Okay. My name is Andrew Obin. I'm BofA's Multi-Industrial Analyst. Welcome to the afternoon session. With us, I have ITT. ITT CEO and President Luca Savi, and Carleen Salvage, new VP, IR and FP&A. We love ITT. You guys are on our U.S. one list. Probably tells you what I think about the company. Always a pleasure to have you in London. Always a delight. I think Carleen is gonna have a couple of statements. Then you guys have a couple of slides, and then we're gonna go into Q&A. Thanks so much.
Thank you, Andrew. Carleen, over to you.
Yeah. Our presentation and comments may contain forward-looking statements which are based on our best view of the world and our businesses as we see them today. These assumptions and expectations can change, and we ask that you view them in that light. We encourage you to review the latest risks and uncertainties in our Form 10-K and other SEC filings available on our website. Thank you.
Thanks, Carleen. I'm gonna spend a few minutes on ITT today, and then we go straight into.
Yeah
into Q&A. What you see today is ITT after the closing of the acquisition of SPX FLOW, which happened on Monday, the 2nd of March. It is a company of roughly $5 billion in terms of revenue, split in three main businesses. One is Motion Technologies, where we're making brake pads and shock absorbers, so exposed to the auto industry and exposed to rail, a little bit in defense as well. You have CCT, Connect and Control Technologies, where we make connectors and components. This business is mainly exposed to general industrial and a lot to aero and defense. What was called Industrial Process, today we call it Flow Technologies, which is the previous pumps and valves business. It includes pumps, et cetera, which today has merged together with the SPX FLOW.
As you have seen, exposure to the aftermarket. A lot of exposure to the Americas is the largest geography where we are exposed to. When you look at the last three years, 2025, we had 5% organic revenue growth. The two years before were 9% every year. We generated good profit, good margin expansion, a lot of value, a lot of value creation. Let me talk about a little bit of the Flow Technologies, which is this new business that is the merger of Industrial Process and SPX FLOW. When you look, you see that our main exposure is on pumps. This is really our core. What we did with the SPX FLOW acquisition, we added Waukesha hygienic pumps, number one leader in North America in hygiene.
We added Bran+Luebbe, Johnson Pump, leaders in the market that they're playing in terms of metering pump and centrifugal pumps. Then we added also some adjacencies, like mixer. Mixer is a good business based out of Rochester in the US. You know, brands like Lightnin in Philadelphia, they are number one, number three in the mixer market. You know, nutrition and health system. Here you're talking about system that we are building and delivering for customers like Danone and Nestlé and Unilever. Exposed to different markets. Now, what we like about SPX also, that reduces our exposure to energy when you look at the Flow Technologies business, but also adds a new market of nutrition and health to the market that we are addressing, making really the Flow Technologies business more resilient.
50% or more in North America and spread also in Europe and Asia Pacific. These are all the brands. What you will see ITT and also Flow Technologies is a house of brands, and many of these brands are actually number one, number two, number three in the segments, in the markets that they're playing into. A little bit of comments about Q1 before we are moving to Q&A. What we saw in Q4 has continued. You saw strong orders when you look at the Q4. Well, we saw strong orders also in Q1, January, February, and also when it comes to March, we continue to see that. We continue to outperform when you look at the automotive market in terms of the OE.
We are outperforming across all the different regions, so you will see that also in Q1. When you look at all in, now with the closing of the deal on March 2, as you know, part of the deal, the $4.775 billion that we pay Lone Star for SPX FLOW. You know, they wanted to retain as a shareholder, so $700 million that were paid in shares as of March 2. You had in March debt dilution as well, and then of course the debt and the interest that you pay on debt. When you look at all of those in, you see from the EPS growth is a low double-digit growth year-over-year. With that, Andrew, over to you.
Thanks so much. Carleen, just to get it right. The guidance you provided on Q4 for Q1, because I think there's a little bit of confusion, this low double digit was what you guided to. The only difference is that we've now closed the deal.
Yeah.
In apples to apples, nothing has changed.
No, no, nothing.
Nothing has changed.
Apples to apples, nothing has changed. It's that we closed the deal and therefore you issue the equity and you have the debt. That's the only thing that changed.
We knew and basically you've communicated this, so because I think in the market.
There is no.
The reaction to the headline is somewhat negative, but the reality.
No change.
Everybody should have known that.
No, no change at all. It is exactly the same thing.
Right. There is no change to SPX outlook either?
No.
No.
No, not at all.
