Q4 2022 Caterpillar Inc Earnings Call
Welcome to the fourth quarter 2022 Caterpillar earnings conference call.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today Ryan Fiedler. Thank you. Please go ahead.
Thank you Emma and good morning, everyone and welcome to Caterpillar's fourth quarter of 2022 earnings call I'm, Ryan Fiedler, Vice President of Investor Relations. Joining me today are Jim up will be chairman and CEO .
Andrew Bonfield, Chief Financial Officer.
Senior Vice President of Global Finance Services Division, and Rob Rengel Senior IR manager.
During our call, which will extend the 840 a M. Central we will be discussing the fourth quarter and full year earnings release, we issued earlier today you can find our slides the news release and a webcast recap at investors Dot Caterpillar dot com under events and presentations. The content of this call is protected by U S and in international.
Copyright law, any rebroadcast retransmission reproduction or distribution of all or part of this content without caterpillar's. Prior written permission is prohibited.
Moving to slide two during our call today, we will make forward looking statements, which are subject to risks and uncertainties. We will also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call.
Please refer to our recent SEC filings and the forward looking statements reminder, in the news release for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast.
Discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings on.
On today's call will also refer to non-GAAP numbers for a reconciliation of any non-GAAP numbers to the appropriate U S. GAAP numbers. Please see the appendix of the earnings call slides.
Today, we reported profit per share of $2 79 for the fourth quarter of 2022, compared with $3 91, a profit per share in the fourth quarter of 2021.
We're including adjusted profit per share in addition to our U S. GAAP results are adjusted profit per share was $3 86 for the fourth quarter of 2022 compared with adjusted profit per share of $2 69 for the fourth quarter of 2021.
Adjusted profit per share for both quarters, excluding mark to market gains for Remeasurement of pension and other post employment benefit plans as well as restructuring items adjusted profit per share for the fourth quarter of 2022 also excluded goodwill impairment now, let's turn to slide three and turn the call over to our chair.
And CEO , Jim up will be.
Thanks, Ryan Good morning, everyone. Thank you for joining us as we close out 2022, I'd like to start by recognizing our global team for another strong quarter.
Results reflect healthy demand across most end markets for our products and services.
We remain focused on executing our strategy and continuing to invest for long term profitable growth in today's call I'll begin with my perspectives on our performance in the quarter and for the full year. I'll then provide some insights on our end markets Lastly, I'll provide an update on our sustainability journey.
Overall it was another strong quarter as demand remained healthy for our products and services sales rose by 20% versus the fourth quarter of 2021 better than we expected.
Supply chain improvements enabled stronger than expected shipments, particularly in construction industries and supported an increase in dealer inventories.
We achieved double digit top line increases in each of our three primary segments and saw sales growth in North America, Latin America, Andy Amy While Asia Pacific was about flat.
Adjusted operating profit margins increased to 17% in the fourth quarter, an all time record as we saw margins improve both on a sequential and year over year basis.
Adjusted profit per share was $3 86, which includes an unfavorable 41 cents per share a foreign currency headwind largely due to M. E N T balance sheet translation.
This was caused by the rapid decline in the U S. Dollar at late in the year and reversed much of the favorable impact we saw in the first three quarters of 2022.
We generated a 17% increase in total sales to $59 $4 billion in the year.
Service is also increased by 17% to $22 billion.
Adjusted operating profit margin for the full year was 15, 4% a 170 basis point increase over the prior year.
Although we did not achieve our investor day margin targets for the year, which I'll discuss more in a moment I'm pleased that we increased adjusted operating profit by over $2 billion and grew absolute OPEC dollars, which is our internal measure of profitable growth.
For the year, we achieved adjusted profit per share of $13.84 also an all time record.
In addition, we generated $5 $8 billion of M E T free cash flow firmly in our target range.
Finally, despite the strong sales in the fourth quarter backlog grew by $400 million in the quarter to end the year at $34 billion, a 32% year over year increase.
As I've mentioned, we did see some improvement in certain areas of the supply chain in the fourth quarter. However, pockets of challenge continue, particularly with some suppliers related to energy and transportation and resource industries.
Similar to previous quarters, our sales would have been higher if not for these supply chain issues.
Our global team delivered one of the best years in our nearly 100 year history, including record full year adjusted profit per share <unk>.
Despite the supply chain challenges our team achieved double digit top line growth and generated strong M E T free cash flow.
We remain committed to serving our customers executing their strategy and investing for long term profitable growth.
Turning to slide four in the fourth quarter of 2022 sales increased 20% versus last year to $16 6 billion.
The increase was due to favorable price realization and volume growth, which included dealer inventory increases and growth in sales of equipment to end users.
Compared with the fourth quarter of 2021 sales to users increased 8% broadly in line with our expectations.
Four machines, including construction industries and resource industries sales to users rose by 4%, while energy and transportation was up 19%.
Sales to users in construction industries were up 1% inline with expectations.
As a reminder, nonresidential represents approximately 75% of caterpillar sales and construction industries.
North American sales to users increased as demand remained healthy for both nonresidential and residential despite some moderation in residential.
Latin America saw higher sales to users well he Amy in Asia Pacific declined slightly in the quarter.
However, excluding China sales to users in the Asia Pacific region increased.
Resource industries sales to users increased 13%, which was lower than anticipated mainly due to timing issues related to outbound logistics and commissioning.
The segment sales to users increased primarily due to heavy construction and quarry and aggregates.
In energy and transportation sales to users increased by 19% slightly above our expectations in the fourth quarter oil and gas sales to users benefited from continued strength in large engine repower.
We also saw a strong turbine and turbine related services.
Our generation and industrial sales to users continue to remain positive due to favorable market conditions.
Inspiration declined from a relatively low base, primarily due to lower locomotive deliveries, while marine was up slightly.
Dealer inventory increased by about $700 million in the fourth quarter, which was above our expectations compared to a decrease of about $100 million in the same quarter last year.
As I mentioned supply chain improvements enabled stronger than expected shipments, particularly in construction industries and supported an increase in dealer inventories we.
We saw increases in each of our primary segments and within construction Industries' dealer inventories are now under our typical historical range of three to four months of projected sales.
In construction industries, the largest dealer inventory increase came in North America, which benefited our most constrained region.
As expected we generated improved adjusted operating profit margin in the quarter, both year over year and sequentially.
