All right. How's the sound? Okay, guys? Got to get off to a good start. All right. First of all, thank you for joining us for our Capital Markets Day. Thank you also for not inadvertently going to 85 Broad. Apologize for all that. A couple of weeks ago, we learned the building was going bankrupt. We quickly, in three weeks' time, shifted the whole production here. And to thank us, we were treated to loud construction noise all morning. Nevertheless, we made it. Here we go. Before I get started, just the fun stuff. Remind you of our Safe Harbor statement. Our presentation and comments today will contain forward-looking statements. These, of course, are based on our best view of the world and of our businesses as we see them today.
These, as we've all learned, can change, and we'd ask you to view them in that light and to view our latest risks and uncertainties in our Form 10-K and other SEC filings on our website. A quick look at the agenda. By the way, the materials are available on our website if you'd like to look online. We'll have three- four presentations on themes, which I'll talk about in a second, three Q&A sessions with each of the presenters, the last Q&A session with the extended leadership team as well. We'll have a break about halfway through. The tech demos are going to stay open during the breaks. At the end, I would invite you to join the rest of the team.
From 5:00 PM to 6:00 P.M., we'll talk about and you can meet some of the extended team in all three of the value centers. We'll all enjoy a little food and drink to celebrate. Quickly on what you'll hear today, and then I'll step aside and let the more important folks in the room take over. Differentiation is a theme you're going to hear throughout the day, focused on execution and innovation, and then how we're going to compound our organic value creation with M&A. Of course, we're going to talk extensively about our 2030 long-term targets and then how the long-term value creation through differentiation will drive scalable growth. With that, once again, thank you all for taking time out of your day with us. Please enjoy this video to kick us off, after which Luca's going to take it.
We are ITT, a global manufacturing leader with engineering deeply rooted in our DNA. We make critical components made for harsh environments that are everywhere in fast-growing markets, flow technology that moves critical liquids around the world, interconnect solutions that quickly transmit power and data, and transportation solutions that keep people safe. In each, our culture of continuous improvement drives our outperformance. We differentiate through execution with unprecedented granularity and a focus on safety, quality, delivery, and cost. We differentiate through innovation with world-class research and development capabilities to higher margin businesses in pumps, valves, and connectors. Whether it is flow, transportation, chemical and industrial, aerospace and defense, or energy, in all of the markets we operate in today, you will find our highly engineered critical components operating flawlessly.
What ties all of this differentiation together is our people, nearly 12,000 ITTers operating around the globe to serve our customers. We are ITT.
Please welcome ITT Chief Executive Officer and President Luca Savi.
Okay. All right. Good afternoon, everybody, and welcome again to 2025 ITT Capital Markets Day. I hope that you will find today's presentation, the interaction, and the conversation interesting, insightful, and worthy of your time. At the end of today, I hope that you will get a sense of who we are, of our culture, and the unprecedented and relentless continuous improvement that drives us every day. That you will get the smell, really, of who we are. You will also see what we are building. You will see what we are going to create and the value that we will create in the next few years. Last but not least, please ensure to spend as much time as possible with the leaders of ITT, the people that you're now able to meet every single day. For today, Emmanuel and I are the boring ones.
Let me share with you what you will hear today from me. I will spend a few minutes, a few words about ITT, tell a little bit about the journey that we have been through in the last few years, and then spend time on the future. Have a look at what is our enterprise strategy, the direction we are taking, how we are shifting our portfolio, and then the value creation that we expect to create in the next few years. This is to deliver the long-term 2030 targets. With that, let me start with a few words about ITT. ITT, as you heard from the video, is an engineering and manufacturing company. We make components, and I stress components, for harsh environments.
If it is in energy, energy security or energy transition, if it is in chemicals, pulp and paper, general industrial, automotive, rail, aero, and defense across all these different industries. We are global, and you can see from the chart. Our strategy has always been the one to be in the region for the region. This is paying off these days. You will see in the numbers. In the last three years, we delivered more than 9% organic revenue growth. You deliver this through market share gains in meeting the competition, in outperforming the market. In the last three years, we delivered more than 13% as an average of earnings growth, of EPS growth. We are organized through three different businesses. We have Industrial Process, our pumps, and our valves. We have a great installed base.
We have across the world, we differentiate through technologies with our Twin Screw Pumps that you've seen over here in the corner. We're working across different sectors like pulp and paper, general industrial, as we said, energy, mining. We provide superior customer service and flawless execution when you talk about the projects, projects that last many years, projects that go up to $50 million, $60 million, $70 million per project and last a multi-year. If you are an oil producer and you're looking to pump and store the carbon that you are producing, it's ITT that you go to to solve your engineering problem or your engineering challenges. You have Motion Technologies. In Motion Technologies, we are the global leader of brake pads for the automotive business and also a leader in shock absorbers for rail. We're talking about global leadership.
Sure, you have global leadership in terms of size when you look at our brake pad business in terms of technology, in terms of R&D, but there is global leadership in terms of the value that we deliver to our stakeholders. If it is our shareholders, the superior ROIC that Friction is able to deliver. If you talk to our customers, the fact that you are an OEM, and if you want to launch your new platform flawlessly, you come to ITT. If you want the best quality that you can find in the market for the brake pads, you come to ITT. Last is our Connect and Control business, where we are designing, engineering, manufacturing connectors and components for the aero and the defense business.
Here we are great at really customizing, and probably you've seen some of the highly customized products in the corner over there with our products, which allows us to be specified in some of the best platforms that we have in defense. What has been the journey? We started the journey a few years ago. What we started with was we started in building the foundations. We started in creating a pristine balance sheet and creating also a new way of working in ITT, a new way of working where what we had is that the customers and business rule, not corporate. A business where common sense, good judgment, entrepreneurship really play a role more than corporate mental elucubration.
A corporate lean is everywhere, in every single plant, in every single office, in everything that we do, and where the depth of knowledge and granularity on data is rewarded. Wherever you go, no matter the results that you have, you have a healthy paranoia for continuous improvement. I hope that you will see some of this today when you meet the people and when you talk to them about what they're doing. In doing this, we've been able to create a lot of value, value that came mainly through organic growth and margin expansion. In the meantime, we started to build the pillars for the future. We started to get ready for the next chapter and building what we say the M&A muscle for the years to come. Where this led us is to today.
We were able to beat our 2022 long-term targets two years ahead of plan. Here we are today. This is where the most interesting part comes in in terms of what's coming next, the next chapter, we call it in ITT. It's really the chapter of compounding growth. It's the journey to become a premier growth compounder. All right? Where do we start with that? We start first with a clear strategy and a clear vision of where the portfolio is going. This was 2018. In 2018, 46% of ITT revenue, ITT business, was coming from Motion Technologies. When you look at EBIT, it was more than 60%. Let me repeat. In 2018, 60% of EBIT was coming from automotive.
Now, when you look at today, the business, thanks to the investment in terms of M&A in companies like kSARIA, Svanehøj, Habonim, Micro-Mode, because of the divestiture of Wolverine in 2024, the automotive business is roughly 31% of the portfolio. If you look at the OE automotive business, which is the most cyclical one, it's roughly 21%. If you fast forward this to 2030, then through organic growth and acquisition, we will have an automotive business. We expect to have an automotive business that will be roughly 21% of the portfolio or 15% of the portfolio if you're looking purely at automotive OE. This, when you fast forward to 2030, through organic investment, through M&A, the company that we expect to build is a $6 billion revenue company where you have Motion Technologies that still grows.
I do not want to give you the wrong impression here. Motions Technology will be the smaller business in the portfolio, but we will keep on growing. It will keep on growing strategically in China, in North America, in electric vehicles, in hybrids, in high performance. It will grow more opportunistically when it comes to Europe and to the internal combustion engine. At the same time, our successful and profitable rail business will keep on, with KONI, will keep on growing as well. We will have CCT, our connect and control business. We will benefit here from the recovery and the growth of aero, the growing of the defense business, where our differentiation in execution and innovation that we will talk about later is able to make us win market share, really, with connectors in defense.
Last but not least, our industrial process, our flow business, where macro trends in energy security, in energy transition, as well as reshoring, will feed the growth together with our ability to outperform the competition in the market and together with the M&A that we're planning to execute in flow. Where is the value coming in the next few years? We've seen that we delivered plenty in the past. Where is it coming in the next five years? The next chapter will have two pillars of value creation. The former is coming from organic growth and margin expansion. Yes, we are not close to be done here. I'm going to talk a little bit about it in a second. The second will be through compounding with M&A. Let's address each and every one of them. Okay?
Let's start with the organic value creation. I mean, you have seen it. We've been able to do it. We got a great team in ITT that is able to deliver on this front. Is there still room there? Let's check from a growth perspective. Right? First of all, as we shift the portfolio to higher growth and higher margin businesses, we have macro trends feeding the growth in the market that ITT is more and more exposed to: flow, energy, aero, defense, rail, you name it, general industrial. That is markets growth. You add to that the fact that our companies, the companies that we have and the company that we bought, are strong companies with a strong leadership position. It's scary sometimes when you talk to Svanehøj and understand the market share that they have in some of their specific segment.
Leadership position in the company that we are part of the ITT family. Last but not least is the outperformance. The outperformance that we've been able to deliver regularly, consistently, quarter after quarter, year after year across all the different businesses, most of the businesses that we are in. That outperformance comes through differentiation, differentiating from the competition both in execution as well as in innovation. We're going to talk a little bit more about that later. Plenty of growth from an organic point of view. What about the margins? For the margins too, these are the majority of the ITT sites. You have there the operating margin of ITT at 18.7%. Right? As you can see, there is roughly 400 basis points of improvement in just getting the underperforming sites to the level of ITT.
Because what we were talking about, our relentless continuous improvement mindset, the other sites to the left are not staying still. There are more than 150 basis points improvement. Just keep on improving also the sites to the left. How? Through lean, through automation, through technology, through the unprecedented granularity with which we are managing the business. Last but not least, with the entrepreneurship culture with which we are running the business. As you can see, there is plenty still of organic value creation that we can create through organic growth and margin expansion. Now let's have a look at the compounding with M&A. What has happened? Right? As we said at the beginning, we were building the muscle. We were trying to get ready.
After we got our balance sheet in a pristine state, then we went out in the market and we recruited Bartek, Bartek Makowiecki. I met Bartek on the 28th of June 2021. Unfortunately, he does not remember the date, which is very hurtful from an ego point of view. He joined Bartek on the 14th of September 2021. Since Bartek joined, we worked together to build the team. We built the team at corporate and in strategy and M&A also within the businesses. We crystallized the strategy in terms of scaling the business, shifting the portfolio, simplifying the portfolio. We started executing. We started building the muscle, the M&A muscle with the acquisitions: Habonim in 2022, Micro-Mode in 2023, Svanehøj, and kSARIA in 2024. This is what we have been doing in the last few years. What are we going to go next?
What are we going to do next? Next is we're going to deploy $500 million-$700 million every year as an average in M&A to buy companies that are leaders in the market they're playing in, in markets that are growing and they've got high margin with strong management team like we had in Habonim, in Svanehøj, in kSARIA. Management team that stayed with ITT. Søren will tell you, Ilan for Svanehøj, Ilan for Habonim, and Mike DiPoto will tell you for kSARIA. The entire management team is still there with ITT, all of them. All of this recipe will be able to deliver an ROIC, which is higher than 10% by year three or five. It will be able to be accretive at EPS within the first full year.
To summarize, we do have two pillars of value creation: the organic one, where you have experience with us in the last few years through organic growth and margin expansion, and then the M&A one, the compounding with M&A. You are able to do this only with the best people. Right? Here we have today with us the high-performing leadership team. Please ensure that you spend time and you will be able to get a sense, really, of who they are, of their deep knowledge, of their customers, of their markets, of their people, the entrepreneurship that they do have, and once again, their drive towards continuous improvement, no matter what results you are delivering. A word also on the board of directors.
Lori, our General Counsel, and I work really hard together with Don and team in the board to really create a high-performing board. We succeeded. I'm really happy and proud today to be part of this board, a board that is hardworking, always prepared, incredibly smart and knowledgeable, that is able to constructively challenge you while supporting the management team and whose value system is aligned with ITT's values. Talking about people, also all the other people that are here today, the speakers as well as the speakers at the stands, I'm sure that you will experience and you will see many of the things that I just shared with you here today. Now finally, the targets, the 2030 targets.
What was interesting is there was 2022 in May, I think it was May, when we had our last, it was our first actually, Investor Day here in New York with many of you. And we shared our long-term targets then that we were able to beat two years ahead of plan. Now it is good to be back in New York and to share what are our 2030 targets. Right? Revenue growth of 10% total, 5% organic, adjusted operating margin of 23% or an EBITDA higher than 25%, an adjusted EPS of more than $12 in terms of total, and the free cash flow margin that continuously improves and is between the 14%-15%. With that, how are we going to, the team is going to cover in the next few sessions really how we are going to deliver this value in more detail.
It really is through differentiating ourselves in the market. How do we sustain this value creation is to continue to differentiate in the market. We are differentiating in the market through execution. The team will talk through that with examples and what we mean by execution in ITT. We differentiate through innovation as well as differentiate through M&A. Let me show you a quick video about differentiation through execution and innovation.
At ITT, execution drives our differentiation. It is how we separate ourselves from the competition each and every day. We execute no matter the challenge to deliver industrial pumps moving critical liquids, advanced suspension technology delivering control on every journey, precision-crafted brake pads setting new standards in safety, secure communications in critical moments, and power and data transmission in the air and beneath the ocean surface.
It is our innovation that will ensure our differentiation continues, such as VIDAR, a revolutionary industrial motor, the only one of its kind on the market today, which will change the game for rotating equipment in harsh environments by lowering costs and reducing energy usage and CO2 emissions, or Svanehøj's cryogenic deep well and submersible pumps, which will be deployed on the world's first ammonia-fueled bulk carriers, furthering our leadership in the green energy transition, or the Geopolymer, the next breakthrough innovation in material science, a greener brake pad using an inorganic binder that requires fewer ingredients and a simpler production process. ITT's execution is a critical piece of our differentiation, and our innovation ensures that it continues.
Please welcome President, Motion Technologies and ITT Asia Pacific, Davide Barbon.
Let's go. Good afternoon, everyone, and welcome.
As you heard from Luca, the first pillar of organic growth is differentiation through execution. Today, with me, there will be Hamdy from ITT and Art from Connector to share with you some examples within our respective businesses. When we look at differentiation in execution, these are six among the most critical values that we carry through our day-to-day activity. This execution is something that is very close to my heart because it really identifies with what we can control. This is all about how we wake up every day in making today better than yesterday and building for a better tomorrow. There are six items, and I call attention on three of them, which we will touch throughout our presentation. One is customer centricity. The other one is one size does not fit all, and the continuous improvement.
When we talk about customer centricity, Hamdy will talk to us about our journey in ITT in Saudi and how they really focus on Saudi Aramco and really accelerate the growth in the region. On a one size does not fit all, Art will talk about their tailored approach and speed prototyping to serve the military sector in connectors. I will close it up with continuous improvement and Motion Technology specifically for Friction. Across all the presentations, though, I'm sure you will understand one piece that really differentiates on everything we do across our site. It's our people, and it's our culture. With that, let me introduce you to Hamdy that will take us over to the IT Performance. Good luck, buddy.
Hello, good afternoon, and welcome, everyone. I'm Hamdy Salem. I've been with ITT for 18 years, a long journey.
During my journey, I took leadership roles in different regions in the U.S., then Europe, Middle East, Africa, and India. During my journey, I experienced firsthand how flawless execution can differentiate us from others. I would like to share my experience with you today and walk you through what we have done over the last years. For those who are not familiar with Industrial Process, I would like to share some information about Industrial Process. As Luca mentioned, we are a global leader in centrifugal pumps, twin screw pumps, and valves, and aftermarket services. These are highly engineered products, and this is what differentiates us from others. $1.4 billion business, and we serve different segments of the market: chemical, industrial, mining, and energy.
We are spread globally with a very big market share in North America, and we are the global market leader in ANSI pumps in North America. We have more than 1.6 million installed pumps globally, and this is growing. As you can see on the financials over the last four years, significant order growth, 16%. With that, a lot of market share that we have gained. The secret for gaining market share, we'll talk about it later when we talk about differentiation through execution. We doubled our backlog in the last four years. Again, another significant impact that we have done to our business and fantastic operating margin as well. To achieve that on an industrial process level, it's the same process that we have implemented in Saudi that I'm going to be sharing with you, the experience in Saudi.
We go down to basics first. We set our foundation: SQDC, Safety, Quality, Delivery, and Cost. These are the main foundations that we have embedded in our culture in every ITT site. Aside from that, customer centricity, this is where we put our focus. Our customer is the most important part of our business. If we have a satisfied customer, we serve them with speed and reliability. This is what puts us above anybody else in the business. We have a multi-phase pump technology that is really a differentiator for us, and it is very, I would say, gives us an edge in the harsh applications like carbon capturing, like Luca mentioned, anti-flaring. We are working on applying these pumps in other energy transition, like ammonia, like hydrogen. This is one of the differentiators for ITT as far as products in the industrial market.