Okay. Okay, fantastic. Maybe just starting with your broader framework, long-term guidance, right? You know, ITT's organic growth expectation mid-single digits in 2026 compares to the guidance of over 5% revenue growth CAGR by 2030. How should we be thinking about organic growth in 2026? You know, what this means for sustainable growth rate as recovery actually takes hold.
Sure. Our long-term targets when it comes to organic growth is, you know, 5%-7%.
Yep
Of organic growth. We deliver a little bit better than that in the last three years, I would say. You know, and when you add the addition of SPX FLOW, we said that SPX FLOW, we would be able to grow mid to high single digits.
Right.
I think that all the assumptions when we look at the organic growth have been confirmed. Of course, if the market gets better, that can only be a tailwind for us.
Right.
All those aspirational organic growth have been confirmed, are confirmed so far.
Okay. So far, we're on track for that.
Absolutely. Yeah.
Okay.
We are.
You know, you sort of talked a little bit about demand trends, and you're sort of saying that orders continue to be strong in February and March. You know, for the short cycle business, right, have you seen any sort of patterns that reflect that PMI is improving, right? Because you guys were constructive in Q4. You were constructive earlier than others.
Sure. When you look at our short cycle business, for the last couple of years, we've been able to grow our short cycle business no matter what the market was doing. That was market share gains. We're talking about growth, not in terms of just price. I'm talking about volume growth, real growth. But that's more the ITT story than the market.
Well, we ran your organic growth.
Yeah.
I think Vertiv was better, Trane was better. I think that's the list.
Yeah. Yeah.
Like, not a lot of people have done better on organic growth since you started.
That's the thing. What we have seen, I would say towards the end of 2025 and also in January, February, it seems like the situation from an economic perspective is a little bit better, and therefore that picture might continue. There are more doubts today.
How should we think about the near-term impact from the events in the Middle East? I guess, specifically, as you do have a Middle East business-
We do.
You also have a defense business. How should we think about the net impact of what's happening?
Sure, sure. For unfortunate reason, the defense business, of course, will benefit from everything that is going on today. That is true, particularly on the CCT business, where we make connectors and also components for the KC-46 and others. That obviously has got a tailwind. Now, when it comes to our business, we do have a very good factory in Dammam in Saudi Arabia, which is performing incredibly well. It's one of our best factory. Great relationship with Saudi Aramco and the customer in the region. Now, obviously, when you look at that, you can imagine, you know, Saudi Aramco has frozen every conversation that we had from an investment and new orders perspective. Now, Q1 has been not impacted at all, so there is gonna be no issue in Q1.
If the situation continues, of course, there might be impact from a supply chain point of view in terms of stuff getting into the factory in Q2. Just to give you an idea of the size, when we look at our Middle East business, it's less than 5% of total ITT revenue, something between 4%-5%, so not really material in that respect.
Excellent. Thank you. The idea is there are enough growth vectors elsewhere to offset it.
Well, to be honest with you, what you see, what is interesting is that you could see, for example, in Q4 of last year and also the beginning of this year, because the price of oil was particularly low, there was not a lot of service orders from our oil and gas business in North America.
Right.
Now, obviously, if the price of oil stays at the level that it is today or stay high, that situation could change. What is impacting negatively in the Middle East can actually translate in some positive trend if it is service work or if it is LNG opportunities moving faster in U.S. or other regions.
Maybe we can go sort of talk about about growth, because I think organic growth actually is one. Well, stock has performed okay, but I would argue that your organic growth is one of the most underappreciated aspects, I think, of the story, and it has been consistent. It's driven by sort of market share gain. You know, on one hand, you know, I saw the auto facility in Italy. That's a very idiosyncratic story. At the same time, you're able to replicate it across your portfolio, so it's clearly not idiosyncratic. Can you just share some of your long-term playbook across businesses?
Sure. I think that the approach that we have is really. I mean, if you look at our organic growth performance is quite good. The way that we incentivize, the way that we look, the way that we manage is that no matter what the market is, and no matter what the market does, I mean, you need to grow. You're expected to grow, and you're expected to grow, winning, of course, market share, and this is real growth. Volume growth. It's not just growth in terms of price.
Mm-hmm.
We like price, we go after price, but if our people are delivering to us growth because of just price, they don't get an easy time, right? They need to deliver real growth that actually is feeding our clients, that we're making more products, et cetera. This is really how we are incentivizing. Now, in terms of what we have really been good at in terms of when you look at ITT, is to create platform for growth. If you look at our KONI business, our shock absorbers, you know, that was a business that was a $100 million platform that was losing money 12 years ago. You know, it was ITT was questioning, my boss was questioning really the fit in the ITT portfolio.
