Welcome to the afternoon, first afternoon session. With us we have ITT, the management of ITT, Luca Savi and Emmanuel Caprais. We also have the IR team here as well. One of the best operators in the space, usually one of the most insightful presentations.
Thank you.
We'll set the bar high. It's a pleasure to have you guys back in London.
Thank you.
I believe you have some slides to talk about. Thanks for being here.
Thank you.
Thank you, Andrew. Can you hear? 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 you, yes, 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 filing available on our website. Thank you.
Okay. Thanks, thanks, Emmanuel, good afternoon, everybody. Let me spend a couple of minutes on ITT because everybody knows the name, but not many people know what we do, which tells something about our marketing skills really. What we do is really components for harsh environment. We're an engineering and technology company, and we are working across different sectors, being automotive, rail, energy, and the general industrial. The products that we do are brake pads. You know, if you were driving on the M25 this morning and you had to use your brakes suddenly, these chances are that the brake pads that kept you safe are ITT brake pads.
We make connectors that are used for transfer of data or power in medical or the EV charger connectors and also pumps and valves. These are really the product that we're making. Across automotive, as you can see, automotive is probably our largest portion in terms of market that, we are working in. Is oil and gas, is, you know, is aerospace and defense and general industrial. Roughly $3 billion company. Last year we had our first investor day, where we communicated our long-term targets, which when it comes to growth is a 5%-7% organic growth. This doesn't take into account acquisitions. Margins of 20% long-term targets and adjusted EPS growth of 10% and a free cash flow margin between 11% and 13%.
When you look at 2022, we are on our way there. With some of the businesses, the pumps and valve business, the connector business, that will probably get to their long-term targets earlier than predicted. Motion Technologies that we get there probably towards the end of the range that we communicated to investor, which was three to five years. One thing that, you know, from a commercial point of view that we just communicated yesterday in terms of press release is a $1 billion agreement that we agreed with Continental, is our partner in the independent aftermarket in automotive. This is a contract that will stand for the next 10 years, and it comes for the European aftermarket business for brake pads in automotive.
With that, I pass it over to you, Emmanuel, for Q1.
Thank you, Luca. A quick update on Q1. I would say broadly, Q1 is shaping up as expected. We continue to see nice order growth. In Q4 last year, we had close to 12% growth year-over-year, and we continue to grow in Q1 year-over-year. This is really coming from obviously positive industrial market, but also outperformance share gains. We continue to gain share in automotive. We continue to gain share in pumps and valves. That $1 billion, a little bit more than $1 billion, backlog that we had at the end of last year, we are working hard to convert it, especially when it comes to our pumps business, our aerospace business and in general industrial products.
Price recovery is going well. We're really focused on making sure that we recover this cost inflation that we faced over this two year cycle. We are really invested in making sure that over this product rejuvenation cycle, we are able to get those costs back through the price. This is working for Motion Technologies obviously. Motion Technologies is gonna be price cost positive this year. Our industrial process business is also doing well, as well as CCT. From a cost inflation standpoint, the commodities and the energy prices are in line with what we were expecting.
A lot of it is due to the fact that we were able to hedge those costs for the year 2023, both for steel, copper, tin, but also energy, electricity and gas earlier this year. As a result, we have a certain level of certainty for 2023. We also see pockets of activity that is slowing down, especially in our industrial connectors. Our distributors are facing destocking mandates. As a result, we see a little bit of demand slowing down from their part, but it's really a lot of destocking. That's probably gonna happen in Q1 and also in Q2. We are also very much constrained by supply chain in aerospace. This is not new.
Aerospace in general has been struggling with supply chain. This is impacting us as well. Overall, I would say Q1 is going as we were expecting. We expect an EPS growth of a little bit north of 15% year-over-year.
Excellent. Thanks so much. Maybe I'll start with your update because I think one of the previous you know, actually, a couple of speakers have sort of said the supply chain is improving. I think Honeywell earlier in the day sort of they actually highlighted material improvement. You know, they said aerospace supply chain is getting better. How much of it, you know, just things are in line with your forecast? You know, just maybe a little bit more color on what you're seeing on the supply chain?
Sure. I think that aerospace for us is continues to be difficult. We're seeing a general improvement in the supply chain, aerospace is something that is an area where it's not improving as fast as we would like. We are in line from an order acquisition, from a customer standpoint, we are in line with our expectations. Just our suppliers have difficulty ramping up. You know, between the suppliers that shut down during the COVID period and that were making maybe a part that we hadn't made in two to three years, with some suppliers who have difficulty securing casting parts, for instance.
