Q1 2021 Nordson Corp Earnings Call
For fiscal year, 'twenty 'twenty, one conference call.
At this time all participants are in a listen only mode. After the Speakers' remarks, there'll be a question and answer session.
To ask a question during that time. Please press star one on your telephone keypad I would now like to hand, the conference over to learn Mahoney. Thank you. Please go ahead.
Thank you. Good morning. This is Lara Mahoney, Vice President of Investor Relations and corporate Communications I'm here with syndrome, now garage on our president and CEO and Joseph Kelly Executive Vice President and CFO.
We welcome you to our conference call Today Tuesday February 23, 2021 to report Nordson fiscal 2021 first quarter results.
You can find both our press release as well as our webcast slide presentation that we will refer to during today's call on our website at www Dot Nordson dot com forward slash investors.
This conference call is being broadcast live on our Investor website and will be available there for 14 days.
There will be a telephone replay of the conference call available until Tuesday March 2nd.
During this conference call references to non-GAAP financial metrics will be made.
A complete reconciliation of these metrics to the most comparable GAAP metric was provided in the press release issued yesterday.
Before we begin please refer to slide two of our presentation, where we note that certain statements regarding our future performance that are made during this call maybe forward looking based upon nordson current expectation.
These statements may involve a number of risks uncertainties and other factors as discussed in the Companys filings with the Securities and Exchange Commission that could cause actual results to differ.
Moving to today's agenda on slide three Naga will discuss first quarter highlights. He will then turn the call over to Joe to review sales and earnings performance for the total company and the two business segments.
Joe also will talk about the balance sheet and cash flow.
<unk> will conclude with high level commentary about our enterprise performance as well as our fiscal 2021 full year guidance.
We will then be happy to take your questions.
With that I will turn to slide four and hand, the call over to Nevada.
Good morning, everyone.
Thank you for joining nordson is fiscal 'twenty 'twenty, one first quarter conference call.
Nordson was well positioned as we entered fiscal 2021.
COVID-19 safety measures and protocols.
Sure we continue to operate safely in this environment.
This has allowed us to be agile and responsive to the needs of our customers. We serve a very diverse set of end markets, including consumer non durable medical.
Electronics and general industrial.
During 2020, we remained invested in what makes nordson strong the direct sales model.
<unk> positioned technology portfolio.
Additionally.
We were successful in advancing several aspects of our long term growth strategy.
Using the NBS next growth framework.
Our employees have been investing the resources in our best opportunities for profitable growth.
While this remains a dynamic macroeconomic environment.
Our team has delivered a very solid first quarter on both the top and bottom line.
It is noteworthy that our first quarter sales and profits are above book fiscal 'twenty and fiscal 2019 comparisons.
In particular, our industrial position solutions being delivered.
Delivered strong year over year growth.
Benefiting from improvements in consumer non durable and industrial end markets.
Also achieved.
Profit margin expansion as volume leverage improved sales mix and manufacturing efficiency gains all combined within the quarter.
In the advanced Technology solutions segment.
Test and inspection product line continued to grow.
Advancements in technology are causing electronics customers to shift from sampling to a 100% inspection and we are benefiting from this trend.
And our medical fluid components product line delivered.
Double digit organic growth largely driven by biopharmaceutical application such as tamper proof packaging for vaccine delivery.
As the first quarter progressed.
We're encouraged by the order entry momentum that we are starting to see in the product line, serving the broader medical and electronics end markets.
We are particularly pleased to see.
The profit margin expansion.
<unk> delivered on modest growth.
The strategic actions taken throughout 2020.
To rightsize the cost structure of several businesses within this segment delivered the desired results.
I'll speak more about the business in a few moments.
I'll turn the call over to Joe could provide a more detailed perspective on our financial results for the quarter.
Thank you Naga and good morning to everyone.
On slide number five you see first quarter 2021 sales were $527 million, an increase of 6% over prior year's first quarter sales of 495.
The increase was primarily related to organic volume and favorable currency with additional benefits from the floor Tech and <unk> acquisitions.
The organic growth was driven by strength in consumer non durable and industrial end markets plus particular strength in the Asia region.
Gross profit totaled $290 million or 55% of sales in the quarter compared to $263 million or 53% of sales in the prior year.