Now, we turned it around, we made the acquisition of Axtone in rail in Poland, and now we have a rail platform of roughly $300 million whose margin is actually accretive to Motion Technologies. We did the same things for the valve business in AP. We rejuvenate our connector business and became in Aero Defense another platform for growth. We have done it with Svanehøj in, you know, cryogenic pumps in the energy transition in marine. This is what we are really good. It's a very really entrepreneurial way to run the business, very granular, hands-on at every single level of the organization, and really, I know that, you know, the 80/20 is very fashionable today, but is really not following when it comes to growth any 80/20 approach.
It's really you go after everything that could be a good growth now or in the future in the business.
Do you see sort of continuing opportunity for share gain by segment?
Yes, I do. We do. For example, if you look at Motion Technologies, market share gains in rail, those have happened in 2025, and we see it in the orders, we see opportunity in the pipeline when it comes to rail, both in Europe as well as in North America, as well as in China, where we are exposed to high-speed trains, subway, locomotive, coach, and everything. When you look at automotive also, listen, we have a very healthy market share in Europe, so you might question, are you really able to grow even further? I would say yes, because there are segments, and you need to be very granular there, like for these high performance or light commercial vehicles, where we do not have a high market share. There is opportunity there.
In China, we closed last year at 33% market share. There is no reason why we cannot improve substantially that one as well. In North America, we closed 2025 at 27% market share. Opportunity to grow that one as well. When you look at the connectors side of the business, listen, we are a small player, so the way that we differentiate a lot is in customizing, in custom design, co-develop the design together with our customers, and be super fast on the engineering cycle. When you look at specific aero and defense application, customization for connectors, there is a room to win market share there. We have done it in the past. We continue to see the opportunity there.
When it comes to flow, I mean, the ability to execute different from our competition, to differentiate both on the innovation and the execution, delivering our products, good quality products, on time, in a consistent way to the customer, gives you loyalty. So yes, we think we can.
Excellent. Thank you. You know, as you've said, you closed SPX FLOW synergy target at 6% of sales. Maybe we can talk about what's just generally in your synergy assumptions. How many years and how much are we assuming for footprint rationalization?
Sure. When you look at the cost synergies, it's at roughly $80 million run rate after year three.
Mm-hmm.
Usually, the way that we will deliver probably is 1/3 , 1/3 , 1/3. Year one, year two, year three. Now, the big chunk of those cost synergies are on the G&A front. This is where the big chunk will come. Second chunk will be on the purchasing. The first one, we're already executing. We've already executed, and we're executing a lot of them. This is where we're already working together, the two procurement team, to deliver those synergies. When it specifically come to footprint, is a synergy that is the one which is the smallest and the one that comes later. The reason for that is, our approach may be conservative to ensure that if we act on a plan and on the footprint, we want to ensure that our customers do not get affected.
We need to plan properly and execute in a prudent way. That will be the gift that will keep on giving in terms of several plans within the ITT companies, as well in SPX FLOW, can be concentrated in a very good plan that SPX FLOW has in Poland.
Mm-hmm.
Also a good plan that SPX FLOW has in Xidu, close to Shanghai.
That sounds, that's beyond the scope of these three years.
I think that the most of the savings that you will see on the footprint will come after year three.
Thank you. What about sales synergies? Because I think you're not including those.
That's correct.
What are the opportunities?
When you look at this, listen, cost synergies, we are fully in control of the cost synergies. I can tell you, we will deliver the cost synergy. I have no worry at all on the cost synergies. On the revenue synergies, it takes more time. You're less in control of the revenue synergies, and this is the reason why we discount them fully and we do not put them in the model. Having said that, we're already working on those together, the two teams, you know, from the ITT and from SPX FLOW. Give an example. On mining, we have a very good base in Chile and in Peru with our footprint over there as ITT. Now, they do not have any base when it comes to Latin America.
Some of those mixers will have the same customers, so there is an opportunity there. We have a good plant in Brazil, and we will have even a larger plant in Argentina. We're investing in making the plant larger. Having that base, we could localize the assembly, reduce the lead time, and be able to sell more in Latin America than what they do today. That is one. Saudi Arabia, when things normalize, will be another revenue synergy because we will be able to have in-kingdom assembly, which is one of the regulation to facilitate you selling in the kingdom. Call it luck or what, but when you look at Waukesha, hygienic pumps, the product in that product portfolio, what they're missing is twin screw pumps, which is exactly what Bornemann does.