Yeah.
It's a little bit difficult, but I would say not materially different from what we were expecting.
Okay. No, that makes a lot of sense. Can I just ask you, and I think you did talk about specifically just talking, I think, on the connectors side. Just generally, what do you feel about inventory? Because I think our view was that as lead times start normalizing, we would have expected people sort of to take down inventory in the channel. Instead, I think just broadly speaking, top-down, we saw industry build up inventory in the fourth quarter. You know, our take was that a lot of it had to do with concern about China reopen, so people built more of a buffer stock. What are you seeing just generally on inventory, the stocking, order activity, not related to underlying demand, but more about this bullwhip?
I'm aware that I think on the connector side, it is probably maybe demand related, and it's a. Let's take the connectors aside.
Yeah.
Right? Because I'm very much aware how you think about it. Yeah, what are your thoughts just generally, connection between lead times, orders, and inventories? How do you see that?
In Odoo, we saw in Q4 a significant adjustment of our customers' inventory. They really stopped the factories earlier in the month of December. The tier ones which had accumulated inventory really used that longer period to reduce inventory. That was not specifically China, it was probably more Europe and the U.S. What we see that this is largely behind us right now. We're not seeing any type of buffer between us and the OEM.
Yeah.
From a pump standpoint, our baseline pump, our distributors are reporting that they don't have more inventory than normal.
Yeah.
We don't see a problem here. We don't see also the growth rates materially changing also. They feel that there's no reason to adjust the inventory from their side. Connector, we talked about. We talked about. Aerospace, I think aerospace, they can't put their hand on enough products, unfortunately.
Yep. No, that's great. Maybe we can talk about sort of longer term stuff just to shift. Over the next three, five years, you know, how do you think about the platforms that will drive market outgrowth for ITT? You know, what are the big structural trends that will support growth at ITT over the next three to five years?
Okay. When you look at the structural trend that will support the growth for ITT in the next few years, start with the second part of the question. Well, if you look at automotive was still quite depressed when you look at 2022 with roughly 82 million vehicle produced. In the next few years, the automotive market will grow, and in that is the electrification. Electrification is good for ITT. We may talk about it later, where we are winning more than our fair share. That is something that will feed our growth. The second component is the capital investment, the CapEx in terms of projects. We have seen, you know, the project orders growing in the last few quarters of 2022.
At the earnings call, we shared also an important order that we won in January in terms of projects. Those projects fed by ensuring or reinvestment is something that will keep on feeding our growth in pumps and valves. Last but not least is the recovery in Aero, which is there and is good. It's probably to be better than what we expected. Also the recovery in Aero, you know, wide body, where we're probably a little bit more exposed. That's good. I would say also unfortunate the growth in defense, right? That would be a tailwind for ITT as well. Those in terms of macro trends.
In terms of the outgrow in the market, you know, when you look at automotive, we outperformed the market in the last 10 years by roughly 800-900 basis points. Of course, that becomes more and more challenging as our market share has grown substantially. What we communicate to the market is that we continue to outgrow the market in the next few year by 400-500 basis points. Because we have won the awards in the last two years that we start production in two or three years from now, we can say confidently that that will happen. When it comes to our pumps and valves business is pure, proper and flawless execution on the projects.
Think about it, our factory in Saudi, in Dammam, making projects for the Middle Eastern region, had a performance in 2022 of 100% on-time delivery on projects. And if you work in that region, I can tell you know, it's not that easy. And having that type of performance will guarantee you the customer loyalty, and this is what will feed our outgrow performance, Mr. Mark.
Excellent. Maybe we can talk about the EV, right? Can you just talk about, you know, why is EV, you know, how is EV different from a regular car? How is the per vehicle content for brakes different from the traditional, you know, ICE platform, and why is that important for, you know?
Yes, sure.
Why are you taking it? What's different, and why are you taking share?
Sure. First of all, when you look at content, you have eight brake pads in an internal combustion engine, you have eight brake pads in an electric vehicle. The content is roughly the same. What will happen that the revenue, the $ per or the GBP per vehicle might be a little bit higher simply because the electric vehicle is heavier. Therefore, when you brake, the braking surface between the rotor and the brake pad needs to be a little bit larger to ensure that your braking performance is exactly the same. You have a bigger brake pad, therefore, the dollars that there are per vehicle is a little bit higher. That in terms of content per car. In terms of, why is it different and why we're...
