Mettler-Toledo International Inc (MTD) 2016 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to our second quarter 2016 Mettler-Toledo International earnings conference call. My name is Nicole, and I will be your audio coordinator for today. All lines have been placed on mute to prevent any background noise, after the speakers remarks there will be a question and answer session. (Operator Instructions). I would now like to turn our presentation over to your hostess for today's call, Ms. Mary Finnegan. Please proceed ma'am.

Thanks Nicole, and good afternoon everyone. I am Mary Finnegan, I am the Treasurer, and I am responsible for Investor Relations at Mettler-Toledo. I am happy that you are joining us this evening. I am joined by Olivier Filliol, our CEO, and Bill Donnelly, our Executive Vice President. I need to cover just a couple of administrative matters, the call is being webcast, and is available for replay on our website. A copy of the press release and the presentation that we refer to on today's call is also available on our website.

Let me summarize the Safe Harbor language, which we have on page two of the presentation. Statements in this presentation that are not historical facts constitute forward-looking statements within the meaning of the US Securities Act of 1933, and the US Security and Exchange Act of 1934. These statements involve, risks and uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. For a discussion of these risks and uncertainties, please see our recent Form 8-K.

All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the caption, Factors affecting our future operating results, and in the business and MD&A of our financial condition and results of operations, in our Form 10-K. One last thing, on today's call we may use non-GAAP financial measures. For detailed information with respect to the differences between the non-GAAP financial measure and the most directly comparable GAAP measure, is provided in the Form 8-K. I will now turn the call over to Olivier.

Thank you Mary. Welcome to everyone on the call. I will start with a summary of the quarter, and then Bill will provide details on our financial results and guidance. I will then have some additional comments before we open the lines for Q&A. The highlights of the quarter are on page three of the presentation. Local currency sales was 6% in the quarter, and better than we expected. We continue to generate very solid growth in the Americas. Asia, rest of the world including China had very good growth. Europe growth was solid. With the benefit of our margin and cost initiatives, we have good growth in margins which contributed to excellent growth in earnings per share. Cash flow was also strong in the quarter. We are very happy with our performance, as well our outlook for the remainder of the year.

We will cover this shortly, but let me now turn it to Bill to cover the numbers.

