Q1 2021 Rexnord Corp Earnings Call
Yeah.
Good morning, and welcome to Rexnord first quarter 'twenty 'twenty. One earnings result conference call with Todd Adams, Chairman, President and Chief Executive Officer, and Mark Peterson Senior Vice President and Chief Financial Officer. This call is being recorded and will be available unreported.
For a period of two weeks the phone numbers for the replay can be found in the earnings release company field.
E K with the S E C yesterday.
April 27th at this time for opening remarks, and introduction I'll turn the call over to Mark Peterson.
Good morning welcome everyone.
Before we begin today's call with great sadness and one of pay tribute Rob Mccarthy, Vice President Investor Relations, who passed away unexpectedly lots of them two weeks ago.
During the election of January of 2014, shortly after the company went public.
Really established in both of our Investor relations function over the years.
Rob Rob tremendous passion expertise and discipline do his job and he was instrumental in the formulation and articulation of our environmental social and governance initiatives, but most importantly, rob of the trusted advisor of the Todd Mi and the board of directors and has left an indelible mark of Rexnord.
Our entire of Rexnord team warrants is water and our thoughts and prayers are with Rob the wife, Sharon and his family.
In the interim I've assume Rob responsibilities until a successor is named and.
And one of those responsibilities at the start the call I remind you that this call contains certain forward looking statements that are subject to the safe Harbor language contained in the press release that we used for yesterday afternoon, as well as in our filings with the SEC.
In addition, some comparisons will refer to non-GAAP measures our earnings release, and our SEC filings contain additional information about these non-GAAP measures why we use them and why we believe they're helpful to investors.
Contains reconciliations for the corresponding GAAP data.
Consistent with prior quarters, we will speak to core growth adjusted EBITDA adjusted earnings per share free cash flow from starting.
The invested capital we feel these non-GAAP metrics provide a better understanding of the operating results. However, these measures are not a substitute for GAAP data and we urge you to review the GAAP information in our earnings release, and our filings with the SEC.
That I will turn the call of our Todd Adams, Chairman, President and CEO of Rexnord.
Thanks, Mark obviously.
The thoughts and comments on Rob we tried to reach out to as many of you as we because of let you know.
As a courtesy of and as a colleague and obviously.
As we make the transition.
So you will be able to do that in person over the coming months.
I'm starting on page three and the basic takeaway is that Q1 is very much on track and a little bit above of what we thought just 90 days ago clearly.
Clearly a much better start in PT.
Both of the OEM level as well as through the channel.
We saw as we predicted the aerospace end market sort of bottoming.
Our book to Bill was just below one this quarter and we anticipate it being meaningfully above one in the June quarter and.
And finally really strong demand across the board in Zurich, and the improving early indicators.
And the Abi and renovations are up as well and so we're really set up to have a great consume cash.
And full year 'twenty one.
The highlight of the quarter as our strong profitability and cash flow and recall. This is against the record March quarter for us last year, we really.
Early onset of the pandemic, we're able to battle through and really have not much impact to.
Two our March results at all so this is I would say of very credible comparison.
And one of the hallmarks of Rexnord is really managing that price cost of equation extraordinarily well and we continue to do that I also want to remind you. It's not just managing price cost, but the compounding benefits of 80 20 continuous improvement in all of our scope of work of showing up as well and as you've seen in our outlook for Q2.
We expect that to continue as we move forward.
As it relates to the RMT with Regal Beloit, we're making great progress, we're hitting all of the key milestones with respect of the regulatory filings in the carve out financial work and working really well together.
And hopefully we're.
Were tracking towards the finish line sometime in the fourth quarter, they've got there the earnings call next week and so we're not going to see a bunch of more than that but really pleased with the transaction and the traction around the work that.
We're able to do to bring this to fruition.
And equally importantly, all of the things we're working on for a standalone pure play water business. We've got a plan for eliminating any of the stranded corporate costs, we completed in the quarter of post the quarter I should say.
Tuck in acquisition of Ats environmental of service and monitoring business that serves restaurants and kitchens and then the acquisitions of Justin Hadrian of going really really well and all of <unk>.
After Mark's comments provided a little bit of a deeper dive on what that standalone business looks like moving forward.
If you turn to page for <unk>.
