Good morning, everyone, both in the room and to those joining us live via webcast today. I'd like to welcome you all to Timken's 2019 Investor Day. For those that I haven't met, my name is Shelly Chadwick. I'm the Vice President of Finance and Chief Accounting Officer for the company. I'd like to take a moment just to thank you all for being here. I know it's a chilly day in New York City, but we appreciate you coming to hear more about how Timken is advancing as a global industrial leader. This morning, you'll hear from our President and CEO, Rich Kyle, as he gives you an overview of our strategy, performance, and future outlook. Our Group President, Chris Coughlin, will then go a bit deeper on our business segments and discuss how the Timken business model is creating value for the company.
After Chris speaks, we'll take a short break. Then Andreas Roellgen, Vice President of Europe, Asia, and Africa, will join us to talk about our continued leadership in Engineered Bearings . Then Hans Landin, Group Vice President, will outline how we are growing a global diversified portfolio of power transmission products. Our final presentation today will be from Phil Fracassa, Executive Vice President and CFO, as he shares more details on our financial performance, capital allocation strategy. Then he'll outline our early 2020 guidance and go into more detail on our longer term targets. After Phil's presentation, we'll welcome Rich, Chris, and Phil back to the podium for a Q&A session, followed by a networking reception and buffet lunch, which we hope you'll all join us for. During the meeting, we'll be providing supplemental materials that outline more details on the financial targets and guidance.
Look for those to be handed out this morning. We'll also be posting another version of our deck, which includes these materials, around the same time. If you've already downloaded our materials, please be sure to check back. Before we get started, I have a few additional items. First, I'd like to ask that each of you take a look at our safe harbor statement on slide four of the prepared materials for more information about forward-looking statements and the use of non-GAAP measures, which you will see and hear more about during today's presentation. Secondly, in the room today with us is Neil Frohnapple. He's our new Director of Investor Relations. Neil, raise your hand. Neil joined us just this week and is looking forward to getting to know those of you that he hasn't already met as he assumes lead responsibility for Investor Relations for Timken.
Neil comes to us with 13 years of experience as a sell-side equity research analyst covering industrial companies in the machinery space. He's already quite familiar with Timken and with many of our investors. Jason Hershiser, who many of you know and have worked with for a number of years, is also here with us today. Jason is going to be assuming another role within finance for Timken, and we wish him well as he transitions to new challenges. Lastly, I want to touch on one additional housekeeping item. You'll see in some of the slides today that we're showing adjusted EBITDA. We've decided to start using EBITDA and adjusted EBITDA as our main operating income metrics in place of EBIT and adjusted EBIT.
The main reason is the amount of M&A we've done over the last couple of years has created a significant amount of non-cash purchase accounting amortization expense, which in turn has affected the comparability of our results. We think this is a good move to help investors better understand our results, and we'll make this change beginning with the fourth quarter of 2019. We intend to use EBITDA for both consolidated and segment results. Prior to releasing earnings for the fourth quarter, we plan to post an Form 8-K that will contain EBITDA information for relevant prior periods. With that housekeeping out of the way, please join me in welcoming to the podium Richard Kyle, President and CEO of The Timken Company.
All right. Good morning, everyone. Thank you, Shelly, and thank you all for joining us here in New York and on the phone. Our Timken management team is excited to share with you how Timken is advancing as a global industrial leader. Timken has been a strong investment, and our company has never been stronger or better positioned to deliver shareholder value for years to come. Today, you'll hear more about our strategy and how we're winning across product lines, markets, and geographies for members of our management team. Each member of this team has been with the company for more than a decade. They have all had key leadership roles in advancing Timken to the company that it is today. They are very capable of delivering on our new financial targets.
Over the last decade, Timken has been evolving into a global industrial leader with a growing portfolio of e ngineered bearings and power transmission products. We took actions to proactively reposition the company. We built scale, expanded our product offerings, grew geographically, and diversified our end markets. The result is a financially stronger company delivering greater returns and cash flow. Our new financial targets over the next five years will continue to grow the earnings power of the company. As compared to the last five years, they reflect slightly more organic growth and a little less inorganic growth, with good margins and returns, and strong cash flow in the deployment of that cash. We'll share through the morning why we're well-positioned and confident to deliver on these targets. The Timken Company has been around for a long time, with a 120-year history and 97 consecutive years of dividend payments.
We will end this year at about $3.8 billion in revenue and adjusted EBITDA margins of 19.5%. We will deliver our second consecutive year of record earnings per share. Since our founding, Timken has been a world leader in bearing technology. Bearings are critical engineered components in all equipment designs that require rotating motion, and they will remain vital in next generation equipment designs. While most of our history has been in bearings, our future is in both bearings and power transmission and motion products, which we've been steadily expanding. Today, our power transmission product offering amounts to 30% of sales. We are a global company with many of our competitors and customers based outside the United States. We go to market directly to original equipment manufacturers as their trusted design partners, and we serve our aftermarket and small OEM customers through our global network of distributors.
We selectively supply to the automotive market, and we are a global broad-based supplier to the industrial market. This is where we focus, and this is where we have a strong and differentiated value proposition. We operate and segment our business by the markets we serve. Mobile Industries is comprised of applications in vehicles and moving equipment. Off-highway equipment like agriculture, construction, mining, and rail. Aerospace, planes and rotorcraft, and on-highway vehicles, cars and trucks. Process Industries is comprised of applications in fixed equipment, wind turbines, solar panels, conveyance systems, oil rigs, and manufacturing plant machinery in diverse industries like metals, packaging, paper, and food and beverage. While there are exceptions to these statements, in general, Mobile tends to be more concentrated at large OEMs, higher volume, smaller products, and less aftermarket than Process. These factors are why Process margins run 800 basis points-1,100 basis points higher than Mobile margins.
We continue to work to mix Mobile margins up, but we expect the margin gap to stay in that range for the current planning horizon. We have and expect to continue to grow Process Industries faster than Mobile Industries, and we deliberately allocate more of our capital and M&A resources to Process. This has mixed the company up and continues to be an opportunity moving forward. In 2019, Process and Mobile will be about the same size for the first time. Bearings remain our primary product line and focus as a company, representing a little over 2/3 of our revenue. We have a strong global position in this large and growing space, and you will hear throughout the day about our competitive strengths and how we're winning with our bearing product line.
About 1/3 of our revenue is derived from products other than bearings, which we classify as power transmission and motion products. These fit into five broad product categories: linear motion, automatic lubrication systems, Drives, belts and chain, and couplings, clutches and brakes. These engineered components are generally found in the same equipment that also contains bearings. Quite often the same customer channels, both OEMs and distributors, and in the same end markets as bearings. Our strategy with acquisitions has been twofold: to add revenue within existing channels, markets, and customers, and also to accelerate our scale in markets, channels, and customers where Timken has historically been underrepresented. This strategy has diversified our revenue streams and provided significant cost and penetration opportunities.
This chart represents our estimated 2019 revenue by end market. I'm going to spend some significant time on this chart as it's very important in regards to thinking about how Timken performed on the top and bottom lines prior to 2014, from 2014 through today, and how we will perform in 2020 and going forward. Two of the big drivers in why we are confident that our top line will perform better in the coming five years. First, the mix that you see on this chart today is stronger than it was in 2014. Second, within each of these segments, we are better positioned to perform. We have steadily shifted the end market mix of our company. We still excel in and focus on serving traditional Timken markets like agriculture, oil and gas, and mining.
We have also diversified our portfolio into other markets, and we've strengthened our performance within both. The first column, General Industrial, includes many markets that individually comprise less than 3% of our total revenue. Machine tool, paper, robotics, aggregate, medical, logistics, food and beverage are all examples of markets contained within that category. It also includes some common aftermarket products that are sold through distributors that could end up in various end markets. This highly fragmented collection of revenue makes up over 1/4 of the company's sales. Our leaders today will share how we are winning in these fragmented markets with a broader and better product offering, and how we have and continue to build a business that is differentiated in serving fragmented markets. After Industrial is automotive. Automotive remains an important market to us at 10% of revenue.
We've significantly shrunk automotive as a percentage of the company over the last decade. Today, it is a market where we intend to hold our position and our profitability, and we have the business pipeline to do so. We're very selective in the niches in which we participate within auto, as the global automotive bearing industry on the whole remains a profit-challenged space. This portion of our business was a drag on the top line for many years, but today we look at this 10% of our business as a good niche business that we will sustain moving forward, but also not the growth engine of the company. Our next largest end market is aerospace. We participate broadly in the aerospace bearing industry as well as the rotorcraft drive market. We are disproportionately weighted to rotorcraft over fixed wing, and defense over commercial, but we have opportunities to expand in all.
Our aerospace business was an underperformer up through 2016. We took actions to improve it, and today, aerospace and defense is contributing to our record performance, and we expect that to continue in the years forward. Three other markets I want to highlight. Renewable energy, which is wind and solar, at 7% of the portfolio. Five years ago, renewable energy would not have been large enough to call out, and it's now one of our largest end markets. As a bigger part of our portfolio with a broader product offering, we expect this market to be an even bigger contributor to our results going forward. While like most of our markets, it does not grow linearly, it is a high-growth market, and it has different cyclical characteristics than many of the traditional industrial markets that are on this page.
Another market that was not historically large enough to call out is marine, which is now over 3% of the company. For Timken, this is primarily U.S. defense. It is not a high-growth business, but it is a stable source of revenue with a multi-year backlog that we can count on for many years in the future, and again, has different cyclicality characteristics than many of our industrial markets. The final market I want to reference specifically is rail. Freight rail has been a traditional strong market for Timken. We also participate in passenger rail, but at much lower global penetration levels. Passenger rail is a significant market for Rollon, and this acquisition broadened our product offering and scaled our global position in this attractive bearing and motion market.
As we look at weakening industrial markets to end 2019, we'd estimate that 1/3 of our business is continuing to expand despite the North American industrial slowdown that started in the third quarter. That would include aerospace, rail, renewables, marine, and several of the smaller markets lumped into the industrial other. Across the markets on this slide, our largest OEM customer approaches 3%. The top 10 OEM customers make up less than 20% of the company's sales. Those top customers purchase across thousands of part numbers and applications. We are typically sole sourced at OEMs. We ship hundreds of thousands of part numbers in a year. When you lay in that product diversity on top of the customer diversity, geographic diversity across these markets, you can see how diverse the portfolio has come.
When we talk about our targets later this morning, you'll see that we are targeting 3%-4% organic growth rate. We're confident that with this market mix and our position within these markets, we are well-positioned to achieve these targets. As we look back to see how Timken has evolved to perform better, I think it's important to note four transformative changes in the company. First, up through mid-2014, we had a steel business that comprised about 1/3 of the company revenues. The spinoff of the steel business significantly altered our cyclicality, capital intensity, and our financial metrics. We've stripped steel out of these 2008 and 2014 pie charts, as well as all the numbers that you will see today. When you look back at our historical performance, our stock price, our cyclicality, our capital allocation, it was certainly a factor in all of those metrics.
Today, we are more focused, and we are moving faster. Second transformative event. From 2000 up until the Great Recession of 2008, 2009, we had an automotive business that was low single-digit margins. We dramatically shrank that business, which hurt our top line up through 2014. As I said earlier, today we like our niche automotive exposure and are well-positioned moving forward, we do not expect this to be the top-line drag that it was historically. Third, our pension plans consumed a significant amount of our cash from 2000 up through 2013. That and the automotive and steel businesses were masking what was really a very good cash generation in our industrial- bearing business, which is largely what the company is today.
Phil will talk a little bit about our pension transformation. Our pensions are significantly smaller than they once were, well-funded, de-risked, and in a very different position, and we're confident in the cash generation of the current portfolio. Finally, as I spoke to on the prior chart, for over a decade, we have changed and diversified our industrial mix by product, geography, and end market to become a better performing company for customers and shareholders. As you look at this slide, up until 2014, the company was really focused on significant transformation. Since 2014, we've really been focused on execution and advancing our portfolio. Now we're positioned to accelerate that execution. On the segments, we've moved from about 2/3 Mobile to about half and half today. Also, if you go back to 2008, the Mobile business was marginally profitable.
Today's 50% delivers solid margins and has for a decade. Very good and very good cash flow. I would expect the mix of the company to continue to steadily move towards Process Industries. On the channel diversity, we expect to continue to keep this mix between 60/40 in both directions with some ebb and flow. As it moves with markets, it moves with mix and as well as acquisitions. We obviously like to participate in the aftermarket, but being designed into the OEM remains important to technical and brand relevance, as well as to capturing our share of the aftermarket. One final note, the chart that is in here that I touched on earlier is our geographic diversification. About half of our revenue is now generated outside the U.S., and our footprint is very well- positioned to serve those end markets.
