Q3 2019 Earnings Call
Does this mean when we take that altogether.
We continue to invest for growth, but our cautious on the macro environment. We believe we can generate solid sales growth and strong earnings growth for 2019, and 2020 , Sean will provide more specifics, but I want to provide some context upfront. Let me now turning to Sean to cover the financials and guidance.
Okay. Thanks, Olivier sales were 753.9 million in the quarter, an increase of approximately 4.5% in local currency on US dollar basis total sales increased 3% is currencies reduced sales growth by approximately 1.5% in the quarter.
On slide number four we show sales growth by region local currency sales grew 7% in the Americas, 2% in Europe , and 4% in Asia rest of World sales growth in Europe was particularly impacted by the decline in food retail absent food retail Europe had sales growth of 4% in the quarter.
Good retail reduced sales growth in the Americas by 2% and 1% in Asia rest of world in the quarter, China had growth of 5% pretty much in line with what we expected in was impacted by strong multi year comparisons.
The next slide shows year to date results local currency sales growth increased 5% in the Americas year to date, 3% in Europe , and 7% in Asia rest of World.
On slide number six we outlined local currency sales growth by product area in the quarter Laboratory sales grew 7% industrial increased.
It's 5% with core industrial up 7%, while product inspection increased 3%.
Food retail declined 15% in the quarter and excluding food retail our overall growth in the quarter was 6%.
The next slide shows year to date sales growth laboratory sales grew 8% in local currency industrial grew 5% with core industrial up 7% and product inspection up 2%.
Food retailing declined 10% on a year to date basis.
Ongoing productivity and pricing programs the factors outside of our control, namely the continue deterioration in the macro economic indicators makes as cautious in our outlook.
Do you believe our businesses less susceptible to an economic downturn than in the past due to the greater percentage of our sales and laboratory in a shift within our industrial business to more attractive market segments.
However, we don't believe we are immune to economic cycles, and although we remain in the investment mode. We remain agile to adapt if market conditions necessitate.
Just to final items to keep in mind.
We'll face very challenging comparisons in the fourth quarter in currency is worse as compared to the last time, we spoke.
Both terrorist and currencies will continue to be headwinds for our business.
But the full year, we expect adverse currency and gross terrorists to reduce E.P.S. growth by approximately 5% in 2019 and by almost 1.5% in 2020.
Now let me cover the specifics.
Continue to expect local currency sales growth in 2019 to be approximately 5%.
Our full year sales guidance, excluding food retailing remains at 6% and local currency.
Now expect full year adjusted E.P.S. guidance to be in the range of $22.65 to $22.70, which is a growth rate of 11% to 12%.
We are now or the range in our Q3 B. is offset by more negative currency.
With respect to the fourth quarter, we would expect local currency sales growth to be approximately 3%, which is an 11% grow up on a two year stack basis.
We would expect to this sales growth.
With this sales growth to result in adjusted D.P. has to be in a range of $7.66 to $7 and 71 sense a growth rate of 12% to 13%.
For 2020, we expect local currency sales growth to be approximately 4% and adjust city p. has to be in a range of $24, an 85 cents to $25.10.
Using the midpoint of 2019 guidance. This represents this result in a growth rate of 10% to 11%.
This includes an estimated had when of almost 1.5% from currency in the gross impact of terrorists.
Some further comments on 2020 guidance, we expect interest expense to be approximately $40 million in 2020 and amortization to be approximately $53 million.
Other income in 2020 will be approximately $2 million, which is a decline from 2019, principally due to lower expected pension income.
In terms of free cash flow, we expected to reach approximately $560 million in 2020, which is a 12% increase on a per share basis.
We will repurchase shares of approximately $800 million in 2020, which includes an incremental amount as we target a net debt to eat it D.A. leverage ratio of one and a half times.
As in the past, we will buy shares evenly throughout the year.
Some additional details.
With respect to the impact of currency and sales growth, we expect currency to reduce sales growth by approximately 1% and the fourth quarter 2019, and 2.5% for the full year 2019.