Well, we are winning more than the market share that we currently have, because it's substantially a different problem. Because of that, one of our strength, which is R&D, is able to bring home the orders. Why? If you have an internal combustion engine, you're using your brake all the time, which means that your brake pad is actually hot. Therefore, for 80 years, the industry has worked to guarantee a performance, knowing that the material science between the tribology between the brake pad and the rotor is at that kind of temperature, and you always study that way. Today with electric vehicles, you don't use the brake pad all the time. That brake pad is cold, so the material itself performs completely different. The performance that you want is exactly the same.
Because it's a new problem, it's something new that nobody has faced before. If you have a strong R&D, which is one of the way that we differentiate ourselves, you solve the problem faster and better than the competition. This is the reason why our win rate in electric vehicles and electrified platforms is substantially higher than our market share existing today.
If you think about that, Andrew, in terms of long-term expectations, you have a global auto market that today is around 80 million-83 million cars. At the peak, it was higher than 90 million. You're gonna have that growth in terms of recovery of the initial production. You have the EV segment that grows disproportionately faster than the ICE segment. On top of that, we have a win rate for ITT, which is higher on the EV side, and you have a price that is also higher. If you think about the compounding effect on the revenue for ITT, it's gonna be very interesting.
Can we just talk about your exposure to IRA? We did a report on EV battery plans, Mark pointed out that you had a press release that I missed, so I will acknowledge it and ask about it. You know, because how should we think about on, particularly on the flow side, right? Because we sort of think about not just electrification, but we do think an underappreciated aspect of the IRA is decarbonization, which is carbon storage, hydrogen. What's your exposure, and what's your ability to play in that part of the industry? What conversations are you having? Then, you know, let's talk about the EV plant because-
Sure. Let me give you a couple of examples. Emmanuel, please feel free to build on those. I talked before about, you know, this big order that we won in, you know, in January for flow. That is an order for, you know, an independent oil company for decarbonization. What this company had in this, in this part of, it's got nothing to do with IRA, but in Africa, is that they had wells, they were extracting oil, comes up with oil, water, and gas. They were separating, they pump the oil, and they flare the gas, which is bad. Where some of our pumps, the Bornemann pumps, which are twin-screw pumps that are able to do multiphase pumping, are actually enabling to stop the flaring.
This is a $30 million order that we won in January. Where in this country, in Africa, we will put these two pumps that will be able to pump everything, gas, water, oil, to a distribution station down the line, 60 mi down the line, where you can separate and then you can sell, you know, the gas. That is a part of the decarbonization, and we are one of the two, three companies that can offer that type of solution. When it comes to the reshoring and some also of the investment in new energy or, you know, that you see in the U.S., we've been able to win, you know, some nice orders if it is in a recycling of the battery in Upstate New York.
I would say last year, our orders growth in those businesses were.
50%.
50%.
For green, let's say green projects, our orders grew by 50%. I think that the projects you were referring to is the auto manufacturing plants that is being built in the south where we are... we got the order for the pumps that are gonna be directed to the battery manufacturing plant, yeah.
If you were to size the green business, you know, however you define it, how big is it today? Like if you were to estimate.
If we look at IP, in terms of orders, it's around $30 million that grew 50%.
Yeah.
-year to 2021. obviously, if you think about, the EV business Inm otion Technologies, it's around 20% of our OE sales, which are for E-EV business already.
Mm-hmm.
which is higher than the-
Right.
The current production, the global production. The other thing is that, for CCT, we sell those EV connectors.
Right.
Those EV connectors actually grew in 2022 100%, and this is roughly a $40 million business.
Okay.
that we created from zero.
Okay.
It's not yet a huge pace, but it's growing really, really fast.
Gotcha. Before sort of, you know, just staying in the process space, you know, given sort of the volatility in the oil prices, what's the feedback from the customer? I think at BofA we do on the downstream, I think BofA is very bullish, about sort of downstream cycle over the next several years, right? With the energy crisis in Europe, I think you should have nice visibility on LNG.
Yeah.
Can you just talk about the visibility? I think people really focus on near term oil price fluctuations, but what kind of visibility do you have, and what are the conversations like with your customers in the face of this volatility?
Sure. When you look at LNG is that we got good opportunities over there. One thing I want to share with you as well is that when those investment were frozen or postponed in 2020 because of COVID, what we were able to do is work together with some of our closest customer being, you know, end user or EPC to win engineering-only orders. Instead of the investment of $20 million-$30 million in a pumps project, we will say, "Okay, why don't we sit down and, you know, we win the award for $800,000, do the engineering, so that when this project comes to life, you know, you got the foot in the door." This is actually what has happened when this investment then restarted.