This 190 basis point increase in gross margin was driven by the combination of volume leverage and improved sales mix and benefits from structural cost reduction measures taken in fiscal 2020.
It is noteworthy that 55% is the highest quarterly gross margin since the third quarter of fiscal 2018.
Operating profit in the quarter was $109 million or 21% of sales.
39% increase from the prior year adjusted operating profit of $78 million.
It is here on the operating profit growth rate that you see additional benefits from the fiscal 2020 cost reduction efforts.
SG&A decreased 4% from the prior year first quarter level of $188 million.
EBITDA for the quarter was $135 million or 26% of sales.
Which is 26% higher than the prior year EBITDA of $107 million.
Looking at non operating expense.
Net interest expense decreased $3 million or 28% from the prior year levels associated with reduced debt levels and a lower effective borrowing rate.
Other expenses increased $2 million, largely driven by currency translation losses associated with the weakening of the U S dollar.
Tax expense in the quarter totaled $20 million or an effective tax rate of 21% in the quarter.
Net income in the quarter increased year over year, 49% to $78 million or $1 32 per share.
This significant growth is reflective of a 6% increase in sales as well as benefits from cost control measures and efficiencies driven by the NBS next growth framework.
Additionally, the first quarter of 2020 included a pre pandemic cost structure, and therefore profitability was lower.
Now, let's turn to slide six and seven to review the first quarter 2021 segment performance.
Industrial precision solutions sales of $288 million increased 9% compared to the prior year first quarter.
The organic volume increase of 6% was driven by strong demand in flexible packaging and nonwovens product lines as well as industrial end markets.
Our strength remaining euro and RMB.
So contributed to 3% and currency benefits during the quarter.
Operating profit in the segment was $83 million or 29% of sales compared to $57 million of adjusted operating profit.
In the prior year period.
This 47% profit growth was driven by sales volume leverage favorable sales mix improved manufacturing efficiency and lower year over year, SG&A, including reduced travel expense.
Advanced technology solutions sales of.
$238 million increased.
<unk>, approximately 3% compared to the prior year first quarter.
This change included an increase of approximately 2% related to acquisitions.
As well as currency gains of 2%.
These benefits were offset by a decrease in organic sales volume of 1%.
The lower organic sales volume was a mixture of increased demand for test and inspection.
Medical fluid component.
And fluid dispense product lines.
Offset by continued softness in the medical interventional solutions and certain electronic dispense applications.
It is particularly encouraging to see the return to growth in our fluid dispense product lines, serving industrial and automotive end markets.
First quarter 2021 operating profit for the segment was $47 million or 20% of sales.
This increase of 450 basis points over prior year, adjusted operating margin of $35 million or 15% of sales was driven by favorable sales mix and the realization of benefits from cost control measures.
Taken in fiscal 2020.
Finally, turning to the balance sheet and cash flow on page eight.
We again ended the quarter with a very strong balance sheet and significant available borrowing capacity.
Cash totaled $226 million.
And net debt was $794 million ending.
Ending the quarter with a one three times leverage ratio based on trailing 12 months EBITDA.
Free cash flow in the quarter was strong at $135 million of 32% increase above the prior year free cash flow for our conversion rate on net income of 175%.
Higher net income and working capital liquidation contributed favorably to the free cash flow in the quarter.
I'll now turn the call back to Naga.
Thank you Joe.
Turn to slide nine.
First.
I want to thank the team for delivering a very strong first quarter.
Over the past two months, Joe and I have been actively engaged in business reviews, and virtual facility tours around the world.
Very excited about the energy within our divisions and the steady deployment of the NBS next growth framework.
Whether that is in how teams are organizing data to fuel decision, making all of the prioritization of best products in the manufacturing processes.
We're also seeing the strategic analysis of product lines to identify the best growth opportunities and filling the sales funnel with these targeted accounts.
One tangible results from the strategic discipline element of NBS next was seen on February one 2021, and as we successfully closed the <unk>.
Divestiture of our screens in barrels product line.
Our decision to divest this product line was based on critical insights gained from the NBS next data driven segmentation approach.
While this business is a respected leader in the plastics industry.
It did not fit nordson profitable growth objectives.
By divesting this business.
We will focus our resources on growing more profitable product lines.
That will deliver on our long term objectives.
We believe our remaining PPS division.
That's the right degree of differentiation and related technical competitive advantages too.