Right.
In hygienic, we have the full range, full portfolio, but we are nobody. Now, we can simply take those pumps, brand them, you know, Waukesha. They are, you know, top range in terms of performance, and that is a revenue synergy that we will have here in North America with Waukesha.
That's something near term?
That's something that is much faster than everything else.
Thank you. You know, you sort of noted that you target 10% ROIC by year three to five in acquisitions. Just to wrap up on SPX FLOW, when should we be getting to this 10%+ ROIC? Is it close to five years versus three, or?
It's close to five.
Okay.
Five.
Okay, fine. Maybe before we go into the segment, just sort of cash flow generation. 2025 was very good, but I think historically, cash conversion has been lumpy, was very strong last year. What does it take to see more consistent cash generation?
I think a lot of the investment in the past was also in terms of increase production in terms of the Motion Technologies that they tend to be more capital intensive.
Yeah.
Therefore, there has been expansion when it comes to the site in China, the site in Mexico, and then also last year, January 2025, we opened a plant of high-performance brake pads in Italy. Now the footprint that we have is the one. There is no major other large investment.
Mm-hmm
to make when it comes to CapEx. I think that you will have more of a stable performance. I would say there is also a lot of improvements to be made when it comes to inventory, particularly in IP and in CCT.
Yep.
Motion Technologies actually is performing very well. The inventory turns of Motion Technologies we saw yesterday in the performance review was 12.5.
12 plus, yeah.
Yeah. I mean, in Motion Technologies has inventory terms of 12.5, just to give you an idea, is a cash machine, right? I think that, working on the working capital for IP and CCT is key, inventory in particular, and receivables and advance payments, particularly for IP as well.
Thank you. Maybe going to Industrial Process. What sort of productivity investments have you made successfully given the strength of core margin for IP, right? Exit in the year was legacy margin of 25%. Also, what does the runway look like?
Sure. When you look at IP, it has been a long journey because let's face it, when we started this journey in 2017, 2018, our profitability was similar to the one of some of our competitors, right? If it is Sulzer or if it is a Flowserve, et cetera. You look at today, it's a completely different story. What has been really the levers that we play? Well, first of all, we had to turn around the way that we manage projects. Projects management is a very good story. What you see today, the project backlog, the margin that we have in that project backlog is in the high 20s%. You know, this was a business that was not making money, you know, many in 2017 and 2018. That has been a lever.
when we close the project and we ship the project, the margin at closing is higher than the margin when we book the project. This tells you a bit about our order acquisition performance and also how we perform when we deliver the projects for our customers. That is one. Second is price. Ensuring that we have a good pricing strategy and that we do not have leakage. Therefore, a very rigorous way to monitor pricing in the orders as well as in the revenue and ensure that you can continuously track it and see the pricing coming through to the bottom line was lever number two. Then also the lean in the factories and on the side.
I was in Seneca Falls last week, and actually that was the best visit that I had in the plant ever, when it comes to the assembly. When you look at the assembly, the warehouse, the material flow works, it was an excellent performance and excellent leaning out. A lot of work still has to be done on the machining side. The machining is still a bit of a nightmare, but there's room for improvement for the future. When it comes to run rate, I think that our target for IP is really to get it to 25% operating margin by 2030, and I think that there is nothing that would jeopardize that.
Excellent. Maybe sort of another question. Over time, can Svanehøj margins reach quote unquote core IP levels?
I would say there is no reason why they shouldn't. I think that they improve, you know, a lot when you look at our performance in 2025, a few hundred basis points improvement in terms of EBITDA. I think that there is no reason why in, you know, two to three years, Svanehøj should not be at that level.
Excellent. You sort of alluded to IP project pricing. Are you seeing any sort of discounting from competitors?
It's when there is a project, the situation is very competitive, and I would say there is always somebody that can come out with a silly price.
Yep.
Nothing has changed. Like, there is always a case.
Gotcha
Unfortunately.
Maybe we can shift to Motion Tech. I mean, you talked about sort of market share gains in Europe, but, what is embedded in 2026 for market share gains, and how does it compare to 600 basis points of average outgrowth over the past several years?
Yeah. It's anything between 300 and 500 basis points, outperformance.
Mm-hmm
In terms of the market. I can share that this is what we're already seeing in January and February. I think that this is confirmed. I think that we expect that to be delivered also in the next couple of years.