Thank Olivier. Hello everybody. Sales were $608.3 million in the quarter. That's an increase of 6% in local currency on a US dollar basis, sales increased by 5% as currency reduced sales by about 1% in the quarter. On slide number four, we show local currency sales growth for the quarter. Sales grew by 6% in the Americas, 4% in Europe, and 8% in Asia/Rest of World. On the next slide, we show local currency sales growth of 5%. On a year-to-date basis, that includes the Americas at 6%, Europe at 2%, and Asia/Rest of World has increased 6% in the first half. Starting on page slide number six, we'll outline sales by product area. Laboratory had very good growth with local currency sales of 10%. Industrial increased by 3%, and food retailing declined by 2%. All of these comparisons are of course to the prior year. On the next slide, you'll see our year-to-date sales summary by product line. Lab has grown 7% in the first half, industrial 3% and food retailing increased by 1%. Now I would like to turn to slide number eight, and walk through the rest of the P&L. Our gross margins were 57.1%, that's a 160 basis point improvement over the prior year amount of 55.5%. We are very happy with this strong performance in the quarter. On a year-to-date basis, our gross margins have increased in line with the expectations we had with our expansion for the full year. Pricing, material costs and mix all contributed to the increase in the quarter, and was partly offset by some additional target investments in our service business. Currency had no impact on gross margins in the quarter. R&D amounted to $30.7 million in the quarter, and that's a 5% increase in local currency. SG&A was $187.8 million, that is a 9% increase in local currency over the prior year. Investment in our Field Turbo program and higher variable comps were offset in part by cost saving initiatives. Adjusted operating income was $129.1 million in the quarter. That is a 9% increase over the prior year amount of $118.3 million. Currency reduced operating profit by approximately $800,000 in the quarter. Adjusted operating profit margins were 21.2%, a 90 basis point increase over the prior year, and of course a level at which we're pleased with. A couple of final comments on the P&L, amortization was $8.7 million in the quarter, while interest expense was $6.9 million. Our effective tax rate was 24%. You will notice our reported tax rate was lower at 22.9% which is due to the tax impact of the one-time pension charge, which I will cover in a minute. Fully diluted shares for the quarter were 27.1 million, which is a 4.6% decline from the prior year amount and reflects the impact of our share repurchase program. Adjusted earnings per share was $3.22 per share. That's a 15% increase over the prior year amount of $2.80 per share. On a reported basis, earnings per share were $2.93 per share, as compared to $2.73 per share. As we mentioned on our last call, during the quarter, we took a one-time non cash pension settlement charge of $8 million before tax, or $0.19 per share after tax. This relates to offering former employees of our US plan a lump sum payout. The plan that we're talking about is frozen, and the timing was advantageous to cash out the vested portion for these former employees. There is no cash flow impact to the Company as we used pension plan assets to fund the payments. Reported EPS also includes $0.04 of purchased intangible amortization, and $0.06 of restructuring charges. The next slide shows the P&L for the first half of the year. We had local currency sales growth of 5%, operating income increased by 7%, and adjusted earnings per share increased by 12%. Absent currencies growth for the first half of the year would have been 14%. Now turning to cash flow in the quarter, free cash flow was $108.9 million which compares to $89.9 million in the prior year. We're pleased with our working capital management and achieved further improvements in DSO, which was reduced by two days to 38 days, as compared to the prior year. ITO was 4.6. Cash flow for the six months was $138 million, as compared to $131.3 million in the prior year. In the third quarter, we expect to complete the acquisition of substantially all of the assets of the business called Troemner, which is focused in two areas, weights and weight calibration, as well as the manufacturing of basic lab equipment. We paid approximately 10 times EBITDA for the business, and it should add about 1% to sales on a full-year basis. It is a unique, strategic fit with our business, and we're very happy to be able to close the business shortly. Olivier will provide some additional background on Troemner shortly. Now let's turn to guidance. We're raising our full year local currency sales guidance to approximately 5% versus 4% previously. We estimate that Troemner will contribute about 50 basis points of sales growth for the half year, so for 2016. Or to say it differently, we raised our organic growth expectations for the full year by 50 basis points to approximately 4.5%. We've also raised our EPS guidance, and now expect adjusted EPS to be in the range of $14.40 per share to $14.50 per share, which represents a growth rate of 11% to 12%. This compares to previously guidance of 10% to 11% EPS growth, or $14.25 per share to $14.35 per share. We're raising the midpoint of our guidance by $0.15 to reflect our strong performance, as well as the acquisition of Troemner. With respect to the third quarter, we expect local currency sales growth between 5% and 6%. This includes about 75 basis points of growth from Troemner. We assume adjusted EPS will be in the range of $3.65 per share to $3.70 per share, which is a growth rate of 12% to 13%. In terms of currency, let me first comment on sales growth. We would expect currencies to reduce sales growth by approximately 2% in the third quarter, and 2% for the full year. In terms of the impact of currency on EPS, we do not expect it to have a meaningful impact on Q3, or for the full year. That's it from my side, and I now want to turn it back to Olivier.