Our adjusted operating profit margin increased by 560 basis points versus last year to 17%, which does not include the non cash goodwill impairment charges and restructuring costs associated with the rail division.
More detail on rail later in my remarks.
Turning to slide five I'll now provide full year highlights and 2022 regenerative sales at $59 $4 billion up 17% versus last year. This was due to favorable price realization and higher sales volume driven by the impact from changes in dealer inventory increased services and higher sales of equipment to end use.
There's.
As I mentioned, we generated $22 billion of services revenues in 2022, a 17% increase over 2021.
Services growth in 2022 benefited from our ongoing initiatives and investments as well as price realization.
We now have over $1 4 billion, one 4 million connected assets up from $1 2 million in 2021.
We delivered over 60% of our new equipment with a customer value agreement and the launch of our new App called Cat Central helped drive growth in ecommerce sales to users.
We also had the highest level of parts availability in our history.
Overall, our confidence continues to increase that we'll achieve our $28 billion services target in 2026.
Our full year adjusted operating profit margin was 15, 4% 170 basis point increase over 2021.
Although we significantly increased margins in the fourth quarter versus last year overall, they did not improve enough for us to achieve our full year Investor day margin targets are.
Margins in 2020, two were impacted by supply chain inefficiencies ongoing inflationary pressures within manufacturing costs and our conscious decision to continue to invest for profitable growth.
As I mentioned during our last earnings call our margin targets are progressive which means we expect to achieve higher operating profit margins as sales increase.
In an inflationary environment, and a higher inflationary environment, where a relatively larger portion of the sales increase is due to price realization.
Less operating leverage which makes the delivery of those progressive margins more challenging.
Andrew will provide more information about our operating profit margin targets.
Moving to slide six.
We generated M E N T free cash flow of $5 $8 billion for the full year, which was in line with our Investor day range of $4 billion to $8 billion, we returned $6 $7 billion to shareholders or 115% of M. E. T free cash flow, which included $4 $2 billion or repurchase stock and $2 $4 billion in dividends.
Shareholders.
We remain proud of our dividend aristocrat status and continue to expect to return substantially all M E T free cash flow to shareholders over time through dividends and share repurchases.
Now on slide seven I will share some high level assumptions on our expectations moving forward.
While we continue to closely monitor global macroeconomic conditions overall demand remains healthy across our segments and we expect 2023 to be better than 2022 on both top and bottom line.
Just to remind you our internal measure of profitable growth is absolutely OPEC dollars, we believe increasing absolute OPEC dollars will lead to continued higher total shareholder returns over time.
We expect to achieve our updated adjusted operating profit margin targets and M. E T pre cash flow target range of $4 billion to $8 billion during 2023.
Now I'll discuss our outlook for our key end markets. This year, starting with construction industries in North America overall, we see positive momentum in 2023, we expect nonresidential construction in North America to grow due to the positive impact of government related infrastructure investments healthy backlogs and rental.
Replenishment.
Although residential construction continues to moderate due to tightening financial conditions. It remains at healthy levels.
In Asia Pacific, Excluding China, we expect growth in construction industries due to public infrastructure spending and supportive commodity prices.
As we mentioned during our last earnings call weakness continues in China, and the excavator industry above 10 tons.
We expect it to remain below 2022 levels due to low construction activity.
Amy business activity is expected to be about flat versus last year based on healthy backlogs and strong construction demand in the middle East.
Set by uncertain economic conditions in Europe .
Construction activity in Latin America is expected to be flat to slightly down versus the strong 2022 performance.
In resource industries, we expect hoping might need demand to continue as commodity prices remain above investment thresholds.
That said our customers remain capital disciplined.
We anticipate production and utilization levels will remain elevated and our autonomous solutions continued to gain momentum.
We expect the continuation of high equipment utilization and the low level of park trucks, which both support future demand for our equipment and services.
We continue to believe the energy transition will support increased commodity demand expanding our total addressable market and providing opportunities for profitable growth.
Heavy construction and quarry and aggregates, we anticipate continued growth growth supported by infrastructure and major nonresidential construction projects.
In energy and transportation, we expect sales growth due to strong order rates in most applications.
In oil and gas although customers remain disciplined we are encouraged by continued strength in demand and order intakes for the year.
New equipment orders for solar turbines continue to be robust.
Power generation orders are expected to remain healthy including data center strength.
Industrial remains healthy with momentum continuing for 2023.
In rail North American locomotive sales are expected to remain muted.
We anticipate strength in high speed marine as customers continue to upgrade aging fleets.
During the fourth quarter, we took a $925 million noncash goodwill impairment charge related to our rail division, which is part of the energy and transportation segment.
The impairment was primarily driven by a revision in our long term outlook for the company's locomotive offerings.
We believe opportunities exist for new locomotives, overhauls, repower and modernizations, but at lower levels than previously forecasted and occurring over a longer time horizon in.
In addition to the goodwill impairment charge, we also incurred restructuring cost of $180 million in the quarter, primarily related to noncash inventory adjustments within this division.
Accordingly, our rail services, including track signaling and freight car remain robust.
Progress rail plays an integral part in supporting and maintaining rail infrastructure in countries around the globe and rail remains one of the most efficient ways of transporting goods across the land.
We will continue to offer a tier four solutions to our customers. However, strategic investments in new locomotive products will continue shifting to competitive sustainable solutions that help customers meet their carbon reduction initiatives, including hybrid full battery electric and alternative fuel power sources, including hydrogen.
These alternative power solutions for rail will leverage modularity and scale across resource industries construction industries and energy and transportation. We believe these enterprise wide investments will provide the caterpillar with a strategic advantage over time.
Moving to slide eight we continue to advance our sustainability journey in the fourth quarter of 2022, as we strive to help our customers achieve their climate related the objectives.
In November Caterpillar announced the successful demonstration of its first battery electric 793 large mining truck prototype with support from key mining customers participating in caterpillars earlier early learner program.
The truck performed at the same specification as a diesel truck on a seven kilometer course, achieving a top speed of 60 kilometers per hour of carrying a full load and 12 kilometers per hour would that slim same load at a 10% grade. In addition to the truck. We also unveiled plans to create a working and more sustainable mindset of the future.
Our Arizona based proving ground. This includes installing and utilizing a variety of renewable energy sources leveraging technologies from our electric power Division and new electrification and advanced power Solutions Division.
We also invested in lift those energy Inc. A lithium ion battery pack producer that manufacturers battery packs for the types of demand environments, our cat equipment drives it.