Excellent. Maybe we can talk about sort of Motion Technologies operating margins. Trend has improved, but, you know, hasn't historically stepped up structurally. You are guiding sustained improvement through 2030. What have you finally figured out?
I think that, you know, when you look at our automotive business, you know, it's very, very profitable. I think that if you think about an EBIT of 20%, you know, there are not many automotive companies are able to post this level of profitability. I think that the beauty is that you and I, Andrew, can walk the shop floor in Barge or in Wuxi, and we can point to areas where we are top-notch in terms of productivity, et cetera. At the same time, we can point to area where we can continuously improve, if it is, you know, the waste, the scrap, or the efficiency of the machine or automate even more on the finishing line.
This is the reason why we think that, you know, a target of 23% operating margin by 2030 is quite achievable.
Gotcha. You know, you have material China exposure, and you've done very well with market share specifically on the EV side. I guess one of the concerns we've heard from investors as Chinese EV manufacturers take share globally. You know, their margins are not that great. It's a very competitive market. How do you not get dragged down? You know, there are a lot of headlines about competition in China on pricing. How do you not get dragged down together with that market?
Sure. Listen, our two most profitable plants in friction are our plant in North America and our plant in China, and those plants are pure OE. There is no aftermarket. This tells you a little bit about, A, how our cost competitiveness, because let's face it.
Mm
We do not decide the price. The market will decide the price, right? Sometimes you are able to get some premium, but in automotive, you're lucky if you get 1 or 2, 3% premium.
Sure.
That's pretty much it, right? The market decides the price and decides that we are able to deliver those margins at the price that the market is paying for our product tells a little bit about how productive and how efficient we run our plants and our supply chain.
Gotcha. Can you just talk a little bit, and I know that you've spent quite a bit of time educating folks as to, you know, what is driving Motion Technologies', you know, margins relative to other auto suppliers, maybe, you know, 30,000-foot view, what makes it possible for you guys to have over 20% EBIT margins even now when auto volumes are depressed and you're not getting any volume leverage?
Sure.
What is the business model?
Sure. There is one part which is linked to where we play in the supply chain, which is the same for us and for our competitors, right? Which we like where we are. For example, you design the new car, the new platform. You design the car, you design the axle, you design the braking system, the caliper, you produce it. The last piece is the brake pad. Now when you are at the very end and you're testing, if you have a problem, you cannot redesign the car, the axle, the braking system, the rotor, the caliper. One thing that you can still play is the brake pad. You are at the very end of the supply chain where you can still change things and you can and that is a nice position to be in.
High pressure and all this kind of stuff, but high position to be in. The cost of the brake pad is a small cost when you look at the entire cost of systems, et cetera.
Mm.
This is true for us as well as our competitors. We like where we are in the supply chain. What is different between us and the competitors is that when you look at our footprint, it is a very concentrated manufacturing footprint. Five plants to make a number of brake pads. Our competitors who make the same number of brake pads will have more than 10 plants. 10 plants to make the same number of brake pads, so you can imagine how inefficient they are when we do have scale and the economies of scale in the plants. Second is the level of performance. We have performed in the last 7 years, every single month at 99.95% on-time delivery to customer request date, no matter COVID, the war, the UAW strike, the hyperinflation, no matter what.
On quality, we measure the quality in parts per billion. Our competitors are two levels worse than we are, orders of magnitude worse. All of those really make our business substantially different in terms of performance as well as innovation.
Excellent. Maybe it's quite interesting, but you have new plant, Termoli, and it's sort of the pilot site for next-gen manufacturing. It is lower volume, right?
Yeah.
Because it's high performance component. You know, can you just sort of, what have you learned internally, and any sort of KPIs that you can share about-
Sure
the performance, you know, and particularly the read-across or automation.
Sure
Because I'm sure that there are some sort of pilot projects that can be applied elsewhere in Motion Technologies and elsewhere in the company.
Sure. One thing that this was an area of growth for us, because usually we played on the vehicles, but in terms of high volume, low mix. This was our manufacturing set up for that because it was highly automated, same machines, and a conveyor that generates a one-piece flow. The material is right to the line, and then it gets into the line, and nobody touches the product until it comes out of the finishing line, where there are three women that are actually checking the quality of the product. Now, this system was great, highly automated, but if you have a low volume, high mix, because of the conveyor, et cetera, you would have lost a lot of efficiency in the line, in the plant, if you're using the same model.