Last quarter, we published our sustainability report it was really our second one but.
It really it really lifted at the <unk>.
<unk> of the work we had done over the course of the last 10 years.
The steps that we took this year I think are to align around some of the best practices of reporting.
With the SaaS B and G O Ray I think everyone knows that we added a committee last year to our board and so we're in year two of that work plan and goal setting to continue to make I would say pretty meaningful progress on things like greenhouse gas emissions and water consumption.
And then finally, you know we go into it I think reasonable detail talking about all of the work we did through the pandemic to support not just.
You know our customers, but our associates. So we're really proud of that hopefully you can get the chance to look at it we've gotten great feedback so far and we'll continue to build on that as we move forward so with that I'll turn it over to Mark and he'll take you through the.
The quarterly results.
Thanks, Todd please sort of.
Line number five.
I mean, even for your basis, our consolidated sales declined 4% for $526 million of the two.
200 basis point benefit from foreign currency translation of 300 basis point of positive contribution from the acquisitions of just manufacturing.
Adrian one of them.
For the platform was offset by the 8% decline in our core sales inclusive of of roughly 60 basis point impact from the product line simplification actions primarily in P&C.
A small divestiture in the P&C platform to reduce the total sales of that approximately one point.
With respect to profitability, our adjusted EBITDA was $120 million in the quarter and adjusted EBITDA margin expanded 10 basis points year over year to 22, 8%. Despite the overall decline of sales as our cost control and benefits from the scope of three actions drove an 18% of decremental margin in the quarter.
So we sort of line of the six who will review our two platforms.
At the platform level water management sales were up a solid 12% from the prior year March quarter, as adjusted manufacturing and Hadrian acquisitions contributed eight points of growth in the core business generated another four points of growth on top of the 7% core growth quarter, one year ago.
More importantly core orders in the quarter increased 10% year over year, driven by solid demand across the platform, including our hygienic and environmental product offering, resulting in an improved backlog heading into the second quarter and an acceleration of our core and total sales growth in the June quarter.
Strong operational execution of our water management platform global of 14% increase in the adjusted EBITDA margin expanded 40 basis points year over year to 26%, which is an approximately 30% of incremental margin inclusive of the mix impact of our recent acquisition.
PMT sales declined 12% of the 200 basis points of benefit from foreign currency translation was more than offset by the small 2024th quarter divestiture from China that reduced the in sales growth by about the points and of course those are the kind of 13% inclusive of an approximate 100 basis point headwind from the 80 20 simplification actions.
Breaking that down further the year over year sales in our aerospace operations decreased 46% as anticipated in the corner represents the bottom of the sales decline for the end market demand, while still down year over year improved significantly from what we experienced in the last nine months of 2020, and we anticipate a return to sales growth in the second half of 2021.
Excluding our aerospace operations core sales in the balance of the PMC platform in the March quarter were down 7% year over year inclusive of the one one basis point headwind from the 80 20 actions and the impact of it of lower backlog, we had entering the quarter because of all of the change in the customer buying patterns of year over year given the pandemic.
Net demand trends continued to improve sequentially and core orders turn positive in the quarter across nearly all of our markets and geographies, resulting in the nice improvement in our backlog as we head into the second quarter.
Well, the North American distribution channel sell through again, excluding our aerospace end markets improved each month of the quarter for glass.
Results of the demand trends, we anticipate that growth of our non aerospace end markets will turn positive of starting the second quarter of 2021.
Operating execution was again solid in the quarter as we benefited from our store for structural cost reduction initiatives, coupled with our cost controls and RV has driven productivity actions as a result, our adjusted EBITDA margin was flat year over year of 23, 8%. Despite the decline in sales from the prior year March quarter.
We sort of slide number seven.
With a strong start to free cash flow generation and adjusted EBITDA in the quarter of net debt leverage was reduced the two times at the end of the March quarter from two one times at December 31, 2020 and remains at the low end of our targeted leverage range from two to three times.
Please turn to slide number eight.
Given that the RMT transaction is anticipated to close sometime in the fourth quarter calendar 2021, we will continue to limit our external outlook for the upcoming quarter.
With that said and taking into consideration demand trends through April our backlog position and the continued uncertainty given the persistence of the global pandemic, we're projecting core revenue in our water management platform the increase by a high teens percentage year over year and the total revenue in the platform the increase by a high twenties percentage for.