There is a lot of the investment on LNG that we will benefit, you know, our IP business in the near future. When you look at also oil and gas, there is a wave of investment due to the lack of investment in that sector, you know, in the past years. There has been this in the Middle East where our great performance is obviously helping in terms of our customer loyalty. You think about the carbonization, the example I gave you in terms of stop the flaring. I mean, you need to expand that across the board. That would be a great opportunity for us in terms of upstream.
Also a solution for that is that, listen, the energy transition will happen, but I think that people realize that probably it's gonna take a little bit longer than originally envisioned. Those investments are happening. We're talking with the customer. The orders, you see them in the last few quarters. I can tell you that the funnel of opportunity is still today very, very rich and the largest it has ever been.
It is, it's interesting. I've been to a bunch of meetings, over the past literally several months, it is new theme that several CEOs have stated that there's this recognition that energy transition will take longer, it does seem to be something that we're hearing more this year. Where did that come? I appreciate that it's a, from my standpoint, it is a realistic view.
Probably.
It is a new theme.
Well, no, I think it's probably a touch of reality.
Right.
Came down to earth.
Right.
Yeah.
Maybe we can just talk about aerospace and defense. Anything about your base case, you know, about aerospace recovery that's different, or should we just look at Boeing and Airbus production schedule and we should just look at that?
Yeah. For aerospace recovery, we're mostly driven by Boeing.
Yeah.
We have some content with Airbus, but historically we've been with Boeing. We're tracking really closely to Boeing.
They said aftermarket wide bodies, right?
Yes, that's correct. It's mostly wide bodies more than... We do have a presence in the narrow bodies, but it's mostly wide bodies.
As wide body opportunity, because I think several folks have stated, I think GE two weeks ago stated that that's maybe better than expected. I think Honeywell said wide body is better than expected.
Yeah, yeah. Demand, demand is certainly pointing towards a quicker wide body recovery. Yes, that's correct. Then we have a little bit of a presence also in business jets and that has been doing really fantastic since COVID, really.
On defense, I guess the presidential budget is out. Any surprises? Any updates from where ITT stands?
No, I would say defense is another tailwind, and it is across the world, right? For sure, U.S. is the biggest market, so that's great. We are working that across in CCT, across the board, if it is the soldier modernization, if it's the Nett Warrior, or if it is also for helicopters with the FARA program, where we're working both with Bell and Sikorsky. We are agnostic on who's gonna win the program. Also the increase in terms of defense budget in Europe, and therefore we have nice wins when it comes to the connector business over here in Europe, in Germany, as well as for our shock absorber business in terms of the new platform for new vehicles, where our shock absorbers or our HydroRide new product are fitting very, very well.
Yeah. What should we talk about? Let's talk about self-help. You know, you know, IP-
Thank you, though.
Yeah, yeah. IP and CCT, you know, very good margins this year. IP in particular, well on its way to reach long-term targets. Motion Tech, you know, price cost has been a headwind. Channel inventories and always supply constraints, that seems to be working itself through. What self-help levers have you identified to sort of continue to expand margins and reach your long-term targets? What are the big buckets that are available to ITT?
Listen, when the one thing is pricing. When you look at the pricing is, if there is a benefit to the inflation, if you wanna look at that, is really developing the pricing muscle. This is something that was underdeveloped within ITT, and we've started, we have learned, we are learning, and therefore that is definitely something that will continue in 2023. Think about what Emmanuel just said, that 2023 for Motion Technologies will be price cost positive.
Right.
That as an example, this is one lever. Second is in terms of operational efficiency. Every time we go to a plant, I can tell you, and you visit a plant, you go through the plant, you get out half smiling and half, "How is it possible that you still have all these improvements to make?" If I think about on the footprint, we communicated last year that we're gonna close the foundry in Upstate New York in Seneca Falls. This is where we're doing steel casting. This is a process that is taking two years because we wanna do properly without impacting our customer and our project base. This is something that will be closed by March 2024.
That will be a benefit in terms of our cost base and our competitiveness. The continuous leaning of the factory is automation, being on a painting line in a pump manufacturing site or on the connector assembly line in Nogales, Mexico. I would say foot pricing, footprint, lean, and automation are the key factors that will keep on driving, you know, improvement in margin.