2020, we expect currency to reduce sales growth by approximately 1%.
Finally, as we typically do we will provide updates on a quarterly basis for next quarter C.P.S.
However, I would like to point out that we would expect adjusted Dps growth in the first half of the year to beat below the second half due to tougher comps any more unfavorable impact from currency in terrace <unk>.
In particular, we would expect you one E.P.S. grow to be below the low end of our full year guidance range.
We will provide more specifics next year, but wanted to point. This out now as I know you'll be updating your models.
That is it from my side L. now turn it back to Olivia. Thanks from let me stop are providing some additional coleman's, although a frightening result.
Business continues to perform very well with 7% local currency sales growth in the corridor, which was against very strong growth in the probably are you most product lines did well, particularly if you look at it on a two year basis.
<unk> and China was particularly strong.
<unk> business is well positioned to continue to gain true.
<unk> on investments in <unk>, we sources spin out 'cause sales and marketing initiatives on the investments.
<unk> to remain favorable unexpected growth in the fourth quarter in 2020 , although we face more challenging <unk> off to several years, a very strong growth.
In Kosovo industrial business product inspection was up into portal in line with all expectations, Oh expectations, all for relatively flat growth in Q4 given strong probably or Europe , and we would expect glow to meet single digit growth in 2020.
<unk> is below medium tome guidance as to packaged food manufacturers and market continues to be mix, we haven't seen the log food manufacturers, we tone to full investment old, particularly with respect to global roll off.
We think this will take some additional pipe.
Real very well position in this business how do we believe growth dynamics are very strong over the medium tem given to focus on food manufacturers on <unk> and expected growth opportunities in emerging markets.
<unk> industrial did very well in the third quarter with growth of 7% local currency, we benefited from some <unk> logistics, but have good growth even excluding this benefit.
We executing well in core industrial this business is gaining traction with it's been after sales and marketing initiatives underlying marketing mind is good enough.
Expect continued soul it's results. Although this business have grow growth in Q4 last year of 13%. So they will face a particular challenging compare them.
Outlook for next year solid, although we would expect growth in China to Motorola modestly given strong multi year comparisons I'm slightly more challenging market dynamics.
Finally, food retail was down 15% into quarto, which was worse than we expected as we highlighted last quarter. This business is impacted by challenging market demand and timing of customer project activity.
Watching this business for profitability north fulfill schools.
Lack the cost reduction actions over the last year in light of the <unk> conditions, we expect marked conditions to remain challenging but expect the business, where we tone too modest growth next year aided by easier comparisons a new product launches.
Now, let me make some additional comments by geography, I will start with you off which was up mid single digits.
Excluding food we <unk>.
<unk> have Grove wife call Industrial did particular, well retail was down significantly we believe <unk> call industrial markets in Europe are good enough to maintain replacement cycles queue for will be impacted by very strong probably a year growth, but we would expect reasonable growth in 20 points.
America's have very strong growth in a quarter, excluding food retailing America screwed, 9% in the quarter lob have very strong <unk>, calling dust will have good growth as well.
Mind off the year, we expect to make us to grow meet single digits.
<unk> single digit growth in 20, 220, we believe markets will remain solid but it will be impacted by probably your your comparisons.
Finally age or west of the World a solid growth with most business lines of doing well.
I know had solid growth in the causal with high single digital outgrowth unmade single digit industrial growth, which wasn't line with our expectations.
But by very strong growth and pie or who you outlook for this region remains solid but they will continue to face strong multi year comparisons other slightly more challenging environment.
One final call. It on the business service had another quarter of good growth in the.
Seven per cent in local currency for both the quarter of yesterday I will have some additional call them in some service shortly.
That's concludes by Coleman's on the different pieces of the business.
As mentioned earlier, we will remain confident that I will grow finished it this kind of continue to generate additional market share.
Let me give you a few examples.
I will start with sales and marketing, which we are continuing to invest in new tools. So feel sales reps have more capacity for impactful customer interaction <unk>.
<unk> one of the acceptable, including our new sales tools. The digital Library library houses Abbas alright of materials, including videos cross selling overviews customer preferences value selling guys <unk>.