To deliver over time, nordson like growth and returns.
I would like to take a moment to recognize recent changes to our board of directors.
At the end of November we welcome.
Dr. John Therefore, the executive Vice President and Chief Technology Officer of Becton Dickinson and company.
And Jennifer from a tier.
Vice President and President of the motion systems group of Parker Hannifin to our board of directors.
John's technical and regulatory experience in the medical device end market we.
We will enrich the strategic perspective of our board as we continue to grow in this attractive market.
Ginny brings strong operational industrial and M&A experience to the board, which will be important as we continue to deploy our NBS next growth framework.
John and Ginny appointments follow retirements of.
Joe Keithley.
Randy Carson and lead banks.
I would like to thank Joe Randy and lead flow there are many insights and contributions.
At that time on the board.
Our board now stands at nine directors.
56% of whom are diverse.
Average tenure is now seven years.
I would also like to remind you of our upcoming virtual Investor day.
Morning of March 30th.
We will share more about the ongoing deployment of NBS next as.
As well as our long term strategic priorities and financial goals.
We will also use this time to give investors a better understanding of our strong competitive advantage.
The differentiated product portfolio and diversified end markets and growth drivers.
Please visit our website to register.
Now for the outlook on slide 10.
As we exit the fiscal first quarter.
Backlog was approximately $495 million.
An increase of 7% compared to the same period a year ago.
Trailing 12 week order entry is above prior year levels across the majority of our product lines and geography regions.
These very positive indicators suggest continued year over year sales growth.
Despite the divestiture of the screw and barrel product line.
For full year fiscal 2021, we expect sales growth to be approximately.
4% to 6% over fiscal year 2020.
Excluding the 3% headwind from the revenue.
Divested screws and barrels product line in the prior year.
Our forecasted full year sales growth would be approximately.
729%.
Our forecast net sales growth.
Bind with strategic actions taken.
<unk> taken around efficiency and cost is.
This forecast is to deliver.
Earnings in the range of.
$6 30.
$6 70.
For diluted share.
The midpoint of this guidance reflects net.
19%.
Net earnings growth compared to prior year.
While it remains and dynamic environment.
And business conditions are changing frequently.
As the World responds.
The challenges of COVID-19 virus and its variants.
We are confident in the diversity.
Of our end markets.
The strength of our backlog.
Nordson is well positioned to deliver on the needs of our customers.
As always I want to thank our customers employees and shareholders for your continued support.
With that we will pause and take your questions.
At this time, we would like to take any questions. You may have to ask a question. Please press star.
One on your telephone keypad Jeffrey.
Next question is from series four Jetski with Jefferies. Your line is open.
Hi, Thanks for taking my questions.
So sales guy coming from price and a 5% growth the remainder of the year, which is slightly below one clinics by having an easier comparable so could you just talk about if there's anything that you're seeing in academics from a cautious on improving growth rates.
Joe you want to take that.
Yes, so when you think about our sales guidance.
For the remainder of the year you have to consider that we have the divestiture of the screw and barrel business. So excluding the divestiture of a screw and barrel business.
Adjusted 7% to 9% growth rate when you look at our guidance now I will remind you that is comparable to our Q1 growth rate, excluding the screw and barrel business, which was over 7%.
And entering.
Q2, our backlog is approximately $500 million, which is approximately 7% above when we entered Q2 last year. So a little bit further color. We mentioned Q1 was strong, particularly in Asia. When you look at the timing of Chinese new year, it's important to understand that the Chinese.
New year.
<unk> fell into Q1 in the prior year, whereas this year. It falls into Q2, so that'll be a little bit of a headwind in Q2, when you look at our guidance range.
A range from an incremental margin standpoint, it would suggest that the remainder of fiscal 'twenty one.
Would be in the incremental margins from the mid <unk> to about 55% that is a lower incremental margins on the 97% that we delivered in Q1, but when you think about it going forward in 'twenty one.
Couple of issues that make the comparisons more challenging one is we started taking cost out in 2020.
Throughout the year, and so that from a cost structure standpoint.
Q1 was a much easier comparison than Q2 and Q3 as we took those actions throughout the year last year.
The other issue I would tell you is incentive comp, which naturally behaves variable and last year, particularly in Q2 the incentive comp.