For our PMC platform, we're projecting core revenue to increase by a mid to high teens for some of the year over year inclusive of one last quarter of declines in year over year aerospace growth.
Based on our platform sales expectations, we expect our adjusted EBITDA margin in our water management platform <unk> between 26, and 27% and our adjusted EBITDA margin in our PMC platform to be between 23% from 24%.
We expect our corporate expenses to be approximately $10 million in the quarter.
Before I turn the call back the Todd your comments of our tax rate interest expense.
The comp expense and depreciation and amortization.
We anticipate our tax rate on adjusted pre tax earnings from the June quarter to be approximately 28%. Our interest expense for the June quarter is expected to be approximately $12 million of noncash stock comp expense should be about $13 million.
Appreciation of amortization will come in around $24 million.
Turning to slide nine and I'll turn the call back to Todd.
Thanks Mark.
I'll just spend a minute or two.
Moving a little bit of a preview of what <unk>.
Standalone discern pure play water will look like a couple of points, we anticipate changing the ticker.
Upon the close we plan on doing some sort of modified road show as we begin the train as a standalone water business and we're going to use the next couple of quarters.
Think to ramp up everyone's understanding of what the business will look like from a from a profile standpoint.
Educate investors so they don't.
As we begin to trade on a standalone basis.
Water solutions will continue to be headquartered in Milwaukee.
Got about 1400 employees and I would say five primary facilities and a truly extensive global sourcing footprint. If you turn to the next page take a giant step back I think it's really important to understand the role we play in the overall water sector and thats, providing water solutions.
Debt improve health and human safety and the environment with the broadest array of products with the single brand designed to work together.
The come together to create this really unique.
Solution set for public and private spaces.
And obviously, we've got a track record of performance really driven by what was the.
For the rexnord business system, which easily transitions to the certain business system and obviously.
We're saving water protecting the environment, reducing cost of building and ownership and creating value along the way it can move to page 11.
What we do falls into really three sectors of the water economy again, all for public and private spaces.
Water and safety water safety and control things like Backflow prevention pressure management fire protection.
And hygienic and environmental obviously, that's our touchless products, our faucets in our flush valves are privacy partitions of sinks in our hand dryers.
Which has been an instrumental part of our growth strategy for the last several years and finally flow systems that specification grade drainage storm water management green rooms things like that the mood water in and around the public or private space in our key end markets, our education and health care, if you turn to page.
The <unk> 12, obviously the track record that we have is we think pretty solid relative to <unk>.
Not just the water companies, but really any industrial business. This year sales will exceed $850 million of returns on invested capital inclusive of all of the acquisitions and all of the purchase accounting from prior the prior <unk>.
<unk> transactions is north of 20%.
You heard from Mark on the 26% adjusted EBITDA margin and very strong cash flow I think it's also important to note that out of the last 41 quarters 39 of those have driven have driven the core growth positive. We obviously had one in 2016 with the weather event and the June quarter of 2020.
Amidst the pandemic. So the 39 out of the last 41 quarter, So 10 plus years.
Really strong growth growth that obviously, 35% of the business.
As a retrofit replace which is up considerably over the last 10 years. If you if you move to page 13.
The last six to nine months, we've talked a lot about touchless.
And what has been happening through the pandemic around hand washing and upgrading.
If you think about what we've been doing here its really happened over the course of the last three or four years. We've developed this portfolio organically and inorganically to provide the really the ultimate hygienic ecosystem for a public or private space and that will be branded bright shield as we launch the the.
The marketing campaign in the coming months that has lapsed handwriting synced partitions.
We see opportunities for safety and I wash ing as well as bottle fillers in the east because of her.
Huge addressable market that is 50% retrofit, where we have stitched together.
Our unique value proposition for building owners and also being able to connect all of this information to building management systems or the cloud or your phone.
Respond to the anticipate what's happening and these are critical parts of buildings.
It adds hygiene and reduce term debt transfer. So we're excited to talk about our hygienic ecosystem and really under the brand bright shield by certain.
If you move to page 14.
The the obvious comparisons.
The observed two others.
Really arent that pure because we think we've got a competitive advantage that is so strong starting at the bottom of the product breadth of the spec share our supply chain capability and then in the last several years building on to that with omni channel presence bright shield in Iot and that is where we are.