Thanks Bill. Let me start with summary comments on business conditions. Lab had very good growth in the quarter with 10% increasing. Pipettes and Analytical instruments and process analytics had excellent growth, with balances, and AutoChem also had good growth. Growth was strong across all regions and reflects our robust product pipeline, benefit of Field Turbo investments and continued strong sales and marketing programs. Spending by our biopharma customers continues to be very favorable. Industrial increased 3% in the quarter, driven by a 6% increase in core industrial. Growth in core industrial was particularly strong in the Americas, which benefited from some project activity in transportation and logistics. We also had growth in core industrial in Europe and Asia, including China. Product Inspection was down slightly in the quarter. This business continues to perform well, but was impacted by timing of some activity, and a strong comparison from the prior year. Product inspection had strong order growth in the quarter, and we expect good sales growth in Q3. Finally, sales declined 2% in retail. This was pretty much as expected. We had growth in Europe and Asia. But decline in the Americas against good growth in the prior year. Now let me make some additional comments about geography. Sales growth in the Americas continues to be solid with 6% growth. We had very good growth in lab and industrial while sales declined in retail. Demand continues to be solid in the Americas, but tougher comps will impact the second half. Europe grew 4% in the quarter. An improvement over the first quarter which we think was in part due to timing of Easter holiday. Lab had excellent growth in Europe, while core industrial and retail also grew. Product inspection was down which was improved in the quarter. Asia, Rest of World had growth of 8% in the quarter. China did very well, and better than we expected as compared to the last time we spoke. Lab growth in China was double digits with almost all product lines showing very good growth. We are pleased with performance which reflects some improving demand, and also the benefit of our actions to redirect resources to fast growing market segments. While industrial in China had modest growth, the fact is that the overcapacity in the industrial manufacturing sector remains. We're also pleased with our results in China, we expect growth in the second half to be in the mid-single digit range. Let me make some comments on Service, which grew 5% in the quarter and on a year-to-date basis. Service represents about 23% of total sales, and it is a key competitive advantage, and an important source of revenue growth. This is the fifth year in a row which service growth is outpacing product growth. Although this might not occur each and every quarter, over the medium term, we expect service growth to exceed product growth. We have a service force of approximately 2,600 personnel, which is by far larger than our direct competitor. Our service team is specialized by product area, and we have made significant investments including training and tools, which supports the daily activity. Core to our service growth strategy is increasing the percentage of our installed base under service contract, and increasing the amount of service sold at a point of product sale. The long-term objective is to change the mix of our service business to be largely contract based versus very fixed. Today contracts we present approximately one-third of our service sales. There are several reasons why this migration is a strategic imperative, including the increasing quality our products, reducing the need for repair, and on the other hand, contract work is more easily planned. Therefore our technicians can be more productive, and finally our studies show that service contracts leads to higher levels of customer satisfaction. And therefore retention oriented. The globalization and harmonization of our service offering which we undertook several years ago, led the ground work to drive the contract business. Our marketing campaigns under the Spinnaker initiative, and our Field Turbo investments are helping to drive this change. Overall, we continue to make very good progress. We believe service is one of our most important competitive advantages, and continues to be an important source of sales and profit growth. Those are all of my comments on business trends.

I now want to provide some context to our acquisition of Troemner. Located in the Philadelphia area, Troemner is the us market leader for weights and weight calibration. And a great strategic fit to our leadership position in Europe. Together we are now the global leader in this niche market. Weights and weight calibration services is an attractive market. It has strong barriers to entry as it requires very specialized know-how and expertise. We have 14 calibration labs worldwide, and the acquisition of Troemner firmly positions us as the US market leader. Troemner is a very strong brand in US based on its world-class metrology competence, and solid infrastructure. Service, which consists primarily of weight calibration is almost 20% of Troemner's business and growing quite well. This is an attractive business as customers must calibrate weights on a regular basis, and one of the very few players to have the expertise to do it correctly. This is a good example of the kind of service business that fits well into our global, and our goal of moving our service business to more contract value-added service. Troemner is also a provider of basic lab products, such as [inaudible], mixers and shakers, which will be a good strategic fit to our Ohaus offering. As a reminder, Ohaus is our second brand used for indirect distribution for laboratory products, and certain industrial weighing products. Troemner will help us strengthen the line side portfolio for Ohaus, which we have worked to expand over the last few years in terms of channel presence and product portfolio. We also believe we can further extend this equipment offering internationally. Particularly in emerging markets. We think this is a great opportunity to extend the offering of Ohaus. Troemner should add about 1% to sales growth with similar margins to our own. We anticipate synergy potential from top-line growth, as well as potential in operational synergies. We expect to complete the acquisition shortly, and have already begun integration plans. We believe this is a solid strategic acquisition, and are excited about the potential development in this attractive market segment. That concludes our prepared remarks. We have kept our comments brief, as we will see many of you tomorrow at our Investor meeting. Let me make some summary comments before opening it up for questions. We are very pleased with strong results in the second quarter. Our outlook for the remainder of the year is good, but we acknowledge the uncertainty in the global economy. Our focus remains on factors we can control, namely successful execution of our initiatives. We feel very good about our new product launches, Field Turbo investment, Spinnaker marketing initiatives, and productivity measures. We believe with continued strong execution we can continue to gain share. I want now to ask the operator to open the line for questions.

(Operator Instructions). We will pause to compile the roster. Your first question comes from the line of Derek de Bruin from Bank of America Merrill Lynch. Your line is open.

Hi. This is actually [Mike Riskin] on the line for Derek. Congratulations on the strong quarter and the Troemner acquisition. A couple of quick questions. The strength in the lab was a little bit better than we expected obviously. It was coming off a little bit off weaker comps prior year. But is that something that was strongly affected by that, or is this something you're seeing operationally?And how do you feel about your ability to carry that double-digit growth going forward?