SG&A included a reversal of the long term incentive comp that had been accrued so that'll be a particular headwind in Q1 or I'm sorry in Q2 to the incremental margins and then the other thing is that as volumes continue to recover.
Travel expense should come back.
We continue to be invested in our direct sales model and so that will mirror closer to historical levels. So these headwinds I would tell you going forward.
What has the incremental margins dropping.
From the 97, you just saw in Q1 down to about the mid $40 to 55 is what the guidance would suggest.
So these headwinds are being offset clearly by the divestiture of the screw and barrel business, which will improve margins and the continued benefits as we deploy MBS next throughout the organization.
Thanks, that's great color and then more of a high level question Theres been a line of semi conductor capacity announcements out there can you talk about how you could benefit from this expansion activity and do you see any of this protein your ordinary income.
Yeah, and sorry, that's a great question as we have talked about semiconductor devices and the opportunities were launched and this is an area of particular strength for the company.
Clearly, we see advantages for us in the test and inspection as well as our defense business.
What you find is there are two things going on here with semiconductor device demand increases youre going to get capacity additions are those capacity additions will take the form of both defense product lines, as well, especially inspection product lines, but in the shorter term youre going to find more test and inspection.
Because our customers it takes a little bit of time to bring on new capacity, but what they are really spending a lot of time.
<unk>.
Using testing inspection to improve yields.
To help them.
Some of the accelerating demand.
Im very excited about this this is a great opportunity for the company well positioned to win here.
So.
We have any additional questions I would be happy to answer them.
Okay.
And I guess, one more then.
Talked about renewed growth from the auto end market could you just talk about what youre seeing and thats been from and how Nike can benefit from an increase in capex and facilities for Evs.
Yes.
On the EV side clearly.
This is an emerging market for us in the emerging opportunity, where we find the greatest opportunities are in the battery manufacturing. So you could think about batteries. They put together many different ways. One of the ways. As you know you are combining multiple cells. So we have a lot of opportunity in.
Manufacturing of the battery that is one way. The second is that we could think about a customer inspection.
The inspection business definitely benefits from.
Power electronic components like <unk>, which.
Our increasing demand, becoming more complex and hence we have an opportunity here.
Both to benefit and badly as well as some electronic components.
That's great color. Thanks for taking my questions Michael.
Thank you.
Your next question is from Matt Summerville with D. A Davidson your line is open.
Thanks couple of questions.
Maybe just back to test and inspection Naga. If you were to use a baseball analogy in terms of how much in line testing is being performed and how much runway is in front of that business. What inning would you say, we're in with what Youre seeing in C&I right now.
And I, 100% inspection as early innings, so you'll see that a lot in auto electronics, you're beginning to see some of that in semiconductor, but clearly early units.
And then just maybe one on corporate expense from our fiscal first quarter I think it was some $8 million above the prior year that seemed unusually high can you talk about what drove that variance and what sort of quarterly run rate, we should be utilizing going forward. Thank you.
Hey, Joe Yeah, I'll take that.
Yes, the increase.
When you look year over year as I mentioned in some of my comments from incentive comp and so while that was.
Oh and last year, its a headwind this year and so from a year over year standpoint, that's what you see.
Driving some of the corporate expense increase when you think about it from a full year run rate historically that fluctuate between $50 million on an annualized basis and call it $65 million depending on.
Performance.
Got it thank you.
Your next question is from Allison <unk> with Wells Fargo. Your line is open Hey, guys. Good morning, Good morning, just.
Just going back to the semi challenges that are happening right. Now I know you talked specifically to that market, but are you hearing or any sort of project delays related to maybe your other electronics end market auto kind of remind us given the plant closures that have been happening lately any color there yes.
Yes, sure Allison no we've not really heard a lot in terms. So in day remember we are more involved in setting up the line.
In platform launches, we're not really in the direct production line, which is sort of where you're seeing some of the delays.
So no we.
We do not anticipate any delays have not noticed that what we are seeing is pickup in expectations from.
Specifically auto electronics customers, who are looking to ramp up capacity by increasing yield and so you see that going in.
Test and inspection growth.
Got it that's helpful. And then just looking at leveraging obviously.
Healthy range for you as well.
Sort of hopefully getting out of this COVID-19 COVID-19 challenges.
Any thoughts or changes to how the EBITDA is an optimal range for nordson going forward here.
Yeah.
So.