Oh, the digitalization tools include feel sales mobility solution.
<unk>, which allow sales reps to immediately follow up on custom request I believe.
We also utilize yeah, most so sales rep.
At a customer side can leverage the expertise of a product specialist <unk> E. day, most allows for grade to reach customers from multiple sides can participate although I, especially effective for presenting our aims and ones that are highly complex or application oriented.
Realization is also at the heart of I.E. Commerce platform, which promotes the ease of doing business and allows for no taught transactions why also further enhancing I will relationship with the customer.
Digitalization tools are just one example of how we are hoping to ensure I was salesforce has the most direct interaction with customers.
With the greatest potential while also enhancing the customer experience.
Service continues to deliver good growth it was up 7% today I think it accounts for about 20, 30% of total sales versus I would direct competitors services and excellent competitive advantage as we have one of the largest most global.
Train service for.
I was service force keeps us close to customers provides insight on how to best stuff that.
Global customers are increasing you're asking for services to be delivered in a unified consistent way across regions countries uncalled peanuts.
To meet this need we now offer to harmonize service levels standard for noncontract customers, where we respond within three days you on regular ourselves huh service level agreements, which can be customized up to four hour response times on available 24 seven.
It is hard file or direct competitors all for such a service level agreements. We also provide value added services. A good example is I would digital performance verification for our product inspection customers.
Targeted to food manufacturers, who needs to show compliance with safety regulations.
The service assesses how an instrument performs according to glue global food safety initiative stuff that I'm provides documentation and as digital format.
Can be assessed.
So you can be accessed.
Worldwide by the customers quality control team.
It is just one a couple of how we are helping customers execute a document routine talk and maintain data integrity.
Yeah.
Consumable is another source of good girl for us and that was presenting about 10% of our total failed.
You today <unk>, 7%.
Pipettes tips are key component, Ohio, consumable offering, which we enhance with the acquisition of biotech about two years ago.
In addition to sales and marketing and service initiative. Our product portfolio is also an important source of growth. For example, we have evolved a comprehensive solution for pipettes asset management, a loud bio form company can have up to 10000 pipe it at one side alone.
As many strays it <unk> tracking each pipettes location.
Inflation state those audit certificates service times and replacement schedules can be overwhelming to.
To help manage this we have developed a comprehensive solution that combines an asset management software without a unique smart stand we told our pipe it with an embedded Oh, if I.D. chip that indicates when's. The next service and calibration on you.
The software connects multiple Smarts times I'm tracks on my that's all pipe at Brian's on models in L. up.
Oh solution helps accustomed to save time and increased productivity, while providing integrated data and trace ability for quality control and compliance.
This is just one example of our technology leadership, and we have money more with.
More within our product portfolio.
That concludes our prepared Commons, we are very pleased with I will result in the quarter.
Today.
<unk> more uncertainty exists in the global economy, we believe we are well positioned to gain share and deliver good earnings school.
What's that I want to ask the operator to open the life of questions.
As you reminders you ask a question you will need to press star one on your telephone to withdraw your question press the pound or <unk>.
Well, we compiled acuity roster.
Your first question comes from the line of Tyco Peterson.
Yeah.
Hi, this is Julie appetite.
No question.
Regarding your commentary, yeah, I think I'll <unk>.
People really strong by region, which is you know come trying to.
Hung up here, so could you just sort of.
<unk>.
Yeah, we need we were all very happy about the performance I think it's a reflection off and they called me that is good enough for us, but then very strong execution by the team in terms of the spin actually initiatives in terms of focusing on the right end user.
Segments.
And we had also some good product launches that that help us. So indeed really a good performance what I. However would also odd here.
The the parts of the economy that is particularly week in Europe is not necessarily one that we have a focus on it so thinking of machinery automobile automobile industry and so on this on and off the most important industry segments Cross.
God I think and.
Okay.
Yeah, that's fine Julia.
I don't and by regarding student <unk>, just wondering what thrill for negative surprise.
And how how's yours.