So you're right. It was a modestly easier comp so in Q1 of 2015, we grew by about 8%, and in Q2 of 2015, we grew by 5%. Last quarter, we grew 5% on the 8%, so about 13% two-year growth. The 10% would imply 15% two-year growth, and a slight therefore acceleration in the two-year growth. If we look out to next quarter, the comp will be 7%, so I think our view is that lab will grow well. The two-year growth rate will continue to be in a similar kind of range to what we had on a year-to-date basis. And specifically in terms of end markets, as Olivier mentioned, biopharma spending is good. It should continue to be good but comp is the matter of it.

So you are not seeing a substantial difference in the two year run rate there?

Not substantial. I think it could probably be explained by a larger order here and there.

Okay. That's helpful. And in terms of the gross margins, similar question, you mentioned that it was mostly flat in Q1, but you had the strong 160 basis point improvement this quarter. Was it mostly making up for some weakness you had in Q1?You mentioned pricing material costs. The 50 basis improvements going forward. Is that still in play for future quarters?

Yes, so we're at I think plus-80 on a year-to-date basis. And that might be a little bit more than we would expect in Q3 and Q4, but still something roughly north of the 50 basis points in Q3 and Q4. As we mentioned, on the last call, we really just had a very tough comp vis-a-vis Q1 a year ago on our growth profit margin. It was by far the biggest year end increase we had all year, and so I think things kind of worked themselves out on a year-to-date basis, in terms of [inaudible], so we feel that the gross profit margin expansion that you guys have gotten used to should continue now in the second half.

All right. Thanks. I will get back in the queue.

Your next question comes from the line of Paul Knight from Janney Montgomery. Your line is open.

Hi guys, this is actually Bill [March] on behalf of Paul. I just have one question. You were kind of highlighting services and product. If you could maybe just by either segment or by geography, where are you seeing strength for each of those, if there are any anomalies in terms of growth or demand? Thanks.

If I take it by geography, actually I was happy with the performance across the geographies, but what I would highlight as particularly nice, is that we in Asia, things are going very nicely. China had actually good growth for multiple quarters, and in the product range we are sometimes challenged, but it is growing. That's a good reflection that our initiatives have actually real impact that we can drive that growth.

I highlight the vertical market in Asia. Our penetration and attachment rates of service is higher in mature markets. I see us catching up in emerging markets in time. If we talk about business segments, in particular with [inaudible] product inspection, wear, service is growing very nicely over the last couple of quarters, in terms of profitability but also strategic benefits. This in particularly important for us as service is increasingly a different place across all of the businesses. That's product actually in particular. [ inaudible ]. But that's probably the flavor that I would give of my critical.

Great. Thank you.

Your next question comes from the line of Ross Muken, Evercore. Your line is open.

Hi, this is Elizabeth Anderson in for Ross, who is on his way out to see you guys. Congratulations on a good quarter. I just wanted to ask a little bit more about your services investments that you have been making, and how that is impacting the sales line, in terms of how do you think about the payback for those investments, and how does that show you evidence of confidence in the revenue line trajectory?Thanks.

So we use the term [inaudible] that we have found on weights, in field additions have been very project-oriented in the sense that we really drilled down on the different territories of that business line, where we see additional opportunities with good paybacks. What we do is we monitor actually the progress of these, so we monitor, one has the implementation of this, recruiting, successfully onboarding, building up the pipeline in [inaudible]. We do kind of quarterly dashboard, then when it comes to the financial results, of course it is a little more difficult to isolate. We have also a dashboard behind that where we look at successfully outgrowing a versatile average where we added resources and there is very nice correlation where we accelerate that growth. So I really feel good about it. Definitely I continue to reflect the results we will talk about services. Services are where we did targeted additions of seeing it for sales of services. We use for tele sales who dedicate salesmen to service and we get good results there.

Great. One quick follow-up. Do you have any worries about any industrial softness or purchasing delays then in Europe post-Brexit? Thanks.

Not really. I think actually overall, the industrial business is not a super end market, but I don't see things get worse at all. They could very gradually things get better. And in Europe, overall, I expect the next few quarters will be reasonably good. The whole Brexit effect, I am not saying it is positive, but it is also not particularly negative. With one exception, theUK itself. Put we need to put this in perspective, the UK is about 3% of our total revenue. UK had already a certain softness before Brexit, I would associate some of the softness with the uncertainty. Certainly after vote, it went even further, we will expect some further softness in UK.