Looking at our financials for the last four years, again, you can see the significant growth in orders, in revenue, and operating income and margin. As I mentioned, this does not happen by accident. It happened by a lot of effort and a lot of work to differentiate ourselves over others. Talking about ITT Saudi, and this is really very dear to my heart because in 2017, ITT asked me to move from Houston to Saudi Arabia to help build the business, build the team, and support the business to grow. In 2017, or end of 2017, our business was $19 million, one nine. If you look at it today, it is a $100 million business with a $160 million backlog. This over the course of the last seven years, which is a significant improvement. I'll tell you how did we do that.
How did we gain all this market share? This is not only market growth, which happened, but also a lot of market share gain by doing the effort and putting ourselves where we need to be to gain the customer trust and loyalty. As I mentioned, foundation is rooted to SQDC, Safety, Quality, Delivery, and Cost. When we talk about safety, if you look at the record of ITT Saudi, 650 days accident-free. Safety is in the core of everything that we do. Every employee in ITT Saudi and in ITT IP is a safety officer. He has a right to stop operations at any time if he observes anything that is unsafe. They have the authority to do that. We acknowledge, we recognize, we award anybody who raises safety concern that might jeopardize the safety of our employees.
If we talk about quality, quality is embedded in everything we do. We start the quality from design, from engineering, and we have our KPIs to measure every aspect in the business from design, from engineering, from documentation through manufacturing. Before any product leaves our facility, there are multiple inspections that happen from the time we receive the part in our shop through the in-process production and before it leaves. 95% of our products in Saudi, it has also customer inspection before it leaves our site. We have to make sure before we call the customer in to inspect the product, we have already done our due diligence because once it's ready, we want to ship it out of the door. If we're not ready and the customer doesn't like it, if any issues with the product, they have to hold it until we fix it.
That will impact our on-time delivery. It will impact our contractual obligation, exposes us to liquidated damages. If you look at our on-time performance in Saudi, it's 96% over the last four years, meaning that we always deliver. We always meet our commitment. You cannot do that without the highest quality product ready to be inspected and get out of the door in time or even before time in most of the cases. This is what quality means to us. When we talk about delivery, I talked about on-time performance, unprecedented 96% over the last four years. Cost is reflected in our profitability, reflected in our margins. You can see that by the high profitability that we're able to achieve.
Part of the cost, we are masters of cost control and masters of managing the project, managing the customer, because part of it is managing the supplier and negotiating with the supplier, making sure that we get the best discounts and the best product in time. The biggest part of it that we are good at is managing our customer and customer expectations. With these highly engineered products and big projects that we have, which is 26% of our business's project business, always there is a change in the scope. Always there are some additional modifications and tweaks that the customer would like to have during the execution of the project, and they always want to have it for free. We have this good relationship with the customer.
We have the intimacy, the partnership that we have the right to ask them for additional money whenever they do a change order, and we are good on managing change orders. A change order comes with a higher margin than the project itself. This is how we change a good margin project to a fantastic margin project. This is an area that we are good at, and we know how to manage our customers. Talking about SQDC, moving to customer centricity. Customer centricity, the best way to convey how good we are, good with our customer, how close we are with our customers. I'll give you a couple of examples, and that will, I would say, show you how good we are on managing our customer, being close to them.
We start our partnership with our customers before the project even starts, before they are awarded by the end user. If we have an Aramco project, they usually, I would say, are awarded to an EPC, an engineering contractor, and then the orders come to us, or we get orders directly from Aramco. We start from the feasibility assessment. We offer our services to an engineer, highly engineered, capable design company in the industrial business. We help them to define the pumps, define the hydraulics, define what they need to do, set up their data sheets to reflect what we offer. When they are ready to buy, our pumps are already defined in the scope of supply. This is how we position ourselves. They see us as a solution provider.
They see us as a partner, not only as a supplier, and that positions us in the right place when it's time to get the orders. The two examples I would like to share with you very quickly, one with Aramco directly. When Aramco was attacked in 2019, half of their production in the Abqaiq plant was impacted. Abqaiq plant is the largest oil production facility in the whole world. The first vendor they called is ITT. Half of the pumps were damaged. These were old pumps, more than 50 years old, and it was not an ITT brand. They came to us. They say, "Can you replace these pumps? Can you help us out and give us replacement?" These were 20 pumps. In six months, they had the replacement pumps completed, installed, and the site in Aramco Abqaiq was up and running.
This gained us the right of Aramco to trust us, to be a loyal customer to ITT, to always call on ITT to help them when they have a highly technical problem that they need help with, and also to help them out in difficult events and in any projects coming forward. You are going to see that reflected in the ITT Saudi financials over the last four years - five years and what is happening in the future as well. That is an example. Another example is another one of our critical customers, strategic customers. They were in a rush. They did not have the resources to define the pump hydraulics that they wanted. We deployed three of our engineers, four weeks sitting with the customer, defining all the hydraulics. That is in 2024. That ended up with a $17 million order, actually two orders for two projects, single source to ITT.
That's because they valued what we have done for them. They see us as a reliable partner for what we can offer them, and we always meet what we commit to. This is an example of customer centricity. Talking about localization, this is, as Luca mentioned, in the region for the region. That really adds a lot of value. It gives us a flexibility to serve the local customers, but also to decide how to manufacture in the best cost and the best strategic approach for our customers to help them out. In Saudi Arabia, there's a huge initiative in the Kingdom of Saudi Arabia that they only prefer to place orders to local suppliers. ITT invested heavily in Saudi to enable the Saudi team with investment in people, investment in the facilities, in the equipment, expansion of the shop floor.
All these investments happened to support the localization, and that paid off. With localization also, we localize the engineering. We localize the design. We localize the supply chain. We are relying on local suppliers in Saudi Arabia that helps the team to be more agile, to be able to control their cost, and to be able to meet the delivery of the customers. Talking about tools and processes, this is, of course, in every country, and I'm sorry, in every company, tools and processes are important. We look at it differently. We do it. We are very granular, like David mentioned. We work on Lean. We work on Six Sigma. We implement visual management. We have the ability and the agility to every day walk anywhere in the facility.
You have the Gemba boards, whether it's virtual Gemba boards, electronic, or manual, and you know every project, every product, where it is, what stage, what phase gate, and we can track it. We have our Gemba walks every day, and we know exactly what do we need to do to get it out of the door. I'll give you an example on this as well. When COVID happened, we were doing the Gemba walks every day, and I was there. We have to go every morning, group the whole, not the whole team, but the leadership team, and we walk over the Gemba boards to see what do we need to do to get stuff out of the door and get projects moving. COVID happens. It was curfew. Everything was shut down. The very next day, in 24 hours, we transformed the Gemba to a virtual Gemba.
We were meeting every day virtually, talking about projects, talking how we're going to be executing. This is how much agility do you have, how much dedication that the team is having, how granular we run our business every day. People is our, I would say, our biggest force. We really, really invest in our people. We like our team to grow, to be empowered, to be able to make decisions on their own, and to run the business the way they see that's the right thing to do. People, for the last seven years, we had less than 2% attrition in ITT Saudi. Whoever comes in the facility do not want to leave. They like the culture. They like that we are successful. They like that we're able to meet our commitment.
Even if they get other opportunities, they come to us and say, "We do not want to go. We want to stay with the company because they appreciate what we do." They see the efforts and the energy in the facility and the respect that we're able to meet our commitment. With that, I would like to introduce you to our team in Saudi Arabia. If you look on the right side, you can see that all of them have big smiley faces, not because Luca is visiting us, but because they're proud of what they have done. The synergy that they have in Saudi is fantastic. If I tell you we have 13 different nationalities in ITT Saudi, 13, one three. I remember when I was there in 2017, when we started to build the team, it was 45 employees, was $19 million.
Now we have 120 employees, over $100 million this year. Again, 13 different nationalities, Indian, Pakistanis, Filipinos, Egyptians, Jordanians, Russians, from every region in the world. We have people working together in harmony, collaborating, being able to get things out of the door. The culture is amazing. The collaboration is amazing. If you look at the records or the KPIs that we have, 650 days, as I mentioned, safety, accident-free, quality, top quality, which we are recognized for by our customers in Saudi Arabia, Aramco, and SABIC, Maaden, that we are the top supplier for them from a quality perspective. They have the supplier measurement that they sit with us every quarter, and they assess us, and the feedback that we're getting from our customers is that we are the top quality that they have in Saudi Arabia. Delivery on-time performance, 96%, as I mentioned, the last four years.
Then the growth, 91% of the orders that we bid on last year, we won. Our hit rate grew to 91%. This is how much trust that we have from our customers in ITT. If you look at this picture, these two pumps are part of a project that is $13.5 million, part of six pumps. These are crude oil booster pumps for one of Aramco's big projects called Safaniya Project. This is the largest pump of this type that was ever built in whole ITT. It was built in ITT Saudi. There were six pumps delivered on time and according to budget. There was a lot of savings and a lot of improved profitability to ITT. It was tested for the first time, built and tested and designed in ITT Saudi and passed the testing from the first time.
These are the first two getting ready to package and get out of the door. It was a great achievement. They were only able to build and test these pumps because of the investment that ITT has done in 2023 to build a brand new testing facility for ITT Saudi to enable them to manufacture such large vertical and horizontal pumps and enabled ITT Saudi to grow their business and be able to be one of the largest competitors in the industrial pumps business in Saudi Arabia. With that, I would like to share with you a very, very short video to show you the ITT Saudi team and their capabilities. This is my last slide. I would like to show you the growth of ITT Saudi orders 2017, as I mentioned, and then growing to 2024. We have $160 million backlog.
This is where we see ourselves in 2030. This is not a fictitious number. This is where we see the market is. This is where we see our capability to grow. If you look at the same ratio of growth over the last seven years, that can be easily done. If you look at the investment that ITT is making in ITT Saudi, this is in the green what we have already invested and completed. The top one in phase two, this is already working on, is going to be completed in Q3 this year. It should be up and running.
Phase three, where we're going to be extending our growth with new products going into ITT Saudi to be able to manufacture different products of the ITT product line and be able to grow the business to get there, and also with the market share that we're expecting to capture. The differentiation is real. The differentiation is in the people, in the talent, in the processes, in the equipment, in the facility, in the execution, in the customer centricity. This is how we are growing. We are proud of what we have achieved, but we are not satisfied yet. There's a lot more that will be done, a lot more that will get us to where we need to be. The investment continues and more growth for ITT.
With that, I'll thank you very much for listening, and I'll hand it over to Art Dunn to talk to you about execution and differentiation through execution in the Connect technology. Thank you.
My name's Art Dunn. I've been in the Connector business for over 25 years, 16 years at ITT, had the honor of leading the Connector group over the last three years. Today, I'd like to talk to you about how the Connector group has been differentiating in execution in the area, really, of R&D and rapid prototyping. Before I do that, I'd just like to cover Connect & Control Technologies, a $900 million business with 2/3 of its business in aerospace and defense military, two rapidly growing market segments, with significant opportunities to grow in Europe, in military, in defense, in transportation, industrial in Asia. I want to bring it back to Connectors.
How has the Connector group been separating itself from its competition? Oftentimes, the simplest actions really can be the most impactful. In 2022, we launched a new product team. That team consisted of seven engineers, experts in their field, high speed, high power, high temp across fiber applications, copper applications, RF applications. That team was led by two seasoned veterans of ITT, Mike Finona, 27 years at ITT, an expert in connector design. He's known throughout the industry for his creativity, but more importantly, his passion for serving the customer. Paul Alpers, 17 years working at the company in business and technology development. Those two individuals, along with seven others, formed this team, and they were given no restrictions, go out and solve customer problems.
Their charter, their mission was simple, become a strategic weapon, not just a partner, a strategic weapon of our customers solving their most complex connector challenges. Their work has been amazing. I just want to cover one example today of what they're doing, but I would invite you to come over to the booth later on. We have many examples we can go through. Here you see a modern-day soldier. He's wearing a tactical radio unit. That unit is waterproof to about 20 meters. The heart and soul of that unit is a ruggedized cell phone. That's his eyes and ears in today's battlefield. If that unit goes down, he is blind to what is going on in the battlefield. ITT is out working with this customer in Northern California. He's building these radio units. We're doing an RF breakaway connector for this unit that they're building.
It's out in the field already. The U.S. Army calls and says, "Stop everything you're doing. We have failures in the field, and we need an immediate solution." You can imagine a soldier's out in the field, and all of a sudden, his eyes and his ears are gone, and he's out in the battlefield. They turned to ITT and they said, "What can you do to help us?" It turned out in this particular radio unit, the soldier was pulling the ruggedized cell phone out of the holster. In the design of the unit, they had never imagined that a soldier would do that. Don't know why you think a soldier out in the field in the midst of a battle, he wants to pull his cell phone out, take a picture, send it back to command.
The unit was not designed to be taken out of the holster. Within 48 hours after being notified of this, we delivered 3D models to the customer of a solution that we could bring to them. Three weeks later, they had working prototypes of this solution. Here is the best part. They went to the U.S. Army, and they made that proposal to them. The U.S. Army said, "Who's designing this connector?" They said, "ITT." This is a sweet part of it all. They said, "ITT, we know those guys. You're good to go." The reason they said that was on 80% of the radios that are in the field is ITT content. We just took that technology and repackaged it and presented it to the customer. This opportunity alone, starting in 2026 and beyond, is estimated to be $10 million a year.
When you think about that, it was speed, it was technology, and then it was brand. It was ITT. ITT, you're good to go. Great opportunity for us, many of them like that, that we're working on. We have an engineering cycle going on here today that we can talk about. It starts with the customer. The customer is at the center of everything we do. Through meeting with the customer and listening to them and solving their problems, we see opportunity to develop technology. That technology over time can be adopted, and it leads to platforms. 53 projects we've finished in the last two years through this process. There are 23 more of these programs that are going to be completed this year. We're estimating that 65% of our revenue growth this year will come from these new projects.
I invite you to come over to the booth, and you'll see a product called C5 Warrior. It started as an individual custom connector for a customer, and it has evolved into a product line. You can come over to the booth. We'll talk to you about high-temp ceramic connectors that we developed for a hypersonic missile application for one of the prime contractors. We're on the third generation as we speak. Lastly, we can talk to you about a customer interaction on a digital box going into the Joint Strike Fighter as they upgrade their boxes. It started out as one conversation around one connector, one custom connector. It is now 23 connectors. It's 90% of the content of that box. That's what happens when you differentiate yourself through execution and speed and brand recognition.
If I can leave you with one thought today, the typical gestation period from developing a connector to volume production is two to four years. This cycle has basically been going on for two years. The revenue streams are just starting to come online. Just imagine the amount of revenue flow that will be coming out of this process. This just started because we wanted to focus on the customer and bring speed and be a strategic weapon for what they do. With that, I'd like to pass it on to the master, really, of execution in the business. We're just beginning in the connector world. We've been doing it for a couple of years. The real master of it is Motion Technology. With that, I'll pass you back to Davide.
Just in case I can read. All right, I'm back again.
Let's get some rules straight here and some scores straight. Motion Technologies delivers, but we are far from the masters. We have a lot, a lot still to improve. Let me start to introduce you a little bit to Motion Technologies for those who are not familiar with our value center. We design and make safety-critical and comfort components. Those components are for Friction. They are brake pads. For KONI, they are used in auto. For KONI, we have shock absorbers that you will see on that side of the stand. I want to make sure you do not only go to the connector side because they have the nice stand. Those KONI shocks are primarily used on railway and defense. We have Axtone energy absorption solutions, which are used both in passenger and freight trains.
When we look at a brake pad, a brake pad is something that most of us don't think about when we drive a car. It's this big. The good news for you is it's a safety component. If you don't have it, the car doesn't stop. The good news is that there is two for every part, every rotor. Every wheel has two of those, so you have eight on the cars. If you have them and they work, you also will not feel any noise or any vibration. When you think about KONI shock absorber in railway, you have to think about riding on a train at around 200 mi an hour. You want to make sure that those shocks are working to hold in and maintaining that train on a track. That's how critical our components are.
When you think then of Motion Technology, we are present all around the world with one technology, the same technology. We use the same processes, and we use the same operating systems. As all the other businesses in ITT, and you heard Luca talking about it, in Motion Technology, we're local for local. That means we can move at the local speed, yet we leverage our global expertise when it's appropriate. On the middle of those pie charts, you see where geographically we are present everywhere. Europe is really our legacy region where we have our largest market share. In North America and China, we open our facility a little bit later, so we have more room to grow.
On the far right, there's a pie chart on Friction, our OE business, which is also growing across all the different types of engines, not only the internal combustion, but also the hybrid and the EV. On the EV, we started to invest and develop on a tailor-made brake pad for electric vehicles when this segment started, and it was a priority in China in 2017. All of this is delivering a growth in Motion Technology that has compounded over the years of 6% while the market is down. While the market is down, we're growing 6%. As Luca said, we still have opportunity to grow our share and grow our margin in Motion Technology. Now let me share in these few minutes a little bit on how we differentiate through execution.
