Cost Savings for FY '25
Q: What are the expected cost tailwinds for fiscal '25?
A: Patrick Watson noted they aim to reach a run rate of $35 million in cost savings by the end of the fiscal year. - They achieved $5 million in savings in Q2 and expect further upticks in Q3 and Q4, totaling about $4 million more. - These savings from the restructuring program will carry over into fiscal '25. -

Operating Margin Guidance
Q: How will operating margins improve in Q4 versus Q3?
A: The company expects a significant margin improvement in Q4 due to positive shifts in price/raw material timing, especially in Infrastructure. - They anticipate exiting the year with an operating margin of around 9.5% in Infrastructure, compared to a modest improvement from Q2 to Q3. - - Additionally, Q4 is typically the strongest quarter for Infrastructure, with a notable volume uptick. -

Inventory and Working Capital Management
Q: Why isn't weaker volume leading to lower working capital?
A: Patrick Watson explained that while they have initiatives to reduce working capital and inventory, the elongated supply chain delays adjustments. - The softening seen in December requires time to align inventory with expected demand, causing a temporary pause in inventory reduction. - However, this doesn't deter their long-term objective to improve net working capital. -

Aerospace Growth Outlook
Q: Is the lower growth in Aerospace temporary or structural?
A: Christopher Rossi believes the risk is temporary due to supply chain constraints affecting OEM production levels, which are still below pre-pandemic levels. - He views the current quality issues as short-term and is confident in their ability to gain market share by adding new customers, including Tier 1 to Tier 3 suppliers. -

Pricing Power and Competitiveness
Q: How does your pricing compare to competitors?
A: The company strives to price for value and believes it is competitively positioned. - Over the past few years, competitors have made similar price increases. - They focus on value rather than competing solely on price, especially in the Metal Cutting segment. -

Inventory Actions Amid Soft Markets
Q: Will you reduce production due to softer markets?
A: They plan to constrain production in the back half of the year, resulting in some under absorption. - This is factored into their outlook, aiming to keep inventory levels flat as they move through the rest of the fiscal year. -

Order Trends in December and January
Q: How did order patterns in January compare to December?
A: The lower order pattern observed in December continued into January without much change. - - The decline leveled off sequentially, serving as an indicator for their reassessed second-half outlook. - -

Market Share Gains Amid Flat Sales
Q: How are you gaining share despite flat top-line growth?
A: Christopher Rossi cited improvements due to simplification, modernization, and innovation efforts. - They have gained share in Aerospace, growing faster than market changes. - However, market headwinds can mask these gains, with volumes still down about 15% from 2019 levels. -

Capital Allocation Strategy
Q: Why prioritize share buybacks over M&A or cost cuts?
A: The company believes their capital allocation strategy is appropriate. - They are pursuing a $100 million cost reduction project without being limited by cash. - While looking for growth opportunities within their core competencies, they also focus on improving cash flow and support share repurchases as appropriate. -

Cyclical Outlook and Recovery Expectations
Q: How does the current cycle compare to past downturns?
A: The current mild downturn is different, with a gradual volume decline rather than a steep drop. - The decline has been extended due to supply chain backlogs. - They anticipate industrial production to improve in the second half of calendar year '24, potentially leading to a slow improvement or a snapback. -

Bridging FY '24 Guidance to FY '23
Q: What's impacting the EPS guidance from '23 to '24?
A: Factors include price realization offsetting inflation, raw material headwinds turning positive, and expected restructuring savings of $20 million to $25 million. - Unfavorable volumes and some decrementals from managing production and inventory are also considered. -

Regional Demand Trends
Q: Which regions are showing demand changes?
A: Most of the slowdown was in the Americas. - China did not recover as expected and is likely to struggle through the rest of the year. - EMEA performed as anticipated but might take longer to improve. -

Future Demand Indicators
Q: Do improving PMIs signal future demand pickup?
A: The leveling of orders in January and some uptick in forecasts are encouraging. - Industrial companies project slower first-half growth in calendar year '24 with expectations for increased business in the second half. -

Impact of Road Milling Price Sensitivity
Q: Are you seeing negative pricing in Earthworks?
A: In the U.S. road milling segment, they are holding prices but observing increased price sensitivity. - This is driven by customers wanting to lock in projects amid budget concerns, affecting pricing dynamics more than expected. -

Inventory Destocking vs. Weak Demand
Q: Is weak outlook due to destocking or end markets?
A: Christopher Rossi believes it's more due to economic uncertainty rather than destocking. - Distributors hadn't significantly restocked previously, so current reductions are not major destocking events. - In Infrastructure, particularly oil and gas, inventories are being worked down with expectations of continued slow business in North America. -