Okay. That was super helpful. Thank you very much.

Your next question comes from the line of Isaac Ro from Goldman Sachs. Your line is open.

Hey guys, thank you. Just the first question on regional performance. On Europe, you mentioned the 4% growth that was helped by Easter. If you back that out, just wondering if there was another effect there in terms of market share or something else that would have allowed you to grow faster than the actual market?

Hey, I think it's sometimes difficult to point specifically to market share gains. I think if we look in our lab and particularly within one quarter, Isaac but if we look at how we're performing in lab and product inspection, I would say those are two categories we would view ourselves doing very well competitively, and very well specifically in Europe. As a reminder, Europe is the place where we have the largest percentage of direct sales, and so many of our Spinnaker initiatives are often most fruitful there.

Got it. And then on the acquisition, I was just trying to put together some of the numbers you gave us. I think you mentioned 50 basis points contribution in the back half. Curious if you can give us a little sense of that number, what it assumes, in terms of timing of deal close in the third quarter, just so we get a sense of the annualized impact?And then as part of that, just wondering, I don't think you mentioned how the revenues will be allocated between lab and industrial?I apologize if I missed that.

A couple of comments, so on an annualized basis, it will add about 1% to sales. And then we're assuming it is going to close in the next couple of weeks. It is at 1% on an annualized basis. If we are off by a week or two, I think that won't make a material difference. And then the nature of the business would be that the vast majority of it will be inside the lab business.

Got it. Thanks very much. Sorry to miss the event.

Your next question comes from the line of Dan Arias from Citi. Your line is open.

Hi guys, this is actually Brian Kipp on behalf of Dan. Just wanted to take a step back, just given the macro shifts that we saw in terms of Brexit in the last few weeks. Can I get an update on your view of how you guys think of the structure of your business?I remember last year when we moved the peg with Swiss franc, conversations were being had as to whether or not you guys would shift some of your costs to euro dollars versus Swiss francs. I wanted to get an update on that in light of the Brexit news, whether anything has fundamentally changed or not?

Regarding Switzerland, no. Currencies actually didn't move particular that it would make a difference. The Swiss measures is something we initiated with a multi year plan, and we are progressing very well on that plan. I am very happy with the progress that we're making. The currency move that took place is impacting our producing organization in the UK. As you might know, for the product inspection, we have the metal detection and the X-ray production there. This is in essence favorable for us, but will not change something to our global manufacturing strategy, or our footprint. So I don't see that this will impact our strategy in any significant way.

Okay. No fundamental change to your hedging strategies either?

In terms of hedging, no.

Okay. I guess another one for me is the incremental margin in Q2, I have it a little bit north of 30%, kind of in line with what we've seen over the past few years. Maybe a little higher Q-o-Q. Just surprised given the 6% organic. I know you have prioritized some investments so that would be net dilutive, but I want to get a sense of how you guys look at incremental margins going forward, especially in the context of a 3% to 4% growth, and north and south of that where you think it can go on the incremental basis?

So maybe a little bit of clarification in terms of the incremental margin, I think at least the way we calculated it is 31% measured in actual dollars, but it is actually about 34% to 35% in constant currency, so probably close to maybe what you expected. Then what was included in there was we did have to catch up, I made a reference to a payment in terms of our SG&A increase. So we did trigger some re-evaluation of where we expected to finish the end of year, vis-a-vis bonus targets. Maybe the last point would be along the lines of talking about for a while is that we do like the effectiveness to date of the Field Turbo program. So there's certainly some up-front investment with regard to our Turbo program in the quarter, and you'll see a little bit of that going forward. In terms of our incremental margins, I continue to think that numbers in mid, high 30s are very realistic, and frankly, absent the judgment and the comp in the current quarter, which won't impact full-year numbers in a material way, we would have been there this quarter.

Okay. Can I sneak one last one in on China industrial. You guys were relatively tepid to start the year, it improved in Q1 in the sense of your outlook. It seems like it has modestly improved in the second quarter as well. Is that accurate, one, and two?Do you expect it to be relatively steady here, or do you think there is a few one-offs here and there that might provide some momentum into the close of the year?