We will help us to deliver the long-term potential that we have identified for Motion Technology. These are the seven pillars that really define how we operate in Motion Technology. I'll call your attention on three: Premier Customer Experience, Continuous Improvement, and Speed. Let's start with the customer centricity because, as Art and as Hamdy said, it all starts from a customer. If there is no customer, there is no business. On that, I want to share with you something about product launches. A car, on the average, has 20,000 components, 20,000 components. You can imagine with all the buzz and our new product launch, if you are a car maker, the only thing you want is a flawless execution. Come to our components, these little lovely components, so small, yet safety-critical, is usually the last in the process of designing the system of a car.
They design the axle, they design the powertrain, they design the rotor, and at the end, they get to our dear brake pad. What does that mean? It means that you're very close to the actual launch of the car. Usually, there are some hiccups along the way with 20,000 components that need to fit properly. If you have, for example, little noise in the car before you get to launch into the market, they can't go to the axle and redo the axle. They can't redo the powertrain. They come to the brake pad and say, "Guys, can you fix the entire system?" We actually need to go back and readjust and modify our brake pad to fit the new needs or the issue that need to be resolved because every vehicle that is running on the street has its own specific tailor-made brake pad.
Now we move into continuous improvement and speed. Before we go to that, I want to share that these seven pillars, as a standalone, they are difficult, and they are hard, they're tough to achieve. What makes it really the unlocking power of execution across Motion Technology is our people and our culture. It's really the glue that keeps the whole seven together and makes us execute day in and day out, month after month. Going back then to the continuous improvement, not continuous improvement like everybody else talks about it. In Motion Technology, we talk about it as unprecedented continuous improvement. Let me give you an example on quality. You see the top box on the left side. Friction, a few years ago, arrived at one PPM. PPM is the standard metrics of quality in a factory. It's part produced per million.
How many defects do you have per million of parts produced? We're at over one. There's not much more that we can go beyond one. The team decided that, "Fine, we're going to change the metrics." We are the only one in our industry that actually measures quality in PPB. That is, how many defects do you have per billion of parts produced? Last year, we closed at 398 PPB, so 398 defects per billion of brake pads produced. We produce a lot of brake pads, but not in that kind of scales. Yet for this year, we could have set a 10%, 20%, maybe 30% improvement target. Our target for this year is 200 PPB. It's more than 50% improvement.
Shifting to speed, typically automotive have a new develop a new car, have a period of about 18 months- 24 months between the time that they design it and then when you go into an award. For our product, this means going back and defining the specs, defining the formula because, again, every vehicle adds its own brake pad. Then we go and develop prototype. We run some dyno tests to see the performance is in line with what the customer requires. We get those discussions. When we finalize that that's what they want, we put those prototypes on a vehicle. We run the cars in different parts of the world on different terrains to make sure that they perform as they require. We industrialize it, and then we go into production. That period now in Motion Technology is 8 months-10 months.
We all move at a different speed. Nowadays, it's all about speed, and it's all about velocity. Different countries have different expectations from the customer perspective. As it happened last year, a few of our most demanding customers needed to have a brake pad in three months. That's from design to SOP, three months. Guess what? They call Friction. They call ITT Friction because they knew they can count on us, and we deliver it. Now, what I share with you in terms of continuous improvement, in terms of speed, it's not just in quality. It's not just in launches. It's on everything we do. Here you see a metric also on prototype where we shifted from over seven years prior to that data. We improved 300%. We were down in 2017 at 10 days, 11 days to get a prototype.
This is where Art, I mean, he talks a lot about MT being the masters. In reality, when you look at his speed prototype, in doing in 48 hours, we're still far to that. Now, we improved that. We were down to three days. Three days, again, it's little room to move. This year, we said, "That's it. We don't look at it anymore in days. We look at it in hours." This is our new target for this year for delivering a prototype to our customers. When you look at Motion Technology performance, that because of this execution and the way we wake up every day making today better than yesterday for a better tomorrow, we have been able to differentiate. Here you see on these two charts, they started from 2017.
For who's not aware, 2017 was the peak of production volume for cars. From 2017 to today, the market is down 6%. In those years, Motion Technology outpaced and outperformed the market every single year. In 2024, we were up 39% in a market that is down 6%. I can confidently tell you that this growth and this outperformance will continue. Why? Because today, we have already the visibility of what we will be producing for the next few years because of the project, a new platform that we have been already awarded in the recent years that will go into production in the coming from an SOP perspective. The outperformance will continue. To wrap up, our unprecedented drive to continuous improvement, depth, and granularity in everything we do enables us to differentiate through the execution.
It is really, by the way, our people set those super stretched targets of 200 PPB, knowing that every month you go to ITT and you do your monthly performance review, you are red, and you are going to be red for the entire year. At the end, you will come more solid and with a breakthrough that will enable us to continue to differentiate from our customer and be their partner of choice. This brings us to the end not only of the section on Motion Technology, but all the pillars of differentiation through execution. Listening to Hamdy and their fantastic performance on Saudi and the performance that IT is having, as well as Art with their speed prototyping and their cycle of engineering, how they have been able to gain market share and differentiate really in execution through their customer.
A little bit of our approach in Motion Technology and in Friction, I hope you gain a better understanding as an insider of how we execute across all our businesses in ITT in order to be able to be the reference for our customers. This is what will feed the 5% organic growth long-term target that Luca shared with us earlier. Thank you very much. Now I call in Art, Hamdy, and Mark to help us out through the Q&A section. Thank you.
Didn't ever die, but I always had a vision. Always had hope.
All right. Let's open it up for Q&A. We'll start with—wait for the mic—Scott Davis of Melius Research.
Good afternoon, guys. Thanks for doing this. I can't help but to ask this question.
Luca put up this chart of the underperforming factories, and presumably you guys run some of those. What are the common characteristics of those underperforming factories, and how do you think you can turn them around?
Maybe we can start with Hamdy and Art. Maybe 45 seconds on each.
Okay. I think the first thing that we need to focus on with underperforming factories is to understand the reasons for underperformance. If it's a supply chain issue or if it's a resources issue, if it's a customer demand that is sometimes more aggressive than how the supply chain is reacting quickly to bring the parts that we need. Getting to the root cause from one facility to another, from one operation to another, it can be a different recipe to correct that. This is what we're looking at.
If we have an underperforming factory, we do the root cause analysis, we assess where the bottlenecks are, and then we start tackling these bottlenecks. It's a continuous improvement process, but it always goes back to fixing the basics, the SQDC that we spoke about earlier. One big factor that maybe I didn't touch in my presentation is the supply chain management. You have to make sure that we have enough, I would say, diversity and redundancy in the supply chain that enables us to bring the parts that we need in time to be able to satisfy the customer requirement. I hope I answered your question, but please feel free.
I know Luca's dying to chime in on this one, so. Yeah. Okay. Anything else to add from the group?
No, I think Hamdy said it right. It's just SQDC. Some plants exercise very well.
Others need to continue to improve in that area.
What I would add from a Motion Technology perspective, and also what I see across the ITT business in Asia-Pacific, there are two pieces that I think are also important in addition to what Hamdy and Art shared. Number one is culture. You start from the leadership. I think it's about having the right leaders that really spend time, quality time on their factories, work with the people, and get them engaged. Because at the end, the person that is working on a specific position or in a supply chain in an office is the one that knows their role better than anybody else.
It's up to us to be able to engage them in a way where they feel okay and open to highlight where there are issues, opportunity, pilot them, and if it doesn't work, try something else.
Okay. Thanks. We're going to go to Joe Giordano at TD Cowen.
Hey, thanks. Just to follow up on that, and you kind of were touching on it, but how far down the line is the visibility if you're at one of these facilities that is underachieving relative to target? What's the incentive structure all the way down the chain to the people on there to fix that? And how much are they even aware that there is a problem? And maybe if you can talk a bit about where you are respectively on your deployment of automation and robotics into the process. Thank you.
Okay. Davide, do you want to start? Sure.
I have two hats. I'm trying to figure out which one, why I got a part-time, which one is the part-time job of the two. When I look at Motion Technologies, we're more on the upper side of those margin. To your point, all our facilities have an incentive mechanism where we pay for performance. It's about being fair and recognizing when that exceptional performance has been done, has been delivered, and has been recognized. We also have an incentive performance to motivate our people to give ideas, to share ideas. That is a wheel that is turned. I also have in Asia-Pacific, maybe some sites that are on the left side. I think a lot of it is people know when they're working on a site that is not doing as well.
I also believe that people all come to work to do their best. I think it's about us just instilling the right drives, the right desire to make today better than yesterday and build tomorrow. I'm really, really a firm believer in culture. It starts from me. It starts from us as leaders to walk the shop, to live in the shop, to spend a lot of time to work with them. We have sites where we not only maybe they are performing from an operating margin, but maybe they're not as clean as we like to do. Now, actually, our leader cleaned the factories as well.
I think it's showing this, making all our colleagues proud for where they work and what they do that then will stimulate them to get more ideas and then incentivize and invest in their knowledge by doing also training and courses on lean, on Gemba walks, and make them part of the process. I hope I answered the question.
When it comes to incentive, Joe, it gets cascaded down completely to the level of the site. Each site is incentivized on some numbers, which might be their value center or the region. The biggest percentage is actually on the site performance.
What you do have, just to reinforce the message that Hamdy and Art were saying about the SQDC, the financial metrics that push the incentive then get multiplied or demultiplied based on an SQDC multiplier that can be more than one or less than one, just to reinforce the fundamentals of the business.
Okay. Next question. Can't see anything yet. Nope. Anything else to add? Okay. Brad Hewitt from Wolfe Research.
Great. Thank you. Maybe a question for Hamdy. I guess you spoke a lot about the factors driving the growth in Saudi and IP. I guess curious, any particular learnings from Saudi that you're in the process of applying to other regions and kind of how you think about that and the impact of that?
Actually, there are several. Thank you for the question, first.
There are several lessons learned and good implementations that we got from Saudi, and we are actually actively implementing it in different places. The Gemba board, we're doing it everywhere. The granularity that the Saudi team is doing it, it's very effective. It helped them to manage the business properly. The way they have done it is they adopted the Gemba board. They changed it. They transformed it to fit their own specific business. It's not the standard Gemba that's being used everywhere else. That worked for them. We're doing the same concept, the same idea, and we're implementing everywhere else. This is one point. Having the visual management, having the Gemba boards to have visibility about your production on a daily basis, on a weekly basis, on a monthly basis. Always when we plan, we have a six-month look ahead.
We do not plan for this month how much we are going to ship this month. We look six months ahead, have six months look ahead. This is one of the key lessons learned that we have from Saudi and are implementing everywhere else. The other one is project management. Again, the granularity of the project management that we have in Saudi, we are also implementing it everywhere else. The way they manage change orders, this was really impressive because you can generate a lot of orders, a lot of business, and a lot of profitability from change orders that the Saudi team is very good at because they are very good negotiators. In other facilities, they did not really see the concept of it initially, but we have been implementing this across the board.
Just when a customer comes back with a request to say, "I want this to be added," a lot of our engineering team, they're not very commercially savvy. They say, "Oh, the customer wants this. It makes sense from a technical perspective. Let's change the drawings and give it to them." They do not realize that it is an additional cost, additional lead time that we need to ask for rightfully from the customer. This is what we have been doing, training our engineers on commercial training, training on margin, letting them understand basic financials, what does it mean? Because an engineer usually is an engineer, and he only focuses on how to make the product the best or perfect.
This is, again, another lesson learned that we are implementing across the board, and we're extending the commercial training and even incentivizing the engineers, not only the project manager. If you get a change order, you get an incentive. You get a bonus of the value of the change order and the profitability of the change order. You get a specific bonus they get paid at the end of the year. Initially, we started with project managers only, but then we realized the engineer is the one who can first identify there is a change in the scope or not, and they should raise it to the project manager. Together, they need to convince the customer that this is an additional value to what you ordered before and would like to get paid for it.
Most of our customers, because they trust us, they respect us, they understand the logic, we always get the change orders successfully. This is another KPI that we added into the project management team, into the engineering team, and it has paid off, and we're seeing a lot more change orders coming. The last thing, or the daily planning that I mentioned, we used to plan on a monthly basis. Now we do the planning on a daily basis. We meet with the team on a regular basis every day in the morning. What did we achieve yesterday? What did we ship? What we didn't ship? Which project went on properly? Which project is not going? And what do we need to do? What's the mitigation plan?
If we do this in the front, upfront, we do not wait until the last minute before the project is ready to ship in a few weeks. We were able to mitigate it, fix a problem soon enough to be able to get stuff out of the door in time and according to budget. I hope I answered the question.
If I may build on what Hamdy is saying, there are two areas where the way that we are cross-fertilizing. One is, of course, you extend the processes, right, so that you ensure that also in Seneca Falls or here in the U.S., we are using the same processes that we are using there in the project management. The second is, from a cultural point of view, in feeding the people. Hamdy is the perfect example.
Hamdy went to run Saudi, turned it around, then ran Europe, and now he's over here in the U.S. and is running Goulds Pumps on a worldwide basis. He's not the only one because you take the best people, the best project manager, and you grow them, and then you put them in some of those sites to turn them around because you know that not only do they have the tools, but they have the culture, that mindset that allows also to turn it around. He's one example of many.
Thank you, Luca. Appreciate it.
Okay. All right. Time for one last quick one.
Thank you, Brad.
Andrew Obin from Bank of America in the front row.
Yes. Thank you very much. Just a question on connectors. Why not be more aggressive strategically in growing portfolio?
You're sticking with aerospace and defense, but you have a competitor, Connecticut-based, built a connector business, $100 billion market cap company. Clearly, you guys have done a lot of things right. Why wouldn't connectors be just a bigger area of focus for ITT to go beyond the verticals that you're already in?
It's really not. We've been focusing our energy over the last two years as we were developing our product development team. We're actually working right now. We'll be presenting to the board at the next board meeting our whole T&I strategy and how we're going to be refreshing our transportation and industrial product set. It's not like we're not there. It's not like we're not trying to grow that business. It's just we have been focusing on the mill aerospace first.
Now we're actually this time around, we're actually presenting our transportation industrial strategy.
One thing I can add, Andrew, as well is that we need to realize what we are really good at, right? If we're talking about a standard connector, something that big volume, super standard, this is not necessarily where we can really differentiate ourselves and we can win against a much larger competitor of ours. If you're talking about customization, if you're talking about differentiating through the execution, that speed that Art was talking about, and then the innovation, this is where really we can win. Therefore, that's the focus mainly is on those programs where you can really deliver a lot of value to the customer. This is one of our strengths. That's the reason of the focus.
Okay. Okay. Great. I'm going to try and keep us on time.
We're going to clear the stage. Before I do, please join me in giving a round of applause to these gentlemen as we move to the next section. Thank you.
Thank you. It's okay. Go.
All right. All right. Thank you, everyone. We're now going to move to the next section on differentiation through innovation. With that, it's my pleasure to introduce Luca Martinotto, who's the Friction General Manager.
Thank you, Mark. Good afternoon, everybody. My name is Luca Martinotto. I'm the General Manager of Friction Technologies in ITT since 15 years, in the role in the last four years. I'm really glad today to be here to introduce the innovation section because I was born in R&D, and still, R&D is in my blood.
Today, together with my colleagues, Dan and Mike, we would like to introduce you with some real examples on how we are differentiating through innovation in ITT. I hope that after hearing about these examples, it will be easier for you to understand what innovation means for us in ITT. It's a passion to solve our customer issues and turn every challenge into an opportunity. It's the obsession we have to combine innovation in product and process, always, not to keep them separate. It's the excitement to deliver to the world game-changing solutions, as you will be hearing in these examples. Whether it's a microconnector in a drone, a VIDAR motor in an industrial plant, or a brake pad in a car, this is innovation in ITT. Let me start from a couple of examples on how we are still differentiating through innovation in Friction Technologies.
The first one is about process innovation and how, thanks to innovation in manufacturing, we are entering a sector where we are not today, the high-performance car segment. The second one is about material science innovation, always product and process. This is opening the door for us to a real breakthrough in our sector, what we call the Geo-Pad. Let me move to the first example. High performance is a niche but growing and profitable market segment where we have never been playing so far, despite we are in Europe, in particular, the market leader. Why this? Those who had the chance to visit our plants, and I've met before Damian and Joe, have had the opportunity to see our one-piece flow, straight production lines, super optimized to produce millions of brake pads with high efficiency. This is our DNA, our strength.
If you look at the Porsche GT3 on the screen, this is not exactly a high-volume application. Porsche, Ferrari, Lamborghini are, of course, very low-volume applications that do not fit with our current production. Clearly, our vehicle test driver would have loved to work for years with these kinds of cars, but totally opposite for our plant managers. Think about our plant in Italy. Barge is the biggest plant in the world to produce brake pads, 100 million brake pads a year. Think about asking the manager of this plant every while to produce a few thousand pieces for a Ferrari or a Lamborghini. This is the reason why we never addressed this market. A couple of years ago, we decided to approach it, but again, in the ITT way, differentiating ourselves.
