organically on continued strength in waste handling, vehicle service and our aerospace and defense business. Fueling solution is expected to have a slower 2020 compared to the strong past couple of years as the underground upgrade cycle in China rolls off. EMV activity in the U. S.
Has picked up and we expect to gain better visibility in the next couple of quarters about potential upside here. Imaging and ID is expected to grow 2% to 3 percent with the outlook largely dependent on conditions in Asia for both marking and coding and textile printing. Pumps and Process Solutions enters the year with a very strong backlog, and we expect it to grow 3% to 5% geared towards the second half. And finally, in Refrigeration, food equipment is expected to grow modestly in 2020. We are entering the year with a very strong backlog, but the trajectory of the past 2 years calls for caution early in the year.
Overall, our multi industrial portfolio with significant share of aftermarket component and service and software revenue is expected to deliver healthy growth in what continues to be an uncertain macro environment. Go to Slide 11. Dover's strategy is simple, but our aspirations are ambitious. We laid out key priorities in 2018 and are tracking very well delivering against those. We plan to advance the same strategy further in 2020.
First, you can see from the result of our rightsizing and operational improvement in our bottom line and our cash flow. We achieved target margin performance in our fueling business. In 2020, we'll continue with the previously announced $50,000,000 cost reduction program as well as our ongoing footprint and productivity programs in Dover Food Retail. Coupled with healthy growth and conversion, these actions will continue providing a margin accretion tailwind. Our businesses sustained strong growth while taking costs out and working on their productivity, all under uncertain macro conditions.
And our top priority in capital deployment is organic reinvestment. We initiated several growth and productivity capital projects and are starting investments in our can forming and heat exchanger businesses to capture growing volumes and upgrade competitive capabilities. Part of our SG and A reduction program was reinvested into various growth R and D and digital initiatives, and we will continue investing in world class digital and operational capabilities in 2020. Lastly, we committed to disciplined portfolio enhancing M and A. Over the last 12 months, we have consummated 4 bolt on, high fit, accretive priority transactions in the priority areas of our portfolio.
The M and A pipeline remains active going into 2020. On a final note, I'd like to address the inevitable coronavirus questions as best I can at this early stage of developments. 1st and foremost, we have been in regular contact with our in country employees and have issued policy guidance using our experience from the SARS time period. We have also put in appropriate travel policies company wide. Our production sites had planned to be down from January 24 to 30 for Chinese New Year, but we expect to remain down through February 9 in most sites as a result of Cantonal enacted safety measures.
In preparation for Chinese New Year, Dover and our supplier network had built inventory to cover this period as normal practice, but we are working closely with our global supply base on potential mitigation strategies actively. I would like to thank everybody at Dover for delivering a strong year and the hard work setting us up for a good outlook of 2020. And that's it. And hand it over to you, Andre, for Q and A.
Nicole, let's open the Q and A.
The first question will come from the line of Andrew Kaplowitz with Citi.
Hey, good morning, guys.
Hi, Andy.
Rich, in RF and E, obviously strong backlog now leaving 2019. I think you said last quarter that good door and case bookings could give you more confidence that you're at the floor of the system side. So the bookings plus the return
to growth in beverage can and
heat exchangers actually mean that you finally have good visibility into organic revenue growth in 2020?
Well, I think on the can forming for sure And on the case side of the refrigerations business, yes. On the systems and service portion, no, because that tends to be relatively short cycle in terms of it really doesn't carry much of a backlog. So I think we feel pretty good about the case door backlog that we have going into the year, and I think that we feel good about Belvac, and I think that we feel reasonably good on
exit run rate for 2020. Does the good bookings in Q4 give you a better shot of hitting that run rate? Is it still on track? And the margin in the quarter, obviously, you've talked about labor availability and overtime is an issue. I assume that's what it was again in the quarter and that mitigates as you get the automation project online.
It wasn't as much labor issues that we've had. I think those moderated in case store production. I think that if we had any disappointment during the quarter was in Unified Brands. We had the orders. We could have shipped, but we're in the middle of doing a plant consolidation and our performance been a little bit lumpy there.
So I think that we've got some of our labor issues behind us in K store leading into automation. And I think that from what I've seen, at least at the beginning of this year, the unified brands has begun their shipment rates have gone back up. So I think we're okay there
also. So you do think you could hit mid teens as you go out the end of the year here, Rich?
Right. Yes. I mean I think that our expectation is to exit at our target margin, Andy.
Excellent. Nice quarter.
Thanks.
The next question will come from the line of Jeff Sprague with Vertical Research.
Just on the automation project itself, Rich, can you just update us just kind of what happens here the next quarter or 2? So you're starting to run beta and cut over, Like where is kind of the stress point on the organization to get this right?