We feel incredibly well positioned for <unk>.
Standard up and carve it out and run it on a standalone basis and I also think it's important to talk about the flexible business model that we have around you know very few of facilities third party rep agencies.
And also you know that.
Supply chain, that's just so powerful delivering that high return on invested capital.
If you turn the page 15.
Does that manifest itself in what we believe is truly a differentiated financial performance relative to other.
Businesses that participate in the water economy.
I won't read all of the attributes, but we feel really good about what we've delivered since we bought the earned in 2007.
It has accelerated pretty dramatically in the last for years and we don't think that there's any seasoning required as it should.
Standalone public company is we've been delivering the kind of results for really a long period of time.
And we.
We will continue to educate people throughout the next couple of quarters, but look for.
Sometime in the fourth quarter on a standalone basis, so with that I will.
Turn it back over to the operator to take any questions you have.
As a reminder, if you would like to ask a question. Please press star one follow up right.
Sorry, one.
Well pause for just a moment to compile the Q&A okay.
Okay.
<unk>.
Brian Your line is open.
Thanks, Good morning, guys.
For next one Brian.
Yes.
So let's start for the year.
I'm, hoping we can touch on zone.
The momentum a bit more and specifically.
What your team is seeing and expecting on the new construction side of the market.
Overall business momentum, obviously very very strong we know that.
And then the recent prints you've had the second quarter guide is robust.
There has been the expectation of when new construction offset that at least for part of 'twenty one.
And so the touchless in organic growth continued MRO penetration et cetera, just.
Just curious how the recent improvement in market indicators and Todd you mentioned that in your script.
Impacts your team's thinking on second half growth and I guess more importantly, the cycle tailwind that Standalone zone should have going into 2022.
Obviously some of the some of the early indicators around API and renovation activity I think along with some potential stimulus.
I would say there.
It's early days.
But they are in the ground and they are starting to starting to grow. So obviously, we're going to.
We're going to continue to.
Drive areas of growth through our hygienic and environmental platform the cat.
Take share in our other segments, but we do think that the setup over the back half and into 'twenty two.
He has clearly improved.
Maybe from what we thought six months ago.
You know and obviously a lot of that has to do.
With our own line and then some of the things we've been working on but clearly from a from an end market standpoint, a little positive momentum the new construction is clearly better news than what we would've dialed in mid last year.
Okay I appreciate the color there.
How should we think about the zones margin progression over the near term obviously, we have the second quarter guide.
Trying to parse out the core trend versus Hadrian impact.
Obviously the non.
Is there a margin last year was very very strong.
How close to last year's margin level should be over the next couple of quarters and then for Hadrian.
Shifting to your your expectations of Guinea.
Getting margins into the the twenty's over a reasonably short time period.
Yeah, I think mark laid it out a little bit but.
We won't match the margins of last year I think that's in our guide this quarter in the second quarter in the June quarter.
We will certainly the closer in Q3, we believe.
But on an organic basis, we think it's pretty darn close yet so what you're seeing is debt.
The transition of Hadrian in and working in the margin is up over the course of the.
This year in that.
So I would say at some time at the end of 'twenty two.
If the margins are 20% they should be in the very high teens for behavior for Hadrian correct.
But obviously very strong profitability.
Over the next several quarters.
As we typically have and I think it's important to understand that the build cycle for construction.
Impacts Q2, and Q3 and the positive.
In North America.
Hey, Brian we're working hard and there's not much of the commodity inflation of our management, we're doing a good job on the passing of its fair to say on the year over year basis inclusive of Adrian our goal is to keep margins generally flat year over year for the full year, which means the core business, obviously improves year over year inclusive of some of you don't Adrian we're working to keep those margins flat.
Okay.
And great to hear from both Yep.
And then how about the PMC incrementals as top line.
Accelerates in the right direction of the next couple of quarters.
The second quarter guide implies kind of low mid thirties.
Incremental solids there.
Is that a reasonable anchor.
Going forward or will you know price cost scope for timing.
The what I assume will be an inflection in aerospace growth in the back half.
You know imply higher or lower range.
Now moving into Q3 Q4 of them.
Yeah I think.
As a starting point.