Hmm that's fine.
Because I I think you P.D.C.
Pretty good already.
So just wondering you know.
That you like to card and then actually look at you or 2020.
<unk> Australia.
So with 4%.
<unk> well it that Aw set US you know teaches food weakness that you're expecting for next year and what would be guidance, excluding food bank. So I will take the first part of that Sean uncovers. The second part of the question so back to a retail and visibility indeed, we have a reasonable.
Visibility within a quarter, but I visibility <unk> is supported by a good diversification across regions of the cross businesses and so I think.
We shall we certainly have a reasonable visibility to very large project, but then there is an underlying business that we we call <unk> properly predicts the whole quarrel.
What plays also in the weakness of retail is that the big <unk> did not come in as expected.
So we experienced that weakness particular also from that and we have we expect as we did talk on the prepared remarks, we'd have to continue to be a challenge you for another one two quarters. It's also because we all matching this.
Business too with profitability adults top line and yeah I.
It's not a fundamental shift, but we do recognize that it's a market.
Food retailing is Italian who market right now we expect that to the latter part of next year will look better for us.
Yeah in terms of the second party that your question Julius I look at 2020 for retail.
For the <unk>, we'd probably and imagine modest growth low single digit but during the first half of the are we wouldn't be surprised if we see it down a slightly during q. wanting in Q2, but down in that kind of like low single digit kind of arrange.
If if we look at the full year, excluding food retail not as much of an impact is we would've seen and and 2019, but you know modestly better than than the 4% and if I just kinda like walk down the divisions or the business areas. You know lab would probably looking at lab in the mid single digit range next year I mean.
Keeping in mind, we have very good momentum enough business feeling very good about the execution by just acknowledging were coming off of several years of <unk> very strong growth there on the Koreans that dust real side, probably looking at more low single digit next year, you know we've been growing very fast in that Disney.
Since the fourth quarter of last year as a reminder of the core industrial business group, 13% in Q4 the last year and we've been have very strong growth levels in the high single digit range for most of this year.
And then if we look at product inspection, probably more in the low to mid single digit range next year. This is a acknowledge below are a longer term expectations. We still feel very good about the business from a long term perspective, given our many competitive advantages, but just acknowledging softness in the package food.
<unk>.
Got it that's very helpful.
<unk> regarding <unk> I think last quarter, you had to have what they <unk>.
Right. After all it seems that it has moderate.
Just wondering is tiny calm down on X.
Like to call out and how should we think about ya outlets like <unk>.
<unk>.
So indeed, there is a coma topic, we have here in China, Miami quarters, So very good results.
That starts now to play in.
I tend to have that we feel still very good about our business in China. We have an excellent leadership position. There we have an average probably 25% marketshare, which is about similar to what we have in the group. We have <unk> programs that are executed really particular also.
Well in China, and we are benefiting from a good diversification off the end use markets that we so so these are all very strong assets that we bring here and I feel that I will end user industries that we have focused on or actually.
Build going welding, China. So all in all good but then we have this comparison topics.
And of course, we also see that there are parts of the Chinese Margaret said, a week or we have just less exposed, but I'm not pretending that we are totally immune to death one.
Thank you so much.
Thanks.
Next question comes from the line of check me him from Barclays.
Thank you good afternoon.
Just to back on a core industrial business. You know that's you know kind of despite some of the macro commentary seem to continue to do while I was wondering if you know you did mention some discrete projects, which may help the quarter you know what would the gross have been.
You know like otherwise and then Sean is we're thinking about 2020 is there any phasing within that.
You know low single digit outlook, you talked about for 2020 as you look at the ear for corn industrial.
<unk>.
Yeah, Hey, Jack I mean, we called out a little bit of some project activity in our T.N.L. business, we we actually see excellent momentum in that business kind of continuing for you know the medium term, there's some very interesting things going on in that business for us. So I wouldn't be what is necessarily a.
One time topic for for next year, but if we exclude that I don't I don't have that number but I don't think the numbers also does that significant on the overall division.