That organization has been under a lot of stress. But in this particular case, we will be building inventory for the transition through the 1st 6 months of the year. So I think it's going to be a little bit challenged from a working capital point of view. We'll be getting the beta units off within next month or so. And then our target is to the cutover of manufacturing on a single product line in product project is not running inside the existing assembly operations of Kstore.
So we don't expect to have any downtime associated with the startup. It's just the cost associated with the startup, including the working capital build.
And just thinking about the profitability in your backlog, right? I mean, a lot of that will hinge on the execution in the factory. But as you try to kind of streamline the SKU count and the like, do you feel like you have kind of real visibility on the backlog profitability itself? And how much of a part is that to the kind of the exit rate that you're talking about for the year?
I think that we've got better visibility than we have had, I guess, previously. I saw part and parcel to reaching our exit margins is some confidence in terms of our what we have in the backlog and the margin that we should generate off of it. So it's not predicated completely on cost reduction as a result of labor content and assembly.
The next question is from the line of John Inch with Gordon Haskett.
Thank you. Good morning, everybody. Good morning, Brad.
Good morning.
And Andre. So the 0% to 2% R and FE guide, was and Belvac coming back and Rich you called out case and door strength. I mean does that obviously implies that the rest of that business is down. Is that business down getting better or are you just assuming it's down the way it's always been down or how should we think about it?
I think that we well, we need to parse some of the pieces. But if you go back and listen or when you read the transcript, I think that we are being cautious with that particular segment because the fact of the matter is it needs to demonstrate a couple quarters of getting its feet under it. But I think that the part that we're going to wait and see mode is on the systems and service portion of the portfolio. We're confident that Kstore should be up year over year. As I mentioned, we feel good about and we feel good about Belvac, and then we'll see.
The 5.4% margin this quarter, I mean, if you haven't been running these parallel systems and the automation project, is there any way to get a sense of where that margin might have been if you hadn't been doing this
I guess there could be, but I don't have it in front of me, right? But there are there's a bunch of costs we did take during the quarter that because of both the transitions largely in UB this time around that we could normalize, but I don't want to give out. That's like, well, if this didn't count, this is what our margin would be. I just can give you an idea of what we expect it to be in 2020 without recasting the quarter. We're just going to have to take our lumps, and we're not happy with the performance, and we think we've got some good line of sight on the non refrigeration portion of the portfolio when it's up to us to deliver on the refrigeration piece.
That's fair. Just lastly, Rich, I remember a conversation we had where you were pretty adamant you were not going to chase industrial software deals and pay the big multiple some of these other companies have paid and how you've done what appear to be a couple of pretty nice fit bolt on software deals. I'm wondering how you're now thinking about this. Have you been able to find kind of a niche of some higher technology, higher value add without overpaying as you look at the portfolio and look to ramp up M and A going forward?
Well, I think that software by its nature, the valuations are higher than kind of core industrial. And so it's not as but I think that my comment was more that we were not going to chase software, damn the torpedoes. Independent of our business. Independent of our business. So the software deals that we've done are highly complementary both to MI and to ESG.
I think that we paid a fair price, but the fact of the matter is that software commands a higher multiple.
The next question is from the line of Julian Mitchell with Barclays.
Thanks. Good morning. Maybe just following up on how you're thinking about the seasonality through the year. I think you'd mentioned in pumps and process and refrigeration and food in particular, quite a back end loaded year. So just wanted to check if you think Dover as a whole can be in that 2% to 3% organic sales growth range through each quarter.
And also whether that net $50,000,000 of cost save, we should just spread out evenly through the year?
Let's take the second question first. Yes, on the $50,000,000 to spread it evenly through the year, I it's the safest bet. It's not incredibly material to the overall earnings, but I get it, it's material to the year over year projected change. Industrial pumps in Q1. We know that MOG and DPC are going to be levered because those are bigger projects.
So there's some caution in those two particular businesses. The upside is EMV, right? So if we take if we go back and take a look at Q4, I think we were a little bit disappointed in the demand. I think we had signaled that industrial pumps was slowing at the end of Q3. It slowed quite a bit, as you can see, in Q4.
So that was kind of a disappointment versus what our forecasts were, but we over delivered to such an extent in EMV. It kind of net neutralized where we were. On DF, I think that the earnings are end loaded, not necessarily the revenue because we've got some pretty healthy backlogs on Refrigeration.
Thank you very much. And just my follow-up on capital deployment. In 2019, if I look at the cash you spend on buyback and M and A and CapEx, each of those three items were in that sort of $150 ish to $200,000,000 range rounding wise. Just wondered when you're thinking about 2020, I can see the share count assumption you've pegged, I can see the CapEx range you've provided. But would we be surprised if that spread is broadly similar in 2020 as it was in 2019?
I think that the CapEx is our best estimate at this time. I think that we would prefer the weighting towards inorganic investment to go up and capital return to go down. But if we're not spending it on one side, then it's going to come back on the other side.