This collaboration supports our commitment to delivering robust electrified products and solutions to our customers.
Lastly in 2022, we continue to advance or autonomous journey, achieving an industry first it will be over 5 billion tons autonomously across 25 main types worldwide during.
During the fourth quarter, we announced our first autonomous solution and the aggregates industry will collaborate with luck stone the nation's largest family owned and operated producer of crushed stone sand and gravel to expand these solutions beyond mining.
We'll utilize cat mind Star command for hauling system on Triple seven trucks contributing to continued improvements in safety and productivity for our customers.
These examples reinforce our ongoing sustainability leadership and how we help our customers build a better more sustainable world.
We look forward to issuing our 18th annual sustainability report during the second quarter.
With that I'll turn the call over to Andrew.
Jim and good morning, everyone.
I'll begin by covering our fourth quarter results, including the performance of our business segments.
Then I'll cover the balance sheet, and then be into your free cash flow before concluding on high level assumptions for 2023, including the first quarter.
Beginning on slide nine sales and revenues for the fourth quarter increased by 20% or $3 $8 billion to $16 $6 billion.
The sales increase versus the prior year was due to strong price realization and volume partially offset by currency impacts.
Sales were higher than we expected supply chain constraints eased in some areas and we were able to ship more product.
Operating profit increased by 4% or $69 million to $1 7 billion, a strong price realization and volume growth were mostly offset by a goodwill impairment charge high manufacturing costs and restructuring expenses.
Our adjusted operating profit was $2 8 billion up $1 $2 billion versus the prior year and the adjusted operating profit margin was 17.0%.
This was an increase of 560 basis points versus the prior year quarter due to a favorable price realization and volume growth, which outpaced manufacturing cost increases.
Fourth quarter margins were lower than we were targeting as well as being lower than where we need them to be to meet our full year investor day margin target.
I will talk more about that in a moment.
Adjusted profit per share increased by 43% to $3.86 in the fourth quarter compared to $2.69 in the fourth quarter of last year.
Adjusted profit per share in the fourth quarter, excluding the goodwill impairment charge of $925 million.
$1 71 per share related to a road division as Jim has explained.
This charge is held at the corporate level industrial impacts energy and transportation segment margins.
Adjusted profit per share figures also exclude mark to market gains for the re measurement of pension and OPEC plans and restructuring items.
Restructuring costs of $209 million or 29 cents in the quarter were primarily related to noncash inventory write downs within that road division.
Again, these charges impacted the corporate level and the inventory write downs all within cost of goods sold in the income statement.
For the full year restructuring costs were about $600 million.
Last quarter, we told you that a noncash charge of approximately $600 million could slip into 2023, which it did.
We expect to close on the divestiture of our long haul business in early February and the wrong cash charge will be included in our first quarter 2023 restructuring charges.
The provision for income taxes in the fourth quarter, excluding excluding the amounts relating to mark to market goodwill impairments and other discrete items reflected a global annual effective tax rate of approximately 23% as reasons expected.
Okay.
Finally, our fourth quarter results included an unfavorable noncash foreign currency impact within other income and expense of 41.
Related to EMEA and Chi balance sheet translation in the quarter.
To explain many of our foreign entities are U S dollar functional.
These entities are generally being a net liability position, causing a favorable translation impact in periods of U S dollar strength.
Within each of the first three quarters of the year, we saw some benefit as the dollar sequentially trended stronger.
However, within the fourth quarter this trend reversed.
Given the significant weakening of the U S dollar within the fourth quarter of 2022, the negative impacts of profit was sizable.
As you would imagine at forward looking assumptions do not include expectations for currency fluctuations.
To give a bit more context, other income and expense excluding the impacts of pension mark to market adjustments as trend is around $250 million of income per quarter for all of 2021 and for the first three quarters of 2022.
This is reflected a number of offsetting items, including currency.
In the fourth quarter, excluding pension mark to market other income and expense swung to a 70 million dollar expense.
The majority of that change is due to the foreign exchange translation adjustment, which is why we have highlighted this.
Overall sales were better than we had expected as we had anticipated margins increase but as I said earlier not by enough to meet our Investor day margin targets.
Adjusted profit per share rose by 43%, but that was moderated by the 41 cent noncash foreign currency balance sheet translation charge that I mentioned a moment ago.
Moving on to slide 10.
20% increase in the top line was driven by favorable price realization and higher sales volume volume was supported by the $800 million year over year impacts of changes in the inventory and an 8% increase in sales to users.
From a sales perspective currency remains a headwind given the strength of the U S dollar.
As I mentioned earlier sales were higher than we expected in the quarter, mostly due to some improvements in the supply chain, which enables stronger shipments, particularly in construction industries.
The increase in dealer inventories reflects improved shipments in construction industries and customer delivery timing in resource industries and energy and transportation.
Overall market dynamics remained healthy sales to users continues to increase and that backlog is strong at $34 billion.
Moving to slide 11 fourth quarter operating profit increased by 4% impacted by the goodwill impairment charge and restructuring expenses.
Adjusted operating profit increased by 78% as favorable price realization and higher sales volume continued to outpace higher manufacturing costs.
Manufacturing costs increased primarily due to higher material costs and unfavorable cost absorption as we decreased our inventories in the fourth quarter compared to an increase in the prior year.
Related to our recent price cost performance keep in mind that we are still catching up from the increases in manufacturing costs, which have occurred over the last few years.
In particular material and freight costs have increased by about 20% since 2020.
And that full year gross margins remain below our 2019 levels.
Our fourth quarter adjusted operating profit margin of 17%, which was a 560 basis point increase versus the prior year.
As Jim has mentioned this is our highest ever quarterly adjusted operating margin.
As I said earlier, we did not achieve our investor day margin targets.
As Jim said in a high inflation environment, you do not get the benefit of operating leverage that you would normally see expect when sales with increases of volume driven.
Yeah.
You will recall that our margin targets of progressive which means at the top end of the range for every $1 billion and says incremental revenues, we need to deliver close to 40 percentage points of that through adjusted operating profit.
This is challenging to achieve in a high inflation environment. When sales are increasing due to price realization designed to mitigate increases in manufacturing costs.
Also please keep in mind that when we bet that we made a conscious decision to continue to invest for future profitable growth.
We have not seen inflation anywhere near double digit levels since the targets were introduced in 2017.