We ended the quarter at approximately one three times leverage.
We continue to be very comfortable.
Leverage ratio is higher than that.
Do you think about two to three times leverage we would be comfortable we have the capacity to go up based on our current debt structure to 375 times.
But as we look at it and look at the opportunities.
We do continue to prioritize M&A and would be looking to take that leverage ratio up closer to the two to two and a half range to support them.
Great. Thank you I'll pass it along.
Your next question is from Chris Dankert with Longbow Research. Your line is open.
Hey, good morning, guys.
Moving to.
I guess, Joe definitely appreciate the comments around Incrementals and how guidance moving forward from here, but I guess to dig in a little bit on on Ips, specifically <unk> typically the low watermark for Ips margin.
Nine percentage is quite impressive I guess.
Is that level of margin execution repeatable do we build from here with the rest of the year is flat good performance if any.
If you could put that 29% margin number in context that'd be really helpful.
Part of what we see going on here. This acceleration of demand in Q1, I think it makes some of our normal seasonality a little bit a question for.
Perhaps this acceleration overrides the normal seasonality you would see throughout the year, but specifically related to that 29%.
<unk> had a very very favorable mix, particularly parts.
<unk> were up.
And there was nice leverage going on it was in that business, where we did take some cost out if you recall our cost action there in Q4, which was delivering benefits here in Q1.
Cost structure, but when you think about that segment going forward the divestiture of the screw and barrel business.
We will provide further margin improvements to that so when you think about it going forward the margins there should expand.
Off of this what you referenced is a very high watermark here in Q1.
Got it got it and then not to press my luck too much here, but I guess are you willing to break out what the impact of mix was on the quarter.
Yes, we're not willing to I mean, you referenced to 29% was a very high watermark, we haven't seen that.
Back in 2009.
<unk> 19.
And so we're pleased with the profitability levels back there.
This lower range a lot of it is coming from the improvement.
And the mix within the business. So if you think about NBS next and as we focus on our most profitable opportunities really that has allowed us not just to take cost out but also to drive an improvement in the sales mix.
And so that's that's what you see in that 29%.
Got it got it.
Chris one more of that I would add is that if you think about the volume the volume leverage in this business is really good and so we had a pretty strong volume growth that helped us deliver some pretty nice incrementals.
So you've got an accelerated recovery that is helping us and as you go into the out quarters.
That volume is going to come down a bit but we're comfortable.
With the current margin rates, but I think it's important to remember the volume played yet as well.
Got it yes, yes. Thank you for that color really appreciate it and I guess, one last one from me.
What is the FX benefit assumed in guidance, we historically FX swings can be fairly significant not a range just any comment on FX and kind of what youre baking in here would be great.
FX in the quarter proved to be more favorable than we had originally anticipated and so for our forecast. We are assuming the current exchange rates maintained throughout the remainder of the year.
And so that headwind or that benefit should continue it starts to moderate a little bit on a year over year basis in Q4.
But that should still be not to pin you down, but about 2% to 3% benefit for the full year at current rates correct you are correct.
Got it thanks, so much.
Yes.
Your next question is from Christopher Glynn with Oppenheimer. Your line is open.
Thank you good morning, guys.
Ammonia and gals.
With.
Curious a couple of questions on Ips wondering if any markets production processes that you serve are currently showing any.
Nice shifts to adhesive centric assembly from.
Sure fasteners.
Yes.
Christina couple of things.
First and foremost the adhesive quarter adhesive business is pretty strong one of the areas that we are beginning to see some really nice pickup is.
In electric vehicles and in battery manufacturing Thats, an area that we continue to benefit from.
Ongoing automation across a wide variety of application is also beneficial to.
To this business, so think about adhesive dispensing, allowing our customers to automate their manufacturing processes. So we see a lot of benefit there.
Not any particular.
On one end market the other but I would say a broad set of end markets clearly.
Consumer electronics interestingly enough as you have some wearables and other consumer opportunities. So you think about our adhesive business really is dependent it is it has grown mainly through new applications that they delever and that that is pretty strong.
And we continue to benefit from automation. So the two things I would tell you on a big driver would be.
Battery.
And number two automation.
Okay. Thank you for that and.
Wondering.
Relative to the two segments within your organic outlook.
Dfc Ats kind of pull.
Pulling up.
We're Ips started the year.