We asked ourselves, how can we—is it a possibility to produce low volumes, high mix with the same output and efficiency we have today in our high-volume plant? The answer is yes. By the way, we did it. Our engineers developed a set of features and enabling technologies to make it possible. I will give you a couple of examples. I mentioned the one-piece flow we have in our factories, several machines connected by conveyor belts, fantastic to produce four million- five million brake pads a year. If we have to make continuous changeover, this is not working very well. We decided to still maintain our strength of the one-piece flow, but without physical connection among the machine. No more physical connection or conveyors. All pieces are moved around our plant by autonomous guided vehicles, the one you see on the screen behind me.
In this way, we can maximize the flexibility in our plant and the machine utilization because every machine can be used if it's free. Other things that we asked our engineers to work on were some smarts add-on to our standard machine. For example, quick changeovers. Due to the fact that these production of high performance require frequent changeover to be quick, such as in Formula 1 when they change tires, to speed up and reduce to lose efficiency. Last but not least, we decided to have here in this new plant an unprecedented level of data-driven production scheduling and optimization. There is brain there optimizing how the machines are working and how the AGV are distributing our parts. Which is finally the results, the overall results?
The result is that ITT today has a new and unique manufacturing concept for low volumes, highly customized products, the high-performance one with double efficiency than the industry standards, maximized machine utilization, and unprecedented level of automation with very reduced manpower there. Finally, we were in the position to approach the high-performance market not only with the good product we always had and the good service we always had, but also with this dedicated production setup. As we like to do in ITT, we combine innovation with execution. We decided to implement this new manufacturing concept in a dedicated facility and expansion of our Termoli plant in Italy. Remarkably, 15 months from the first turn to the operational facility with the flawless start of production in Q1 this year. The plant is now running.
By the way, it's running with almost 100% of green electricity because of the solar lake panel that we installed there. In less than two years, and I repeat, less than two years, starting from 0% market share and no plant. This, to give you an idea of the trust our customer has on us, we have now been able to achieve already a 5% market share and the funnel of opportunities in our hands targeting 30% market share in the next five years. This is a unique plant at the technological frontier of our sector. You will not be able to find something similar in our sector today. We have to find out of the brick industry and the friction industry. This was the first example. Let's move to the second one. The second one is about material science, again, process and product.
We have many examples on how we have been differentiating in Friction Technologies through material science. Think about copper-free materials that allowed us to enter and hugely increase our market share in North America some years ago, or the more recent product portfolio for hybrid and electric vehicles, for which we are still improving our position in almost all regions. Today, I'm glad, really glad to be able to share with you our latest innovation in this field that is a real game changer. I can tell you, for an R&D guy or a former R&D guy as I am, there is nothing more exciting than thinking that what we are doing can really change a sector, an entire sector, or an entire industry. This is the case of what we call our Geo-Pad.
With the Geo-Pad, we are attacking the core of our product, the binder, the glue that keeps together all of the ingredients and components of our product. Since more than one century, the whole friction industry has been using an organic binder in all products. We are using, and everybody else is still using that. For the first time after one century, we are going to replace this organic binder with an inorganic green binder. This inorganic binder, we call the geopolymer, has been studied, of course, through several years of studies in our laboratories, in our headquarter. The result is simply amazing because this product is not only greener, with a reduced ecological impact, but has also superior performances compared to the ones we are using today.
50% of our new product will be made with this geopolymer that will be fully produced in-house, while today we are buying raw materials and combining them. So 50% of our product will be in full control of ITT and fully patented. And thanks to that, we will also be able to reduce 30% of other ingredients that we have today in our product, so streamlining our supply base. Even more remarkable than that, an entire step of our current manufacturing process, when we put our pads in ovens for thermal treatment, will be eliminated because no more needed. This is, for us, amazing because we have plenty of ovens in our factories, and these will bring us to have a huge streamline of our manufacturing process, a reduction in CapEx, a reduction in energy. Performances, green proposition, and streamline of process and supply base.
We are clearly excited about this product. Where are we with this project? We completed the full product validation according to the industry standard with positive results. The first line to be able to produce in-house the geopolymer will be installed in Italy in the next couple of months. Of course, we have also a full coverage in terms of IP, of patents, of this new technology application in our sector. A few words about our approach to the market. Since the last two years, we have been running a pilot project in aftermarket in China, hundreds of vehicles running for two years to collect information. Luckily, with positive feedback, and due to that, we are now approaching the OEM market, our customers.
We have already approached two OEM customers in Europe with positive feedback, and we are confident to be able to release a pilot project in Europe in original equipment by the end of this year. To close, since the brake pad was invented one century ago, an organic binder was there. Every single pad out there is today with an organic binder. This will no more be the case in the future. We are reinventing the way our product is designed and the way our product is manufactured. This is innovation in ITT. With this, I leave it to Dan with another exciting game changer.
All right. Good afternoon, everybody. My name is Dan Kernan. I am the General Manager of VIDAR. I have 20-plus years at ITT and really specifically in the flow industry. Although I'm here in a General Manager capacity, I would say my background and at my core is engineering. And in those 20 years and in those engineering capacity, I have nearly 20 patents in the flow industry. I will say that VIDAR is by far the most exciting thing that I've worked on here at ITT and in my career. For sure, I'm going to give Luca a run for his money on the Geo-Pad to make it the most exciting innovation at ITT. What VIDAR is, VIDAR is a new type of motor. It's a game-changing motor specifically designed to go after industrial pumps and fans.
I'm so excited about VIDAR because where it came from. It came from listening to customers. It came from solving a problem that spans across all industries in our space. It's underpinned by some very innovative technology, which we have over a dozen patents on. Before I actually get into what makes VIDAR special, I want to take a step back and kind of look at the current state of the flow industry and what's the problem we're trying to solve. It really starts with your daily life, the modern conveniences that we enjoy, the tap water we turn on, the chemicals that clean that water, the gas we put in our car, the cardboard boxes that are all sitting on our porch right now piling up. Those are all made from transporting, mixing, pressurizing, heating, and cooling fluids with pumps and fans.
To that point, just industrial pumps and fans consume $300 billion of electricity annually. That's about 10% of all electricity. It is a big number. Through our 170+ years of experience with ITT and brands like Goulds Pumps, through analyzing hundreds of pump systems, we estimate that $30 billion-$60 billion of that is wasted. Why is that? If you look at how pumps and fans are controlled today, about 85% of them are operated with an outdated fixed-speed motor. Now, I'm not suggesting customers are buying outdated motors or their motors today are outdated, but the technology has been around for about 100 years. They have one inherent flaw. They go one speed. They go 100% speed. When we're making products, we need to be able to control that flow.
If I have got a motor going one speed, which means my pump is going one speed, I need a method to control that. The typical way we do that is with mechanical controls. We take a control valve for a pump or a dampener for a fan, and we pinch it back or we throttle it back. The analogy I like to use, it is a lot like driving a standard car with two feet. Imagine pressing the gas pedal all the way to the floor, revving that engine up to maximum speed, and then using the brake to control your car. It would be silly. We would not do it. It wastes gas. Certainly puts a lot of wear and tear. Yet, that is how we primarily control industrial pumps and fans today. Now, the industry came up with a solution to this.
They came up with something called a variable speed drive. Variable speed drive connects to the motor, allows us to vary the speed of the motor, allows us to take our foot off the brake, regulate the speed, much more efficient. Anywhere from 30%-70% more efficient to do it this way. Yet, if you see up there, only about 15% of industrial pumps and fans are operated with variable speed. The reason for this is VSDs today are very big and bulky. They require a lot of space. A typical VSD for an industrial pump is about the size of a mini fridge to a fridge. You need one VSD for every motor you want to run variable speed.
If you have a plant with hundreds or thousands of pumps or fans and you want to make a significant impact on upgrading your equipment, you would probably have to build a whole new clean electrical room. Because these VSDs cannot just be put by the pump. They have sensitive electronics. They have to actually be protected and go into a separate space, hundreds, if not thousands of feet away from the pump. All this complexity has led to only this 15% adoption. This is where VIDAR was born. This was the frustration we saw with the customers. This is what we wanted to solve for them. On paper, VIDAR is a pretty simple concept. We are going to take a VSD. We are going to take an industrial motor. We are going to put them together. We are going to make a variable speed motor.
We're going to make a motor with embedded variable speed intelligence. The challenge that we faced, though, is we couldn't just bundle existing VST technology. It was just too big. If you come over to our expo, we have one to just give you an example of the size of this. We had to work with some of the brightest minds, universities, and we came up with our patented AC link technology, which shrunk the VST down by about 60%. This now allowed us to embed it into the motor into a single compact solution. Now if the customer wants to upgrade their pumps or fans to variable speed and enjoy that 30%-70% energy, they take out the existing motor and they drop VIDAR in.
We're going to do that at 30%-50% less total installed cost than the traditional way to doing that with a VST. Let me show you a simple case study how this works. This is grain processing in Cedar Rapids, Iowa. We replaced the fixed-speed motor with VIDAR. In case you're wondering, the green and gray, the sexy-looking motor, that's VIDAR. Opened up the control valve. The results were immediate. Over 50% energy savings by swapping out motors, slowing it down. That 50%, this is a 75 horsepower, was enough energy to power 30 homes. One pump, that's how much energy. It's going to save this customer approximately or nearly $20,000 a year just in energy. That doesn't include all the reliability, the less wear and tear on the equipment. They're going to pay for this VIDAR motor replacement in under two years.
That's kind of, I would say, more the financial angle. There are other benefits. If we do not consume the power, we do not generate CO2, so there are CO2 savings. What we found in the market also is it is less about, I would say, the sustainability, and it is more about how it impacts the plant. When we talk to our customers, things like better reliability, better process control, reduced noise pollution, these are actually what interest our customers and the value that VIDAR can bring beyond just energy savings. We did not just do it in one place. We did it across all the key markets in chemical and pulp and paper, general industry, municipal water, oil, and gas. We did not just put it on ITT pumps. We can put this certainly on our pumps. We put it on non-ITT pumps. We put it on fans.
This isn't just a product for the ITT portfolio. It crosses all types of equipment. From a go-to-market strategy, we can go as an aftermarket upgrade with VIDAR, and we can also package this with new equipment. That leads us to the opportunity. We feel, or we estimate, that VIDAR has an addressable market of about $6 billion with a motor with embedded variable speed intelligence specifically designed and certified for industrial environments that nobody else has in the market. We launched this product in March. We've begun accepting pre-orders. We start shipping in July. Our goal in five years is to have it be a $150 million business. Long term, we believe we can capture 10% of that addressable market. I just want to conclude on talking about the theme. I really think VIDAR, this is innovation at its best.
This is how ITT differentiates with innovation. I want to say thank you. I want to say, come see VIDAR for yourself in the tech demo. We'll be happy to answer questions. With that, I want to pass it off to Michael Guhde to talk about defense connectors.
Wow, that is a great example of differentiation through innovation. I'm really excited to see what's going to happen here in the future and to see that you give them a run. I think we have some things inside the connector business that we want to talk about to maybe put our mark on ITT for the future. My name is Michael Guhde, and I'm the President of CCT.
I'm excited to share how our connector business is differentiating by creating innovative solutions through the strong execution that Art talked about, as well as game-changing technology. As we partner with our key players in the military and aerospace markets, we hear about the challenges that they're trusting ITT to help them conquer. Because of that, we're focused in four key areas with our product development. One, speed. Data and bandwidth requirements are ever-increasing with the expectation to reliably provide up-to-the-minute information to the pilot, the sailor, the soldier, driving the need for this increased speed. Power. The expansion of electrification, as well as the increased computing requirements in today's power-hungry platforms, create the need for connectors that are capable of delivering the amount of power that a modern Formula 1 car produces. Think about that. Up to 800 horsepower being passed through one connector. Density.
Our customers need all this power and data packaged in spaces that are ever smaller and lighter as unmanned vehicles electrification takes place, and they're looking for time in theater, as well as reducing load on soldier in terms of the gear that they're carrying, requiring that they be sometimes less than half the size of today's legacy solutions. Temperature. The expansion into space and hypersonics mean that ITT connectors have to operate in environments that would melt aluminum. I want to share with you an example of a defense prime who partnered with ITT to develop their new transponder.
This customer set out with the goal of reducing the size of this device by up to 70%, moving from something that was roughly the size of a shoebox into something that was more the size of a paperback book, requiring us to move from a connector that historically would have been about the size of a Coke can to something that's less than the size of a penny. ITT's engineers responded with the speed that sets us apart and delivered concepts within a week and working prototype hardware within six months, enabling the customer to successfully meet their targets. Here is how we did it. C5 Warrior is ITT's new compact platform capable of up to five times the number of connections in a format that is roughly the diameter of your pinky.
This new platform moves from simple radio signals to high-definition TV signals and battlefield data to and from the soldier. How big of a challenge is this? I want to give you a real-life example. How many of you have gone and plugged in a USB cord and had to do it three or four times, even though there are only two possibilities, right? Okay. Now imagine doing that, connecting all of the things in your office with one connector and having to do it in the rain, having to do it in the dark, having to do it while you're tired, and God forbid, having to do it while you're being shot at. It has to work.
Platforms like C5 Warrior and our innovative Cu-Light Series, which captures the speed and bandwidth of fiber optic and converts to reliable electrical signals in a compact, lightweight platform, are driving growth in our connector business with new products representing 16% of our orders in 2024 and a new product growth rate that's exceeding 25%. I would welcome you to come and visit our booth and see some of these exciting technology developments like C5 Warrior and Cu-Light, as well as VIDAR and the Geo-Pad during the tech displays during the breaks. Luca, Dan, and I have shared a few examples of ITT differentiating through innovation with intense customer centricity, like Luca described, where ITT Friction acts as an extension of the OEM to meet performance needs, linking process and product together through the optimizations of materials and manufacturing.
ITT is delivering game-changing technology like VIDAR with its integrated speed and control capabilities, or the C5 Warrior platform solving the needs of our customers. All of these solutions are performing under pressure, delivering highly reliable results where performance matters. Now I welcome Luca and Dan back to the stage for Q&A around differentiation through innovation.
Face. Because I love the adrenaline in my veins. I do whatever it takes. Because I love how it feels when I break the chain. Whatever it takes. Yeah, take me to the top. I'm ready for whatever it takes. Because I love the adrenaline in my veins.
Okay. We'll open it up to our second Q&A session. Let's start with Jeff Hammond of KeyBanc. Alex, if you could pass to him.
Yeah, hi, good afternoon. My question's on the Geo-Pad. I think the other examples were a little clearer in terms of the revenue opportunity. I guess I'm just trying to understand, is the customer asking for it? Is it just a more profitable and superior product? Just maybe the end game in terms of the revenue growth opportunity. Thanks.
Okay. Thanks for the question. I think it's a great question. Let's say your doubt is true because at the end, the beauty of this product is we have several possibilities in terms of value proposition. This is what we are discussing internally because there are regions where the green value proposition is probably more interesting today, maybe Europe, maybe China. There are regions where there are some performance characteristics because this product has some performance characteristics that make it, for example, particularly suitable for electric vehicles. This is where probably China is more interested than other regions. We are really thinking about the value that this product might have for our customer and try to understand how to position it with the first customer by region also.
Of course, there are then the advantages of streamlining our process and reducing our internal costs that are something for which we will benefit.
Okay. Next question goes to Sabrina Abrams of Bank of America.
Thank you. I guess I can ask this question for all of you. Just all of these innovations sound like they're going to save your customers either money or efficiency or drive efficiency, very cutting-edge innovation. I guess what's the pushback and what would drive a slower pace of adoption? I guess how are those conversations going with your customers? What does that sort of timeline look like for ramping and getting them on board?
We'll start with Dan.
Yeah, sure. It's a fair question, particularly in the industrial space. It is definitely more of a conservative market for adopting new technology. We will certainly have to prove the reliability and robustness. Our strategy, particularly in the beginning, is to plant as much, we'll call it corn seed as possible or seed, and really get it as in many plants as possible because we know that it's going to take a year or two for them to trust the product, trust the reliability before we start to see that ramp up.
Luca.
Yeah. I mean, that's something we are, the brake pad is a safety-critical component. And so when in particular we are talking about breakthrough and game-changing, it is understandable from our customer side, a kind of prudency and so not willingness to be 100% sure. We are expecting not an introduction that is a disrupting introduction, but more of some pilot project that will prove that this is okay. It's, on the other side, the beauty of working on critical components is that they have values.
Okay. Okay. Let's go to Damian Karas, UBS.
Thank you. Dan, I wanted to ask you about VIDAR. You mentioned you've already gotten some pre-orders. In your conversations with customers, what's kind of the, I guess, initial hesitation or maybe pushback, if you will, that you're maybe hearing in these early conversations? I'd also be curious to hear kind of what this variable speed motor means for the aftermarket and replacement cycle over time.
Yep. Okay. I think in the beginning, it is all about reliability. We have to, with the VIDAR product, through our testing, through our design, we have to earn that trust. That's probably the biggest pushback: how long will this last? Will it last in these environments? These are nasty environments. The pushback is, I'm not going to put 100 of these in my plant to start, right? Let's start with a couple. Maybe we add from there. Kind of what we talked about before, I think you're going to see that slow ramp in the beginning before we hit that critical key point. I'm sorry, what was the second question?