What's been really interesting to us is that the growth and industrial has been extremely broad base geographically and in in in a lot of our part of categories as well and I just feel like you know the this focus on them more attractive segments of the market I really has gained momentum over the last year and as I mentioned.
In my previous comments with Julie I mean, you know we grew up 13 per cent in the core industrial and Q4 of last year, and we really seen trying execution throughout this year as I looked at 2020, I haven't thought too much about pacing, but I I can't imagine you know Q1 might be a little bit a lower than.
In the other quarters could be flat it more flashed a modest growth just given that we have a very difficult comparison in the previous year, but you know frankly haven't put a lot lot of thought into that one and we don't have very good visibility going out that far in this one time, but of course, we'll we'll give you an update the next time we talk.
Yeah, That's fair and then on the gross margin so 60 basis points your rear I think.
The best progression you've had in a while you can walk us through some of them moving or <unk>.
F.X. Terror embracing just you know what the drivers in that were yeah sure. Yeah, I know very pleased with with the margin expansion in the quarter also came in line with what we what we had expected at least you know price realization did well it was about 2.5% again that was probably a little bit that.
Her then what I was thinking when the last time, we would have spoken that would have had a benefit of about 100 hundred and 10 basis points on the margin I kind of upsetting that was the gross impacts of the terrorists at 50 basis points and so I think those are really the the two items that to call out there was certainly.
A lot of things offsetting each other that were smaller in nature going you know either way, but nothing more to really mentioning.
Great function.
You are next question comes from a line of channel, 10% from U.B.S. Oops.
Great. Thanks, Thanks for taking the question.
Packet geography spores or Sean just for a moment just I don't think you mentioned it quicker.
Think about you know China, India, specifically did you ever got the fourth quarter and 2020 I think it may have been asked earlier, but I'm just kind of think about yeah. The cops are a little bit easier for 2020, but you're trying to get a flavor for how you're kind of modeling.
Yeah, right now yeah, thanks, and so right now for Q4 ward looking out probably more mid to high single digit growth, but as we look to 2020 right now we're assuming mid single digit grow you know I would imagine the lab business will do better maybe high single digit, but probably more cautious you on the industrial business not that were particularly safe.
Anything in our business, but just given the overall environment. There that's kind of how we're thinking about it right now I'm like like every year with China, There's always upsides and downsides and things can change quickly.
And then and then I'm sorry for Europe , <unk> I don't know if he gave those numbers 2020 I'm just wondering how you think about.
For Europe right now, we're thinking probably low single digit in Europe , and then on just to be clear for America's mid single digit.
<unk> and and then and then maybe I know you talked about the global economy and kind of where we're at you guys are kind of powering through with the exception of food recount because.
Kind of your sense for 2020, and the Guy and a 4% is there is there anything you see other I mean like what indicated you watch because you know you've been kind of highlighting the risks for about four or five corners, and yet you know receptionist would retail.
Held in well so I'm just wondering about it seems like you're wanting something may come but maybe it won't come. So just can you give us a flavor for.
Indicators you're watching thanks.
<unk> old enjoyed this and we have in total still look favorable I think we call. It it'd before we have in retail a pocket.
Food area, So my market federal more challenging but up to that of that all I will K.P. I said, we have internally lead scroll told us up looks favorable we are very pleased about the team being focused on execution.
The see good results of our sales and marketing programs. So that's unchanged <unk>. Good I think the overall economy, we look at P.M.M.Y. metrics, we look.
It can all myth.
We.
Warm to take that in our situation.
And in that sense, we continue to talk about Oh for clouds economic clout I think that was one board that I used a year ago and that would still apply it here.
But it's not that we see something particular <unk> or that the clouds gets really dark here.
Yeah.
In that sense no no anything that is so different to what we experience. The last few quarters and we we always said the economy needs to be good enough for us to grow and we feel the economy is good enough.
And it and then he won fun with some food retail I know, it's small part of the business, but it's so so in 2020 it gets better from a <unk> and then as you look out.
Fundamental issues or kind of benefits that will improve you feel like with the supermarket industry or the other parts of the Danish you're serving just given the pressure from the internet. Thank you.