The mid thirties in Q2 was good and I think it's very likely the pits.
Better in the second half of it.
The functionality of base.
For the year, I think there'll be substantially above the 35% range for the.
For years.
Okay. Thanks again.
You bet.
Again, if you would like to ask a question price by one of the next question comes from the line of Jim.
With Keybanc capital markets.
Hey, good morning, guys.
Thank you Jeff.
So I think I think.
Just on a lot of a lot of questions. This quarter on other companies on price cost and supply chain, which we are.
We're kind of apps and I think for in the prepared remarks can you just and I know.
Do you guys manage those pretty well can you just talk about what you're seeing on an inflation, what youre doing on price and particularly with the the hygienic piece, which is has got great momentum, where youll see any any emerging supply chain issues.
Yeah, I mean, I don't want to say, it's sort of the business as usual for us, but it's sort of it's business as usual I think the way we've.
<unk> developed our supply chains and also the ability to pass on the price.
Our business in different ways.
In both platforms.
And I guess, we're not particularly.
We don't think it's I don't think it's too unusual obviously, you know the supply chain shortages.
The the crop up for us as well from time to time that we've been able to manage the look through our plan of being able to.
The proactive and what that might look like and obviously the hygienic piece we've got.
Our plan with very robust from.
From a demand standpoint, and so the supply chain is not an issue at all.
At this juncture, so I don't want to say, it's sort of business as usual, Jeff, but because there is there is the level of inflation out there, but our ability to manage it as unchanged right the ability to.
Do smartly.
One of our SIOP and feather it in price where appropriate none of that is different and I think the benefit that we have is the compounding.
Offsets of 80 20 of the robust continuous improvement program and obviously the scope for initiatives that Mark talked about it. So that's why we're not.
We're not really.
Guiding to any margin pressure of operations over the book over the balance of the year.
Okay, Great and then you mentioned as you were talking about Zurn education and healthcare.
We're hearing a lot from the HVA see companies about the stimulus and IQ, but I just wanted to get a sense from you what youre seeing in the education market. How you think you might benefit us as.
Is that spend goes through obviously.
Safety is a big big item for for schools and just seen.
Of what Youre seeing in that in that platform.
Yeah, it'll it'll definitely be of positive for us I mean, obviously the schools of getting a significant amount of money to do upgrades around safety and technology.
So each facts of important T is important but also.
Hygiene is also of importance or we've got you know the team is tracking where all of the salaries of going on we're winning and how we are presenting.
What the opportunity of the overall safety of all of our school and.
That'll be the catalyst for positive growth for the back half of it.
Okay, and then just last one on free cash.
Clearly the comp was tough in <unk>, but just how are you thinking about.
I think you made some comments last quarter, how are you thinking about free cash flow.
Versus versus what you had talked about a couple of months ago. Thanks.
Q1 is I think considerably above what we had thought.
And.
And so more and more of it is looking like it will start with the three at the end of the year.
There's a lot of road the travel between now and then obviously you may not even see the full year with the.
Beyond the <unk> transaction, but you know if you have got the pin me down right now I would tell you it probably starts for the three.
Okay. Thanks, guys.
The 300 billion.
Yes.
Helpful. Thanks.
You bet.
The next question comes from the line of my people what's the.
Baird.
Yes.
Yeah. Good morning, I think Thats me.
Yes.
Hey, good morning.
So maybe maybe tying my hand, the jacks question, but.
The different way.
Obviously, you guys have a lot of tailwind and its water management business.
The funding for some of your key customers.
The core level of activity in the market picking up.
So I guess I'm wondering here is the world contemplating doing.
<unk> business is it.
The end alone the company how should we think about the growth algorithm maybe longer term here I mean.
Business was able to grow mid single digit quite comfortably when you didn't have the kind of the tailwind that debt.
We're all talking about here.
What's the right framework as we think about the next two to three to four years for.
Growth.
Yes.
Yeah.
We don't want to get ahead of ourselves.
You know the separation but.
39 out of 41 quarters of positive total growth.
For a 10 year period of 5% to 6% compounding of core growth.
The backdrop and if it if it comes to fruition I think as we believe.
It's certainly going to be better than that.
And so that was the sort of.
The relatively mixed.
Period of.
