Christian Zilo

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.