We cannot change the machines that we're using, the presses, the grinding, the finishing line, the oven, or the painting line. What was good is that our engineering team in Italy actually designed a plant, a line where you have the same machine, which was a must, because that is a standardization that is a must across all different plants. They eliminated completely the conveyor system. They automated even more with more robots and AGV, practically a robots on wheels, so that we were able to maintain the same efficiency in the plant, but also with a low volume, high mix. This is what made us willing to go also after this market.
So far, we won in terms of awards 9% market share of the high performance, which means you don't see that in revenue, because when you win the award, it takes two years to get to the SOP, to the start of production. I would say we have been very effective in terms of winning. We started that plant in January last year, and we're already profitable when it comes to January 2026. The team has performed incredibly well.
Any read-across, you sort of said it's low volume, high mix, and I'm probably comparing like apples and oranges. Any sort of read-across for SPX, because I know that flow businesses, it's single piece flow. I think it's the ultimate low volume, high mix product.
Sure.
Even low volume, or it's just order of magnitude, high mix, then.
Yeah. I think that there are
Is it comparable, or is it just two different products?
They're different processes.
Okay.
I mean, there are things that you can learn from. For example, Motion Technologies is absolutely a master in reducing the changeover time.
Yep.
We have a methodology in doing that, and I think that is something that can be applied also when you come to changeovers in the other businesses. I would say they're more opportunistic and ad hoc than a blind adoption of one methodology to the other business.
All right. Maybe we can shift to Connect and Control. What about margin growth for Connect and Control in 2026? A couple of things. A, dilution from Kais-AIR largely goes away, and B, I think sort of you talked about but, you know, uplift from renegotiated contracts was probably.
Yeah. Sure. When you look at CCT, we closed that business at an operating margin between 19% and 20% in 2025. Our long-term target by 2030 is 25% operating margin. It's the business that's got the longest, the highest, the biggest improvement to make, but at the same time, it's the one that's got the biggest leverages. First of all, of course, the market is great, so you will have benefits from a volume point of view. As you said, there is a pricing impact. We finalized the negotiation with Boeing at the end of last year. We had long-term agreements with fixed price contractor that go back to 2014, 2015.
You can imagine this is quite impactful from a pricing point of view in 2026, and it will be also in 2027, 2028, and 2029. Then there are a lot of efficiency that can be gained in the way that we are running the shop floor. Today, I would say when it comes to lean, probably the plants in CCT are the least mature across the ITT portfolio.
Mm-hmm.
Those are the three main levers that we are working on.
Thank you. Maybe defense aftermarket, you know, you've alluded to it, but how should we think about potential impact from the events in Iran?
I think that, to be honest with this, is definitely a tailwind. When you look at the CCT, the connector side really do not have a lot of aftermarket. It's more on the CT side, on the component side that there is a good aftermarket business. I would say that the unfortunate circumstances that we're facing today are actually playing a tailwind for our defense business and the defense aftermarket for CT as well.
Inside that business, just generally, your short cycle business has held up much better than peers.
Yeah.
What's been driving the outperformance, and does that outperformance slow when the market recovers? Or do you expect to continue to outgrow the market?
No, we expect to continue to outgrow the market. I mean, at the end of the day, our people do not get credit for a growth which is the market growth. Everybody would be able to do that. You know, market grows 5%, you're growing 5%, you're not really growing. I mean, it's the market that is really pushing you. So, we expect our businesses and our people to continue to outperform the market on the connectors as well as on the control component side.
Excellent. You know, the margin target for CCT assumes the most margin expansion of the three businesses. I mean, clearly, I think Kais-AIR and Boeing are part of it. Maybe another way to ask about it. What are the gross margins in this business relative to the other businesses? Is the paradigm that it's a gross margin story?
It's the highest.
Huh?
It's the highest.
It's the highest.
It's the highest.
It's the SG&A?
Yeah. It's the highest.
Okay.
Okay. You need, despite all of that, there is, even if the highest gross margin, I would say, just to give you an example, you are on a manufacturing line making components in CCT, and you have this station which is called the tuning station. Well, it's a tuning station because you didn't get it right the first time, right? In Motion Technologies, you will not get a tuning station. That's a waste.
Right.
Right? I think that, even if that is an improvement that you will have in the gross margin.
Yeah
Right? Even though the gross margins are the highest in the ITT portfolio, this doesn't necessarily mean that they cannot be better. They can.
I think we're right on time. With that.
Okay
Carleen, Luca, thanks so much.
Thank you very much, Andrew.
Thank you.
Thank you.