In a low inflation environment productivity improvements can be made to offset inflationary increases so normal targets remain effective.
And the current high inflation environment, you can you kind of achieved the level of productivity. So we are adjusting the target for sales range to reflect the inflationary increases we've seen in 2022.
On slide 12, we've updated our margin targets slope to account for the impacts of inflation as depicted on the chart.
We still have the same aspiration for margins. However, the corresponding level of sales and costs are generally around 9% higher than they've been in enrollment inflationary environment.
As you can see the low end of the sales range is now $42 billion, while the top end is $72 billion.
This compares to the previous bookings of $39 billion and $66 billion respectively.
Yeah.
The key point is that despite the inflationary impacts on sales and costs, which impact margins our expectations for profit and cash generation have not changed and we remain focused on delivering increases in absolute OPEC dollars.
Depending on the inflationary environment that we see in 'twenty two 'twenty three will have to be revisit the range next January .
Moving to slide 13.
Across our three primary segments sales and margins improved in the fourth quarter versus the prior year supported by price realization and sales volume.
As expected price more than offset manufacturing costs in all three segments.
Starting with construction industries sales increased by 19% in the fourth quarter to $6 8 billion.
Driven by favorable price realization and sales volume, partially offset by currency.
Volume increased primarily due to changes in dealer inventory and higher sales to users.
Dealer inventory increase in the quarter compared to a reduction last year.
Sales in North America rose by 34% due mostly to strong pricing the positive change in dealer inventory and higher sales to users.
Sales in Latin America increased by 39% on strong price realization and higher sales volume.
The latitude mostly to a favorable change in dealer inventory.
And the <unk> sales increased by 10% on price realization and sales volume, partially offset by unfavorable currency.
Sales volume was supported by positive year over year change in dealer inventory as the decrease in the prior year's quarter was larger than this year's decline.
Sales in Asia Pacific decreased by 10%, mostly due to unfavorable currency impacts partially offset by stronger price realization.
Lower sales volume also contributed to the decline as dealers decrease inventory during the fourth quarter compared to an increase in the prior year.
Fourth quarter profit for construction industries increased by 87% versus the prior year to $1 $5 billion.
Price realization and higher sales volume drove the increase.
Unfavorable manufacturing costs, largely reflected higher material costs unfavorable cost absorption and increased freight.
The segment's operating margin of 21, 7% was an increase of 780 basis points versus last year.
The margin for the quarter was better than we had expected on strong with the volume price and moderating material costs.
As a reminder, the fourth quarter is usually the weakest quarter for margins in construction industries, but with the benefit of a price realization. The reverse was true in 2022.
Turning to slide 14.
Resource industries sales grew by 26% in the fourth quarter to $3 4 billion.
The improvement was primarily due to favorable price realization and higher sales volume.
Volume increased due to the impact of changes in dealer inventories and higher sales of equipment to end users.
Dealer inventory increased more during the fourth quarter of 'twenty two than the prior year due to the timing of customer deliveries, which includes the impacts of outbound logistics delays and commissioning.
Fourth quarter profit from resource industries increased by 110% versus the prior year to $605 million, mainly due to favorable price realization and higher sales volume.
This was partially offset by higher manufacturing costs, primarily material price I'm plugging and related manufacturing costs.
The segment's operating margin of 17, 6% was an increase of 700 basis points versus last year strengthening versus the third quarter as we had expected.
Now on slide 15.
Energy and transportation sales increased by 19% in the fourth quarter to $6 $8 billion with sales up across all applications.
Oil and gas sales increased by 38% due to higher sales of turbines and towboat and related services.
Reciprocating engines and after market parts.
Power generation sales increased by 12% of sales, where large, Ohio and large reciprocating engines supporting data center applications.
Sales increase in small reciprocating engines turbines and token related services as well.
Industrial sales rose by 19% with strength across all regions.
Finally transportation sales increased by 6% benefiting bonds.
That's a departments for marine applications and received separate heading engine after market parts.
Rail services were offset by lower deliveries locomotives.
Fourth quarter profit for imaging transportation increased by 72% versus the prior year to $1 $2 billion.
The improvement was primarily due to higher sales volume and favorable price realization.
I am manufacturing and SG&A and R&D costs acted as a partial offset.
Manufacturing cost increases largely reflected higher material costs and volume related manufacturing costs.
SG&A and R&D expenses increased due to investments aligned with our strategic initiatives, including electrification and services growth.
The segment's operating margin of 17, 3% was an increase of 530 basis points versus last year strengthening versus third quarter as we had expected.
Moving to slide 16 financial products revenue increased by 10% to $853 million benefited by higher average financing rates across all regions.
Segment profit decreased by 24% to $189 million.
The profit decrease was mainly due to a higher provision for credit losses at cat financial and the non favorable impact from equity Securities and insurance services.
The increase in provisions reflects this change reflects changes in general economic factors rather than company specific economic factors.
Despite these changes are leading indicators remained strong Pos.
<unk>, 1.89% compared with 1.95% at the end of the fourth quarter of 2021.
Also this was an 11 basis point decrease in cost us compared to the third quarter of 2022.
Retail new business volume decline versus the prior year, but remained steady compared to the third quarter.
As I mentioned last quarter Cat financial is not seeing slowing business activity. We continue to see strong competition from banks due to higher interest rates and more customers willing to pay cash for their machines.
Used equipment demand remained strong with inventories at historically low levels.
We continue to see high conversion rates as well as customers to choose to choose to buy at the end of the lease term.
Now on slide 17, Amy achieve free cash flow in the quarter increased by about $1 2 billion versus the prior year to $3 billion.
The increase was primarily due to higher profit.
On working capital our inventory decreased by about $600 million in the quarter.
Improved availability of some components benefited shipments as we decreased our work in process inventory.
We also saw strong shipments of solar turbines in the quarter.
We repurchased about $900 million of common stock in the quarter and paid around $600 million in dividends.
We are pleased with the strong free cash flow, we generated in a year, where we paid $1 $3 billion in short term incentive compensation.
<unk> increased our inventories by over $2 billion.
Our liquidity remains strong with an enterprise cash balance of $7 billion and another $1 $5 billion in slightly longer dated liquid marketable securities, which generates improved yields on that cash.
Now on slide 18, I will share some high level assumptions for the full year, followed by the first quarter.