Oh I think the challenges will remain but we will have adjusted to that for comparisons will become easier of course, but we have been also proactive in.
We structuring parts of this business <unk>, we will half the benefit of about behind US. That's also one of the reason why we feel like the second part of next year will be battle.
And that should position well also for the future.
Great. Thank you.
You know our next question comes from the line of V.J. Kumar with every crash site. Your line is open.
Hey, guys. Thanks to take my question and now well he they just that baby one on the 20 comments, you're making up.
If I understand and currently what you're saying is we want to be cautious, but you haven't seen any decent <unk> in either industrial or food versus what you're seeing right. Now. This is more for cautious Tony or just taking but no but from an actual trend that you're seeing so far you haven't seen any details <unk>.
Are common yep, that's a fact coleman doesn't called way I would say.
What we have seen year two days in in the business <unk>, Oh product inspection food retailing <unk>, a very pleased on we have not seen a slow down in the momentum.
From so it's it's yeah.
This is true for all the relevant K.T.I.'s. So not just kind of the report itself sales, we quote a D.V.D. leister notation and all that stuff.
Yeah. That's helpful. And then maybe one on the the assumptions on 20, it looks like just based on a D.P.S., maybe there's some moderation margin expansion for next year.
Not sure. If this is aspects or what kind of <unk> you know maybe any any any comments on income under marching sat next year.
Yeah.
No I mean, I I think when I look at our guidance for for margins I feel actually pretty good you know from an operating profit margin perspective, there might be a little bit of currency noise, there, but excluding currency worth worth looking at operating margin expansion of about 90 basis points, which is closer to the higher.
One of our typical guidance at 72 100 basis points when I look at the incremental margins I mean looking at you know 40 north of 40%.
<unk>.
The gross profit margin level, you know it probably isn't the 40 to 50 per cent kind of arrange so overall, yeah. We feel good about our margin expansion story.
Thanks Guy.
Your next question comes from the line of steep which have from Wolf research.
Uh-huh thanks for the time here.
One of them. It's just one housekeeping question for Sean and then a couple on a customer dynamics for for other Sean Olivier.
Sean I Wonder if you could just speak to the parents impact that you had embedded in the guidance for for 2020, just operationally Helen whereas that manifesting.
And then I have a couple of customer dynamics.
Yeah sure thinks c. so for terrorists right now the the direct impacted the terrorist is about a half a percent headwind too.
T.P.S. next year.
In a in just the maybe proactively addressing currencies <unk> well, yeah, probably close to one per cent had when next year as well too.
Sorry, sorry, but the question was <unk> is it what is it about the the terrorists is is is this about redomiciling something operationally or is it a direct more direct impact.
It's a <unk>, it's the cost and we incur yeah, because we import products out of China, two we call a significant part of our production is based in China.
And then we export and when they arrived in U.S., we have hobbies that apply to that on the always the assumptions that we use on these calls is walk has been communicate that we all know taking any speculation of what might change on on yeah. So just to declare we're assuming that 20.
5% rate on the enacted terrorist stays in place.
Okay. Perfect. So then to on customer dynamics, and then I'll jump back and Q1 is on farm you guys are pretty substantial exposure to farm as a customer base can you talk about what you've seen in terms of demand trends there are and what the assumption is for 2020 and then on China I appreciate the comments about.
Operating environment started making a lot of sun.
To make sure that in your narrative when you are not calling out any more challenging tender dynamics or local competition or local preference any of those items just to make sure you're you're indicating to you're not seeing any of that makes it much.
Yep.
Let's start with a lifetime or <unk> actually why I say life since that's the way we look at I would the business.
We don't particular, not always the down just to be fall mall or so I would <unk> business has big pharma euros. We include also biotech companies. So it's relative <unk>. This is <unk>, 30% if I were revenue.
It has been the market is doing well across we will have big with competitive positions. We have this isn't he.
Use these compared to this differentiations said, we all we have there are so also additional beneficial things happening like data integrity, which is becoming more important until it. So it is a very good and use the industry going well for us globally.