Kind of coupling the type of organic growth, we expect from the balance of the year, yes.
Yes.
What we're really let me give you some.
And market trend.
And then Joe can add some color on how we're thinking about the actual growth rates.
Yes.
We expect is in the back half.
Two things here, one is even though our medical business.
As Covid eases.
And as elective surgeries come back we should expect our medical business to get back to the high single digit rates in the back half of the year. So that's that's one big driver for US second is.
You begin to see some very strong electronic orders in our business today that will show up in the second half.
As a as a growth driver for us.
In terms so those two will certainly help.
Our.
S business you know one thing.
One thing we have not talked about is that.
Our medical fluid component business, which is primarily driven by Biopharma applications has a solid growth in the quarter. We expect that to continue that continued strength in the out quarters. It's a big it's a small business today, but.
But we are very excited about this opportunity. This is really because of all of the single use components.
Sounds great. Thanks, just the last one if I can sneak it in.
The FX impact on the top line growth does that still sort of drop through is two to three times multiplier to the earnings impact.
Yes, so the FX to the bottom line.
Our cost structure.
Our lines I would say with our sales structure quite well in terms of.
The FX euro denominated.
GBP dominated.
Cost as well as revenue so that does flow through there is a little bit of a margin expansion within our Ips business.
When you see the dollar weakened against the euro and the GBP.
Thanks for the color.
Hey, Jon if you would like to ask a question. Please press star one on your telephone keypad. Your next question is from Andrew Casella with Gregory Your line is open.
Good morning, guys.
Good morning, good morning.
Just wanted to touch on the Ats so.
I thought I thought we would see that turned to growth.
Just given a difficult given that.
Lapping some easier comps.
And.
Your overall guidance really for organic growth isn't quite that.
Hi, if you exclude FX it.
It doesn't really include it doesn't really seem to be assuming much of a.
Yes, snapback in Etfs in the back half I'm, just trying to figure out.
Are you just being conservative or.
Yes, I can it hasnt quite grown.
What do you say can grow two to three times GDP in three years now so.
Yes.
Where can you give some investors from competent business this growth is coming.
Or is this conservatism.
So I guess when you think about the growth rate of 4% to 6% and going forward.
It's important.
Excluding the divestiture again at 7% to 9% and so if you think about FX that would suggest.
Three sorry, 4% to 6% organic in that range. So just so we're clearly.
The components, so that's what we're suggesting.
Yeah.
And Brad.
Yes.
Go ahead go ahead sorry.
No no no you could do it yes.
Yes, Andrew.
One of the things that I would add is that on the AP side.
As COVID-19 leases, our medical business today is primarily flat because COVID-19 declined COVID-19 related surgery declines.
Putting a damper on our.
Component business, but offset by.
Very strong growth in Biopharma okay.
As Covid eases in the back half, we do expect this business to get back to high single digits in the back half so the.
So the Aps what we have baked in is we are expecting medical to come back we certainly on the electronics side. It is important for you to remember that.
Broadly nordson plays.
In high precision applications with what we are really good at.
Test and inspection is growing nicely for us so that is baked in.
Two are.
Outlook as we forecast today.
And especially continues to grow and if you think about electronic dispense business.
We're seeing some pretty nice order entry that is starting to grow in the second half.
Maybe level set here on the electronics dispense side of our business.
We think about our electronics dispense business, what we're really good at is high position reliable dispense at very high speeds, that's where we're good.
And those has great application across a broad category electronic end markets not specifically, one particular product category.
The smartphone or other things like that what we're finding is that the demand is pretty high for this level of physician.
Driven by all of this digital acceleration that you're seeing driven by automotive electronics and so.
What we really like here is that we have a new team in place that is looking they're using MBS nights and looking at opportunities clearly what we are seeing is that.
Mobile phone manufacturing has matured.
It has matured and hence.
These applications don't require that level of precision that is needed and so we've got a new team looking at we're looking at this opportunity.
But more focused around semiconductor package more focus on the digital acceleration across a broad spectrum of end markets and.
We're confident that this business gets back to.
Mid single digits.
Growth in <unk>.
Separate from some of that in the second half of the year.
Yes.
I'm sorry.
Sorry go ahead.
<unk>.
When you think about our growth rate organic of let's call it 4% to 6%.
Don't forget that in 2020, our sales only dropped about 334% so the drop off from 19 wasn't.