So if I look at China in total, I think the second quarter was marginally better than the first. That was largely driven by our lab business and in particular, process analytics in the lab business. If we look at kind of where we are, we would expect a positive second half of the year, particularly vis-a-vis where our expectations were when we started the year, but probably a little less than what you saw in the most recent quarter. I thinkwe grew our lab business in China by close to 20% in the second quarter. And I think we don't expect that kind of growth, a little bit large order driven. Particularly in the third quarter, we're probably sitting here today we would estimate that maybe the fourth quarter would be better. It is probably a little too early to predict right now.

All right. I appreciate all of the color, guys. Congratulations on the quarter.

Thank you.

Your next question comes from the line of Tycho Peterson from JPMorgan. Your line is open.

Actually, Bill, following up on the China question a minute ago. Did you give the exact growth number for China?I may have missed it. Are you expecting low single digit, mid single digit for the full year?

Yes, I think at this stage, mid single digit would be a pretty good guess. Specifically in the second quarter. We were at 9.5%, 10%. And about 20% on the labs.

And then product inspection, that's been a bit of a drag for a while, I think you previously mentioned you were expecting around high single digits for the year. Can you talk about some of the dynamics, what caused it to climb this quarter, and when do you think things will turn there?

Maybe just to clarify at least for us, we're thinking this is the first comp from a sales reported number, the first weak number that's been pretty consistent. It was 7% in the first quarter. 6% last year. It's totally in backlog sales, actually the order entry in the quarter was high single digits. And we were looking for a return to high single digit or better in the third quarter. In the details of the why, if you kind of look at what happened in our product mix, you know it is one of the longer lead time products that we have in the portfolio. And just the mix changed a bit in the quarter, where there were a lot more within that engineer to order, which is even an extra couple of weeks. So we're very happy with how that business performed in terms of execution, and continue to think that the market dynamics are good in that business cycle.

Okay then just lastly, what are you baking in the back half for core industrial out of Europe?Are you assuming things improve from here?

Let me double check the details. So maybe in the second half of the year, we think we'll have some growth. I am double checking to see if there are any large P&L orders or something in the second half of last year, but I don't think so. So some modest single digit growth.

Okay. Thank you.

Your next question comes from the line of Steve Willoughby, Cleveland Research. Your line is open.

Hi guys, good evening. Just two things. Bill, the EPS guidance increase that you guys did, is there any, are you guys expecting any accretion in the back half of the year from the acquisition you've done here?And then I guess secondly, it is not every day that you guys do a lot of M&A, so I was just wondering if there was any future opportunities down the road for further consolidation in a smaller lab manufacturers such as [Fisk]?

I will take the first part of the question but let Olivier start with the second part of your question.

So let me, so this is a case that fits perfectly now with franchise. From a size perspective, it is really core to us. IT is opportunities around. Yes, we definitely go for them. We have a radar of possible targets. There are more, such companies. You can't really time when they become available. Often there are topics. There are succession topics and so on. So we really pursue them, and whenever they materialize, we are more than happy to close them. We are looking at smaller ones too. You shouldn't look that as a new strategy we're pursuing that we are instituting. Yes, we did a couple of technology adjacencies, and this time we had a great opportunity to acquire actually a service business, and if that pops up again, we will do so.

And with regard to it should add a couple of pennies, maybe up to a nickel in a best-case scenario. And that would include us making some investment in terms of different things on the growth side, for example, in terms of some international distribution of a product. Steve, do you have any other questions?

No. That is good. Thanks guys.

Your next question comes from the line of Richard Eastman from Robert W. Baird. Your line is open.

Just a couple of follow-ups on the Troemner acquisition. Olivier, did they compete with you, or does this kind of fill a regional hole in your service capabilities?Is that part of the fit here?

We did compete, but while in Europe, we are market leader, in US Troemner was the market leader. We had a relatively small weights and weight calibration business in US. So it perfectly fits in our franchise.

I see.

Troemner has a fantastic brand and competence in the US, that they have built up over decades that always made it difficult for Mettler-Toledo to compete. As in Europe, we have been the leader. It was basically for Troemner to establish a presence in Europe.

I see. Did their route to market for their mixers and stirrers, and some of the basic lab equipment, did that go through Ohaus, or how did they get to market with those products?