As we begin 2023 demand remains constructive given the strong order backlog and improving supply chain dynamics, although we do not expect the benefit of a dealer inventory tailwind when like we saw last year.
As a reminder, <unk> imagery rose by $2 $4 billion in 2022.
Around 40% of the increase relates to construction industries with the balance, reflecting the timing of deliveries to customers and resource industries and energy and transportation.
As Jim mentioned over 70% of the combined Europe and dealer inventory and resource industries and energy <unk> transportation is supported by customer orders.
For the full year 2023, we anticipate increased sales supported by price realization.
Although we expect stronger sales to users in 2023.
Headwinds from the $2 4 billion dollar dealer inventory build in 'twenty two 'twenty three 'twenty two will more moderate volume growth.
Our planning assumption is that we do not expect a significant change in dealer inventory by the end of the year.
We do expect service sales momentum to continue after reaching $22 billion in 2022.
From a sales seasonality perspective, we expect a more typical year with lots of first quarter for total sales.
For the full year, we expect our adjusted operating profit to increase reflecting higher sales and we expect to be within the updated adjusted operating margin ranges.
Pricing actions from 'twenty to 'twenty, two we will continue to roll into 'twenty, two 'twenty, three and we will evaluate future actions as appropriate to offset inflationary pressures.
We currently expect to see a moderation of input cost inflation as the year progresses, and therefore, a corresponding moderation in price realization as we move through the year.
Probably slow should still more than offset manufacturing cost for the year.
Increases in SG&A and R&D expenses are expected to exceed the benefit of lower short term incentive compensation expense. This year as we continue to invest in strategic initiatives, such as services growth and technology, including digital electrification and autonomy.
Below operating profit, we anticipate a headwind of approximately just over $800 million or about $18 million per quarter and other income and expense at the corporate level related to pension expense due to higher interest costs, given the higher interest rates.
This is a noncash item.
For the full year of 2022, the strengthening U S. Dollar actually it is a tailwind of $199 million relating to the <unk> balance sheet translation impact that I spoke about earlier.
This would not recur after weakening we've seen in rates thus fall continues.
Based on current rates, we'd see a headwind of around about $80 million in the first quarter.
Yeah.
Remember the 2022 was not a typical year for us as margins increased sequentially throughout through the year as the benefit of the price realization was stronger in the second half of it yet.
Also manufacturing volumes were impacted by supply chain issues, which did add impact of absorption rates from quarter to quarter.
These factors mean will mean that we do not expect to return to a normal seasonal margin patents in 2023.
Moving on we expect to achieve that I mean, cheap free cash flow target of $4 billion to $8 billion for the year with Capex in the range of about $1 $5 billion.
We'll have about one point for a $1 $4 billion cash outflow in the first quarter related to the payouts of last year's incentive compensation slightly higher than we saw in the first quarter 'twenty to 'twenty two.
We anticipate restructuring expenses around $700 million. This year, the majority of which is related to the longwall divestiture charge that I mentioned earlier.
Finally, we anticipate a global effective tax rate of 23% excluding discrete items.
Now onto our assumptions for the first quarter.
In the first quarter compared to the prior year, we expect sales to increase on price and slightly stronger volume, reflecting higher sales to users.
With regard to diesel inventory, we expect a typical seasonal build in the first quarter of this year.
As a reminder, dealers increased inventory by $1 $3 billion in the first quarter of 2022 and.
And we expect a lower build in the first quarter of 2023.
Sales should increase across the street property segments in the first quarter versus the prior year.
Compared to the fourth quarter, we anticipate lower sales in the first quarter at the enterprise level following a typical seasonal pattern.
We expect lower sales sequentially in each of our three primary segments as well.
To provide some color construction industries is following an abnormally strong fourth quarter with shipments exceeded our expectations.
Resource industries had a strong fourth quarter with its highest quarterly shipments since 2012 and expects lowest sequential sales in the first quarter due to the timing of shipments, which as you know can be lumpy.
Energy and transportation sales should be sequentially lower as well following normal seasonable patterns.
Keep in mind that solar turbines had a strong fourth quarter.
Specific to the first quarter versus the prior year keep in mind that the first quarter margin logic margins last year with very low.
We expect substantially strong enterprise in segment margins in the first quarter of favorable price and volume.
Price realization should more than offset manufacturing cost of both the engine problems.
Primary segment levels as well.
Also we could see headwinds related to pension and currency below operating profit as I just mentioned.
Compared to the fourth quarter trading trading two we expect adjusted operating profit margins to be flattish to down for the first quarter at the enterprise level.
Keep in mind that our fourth quarter of 2022 adjusted operating profit margins.
Where our highest quarterly margins ever.
By segment in construction industries, we normally see higher margins in the fourth quarter first quarter.
It was coming off a very strong fourth quarter, we expect lower volume to weigh on margin sequentially.
This is the business, which usually drives enterprise wide sequential margin improvement from the fourth quarter to the first.
Suddenly lower volume should drive sequentially lower margins in resource industries.
And then energy and transportation, we expect lower margins sequentially. Following a strong fourth quarter, which is a normal pattern for this business.
Turning to slide 19, let me summarize Seth.
Sales grew about 20% led by strong price realization and volume gains across the three primary segments.
Adjusted operating profit margin increased by 560 basis points to 70, 217%.
M E&P free cash flow was strong with $3 billion for the quarter and we continue to return cash to shareholders on a consistent basis.
Service revenues were $22 billion for the full year, a 17% increase as momentum builds in 2022.
The outlook remains positive with improving supply chain dynamics and that backlog up around 400 million to over $13 billion.
We've updated our margin targets code to account.
Targets Coke to account for the impacts of inflation with sales and costs.
We expect our 2023 adjusted operating margins to be within the updated range.
Despite the inflationary impacts on sales and costs, our expectations for profit and cash flow generation have not changed and we will continue to execute our strategy for long term profit ago.
I want to confirm that our full year 2022 restructuring costs were about $300 million for the year. So I apologize if I didn't know that and the goal now is that now behind others questions.
Yes.
As a reminder, management asks that we limit to one question per analyst.
Clarification is desired please rejoin the queue.
Your first question comes from the line of Mig <unk> with Baird.
Your line is now open.
Thank you.
Good morning, everyone. Just wanted to I appreciate all the color on dealer inventories.
I guess.
It looks to me like about a $1 billion of the build is in construction a good chunk of that is in North America.
And retail sales here have been.
You know I'll call it flattish over the past.