Of end market activity for us so yeah, I mean, moving I think it'd be super comfortable with the five to six and then if the.
The regulatory.
And funding in end markets sort of turned positive it'll definitely be better than that.
Because you know the five to six for sort of demonstrated performance over the last 10 years.
Not exactly the kind of looking for.
But but but better than what we've been doing.
No I mean look fair enough I understand day, you don't want to sort of get ahead of yourself here, but that's.
That's the question that I get from investors quite often and I'm wondering if you can maybe comment publicly on that.
When when we're kind of looking at the slides that you provided here I'm Darren.
You talked about the $8 billion addressable market I, just want to make sure that our property we understand that.
First this is simply.
Talking about the debt.
<unk> ecosystem right shield.
8 billion market.
Can you maybe give us a little more sense as to kind of how you came up with this number is just the north American number is this the global number and.
Yeah.
Think about the other portions of your business kind of how do you frame that opportunity outside of the hygiene.
Yeah. So we think the sensor market Standalone is about 5 billion.
And that's the incremental $3 million as all of the renovation.
And retrofit activity just around.
The hygienic and environmental categories.
We're now again.
So I think when we a couple of quarters ago, we size the sensor market them based on the installed base.
The lifecycle of all the product and so this would be just primarily a north American number.
We really don't have much exposure outside of.
North America has some some pockets in Australia and the middle East.
And you know I think.
What's the what's exciting for us.
Is a lot of that comes through with the chasing the channel and Janssen.
There are people, who are doing that each and every day, maintaining facilities and as things need to be addressed for either where all of them for.
All of them safety.
As of the guys that are performing that work.
Essentially.
No exposure to that end market in the last.
Several months.
Our partnered with.
So the companies to address that channel, we now have upwards of 150 sellers.
Our third party and that will be.
Packaging, our solutions and providing them to their existing customers and so now there's momentum in that.
Thats brand new for us for any channel branded channel.
Really haven't addressed and obviously we.
We've added the omni channel and we've got an organic plan to install model where you can.
The fine what did you want to change in your building and improve the.
Health and safety.
All of the building.
And we'll schedule the.
The upgrade of install with a network of of.
Performance guys that we've lined up around the country and so this is the.
The price yield opportunity.
What's in the works for a while.
It is identify the products that we needed to do some organic development. We did some organic inorganic activity you know I'd say, bringing in the marketing of pretty robust way.
Is sort of what we were planning on doing all along.
The pandemic spurred I would say an initial surge that we really had not penciled in but now were sort of the back to the the.
It's just the demonstrated growth of this channel and opportunity that we've been able to pull together.
Right Okay.
The last question for me in another longer term question.
As your ex U.
Thinking maybe five years out.
Business currently is a north American business like you said predominantly.
And I'm talking about certain here.
Is there.
The thought here that debt.
This is going to become a more global business can you are you contemplating M&A or any other means through which.
You could be looking more broadly at.
Opportunities beyond North America.
Yeah, There's no question that we do.
We see opportunities to grow the business organically.
Well both.
In North America, as well as selectively outside of North America, I don't think of it.
We're going to chase.
Some regions.
Just because of the market structure and things like that but I think it's a really good chance it will be more of the Louisville.
Day in the next five years for sure.
Okay. Thank you so much.
Net.
The next question comes from the line of Brett.
Lindsay with critical.
Hi, good morning, all.
Was hoping you could just provide a little more color on the complexion of the 10% order increase of water.
Was it primarily the hygienic applications are you continuing to see positive development in the rest of the business portfolio.
And then any color you can provide on the various verticals between commercial institutional.
What those trends look like on an order and sales basis within water.
Yeah, I'll, let mark give you.
So for a little more detail, but it was broad base growth was broad based I think you saw.
Terrific growth in our water safety of control categories or hijacking environmental was up considerably in the.
Quarter, and we're starting to see you know the new construction flow systems work pick up I would say both in education and the.
The surprising degree some of them some of the commercial applications as well.
I don't know the you need to give you much more color than that yeah, I think the all just of those.
As people know when you start seeing New York opening up in Boston opening up the California opening up.
Does that start at some point in time last year, what was the price has started its going to get finished.
Moving to Todd's point, where we're kind of seeing it a little bit broad based right now because of a lot of things that were stalled.