Great. Thank you.
You're welcome.
Next, we have Andrew Obin with Bank of America.
Hi. This is David Ridley Lane on for Andrew. What gives you confidence around the demand improving in pumps and process solution as you go through 2020? I've definitely heard your commentary that it could be softer here in the first half.
Our biopharma business, we expect to again grow in double digits. I think that our caution is around industrial pumps. We have good backlogs on a project basis in MOG. So we feel good about that. And then DPC, we're betting on a little bit of return to growth largely in the second half.
So I think we've got it's a glass half full scenario. We've got some backlogs in our project related businesses that to the extent everything remains firm, we'll deliver on those. We're going to be a little bit cautious on industrial pump demand until we see and interact with our dealers a little bit about where they stand at their stocking levels and the like. So I think that, that gives us some confidence that the only risk that we're taking in terms of the growth is largely on the industrial pump side.
And did the tone shift with customers around EMV upgrades? Is there a greater sense of urgency? 2020.
I guess if we look at Q4, you could make an argument that the phasing of the demand could be pulled into 2020, but we don't have enough data that allows us to say that let's move that number up in terms of how it extrapolates into revenue. But clearly, what's happening is, as you can read the newspaper every day, you're getting now the first instances of credit card fraud at retail operations. And once you have that, that kind of jolts a lot of people into action. So I think that's the phenomena that we see.
Understood. Thank you very much.
You're welcome.
The next question comes from the line of Nigel Coe with Wolfe Research.
Thanks. Good morning. So, Richard, I just wanted to kind of follow-up on the pumps outlook. Obviously, industrial pumps is the area of concern. How much backlog do you have kind of unwritten already for 2020 in that revenue growth outlook you've got?
And how does that compare to sort of a normal sort of backlog builds into the fiscal year?
Well, the absolute value of the new segment in terms of backlog is up, but that is weighted towards DPC and MOG, which tend to be project driven. So we've got some line of sight on that. The industrial portion of the business outside of biopharma is flat, and that's also where the vast majority of the revenue stream goes through distribution. So as I mentioned earlier, we saw an amount of inventory management going into Q4. We need to see where we stand and we need to get a quarter under our belt to kind of so I think that we're cautious about industrial on the industrial pump demand.
But I think we feel good about biopharma and we feel good about MOG just based on the backlog.
Okay, that's helpful. I mean it would be also helpful if you've got any color on terms of where distributor and channel inventories are right now. But I did want to touch on CapEx because it's running at $200,000,000 which is about 3% of sales. Typically, you've been running at 2%, and I think most of your multi NGP is in that 2% zone. I know you're investing.
You just mentioned you've got a preference for internal investment. I'm just curious how long do you think CapEx will remain at these levels and when you see it done and back?
I think we're still spending on the brand new site for our biopharma business that is going to roll off. So as Brad mentioned before, we underspent our guidance on CapEx. One of the reasons that we did was I think we underestimated how cold it is in Minneapolis to get that building stood up. So as part of the spending is rolled into 2020. That to me is a one timer and we don't have anything like that.
So we really have 2 or 3 really big projects running through our CapEx spending now. I think we highlighted in 2018 Using round figures, in aggregate, that is close to between $90,000,000 $100,000,000 of CapEx spend. We probably spent 60 50% to 60% in 2019. We're going to roll forward to 40 percent unless we come up with another project that says, build a brand new building based on growth, I would expect that amount of CapEx to come down as a percent of revenue.
Next, we have a question from the line of Josh Pokrzywinski with Morgan Stanley.
Hi, good morning guys.
Hi Josh.
Rich, just on Imaging and ID, I think the 2% to 3% seems like it would be similar to what would be in a normal year. I know maybe some persistent weakness in the Q4 that doesn't give you all the optimism in the world. But you're coming off some fairly easy comps. The business doesn't seem like it takes a long time to build momentum once it's generated. At what point in time could we start to see more momentum there?
Are we kind of locked into a week 1Q just based on your visibility and from there it becomes more of a macro call? Can you just kind of walk us through the phasing of what a better scenario would look like timing wise?
It's very Asia dependent. And forget the recent news around Asia. Asia had slowed progressively in that particular I'm talking about the printing and ID portion of the business throughout 2019. So I think we were relatively cautious about expectation there, quite frankly, going into 'twenty. We didn't make some deliveries that we thought we were going to make in digital printing in Q4 because of financing, letters of credit and the like.
So part and parcel to that growth rate for '20 is somewhat levered onto the textile printing business because we believe that the orders are there. We just need to sort out some of the financing on it. So it's hard to say. I mean, I think that that's a question we can probably answer at the end of Q1 once we see what's actually happening in Asia on the printing and ID side to say whether we're going to have an inflection point. Having said that, we've just invested in a complementary revenue stream for Marketimimage.
