Rachael Lee

Rachael Lee asked for more detail on the strategic rationale for the RO acquisition in China, focusing on technology value-add and water market growth in China. She also inquired about the better-than-expected organic sales growth in diversified industrials, specifically how auto, aerospace, or other businesses performed.

Answer

Lori Koch, CEO, explained that the RO acquisition in China was primarily for capacity to enable local-for-local production of membranes, given China's market size and local preferences, rather than for new technology. She noted that diversified industrials' better performance was largely due to timing shifts, with full-year organic growth still expected at 2%. She highlighted nice improvement in next-gen mobility (auto and aerospace), particularly in US/North America auto markets, and strong performance in EV.

Rachael Lee asked about the strategic rationale for the RO acquisition in China, focusing on technology value-add and water market growth, and the performance of the diversified industrials segment, particularly auto and aerospace.

Answer

CEO Lori Koch explained that the RO acquisition in China was primarily for capacity expansion to support a local-for-local strategy in Asia, which accounts for a third of sales, rather than for new technology. She noted that diversified industrials saw better-than-expected performance, partly due to timing shifts, with nice improvement in next-gen mobility (automotive and aerospace) and continued strong performance in EV battery space.

Rachael Lee from Citi asked for a deeper dive into the achieved $400 million in cost savings, the potential for more, and the expectations for working capital in the second half of the year.

Answer

CFO Neal Sheorey and CEO Kent Masters detailed that savings came from headcount/SG&A and manufacturing productivity. While not committing to a new target, they affirmed the focus on cost-out continues, with future efforts targeting supply chain and back-office processes. Sheorey expects working capital to be a source of cash in the second half due to seasonality and lower prices.

Rachael Lee, on for Patrick Cunningham, requested details on the specific areas of share wins in HHC in Europe and recent volume performance there. She also asked about potential volume risks in the Building Adhesive Solutions (BAS) segment, considering tariff pressures and market headlines.

Answer

President and CEO Celeste Mastin detailed broad-based share wins across HHC in Europe, including in hygiene, beverage labeling with a new anti-mold product, and packaging. For the BAS segment, she expressed strong confidence, stating the business is well-positioned in growing U.S. construction markets like data centers, healthcare, and education. She highlighted key innovations, such as a new non-fluorinated spray adhesive and a product for data center floors, as drivers of growth and evidence of successful synergies within the segment.