Three quarters or so.
I guess I'm curious as you think about Q1 and do you think about that.
No.
Inventory build where do you expect that to occur is the channel stocking up in North America construction and how comfortable are you with dealers actually being able to.
<unk> put through this inventory to end users in 2023. Thank you.
You know, we typically see an increase ahead of the spring selling season. So that's why we think it'll be a traditional kind of increase.
Talked about what we see happening in the various markets again, the strength in infrastructure, which is 75% of Ci.
It's a moderation in <unk>.
Residential in North America, as we discussed.
But again North America is really had been our most constrained region. So we're pleased to see healthier dealer inventories.
In North America and unit.
Now in that typical range of three to four months and again, we talked about the fact that our eye in E&P.
Typically don't hold a lot of dealer inventory.
Hoping to get an order over 70% of of the year end dealer inventory for Orion E&P is tied to customer orders.
So I hope that helps.
Yeah.
Your next question comes from the line of Rob Wertheimer with Melius research.
Your line is now, Ohio I guess.
Thank you I'm going to ask you about turbines within E&P, obviously, the global energy mixes and shifting.
<unk>.
That gas to Russia, and so forth are you able to say origin been strong I assume related partly to that.
Is the solution sort of already in the pipeline for solar or are there a lot of projects underway and are under consideration and do you expect to keep that.
Segment elevated for the next several years.
Well, it's always Rob it's always good morning, it's always tough to make a multiyear prediction, but I will say that.
Orders, our order rates are quite strong for solar as its quotation activity.
Solar is very involved in that natural gas value chain compressing a lot of gas to LNG facilities for <unk>.
Export around the world.
You know there has been an underinvestment I'd argue in oil and gas over the last few years and that is starting to be reverse now and that has a positive impact on both our cat oil and gas business and our solar business. So.
Again, very difficult to always Jamaica, a multiyear projection not knowing what's happening in the economy, but based on what we see today.
Business is quite strong for solar both on the services side and on the new equipment side.
And one of the things we have seen that there was a for awhile there after the decline in oil prices a few.
Few years ago, we saw a decline in international projects that if that's picked up for so long. So we're seeing more international projects. We're also seeing strength in north American gas compression with solar as well.
Yeah.
Your next question comes from the line of Jamie Cook with Credit Suisse. Your.
Your line is now open hey.
Good morning, I guess my question can you talk for 2023, where is there opportunity to put through incremental pricing and where you see deflation and a question just comes from Jim you know just the incremental margins that you put up in the fourth quarter were fairly impressive. So I'm just wondering how big sort of the price cost you know.
<unk> can be in 2023 with the strong pricing actions and supply chain anything and you know potentially.
Potentially deflation in some areas.
Well, Jamie you know, we always certainly when we think about price actions, we've taken a number of things into account certainly we take into account the the increases from our suppliers and cost. We also of course pay very close attention to competitive.
The competitive market and always striving to provide more value to our customers. So it's difficult for us to make a prediction as to what will happen and I think we demonstrated the ability.
To pass along price when we need to because of inflationary factors, but again, we always keep competition in mind as well. So again pleased at how we're doing so far and the way we're managing that balance.
Yes, So I think we've said from a planning assumptions perspective, obviously, there is some carryover price impacting us and particularly in the first half of the year as we expect to go through the year, we expect that benefit of pricing moderates in the second half, but also we expect the increases in manufacturing costs to continue to moderate as we go through the year.
Yeah.
So, but obviously, that's the planning assumption and as always the case.
It's predicated on the assumption that our debt and put inflation does moderate and as Jim said, we'll obviously keep an eye open on that type pricing actions accordingly.
Sure.
Your next question comes from the line of Jerry Revich with Goldman Sachs. Your line is now open.
Yes, hi, good morning, everyone.
I'm wondering if you could if you could just talk about your.
Your production plan in construction industries.
What are you folks.
I'm looking for in terms of the decision to potentially curtail production. If we do continue to see dealer inventory builds ahead of expectations. Just if you could just touch on the key indicators that you're looking at in <unk>.
Can we gradually affect the production slowdown if that's indeed, what we need to do it over the course of 'twenty three.
Thanks, Jerry and it certainly you know again, we obviously pay very close attention to what's happening in the marketplace. We pay attention to stews dealers are independent businesses make their own decisions about inventory, but certainly you know we do work with them and then the last thing we want to do is to have too much inventory in the channel as it occurs today as we mentioned earlier.
We're now back in our normal typical range and still we still have many dealers that would like more equipment from us to support customer orders. So when we talked about the fact that nonresident, 75% of construction industries and it is still quite robust and strong and we expect it to grow yes, some moderation in in residential but again 75.
5% is non resin so again well as we always do we will pay close attention to the market and we'll we'll we'll modify our production plans as appropriate but there are still some products that we want we need to produce more up quite frankly, and we're stealing with still dealing with some supply chain issues in some areas.
So you can get us out of one size fits all answer we've talked about the fact that China is slow and we will continue we expect it to continue to be slow below 2022 levels, but.
In many areas.
Demand is quite still quite strong.
Your next question comes from the line of David Raso with Evercore. Your line is now open hi, Thank you for the time and my question relates to the first quarter guidance.
Normal seasonality on sales EBIT margins, usually go up a couple of hundred basis points I mean, that's sort of a you know a.
$4 50, EPS number what you're implying is a little closer to four.
The margins in particular, you mentioned retention.
And I know C is at a high level, so that like the comp is tough sequentially, but.
But on price cost what are you assuming on price cost first quarter versus fourth quarter or if you could just give us some color. It's just to see the margins flat to down sequentially, even with the tough comp is a bit unique and just if you could help us flush out some of the price cost. Thank you.
David Great question and part of the reason why I highlighted that Ci margins.
I see very very high in the fourth quarter part of that was because normally in the fourth quarter, you don't see a delay.
Dealing with rebuild as big as we did see in the fourth quarter. The fact that that release did help our overall ci margins come in a little bit better than we expected as well.
Obviously, what that does mean is normally yes, correct, we normally get a two to 300 basis points bump in the first quarter based on production.
And ramping up production, obviously those production rates aren't quite the same as they would normally be fourth quarter to first quarter.
Because obviously, we're looking at a very different profile, particularly given that obviously we were building production.
Through 2022, particularly in Ci.
So that is the biggest challenge and that's probably the biggest single factor, which will drive margins sequentially lower on price cost.