Andrew, if you think about IP, I think it encapsulates all this because you remember IP, we are now around between 18% and 20% in terms of margin. IP, really when you think about that margin trajectory, really benefited from pricing, benefited from lean, especially in Seneca Falls. We've talked a lot about this, how this has really enabled us to really reduce the lead times and increase the throughput. If you think about footprint, you know, we talked in the past about how we closed one site in Brazil, one site in the U.K, and now we're closing the foundry. All this is really coming together now and help us produce those really good margins we have in IP.
Got you. Something, Luca, you said, which I also found interesting. You know, the trick with inflation, I think that it's all about expectations, right? If people expect inflation and start sort of pricing it into their behavior, that's what makes it sticky. Do you find that, because you have mentioned that, you know, you've developed the pricing muscle, another way to say is that, you know, your customers are now trained to expect inflation, do you find that people's behavior has changed in terms of inflation, broad inflation expectations, as they sort of build their business models as you negotiate?
Yeah. I think that there is an element of that for sure. Just to give you an example is in automotive. I think if you look at automotive for 20, 30 years, they behaved in a certain way, where you had to give efficiency every year. I think that what there has been a realization because of inflation is that, you know, you have to take into account the cost of the raw materials when that you cannot compensate with pure efficiency, the cost of energy over here in Europe. Therefore, there has been more of an opening and the realization of what's going on. As long as there is that, then it's put into the budget, and then it's easier to sit down and negotiate with the customer.
My next question, I think you've answered part of it, but maybe it's another way of asking, something similar. If we look 2023 outlook, right, it's 7% organic growth and 6.5% EPS growth at the midpoint. You know, your long-term targets are a 10% EPS CAGR, 5%-7% sales CAGR. Your sales is coming in at the high end, and it seems between inflation, reshoring, probably that's gonna be easier to get. How do you think about sort of managing operating leverage in this environment, and particularly the need. You know, we did some numbers, and I think the growth has been, and our capacity expansion has been like 1% a year for the past decade, right?
You could just sweat the assets and get more and more out of the existing assets. As we have environment where there is potentially more growth, right? How do you think about the balance of, you know, operating leverage, but at the same time, having enough capacity, having enough right capacity to keep up with the end market?
So if you think about.
Does that make sense what I'm asking?
Yeah, no, absolutely. If you think about the incremental margins this year, they're gonna be a little less than 30%.
Right.
Which is not the highest level we've been, but it's really a good number. One of the reasons, one of the main reasons is because we are investing. We are investing in productivity, we're investing in growth, and the growth is mainly coming from Motion Technologies with all the market share gains that are happening right now. We need to support our customers with their increased volumes. If you think about productivity, this is mostly IP and CCT, where we really have to drive those productivity projects in order to make the margin levels that we have sustainable and further expand upon them. There's another aspect which is about innovation.
We are investing a lot in IP and CCT with new products in addition to MTO for sure. In the past, IP and CCT weren't really focused on rejuvenating the product portfolio.
Right.
You heard us talk about value analysis, value engineering, projects that are redesigning completely the pumps, reducing the cost, increasing the performance. We are investing in new products also. We are looking at all kind of end markets where we see an opportunity. Mining is one of them, for instance. In CCT, obviously, we're investing in new products for defense. We, Luca mentioned that we came out with a whole new suite of products for the Net Warrior program, and that's gonna be a really lightweight connectors that are really gonna help us gain share. For us, what's really important is to make sure that we make the investments both from a process and from a product standpoint that are gonna allow a long-term growth.
Just to finish on the investment side, sort of working capital, right? What are you thinking of this high growth environment? What's your ability or what's the need to sort of carry higher level of working capital, and what's your ability to sort of release working capital in the near term?
I would say when you look at working capital in 2022, our working capital increased substantially. I would say half of it was a conscious decision in order to be able to deliver for our customers. you know, we would not have been able to deliver 99% on time delivery in automotive if we didn't invest in working capital and inventory. But some of it was due to, you know, the supply chain constraints, but also our constraint internally. I think that there are improvements that we can make in working capital despite the growth that we will have in 2023 and the years to come.
Yeah. I think if you look back to what has happened in 2022, the working capital growth was really driven by inventory. We increased inventory by roughly $100 million, which is a really large number.
Right.
In 2023, that a little less than $400 million of free cash flow that we're predicting, that we're guiding for in 2023, some of it obviously is driven by a higher income level, but some of it is we're starting to deleverage the balance sheet and then making sure that we convert some of that working capital, especially the inventory, in cash. One great statistic that I think shows a little bit the progress we've been making is that in Q4, our free cash flow was the double of the first three quarters of 2022.