What.
Porting to us and the end of the day, it's a market that is still nicely diversified because we we have not just big pharma, it's small big across geography, historically, what we have seen is the west times with Big pharma was restructuring in the west, but then you saw.
A lot of C. arose coming up in the east.
We have benefited from that and I looking forward I see that underlying diversification that he's also beneficial for us, but we certainly count strongly on lifetimes industry. We continue to invest in it. It's certainly one of the markets that we expect expect us.
To continue to win Walker chip.
The second question. So you want to take that one or yeah. I think the second question was in the in China any local preference I think the short answer is we're not experiencing that like some of the other peer group companies are in China were very much viewed as a local.
Company, we've been there for over 30 years, we employ a lotta people, we make a lot of products. There are very strong reputation in the market. If anything we would be probably second Lee viewed as a Swiss company and shine as opposed to an American company.
Until bottom line, we don't have any this advantage here or we don't see any problems coming up or so and country I would say we have a trend in the Chinese markets, where a quality really matos people in that sense willing to pay.
Premiums also for west and <unk>, so feel good about up.
Okay.
[noise] newer next question comes from the line of Deer spread from thinks America Merrill Lynch.
Hi, good afternoon.
<unk>.
Hey.
So just a question.
Just sort of thinking about.
Yeah. Some of the past friends. When you know we we saw you gives relatively conservative guidance, and then sort of like eat that <unk>.
When you look for next year he broke into it it was there any sort of like pockets.
Where people didn't buy in in lab in industrial because they were worried about terms to worry about trade and you basically saying, it's like do you think your son's catch up spending to be done in 2020.
So we're thinking about what we happened back in 2016, 17 time frame and you have to catch up trained what do you know when you're trying to industrial getting some down so much just wondering about dynamic repeat for next year.
No I don't I I think we refer to as a <unk> pent up demand I I don't see that I see I I say, so because I don't see that we are experiencing a particular <unk> decline here or I, we are expecting that'd be calling me remains above the same as it is now and.
<unk> also before good then off so would the good enough to actually implies that there isn't a customer was holding back and then we would expect I picked up the following year.
In terms so.
Oh guidance being conservative for so I would say we did it in the same similar way as last year of course to I would guide as they are upsides and downsides, but I don't feel like we are more conservative or more bullish than last year.
Great. That's helpful and just yeah realized juror guiding based upon what the current political situation looks like but if tara situation between the U.S. Sunshine that goes away just that or normalizes does that impact your.
Ability at any way to all this sort of like how you would get pricing for next year I you would you not that as much pricing because she took them this year.
So if the types would go way you would see and up side, you know eat yes, and I will margins.
<unk>.
We can keep the current pricing power that we have bear a few things that would we would reverse but in general there's there's a significant upside to the P.S. if the <unk> would really go away.
Particular, because I would think that currency might also change rhonda, but what I wouldn't know.
Automatically assume is that the top line would improve because of that again I don't feel we lost business because of their trade war.
Yeah.
Right, Thanks very much.
Yeah.
Comes from the line of Steve.
Cleveland Research.
Hi, good evening and thanks for taking my questions. A couple of four yeah first I guess, Sean just a few housekeeping items I apologize. If you did mention it but have you did you provide specific operating margin tax return chair account guidance for next year.
Oh, I think so but I don't mind going over it again, you know in terms of operating margin. We're looking at a margin expansion, excluding currency of 90 basis points.
In terms of tax rate, we're assuming we maintain our rate of 20%.
And in terms of weighted average shares were estimating just just over $24 million I.
I mean, 24, I'm Gonna insurance.
Yeah. Thank you and then just to follow up question, maybe for Olivier the the product inspection business, we take a little bit longer term view, you know going back a few years, where the business that you know consistently grew in you know double digit range and it's you know big closer to get you know flatish are low single digit growth over the last two years.
You know I understand that you know some of these customers are under a financial pressures, but just wondering <unk> you know what your view is on kind of the longer term potential growth this business.