Still expect strong price in Q1, it will not be as big as Q4 for the simple reason, we are lapping price increases that we put through at the beginning of 2022.
That will be coming down slightly, but we do expect price cost to be favorable for the first half of the year again, that's just going to create a little bit of noise in the margin structure quarter on quarter.
Unfortunately, we are not going to go back to the normal lower margins in Q1 and higher margins in Q4, which you guys are going to be able to bubble is going to still be a little bit different as we go through 2023, obviously 2022 was the opposite.
Your next question comes from the line of Tami Zakaria with Jpmorgan. Your line is now open.
Hi, good morning, and thank you so much so I'm I'm trying to understand the volume commentary for this year. Since you. Since you expect sales to end users to be stronger this year versus last year, but your you don't expect dealer inventory restocking benefit does that mean dealer inventory.
It actually declined again from current levels to support the stronger sales to end users.
No.
Assumption at the moment are Chinese.
<unk> is at the moment, it's a planning assumption is always the case the dealer inventories will be flattish for the year and should not increase or decrease effectively what that does mean, though is obviously the headwind exists from ash shipments on the $2 $4 billion of dealer inventory got built in.
<unk> 20 to remind you a big chunk of that round about 60% is in.
E N T and in our I am which is related to customer orders, which will be pulled through into our sales to end users in due course, but overall, we expect gains in sales to users to be up.
Year over year.
And that will the dilemma a.
Headwind will moderate that level of increase the volume that we will see a nice shipments.
As I said in my remarks.
Yeah.
Your next question comes from the line of Mike Feniger with Bank of America. Your line is now open.
Thank you just following up on the solar comment in the oil and gas portfolio E&P was a dominant driver of earning 78 years ago with leading margins for cat. It's one of the only segments youre not getting that double digit pricing right now.
Others do you see room for that to pick up following this reversal of Underinvestment. The last few years is there anything structurally keeping cat from returning to those prior peak peak margins in E&P. Thank you.
Good morning, Mike. Thanks for the question. So you may recall that we put through price increases later.
In <unk> than we did with machines just based on the market dynamics that existed at the time, So having said that as I mentioned, particularly in oil and gas and power generation market is quite strong and we expect our volumes certainly in oil and gas to increase and you know, we're dealing with and get oil and gas still some supply chain challenges and so we're dealing with that.
That factor was your ramp up so long as again I mentioned earlier is very real.
Strong fourth quarter, but still very robust order rates coming in and a lot of quotation activity. So again.
We do expect that Ian teed, it took to improve in 2023.
And I won't try to compare it to where they were a few years ago I'm going to say that the business is strong and improving.
Your next question comes from the line of Nicole to Blaze with Deutsche Bank. Your line is now open.
Thanks, Good morning, I just wanted to get an adult you. Good morning, I just wanted to dig into the manufacturing cost side of the price cost equation. It sounds to me reading through the comments you made in response to an earlier question that you still expect manufacturing cost to be a headwind year on year and 2023 can you just kind of talk through the big components of that.
Materials versus freight and why we shouldn't expect at some point in 2023 for manufacturing costs to become a tailwind. Thank you.
Yeah. So I mean, there's a couple of factors obviously.
Coming to that our material costs will still be a headwind. We expect some of that is material cost inflation that was still seeing through this year.
Some of that material cost inflation is not just necessarily commodity costs. Some of it will be labor cost are and some of it will include energy costs. So all of those factors. We are anticipating will moderate as we go through the year, we are starting to see signs of.
<unk> of lower levels of a request for price increases coming from customers from suppliers.
So that's a positive sign and hopefully as a you know.
As things on one through the <unk> some of that will moderate again, we have not.
[noise] assumptions.
You know we base our pricing actions on what we're assuming from a manufacturing cost perspective, and obviously, we will take action as appropriate.
If we need to if they're all great increases and were currently expecting.
Manufacturing costs in 2023.
Yeah.
Your next question comes from the line of Chad Dillard with Bernstein. Your line is now open.
Hi, good morning, guys.
Good morning Jed.
So in China, I know you mentioned that you were expecting levels to be below 22 at least on the end market perspective, but maybe you could talk about just what youre seeing in like you're in the channel from an inventory perspective.
Relative to I guess normalized levels.
And then how should we think about the business now that you have.
The G series.
For a full China's cycle.
Yeah again, just to reiterate we had.
A couple of really strong years in China in 2000, 2021 and <unk>.
And we saw softening in 'twenty, two and again, we we don't see signs of improvement at this point, we continue to invest in new products to try to maintain our.
Our competitiveness with the new products. So that's that's continuing and we've been pleased with the response to those new products, including the gx, but that.
That above 10 ton excavator market, we do expect to be weaker in 2023 than it was in 2022.
And the inventory and end up in the fourth quarter versus a build in the prior year is lower.
Yes, so we actually had a reduction in dealer inventory in Asia Pac this year Uh huh.
And see I versus a build in the previous year.
Your next question comes from the line of Tim Thein with Citi. Your line is now open.
Yeah. Thanks, Jim maybe just a follow up on.
Just mining outlook within our eye right.
Get the point about that.
<unk> capital.
Capital discipline.
That in place for some time, but.
And then on the back of what it is.
Parents to be strong results and outlooks from.
Competitor in Asia overnight, maybe just say a bit more about kind of the outlook and your views.
And the mining piece of IRI for 23, Thank you.
Thank you Jim we've been talking for a number of years on our earnings call about what we expected in the mining industry, which was.
A moderate growth year on year and as opposed to what we saw.
Going back you know thinking about 10, or 12 or 15 years ago. When we saw some wildfire cycles up and down and really that I believe that's a function of our mining customers remaining capital disciplined and Thats, a very positive thing I think for them and for US as it is and what we've been saying for a number of years now on our earnings calls that we expected year over year moderate increase and that's exactly it.
It's playing out so we're very encouraged by our quotation activity with customers that conversations that are going on we have a strong backlog, which we feel good about.
Mark trucks remain at low levels are as high utilization of equipment and customers make decisions on a whole variety of factors as to whether or not they're going to rebuild or they're going to buy new trucks, and we benefit from either one of those things.
Very encouraged by.
Our our autonomous solution and we firmly believe we have the best solution in the industry and that's been demonstrated by the decision of the purchasing decisions that our customers are making and.