All this just further illustrates that Timken today is a stronger, more diversified company, positioned to perform better going forward. I've been talking about how much better position we are today going forward. We've performed very well looking back over the last five years. Our five-year revenue CAGR of over 4% has been comprised of over 4% from inorganic growth, with positive organic and negative currency of both under 2% offsetting each other. You'll see that we're in position today to roughly double that organic rate over the next five years to 3%-4%. Just to remind everyone that not only were 2015 and 2016 weak industrial markets, the U.S. dollar strengthened considerably over that timeframe, which negatively impacted us and all U.S. multinationals. On flat currency, the five-year CAGR would have been 6%.
Adjusted EBITDA margins have run between 14.5% at the low in 2016, and this year's high of 19.5%. Our EPS CAGR of 13% with consecutive records last year and this year, and our return on invested capital ranging from 9%- 12.8%. We receive a lot of questions about our cyclicality and how we'll perform in a down cycle, and I want to make four points on this. First, excluding steel, our adjusted EBITDA margins have held this range of 14.5%-19.5% for a decade. During that decade, there have been big swings in steel prices, commodity prices, currency. There's been volatility in trade, changes in tax law, changes in technology, and there have been cycles in every one of our end markets. Timken has been a steady and improving performer for more than a decade through all that volatility, and we will continue to do so.
Second point is, if you look over a longer period of several decades, outside the great recession of 2008, 2009, and again without steel, our markets expand and contract over quarters and years. We get a lot of questions about sharp falls, and certainly when we had a steel business, we experienced sharp falls. If you extract that and look over 30, 40-year period, that is just really not how our markets have historically moved. In fact, the drop we just experienced from the second quarter to the third quarter of this year was among the sharpest quarterly declines we've experienced in the last two decades, and we are navigating that drop just fine.
Third point, in a flat or declining market, we generate very good cash flow, and we can either pay down debt or be on the offensive in buyback or M&A, just as we were in 2015 and 2016. Finally, the point I've been making, we are a stronger company entering 2020 than we were anytime on this chart or the decade that preceded this chart. No two cycles are exactly the same, and we don't know how or when the next one will play out exactly. As you will see shortly from Phil, we're planning for a small contraction for next year to start the year off the weak finish to this year. At the last Investor Day in 2017, we laid out some targets, and in total, we've exceeded those targets by successfully executing our strategy.
The targets took a balanced approach to driving growth, margins, returns, and cash flow. In total, we moved the needle on all of them, and equally importantly, positioned the company for better performance moving forward. Most notably, we deployed our capital deliberately. We added acquisitions to our portfolio that mixed the company up, allowed us to strengthen our position in existing and new markets, and expanded margins. We invested in CapEx, paid an increasing dividend, and reduced our share count. Our TSR has been good, with total returns above our selected peer medians for all periods, and the only timeframe we lagged the two selected S&P peers was for the five years, and that was a tough comp for industrials in general. Couple important points on this chart. Timken's TSR performance over this timeframe essentially came all from performance and little to none from absolute or relative multiple expansion.
Our multiples on adjusted EBITDA, EPS, and cash flow as compared to our peers have given us very little credit for the performance that we've delivered and the transformative changes to the company that I talked about. Our multiple remains more in line with the company that we were when we had large auto and steel businesses. Even without multiple expansion, delivering on our new targets over the next five years should deliver very solid TSR. If during that process, we can also get some relative multiple expansion in line with similar industrial companies, the TSR opportunity is even much greater. You can see our vision taking shape in the evolution of our company.
It guides our strategy and our execution. We will continue advancing as an industrial leader with a broadening offering of e ngineered bearings and power transmission products focused on continually improving performance, reliability, and efficiency. Before I go into detail on this slide, I want to comment that really both from a market share standpoint and a technology standpoint, our markets move relatively slowly. When you reflect back to that market chart that I spent some time on and think about all the customers, end markets, products, and application that our products are in, most of our product is designed into a piece of OEM equipment that is in production for many years, and there is very little desire from our customer, the OEM equipment manufacturer, to change out incumbent suppliers. That product is serviced, sometimes for decades, with service parts.
The great thing about that is the stickiness of the business for us. We don't generally get replaced by OEMs, and we establish long streams of revenue. The negative is we don't generally win big market share overnight. We win market share with a lot of small- to- medium wins with OEMs and end users over design cycles and over replacement cycles. That's how Timken wins market share. While these trends are opportunities for us, they're generally happening over design cycles and over multiple years. Taking electrification as an example, while electrification is a clear trend in the design of future on-highway vehicles, even there, it remains a very small part of the actual production market. It will take a long time before it's a material part of the installed base, and it'll take even longer before it moves large scale beyond the passenger vehicle market.
We are participating in electrification and hybrid designs across all of our markets where it is happening. We see more activity around hybrid designs in the off-highway equipment market, which means full electrification is still more than another full design cycle away. Design cycles are good for us. Sometimes new designs use more, less, or different bearing and PT technology, but they require premium technical suppliers like us to participate in the equipment designs, and that is opportunity for Timken. Sustainability is a major opportunity for us with our products helping to advance the reliability and efficiency of the solar and wind energy industries. The wind industry relies on highly e ngineered bearings and power transmission products to generate power.
There's great opportunity for Timken in this space, and we now provide bearings for the main shaft, very large bearings, and the gear drives, as well as lubrication systems, clutches and couplings. Through our recent acquisition of Cone Drive, we now provide drive solutions in addition to bearings and couplings for solar equipment, which is another growing and attractive market for Timken. In addition to renewable energy markets, every equipment maker is actively working to improve the sustainability of their future equipment designs. Again, this requires bearing and PT producers to participate in the designs of those systems to reduce weight, reduce friction, reduce emissions, reduce size, use different sources of energy, and all of the technical challenges that go along with that. This requires strong application engineering expertise, and this is a place where Timken really excels. Asia also remains a sizable opportunity for us.
Timken has been successfully investing in and building our brands and capabilities in Asia heavily for two decades. We have a talented team now, good market positions and we're well- positioned to participate in the higher growth that this region offers for industrial products. This is often a key synergy opportunity in our acquisitions. Typically, we look at that we can take the acquired company into Asia faster than what they could do on their own, but we sometimes acquire the position in Asia, like we recently did with BEKA Lubrication. Finally, automation. Our acquisitions of Cone Drive, Rollon, Groeneveld, and BEKA all participate in various parts of the automation market and trend. In the case of Cone Drive, we design and supply drive systems for robotic arms. Our Groeneveld and BEKA products automate the application of lubrication for industrial equipment, and Rollon participates in the factory automation market.
We receive a lot of questions about the specifics behind these macros. Do the new designs use bearings? What kind of bearings? Are there more bearings, less bearings? The same for power transmission. There are generally positives and negatives within these trends, but the net has been market growth, and we expect it to continue to be market growth. For example, in energy, wind and coal use more bearing and PT products to generate the same amount of power as natural gas and solar. Our technology is relevant in all four energy sources and is relevant as long as there are moving parts in motion. All of the next generation of equipment that is under design today continues to rely on Timken technology. These three pillars of our strategy have been consistent for several years. We will be the technical and service leader wherever we participate.
We will be design partners for OEMs and service that equipment with distributors and end users. Our objective is to outgrow the markets in which we participate while shifting to higher growth markets and technologies. Our new application pipeline continues to build, and you will hear examples of that today. We are a manufacturer, and we sell primarily to manufacturers, and we are very good at it. Our safety and quality records are outstanding. We run factories efficiently. We drive performance in our operations by the hour. We operate globally. We get good returns on investments we make in our plants, and we leverage technology to drive cost and efficiency across the entire business and supply chains. It's critical to our top and bottom line that we continue to innovate across all aspects of our business to continually improve our performance.
Our pipeline of activities today across the operational excellence space is very robust. Finally, we'll make excellent decisions around where and how we deploy our capital. Phil will talk more about our framework, decision-making, and recent results. This management team has built a very good track record in this area. The Timken business model has also been key to our strategy for several years. I'm very confident that we understand where the profit pools are and the places where our technology and capabilities are relevant. We're focused on investing and winning in those parts of the market. This is one of the biggest differentiators with our company today from over a decade ago, as well as a differentiator with many of our competitors. The Timken business model drives that approach to focus and investing. The bearing industry is large.
Most of it is great, but parts of it are financially challenging, and the same could be said for power transmission. We filter that big market down with the four criteria on the left, challenging applications, aftermarket, fragmentation, and high service or cost of failure requirements. On the right are our competitive differentiators. This is where we focus on building our internal capabilities to capture and win the opportunities that make it through the filters. In the middle, we look for expanding markets, technologies, and products. Bottom line and the point of this is that we are selective in what we pursue, both organically and inorganically, we bring outstanding capabilities to the execution of the pursuit of those market opportunities. This right side is also an important part of our acquisition strategy. We are primarily acquiring family-owned businesses.
What we do is keep that small company focused on the technology and the customers they serve, while we relentlessly use our scale and capabilities to drive operating efficiencies in digital, purchasing, logistics, manufacturing, global expansion, sales, and other synergy opportunities. Chris will take you through the business model and with some more examples in detail. First, let me spend some time on where and how we compete in regards to mission-critical applications. Our customers rely on Timken to provide assistance in developing and designing their products, and then in ensuring that our products perform without fail to specification. Quality, reliability, and brand promise are very important. A bearing or PT component failing prematurely or not performing properly in the equipment where we participate is generally a very expensive problem for the end user.
OEMs, distributors, and end users value our technical sales model, which combines field sales and service engineers with application specialists, all supported by product development and R&D capabilities. Most of our customers operate globally, and their equipment ends up all over the world, and we are there to service that OEM or end user. Again, we focus our operational excellence initiatives on quality, safety, service, cost, and capital efficiency, ensuring that we are a great business partner that delivers industry-leading customer service. The combination of these factors creates significant barriers to entry to new players and allows for ample differentiation with global competitors. We get asked a lot about emerging market competitors and commoditization. Nobody is putting a non-premium branded bearing into a helicopter, an offshore wind turbine, a high-speed train, or the other applications where Timken is focused.
Timken has a long history for being an excellent corporate citizen, something we all take a lot of pride in, for making the communities where we live better, for being an excellent employer all around the world, and for being good stewards of the world's resources. We recently released our first comprehensive corporate social responsibility report, which establishes our position across multiple ESG metrics, we will continue to drive the world forward responsibly through our products and through our actions. Capital allocation has been and will continue to be a significant driver of shareholder value creation. As I mentioned, our historical pension liability, auto business and steel business overshadowed what was a good, and is now an even better, cash-generating business.
While Phil talked about our capital allocation framework and priorities in more detail, I want to emphasize again, we're very confident in the cash generation of the business and equally confident in our ability to deploy that cash to CapEx, dividends, buyback, and M&A to drive total shareholder returns and a stronger Timken Company. We have become a more acquisitive company in the last five years. It's making our bearing business stronger and our company stronger. The bearing industry is a great space, and bearings will remain our core offering, but as I mentioned, we are selective in our approach to growth. There's a significant part of the industry that we're not particularly interested in pursuing, and the industry is relatively consolidated. We have focused our M&A on the engineered components around the bearing in the power transmission and motion space.
The space tends to be more fragmented, less consolidated, has good profit pools, and provides ample synergies with our bearing business. Acquisitions have strengthened and expanded our portfolio, allowing us to advance our position in bearings in industrial end markets and expand into new adjacent power transmission products. By entering these products, we've been able to serve current customers more fully and expand our global customer base. As we look forward, we plan to continue to pursue both on M&A to deepen our position in our current product lines and selectively add other product lines that fit the characteristics of the Timken business model. Timken has become a successful acquirer, and we have the talent and the operating capabilities that will allow us to continue to capture significant cost and sales synergies.
As we go forward, we'll continue to execute our strategy, deliver industry-leading operating performance, and deploy our capital to drive value creation. We will continue to pursue a balanced approach to growth, margins, returns, and cash flow. We will be deliberate in where we grow, how our mix evolves, and how we allocate capital. Our focus is on building shareholder value. We're targeting the result of these actions to yield 3%-4% organic growth and 2%-3% inorganic growth. Slightly more organic than the last five-year window and slightly less inorganic. The higher organic growth is based on today's mix, the growth pipeline in place, and the strength of our product portfolio. Inorganic is opportunistic in nature, but we believe we can add $100 million-$150 million of revenue on average annually.
We think this is both an amount that we can find both strategic and financially attractive targets, as well as have the ability to absorb them internally and assure that we are adding value to the acquired businesses. We're targeting EBITDA margins of 20% and 10% compounded adjusted earnings per share growth. We will end this year at roughly 2x net debt- to- EBITDA. We remain committed to an investment-grade balance sheet. We will plan to stay in our range of 1.5x-2.5x. We're confident that these targets are achievable and will continue to grow the earnings power of the company from 2019's new level. We also believe that delivering another five years of performance in this range should improve our multiple relative to industrial peers to provide further upside to our TSR.