So let's see what we can do with that going forward.
Got it. And then just taking a step back, obviously, a lot of focus the last couple of years on productivity and 2020 certainly has a lot more with some of the investments you're making CapEx and otherwise. Is 2020 a year where you can start to shift your gaze toward portfolio, whether it's on the M and A side or examining maybe non core pieces of the business? Or is this still going to be kind of like an eyes down productivity focused year in its entirety?
I'm sure the management team is not going to like when I say this, but the productivity issue never goes away, right? So what we're going to grind out in 2020 is our expectation to grind down in 2021 and going forward. That's why we're investing quite a bit in our digital efforts and our back office efforts and a variety of other things. So we're taking the P and L costs of investing in those areas with the expectation that we can grind out the productivity in the following years. So that really doesn't go away.
We actually have spent a considerable amount of time on our portfolio. It hasn't translated into a lot of inorganic activity, but it's not from a lack of trying.
Got it. Appreciate it. Thanks.
The next question is from the line of Joe Ritchie with Goldman Sachs.
Thanks. Good morning, everyone.
Good morning. Good morning.
Just in your fueling solutions organic growth guide, how much of a headwind is baked in for China underground subsiding here in 2020?
In percentage terms, I don't recall. I think it was $50,000,000 more or less in terms of absolute revenue.
Okay. All right, cool. And then specifically on capital deployment, I may have missed this earlier. I know we talked a little bit about M and A. But how are you guys thinking about the toggle on buyback and what should we kind of bake in or what is baked into your expectations for 2020?
I kind of we reset the clock, Joe, back to 2018. We said we weren't going to sit in a cash pile. Our preference is to deploy it inorganically. Obviously, we did purchase, what's the total, dollars 140,000,000 in total?
143, yes.
143,000,000 of equity back this year just because we haven't been deploying it inorganically. My preference in 2020 would be the proportionality of inorganic investment to rise. But if can't deploy it efficiently with high returns, then you can expect the same.
Makes sense. Thanks, guys.
Next we have a question from the line of Deane Dray with RBC.
Hi, thanks. Good morning. This is Andrew Krill on for Dean. Can you comment on the price cost environment you're seeing now and then what's being assumed for 2020 and if you're still seeing any impacts from tariffs? Thanks.
I think that we're neutral on year over year input costs right now. I think that we've got we picked up, I think, the year over year benefit on inputs in the second half of twenty nineteen. So our expectation is relatively neutral, and we think that pricing should be in excess of inflationary inputs, which includes labor is really our goal.
Got it. And then just a quick follow-up. So we know you have the $50,000,000 takeout cost takeout target for 2020. Just if the macro were to slow down more than expected, is there any potential to engage in further restructuring? And you size maybe what additional savings that you could read from that?
Thank you.
Yes. I think that what we're taking out of the $50,000,000 has nothing to do with the demand cycle. So that $50,000,000 is just core reduction of costs. If the demand cycle was to turn against us, clearly, we would take action on our cost
base.
And the last question comes from the line of Steve Tusa with JPMorgan.
Hey guys, thanks for fitting me in here at the end.
Hi, Steve.
When you guys think about kind of the dynamics around EMV, just can you just remind us kind of how that plays out beyond 2020? And how you see that kind of trending in 2021 2022, what we have to keep in mind on that front?
Yes. We had our previous estimates was the peak amount would be 2020 and that would reduce progressively in 2021 2022 more or less about 30% a year. Based on the exit rate that we saw in the Q4, there's an argument to be made that it may be higher in 2020 2021 because of adoption rates. But look, we only have 1 quarter of data point to model it. But I think that as I mentioned, we heard during the presentation, we know that we've got a headwind in China demand on the underground side.
We may have a tailwind on EMV, but we'd like to get a quarter under our belt to see how that's progressing.
Okay. Great. And then just on Refrigeration. At what stage do you kind of reevaluate the strategy with kind of trying to operate that business better? Is that do you feel better about that today?
Or a little more cautious about it given the kind of the sluggish stubbornly kind of sluggish performance?
Look, I mean, we're committed to intervening on the cost base and this is the year when it takes place, Steve. So I think that we're going to run it for the year. I think that where we're intervening is where our backlog is the strongest. So that gives us some pause for success. There are tertiary pieces of the refrigeration side that we're taking a look at, not kind of the production of Case Door.
But on the Case Door side, I think that this is the year that we've got to deliver quite frankly.
Got it. Okay.
Thanks a lot. Thanks.
Thank you. That concludes our question and answer period. I will now turn the call back over to Mr. Galiuk for closing remarks.
Thanks. This concludes our conference call. Thank you for your interest in Dover and we look forward to speaking to you next quarter.
Thank you, everyone.
Thank you. You may now disconnect your lines at this time and have a wonderful day.