And as a reminder of course, our eye also includes quarry and agg, which other trends there are positive as well a lot of that's driven by infrastructure spending and anticipated infrastructure spending. So again, we feel good about the mining business.
Again quotation activity is very strong in <unk>.
And we're having very good conversations with customers.
Yes.
Your next question comes from the line of Matt Alcott with Cowen. Your line is now open.
Hey, Marty Thank you.
I was hoping you guys can provide us with some more insight into the strength youre seeing in the middle East.
And related to that but longer term Saudi.
The Abi has big plans in both construction and more recently mining are there any meaningful incremental opportunities for you guys. There.
Good morning, Matt and I believe we mentioned in our prepared remarks that that EMEA, Amy which is Europe Africa. The middle East is expected to be about flat and we said that our strength in the middle East is offsetting some uncertainty in Europe . So certainly when oil prices are elevated that tends to.
Provide.
The big investment capabilities for customers in the middle East, whether it's for oil and gas business saw for construction.
So again, there's a big there's.
Certainly a bright spot and a positive one and one that we feel will continue through 2023.
Okay.
Your next question comes from the line of Steven Fisher with UBS.
Your line is now open.
Thanks. Good morning, just curious what was different about the supply chain and construction, which sounds like it was pretty smooth versus E N T and resource, which sounded lakers or still a little challenging is it just still the randomness that's out there and then last quarter you had talked about some of the <unk>.
Manufacturing inefficiencies due to supply chain just curious.
How that played out in Q4, and what you expect for that in 'twenty three thank you.
Yeah. Thanks, Thanks, Steven and then certainly you know we have a diverse group of suppliers and a diverse product line and we did see.
Some improvement in the in the quarter, but there are still some areas of strength and just when we think it's very different product by product and even though you will see a number of suppliers in better shape. All it takes is one component to prevent you from shipping an engine or a machine is part of it is just the nature of the Beast I think as to what's happening in various <unk>.
Histories, and if we look at our large engines you know its more of a struggle frankly than it is with some of our construction machines at the moment and these things ebb and flow over time.
That's where we are today, we still see some semiconductor availability challenges I know one that with the higher end chipsets improved significantly in the industry based on industry reports, but for the semiconductors that we use it continues to be a challenge and so you know in the fourth quarter, we certainly did still experienced inefficiencies associated with.
Our supply chain challenges and that had an impact on us because we're still doing things like workarounds and it's not it's not it's not anywhere as smooth as it needs to be and I think if you look out for the rest of the what we do expect is that obviously, we start to lap those in the second half of the those inefficiencies. So we should need to see a moderation or actually a reverse.
We will have some of that supply chain inefficiency we saw in.
In the second half of the year.
Your next question comes from the line of Christian <unk> with Oppenheimer. Your line is now open.
Hi, Good morning, Thank you for the question.
When Chris follow up on the services gross annual reported now 22 billion on track to meet that $28 billion target by 2020 and can you just talk to us about some of the growth drivers in that business and maybe provide us with an update on customer value agreement take rate.
You bet. So so again, where we're at we are encouraged as I mentioned about our our progress in services that we mentioned when we threw that target out that it wouldn't be a straight line it wouldn't be linear and we knew we had to make investments to make it happen and we are continuing to invest in a whole variety of things. We've got more connected assets now $1 4 million up from $1 2 million last year.
We're investing significantly in our e-commerce capabilities, that's one more arguably at arguably we're a bit behind but we made great progress and very proud of what the team is doing there and those sales are increasing to answering your question on customer value agreements over 60% of new equipment.
In the energy.
In 2022 was delivered with the CVA and that's really important because it creates that customer touch point and it gives us the ability to demonstrate that value that we can provide and also we're investing heavily in NII and we have what are called prioritize service events. So what that does is it allows us to get dealers a lead on aftermarket service and repair.
Fair in advance and it does it.
It provides value to our dealers of course, but it also provides value to our customers because it allows them to do.
Avoid unplanned downtime. So that's really good parts of it as well and also working on parts availability and we need to have the right parts at the right place at the right time, and that's one of the benefits of having connected assets and also utilizing AI with us connected assets to ensure that we anticipate where those parts will be needed in.
That's a key enabler as well.
Operator, we have time for one more question.
Yeah.
Your final question today comes from the line of Steve Volkmann with Jefferies. Your line is now open.
Thank you guys for fitting me in here. My question is on inventory the cat inventory on your balance sheet was up two 2 billion or something roughly in 'twenty, two and I'm sure. Some of that was price, but is there an opportunity to sort of drive that back down our supply chain improve or are we in sort of a new reality, where we need a little.
Higher inventory because of the vagaries of all the supply chains in international trade and et cetera.
You know, we're not running as lean as we I would like us to be and certainly that is a.
As a consequence of the supply chain challenges, we're having and I think I've mentioned in previous calls you know the term decommit is one that I hadn't been familiar with until Covid hit and where customers that are at very short notice decommit and don't give us components, when we need them and so that's created inefficiencies. It's also resulted in more inventory. So I wouldn't say, it's a permanent condition.
I believe I, you know as the supply chain situation improves I do expect us to become leaner again and to be able to.
Sure.
Our internal inventory.
Yeah.
Thank you.
Yeah.
Alright, well. Thank you all for joining us I really do appreciate your questions just to summarize here you know I'm very proud of our global team as they delivered one of the best years, we had on record we had strong overall top line growth services grew 17%, we generated strong adjusted operating profit and M. E T free cash flow in the year and we achieved an all time record for adjusted <unk>.
But for sure as we think about the year, we're encouraged by the strong quotation activity, our $30 billion backlog and as we mentioned, we believe 2023 will be in an even better year than 2022 on both the top and bottom line and we continue to remain focused on supporting their customers an.
Excuse me our strategy for long term profitable growth again, thank you for your questions.
Thank you, Jim Andrew and everyone, who joined US today, a replay of our call will be available online. Later. This morning, we'll also post the transcript on our Investor Relations website as soon as its available you'll also find our fourth quarter results video with our CFO and an SEC filing with our sales to users data.
Click on investors that caterpillar dot com and then click on financials to view those materials.
Do you have any questions. Please reach out to Robert <unk>, The Investor Relations General phone number is 390 670 54549, we hope you enjoy the rest of your day and now I'll turn it back to AMETEK conclude the call.
Thank you so much for attending today's call you may now disconnect.
Yeah.
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Okay.
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