The replacement cycle. There is certainly motors and pumps have a replacement cycle. You could argue, let's say the motor, the fixed-speed motor fails, that's our opportunity to sell VIDAR. We're actually trying to pull that forward because there is attractive payback. There are other pain points too. It's not just about energy. A lot of the pre-orders that we've had or the pilots we've done, they're usually fixing a pain point more on the reliability and the process side and less about energy.
Okay.
Thank you. Luca, if I could just ask a follow-up on the geopolymer binding agent. Are you able to give us a rough sense on removing this furnace kind of heating aspect of the production line? How much cost is that removing? How much more profitable could you be on an existing OE platform that you're already on? I'm sure your peers are also keeping a very close eye on this. Just curious how long you think it might take for one of them to kind of come up with a comparable inorganic solution.
They’re probably watching now.
Starting from the end, we kept a lot of attention on the patent coverage. I mentioned patent coverage because it's really a patent. We have a patent. We are covering all possibilities. We think we have at least for someone to do exactly what we are doing. There are maybe other possibilities from the chemistry. This is what we're doing. I'm not sure about the cost. I'm working at the mark, but there are two. There is a direct benefit that is the direct, of course, the CapEx we are saving because of the cost of this equipment in our facilities. There is something that, in my opinion, is equally important because it's how this will improve the logistics in our plants because we have three major steps in our plant: pressing, ovens, say, thermal treatment, and finishing.
If you remove this one in the middle, we'll create really, so the guys that are more excited in our company are the guys taking care of the logistics. This is not quantified as so easy to quantify as the cost of an oven, but it's as important as it is even more.
Okay. Okay. Mike Halloran, Baird. All the way in the back.
Hey, everybody. Morning or afternoon, I guess. Two questions here. First question, just on the VIDAR side of things. How much is this like-for-like from a footprint perspective? Is that a component that matters here? Secondarily, internally, are you replacing? Who are you replacing or displacing, and how much the opportunity is just to embed this on your existing pump portfolio?
Sure. So dimensionally, yeah, the idea is make it easy. This is dimensionally equivalent to your motor you buy today. It is a few inches longer. In this space, what really matters is that where you bolt it and where the shaft lines up, those are the critical dimensions. In that regard, it's a complete drop-in, and that's what makes it easy. In terms of replacing who are out there, yeah, you're talking the major industrial motor manufacturers. We are in North America, the leader would be ABB and WEG, those types of motors. From our portfolio, yeah, we can absolutely package this with new pumps, and we plan to.
There are things that we can do with our portfolio as well to optimize the portfolio to give us an advantage, knowing that we're not restricted to one speed anymore, knowing that we can operate variable speed.
A higher-level generic question. What's the threshold for you all from an innovation perspective at this point? As you scale, I'm assuming the revenue size has to be bigger to accommodate the portfolio. How do you think about what the investment threshold is internally to put capital dollars towards these and move forward on launch in a generic sense?
Okay. Mike, do you want to take that?
Sure. I'll take a stab at it. I think as we think about product development, we think about it in several different states. The products that I was describing, the C5 Warrior, really has evolved into a platform where we've got multiple product lines, and we're really thinking about something that can blanket many markets. The threshold becomes a little bit higher there, and our expectations are higher from that perspective. I think we shared some of the revenue numbers on the material previously. We've been expanding from an R&D standpoint pretty aggressively within the CCT business to really capture these trends. Probably the largest single investment is in the brainpower that we need in order to be successful. That's been where we've been spending the money in order to get the maximum return.
I think as we build these building blocks, it gives us the flexibility to create customization that we can then go in and solve very specific problems building off of those platforms. Once we have these sort of big umbrella platforms, it gives us the ability to go in, be very targeted, very specific, and very sticky.
Good. Okay. Okay. We're going to go to Vlad Bystricky of Citi.
Hi, guys. Thanks for taking my question. Maybe just going back to the high-performance brake pad market, can you talk a little about how you're thinking about the market size in dollar terms and then visibility to the 30% share that you're targeting in 2025? Is that based on work you're bidding on, platforms you've already won? Just how should we think about achievability of that goal?
The addressable market has been measured, giving so with some, let's say, we defined the perimeter with the horsepower of a car, which is the perimeter that we were interested to attack. This was defined as these 12 million brake pads here. The 30% refers to this, of course. It's based on a funnel of opportunities that we have already in our radar. It's not something we have already won, to be clear. Based on what we have already won compared to the funnel we had so far, we are projecting a similar win rate for the funnel for which we have visibility. I don't know if I've replied to your question.
Okay. We have time for one more. If there are any final questions for this session. I cannot see who it is, but way in the back, Kayla, if you could give him the microphone. If you would not mind, just name and firm would help.
Sure. Hi. Mustafa Okur from Bloomberg Intelligence. Maybe bring a Porsche GT3 RS next time for a tech demo. That would gather a lot of interest. One for Luca first. I'm wondering if there are any learnings, be it material science or maybe the AGVs that you're deploying, to take those learnings and apply them in the high-volume brake pad factories as well. A follow-up for Dan. VIDAR looks like a great product. You seem to have some patents around it. Is there any risk of cannibalizing your valve products, maybe? If you could give any color on that. Thank you.
Okay. I'll start.
I'll start. Yeah.
Yeah, sure.
Thank you for the question. No, in particular, I think if we think about high performance and what we are doing there, and this is my R&D part that is now applying, this is something we have discussed with Luca and Emmanuel because it's something that, in my opinion, will be very interesting to have because it's not only addressing, and it's connected also to the payback you want. It's a sector that can have a quick payback of what we are doing. On the other side, the technology level where we are that is really not usual in our sector is something for what I'm sure our conventional production will be benefiting in the next years. It is an open laboratory, if you want, a pilot that has a payback by its own. That's good.
Okay. Yeah.
If I can add to what Luca was saying, if you think about a traditional plant today making all these brake pads in high volume, you have the underlayer, all the material, the friction material that gets carried in this big bag, big container, and with these little trains or forklifts, which, by the way, they're not very safe. You're already testing these AGV technologies with some of these materials. The same is with the backplates, with the piece of steel that is in the brake pad. That will eliminate a lot of unsafe forklifts, automate a lot of production, and reduce as well, make it more cost competitive with a more automated plant.
Yeah. Thank you, Luca. Yes. Because for the sake of time, I did not mention all the features, but this will be also for us the first plant forklift-free in Friction Technologies and the safer one in that sense. Also the most advanced one in terms of emissions because we will have all 100% of green energy. All machines have already been studied and designed to have the minimum consumption. There are really a lot of interesting features.
Yep. On the valve side, it will not have really any impact on our valve business. We are specifically targeting, from a VIDAR perspective, control valves. The valves that ITT and our portfolio, they are still necessary to keep things in vessels, keep them in tank, keep them separated. That segment of control valves is not a big part of our portfolio, so we really will not have any impact on it.
Very good. Okay. Excellent. We're going to take our first break now. It's about 3:14 P.M. We'll be back to start promptly at 3:35 P.M. Please enjoy some food, drink, tech demos, and we will see everyone in 20 minutes. Thank you, guys.
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Take that money, watch it burn. Sink in the river, the lessons I learned. Take that money, watch it burn. Sink in the river, the lessons I learned. Take that money, watch it burn. Sink in the river, the lessons I learned. Take that money, watch it burn. Sink in the river, the lessons I learned.
We go together. Better than birds of a feather, you and me. We'll change the weather. Yeah. We're feeling heat in December when you're 'round me. I've been dancing on top of cars and stumbling out of bars. I follow you through the dark, can't get enough. You're the medicine and the pain, the tattoo inside my brain. And baby, you know it's obvious. I'm a sucker for you. Said I wouldn't ever win it with blind leads. I'm a sucker for you. Yeah. Any road you take, you know that you'll find me. I'm a sucker for all these subliminal things. No, I know them 'bout you. 'Bout you. 'Bout you. 'Bout you. And you're making the typical me break my typical rules. It's true. I'm a sucker for you. Yeah. Don't complicate it. Yeah. 'Cause I know you and you know everything about me. I can't remember.
All of the nights I don't remember when you're 'round me. Yeah. I've been dancing on top of cars and stumbling out of bars. I follow you through the dark, can't get enough. You're the medicine and the pain, the tattoo inside my brain. And baby, you know it's obvious. I'm a sucker for you. Said I wouldn't ever win it with blind leads. I'm a sucker for you. Yeah. Any road you take, you know that you'll find me. I'm a sucker for all these subliminal things. No, I know them 'bout you. 'Bout you. 'Bout you. 'Bout you. And you're making the typical me break my typical rules. It's true. I'm a sucker for you. Yeah. I've been dancing on top of cars and stumbling out of bars. I follow you through the dark, can't get enough. You're the medicine and the pain, the tattoo inside my brain.
Baby, you know it's obvious. I'm a sucker for you. Yeah. Said I wouldn't ever win it with blind leads. I'm a sucker for you. Yeah. Any road you take, you know that you'll find me. I'm a sucker for all these subliminal things. No, I know them 'bout you. 'Bout you. 'Bout you. 'Bout you. You're making the typical me break my typical rules. It's true. I'm a sucker for you. I'm a sucker for you. I used to rule the world. Sees it rise when I gave the word. Now in the morning, I sleep alone. Sweep the streets I used to own.
Our program will begin in five minutes. Please take your seats.
All the dice. Feel the fear in my enemy's eyes. Listen as the crowd would sing. Now the old king is dead, long live the king. One minute, I held the key. Next, the walls were closed on me. I discovered that my castle stands upon pillars of sand, pillars of sand. I hear cherished love bells are ringing. Roman cavalry choirs are singing. Be my mirror, my sword and shield. My missionaries in a foreign field. For some reason, I can't explain. Once you'd gone, it was never, never an oldest word. That was when I ruled the world. There was a wicked and wild wind. Blew down the doors to let me in. Shattered windows and the sound of drums. People couldn't believe what I'd become. Revelationaries wait for my hand on a silver plate. Just a puppet on a lonely string.
Or who would ever, whatever came? I hear cherished little bells are ringing. Roman cavalry choirs are singing. Be my mirror, my sword and shield. My missionaries in a foreign field. For some reason, I can't explain. I know Saint Peter won't call my name. Never a lonely word. That was when I ruled the world. I hear cherished little bells are ringing. Roman cavalry choirs are singing. Be my mirror, my sword and shield. My missionaries in a foreign field. For some reason, I can't explain. I know Saint Peter won't call my name. Never a lonely word. That was when I ruled the world. If you love somebody, let it down the mother he goes. They just may run away from you. You'll never know quite when. It just depends on how long the time is left for you.
I've had the highest mountains. I've had the deepest river. You can have it all, but now keep moving. I'll take it in, but don't look down. 'Cause I'm on top of the world, I'm on top of the world. Been waiting on this for a while now. Paying my dues to the dirt. I've been waiting to smile, to hold me in for a while, take you with me if I can. Been dreaming of this since a child. I'm on top of the world. I've tried to cut these corners. Tried to take the easy way. I kept on falling short of something. I could have gave up then, but then again, I couldn't help 'cause I've traveled all this way to something. I'll take it in, but don't look down.
Our program will begin in five minutes. Please take your seats.
On top of the world. Been waiting on this for a while now. Paying my dues to the dirt. I've been waiting to smile, to hold me in for a while, take you with me if I can. Been dreaming of this since a child. I'm on top of the world. 'Cause I'm on top of the world, I'm on top of the world. Been waiting on this for a while now. Paying my dues to the dirt. I've been waiting to smile, to hold me in for a while, take you with me if I can. Been dreaming of this since a child. I know it's hard when you're falling down. It's a long way up if you think you're 'round me. Get up now. Get up. Get up now. I know it's hard when you're falling down.
It is a long way up if you think you're 'round me. Get up now. Get up. Get up now. 'Cause I'm on top of the world, I'm on top of the world, been waiting on this for a while now. Get up. Paying my dues to the dirt. I've been waiting on this for a while. To hold me in for a while, take you with me if I can. Been dreaming of this since a child. I'm on top of the world. Feeling my way through the darkness. Guided by a beating heart. I can't tell where the journey will end. I know where to start. They tell me I'm too young to understand. They say I'm caught up in a dream. I will pass me by if I don't open up my eyes. That is fine by me.
Wake me up when it's all over. When I'm wiser and I'm older. All this time I was finding myself and I didn't know I was lost. Wake me up when it's all over. When I'm wiser and I'm older. All this time I was finding myself and I didn't know I was lost.
Our program is about to begin. Please take your seats.
I tried carrying the weight of the world. But I only have two hands. Hope I get the chance to travel the world. But I don't have any plans. Wish that I could stay forever this young. Not afraid to close my eyes. Life's a game made for everyone. And love is the prize. So wake me up when it's all over. When I'm wiser and I'm older. All this time I was finding myself and I didn't know I was lost. So wake me up when it's all over. When I'm wiser and I'm older. All this time I was finding myself and I didn't know I was lost. I didn't know I was lost. I didn't know I was lost. I didn't know I was lost. I didn't know.
In the past, we have grown consistently through organic growth and margin expansion. Now we are building our M&A muscle, growing our capabilities and entering higher growth, higher margin businesses. With Habonim, we brought world-class valve technology to ITT, crafted for precision, reliability, and efficiency. Through Svanehøj, we expanded our flow portfolio to include cryogenic applications for the marine sector, managing critical green fuels, including ammonia, LPG, LNG, methanol, and hydrogen. With kSARIA, we're advancing our interconnect solutions on fighter jets, commercial planes, and submarines, pushing the boundaries of defense capabilities. Still, we maintain a robust pipeline of targets aligned to our long-term strategy, all of which operate in attractive markets with leading positions and strong management teams. With our operational depth and robust balance sheet, we are poised for further growth through M&A, driving even greater value creation across our portfolio. This is ITT's next chapter.
Please welcome ITT Senior Vice President, Chief Strategy Officer, and President, Industrial Process, Bartek Makowiecki.
Thank you very much. I really hope you had a chance to talk to a lot of our ITTers and check out some of those pretty amazing innovations that we have in the pipeline. We spent the first half of the meeting really talking about where the money comes from. A lot of that comes from disciplined execution. It comes from innovation. I'm fortunate enough to be on the side that gets to spend the money. We're going to talk a little bit about that for the next half hour or so. Just a little bit in terms of my background, I'm Bartek Makowiecki. I joined ITT about three and a half years ago now. I joined to lead strategy and M&A, as Luca outlined before.
Now, in a rare lapse of judgment, Luca did decide last September that he wants to also let me run Industrial Process. Here I am. It's certainly been an interesting journey. Right now, I'm going to focus more on the M&A side than on the IP side. You've heard a lot already about my value center. With that, let's go into what we're going to cover on the M&A side. I will spend some time talking to you about our overall framework. When I say framework, the idea here is to, like with the other sections, be able to articulate how we differentiate in the M&A space and actually what allows us to win. A lot of that is a similar theme to some of the other areas, which is really its discipline and its rigor.
You're going to see that resonate throughout the presentation. I'll be followed by Søren, Michael, and Kasturi, who will put a little bit more meat on the bone and give some specific case studies and examples of our recent acquisitions and take us through how they perceive it, how it's been to be part of ITT, and how the journey is going for them so far. With that, let's start maybe of where we're going. This is more of a recap of what Luca covered earlier today. I think so much is clear. I think the direction is very clear, very obvious. We're very committed to it, both at a leadership team level, but also at a board level. We know where we want to grow. We have identified certain end markets and certain segments that we want to grow disproportionately.
Just to name but a few, you see aerospace and defense here, for example, going to grow quite a bit going into 2030. Same on the industrial side, on the energy transition side. We're going to continue doubling down on those trends. M&A really is going to be a big part of that journey. It has been even between 2018 and today. It's a mix both on the divestiture side, but also on the acquisition side. Now that we talked about the direction of travel, maybe we can talk briefly about our framework and really in the how. When I look at the how, some of these criteria that you see here, a lot of these will seem familiar. Most good diversified industrials will have criteria that ring the same. I'm not going to try to reiterate all of those.
What I will do is highlight maybe a couple of differences between our approach and what you would otherwise see. The first one, I would say, is just the point of rigor that I was making before. All of these things are not criteria that we kind of mix and match and are willing to really dilute or soften as we look at targets. We are very disciplined about making sure that all the acquisition targets that we look at really fit all of these criteria. If they do not and they strike out on any one of those, we generally tend to walk away. It takes that discipline. That includes, and that is maybe a different aspect, and you do not see that in a lot of people's acquisition criteria. It is that piece around strong management teams. That is something you have met some of those folks already here.
Some of them are here with us today. That is a defining criteria for us. As opposed to perhaps other players, we will actually prioritize this very early on in an acquisition process. You will see Luca engagement, Emmanuel engagement, even before we even submitted initial bids. For us, that part is so important. If we do not see a management team that fits with us culturally and that we think is going to be able to take that business and grow it, we are not interested. We are not here to parachute in people. We are also not really in the fixer-upper game. We buy high-quality businesses. We will talk about some of those today. That strong management team piece is critical. We have walked away from numerous opportunities if we do not feel we tick that box.