They used all of the indirect channels, but Ohaus was not a partner of them. And they have multiple brands that they are also leveraging at this current stage. And we are going to maintain that. In addition we want to leverage the Ohaus brand, or the Ohaus franchise to expand in particular in international markets, where Troemner wasn't particularly strong with their lab equipment business.

I see. Okay. And then Bill, just a question, we took up 2016's core growth guide from 4% previously to now more like 5%. Did you suggest earlier that 50 basis points of that increase was due to Troemner?

Correct. Raised the pure organic number by 50 bips.

Okay. Despite the strength you're seeing out of Asia-PAC, and even the reacceleration maybe in Europe, I mean is that a high confidence forecast that that's all that would contribute in the second half?I would think that geographically, Asia-PAC seems to be driving more upside than that?

I understand the comment. If you, I think the comment that we've been making now the last couple of quarters, Rick, is that given overcapacity, as well as let's call it credit risk in the Chinese market, that it's worth putting a little bit of a discount on that piece of it. That would be kind of number one. And number two would be in the details now, and I am not counting a lot of basis points, but that we see some tougher comps in a couple of different areas. So if you look at our year-to-date number, we're plus-5% and we're saying by the end of the year, we should finish at 4.5% at the midpoint of the range, and I guess closer to 5% at the high end of the range. So let's see how China and some of these comps play out. Biopharma has been a strong market for a while. I would like to think that there is upside to the numbers, but we'll see as the quarter and the second half plays out.

Okay. That's great. And then just one last question maybe for Olivier. The lab strength in China, is that somewhat traditional relative to the other geographies?In other words, is that coming out of the biopharma vertical, or are we seeing more uptake there in other labs, environmental or food and beverage?Or does the strength there by vertical match up with US or Europe?

I would say yes to both what you said. Yes that generally the lab is doing well, but I would also say yes, that the life science and biopharma is particularly strong in China.

It is. Okay. Great. Thank you much.

Your next question comes from the line of Brandon Couillard from Jefferies. Your line is open.

Thanks. Good afternoon. Bill, circling back on China. Just give us an update on how, what the current or latest KPI readings, how they're faring in China in general?If you could give us the order growth rate in the period?

So hey, maybe on the economic stuff, I am not sure if we're a better source than kind of what you guys read. It is a bit of, a lot of economic data globally. It is a bit of a mixed picture. Maybe one interesting insight we might give you is that I know there's been some articles that some of the GDP growth has come from leveraging up further some of this data on enterprises and regional governments. It was interesting for us to see when we sorted through the details of our numbers, that we saw really good growth of course in the government sector when it came to labs, but we also saw across the board very good growth with multi-nationalism.

And that's an interesting comment in the sense that if you look over the last three years, the percentage of our total sales in China going to multi-nationals has shrunk, but now we see a nice rebound in the first half of the year across product categories, and I think that's this famous comment we talked about of, for a multinational company, they can defer the replacement cycle for a while on our products, but eventually it bounces back. I think we see that a little bit there. Probably a little less on the project side, but much more of this return to the normal replacement cycle.

In terms of the order entry, order entry was similarly positive to what we saw on the sales side. It was a solid number. It is not that purely the order entry would make us cautious about the second half. It is just the realities of that is still a market with instability in it. I think us remaining cautious makes sense, but I actually felt what we shared with you about multi-nationals was one of the more positive readings that we had in our data coming out of China.

That is helpful. Two other quick stats. Could you give us the net ASP in the second quarter, how you feeling about the second half?And then should we assume the tax rate is still 24% in the second half?

Sure. So in terms of our price increases, our net realized price increases were 230 basis points up in the second quarter, and on a year-to-date basis, they're now up at 2%. We did go and look just to put that in a little bit of context, some of that was us chasing some of the currency movements that kind of happened in the course of the earlier part of the end of the first quarter, early part of the second quarter. And so we are trying to do something in terms of mid-year prices. I would not expect the second half of the year to be worse than 2 at this point in time.

Super. Thank you.

(Operator Instructions).

Hey Brandon, tax rate we expect at 24%. I realized I forgot to answer that part of your question.

There are no further questions at this time. I turn the call back over to Mary Finnegan.

Thanks Nicole. Thanks everyone for joining us tonight. Hey as always, if you guys have any questions or any follow-ups, please don't hesitate to contact us. Take care. Have a nice night.

This concludes today's conference. You may now disconnect.