In summary, Timken is a strong investment. We're an essential ingredient brand inside many of the world's leading industries. The core of our business is very strong and positioned for continued success. Our innovation pipeline is expanding and our know-how in e ngineered bearings and power transmission is second to none. Our global distribution network profitably serves fragmented markets, and how we operate and invest in our business is a differentiator and value creation opportunity as we look to the future. Now I'm going to turn it over to Chris Coughlin and our other leaders who are driving this success. This team is committed to and believes in the targets that I just summarized and is very capable of delivering. Now Chris Coughlin, our Executive Vice President and Group President.
Good morning. I'm Chris. I'm responsible for all of the operating commercial activities with regards to the company's e ngineered bearings , power transmission products, and industrial services offering. Here are the key messages you'll hear me highlight today. First, I'm going to provide some more insight into the markets and specific segments we focus on, but I'm going to spend most of my time on the model that we operate the business by. It starts with creating significant value for our customers by solving the toughest, most complicated challenges within industrial machinery. We achieve our revenue outgrowth in several ways. First, we operate with excellence in the core markets. In addition to that, we focus on winning in attractive growth markets that possess long-term aftermarkets, which is a critical aspect to the margin profile that we run, as demonstrated in the Process Industries group.
Our technical organization continually assesses the value drivers in these growth markets to develop innovative solutions, products, and services that strengthen our competitive offerings. We then drive our competitive advantage by leveraging our globally integrated digital platform and relentlessly driving operational excellence across the enterprise. Let's start with the markets and segments we focus on. As Rich outlined, we look at markets and how we serve them. Mobile Industries for Timken is just under $2 billion . The off-highway sector makes up about 30% of this group, with the balance roughly evenly split among aerospace, rail, heavy truck, and automotive. In these markets, we're primarily dealing with original equipment manufacturers and their associated service channels. Our approach in Mobile Industries is to go after the most demanding applications, generally those that require higher performance solutions.
Because we have been doing this for many decades, we have deep customer relationships with our largest OEMs, particularly inside their technical organizations. We further differentiate from competitors by applying strong application engineering support coupled with excellent customer service in terms of delivery, lead time, and speed. Today, the Mobile Industries business is in a significantly better position than it was five years ago. The business is about 15% larger, and margins have improved about 130 basis points. Our opportunity pipeline is strong and growing, our competitive position has been greatly improved as we have continued to migrate our manufacturing footprint to low-cost locations. We look to the future, we see good growth drivers. For instance, our expanded power transmission product line is very useful inside our core legacy off-highway market position. We view things like electrification as a good trend for us.
You need to realize Timken is small in passenger car. For us, electrification is really around light truck and heavy truck applications. Sometimes, in this area, it's actually an advantage for us because the addition of battery weight changed the load dynamics on those applications, and thus they require higher performance solutions. We're also positive about the long-term prospects for rail. Both freight and passenger rail continue to grow throughout the world as urbanization continues. For example, our recent investment in Russia has allowed us to meaningfully participate in one of the largest freight markets in the world. Lastly, we expect aerospace markets to continue to grow, and we're investing a lot in this area to ensure our participation on these future platforms. Process. This is the segment we are really focused on growing. We operate, quite frankly, with impressive margins.
50% of the revenue stream here is global distribution, which is primarily serving end users and small original equipment manufacturers. The balance is original equipment manufacturers in areas like renewable energy, heavy industries, with gears and services making up the balance. Our approach in Process Industries is straightforward. We focus on winning at original equipment applications that possess a long-term aftermarket. We utilize distribution channels to maximize the lifetime revenue of the application. It's very simple in concept, difficult to execute. The major reason for that is the end user fragmentation makes covering the market difficult. We excel in dealing with fragmented markets, and we prefer them as they are easily defended and there's a significant opportunity to extract profit. It's also important to know we use the same model for our power transmission products as we do for bearings.
The core business models are essentially the same. Like Mobile Industries, Process Industries today is in a much stronger position than it was in 2014. For Process, revenue's actually 35% higher over those last five years, and the margins have expanded near 200 basis points. Again, our opportunity pipeline is large and growing, and our product line expansions over the last five years have created many new opportunities within our global distribution network. With regards to growth, we have a proven track record within the Process Industries group. Since 2009, we've actually grown at a 9% CAGR in this area. In fact, though, if you go back to 2001, which is when Timken really began focusing on growing Process Industries, we actually have a 9% CAGR since that period as well. As we continue to look forward, we once again see significant opportunity to continue growing this.
As we'll continue to highlight during the day, our renewable business in wind and solar is rapidly growing. There's lots of opportunities to continue to expand our global distribution network and the associated power transmission products that we take through those networks. At this point, I will now move on to the Timken business model. Rich previously showed you this. This is the model by which we operate the business. The left side is how we filter the opportunity. The right side is how we differentiate. For the balance of this presentation, I'm going to take you deeper into this model to explain exactly how we use it and where we apply it. At a summary level, though, there's several points I'd like to make about this model. First, it's differentiated from most of our competitors.
For instance, our major bearing competitors all have significant exposure to passenger car automotive. Timken participation in this space is relatively small. The reason for that is this model and the way we filter opportunities and how we define attractive markets. It's also important to recognize the same model applies to all of our products and businesses beyond bearings. The core business models are essentially the same. Thirdly, this model is time-tested, it's proven, it's robust, and it's scalable. It is this model that drives our performance. It drives our market outgrowth, enables our margin profile, and creates long-term defendable market positions. Let me now go into the specific aspects, and I'll start with challenging applications.
Timken, as Rich pointed out, is a global engineering company. We are capable of solving the toughest challenges in complex machinery. Envision a 400-ton mine truck operating 24 hours a day, a wheel end with a tire 30 foot in diameter operating with heavy loads, hot, contaminated environments. This is the type of application that the Timken Company excels in. Over the past 120 years, we have cultivated the technical capabilities and engineering knowledge. We've combined them with decades of test data to become the industry leader in designing power transmission solutions. We have deep technical and proprietary knowledge in areas like tribology, materials, surface engineering, and load distribution. We utilize over 80 specific engineering analysis models to design the solutions that we provide for our customers. Customers value these capabilities a lot. They especially value them in new equipment platforms.
Our customers know that the Timken solution is going to work. It enables them to control risk, it enables them to optimize performance, and enables them to optimize the cost of their new platform. The customer knows that the Timken solution will work and that it will arrive on time. As the application matures, we'll continually work with the customer to improve both the performance and cost of the design. Over time, we use our distribution network to ensure that we capitalize upon the long-term aftermarket. Now, let me move on to the specific points about the aftermarket. The Timken team is completely focused on winning throughout the application lifecycle, resulting in the revenue split that you see shown on the right.
With regards to winning at the OEM, we've already discussed the first two points around how we focus on the difficult applications and we use our technical capabilities. We also utilize a global manufacturing footprint and an integrated digital infrastructure to provide our customers cost-effective solutions with excellent customer service in terms of delivery, lead time, and product quality. Combining our technical capabilities with a cost-effective global manufacturing footprint is a powerful combination in a competitive sense. While we generate our strongest margins in the aftermarket, it's important that we win at the OE to drive the installed base. The installed base alone doesn't give you success in the aftermarket. We also need an extensive global network, we need excellent customer service, and we need a broad product offering. With regards to the network, it's critical that we have it for dealing with the fragmentation.
We have millions and millions and millions of applications operating all over the world. It is impossible to serve those in the aftermarket without an extensive distribution network. Service, especially product availability, is a critical success factor in the aftermarket. A replacement part is generally needed immediately. Timken uses pretty sophisticated inventory modeling to create regional distribution centers that we then combine with our distributors' local network so that we can ensure product availability. Most of the time, because of that network, the Timken product is available when it is needed immediately. Lastly, product breadth is beneficial as well. Given the fragmentation, a broad product line gives us a greater revenue opportunity at any given distributor or end user. Since a normal distributor will have thousands of suppliers, they actually greatly value strategic suppliers that can bring a broader range of capabilities and products.
We've had success, both scaling and diversifying our global distribution business. Since 2001, global distribution has grown at a 5% annual CAGR. It is now a $1 billion business for us, and it consists of a more diversified revenue stream that operates at excellent margins. More importantly, our current position is significantly stronger than five years ago. Our network of nearly 1,000 Timken authorized distributors now completely cover every region in the world. Our expanded product range has increased share both within our legacy distributors and has provided new growth opportunities with many of the small OEMs. Further, the product expansions via acquisition have significantly increased the size of our global sales force, and this is a major benefit when trying to cover fragmented markets. Moving forward, we see many opportunities to continue doing what we've been doing.
We'll continue to expand and scale the global network, diversify our product offering, both through the products we carry today and that we're taking through our channels and those we have yet to develop. Now at this point, I want to move on to how we assess the markets we compete in. What you see on this slide is one method of how Timken segments markets. Historically, Timken was situated on the right side of this chart, mostly because our legacy tapered roller bearing product thrived in areas that required high operating load characteristics. However, that product is often not the right technical product for the lighter industries that we show on the left. Over the last 15 years, we have aggressively expanded our product offering with other bearing types and complementary products to enable us to compete in these lighter-duty industries.
Many of these lighter-duty industries are actually rapidly growing, but they tend to value things like speed and precision over load capability. For instance, think about just e-commerce. E-commerce is driving an explosion in warehousing and logistics. There's substantial growth opportunities for us in these markets as we improve our competitive offering that brings value to these types of applications. Consequently, we are very focused internally and organized around building scale in these types of markets. Significant organizational resources are dedicated to each of these markets to create the products, the channels, and the value propositions necessary for us to scale our market position in these types of applications. Take food and beverage, for instance. Five years ago, our exposure to food and beverage was minimal, essentially zero.
Today, we have full-time resources focused on this market, and we offer a large range of products in bearings, belts, chain couplings, gear drives. It's our intention to continue this expansion via both organic and inorganic means as we move into the future. I now want to transition to the right side and talk about our competitive differentiators. Talent and technology innovation are very important parts of our business model. We have strong, experienced management team, and we have some of the most innovative engineers in the world. In the interest of time, today, I am only going to focus on the business capabilities and the operational excellence during this presentation. Timken operates one of the best integrated information technology platforms in the industrial market space. That statement is based off of extensive benchmarking with all of our customers. The importance of this cannot be overstated.
Timken has a globally connected digital infrastructure that spans suppliers, manufacturing, sales, engineering, pricing, and customers. The result is we're just simply faster than many other companies. Further, this infrastructure enables the use of global processes to optimize and coordinate decision-making. Altogether, this is what's driving our industry-leading customer service in terms of product delivery, availability, and lead time. We are focused on continuing to leverage and expand this digital platform, both within our legacy operations and for synergy capture within our acquisitions. The solutions we have shown here have already been implemented to drive customer efficiency and engagement. They're already fully deployed and creating significant value. As we continue to invest and expand our digital platform and are in the middle of a five-year program to broaden our capabilities.
Just this year, we created the digital linkage to our supply base, which effectively has integrated them into our ERP system, our manufacturing systems, our quality systems, and customer qualification systems so that we can improve the speed and reliability by tightening and aligning our supply chains to our customer demand and our customer qualifications and our customer quality processes. Starting in 2020, we're going to shift to the other side. We are going to integrate our customers and our distribution networks into our ERP, engineering, and commercial systems. Timken's digital infrastructure is already being leveraged to create enormous value. It is our intention to expand it and continue driving it as we move into the future. Finally, I want to move on to operational excellence, and this is really the core of the Timken Company.
We are a lot of engineers, we tend to look at operations in a very technical- type manner. Operating with excellence is centered on everything we do in the organization. It's one of the core drivers recently that you've seen with regards to our margin performance. We utilize the Timken Manufacturing Operating System, which is actually a subset of the Timken business model, and we use that to implement lean principles and scale our continuous improvement initiatives throughout the manufacturing and supply chain infrastructure. It's what drives quality, service, and cost. It also drives our long-term process to how we determine our manufacturing footprint, where we increase the capacity, and how we deploy proprietary new technology. Through our operational excellence framework, we have been systematically adjusting our manufacturing footprint to balance our regional infrastructures to optimize the cost and align those infrastructures with growth markets.
These changes have positioned us to be a premier global industrial supplier to big global customers and global distribution channels. Over the last decade, we have regionally balanced our bearing manufacturing footprint while also installing world-leading manufacturing capability into emerging markets like Asia and Eastern Europe. In just the last five years, we have established new bearing facilities in Russia, Romania, India, as well as completing significant existing plant expansions throughout India and China. State-of-the-art processes in robotics, automation, and vision inspection systems have been deployed throughout our global manufacturing facilities, and we've linked them together with our digital platforms so we can seamlessly serve our global customer base. Our operational excellence approach is not just limited to manufacturing supply chains. We utilize the same methodologies to drive continuous improvement within our SG&A infrastructure.
As shown on the right, we have been systematically improving our SG&A efficiency as a percent of sales. Recognize we've been able to do that despite bringing in acquisitions that operate with higher SG&A profiles. In summary, our operational excellence framework is a key driver of our overall performance. It's effective, it's proven, and scalable for implementing into our acquisitions and our legacy operations. Moving forward, we will continue with these same methodologies to continue to improve our operating performance. In summary, hopefully, this gives you some confidence in how we manage and how we think about the company and how we operate the company. Over the last five years, our competitive position and operational performance has been structurally improved. Our business model is unique and provides the ability to operate with strong margins, gain share in new markets, all while having best-in-class customer experience.