Right.
We have created that momentum already in Q4, we're gonna continue every year. We think that by probably sometime in 2024, we should have been able to recover all the working capital excess that we had to build in 2022.
Maybe we can talk a little bit about M&A priorities.
Mm.
How is the environment? We've heard an argument that recently a lack of private equity bid sort of makes people reluctant
Mm.
To sort of put properties out there. From your perspective, like what is, you know, how do you see various actors, you know, access to capital valuations, what's available? Can you just talk about what it is you're seeing on the M&A front, and what are ITT's priorities on M&A?
When we look at the ITT priorities in M&A, you know, our last acquisition was in 2022. It was a valves company based out of Israel. We bought it with a multiple of 12, and when you look at the results of 2022, the real multiple was actually something between eight and nine.
Right.
I wanted to share this because, that is the type of acquisitions that we are really looking for and cultivating and hopefully bring home. I think that we are focusing more today on acquisition to add to that 5%-7% organic growth, particularly now that we are asbestos-free because we got rid of the asbestos in 2021. The areas that we are looking at in terms of acquisition are really three areas, are pumps, valves, and connectors. We like those area that will help us to rebalance the portfolio, but also those are areas where the market is very fragmented. There are opportunities there on the pumps, on the valves, and on the connectors.
When we look at what we've been able to achieve in the pumps and valves business in terms of the profitability journey, taking them from, you know, what it was a 7% operating margin to 18.8% in 2022, and also the margin on the connector side of the business, we think that we can create a lot of value there. When it comes in terms of the opportunity we see there, True what you're saying in terms of there was been an impression that private equity was no longer there. The deals that are strategic for them to make, they're still there. So.
Right.
That would be my feedback.
What about rail as an area of interest for Emona? You didn't mention that.
Yeah. Rail is an area which is interesting for us as well because we like the dynamic of rail. I think there is a lot of investment is gonna happen in rail in the future. 60% of the market in rail is aftermarket. Therefore, the dynamics are good. I think that what we have seen in rail is also that we can grow organically quite a bit.
Nice.
There is a major European program, which is the DAC, the digital automatic coupler, which will practically substitute the coupler in the freight industry in Europe to make it much more efficient.
Mm.
That is going to be. You know, they're going to substitute the coupler of roughly 500,000, you know, cars in rail. There's going to be this huge investment, and then it continues for the next 20, 30 years. We are working with a couple of tier one with the designing a specific product, which is the draft gears, the energy absorption, and therefore we see opportunity to grow organically there as well.
Very interesting. Maybe we have a couple of minutes. I don't know if there are any questions from the audience. Going once, going twice. Okay.
Three.
I have questions. Maybe what kind of visibility do you have on reshoring both from the perspective of your customers and how you guys look at it? I know for you, reshoring is North American reshoring, maybe nearshoring as opposed to North America because you have material operations in Mexico, which you're expanding. What are you seeing from your customers, and how are you guys yourself thinking about sort of moving your own supply chain closer to home?
In terms of, let me talk about.
Regional.
The supply chain. You can give a couple of example on the reshoring. In terms of the supply chain, the strategy that we have always adopted is being to be in the region for the region. For instance, if you look at MT, we are in Europe for Europe. We opened a plant in Wuxi, China, for the China market, for the Asian market. We open a plant in Silao and Mexico for the North American market. This is the model that we have adopted and we believed in. Having said that, there are some sourcing that we believe will stay global. Let's face it, I mean, if you make pumps and you are sourcing casting, you know, you will keep on sourcing casting out of China and India. It doesn't...
There is no way that you would be able to compete otherwise. You will still have from a supply chain some resiliency and develop relationship with foundry locally in North America, be it Mexico or U.S. You know, some supply will keep on being global. In general, it's region for region. On the insourcing?
Yes. I would say on the nearshoring, I can give you a couple of examples. We participated, and we got the project business for the new semiconductor manufacturing facility out of Arizona. Our approach to a nearshoring is really, we understand the trend, but we're really asking our people to look at all the different opportunities that we have there, and we go after them very strategically.
What do you do there, Sammy? Is it connectors? Is it water treatment or?
Yeah. We do... it's in the water treatment.
Okay.
Yeah.
We have 15 seconds left.
Okay.
I'm gonna finish it there.
Okay.
It's always a pleasure. Thank you so much.
Thank you, Andrew.
Thank you.
Thanks, everybody.