I will actually give you examples for each one of these on the subsequent slides. Hopefully all of this will become clearer. Let's start with strategic fit. Pretty obvious one. It actually ties to some extent to a question that we got on CCT. When we did the work, and I spent a lot of time with the CCT team and with Art on the connector side to define where we actually play. Where do we want to win? I think one of the first realizations was actually it's futile and probably not the right path for us to try to be everything to everyone. We really wanted to identify where we have a power alley, where we have a right to win, a true right to win. Some of you mentioned that there are larger competitors. It's true.
You have got to try to find a niche or an area where you truly have a defensible position. For us, that area, as you saw from some of the data that Art showed, really is aerospace and defense. It is about doubling down on our strength. Our goal really initially when we started strategy is to focus on that. Now we are elaborating that and adding markets. The primary area of focus is that. Once we had identified that and we were confident that we can actually win in that space, there were areas that we felt we needed to reinforce our product portfolio. The one area that we have identified at the time was actually complex cable assemblies. That was a key missing element that some of our competitors in that space had, and we did not.
We identified it as a place where it would allow us to essentially create more customer intimacy by being able to provide a little bit more of a system offering and be closer to the customer. Once we identified that, we went out and identified the targets that could potentially fit and the acquisitions that could potentially fit those criteria. In that case, kSARIA was top of our list. We had been cultivating that target for many years. Generally, you will very rarely find us being opportunistic on the M&A side. Generally speaking, it is directly linked to strategy. It is directly linked to where we are going. Also, we will have had touch bases with the owners, with the management over the years.
As a result, we have a lot of conviction and comfort around the acquisitions that we pursue. kSARIA was a very logical extension of that strategy and therefore allowed us also to move quickly and win in that particular deal. Strategic fit. The next criteria here is making sure we buy into attractive end markets. We talked about shifting the portfolio. Shifting the portfolio is not just between value centers. Some of that is also making sure we double down on very strong trends that we see in the markets. One of those, and it's probably a little bit overused these days, is energy transition. It is huge. It is real. The thing is, people oftentimes use that very broad term.
You really have to understand what part of that energy transition, what part of that wave do you want to ride to really understand how you can then use that to win. One of the subsegments of that for us was the transition that we're seeing in the marine fleet. The gist of it, and Søren will tell you a little bit more about that. The gist of that is that today, most of the marine, the fleet out there is running on bunker fuels. Probably the dirtiest kind of fuel you can have. It's not energy efficient. It's really polluting. What we know is going to happen, and this is not a speculation. It's just a matter of speed. A lot of the marine operators, they're committed to these targets that you see here.
This conversion from 8% green fuels to 90% is essentially already agreed to by all the operators. This will happen. You have to ask yourself, if I want to ride that wave, who is going to help us do that? That is where Svanehøj came in. Same thing, we developed the relationship, we got in early, we got comfortable with the management team. That was one of the first things that we did together with Emmanuel and with Luca. Once we got comfortable, we knew it had the right end markets. It, again, allowed us to move quickly and purchase it. That is your example around attractive end markets. Same thing, I am going to use Svanehøj again as an example.
If you want to use the same theme of riding that strong wave of energy transition, normally you want to do that via a leading player. That is a little bit of a bias of ours because generally speaking, ITT is a portfolio of leading brands. We are not fans of getting into a new market by buying an also ran. What you will see, whether that is Cannon, whether that is our Friction business, whether that is Goulds, in our particular spaces, we are leaders. As we look for companies, whether that is kSARIA or whether that is Svanehøj, we like companies that already have a very strong position in those spaces. Svanehøj definitely ticks that box. I mean, they have by far the leading position in pretty much across the board, the alternative fuels, whether that is LPG, whether it is ammonia, strong position in LNG.
Again, you got the right wave. You got the right rider. Really good opportunity for us to outperform. We'll share with you how that's going for us, which it's pretty well. That's on the selection. Now, the rigor really also comes in on the execution side. That is, we said here, in the deal. That is, how do we actually get a deal done and how do we win once we've identified a target. I think the key to the strategy here is really to try to be the buyer of choice. Everybody says that. Of course, everybody would like to be a buyer of choice. What does that really mean? You have to, of course, guarantee you're going to pay a fair price. You're not always going to get rock bottom prices.
You've got to pay a fair price. Beyond fair price, there's other criteria that matter to sellers. There's execution certainty. There's being easy to deal with. There's how quickly can you get something done. Even more important, your credibility. Do you keep your promises? That is a reputation that we're trying to keep in the market so that people know, so that the bankers involved know, so that the sellers know that when we say something, we put a number out there. Unless we find something that truly allows us a walk down, we're going to stick to that so they can trust what we say. That part is very important. Also the fact around providing a good home for those businesses. Especially with private sellers, the brand that they build, it's important to them.
They do not want it to just be subsumed into some nameless entity and the brand to disappear. Definitely true for kSARIA. Definitely true for Svanehøj. There is an attachment to brands. We are a portfolio of brands. That is a helpful part and a helpful selling point for us. The fact that we also give the acquired teams a lot of autonomy is also a selling point, generally speaking, with management teams. Again, easy for me to say all of this, proof's in the pudding. When you look at the five deals that we have done since 2021, none of those deals have ever seen the end of an auction. Of course, my goal is to have a one-on-one conversation every time. I will take second best, which means I can shut a deal down before I get to final bids.
We were able to do that in every single instance. That is a function of the good relationships that we have with the targets. That is a function of our ability to move and move with rigor, but also move with intent and speed. That is the execution piece. Now, really, once you own the asset, that is where really you get towards sort of the money end of things. There are two key parts of this from our perspective. That first part a lot of times gets underestimated. Folks get very focused on synergies. What can you do to improve a business? Keep in mind that the way we think about M&A, we like buying good businesses that already have a strong team that we want to fuel their growth. We do not want to come in and tell them how to run their shop.
Our first priority, and I sort of simply put this, do not break what you buy. It sounds obvious. I can tell you from my experience in M&A, it is probably the number one error in terms of value destruction in M&A. People will buy a quality asset. They will see the management leave. They will see key customers leave. They will destroy value. It does not matter how many synergies you bring. You absolutely have to do that. I think we have a good track record of doing that. Søren and Mike and Kasturi will tell you a little bit about that. Beyond that, you also have to have a systematic approach in terms of how you integrate. For us, that means we have a clear playbook. We know what the critical items are that are non-negotiable.
We will go after those. Beyond that, each integration is pretty bespoke. We will customize it to whatever deal we have. The integration will depend a little bit on what we are trying to drive for. We are flexible while giving them an ability to also run their base business. Finally, you have to resource it well. That has been one of my learnings from previous shops. Look, integration is not a part-time job, at least for the first 18 months-24 months. You have to have the resources. You have to do it right. We usually, on every deal, have a dedicated integration manager whose job is not to run the business. The job is to make sure the companies plug in effectively into ITT. We deploy that approach pretty much across all the deals that we are looking at.
With that said, this is literally the money end of things. What does that all translate to? I'm going to use Habonim as an example here because that one's been in the portfolio for longest, so I can give you the most comprehensive picture. Now, look, the value creation really starts with price discipline. While I said you've got to pay a fair price, obviously we want to be on the lower end of what would be acceptable for that specific market. With Habonim, we paid 11 x. That's the multiple that we paid for when we acquired it. Arguably, when you talk to people in that space, they will tell you 12x-13x is probably kind of what the going rate is. Good price discipline, so make sure you don't overpay. To be fair, that sometimes means don't fall in love.
You're going to have to move along from some deals that get a little bit frothy and a little bit pricey. It starts with price discipline. Second part of this is a little bit execution, a little bit make sure you buy good quality assets. Here we bought somebody that was already profitable, that already had good growth. Since they've been under ITT's ownership, they've grown 6% CAGR. Keep in mind that this is against the backdrop of all the issues and the tensions in the Middle East. This is a company that's in Israel. They've still grown, delivered, and have shown tremendous growth. The EBITDA margin 26%. Accretive to IP, accretive to ITT overall, great outcome. When you put all of that together, you get attractive returns. Now you might say, is 11% what we're shooting for? It's not.
Ideally, we want to get into the mid-teens. We want to get higher. But this is two years into the deal. Normally, we're looking for three years, five years. We give ourselves the run rate. Here we're hitting that number way ahead of schedule. Real success story here in Habonim. With that, I'm actually going to hand it over to Søren, who's going to give you a little bit more of his experience and a little bit more color on the Svanehøj business. Thank you.
Yeah. Thank you very much. Thank you for the opportunity to speak a little bit about Svanehøj. I'm trying to cover three things here. I will say a little bit about the company and what we do to make you understand why we think we stand out.
I want to show you, build on what Bartek said and try and explain from my side what it feels like to be bought by ITT. Last but not least, I want to share a little bit about why I'm quite excited about the future for Svanehøj. Here I have to warn you, I'm from a part of Denmark where we don't get excited. So when I get excited, it's good. I've been in the company for six years, lucky enough to be the CEO for six years. This is what we do. Svanehøj is almost 100 years old. We do marine pumps. We have done that from the foundation of the company, founded by marine engineers. It's literally written on the walls of Svanehøj, "We were born at sea." Over the time, we built all kinds of pumps for vessels.
Still today, we have the full portfolio. The core of what we do, our basic business today is cargo pumps and fuel pumps. Cargo pumps, here you're looking at a gas carrier. Cargo pumps are the pumps you use to offload the cargo when you arrive at your destination. The fuel pumps, I encourage you to go and see. We have some of them here at the tech demo, are the pumps that are used to pump the fuel towards the engine. This is a gas carrier. The main core of what we do is pumping liquid gas. We started with that some 50 years ago when you started liquefying gas. Today, it's the main part of the business. I want to take you inside a gas carrier. Here we're looking inside a tank.
To illustrate the size of it, we are looking at something that's 100 ft high. It holds 98,000 cu meters of liquid gas, 25 million gallons of gas. It is a big vessel. That is why we call it mission critical. When you arrive at a port and you hit the bottom to offload, you really want the pump to start. If they do not start, then you do not get the gas out. You can say, argue, why is that a big deal, liquid gas? Liquid gas is cold. The reason you liquefy it is to be able to transport it. When you liquefy it like methane, it becomes 600 x smaller. That is the only way to transport big amounts of it. To liquefy methane, you need to cool it to minus 260 degrees Fahrenheit. That is really, really cold.
There is no way of opening a tank and looking down. If the pump is not working, you are not getting the gas out. You have a major problem. That is really mission critical. We delivered thousands of pumps over the years, and the customers keep coming back to us also for that reason. On the right here, on the left here, you have a picture of one of our other pumps. It is actually on the tech demo. This particular pump is pumping, you can see it is completely frozen. Here, it is pumping liquid gas that is - 300 degrees Fahrenheit under 400 bar. Four hundred bar would be 800 lbs on my thumb here. When you talk about harsh conditions for pumps, this is it. Cooling it down to almost as cold as you can get things and still having it work.
That's really the DNA of Svanehøj. What we do is, and what we have 300 people that are fully centered around, is making mechanical stuff work under extreme harsh conditions. There are not a lot of companies in the world that can do that. We can. In numbers, and you probably know some of the numbers here, we have had strong revenue growth in the last handful of years. Around 60% of the business we do today is within liquid gas. Around 40% is aftermarket. The aftermarket is, of course, a good business for us, but it is also a driver to sell the new pumps. If you have this kind of mission critical equipment, you also need to know that your supplier can help you if something is wrong. We have service organizations scattered around the world. That, of course, drives the revenue. Strong growth.
The order backlog is record high. It has been for a number of years and is still growing fast. This is on the backdrop of what Luca and Bartek also talked about, the energy transition, the need for energy security. It is the energy transition specifically in the marine sector on fuels. The book- to- bills, 1.3 last year, 2 starting this year, and the momentum continues. Most of these orders are coming from fossil gases. That is really where the main driver is today. We are also securing some very important orders on the new fuels that are coming. We are delivering the first ammonia fuel pumps for the first ammonia-powered commercial vessel later this year. It really will be a first where you are burning ammonia as a fuel. It is not a simple thing.
We also have the first CO2 carriers with our pumps in the water now. CO2 carriers are, the CO2 we're talking about here is carbon captured CO2. You capture the carbon in a system, and then you need to do something with it. The first projects we're delivering is for a Norwegian owner where they are picking up the CO2 different places in Europe with the ship, sail it to Norway, and then they pump it into an empty gas field and store it permanently there. These two vessels are actually just going into operation a few weeks ago. The reason why we get these orders is we are the only company in the world that has real track record in pumping liquid CO2. We have done it for more than 20 years.
Not captured CO2, but carbon, so what you'll have in your bottles here if you're drinking soda. So food-grade CO2. It sounds easy. How do you, but pumping liquid CO2, if you try to investigate that, it's actually quite complicated. You need to know what you're doing. If you do it wrong, it all goes into dry ice. You need to use a spoon to get it out of the vessel. You don't want that. A few words about the fit and how has it been to come into ITT. I've been in a year now. It's a little bit more than a year since we closed. I can remember the date. It was on the 18th of January. Yeah.
No, I mean, after a year, I'll say one thing is, I'm new here, but actually I feel fully a part of the team. The management team in ITT has done a really good job of welcoming us in. There are three kind of reasons that I put up here. One is there's a cultural fit. The engineering part is kind of obvious. We are an engineering company. There are a lot of engineers in Svanehøj. I'm an engineer. The same, and you can see with all the tech demos here, Luca is an engineer. It's more than that. It's also the common sense approach that was talked about, the fast decision-making that I'm used to. That's the same in ITT. If I need a decision, I call Bartek, I FaceTime Luca, I get a reply immediately.
This really works the way that Svanehøj also works. We share the roadmap to growth. Svanehøj has a really good plan, and we're going to pursue the market with these new products and the existing products. We get the full support from the management team in ITT to do that. What's mostly important for me is this about the identity. We were on our own for a few years, and we like the culture we have in Svanehøj. We were a bit concerned what would happen with an industrial coming in. On the first town hall, Luca said to all the employees, this was a global town hall, that Svanehøj was going to stay Svanehøj or remain Svanehøj. He also issued a veto to me. If they were coming with things that did not bring value, then I could stop it.
I never used that veto, but Luca kept the promise. We are still Svanehøj. If you go to a Svanehøj site and ask the employees, they will say exactly that. We really found a good home in ITT. The last part, and then I'll hand over, is really building on what Bartik showed. This is a little bit busy. I realized that. What we're looking at here is what you're seeing on this axis here is the entire size of the merchant fleet in the world. Here it's measured in million gross tonnage. It could also have been a number of vessels, so around 100,000 vessels. Starting 2008, steady growth in the fleet until we are here today. The growth will continue. The fleet will still be bigger. The colors on the column show what kind of fuel is this fleet using.
If you look at 2008, they were all just using the dirty oil that Bartek talked about. Today, it's a bit more than 90% still oil and 80% that are using mainly LNG. If you go back 100 years, it would have been wind as the main fuel or 120 years. There was a very fast transition to oil. That's really what we're looking into here. In the next 25 years, we'll see a full transition to these cleaner fuels. Because a vessel lives for 25 years, it's happening right now. In order to get here, what's being built of new vessels now, they need to be prepared for the new fuels. That's why it's really exciting for us. It's not just something that could come. It's happening right now. We're selling the pumps now.
Half of the vessels ordered last year were with a fuel system for one of these gases. Most of them LNG now and later the other fuels. That was it. Thank you very much for listening. I will hand it over to Mike, and I can tell you about the kSARIA story. Thanks.
I'm Mike DiPoto, President of kSARIA. I started 18 years ago with kSARIA. At that time, we had zero revenue. When I'm sitting here today amongst all these talented coworkers, I'm amazed at the journey of kSARIA. The journey is not over. The journey is definitely not over. We really have the support of ITT to continue to grow our business. With that, we'll take a quick look at some of the financial metrics here for the company. We closed out 2024 at roughly $200 million in revenue. The breakouts on the revenue is we basically, I forgot to mention, but we are a leading provider of harsh environment interconnect solutions for aerospace and defense. Basically, we make cable assemblies for military and aerospace applications. As you can see in the middle chart, 85% of our business is defense-oriented.
There are actually inside of that six separate segments that we deliver to. They're very diversified. We don't have one customer that is delivering more than 12% of our total revenue. Very good diversification inside of the business. When you look at our revenue by source status, I actually think that this is the most important piece of this slide. While most of our revenue, pretty much all of our revenue, comes from North America, the big critical piece of this is that 70% of our business is either sole source directly to kSARIA or we're the primary source, where we're the lead person on the print, the customer's print. That's extremely important, and I'll touch on that in a moment. Customer intimacy, we've heard a lot about that today. For kSARIA, it's extremely important.
When we first started the business, we spent a lot of time tackling new customers, new programs, giving attention to customers so that we could continue to capitalize on new program development. Over the years, we've continued to stack new program after new program and begin to stack backlog, which has given us very good visibility in our business. When you look at our P&L and balance sheet, we have backlog, and we can really project as we go forward on the business and plan for the business. Why kSARIA, I mentioned briefly, we're aligned to highly coveted defense modernization programs such as the F-35, the 787 Dreamliner, the Virginia and Columbia-class submarines, and also various tactical radios for on-soldier communication. As you all know, the DoD defense budget you can see on the screen here is growing roughly 2%.