Moving forward, we're positioned to increase participation in attractive new growth markets with long-term profitable growth opportunity, and we intend to continue scaling up revenue while delivering strong margins, creating defendable long-term market positions, all while achieving market outgrow. Thank you very much.
Thanks, Chris. Thanks, Rich. Appreciate what you've shared thus far. We're going to take a quick break just so everyone can freshen up their drinks. Refreshments and other things are available out in the hall. Restrooms are down the hall just here on the left, and we'll start back up at 11:00 A.M. Thanks. Everybody, if you could find your seats, we're going to get started again. Enjoying all the informal Q&A. We will have formal Q&A at the end of the presentations you're going to see now. Please join me in welcoming Andreas Roellgen to the podium.
Okay. Good morning. My name is Andreas Roellgen. I'm originating from Germany, and I'm heading up our Europe, Asia, and Africa regions. It feels like Rich and Chris covered already a whole lot and answered basically all the questions you may have on your mind already. Let me highlight now how we are growing actually our portfolio in the Engineered B earings business, sharing with you how we are properly outgrowing our business around the world. The key points I'd like you to take away today are the following. We are focused on winning in diversified industrial markets. That is what differentiates us in the bearing space, both in terms of our value proposition to original equipment customers, as well as our ability to maximize the lifetime of revenue to drive margin performance.
We are constantly expanding our portfolio of highly e ngineered bearings. With our advanced sales model, we are growing our pipeline of opportunities in attractive markets we choose to compete in. We are moving with velocity to capture an increasing number of global growth opportunities, taking advantage of high growth regions and markets, notably in Asia. As I walk you through my presentation, I'm going to share specifically a few case studies with you that show you how we are winning and creating value in the bearing space. Rich has walked you through our corporate strategy. You may recall that e ngineered bearings represent 70% of the company's sales, and 30% is coming from power transmission products and services. As bearings remain our most important product group, I'd like to convey some key elements of our strategy here again.
Our goal is to be the world leader in industrial- bearing solutions, focused on diversified industrial markets. What are we doing concretely? First of all, we are really creative, as Chris laid it out already, in engineering optimal bearing solutions for customer applications. Remember our business model. We focus on the most challenging applications in the most attractive markets, and then design the most power-dense solutions. This competency is hard to replicate, particularly by emerging competitors. We deploy a comprehensive customer-centric business model by which we focus not only on the original equipment manufacturers, but through our service engineering team around the world, we accompany the full life cycle of critical equipment at end users, allowing us to pull the Timken brand and certain unique design features through the OEMs and cross-sell our expanded product lines.
On the operational side, we structure our manufacturing footprint and supply chains close to markets to deliver industry-leading service, and then we leverage our distribution network around the world to ensure product availability where and when our customers need it. This is, in essence, the strategy we successfully deploy in bearings, and that enables us to outgrow competition in markets we choose to compete. You remember Timken invented the tapered roller bearing, and in the first 100 years of the company, has built a formidable installed base of products in equipment operating around the world with essentially this one bearing type. This is part of the reason why today about 44% of our revenues are generated from distribution and end users, as Rich pointed out earlier. However, over the past two decades, we have massively expanded our industrial product portfolio through both organic and inorganic investments in product vitality initiatives.
When you think about the product categories of the bearing industry, we drive value primarily with roller bearings, with precision bearings, and with housed bearings. That's the focus of our portfolio. In contrast, we are not really engaged in the commodity markets of ball bearings, for example, for two-wheelers, light passenger cars, or white goods. Today, we're offering a full range of bearing sizes, rolling elements, and proprietary designs applicable to a wide array of industrial applications. Approximately half of our portfolio is comprised of custom-engineered solutions. Our offering drives customer value at OEMs and captures the life cycle of revenue through the aftermarket. Timken's technology and innovation are critical elements in executing our growth strategy. Our expertise is in friction management, power transmission, and metallurgy, and we apply our knowledge to engineer bearing solutions that withstand the harshest conditions and most critical operating conditions requirements.
Our globally consistent quality ensures efficient and reliable performance. You've heard Rich and Chris talking about how emerging trends in sustainability, power efficiency, and automation require Timken expertise. Our technical strength is exactly this, providing the best possible, highest performance design for a new complex application from scratch. A capability that, again, emerging market competitors find impossible to deliver at this level of excellence as they lack what we call our institutionalized knowledge. This knowledge resides in our proprietary tools, our systems, our algorithms. They make the difference in the application design process. Then it is our material science, our manufacturing technology, and our integrated quality systems that make the difference in the performance of our products in the applications. Finally, it is our sales and service engineers that come with extensive technical expertise to aid customers with custom solutions, with the majority of them being degreed engineers.
These elements are embedded in the Timken brand. Our brand is a tremendous asset in the marketplace, representing 120 years of accumulated strength that we are celebrating this year. With a $30 billion opportunity in industrial markets, Timken is focused on targeting attractive, fragmented end markets to achieve profitable growth. The bearing industry is not homogeneous. Therefore, as Chris described before, we apply a disciplined process to analyze and segment the industry and then drive strategies of the business where the profit pools are the greatest. This has been, and continues to be, a significant driver of our financial performance record. Key considerations when selecting market opportunities best suited for Timken include long-term operating cycles, custom product requirements, high need for service and support, aftermarket channel exposure, and steady demand leading to less cyclicality, among others.
This is where we focus, offering a full product portfolio and serving a broad application set. We selectively participate on the left side of the chart build 2, where we find niche opportunities to drive value. An example of that would be small gear drives. End markets with high growth opportunities for Timken include heavy and light industrial equipment, wind energy, rail, food and beverage, among others. Our traditional space has served us well, and we will continue to rigorously serve our large industrial markets of off-highway, heavy industries, heavy trucks, to name a few. In addition to those, we continue to identify highly attractive and profitable growth markets from a bearing perspective. This is where we are focusing more organic growth and product development investments. As an example, I'll touch on wind energy in a moment.
Other markets with strong attractiveness, given our set of core competencies are, again, food and beverage, aerospace, rail, precision bearings. Wind. Wind is one of those markets we started focusing on just over a bit more than 10 years ago. In that time, we have become a leader in the wind industry due to our technology and innovation solutions in that market. We continue to see a need for optimized reliability, cost, and performance in wind applications for bearings. Consequently, we place strategic capital investments in our core bearings business to strengthen Timken as a local supplier to essentially all leading wind turbine and gear drive manufacturers, and select wind park operators in the world. In addition to that, we complement our offering through inorganic investments.
We just recently announced the acquisition of BEKA Lubrication in Germany, and prior to that, acquired PT Tech and Lovejoy for couplings, all of which are providing critical technologies to serve wind, and which make us even more valuable as a solution provider to customers. As an example, by applying the Timken business model, our engineering expertise, and our advanced manufacturing process technology, we have partnered with one of the top global turbine builders to produce the world's largest wind turbine that is soon being launched in offshore wind markets. With our efforts, we have grown our wind business from zero two decades ago to about $200 million today, with about an 18% compound annual growth rate since 2010.
Our investments position us extremely well for continued strong growth in wind going forward in both, again, original equipment applications as well as in the aftermarket, driven by our installed base of products. On the product side, housed units is one of the bearing product categories we have developed from scratch also over the last two decades. In housed units, we are dealing with an extremely fragmented market with few industry players offering the full portfolio of products that serve customers, for example, in cement and aggregate, food and beverage, and other Process Industries with unique application requirements. We have been building that portfolio to become a full service provider, starting with the Torrington acquisition in 2003. Then developed a number of new product lines organically.
Similar wind, though, we have broadened our portfolio with three strategic acquisitions of QM, Revolvo, and EDT, and intend continuing to do so with attractive opportunities. As a result, we have grown revenues with this product line from a single-digit million in 2002 to over $150 million this year, a compound annual growth rate of more than 20%. This is a perfect example of how the combined organic and inorganic initiatives create a stronger business for Timken, and with a heavy aftermarket housed bearings, we're also mixing up the margin profile of our business. As you can tell from our financial track record, we are clearly successful in entering and driving outgrowth in new regions. This is because of a proven two-pronged model.
On the one side, we leverage our global competencies, such as the Timken business model, our engineering and technological know-how, our product platforms and operational excellence all across the world in a very consistent, trusted, quality way. Then to maximize capturing local opportunities, we have completely local management, engineering, and sales teams in place to drive customer centricity in each region. This way, we provide truly customized solutions to original equipment builders and the appropriate service levels to distribution. Finally, we are increasingly sourcing our materials for local supply chains, thus having the ability to operate as efficiently and sustainable as possible while cutting costs in the operations. We are expanding globally from a very strong base of our bearings business in North America.
While in the past, we generated more than 50% of our bearing business over here in U.S. and Canada, with the outgrowth in focus markets in Europe, Africa and Asia, we have expanded our global reach to the extent now that more than half of our revenues in e ngineered bearings are generated outside of North America. We expect that trend to continue, that trend of outgrowth, given the huge bearing markets in Europe and Asia, given the gradual shift of industrial production to emerging markets, and given our superior business model we consistently apply around the world. With our efforts, we have essentially worked ourselves into the top three industrial- bearing suppliers in every region outside Japan. Let me come to another example, Asia, as Asia remains a critical growth market for our expansion.
The fundamental growth drivers, such as growth in population, standards of living and infrastructure, the ongoing urbanization, and changes in the energy profile remain in play. These are all areas Timken excels in developing solutions for. Again, we are winning in Asia by leveraging our global competencies through a strong local management to capture opportunities in fast-growing markets such as heavy industries, energy, rail, off- highway. It is important to notice that we are succeeding with all three types of customer groups in Asia. The Western multinationals with operations in Asia. Secondly, the local private companies. Thirdly, the state-owned enterprises that we find primarily in China. Since bearings are critical components for the performance and reliability of a machine, they all share the same needs, particularly for export markets. Customers want quality in their applications. They want Timken inside.
Timken is well-positioned in Asia, also with an expanded manufacturing footprint, with increasingly local sourcing, a record number of new product introductions, and a network of distribution partners to capture growth in the aftermarket with fragmented end users. With about 18% compound annual growth rate from 2016 to 2020, we have clearly outgrown our markets. While GDP growth in Asia has leveled down a bit from prior years, the region remains the most attractive market in the bearing world relative to growth rates, size of the business, and industries we serve. We continue to see significant growth opportunities ahead, and with our strong customer relationships in the region, our continued investments in capacity and products, and our proven business model, we are confident to continue outgrowing markets in Asia going forward. Here's another one, and another attractive growth market for us is metric bearings.
As a U.S.-based company, we have historically been strong in inch-sized bearings. We have always been engaged also in metric bearings, but just recently, we completed our product range to the extent that customers see us as a full-range supplier now, which is key in the fragmented industrial world. With more than half of the global bearings market being metric, we have the opportunity to leverage our position in inch to expand in Europe and Asia with metric bearings of all relevant sizes, forms, and features. To capture that opportunity, we have invested in a best cost manufacturing footprint with latest process technology in Central, Eastern Europe, and Asia. Actually, of all parts of the world, you can find our most modern manufacturing processes now in the East with latest automation technology and other industry-leading innovative features as recognized by our global customer base.
As a result of our efforts, we have recently won a record number of new customers in Europe and Asia. We have gained share in targeted industrial markets and enjoyed about 15% compound annual growth rate in metric bearings since 2016. Our pipeline of growth opportunities, which is part of our sales business model, has grown to record levels as we speak today, promising continued outgrowth in the future. In summary, we are celebrating 120 years of the Timken Company these days that is continuously and successfully advancing its business model for bearings. Secondly, we see the latest technology trends as we laid out earlier provide ample growth opportunities for advanced designs, enabling us to further differentiate our products and profitably grow in attractive markets.
Thirdly, we have actually accelerated feeding our massive installed base of products in equipment operating all around the world, providing a constant stream of profitable aftermarket opportunities. To conclude, we are confident that in these exciting times of fundamentally changing technology driven by the global trends of electrification, digitization, urbanization, bearings will remain a vital component to the world's equipment and vehicles. With this, I'd like to close and thank you very much for your attention. Thanks a lot.
Well, good morning. My name is Hans Landin. I'm responsible for leading Timken's power transmission products. You heard earlier how Timken is advancing as a global industrial leader. I will provide more insight into how we generate shareholder value with our global diversified power transmission portfolio and how we are advancing our business for continued success. Power transmission is an attractive space that provides natural adjacencies to our core bearing business and is delivering strong value creation. Through an expanded product portfolio, we are able to capture more of our customers' value stream, while at the same time, serve them more fully. Our power transmission portfolio adds significant value to our enterprise by strengthening and enlarging our distribution channel and expanding us into less cyclical and higher growth end markets. We intend to continue on this path.