Significant as others. So therefore, the bounce back opportunity.
There's not a significant consumption.
Yeah, and I think.
You said you sounded like China had a good.
As expected was pretty strong in Q2, it's going to be a little dampened over there but.
I guess exiting.
For the year in the second half.
Presumably all three regions.
Europe and U S.
It sounds like those all have to be what youre, assuming those are all growing in tandem.
Exiting 2021.
Yes, just I guess.
Based on easy comps and dependent make lifting.
Is there any other like regional I.
I guess the regional color you can provide.
Yes that line.
No Andrew I think you've kind of COVID-19.
If anything what I would tell you is that Asia is strong today.
Europe was flat organically, we do expect that to change.
So you're starting to strength in but right now, let's striking though in the first quarter.
But I wouldn't add anything more than what you've already captured.
Okay.
Alright, thanks, guys.
Okay.
Your final question is from Walter Liptak with Seaport. Your line is open.
Hey, good morning, guys from.
Good morning.
I wanted to ask about the NBS next.
And can you.
Maybe elaborate a little bit about that.
Cost savings that you got benefited this quarter versus the benefits from MBS next.
Is it possible to differentiate one from the other.
No I mean, it's really not because when you say the cost savings that we referenced but I think at several points.
When you step back and think about our cost actions. It was all driven by the strategic discipline within our MBS next growth framework and so as we focus.
On the best growth opportunities, we stayed invested in those opportunities. So that we could capitalize on that and then where there weren't the best growth opportunities.
That is where we took action to right size I would say our cost footprint or an example of the screw and barrel divestiture improve.
Improve our profitability there so at the heart of it Walt I would tell you the margin expansion when we referenced sales mix improvement within Ips when we.
Reference benefiting from the cost structure reduction actions all of that is rooted in the NBS next strategic discipline.
Growth framework and so it's really.
When I look at it when we look at the incremental margins of 97%.
That's a lot of NBS next delivering the benefit.
Okay.
Okay, Let me, let me try it this way.
Is as you look at your SG&A overall for.
The remainder of the year.
Sure.
Is there like a dollar level or a percentage of sales that you can help us with so we can we can think about.
The cost benefits.
Some of these costs coming back into into Nordson.
Yes, I guess, let me just give a little color commentary specifically on costs.
Last year, we had several actions.
Net referenced incremental annualized cost savings some of them were $10 million, one was $5 million from some of those started at different points throughout 2020, and so those are hitting it before I would say benefit run rate here in Q1.
So you see that that should be maintained going forward I will tell you also on the cost side, we are benefiting on a year over year basis of about $6 million for lower <unk> expense as Q1 last year did not have.
The pandemic cost structure of no travel.
And so as that starts to come back.
Going forward.
If theres a potential another $6 million I don't think it'll all come back right away, but.
As you think about it from this run rate, it's about $6 million on the <unk> that we benefited in Q1.
So and.
The other thing that references that Q1 typically is our heavy SG&A quarter. If you look last year in the prior year for different.
<unk> benefits reasons, and so that trend should.
Should continue as we go forward.
Throughout 2021.
Okay. Okay. Thanks for that color and then maybe just the last one from me about.
You mentioned.
In the prepared remarks, the vaccine packaging.
I Wonder if you could.
Just talk a little bit more about that was there is there a revenue size.
Or are these orders that came in last year that net.
Shifts is there more orders that will benefit from come through sales and now <unk>.
Second quarter second half.
Sure.
Yes.
This is a business that really strong growth driver for us in day, one that we have been working on force number of years Walton starting to show up in the marketplace right now.
This is single use plastic components, which are used in the manufacture of biopharma in this particular case vaccines as well.
And.
Yes.
We saw some pretty strong growth in the quarter, we expect that growth to continue in.
In the out quarters.
And maybe even further out.
The biggest reason we are able to have a sort of a flat medical revenue when compared to our customers being digest more of our single use plastic components that are used to.
And critical.
Biopharm manufacturing steps.
Okay.
Right. Thank you.
We have no further questions I will turn the call back to presenters for closing remarks.
Thank you for your time and attention on today's call. We look forward to talking to you further during our virtual Investor day on March 30, <unk> have a great day. Thank you.
This concludes today's conference you may now disconnect.
Okay.
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Yes.
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