Our opening back up and in the momentum of the past the point I would say it was really generally broad based and then some of the category of looking or a flow of products that are going in kind of earlier on in the building application, we saw that picking up in the quarter as well as well as into April so.
Yes.
Todd commented earlier on the call.
Feel much better of our end markets today than we did in Chile, you know 90 or 180 days ago.
Generally the generally broad based at this point.
The good to hear and then just one last one on the Q2 margins.
If you could just put a finer point on some of the moving pieces within the guide within water management, I guess I'm, just surprised when I get to the dilution from some of the integration on the deals but.
Surprised that we wouldn't see.
A better margin profile given the uplift in sales and orders is it <unk>.
Duration of COVID-19 cost saves from last year.
<unk> costs and any other final point you could offer.
The margins last June.
Nine one.
I would say that it was very bare bones.
The spending and travel and any kind of the line.
<unk>.
And so.
Obviously, there is the mixed impact from Adrian talked about.
There is some of that spending coming back and then we also are investing.
I think you know we're investing in this the GNC and channel.
Investing in some of the connected products.
Net interest together the bright shield.
Product offering and solution.
So I think we guided to 26 of 27.
On an organic basis of a stone's throw away from where we were last year with all of that in there. So I think that you know.
The the Decrementals are what they should be given.
Given as you look for doing inside of the business and the and the mix change behavior right of if you look at it sequentially from our first quarter, it's going to be the incremental sequentially.
Isn't that high 30% range, which is pretty good for that platform.
Okay, Great I appreciate the insight I'll pass it along.
Sounds good I cant think.
If you would like to ask a question press Star one. The next question comes from the line of Andrew think of.
Of them here.
Hi, Good morning. This is Emily <unk> on for Andrew <unk>.
Just a question on Pn sees the P&C, excluding aerospace declined 7% organically this quarter so.
I'm curious you know other than aerospace could you unpack sort of which end markets.
Philosophically, which ones youre starting to see recovery within P&C. Thank you.
Yeah, I think the the more.
Moving to note. The think about there is what the orders did versus the sales sales of more type of timing and backlog and some of them. You may recall last year. When you look to the results last year in P&C compared to that of industrial concept. We we outperformed other one of the glass for our core growth was down 1% in P&C.
From the order standpoint, that's the truly what's happening in the end markets. We saw demand from positive and PMC, we saw orders ex fan of.
The first time in several quarters, but of the demand did turn positive in the quarter and I'd say it was across really the majority of our sectors of process sector of our consumer sector. The energy sector of the reasons as well so from a demand standpoint.
We did see that positive trend and we expect that in the second quarter as you saw from the Guy.
To really accelerate.
When you go to the back half of the year as well.
We will we should see some very nice core order demand growth as well as of the sales growth for the back half of them for as well.
Okay great.
And then my follow up question, just switching gears a little bit another question on stimulus. So I know the school stimulus likely the of positive Zhang.
But in the recent released though I think there was about $350 billion of state and local aid.
Sure.
Water sewer infrastructure that must be spent by 2024.
I'm curious if you have any early thoughts on how the jump in the government spending of water infrastructure will impact of alright.
Thanks.
Yeah, I think as Todd mentioned earlier, it's not just the not just the ask the funding for the schools. It's also as you highlighted the general stimulus funding in April that can benefit off of as you look at our site works.
Markets, where you're looking at the mention of water storm water around the building you know we don't have a lot of infrastructure.
Define exposure, but I bring product categories that are managing water.
Managing separation of water around the building will clearly be a benefit to us of both of those funding programs.
The provide nothing but a tailwind for the platform.
Hello.
Yes, I'll pass it on the price.
So my question. Thank you.
Thank you.
The next question comes from the line of Mitchell Pinheiro with Gates capital.
Okay.
It looks like he he.
He hung up.
Again, if you would like to ask a question press star one.
We have a question from the line of Mitchell Shapiro with Gates capital.
I have no other questions.
So the bigger the one that could join us from the call today. We appreciate your interest the rexnord and we look forward to providing our next update when we announce our June quarter results in late July Thanks, everyone have a great day.
This concludes today's call you may now disconnect.
Yeah.
Okay.
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Thanks Todd.
The year.
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Okay.
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Okay.
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True.
Okay.
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