Expanding our product offering through executing our organic and inorganic power transmission growth strategy. Power transmission will remain a key element of Timken's outgrow strategy. Through natural extension of our bearing business and strategic M&A, we have built a strong and diversified power transmission portfolio today. Our power transmission portfolio has now grown to an annual sales of over $1 billion, and is so broad that it can compete head-to-head with the leading global players in the market. Through strategic acquisitions, we have entered into many new markets and accelerated our geographic expansion. For example, Groeneveld, Cone Drive, and Rollon, which I will highlight a little bit later in my presentation this morning, are three companies that we have successfully integrated to expand our presence in lubrication, Drives, and linear motion.
Also to accelerate our growth in Asia and in Europe, and increase our presence in attractive growth markets such as solar, automation, and logistics. These diverse product lines work together to help Timken deliver our strategy, improving our profitability, and delivering outgrowth by expanding into higher growth markets and new geographies. The potential is tremendous within power transmission, and we are very well- positioned in this space. We have access to new high growth markets with high entry barriers and with strong profit pools. We have incrementally reduced our cyclicality, and we are delivering improved profitability for the enterprise. I see very strong opportunities to accelerate our profitability via continue to package power transmission with bearings, and more aggressively create cross-selling synergies. Also via building scales, expanding geography, and specifically in China, as well as strengthening our global distribution channel around the world.
Our customers today recognize the value of Timken's broader product portfolio. We are providing customers with one resource to meet their power transmission needs. Expanding into power transmission products is a logical and natural fit with bearings. It has similar business model, designing at OEMs, and often has a frequent replacement cycle to create aftermarket. Many times, we find that the aftermarket demand is supplied via the same channel partners. This schematic highlights the space we are targeting for our power transmission growth. We are targeting critical mechanical components located between a drive element, such as a motor, and the driven equipment, which can be everything from a pump, compressor, conveyor, a fan, et cetera. We can also package these components for our customers.
For example, we have large agriculture customers who are now benefiting from a combination of Timken products such as bearings, chains, belts, clutches, and lubrication systems all in one application. Also by leveraging the Timken business model, we are now more relevant and a stronger partner for our distributors. Our power transmission offering is strengthening Timken's position in the so important global industrial distribution market. Let me give you some more color on why I think that is. It really comes down to three strong value propositions. The first one is increased market reach and improved customer accessibility. With the largest sales teams and more distributors, we simply have more reach. For example, with our efforts in power transmission, we have recently gained a lot of more distributors in HVAC, powersports, and lubrication systems. We also gained more reach in new geographies by scaling in our existing markets.
By leveraging Timken's global capabilities and best practices, we are offering world-leading products and product availability and services to our customers. The other value proposition is a broader product offering. This creates both cross-selling and upselling opportunities while providing value as a one-stop shop. Our increased offering also provides scale and increased relevance and value in a consolidated distribution channel. Lastly, we are leveraging our existing relationships as well as our global capabilities such as our digital platforms, logistics, and global sales teams to better compete and to win in the marketplace. The result has been excellent. We have grown our power transmission distribution sales at an 18% compound annual growth rate over the last three years. Let me now present a little small case study on how we put this playbook in action, and how we win in distribution while mixing up our margins and create value.
We will use belts to illustrate this example. It is important to understand that belts are typically sold through the same distributors as we sell bearings through. Belts are also replaced more frequently than bearings, and we typically see a ratio between OEM sales to aftermarket, which is greater than 2. This is really good news and a great opportunity for us because we see the aftermarket margins significantly higher than the OEMs. We bought our belt business in 2015. The business we bought was a modest margin business with about 75% of its revenue coming from OEM. Our strategy was, and is, to systematically over time grow the distribution and aftermarket business, and while doing so, mix up the distribution sales and improve margins by several hundred basis points. What have we done?
Well, we created a world-class distribution model utilizing the quality belts we design and manufacture, with then utilizing Timken's digital and logistic platforms, which has made our products now much easier to order, with improved availability and simply made us much more attractive and easy to do business with. We then combine our sales efforts by joining our sales team together and to grow our aftermarket share at strategic target key leading distributors where we have deep relationships and good knowledge of their operations. Basically, cross-selling and leveraging our deep customer relationships between all our product platforms to create scale and unprecedented coverage. The results have been great. Yes, as our strategy was to year-over-year systematically increase the belt distribution mix. That is exactly what is happening. With increased distribution mix, we are seeing stronger margins.
Not only is it worth to say that this was great for belts, it also helps Timken overall because as more belts we have been selling for distribution, the more relevant we are overall, and it helps us succeed in our product lines as well. Our power transmission strategy is really to scale in our traditional markets and our traditional channels, but also to accelerate our pace of entry into new, fast-growing, and highly desirable markets. This slide shows some attractive markets where mega trends like automation and renewable energy are creating strong market growth, and our power transmission efforts have helped Timken to grow our share in these markets. For example, our acquisition of Rollon, a leader in linear guides, telescopic rails, and linear actuators, enable us to now serve new customers in the aerospace, packaging and logistic market, but also in medical, robotics, and automation.
Our most recent acquisition, which is BEKA Lubrication. They are expanding our leadership in the highly attractive automatic lubrication system markets. With BEKA, we have become the second-largest supplier of industrial automated lubrication systems globally, and this is creating new opportunities for us in wind and other industrial end markets. Let's see how we are penetrating one of these key markets, like solar, with another case study. Solar energy is expected to grow from today's 2% of the world's produced electricity to 22% by 2050, and we expect Timken to play a major role in moving that growth forward. We have expanded our capabilities and expertise in solar via the acquisition of Cone Drive. Cone Drive has built a strong reputation over the years for innovation in the solar markets. Accuracy and precision are two critical elements for maximizing power generation from a solar plant.
As such, a great fit with Timken and Timken's technical expertise in our business model. By using precision motion control, Cone Drive's products position thousands of mirrors in a synchronous way to precisely reflect the sunlight into a target that sometimes is as small as 20 sq ft- 30 sq ft and could be placed at a distance as far as 2,000 ft away. All this while operating in severe environmental conditions. Cone Drive has become a leading supplier to the global solar industry by offering a differentiated, high accurate Drives solution. We are now leveraging Cone Drive's leading position to cross-sell and supply the industry not only with Drives and controls, but also with bearings, clutches, and universal joints. The results also here has been very impressive. We are winning in the marketplace, and we are seeing double-digit growth in solar from now supplying the world's largest OEMs in the world.
Let's talk a little bit about our power transmission growth strategy. We really have a two-pronged power transmission strategy. The first pillar of our strategy is to drive organic growth in existing product lines. We are doing so by using Timken's best practices and accelerate our product vitality and innovative efforts. We have so many exciting examples. For example, we took Timken's expertise in material science, in heat treat and tribology, and we then combined that with Drives expertise in chain manufacturing. We did that to develop a brand new leaf chain, which is used in safety-critical forklift applications, and the market reception and sales growth has been tremendous. As discussed, we are driving for geographic and market expansions, and we are leveraging Timken's global distribution market and customer network to together with capturing synergy opportunities, accelerate our organic growth.
Strategic M&A is our second pillar of our power transmission growth strategy. Here we are seeking good businesses with strong market positions in markets with strong profit pools, which often are underserved. We are targeting companies with products which is adjacent to our existing products and businesses. With all acquisitions, we are using our proven M&A playbook, which has enabled Timken to increase its profits, incrementally decrease our cyclicality, while also increasing our global scale and adding top-line growth. In a later slide, I will show our M&A strategy put to work through our successful acquisitions like Groeneveld, Rollon, and Cone Drive. Before then, let me just give you a little more insight on the different elements in our M&A playbook, and as such, how we add value through strategic M&A. It all starts with identifying and acquiring good businesses and simply make them better.
How do we make these companies better? Well, we establish strong executional synergy cases where we drive cost synergies via applying our best practices in areas of operation excellence. In addition, we apply our business model to drive cost synergies via streamlining back office functions, leveraging our current capabilities within areas such as digital platforms, IT, systems, warehouses, and logistics. A great example is Diamond Chain, where we now are applying Timken's operating model and digital expertise to drive our cost. We do that while significantly improve Diamond's service levels, and as such, add tremendous customer value. Another example is Lovejoy couplings, where we within two years after the acquisition, had improved Lovejoy's margins by over 400 basis points through a combination of investments that leverage our scale and operate the business more cost effectively.
On the revenue side of synergies, we are driving growth via systematically accelerating our innovation and product vitality. We are offering a new level of market reach by utilizing our extensive network of distributors around the world, as well as our sales team. We are deploying resources and we are improving customer service and scale. In summary, we have a well-proven playbook which works. Our goal is, with our power transmission acquisitions, to collect significant synergies that will allow us to strengthen our long-term position in the power transmission market. I now want to give you a little bit of an update on three of our largest acquisitions which we acquired in 2017 and 2018. Let's start with Groeneveld, which we acquired in 2017. We now forecast to end 2019 around $115 million in revenue, and with adjusted EBITDA margins above 20%.
We are on target with our synergy plan, and so far, we have seen especially strong synergies from growth in U.S., but also from significant lower operating costs coming from, for example, synergies in such as operation, procurement, and logistics. Rollon, which we acquired in 2018, is also delivering very strong financials. We estimate this year to come in at around $135 million in revenue, and with our synergy plan also tracking on plan. We expect EBITDA in excess of 30%. On the synergy side, we are especially pleased with how we've been able to grow Rollon in the distribution area, as well as how we've been able to expand Rollon's geographic expansion in 2019. Finally, Cone Drive, which we acquired in 2018. We have seen very strong growth, and we are projecting $155 million of revenue this year.
Cone Drive is tracking on plan to our synergy plan, which has helped Cone Drive their productivity, and we're now estimating our adjusted EBITDA for the year to come in at greater than 20%. Combined, these three businesses will have delivered 35% of organic revenue growth over the last three years to The Timken Company. They have expanded their adjusted EBITDA margins by 60 basis points in 2019. This has led to that we have brought down the net acquisition multiple already by over three turns for these businesses. We expect this growth trend to continue as we will further utilize our Timken business model and organically grow these businesses, as well as executing our synergy plan. To close, let me say that the future of Timken's Power Transmission business is very bright.
Moving forward, you can expect to see more from Timken's Power Transmission businesses, more diversified products via product vitality and M&A activities, more sales and profit from identifying and capturing cross-selling opportunities, geographic and channel expansions, as well as driving our cost from our operation and back office functions. In summary, Power Transmission is advancing us as a global industrial leader. It's a key element of Timken's outgrow strategy, and has proven to deliver very strong value creation. With that, I thank you for your attention and your deep interest in Timken's Power Transmission business, and I would like to hand over to Phil.
All right. Thanks, Hans. I've got the last presentation of the day, so I will try and get through my slides as quickly as possible, or at least get to the slides you're most interested in as quickly as possible. I do have a few things to cover ahead of time before we go to the Q&A session. I hope you'll bear with me. Before I start, I'd just like to thank all of you for joining us today, both here in New York City and over the webcast. I hope you found the presentations thus far, both informative and insightful.
For my presentation, I want to quickly recap our strong financial performance over the past few years, take you through our capital deployment framework and give you a sense of what to expect going forward, provide some initial high-level guidance on 2020, and then finally, review the long-term targets that Rich took you through already, but also kind of sprinkle in a view on what that might mean for Timken in terms of performance over the next five years. Most importantly, I want to convey our confidence in the sustainability of our strong financial performance and our confidence in Timken as an equity investment. Let's quickly start with 2019. We're 2/3 of the way through the quarter, and while December is always difficult to predict, at this point we're affirming our full-year guidance range as we issued back on October 31st.
We still expect sales to be up 5%-6%. We expect record adjusted earnings per share in the range of $4.70-$4.75 for the year. This would imply $0.94-$0.99 per share for the fourth quarter. We also continue to expect free cash flow of roughly $375 million. Frankly, I think we'll beat this number. I want to highlight the margins, because again, they really stand out. We expect adjusted EBIT margins in the range of 19.5% for the year at the midpoint, which is up 140 basis points from last year. That's despite flattish organic growth. Our strong margins reflect positive pricing, strong operational execution across the enterprise. Acquisitions have contributed as well. Excuse me.
Final point, I'd say our end markets are generally holding up to our expectations, and we're delivering very strong financial performance against a relatively soft industrial economic backdrop. Rich covered this slide earlier, so I'll be brief and just make a few points. Timken has truly made a step change in financial performance over the past five years, and we did what we said we were going to do. We've grown the top line profitably, enhanced the portfolio through acquisitions, and structurally improved our operating performance, margins, and bottom-line earnings. On this chart, you can see our performance in the 2015 to 2016 period. This is the best the company has ever performed in any downturn, as we kept adjusted EBITDA margins in the mid-teens, held earnings per share around $2 at the bottom in 2016, and delivered ROIC above our cost of capital in all years.