Part of that budget is the defense electronic budget, and that's growing inside of the DoD budget at 6%. kSARIA's long-term growth stacks up above those two with high single-digit growth. We're going to continue that momentum that we've created over the last 18 years. How did we come to join ITT? When we decided to go to the next growth phase of the company, we were very familiar with ITT given our relationship with them as a supplier. Luca, Emmanuel, and Bartek all engaged early, understanding the synergistic relationship between the two companies, which ultimately led to a successful closing. The combination was a win-win given the synergistic nature of the Cannon and kSARIA businesses, where we're working with one another across the platforms. We're sharing programs with them. They're sharing programs with us, and we're building a better business through that collaboration.
With that, I'm going to turn it over to Kasturi to talk about Habonim.
Thank you, Mike. Good afternoon. I'm Kasturi Rangan. I lead our specialty product businesses, which is basically on the pump side. We have Bornemann and Rheinhütte. And on the valve side, we have our engineered valves businesses and Habonim, which I'm going to talk about today. I joined ITT about three and a half years ago. My first major assignment was actually the Habonim M&A, the acquisition, and then the integration of the business. I'll take you through a little bit of that journey. Before I do that, a really quick introduction for Habonim. Who's Habonim? Habonim, we are a specialty valve provider, primarily ball valves, what we call small ball valves with specialized applications in cryogenics, extremely low temperatures. I think Søren was talking about that, and then high-pressure valves. Cryogenic and high-pressure ball valves.
We sell into multiple end markets, but a couple of them that are really high growth for us is LNG and hydrogen. As I said earlier, though we're Israel-based, we actually sell all across the world. If you turn back the clock, let's say three years, what was it about, what was it about Habonim that we really liked? The first thing I would say is the strategic fit. We really were trying to find another specialty valve business because we liked that model. Habonim, I just talked about, their sweet spot is cryogenic and high-pressure applications. Loved that. Take that box. Two is they were exposed or they were really into LNG, and they were starting to get into hydrogen. Two end markets that we actually really liked. Again, growth markets. Take that box.
I think what really got us are the other two pieces, which I think I want to spend a little bit more time. Habonim is actually a 75-year-old company. This year is our 75th-year anniversary. They've always had a long heritage on product innovation. As an example, what you call Total HermetiX is a way that you actually ensure zero leaks. It's an innovative technology that does that. As you can imagine, it's really critical when you have emissions, when you want to prevent emissions, that I would say. They've had it for a while. There are lots of other product innovations that they have. I think what is actually really special is the way that they've built their product platforms.
What I mean by that is they actually build the product platform, think of it as a set of Lego blocks that you can put together in so many different ways so that you can address very specific customized applications for your customers. The one thing, and that's actually something that we learned from Habonim and we are implementing across many of our businesses within ITT today. The one thing that stood out for us is actually when we were doing our due diligence, we heard time and again from our customers that they loved working with Habonim because they wanted to solve the customer problem, and they will find a solution. Their DNA, Habonim's DNA, was really around engineering and applied solutions. Very similar to what you've heard, I think, all through today is ITT's DNA.
With all of the boxes ticked, this was really a very good fit for what we wanted, and we thought we could be a great home for Habonim. What have we been doing since acquisition? I would say two big pieces or two words I would say are focus and innovation. Focused innovation. We said we will focus our innovation into end markets, LNG and hydrogen. The first thing is if you look at where Habonim's ball valves are sold today, are branded, they're mostly around what we call small LNG. It's the logistics. It's on the ships, the kind that Søren's Svanehøj pumps go into, as well as road transportation, terminals, etc. You really require valves that have cryogenic and high pressure.
As we're getting into hydrogen, it's the same similar kind of applications, mostly around storage and distribution, but the requirements are quite different. You actually need ultra high pressure, which is we're talking about greater than 500 bars, almost up to 1,000 bars of pressure. We are starting to actually focus around that and expand the offerings that we have. What have we done? Some numbers, etc. We've accelerated the amount of product innovation that we've done. Over the last, I think, two and a half years, we've had 13 new product lines for these applications. We've actually done more than a dozen new certifications. Why is that important? Certifications. In this game, especially in an evolving market like hydrogen, the quicker that you can get certifications, you actually get qualified to be on the early stages of a lot of projects.
Doing that today, we are winning that game. I think over the last two years, we've had more than 100 orders just on hydrogen getting into the early stages of projects. Overall, from 2022 to 2024, our LNG, which was already an established market for us, we've grown our revenue by 70%. On hydrogen, almost 250% of revenues have grown. Overall, LNG and hydrogen today are almost a third of our revenue base. I think over the last three years since the acquisition, this has been really good for us. I think we have preserved the inherent DNA that Habonim has and actually turbocharged their growth. I think it's a great model for us. As Luca mentioned at the start, the entire leadership team that was there during the acquisition continues to be with us today.
If you have not had a chance, please do meet Ilan, our CEO, Habonim's CEO. He is there today, and you can meet him at the booth as well. With that, I will turn it back to Bartek.
Okay. So just to conclude this segment, maybe just a personal note. For me, it's really rewarding to see these deals. Everybody worked very hard on them to really, A, to come to fruition, but then to thrive within the ITT portfolio. I mean, the fact that we haven't lost any of the key management, the fact that these businesses haven't missed a step, they continue to grow, they continue to perform, is really, really nice to see. Not that buying businesses is not hard, but integrating them effectively and creating value is harder. The fact that we've been able to do that with the ones we bought, I think is really positive to see. Just a couple of comments. You can see, I mean, we're off to a decent start. Five acquisitions since 2021, over $1 billion of capital deployed. Portfolio shift is underway.
We talked about that, and we also talked about where we're going. What's also nice, just to underline what I was just telling you about the businesses thriving, this is a little bit of a preview of what we see the projected growth of these businesses to be this year. You can see here, kSARIA, over 10%. Svanehøj, over 20%. Micro-Mode, over 10%. Habonim, high single digits. They're really, really, really thriving and doing well, and they're actually going to be very accretive to our overall growth profile as a company. They're doing well. The nice thing is, as we've talked about, we do have a rigorous repeatable M&A framework that we can now utilize to continue the journey. We also have a corresponding robust and growing pipeline to go along with it.
I would say we rinse and repeat, and we continue the journey. It's early innings, but we have plenty of work to do, and we have plenty of opportunities. That really concludes the M&A section. Maybe a couple of words because Luca talked about the two pillars. We have the organic pillar of growth, and you can tell. Obviously, we're doing quite well on that front. We're starting our journey on the M&A side. Lots of runway on that second pillar as well. They share similarities. Whether you look at the rigor, the discipline, the passionate people, all of those things are very sort of unique and very common to both of those. I would say we're very early in our journey, very excited.
Emmanuel is actually going to come up now and is going to bring it all together and give us a little bit more color of the overall value creation. Thank you.
Thank you for joining us today. Throughout the day, you've heard about our business leaders and what differentiates us through execution, through innovation. Today, it's my task to translate all this in financial impact and to show you how much more value creation we have at ITT in the future. Since we last met in June 2022 during our last Capital Markets Day, we've been busy driving organic value creation. We delivered outstanding revenue growth and also margin expansion. We achieved our targets two years ahead of schedule. We have been adding the contribution from kSARIA, Svanehøj, and that's just the beginning.
As we accelerate the deployment of our capital, we expect the deployment of the capital towards high margin, high growth businesses, we expect to be able to deliver our 2030 financial targets and further enhance the differentiation of ITT versus the competition. Let's kick it off and take a look at our performance since our last Capital Markets Day. I want to take a look back at what we achieved, and let's look at our historical performance. As you can see on the graph, if you look at our revenue, we grew more than 9% and total revenue in that period more than 30% since 2021. That's really impressive growth. At the same time, we expanded margins 170 basis points to 17.8%, which means that we've been able to drive profitable growth.
The 44% increase in EPS, as well as the 12% free cash flow margin, is also very impressive and completes the picture of strong performance for ITT since 2021. Now I want to have some context of this performance and compare it to our long-term targets. Here, the key takeaway is we met or exceeded all our targets two years ahead of schedule. I want to focus here on the 13% EPS growth, which is, I think, and we all think, particularly impressive in ITT. Obviously, this is the result of profitable growth. This profitable growth has come from market share gains in pump projects, in connected defense OEMs, as well as in Friction to cite a few . You have come to know us for our relentless focus on productivity, which has allowed us to grow our operating income 50% faster than our revenue.
We've also been more efficient at converting earnings into cash, which really has allowed us to show a significant improvement in our free cash flow margin at 12%, which is back in the middle of our long-term target. Next, I want to look at how our businesses have performed against each of their individual targets in terms of revenue and margins. If we look at revenue, the first thing here is that ITT has been able to grow its businesses on an average at 9% every year from 2021 to 2024. If you look at Motion Technologies, at 6%, we have been able to continue to grow and show how we are able to gain share globally in Friction, but also in rail. We have achieved now more than 30% global market share in Friction.
Our real business has been taking share in Eastern Europe as well as in China. We are just starting to feel the benefits from the public infrastructure investments that are happening in Europe and also in Asia. At 12% growth in Industrial Process, here we have delivered strong performance. That reflects the outstanding project management performance, as well as the strong operational performance that have led us to, for instance, as Hamdy talked to us about, the 90% + win rate in Saudi. Saudi and other regions are leading the way in share gains in large projects. Obviously, the more pumps and the more projects you sell and you install, the more aftermarket also you get. This is why we have been able to grow aftermarket spare parts by more than 50% in the past three years.
Finally, I think if you look at CCT, the equally impressive 11% is coming from market share gains in connectors, in defense OEM, in industrial, in medical. Also, thanks to the aerospace recovery we've been experiencing since 2021, we've been able to demonstrate strong growth despite the difficult situation with Boeing. Now, if we look at the achievements from a margin standpoint. Here again, we came on top of our margin target of 18.5% to finish 2024. All our businesses progressed really well against their respective targets. The highlight, of course, is IP, which early on surpassed its 20% margin target. IP is now, excluding the impact of Svanehøj, now around 23% of segment margin. When we layer on the 2025 margin estimates, we can see that ITT is expected to expand approximately another 150 basis points operating margin.
We are on track to meet or exceed our margin target in MT. We will deliver our margin target in CCT next year. Now that we've looked at the progression since our last Capital Markets Day, I'd like to discuss a little bit more the 2030 targets that Luca previewed earlier. First, let's look at our end markets. There are a few things that I'd like to point out. The first is that we expect to grow in all our end markets. This is because of our track record, our share gains of outperformance, and that will continue. Specifically, in the industrial market, we expect to further drive the performance of our pump distributors. Hamdy, that you heard earlier, has been working in establishing effective measurement of our North American distributors' performance and also ambitious targets for them to drive volume growth.
We have high hopes for this. Regarding CCT, we are deepening our relationships with distributors in Europe. We are also actively expanding the SKU coverage, especially in defense connector models. Finally, we have also been improving significantly our aftermarket service rates. This will continue to generate share gains in pump spare parts, as we discussed earlier. The second end market I would like to cover today is aerospace and defense. Here, we are really well positioned to significantly outpace the defense OEM market growth thanks to our customized connector solutions. You heard Art talking about it, as well as Mike Guhde. With the addition of kSARIA, we intend to realize synergies on large platforms, on large connector platforms, and take advantage of the complete offering that we have for interconnect products. As for energy, automotive, rail, we will continue to outpace this market as we are already doing today.
Now, if you look at the performance of our businesses, what we expect out of them for 2030, we expect Industrial Process to grow 5%-7%, with the majority of the increase coming from project share gains, especially in energy and decarbonization, as well as pricing. Motion Technologies is expected to grow 2%-4%, as Friction will continue to outperform global auto production by 400 basis points - 500 basis points. Connect & Control Technologies is expected to expand revenue by 7%-9% on average, primarily thanks to aerospace and defense. As for margin, we expect to deliver 23% operating margin by 2030. This is a significant progression compared to the 18.7% that we are currently, where we finished 2024 at. As you can see, we expect all our businesses to significantly improve their margin profiles, with IP and CCT leading the way at 25%.
MT at 23% is expected to largely surpass the current levels of 20%. I just want to give you a little bit of highlights of how we're going to get there. Productivity will continue to be a major driver of margin expansion. We expect to, obviously, further deploy the Motion Technologies playbook. At the forefront of this, as you've heard, we count on SQDC, the deployment of the SQDC methodology, which allows us to measure progress, but also to compare ourselves to the best-in-class operations in the industrial world. When we look at the progress we've achieved in IP and in CCT, we're still miles away from our ambitions from an SQDC standpoint. This is where resides all the margin expansion potential. We expect also volume to drive growth. Here, we expect margin expansion of roughly 250 basis points-275 basis points.
Price also is expected to contribute to the margin expansion. All this is expected to offset, to more than offset, the cost increase that we'll face from an inflation standpoint or from a commodity standpoint, as well as all the investments that we're going to continue to make to develop products as exciting as VIDAR, for instance. One item that I wanted to note on pricing is that we're no longer going to apply blanket price increases across all our products. The strategy has changed. The strategy now is about being strategic in order to deploy price where we can capture as much value as we can. We'll continue to find more opportunities at ITT as we increase the sophistication of our analysis and of our teams. Let's look at the M&A value creation.
I want to highlight a few things because we've talked about how we're able to grow from an organic standpoint. I want to talk about how M&A is going to contribute incrementally to that organic value creation. First, we expect to be able to grow revenue by 400 basis points-500 basis points over the period. It's possible by deploying roughly $600 million of capital every year. For ease of modeling, we considered that we would close transactions by mid-year every year and that our acquisitions would be able to grow high single digits every year until 2030. This is very similar to what we have experienced with Svanehøj and kSARIA. Second, we considered an EBITDA margin level of roughly high teens. This to expand by 100 basis points every year.
We expect these acquisitions to generate $0.75 - $1 of incremental EPS by year 2030. Recapping what you heard today, with more than 5% organic revenue growth CAGR and a contribution from M&A of approximately 400 basis points-500 basis points, we expect to deliver approximately 10% total revenue growth every year on average. When we look at EPS, we expect EPS organically to grow to more than $11, roughly doubling compared to what we delivered in 2024. With the contribution of future acquisitions, we expect to get to more than $12 by year 2030. Now moving on to my favorite subject, cash. As we expand margin and as we continue to drive down working capital, we expect to be able to deliver a free cash flow margin of 14%-15% by year 2030.
It is key to continue to fund organic growth and to drive and to support the growth of our businesses. As we think about putting to work that incremental capital, we envision to really grow the amount of capital we allocate to M&A, as you can see on this pie chart. With an expected capital to be deployed of $5 billion, we will execute our 2030 ambitious plan with approximately $2.5 billion-$3 billion allocated to M&A and some of the rest going to repurchases to reduce our share count by 3.5%. Finally, we will continue to grow our dividend in line with our earnings. To recap, we expect for 2030 to grow organically by more than 5%. We expect to add the contribution from M&A and be around 10% growth on average every year.
We expect to deliver approximately 23% of adjusted operating margin, which is more than 400 basis points of improvement compared to 2024. We also expect around 25% of EBITDA margins. From an EPS standpoint, we anticipate $11 of adjusted EPS and $12 when adding M&A contributions. Importantly, free cash flow margins are 14%-15%, which is a significant improvement compared to the 12% we are generating today. Let me go to the takeaways. I know you saw a lot of exciting and important information today. Before we move to Q&A, I wanted to mention a few points. As we continue to differentiate through execution and innovation, we are generating more and more opportunities to further create value. We are setting up the foundation for M&A acceleration.
As we turn to the future, we expect to continue to focus on what has made us successful, which is differentiation through execution and innovation, which has powered our earnings growth until now. We plan to accelerate the shift of our portfolio to flow and connectors with high margin, high growth products. We will then, as a result, enhance the earnings profile of ITT, as well as our cash flow performance. Thank you for your attention. Now, if I can ask the ITT leaders to join me on stage for our last Q&A session of the day.
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OK, we're going to do Q&A. As you can see, we have the extended leadership team here. We're opening it up for our final Q&A. We'll start over. Matt Summerville and D.A. Davidson.
Thanks. Just one quick one for Emmanuel. What incremental operating margin on an organic basis are you using across the three segments to build up to that longer-term trajectory? Thank you.
Yeah, so it's around 35% incremental margin. Obviously, it varies by the different segments. Probably IP and CCT will be a little stronger there.
This is obviously driven by, obviously, price, which complements the volume benefits.
OK, let's stay over there. Joe Giordano at TD Cowen.
Hey, thanks. Two for me. You mentioned house of brands a couple of times. And you guys are kind of in the sweet spot where you don't have a million brands. You can kind of balance the ITT identity and the identity of the individual companies. As you start branching out, deploying all this capital, how does that evolve? ITT has its own reputation. How do you balance? Do you want people to just think of one place that you go for all these things? Or do you want Svanehøj plus Habonim? Maybe go there, and then I can follow.
Sure. I can answer that. No, it's the brands. Those are the ones that are close to the customer.
Those are what is recognized in the market. I think that the brands are here to stay. It's KONI, it's Svanehøj, it's kSARIA, it's Habonim, it's Goulds Pumps, it's Engineered Valves, it's ITT Cannon. Those are here to stay. This is what we expect to continue. Now, ITT is there to support and to feed their growth and to help. As I said at the very beginning, it's business sense, it's common sense, it's no corporate nonsense.