I wasn't sure how much of the yeah. The sales from customers are discretionary versus more kind of driven by regulation like so much.
Hey, just to <unk>, we might have a have quarters with double digit growth, but we were more high single digit the high single digits, sometimes and quarters. We can have a very big <unk>. It it can be <unk>, but.
Medium term long term I expect us to have this means to high single digit growth in product inspection. It is driven by cause we have and they really an exceptional strong <unk> that <unk> <unk> have a lead in all the <unk>.
<unk>, so including check weighing <unk> X. Ray envisioning spectrum.
We have a fantastic so obvious network that customers really bother you. We are really apart no to global that counts too for global goal out on these global rollout are driven by.
Quite a month to put the bronze.
They <unk>, but in indirectly in the sense the regulation, especially five how we call for me to take place.
And.
<unk> <unk> course, a lot of cost on on the gain also <unk> when you need to do recall, but it's up to the different columns to decide how they protect themselves and we certainly field up installing were <unk>.
The ones at the end up a pocketing line, it's the best insurance.
And allows people really put back the interest of the company.
Provide the best quality is due to customers.
Thanks very much.
Yeah.
X. question comes from the line up all night from Jeannie Oh.
Yeah.
[noise].
Paul Knight Your line is open.
Thanks, Hey, Libya could you talk about the particular products do you are driving this accelerating growth in lab products as 2020 rolls out.
I wouldn't narrowed down to particular product we talked about.
This on Paul.
Calls that we have the most modern product portfolio in line.
That we have ever hot but this is across all the product line. So this is true for pipettes. This is true for analytical chemistry. This is true for out of automated chemistry. It's also true for our lab balances. So it's the whole portfolio and it's not what things that.
I would say one benefit to us in the last two quarters. This is an ongoing thing we benefited last year and we certainly going to benefit next year.
In our business as an individual new product doesn't really move the needle. It's the some of things and having this technology leadership that allows us to win new customers and also allows us to raise prices.
Gives us this pricing power.
And in my way is pricing power a year is at a 100, Bips 200, bips low single digits.
Yes, hey, going forward and impact of course this year, we did very well we are two and half percent year to date.
We've been north of two in the last couple of years as we kind of guide we typically think about 150 bips as I look at next year as 150 to 200 basis points is probably.
A reasonable range.
Okay.
And then lastly, you had mentioned earlier that consumables were 10% how much is a software content now in service content of Oh.
Mettler Toledo.
So service is 23%.
And then we have.
That is 10% from consumable Thats why we say we have about a third which is really reoccurring.
And.
Both have been growing very nicely this year about 7% range.
Okay. Thank you congratulations.
Thanks.
And as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key.
Your next question comes from the line of granting clear from Jefferies.
Thanks, Good afternoon.
Let me just curious if you could share an update on stern drive with us and perhaps quantify the net savings from that program in 19 and incremental opportunities you see in 20, Yeah. So has really good momentum happy to do you raised his question because yes, it's one of the contributions to our margin expansion.
We have really all the producing organizations across the world engaged in that.
We we really.
See benefits in terms of productivity on the full floor, we see benefits in material cost we have very good new pro additional initiatives. So sub project. He also for next few years you might recall at the end up on an earlier call. We we mentioned that we have about 300.
So project to understand right.
We have a similar number of project also going into next year.
In terms of resolve this year, we very happy about this and so that tends to achieving our targets I expect about the same benefit though for next year from the program.
To highlight we.
We look at Stern drive a in a similar way as to spin out it's a journey.
I expect this to be incremental every year, but I wouldn't be surprised if in 10 years, we are still going to talk about sterndrive on this call.
Oh.
Forget and then Sean June give us the Capex number for 20. Thank you.
Capex number for 20, just one second for.
I'm just under $110 million.
Hi, good thank you.
Last question at this time I will now turn the call back over to the presenters.
Thanks, Mike and thanks, everyone for joining us. This evening is always if you have any questions. Please don't hesitate to reach out have a good evening everyone.
Oh right.
This concludes todays conference call. Thank you for participating you may now disconnect.
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