We're stronger today than we were then and expect to perform even better in the next downturn. You can also see the recent 2017 to 2019 period, with 2019 as the peak, if you will, to date. This performance is higher than we've ever delivered before, with adjusted EBITDA margins approaching 20%, record adjusted earnings per share of $4.72 at the midpoint, ROIC north of 12%, and strong free cash flow of $375 million. As Rich said, the strategy's working. It's probably not too surprising that we plan to do more of the same over the next three to five years. I want to spend a little bit of time on this slide on both cash flow and the balance sheet.
From a balance sheet perspective, while we have added around $1.3 billion of net debt over the past five years, mainly to fund acquisitions and share buyback, our leverage remains squarely in the middle of our target range of 1.5x-2.5x net debt- to- adjusted EBITDA. We continue to maintain a strong investment-grade balance sheet, and we don't expect that to change. What has changed, and changed for the better, is free cash flow. Along with the improvement in our operating performance has been a commensurate improvement in free cash flow. Our $375 million of estimated free cash flow for 2019 is a good example of what this company can do. We expect free cash flow conversion over 100% of net income through the cycle.
It'll be less in high organic growth years like 2017 and 2018, and more in other years, but we're confident in our ability to convert over 100% of our net income to free cash flow through the cycle. This provides fuel for acquisition growth and capital return. We expect cash flow to grow with earnings and be augmented by continued efforts to improve our working capital performance while staying true to our business model. Later in the deck, I'll cover our early look at 2020, and you'll see that we expect to generate even more free cash flow next year. Here's our capital deployment framework. We talk internally about smart capital deployment, and I believe this has truly become a differentiator for Timken. We're using our balance sheet and free cash flow to drive our strategy, make Timken a better company, and deliver top-tier returns to our shareholders.
Our framework is largely unchanged from what we reviewed with you back in 2017, but I do want to point out a couple of updates. Investing in our core business is still our number one priority. You'll note that we're now targeting CapEx in the range of 3.5%-4% of sales. This reflects the fact that most of the acquisitions we've done operate at lower capital intensity levels than our core bearing portfolio. For the dividend, we're targeting a payout ratio of 20%-35% of adjusted net income, which stacks up well versus other mid-cap industrials. Our commitment to the dividend remains unchanged, and I'll cover this further in a few minutes. Oh, excuse me. Hang on one second. Sorry.
Finally, we've changed our leverage target to be EBITDA-based, which is more consistent with how we think about it internally, as well as how lenders and rating agencies look at it. We're targeting net debt in the range of 1.5x- 2.5x a djusted EBITDA, which is in line with the low- to- mid BBB investment-grade credit ratings. This is the foundation of our framework. We intend to deploy our capital, but we also intend to keep our leverage within this range. As I indicated earlier, we presently sit just about right in the middle of the range, and we're comfortable with that at this level in the current environment. Frankly, we'd expect to stay within this range, even in a downturn, due to strong cash generation, as we usually see cash conversion of well over 100% when sales decline.
When I talk about capital deployment as a differentiator, this is what I mean. As you can see, we've deployed over $8 billion of capital over the past 15 years, and it's had and continues to have a big impact. This chart summarizes our capital deployment over three different five-year periods, 2005 to 2009, 2010 to 2014, and 2015 to 2019. Note that these numbers exclude discontinued operations, like the steel business we spun off in 2014. The first thing I want to point out is pensions. You can see that pension and OPEB required a lot of capital back in the 2005 to 2014 period, about $1.6 billion, to be exact. This has dropped significantly in the most recent five-year period, down to around $100 million or so.
As we've de-risked our exposure and frozen or terminated most of our plans, and we expect only modest cash contributions going forward. This has and will continue to free up more capital to invest in growth or capital return. Apart from pensions, you can see that we've stepped up our capital allocation over time. Looking at the past five years, we've allocated $3.5 billion in capital with a balanced approach. Over $600 million in CapEx, over $1 billion in capital return, which includes both dividend and share buyback, and over $1.5 billion in acquisitions. As I indicated, we expect strong cash flow going forward, and we intend to deploy that cash in a smart and balanced way. We continue to have a bias toward growth initiatives and acquisitions, and we expect to keep our leverage within that target range.
When we talk about investing in the core business, we're talking about driving organic growth and margin expansion. This is R&D, innovation, application engineering, and of course, CapEx. These investments generally produce the highest returns at the lowest risk. As I mentioned, we're targeting 3.5%-4% of sales for CapEx, which reflects our current mix of business. Think of around 1% as being maintenance CapEx, with the remainder driving growth through new capacity in low-cost countries, like our new plant in Romania, as well as driving operational excellence across the enterprise, like investments in automated inspection equipment in the U.S. Note that for 2019 and 2020, we expect to be at the higher end of this range for CapEx as we continue to invest for growth in sectors like wind energy and add capacity in key regions of the world.
You guys have heard me talk about the dividend many times. We're committed to our dividend. We just paid our 390th consecutive quarterly dividend earlier this month. Rich and I are proud that 2019 will be the sixth consecutive year of annual dividend increases. I know I speak for Rich and the board when I say that we want this streak to continue. We will continue to pay an attractive and competitive dividend that grows over time with earnings. We'll target a payout ratio of 20%-35% on adjusted earnings per share, as well as an attractive yield as compared to key benchmarks. Share buyback has played a critical role in our capital deployment strategy and will continue to do so. Since the beginning of 2014, we have repurchased about 23% of our shares gross.
After taking stock compensation into account, our shares are down about 19% net over that period. This has driven significant EPS accretion. We continue to view share buyback as an attractive use of capital, and we expect to buy back shares over the next five years. We have about 5.5 million shares remaining on our current buyback authorization, which expires in February of 2021. I would expect us to put a new authorization in place before that time. You've heard a lot about acquisitions from Rich and Hans earlier. We've completed 20 deals in the past 10 years of all shapes and sizes, with purchase prices ranging from around $10 million at the low end to over $500 million at the high end. We've allocated over $2 billion of capital to M&A over that timeframe.
These acquisitions are expected to contribute over $1.1 billion to the top line in 2019, with EBITDA margins that are accretive to the company average on a net basis. You guys have heard me say this many times. We believe in the value creation potential of M&A, and we will continue to add attractive businesses to the portfolio where it makes sense. We'll stay disciplined as we always have. We need a strong strategic fit, and we expect our acquisitions to be accretive to earnings in year one and earn the cost of capital, which we think of as 9%, by year three. If the M&A is not there, we'll look to other options for capital deployment, like share buyback or debt reduction. On size, we'll continue to focus on small- to- medium-sized businesses.
We're not opposed to doing a larger deal if one comes along, but again, we'll be disciplined. The reality is there aren't that many large acquisitions that would be of interest to us. Just a note on BEKA. We're very excited about BEKA and the leadership position we now have in the attractive automatic lubrication system space. However, as a reminder from what we said on the third quarter call, BEKA will be dilutive to company EBITDA margins out of the gate. There's tremendous opportunity for value creation and margin expansion as we integrate this business with our Groeneveld business. It's just going to take a few quarters to get there. That's it for capital deployment. In a nutshell, we like our framework.
It's a differentiator for Timken, as we generate strong cash flow and balance sheet capacity in the future, we expect to continue driving a balanced approach to capital deployment targeted at the highest returns for our shareholders. Okay. Now on to the outlook, there's going to be some handouts coming around. Here's our early look at 2020. Given it's December, we decided to provide you with a high-level look at 2020. The next couple of slides will take you through it. Let me preface this by saying that certainly a fair amount of uncertainty continues to cloud the industrial space. Our early look guidance today is a little bit wider than we normally give. We'll look to narrow and update this in early February when we release fourth quarter earnings.
Right now, we see 2020 as roughly flat on the top line, with sales ranging from -2% to +2% versus 2019. We're estimating that acquisitions and currency will add about 2% to the top line on a net basis. The currency assumption is based on current exchange rates. Organically, right now we're estimating that revenue will be flat to -4%. I'll dive deeper into the specific markets on the next slide. We're estimating adjusted earnings per share will be in the range of $4.40-$4.80 per share, which is down slightly from 2019 at the midpoint, driven mainly by the impact of lower organic volume and unfavorable acquisition margin mix from BEKA, which is more than offsetting positive price cost. Again, we'll likely narrow and update this guidance in early February.
On cash flow, we expect another strong year, with free cash flow estimated to exceed $400 million, which would be over 120% of GAAP net income at the midpoint. Here's our current estimated look at the organic growth by end market sector for 2020. As I indicated, there's still a lot of uncertainty out there, but we wanted to give you some sense for what we're seeing right now. Our guidance assumes organic growth will be in the range of flat to down 4%. Here you can see our estimate for the various end markets and sectors at the midpoint. As you can see, we expect off-highway and heavy truck and automotive to be down year-on-year, while renewable energy, aerospace, and industrial services are expected to be up.
This is the benefit of our business mix, as we still see strong fundamentals in markets like renewable energy, aerospace, marine, and global rail, which are helping to mitigate the sizable declines that are expected to continue in off-highway and heavy truck. For the year, we expect sales to be down 2% organically at the midpoint. The first half and second half will look a little bit different, though. In the first half, we'd expect sales to be down mid-single digits organically year-on-year at the midpoint, and in the second half, we'd expect to be flattish to up slightly as the comps get a lot easier. Rich reviewed this already. I'll be brief. These targets are over the next five years. Over the next five years, we intend to generate a strong top-line growth CAGR driven by both organic and inorganic growth.
We're targeting a roughly 6% top-line growth CAGR over the period. On margins, we're focused on generating the top-line growth and delivering 20% EBITDA margins at the consolidated level. Our focus is on growing our business and delivering a 10% earnings per share CAGR over the period, which would include some share buyback to hold leverage near the middle of our 1.5x-2.5x r ange for net debt- to- EBITDA. Cash flow will continue to be strong as we expect to convert over 100% of our net income to free cash flow over this period. We wanted to give you a sense and translate these targets into some hard numbers and give you a little bit of a sense for what's possible for Timken over the next five years.
On this chart, we walk from the 2014 peak to the 2019 peak, then to our new five-year target, which would be the next theoretical peak, if you will. If we can deliver sales growth in the range of 6%, which reflects our expectations for higher organic growth than we delivered over the last five years, and slightly more modest inorganic growth, we'd see revenue of around $5 billion in five years. Note that the inorganic growth will be opportunity driven. It could be more, which would mean less buyback or vice versa. With EBITDA margins of 20% and capital allocation including share buyback, we'd expect to deliver earnings per share of around $7.50 in 2024. We expect ROIC north of 13%, which is well above our cost of capital. The next five years is not going to be linear or go straight up.
We expect 2020 to be down slightly from 2019, as I discussed, but we don't see a prolonged downturn at this point. What you can expect from Timken is strong performance over the period. We have a better mix on the top line, a more variable cost structure driving more resilient bottom line. This will translate to higher peaks and higher troughs with a tighter delta between the two and overall strong performance through cycles. Finally, on cash flow. Over the next five years, we're planning to generate free cash flow of almost $2 billion. Which, along with our balance sheet capacity, can be used to fund acquisitions or capital returns. This will provide us with tremendous opportunity for value creation within our capital allocation framework.
Our five-year target for earnings per share assumes that we deploy our free cash flow toward M&A or capital return, such that we remain near the middle of our targeted range for leverage. What are the imperatives to deliver these targets? Essentially, we need to continue to drive our strategy and the Timken business model. We need to be thoughtful and selective in terms of our mix of business. We need to be relentless in our approach to operational excellence and cost management. Most importantly, be smart with our capital deployment, including M&A and share buyback. This management team has shown the ability to do this, and we're confident we can drive even higher performance over the next five years. That is it for me.
Right now I'd like to turn it back over to Rich for some final remarks before we jump into the Q&A session. Rich?
All right. Phil's the only one that didn't get a round of applause. I'm not sure what that implies for the reception of our new targets, Phil. Thank you. I just have a few comments to wrap everything up that you've heard. First, Timken has been a very good investment. 10-year TSR has been ahead of the median for the S&P 500, as well as all other industrial peer groups that we benchmark. We have a solid management team. This is a small subset of them. Our senior leadership team is experienced in our industry. They bring a great balance of technical, commercial, operational, and financial skills with a great amount of passion to the company every day. Bearings and PT are here to stay. Technology's changing, the world's changing, but Timken and this management team have successfully navigated those changes over the last decade.
We will continue to do so in the coming decade. Heard it a lot, we generate good cash flow, and we have the company positioned for greater levels looking forward. We will deliberately put that cash to work to create value for customers and shareholders. My final point is that we remain a very compelling investment today. While we've outperformed the S&P 500 median over the last decade, our multiple on earnings, EBITDA, cash flow remains well below the S&P 500 averages. We have the opportunity to not only create value through our growth in earnings and cash flow, which we will deliver, but also through our relative multiple. With that, I'm going to invite Chris and Phil to join me up here, and we will field questions.
Move that a little. Oh, be careful. The cord. Yeah, the cord.
