Christian Zilo

Christian Zitzl asked how the new CTO and executive appointments will specifically translate to innovation and sales growth, what actions will be different, and whether the initial focus is inward or market-facing. He also inquired about M&A activity, given the favorable backdrop and lack of recent additions, asking if it has fallen down the priority list.

Answer

Lucian Boldea (President and CEO) stated the appointments are 'absolutely market-facing,' aiming to create an ecosystem and framework to invest more in R&D, aligning with macro trends and high-growth industries to drive innovation and M&A. Early days involve establishing growth processes and frameworks, with more details expected at Investor Day. He clarified that M&A is not down on the priority list; the pause was to roll out a clear strategy at Investor Day, defining Timken as the 'natural owner' for acquisitions. An active pipeline exists, alongside the focus on 80/20 portfolio work, including potential divestitures.

Christian Zeilon inquired about the underperformance of the automation business in Q3 relative to expectations, asking if it was solely due to automotive CapEx, and how the company views Q4 and parts of 2026 for automation sales. His follow-up questioned the drivers behind the Harris Products Group's strong pricing ability over the past six quarters (demand, tariffs, catch-up) and whether this dynamic is expected to continue.

Answer

Gabriel Bruno (EVP, CFO and Treasurer) stated that automation compression in Q3 was largely in automotive but also heavy industries, with revenue recognition timing causing Q3 to be below the expected $215 million/quarter pace. He noted that Q4 is expected to recoup some of this, trending slightly better than previously communicated, but still implying a mid-single-digit decline for the full year, with 2026 being the primary profile for order activity. For Harris Products Group, Gabriel Bruno explained that a significant portion of its business is tied to commodity silver and copper, with a mechanical pricing model that adjusts to market changes, making pricing largely reflective of these commodity movements.

Christian Zilo, sitting in for Steve Barger, asked if visibility in the automotive automation market has changed since Q4 and whether recent tariff news could impact the outlook. He also inquired if the current environment mirrors the 2018-2019 period of tariff-driven price hikes followed by volume weakness, and what the implications are for Americas margins.

Answer

CEO Steven Hedlund stated it was too early to assess the impact of very recent tariff policy changes. CFO Gabriel Bruno added that while long-lead-time auto projects provided some strength in Q1, they are closely monitoring the industry's response to tariffs. Regarding the 2018-2019 comparison, Bruno expressed confidence in the long-term improvement of Americas margins, which will be supported by an eventual recovery in automation volumes and contributions from acquisitions.