Fair. Just for Luca and Bartek, it's a bit of an unusual combination to have running strategy and running IP at the same time. Both seem like their full-time jobs. Maybe a little bit of what that experience has been like, and then maybe the thought process behind that pairing. Thank you.
That's a good question. That's what I told Luca as well.
I did think I had a full-time job, but apparently, I did not. Look, I mean, it's certainly been an interesting experience, right? I appreciate the privilege to kind of be on both sides. Look, there are some natural synergies, right? Obviously, it's a very steep learning curve for me. There are a couple of things, right? Remember, I have very strong leaders that I can lean on, right? Some of them, I mean, actually, all of them are here today, right? I've got Hamdy, I've got Søren, I got Kasturi, right? All of them, I don't need to teach them how to be GMs, right? It's more making sure they get the resources they need, working with them, and helping them maybe on the strategy side and helping drive the direction.
The rest of the staff functions on my team, and some of the guys that are actually here, are very strong as well. I have the support I need. Generally, my approach is I'm not a big micromanager. I start with people, making sure I put the right people in the right places. That was one of the first things I did, right? After the first couple of months, I made a fairly significant restructuring and reshuffling of, let's just say, the folks in the lead of my leadership team, taking out layers, making it smaller, more efficient. That does allow me now to zoom out again a little bit because for a couple of months, it was becoming a little bit lopsided. I was starting to go 70% IP and less on the M&A and strategy side.
I think I'm starting to be able to zoom out again. It's starting to be a little bit more balanced. That's one. The other thing I would say, there's a lot of synergies just because in the end, IP will be one of the areas where we deploy a lot of the capital, right? I'm spending a lot of my time on, obviously, putting the people in the right places, but then also defining the growth strategy. That's always been something I was involved in. It was a fairly natural segue that way. That would be my comment. You can.
Now it could be 100% in IP and 100% in M&A.
There you go. Thanks.
OK, let's go to Damian Karas, UBS. Behind you, Damian.
All right, thank you. First question on the financial targets.
The 25% for CCT segment really stood out. Just curious if you could maybe parse out a little bit that 700 basis points of expansion and your confidence in getting there.
Yeah, so one thing that we have a lot of ambitions for CCT. And by the way, CCT, as we discussed in Q2 of this year, will already be at the 22% target that we have set.
Legacy, right?
The legacy, excluding the kSARIA. So I think that when you think about CCT, as I mentioned, price is a really important component. In CCT, we sell a lot of products that are really niche. And so we're the only ones being on the drawing. And as a result, we have a pricing power that is really interesting. When you think about productivity at CCT, we have obviously moved to deploy the Motion Technologies Playbook to drive productivity.
There are many, many opportunities, whether it is in automation or sourcing or basic shop floor leaning. Here, we have a multi-year runway of driving productivity that is really going to drive margin expansion. I would say, finally, at some point in time, we need to see a recovery in aerospace. We have not seen that. We have not been lucky since 2021, but it has to happen. When you think about CCT and the contribution of aerospace, the drop or the incremental margin is pretty significant. We are very confident in our ability to achieve CCT's margin target that we had set in 2022 and then go to the 25% by 2030.
Maybe, Michael, you want to build on that?
I confirm.
I think the answer is yes, right? No, I think everything that Emmanuel said is very apropos.
I think with the value that we're creating through our products, making sure that we extract that value from a price model standpoint is very important. It's an area we just recently invested in our business to make sure that we're getting the most out of what we develop. Operationally, we continue to deploy automation and some of the tools that will allow us to build our products most effectively. I think we have a bright future ahead of us. I think, as Emmanuel stated and Art shared earlier, many of these new platforms that we're developing are just now starting to see their growth curve. As they really become a more dominant component of our product portfolio, we can expect to see the revenue profiles that will prove as well.
Makes sense. That's helpful.
How about on the free cash flow side, kind of getting to that mid-teens margin? How are you thinking about that? What levers do you have?
Yeah, so obviously, there is going to be a significant contribution for margin expansion, for sure. I think that the big prize that we are going after is working capital, obviously. We have made significant progress. In Motion Technologies, we are down to 15%-16% of our revenue. That is really, I would say, best in class in the industrial world. We are in early beginnings in CCT and in IP. Here, I think that when you think about SQDC and all the focus on making sure that you lean out this factory, the byproduct of that is a reduction in inventory because you increase the velocity of your plants.
We think that we have a significant amount of cash to go find into working capital. It's going to take years. It's going to take a long time because it's about implementing the right processes. It's about having also the right resources. The opportunity is there. We just have to be disciplined and go after it.
In here, we can learn from Svanehøj, right, Søren? What is your working capital?
6%-7%.
6%-7%. Definitely, this is something that Hamdy and Kasturi are going to copy, right, Hamdy?
If I could just add to this, obviously, Svanehøj manages really well their inventory. I think what they are masters at is getting customer advances for each of the projects. It's a different focus than we used to have in IP.
We are trying to convert the rest of IP to that focus, to not only negotiate for the large project, negotiate for the best margin, but also negotiate for the good payment terms. It is going to take time. I think that we have a lot of runway to deploy that approach into the rest of IP.
Let's go to Brad Hewitt from Wolfe.
I guess maybe on the MT side of things, the 2%-4% growth outlook through 2030 looks like you are assuming about 1.5% CAGR in auto builds. If you do the math of 400 basis points-500 basis points outgrowth, I mean, that alone would drive MT to grow about 3.5 points per year. That is before considering auto aftermarket or rail. Just kind of curious if you could talk about the moving pieces there for MT growth.
Yeah, so I'll start by saying that at ITT, we've always been a little bit conservative. That has served us well in terms of the projection for future growth. Every time we cut a little bit of the growth that is expected by IHS because the market hasn't been as positive in the past few years. That's one thing. The second thing you have to take into account is that Motion Technologies, and specifically the Friction business, is a business where we have to give price every year. We have a price erosion that's happening. We're able to maintain that price erosion between 1% - 1.5%. You have to have a price erosion. That cuts into your growth.
Maybe a follow-up for Bartek, I guess.
On the M&A side, the last couple of deals since 2021 have all gone very well, all tracking ahead of plan or in line with plan, at least. I guess curious if you've learned anything that you can apply to kind of strengthen that M&A muscle going forward even further.
Sure. I think you learn something on every deal, right? We go in front of the board one year after we buy something, and then two years after we buy something. Part of that exercise is to actually talk about what lessons have we learned, right? I can say we're going to share, for example, Søren and I are going to have that discussion with the board next week. Actually, maybe I'll give you an opportunity, Søren, to share some of the things we're going to share next week on Svanehøj in specific.
I'll make it real.
Now the question was, what you guys learned?
Yeah. OK.
Let me share one point on the lesson learned from my side. Then Søren and Bartek can add. One of the things that we agreed with Søren, and Søren was always the clear mast and then the veto that he had, et cetera. In all of that process, that worked very well. Probably one area that we could have paid more attention to together, Søren and I, was on the safety front. We are very, I mean, safety is first things first. On that front, we probably didn't align at the very beginning in terms, and it could have been probably that a must, right?
This is probably something that if we go back in terms of deal, probably something that I will discuss down with Søren on the safety to be more of a must to align rather than having differently. That from a lesson from my side.
Yeah. Yeah, go ahead, Søren.
No, no, I completely agree. This is an area where we at Svanehøj, we had a decent safety standard. But I also had to admit not at all to the level of what's being done in ITT. That should just have been more precise from the beginning. We learned that.
Yes. Another thing is, right, there is obviously I talked a lot about keeping the base business, keeping that growing, and all of that, right? That's fine.
Creating enough connectivity and enough touch base, you've got to balance that against the ability to drive synergies. I think one of the things that we're seeing now, and this is where we're a year after acquisition, really that is starting to happen. We could have probably done it a little bit faster, right? I'm seeing opportunities. For example, clearly, we have a very strong channel to market with Svanehøj into marine, right? We have other products that are relevant there, right? Our Bornemann pumps, for example, some of them go on ships. Now, Bornemann, that's not their primary end market. It was always a little bit lost in an afterthought. Now we have a better channel to market, right? Same thing is true.
We have a small business that we probably do not spend enough time talking about. It is called C'treat. And they make these RO systems, essentially water makers for offshore platforms, those type of things. Small business makes a ton of money, but was always a little bit orphaned, I guess, arguably, in the IP portfolio and the ITT portfolio. Now they have a bigger brother. There is an opportunity for them, actually, because there are parts of Svanehøj out of Singapore that, for example, have some offshore exposure. That is something that we can do together. We can bring to the market. Creating that interconnectivity, I think, earlier on, perhaps, is important. You have to balance that with not overwhelming the unit. Those are just some examples.
I think, broadly speaking, I think it's, again, sticking to our guns and making sure we leave the independence and we leave that. I think that is something that is going really well. We want to make sure we maintain.
Let's go to Vlad Bystricky from Citi. And then right after Andrew Obin. Good.
Great. Thanks, everyone. Lots of good information here today. Just going back to your comment on pricing, Emmanuel, and the shift away from blanket pricing to a more targeted approach, can you just talk about what changes you're making internally or need to make to be able to implement that change in approach? And then just thinking about the outlook to 2030, how you're thinking about prices that contributed to the 5%+ organic that you're targeting.
A few things. And then feel free, I know, Michael, feel free to add to this.
The first thing is data. I think that for a long time, we weren't looking enough at data. We were relying on anecdotes. Now we built a comprehensive database for pricing and trying to really also understand what is the market price. There are products where it's easier. When you talk about projects, for instance, it's not that easy. The emphasis on data and data-driven decision is really important. We've been adding capabilities from a pricing standpoint. We hired a Vice President of Pricing and Working Capital Management who is part of Finance. He's helping the team rolling out the right tools in order to look at the businesses. He's very busy. We've been able to generate significant results. To me, that has been key because pricing is a science.
You learn it through tools and methodologies. Then you layer on top the feedback from the sales teams to be able to come up with the best proposal.
I think to add a little color to Emmanuel's comments, the element of data is absolutely critical. I think it's looking beyond just simple things like, what does it cost? It's looking at what does your competitive landscape look like? How much value are you bringing to the market? We shared some examples here today with VIDAR, with the Geo-Pad, with the C5 Warrior. Being able to distinguish what is that incremental level of value that is going on with those particular products so that you can make sure that you're positioning yourself well in the market from the get-go and getting appropriate returns on a year-over-year basis.
Within the CCT organization, we've added a Strategic Pricing Executive Director to be able to go after those types of things and build those models that allow us to see that in a very quick and appropriate way. I think also having the ability to understand where you need to make the appropriate deal in order to make the product move forward and get the volume flow through as well. I mean, I think when you look at strategic pricing, we need to make sure that we're not so hyper-focused on raising the bar all the way, that we also have this component of revenue and volume growth that has to be balanced as well.
Yeah. Yeah. Just one last example. One thing that was really interesting that we did with Dan's team is that we worked on a pricing project for VIDAR.
Because the thing with VIDAR is that it's a brand new product, super differentiated. There's no reference point. We put together a complete pricing study. We asked professionals in the industry to understand the willingness to pay of the industry. In the past, ITT would have said, what's the cost? Let me put some good margin on top of it. Let me introduce it to the market. This is not what we did. I think that this allowed us to capture a lot of value. Finally, on your second question, we expect over the period, pricing will generate roughly 500 basis points of margin expansion.
Let's go to Andrew Obin from Bank of America.
Yeah, sure. Thanks so much. Just maybe a follow-up to the question. There was a lot of talk about M&A, about more focus on capital allocation.
Clearly, you've added capabilities there. Clearly, you're moving to a much more focused and strategic pricing. I think all of this strength through the strength of the underlying operating model to be able to build on top of it. The question is what we've seen, and this is probably a problem three-five years from now, as companies become more and more focused on M&A and this sort of strategic pricing, sometimes organic growth gets lost in the process. Now, you still deliver it works from a stock perspective. Down the line, you end up having a problem where the company emphasizes capital allocation, you emphasize the strategic problem. Maybe you lose some of that organic growth muscle because organic growth is hard and boring.
How do you ensure that in three years- five years, you retain this organic growth muscle, which has been sort of the hallmark operational execution, operational focus, has been the hallmark of ITT under Luca's leadership? Thank you. Long question. Sorry.
A couple of addresses in two ways. First of all, is real growth when we are in the performance reviews on a monthly basis, on a quarterly basis? Every single time we're talking, we're talking about real growth. For example, price for me is not a growth. OK? Sure, from a financial point of view, from the numbers, yeah, you can report it as a growth. We're talking about volume growth. This is a conversation that we are having with each value center. Is volume growth, is real growth.
That way of looking at these things, which is the substance, the spontaneous numbers, is in the DNA of ITT today. That is on the pricing, which means just to tell you the approach, right? Second, I would say that was exactly the reason why, Andrew, we were not having an investor day meeting, capital markets day meeting, talking to you guys about the M&A and the capital deployment. This is why we spent time to say there are two pillars here. There is the organic value creation, which, trust us, is here to stay. We are going to have more organic growth as we are moving to businesses that have got higher growth. Look at Svanehøj. Svanehøj will have a double-digit growth for the next few years. This Svanehøj is now organic, an organic part of ITT.
We will keep on focusing on organic growth for Friction, for KONI. That is a core pillar of who we are. We keep on doing that. The other one to add to it is compounding. The focus is not going to go away.
Maybe, Luca, if I can add, part of the answer is also what you see all around you here. That is the innovation piece, right? The M&A is nice, right? It adds a lot. We also will continue investing in new products, right? VIDAR is an internal development, right? We put that through our venture program to accelerate it. It is not something we bought. So are some of the other technologies that we have. That is something that we are very focused on. We will continue deploying capital against.
You heard today the high-performance product, right? That is a $50 million before we got all the government money, $50 million investment in an organic growth, an organic development, right? Those are the type of investments that we will continue making. They'll be equally important to the growth story.
Thank you. Yeah. Go ahead.
To ask, is Motion Technology the one that seems to be left?
Wait. I'm at home. They can't hear you on the webcast.
Maybe just add a little perspective for Motion Technology, which is where we're going to focus mainly on the organic piece, while the other two value center are also with the compounding effect of the M&A. We are maintaining a very high CapEx requirement every year for our internal growth.
Just to give you maybe a point of reference, part of our innovation and R&D within our P&L at Motion Technology is about 3.5%-4%, which most of our it ends up being much larger than even our customers are doing in the market space. We'll continue to see that kind of investment commitment in order to feed the innovation that you heard from Luca and the rest of the KONI and Axtone team.
OK. Sabrina?
Thank you. Just one on the M&A and the ROIC targets. It's a very robust target, like 10% in year three on the earlier side of the range. Understanding, I think, Habonim, you had 11%. It's been three years. That was purchased at 11 x multiple. I think generally, as you go for bigger assets, maybe the multiple you have to pay for goes up a bit.
I think the cost out, I guess the question is, what's driving the confidence level and the level of cost out that you'd have to take in order to get the early end of that year three 10% ROIC target?
You need a ticket?
Sure.
Go ahead.
So Habonim was an example. But it's not necessarily an outlier, right? In the list of companies we talked about today, most of them are maybe one turn higher than that at acquisition. There's nothing in there that's crazy in terms of multiple. Price discipline will remain a part of it. Now, whether that's large or not, in the end, yes, there might be some assets that we may be able to, maybe willing to, stretch for a little bit more. Hence that bracket, right? We say we want to get there by year three - five.
By definition, you get a little bit larger. Maybe you can go. We're not going to completely let the reins go and say, look, you know what? We fall in love with it. It's great. Let's go. Let's go make it year seven or year eight. That is part of the discipline. That's part of the rigor that we're trying to instill. I would say you will continue seeing that discipline. Look, sometimes things get too frothy and you walk away from them. The other part of this is, obviously, we've got to continue looking for value creation opportunities for synergies. That's the other offset of that, which allows you to then pay down a multiple. Finally, remember, we're buying good businesses, right? I can buy something even without synergies.
If it grows like Svanehøj is growing, where the business is when we bought it was around $150 million, it's going to be closer to $200 million this year. Needless to say that multiple starts coming down really fast over the couple of years. Those are the couple of factors that I think play in.
I think we have time for one more. Any final questions? No? OK. Great. I will turn it over to Luca for closing comments.
Just that maybe so first of all, I think that after the closing remarks, we're going to have time to visit the booths, talk to the people, and also have some drink and some food. Please ensure that you spend the proper time.
I think that the thing that I would like you to ensure that you go home with is a clear view of the value creation in front of ITT. Those are, as I was telling Andrew, those two pillars, which is organic through organic revenue growth, margin expansion. This is here. We are going to work hard on that and to deliver value. The other, the compounding M&A. The way that we are going to sustain this is really the differentiation that people have shared with you in terms of execution, innovation, and M&A, and the people that you have met here today that are a good example of the culture that you have in ITT. Maybe the last thing I am going to say, and the last element of differentiation, is another thing that I believe differentiates ITT is that we do what we say.
With that, let's go and get to the booths. Thank you.