All right. That's probably as far as we can go.
All right. I'll go on the other side. We got mics going around. Rich, right up here. Get a mic to Joe. Right here, Joe.
Thank you. As you think about those long-term targets, the EBITDA margins of 20%, in hearing the presentation today, there's a lot of discussion around growth, there's a lot of discussion around acquisitions. There was some discussion around improving the aftermarket piece of your business. I guess, as you're thinking about how you get to 20% EBITDA margins over the long term, what is the right way to think about the way that you're going to get there across those pieces?
I think you. Am I? All right. I think you hit on the various elements of it, and it's a little bit of those. Obviously, we do look to mix up through M&A. On average, I would say day one, the acquisitions have generally not all come in at that level. We've probably created more value with buying things in the mid-teens and mixing them up to towards that 20% than we have paying for the businesses that are already above that number. There's some mix down short-term with that, mix up long-term. The mix to Process to Mobile is definitely the biggest factor, I think, in moving the company margins up for us to get up to that 20%, above that 20%, have a higher trough number, close the gap. The mix to Process Industries is by far the biggest piece.
The reason the number, as we sit here today, isn't higher is, one, we are looking at a slight dip next year. Two, we feel there is more value creation opportunity by increasing the organic growth rate at these margin levels than there is in just going for that. We generate good value growing parts of our portfolio that are 16% EBITDA and 17% EBITDA margin as well. Anything else you'd want to add to that, Phil?
No, I think Rich hit on it. When you look at our segment margins today, you look at Process Industries at 26% EBITDA margins. That is near the top of companies that serve those sectors. Even our Mobile Industries margins, EBITDA margins of 15.5% are well above average for companies that serve those sectors. So I think Rich is right. We wouldn't plan on significant margin expansion at the segment level, if you will. But as we mix more into Process, that'll really be what drives the margins from where they are today to that 20% level.
Maybe just following on with Chris and the aftermarket business. I think you guys mentioned that your aftermarket business is, call it, roughly mid-teens portion of your business, at least on the Mobile side. From a distribution standpoint, it sounds like that's a big part of the story. Where are we today? Where can we go from an aftermarket mix perspective for the entire business? What needs to happen from an investment perspective for you guys to get there?
I think we have the platform to continue to grow, number one. That's why we kept emphasizing digital. Digital is not necessarily a buzzword, right? The issue with distribution is dealing with the fragmentation, and that's the challenge to grow. We're going to continue to expand the infrastructure that we have. For instance, we're moving into Africa and some other regions like that. The broader product portfolio helps a lot because once again, that helps you deal with the fragmentation in terms of revenue growth, right? When we go into an end-user complex now, we have a suite of products to offer versus just a tapered roller bearing where you would have been 20 years ago. We need to continue to do that because that scale is very important relative to the fragmentation, relative to achieving the growth rate in distribution. Does that answer it?
That does. Then maybe just one more just for Phil. Obviously, got to talk a little bit about the 2020 guide. As you think about how you guys constructed the guide, and let's say maybe potential risk to the guide, what are you most concerned about as we head into 2020? Then how should we also think about what the decremental margins are expected to be, particularly in the Mobile business?
Yeah. I think as I mentioned, it's early, and obviously, just given it was December, we wanted to give you a sense for what we're seeing. I think the biggest risk would be certainly a deeper decline across some of the capital goods sectors like off-highway and then that sprinkling into some more of the industrial sectors. If you look at that market chart, it looks a lot like what we showed you in the third quarter in terms of off-highway and heavy truck being the biggest risk areas. A lot of the Process Industries sectors, wind and solar is going to grow next year. The other Process Industries sectors are relatively neutral, plus or minus, just globally as we look at it today. I think that would be the biggest risk. I think we're assuming a relatively status quo trade situation, unfortunately.
If the trade situation resolves itself, that could be some potential upside. I think from a margin standpoint for the year, if you do the math, you'd see that the EBITDA margin assumption is for margins to be slightly lower at the company level in 2020 than they were in 2019, probably on the order of, call it, 50 basis points or so, and that's really the impact of lower organic volume. Decrementals are pretty good there, though. I would tell you probably well below 30%, as we've talked with you guys about before. I think we are feeling the effects a little bit of BEKA coming in and mixing us down as we've talked about. We expect that business to improve as we move through the year, but it's going to probably take a good couple of years for us to get those margins back above 20%.
Expect really good decremental performance. As we said, as we get into 2020, Rich talked about two things on the third quarter call. We still expect that to be the case. Revenue will be up sequentially from the fourth quarter to the first, and then we do expect modestly positive pricing and positive price cost, which is going to help those decrementals in 2020.
Yeah, Joe.
Hi. First, a question on the organic growth in 2020 and implying down low singles. I think that that would basically imply something like normal seasonality from where you are in Q4. Is the cost structure now at a point to align with that kind of revenue and the seasonality that you have going through 2020, or are there actions that we should anticipate that still need to be done?
I think the cost structure is largely in line with where we expect the first quarter to be, which as Phil said, it will be up modestly from the first quarter. We'll see how much, but it will definitely be up from the fourth quarter. I think the cost structure is in line with that. Our inventory levels are in line with that. Obviously, we took inventory out this year as well as our customers' inventories. Then I think the customer inventory situation really depends on how the markets play out through the course of the year. We start the year, I think, in really good shape internally, and to the degree the normal seasonality plays out, I think the inventory in the channels is reasonable as well.
Then a question on metric bearings. Can you size what the revenues are today for you there and how you think about the opportunities that if that's more than 50% of global revenues in those markets, how big can you get there?
Well, I don't think we want to provide the revenue number, but suffice to say that our global market share in metric bearings is lower than our global market share in inch bearings for the reasons that Andreas highlighted. We see just getting ourselves to our normal market share inside our distribution channels with metric is a tremendous opportunity for us. You saw, I think it was 15% annual growth rate of that. The reality is the bearing market doesn't grow 15% a year. You can see that our focus on that is pretty successful. We are pushing in the distribution channels trying to get our distributors to carry
The full product line, both inch and metric, and been pretty successful with it.
I would just add, and even beyond metric bearings. When you look at all the new products that Andreas talked about, the other rolling element bearings, we're still in the early innings. Those products are relatively new in terms of development and launching, most of them over the last 10 years. While we have a solid market position in our legacy tapered bearing line, inch taper bearing line, as Chris said, we've got probably, in some cases, low single-digit share in some of these newer product lines, and that's the growth opportunity because those products are competitive. They can compete with the best in the world. We're taking them through our channels, and we're seeing some really good growth as a result, even beyond the metric stuff.
Just last one on mix with a five-year target. What percentage do you think Process is five years from now based on some of the growth initiatives?
I think the only best way to look at that over the target range would say, probably a little bit more organic growth in Process than Mobile, just given those markets, and probably more of the M&A geared toward Process than Mobile. We're not going to put a specific target out of X%- Y%. If you saw from 2014 to 2019, we went from 55/45 to 50/50, we moved 500 basis points in that five-year period. We did a lot of M&A during that time frame, which really helped. I would expect it to continue to move in that direction, whether it's to quite that degree, we'll have to see. It'll definitely in five years will be more Process than Mobile, for sure.
Hi, Dave.
Yeah, David.
Hi, Dave Raso here. On the 2020 guide, the price cost that's baked in there, and we had talked about the first half of the year, particularly a very positive price cost. It seemed like for the full year, the price cost could be as much as positive 50 basis points. I'm just trying to understand the way the guide's playing out, the down 50 basis points and up margins. What price cost is baked into that?
Yeah, I think all we're really saying at this point is positive price cost, modestly positive pricing, and the pricing's being driven by some carryover from what we did in 2019, sort of the full-year effect of what we did in 2019. We are planning on some distribution pricing in 2020, which will be modest, we are seeing some favorable cost tailwinds, if you will, as input costs have come down. At this point, we would just say positive. We'll provide a little bit more color as we refine the guidance in early February. It is positive, really what we're seeing offset that is the impact of the lower organic and the fixed cost absorption that we would feel from that, other inflationary pressures across the enterprise, and obviously the mix down from BEKA.
When you think about BEKA, we haven't really talked. If Timken's running 20% EBITDA margins or 19.5% this year, BEKA will come in, call it much closer to 10% than 20%. We're going to work to get that up over time. The short-term mix down from BEKA is having a negative impact on that number for sure.
Before you answer his second question, since Phil talked about the negative side of BEKA, let me talk about the positive side for a moment, which is now we've added a month and a half. The product line's fantastic. Again, family-owned business. They've invested very heavily in engineering and product expansion, and we're going to leverage that very well. Then when you compare every productivity metric of revenue per sales head, revenue per factory head, et cetera, Groeneveld versus BEKA, we are way ahead of them, and we see a lot of productivity opportunity just within BEKA, and then obviously the benefit of bringing the businesses together. We've got to do that right. We've got to make sure we grow the revenue at the same time. A month and a half in, looks very encouraging.
Yeah. To be clear, though, BEKA's incremental sales in 2020 are only about $120 million. It's 3% of the company. They shouldn't be that big a drag on the margins.
It's a modest drag. Again, margin's down 50 basis points roughly or thereabouts, driven mainly by, as I said, the impact of the lower organic volume and then impact from the acquisition.
The guide seems to imply, unless the interest expense goes up a lot more than I'm thinking or the tax rate changes a lot, you're not really assuming any share repo in the guide. It seems like you're assuming a share count that isn't terribly different than the year-end. The free cash flow is $400 million, and the dividend's going to be $80 million-$90 million. Where's the $300 million going?
Yeah. We usually in the beginning of the year guide modeled the capital allocation going to debt pay down, which does not do a lot to-
Okay. All right
the earnings per share. We would certainly look to do other things with it. It kind of depends. To go and factor M&A when you don't know whether that's there versus the buyback and the accretion. Yeah, there's certainly some upside to that.
From that $300
versus de-levering.
Yeah.
Yeah. I'd say modest, though.
Yeah.
Even if you put it toward buyback with the averaging that you got to take into account for accounting purposes, you're talking less than $0.05, but clearly would be upside if we put that to buyback or M&A.
Yeah. If you apply 310 basis points to repo, it takes the share count on average down 2%-2.5%, which is more like $0.10, $0.15.
You get a half year. You get a half year the first year, and then you get the rest the next year.
Yeah. Okay. Thank you.
Thanks, Dave.
Hi, Justin Bergner, G.r esearch.
Hey, Justin. Hello.
First question is on the sales growth guide. If you expect to be down 200 basis points at the midpoint this year, are you effectively saying that over the next five years, you expect to do better than that 3%-4% because you're absorbing the first year?
Yes.
Okay. It's more like midpoint 4% or higher.
Right.
Second question is, can you tell us what you're thinking in terms of market growth? It seems like the guide is implying something closer to 150 basis points- 200 basis points of outgrowth versus the 100 basis points you gave a few years ago. Is that in the right ballpark? How much is cross-selling with power transmission products sort of driving that higher outgrowth outlook in your new guide?
I would say, I was predicting everybody can put their build rate on the global heavy truck market and off-highway equipment markets and so on and so forth on that, and there's some bandwidth of that. Certainly as you look backwards to the 2014 to 2019 period, 2015 to 2016 start we had, we dug ourselves a deeper hole in 2015 and 2016 than what we are anticipating we're going to dig ourselves in this next five-year cycle. That being said, to your point, we are starting as a negative and then coming at it. We do, I think, have a slightly higher anticipation for the net of the markets. I would also say, I think that's probably conservative because there's also the market mix part of it that we have. Our wind business is twice the size today than it was five years ago.
That's been the highest growing part of our business for the last decade, so it's now growing off a bigger base. We were zero in the solar market five years ago. The mix element is a factor in there. I would say the outgrowth, in whole, we're still targeting the 100 basis points.
The 100 basis points would be relative to your mix of business, but the mix of business might mean that the market growth in.
Yeah, the mix of business will be in the market assumptions.
In your areas. Okay. Then maybe just one more question. There's been a lot of frustration over the years that while your stock price has gotten the benefit of earnings growth, it really hasn't gotten the benefit of multiple expansion from a low level. Has management and the board thought about doing sort of a meaningful one-time share repurchase at any point to reflect the company's view, which I think is shared by many investors and analysts, that the multiple is too low? Or is that something that you'd rather put off in favor of M&A and other capital priorities?
Well, I would say, first, we've obviously bought back a lot of shares. We like share buyback. We review it with the board every board meeting, in conjunction with the M&A opportunities we're looking at. We have talked about and looked at announcing it one large time. I think the likelihood is much higher that we will be consistent buyers of our stock than come out and do something sizable. That being said, depending on what happened with prices. I think that is more likely to be a consistent approach. As we indicated here, we did a lot of buyback. We did a fair amount of M&A. As we look in this guide, we're looking a little heavier weighted to buyback.
Thank you.
Great.
Alexander.
Alex Roepers from Atlantic Investment Management. Thank you for this presentation. Just have a few matters I want to clarify. First of all, on page 83, you did a very nice job showing the capital deployment in five-year increments. Then you've given us a guidance for free cash flow for the next five years of $2 billion. Just wondering if you have the numbers at hand by chance of the free cash flow of those previous five-year periods to put in perspective, because I presume that the rest is debt that you took on.
Sure
to do the acquisitions and all that. That's my first point.
Yeah. I think when you look in the last five years, we would've put on about $1.3 billion of net debt. The delta between that and the 3.5% Would represent the free cash flow over that period.
Are you suggesting that your free cash flow in the next five years is equal to the free cash flow of the last five years?
No, it'll be more.
Well, it would be nice to put it in perspective. You're predicting $400 million of free cash flow in 2020, and therefore the $2 billion implies that the other years are kind of on balance the same number, which seems to, with 2020 being a bit of a down year, seems to be a conservative assumption.
I think when you look at 2020, it is a slightly down organic year, we do have some positive working capital. As we grow, we've got to put working capital into the business.
Yeah
But we are guiding to have the target would be north of 100% conversion. Now, I think if you look at 2020, it's well north. It's probably more like 120% conversion. It's a little bit more in the year than you do over the cycle. We would still expect strong free cash flow performance over 100% over the next five years.
Got it. With the guidance for 2020 EPS, you've given the 10% CAGR for the five-year plan period, or not planned or aspirational five-year period. That means that you're looking at 13%-15% CAGR from 2020 base because it's down, obviously. It obviously again suggests you should earn a higher multiple over time given how you've developed the business. I'd imagine that the board looks at M&A as being as accretive, if not more than share buybacks. Share buybacks is kind of a fallback options. For hypothetical reasons, one can assume for now that other than dividends, you can use all the $2 billion for share buybacks. Presumably, you'll grow the business and do better than that.
Again, those numbers are not accretion from M&A and/or share buybacks, and they should be equal or better for M&A is not in your $750 million number or in your 2020 number for EPS. Is that correct?
No. Well, if I understood you correctly, Alexander, the $750 million would include an assumed deployment of the free cash flow toward M&A, obviously, to generate the 2%-3% inorganic growth rate, and then toward buyback to maintain leverage near the middle of our targeted range. I would say, as I said, we expect to generate free cash flow of that $2 billion, if you will. Taking that and along with the balance sheet capacity we have, going to the dividend, going to, obviously, CapEx, and then a healthy dose of both M&A and buyback over that period of time.
Okay. Thank you.
Afternoon, guys. Thanks for putting on this event. Very informative. I guess, what we've seen the past five years in Asia, the growth rate has been really impressive. I guess, when we look at the next five, what kind of an organic growth rate are we assuming in Asia specifically? Then maybe just speak to some of the opportunities or challenges given just how fragmented that distribution market is versus Europe and in the U.S.
Yeah. I guess we're probably not going to quote the organic growth rate. When we look at Asia, and let's zero in, we're really talking about India, China are the main drivers of the area. Tremendous opportunity. The rail market, for example, we're the number one person in the India rail market, which is getting enormous investment going on, and it's going to get tremendous investment here in the next five, 10 years. Renewables. Both India, China have substantial pollution issues, and thus both governments are pushing enormous amount of effort and energy into the renewable space. That space is moving very hard. There's always been the core legacy markets of ours that continue to grow around mining, off-highway, and things of that nature. With regards to the distribution market, yeah, I mean, the fragmentation is a challenge.
You won't traditionally see double-digit growth rates in our global distribution business. That's one of the negatives, right? The reason for that is this fragmentation. I mean, the revenue comes in enormous or in very small bites, if you want to think of it that way. The power of that, though, is it's not a cost-plus business. The pricing power because of that fragmentation is significant. Thus, this is why you see those margins in the Process Industry Group. In terms of growing it, we have enormous amount of energy focused on that. We are globally coordinated. Once again, this is where the digital platform comes in because that's how we connect to all this fragmentation, via those distributors. We'll continue to build out those networks, and keep running the same playbook we've been running.
Once again, as I quoted the numbers, since 2001, we got a 5% CAGR on that distribution business. Might not sound like a lot, but to get 5% every year across that fragmentation, there's an enormous machine that's running to be able to do that. The thing I would add on that, too, is the installed base. Chris talked about the investment that's gone into India rail the last five years going to be bigger the next five, and our installed base is now bigger.
Yes.
Will be bigger the next five years. You go back 20 years, I mean, our Asia business, particularly China, was an OEM business, and now we've really built this large installed base. The OEM side continues to grow. That installed base is really where that long life of revenue comes.
Our ability to capture that installed base, is a lot easier in the fragmentation, than on the OEM side. Just to finish that point. Our installed base in China is just now beginning to hit the aftermarket cycle in a practical sense. What we will see, take the Chinese steel industry, tremendous Timken installed base installed over the last 15 years. That installed base is just maturing now relative to as you would view it in an aftermarket cycle. That'll also provide a tailwind for us in Asia over the next 10 years, for sure, as that installed base matures.
Got you. Thanks so much for the color there. Very helpful. I guess just one quick follow-on. You did highlight passenger rail as kind of an increased opportunity for growth going forward. I guess, what's the relative opportunity versus, say, your current freight exposure? How much of that passenger market do you really want to participate in?
Well, we like the passenger market. To be honest with you, the really good money's in freight, okay? Particularly if you think of it in an aftermarket context in the rebuild cycle of rail cars. Passenger rail is very attractive. It's a very sophisticated space, if I could use that, for safety-critical reasons, obviously. To your point, we will grow more rapidly in freight than we would in passenger.
Yeah. Thank you.
Hi, Courtney Yakavonis from Morgan Stanley. Just a quick question on the 2020 guidance. You had mentioned you expect sales to be down mid-single digits in the first half and then flat to up slightly in the second half. Is that primarily driven by an improvement in some of those negative end markets turning to flattish by the end of the year? Are you expecting this momentum to happen throughout the entire portfolio?
It would really be a leveling off of those markets. It would be an ending of the deceleration, and I think it was one of the questions earlier about it's really normal seasonality. It still has a step-down from the first half to the second half, but it would be
A more modest step down than what we have experienced this year, which leads you to this year down 7%, 8%, Q2 to Q3. Normal would be down 1%- 3%. That then with the comps gets you back that. We're really not projecting a second half recovery.
Right.
That would be upside. If there was a strengthening, and that's certainly a possibility as well, although I do think, to Phil's earlier point, trade certainty would certainly help that situation. We did get the USMCA. It's not a huge direct impact on us as a company, but it is a big deal to our customers. I think that was a real positive.
As Rich said, this year we saw a pretty big sequential step down from the second quarter to the third quarter. I think a lot of it is the comps just getting a lot easier in the second half as well, driving some of that.
Okay, great. Thanks. Just on the five-year outlook, you talked about some of the secular trends, wind and solar, probably a larger part of the portfolio. You mentioned some comments earlier about the content shifts, on electric, both for autos and for light-duty trucks. Is any of that being baked into the guidance at this point over the next five years?
I would say all of it is. Again, the challenge though with that is the level of fragmentation and then estimating the technical change. Yes, we have assumptions in there that wind and solar will continue to become a bigger percentage of the world's energy. Coal will continue to become less. We'll still participate in coal, but we don't see that going back to where it would've been 10 or 15 years ago. I think the answer to your question is, yes, we've tried to factor in what's going to happen with the markets, what's going to happen with the technology within those markets, and then what's going to be Timken's participation in that.
Yeah, the only thing I would add is, because I got a question in one of the breaks about the organic growth rate of the 3%-4%, which sort of implies a call it a 2%-3% market plus the outgrowth. That's more than what you guys did over the last five years. Rich mentioned it, we all mentioned it. I think it's true. One of the things to keep in mind is, you heard a lot about the product vitality initiatives, which we think are going to put us in a position to continue to generate growth and improve the growth rate. Also the mix is different, as Rich just said. When you look at 2%-3% market with a bigger position in wind and solar today than we had five years ago, 10 years ago, that's going to grow faster.
Some of the traditional capital goods sectors will grow on, again, the lower end of that range. We do feel like the mix of business we have today supports that two to three market assumption. From there, targeting the key sectors, trying to generate that extra 100 basis points is what we're confident we can deliver.
Yeah, there's quite a few of the other factors. One of the reasons I highlighted aerospace is aerospace was more self-inflicted for us back in 2015 and 2016. We did a restructuring of the business in late 2014. That's behind us now we believe we're going to outperform that market versus we were underperforming that market. Again, it depends. We definitely need some market help to get to a 4% organic CAGR. It doesn't take a lot of market growth for us, I think, to get there with the level of self-help that we have.
Sure. There's time for one more. Joe? Yeah, follow up.
Just curious about general environment. You talked about you maintained the guide for 2019. Over the last six weeks, nothing appears to have deteriorated. Just as you're planning and thinking about the next year, the next five years, and still obviously a lot of uncertainty, if you take what's happened over the past couple of quarters, you talked about that sharp deceleration from 2Q to 3Q. Just your general comfort level with stabilization in this step down now, what you're seeing out there, what you're hearing from customers to gain a little bit of comfort in that vis-à-vis what's still a high degree of uncertainty?
For the year, obviously with the few weeks left, as Phil said, we're going to be at the guide that we set on the top line. That is, again, a fairly sizable drop from Q3 to Q4, which we would expect some normal seasonal drop, but this is quite a bit deeper. It's a pretty weak finish to the year off the first half. As we said on the call, that usually would bode for a really good start to next year compared to the fourth quarter. We're now obviously building, in some cases, have full order book for the first quarter. In other cases, we're into January, and that's going to happen. We're going to get off. We are going to see a step-up from the fourth quarter to the first quarter.
From there, we're kind of just projecting stabilization and a leveling off. I think there's an equally good case that you could make that we should see more strength there. Obviously, there's some concern that there could be weakness as well. One of the other things with our markets, nothing's really been at bubble level for the last few years. There's nothing that would paint a particularly negative picture for us. Sitting up here right now, I'm pretty bullish on it.
This is going to be our last one, and then we'll do some more informal Q&A over lunch.
Thanks for letting me squeeze one last question in. Sorry to end with a cautious question. I guess a couple years ago, there was more concern among the investment community that the likes of Amazon Business would, I guess, pressure industrial distribution margins. That concern has seemed to go on the back burner over the last year or two, just people aren't talking about it as much. Are there any concerns, whether it's Amazon Business or other facets that could put at risk the high margins that you see in your process and aftermarket business over the next five years?
Let me start that one, and then I'll let Chris talk a little bit about it. We talk mostly about industrial distribution, but we have a lot of distribution channels. Industrial distribution is the big one, but we've got a separate automotive aftermarket distribution channel. Heavy truck is an often different channel. There's aerospace specialists. We now have lubrication specialists. We've got quite a few different channels, which certainly mitigates some of that risk. The second thing I would say is, one of the advantages we have is nobody's getting blindsided by this. Our distributors have been appropriately paranoid of that risk for many years and are working hard and investing hard to make their business model so strong that there's no reason for anybody to want to buy something from an Amazon versus themselves.
It's a big part of the digital platform stuff that Chris talked about, so I'll let him expand on it a little bit.
Well, to your point up front, nobody underestimates Amazon in the spaces we operate in. In our spaces today, they are pretty much a non-factor at this point in time. The one thing or two couple things to highlight. One, you'll note we keep talking service. This is important because when you go into a steel plant, cement plant, petrochemical plant, wherever it may be, it's totally different than the consumer. As a consumer, you know what you want to buy from Amazon, and you go on Amazon and order it. Inside these complexes, inside this machinery, the customer many times doesn't know exactly what they need. These are technical products, technical problems, and things of that nature. That is one area where Amazon really just doesn't have that infrastructure.
Our distributors have a field core, which couples with our field engineering groups that are going into these complexes and helping these end users fix their petrochemical plant or whatever it may be. As of now, it's not a relevant problem. Once again, I would say nobody underestimates Amazon. The one thing I would point out, maybe I shouldn't, but I would, there is one trend going on that is important to know. It is the globalization of distribution channels. This is important because if you go back in history, distribution channels were families fragmented. They were very fragmented. There is a global consolidation of distribution channels. There are now distributors who are in the U.S., they're in Mexico, or they're in ASEAN, Australia, things of that nature. That is both an opportunity for us and potentially some issues there.
The opportunity is those who are global, who are strategic of scale, which is where you see us keep talking about that, are going to become, in my opinion, the preferred partners of these global distribution firms. They're not going to want to deal with a bunch of little fragmented people around. This is one of the strategic reasons we continue to do what we do. That trend would be the trend that I would say over the next 10 to 15 years is going to require some maneuvering by the companies that play in these spaces.
Want to wrap up?
Yep.
I want to wrap up with thanks for coming today. For those of you on the phone, thanks for listening in. For those of you that are here, we have some food outside as well as the management team will be around for a little while and happy to continue the conversations out in the hallway. Thank you.
Good. Thanks.