nVent Electric PLC (NVT) 2019 Q2 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning.

  • My name is Jason, and I will be your conference operator today.

  • At this time, I would like to welcome everyone to the nVent Second Quarter Earnings Conference Call.

  • (Operator Instructions) Thank you.

  • J.C. Weigelt, Vice President, Investor Relations, you may begin your call.

  • J. C. Weigelt - VP of IR

  • Thank you, Jason, and welcome, everyone, to nVent's Second Quarter 2019 Earnings Call.

  • We're glad you could join us.

  • I'm J.C. Weigelt, Vice President of Investor Relations, and with me today are Beth Wozniak, our Chief Executive Officer; and Stacy McMahan, our Chief Financial Officer.

  • On today's call, we'll provide details on our second quarter performance as well as our third quarter and full year 2019 outlook.

  • Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent's filings with the Securities and Exchange Commission.

  • Forward-looking statements included here are made as of today and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.

  • Actual results could differ materially from anticipated results.

  • Today's webcast is accompanied by a presentation, which can be found on the Investors section of nVent's website.

  • References to non-GAAP financials are reconciled in the appendix of the presentation.

  • We'll have time for questions after our prepared remarks.

  • And now, I will turn the call over to Beth.

  • Beth A. Wozniak - CEO & Director

  • Thank you, J.C. Good morning, and thank you for joining us.

  • I want to begin with a brief overview of our second quarter performance before turning the call over to Stacy to review the details and provide third quarter and updated full year guidance.

  • I'll then provide some commentary about our press release we issued earlier in the week, regarding our agreement to purchase Eldon and why we see this as a great strategic fit for nVent.

  • Beginning on Slide 3, sales for the quarter were $540 million, growing 1% organically.

  • Growth was driven by Enclosures and EFS, both up 3% as well as positive momentum from our strategic growth initiatives.

  • However, these were somewhat offset by sales declines within Thermal Management.

  • Return on sales declined 30 basis points to 19.4%, driven by volume and mix headwinds within Thermal Management.

  • Adjusted EPS was within our guidance range at $0.44 per share.

  • We are executing on our capital allocation strategy to generate long-term value for our shareholders.

  • This includes investing in organic growth, looking for a strategic bolt-on acquisitions such as the recently announced Eldon acquisition and creating value through shareholder distributions such as paying a competitive dividend and repurchasing shares.

  • We repurchased approximately $153 million in shares during the quarter, which brings repurchases through the end of the second quarter to $233 million, representing approximately 5% of our shares outstanding.

  • Overall, we delivered another quarter of solid organic sales growth in both Enclosures and EFS.

  • We continue to make progress with our One nVent strategy, improving our new product vitality, strengthening our digital capabilities and growing in focused verticals.

  • Our Thermal Management segment was challenged by declines in our high-margin commercial vertical and continued delays in longer cycle energy which we will discuss in further detail.

  • I also want to take a moment to speak about the broader verticals where we compete.

  • From what we're seeing and hearing, demand has softened relative to the last time we spoke in April, particularly, within the industrial vertical.

  • We have seen more manufacturing output decelerate, softness in global markets and leading sentiment indicators continue to weaken.

  • Earlier this year, we pegged growth within the global industrial vertical to be approximately 3%.

  • The indicators we follow now point to a flat to modest decline in the back half of the year.

  • The commercial vertical saw second quarter demand similar to the first quarter.

  • Energy saw a slight increase in demand with good signals out of mid to downstream.

  • Infrastructure continue to be strong, particularly in data centers and networking solutions, which is an area where our team has made great strides, moving beyond just selling Enclosures to selling complete solutions by incorporating Thermal Management and EFS products.

  • This initiative grew strong double-digit across nVent, with strong demand for our data center liquid cooling products and our in row and rear door offerings.

  • This is a great example of our One nVent strategy paying off.

  • We have taken all these macro trends into account when formulating our guidance, and we continue to look at actions to align our cost structure to this revised outlook, while executing on our strategic growth initiatives.

  • Turning to Slide 4, titled our One nVent strategy.

  • We remain committed to our strategy, and continue to see positive trends in key verticals in our One nVent approach.

  • Our new product vitality score continues to increase to mid-teens with innovative launches such as our ELEXANT family of controllers and high-density liquid cooling Enclosures.

  • We've announced the acquisition of Eldon, which will accelerate growth by expanding our global reach and enhancing our capabilities to service customers with advanced and flexible solution.

  • I will now turn the call over to Stacy to provide detail on our second quarter performance and provide third quarter and full year updated guidance.

  • Stacy, please go ahead.

  • Stacy Powell McMahan - Executive VP & CFO

  • Thank you, Beth.

  • I will begin on Slide 5 titled Second Quarter 2019 nVent Performance.

  • Organic sales grew 1% with solid growth from Enclosures and EFS, while Thermal Management saw continued declines within longer cycle energy and weakness in commercial.

  • Our strategic growth initiatives grew organic sales high single digits during the quarter.

  • The $10 million negative impact from currency during the second quarter was in line with our expectations.

  • Segment income for the quarter was $105 million, down 2% versus last year, driven by volume and mix weakness within Thermal Management.

  • Strong price plus productivity offset inflation by $2 million during the quarter.

  • Please note that the adjusted tax rate remained at 18% during the second quarter, as the proposed U.S. tax regulations have yet to be finalized.

  • Now please turn to Slide 6 for a discussion of our second quarter segment performance.

  • Starting with Enclosures.

  • Sales grew 3% organically in the second quarter, with strong contributions from data center, networking solutions and commercial.

  • This was somewhat offset by flat growth within our largest vertical, industrial.

  • Segment income grew 1% and the return on sales declined 20 basis points.

  • This segment saw price realization of approximately $2 million.

  • Productivity was lower than expected as our factories adjusted to the slower demand.

  • In addition, inflation continue to be unfavorable versus a year ago, which is a trend we expect to ease in the back half of the year.

  • Looking to the second half of the year, we expected slowdown in growth relative to the 3% organic growth in the first half.

  • Per Beth's earlier comments, we are seeing a slowdown in the industrial vertical, which makes up approximately 60% of sales within Enclosures.

  • We are aligning our cost structure to this revised outlook, while continuing to execute on our strategic growth initiatives.

  • While we continue to expect full year Enclosure sales to be up, we have moderated our outlook for sales to reflect growth of 1% to 3%.

  • In the first half, we have expanded margins by approximately 80 basis points and expect margin expansion to continue in the back half of the year.

  • Moving to Thermal Management.

  • Sales of $129 million declined approximately 4% organically.

  • Industrial MRO sales continue to grow double digits, while commercial and longer cycle energy declined.

  • Within longer cycle energy, project starts continue to be pushed to the right driven by global uncertainties.

  • With that said, Thermal Management did see project order momentum build in June and early July, including several U.S. midstream and European petrochem projects.

  • Thermal Management saw order intake increase by mid-single digits during the quarter and sequential backlog increased.

  • Looking at the commercial vertical, results were driven by a difficult comp last year and some softness in demand.

  • Return on sales declined 230 basis points, driven by negative volume and mix headwinds from declining commercial sales.

  • Looking at the back half of the year, we're cautiously optimistic with a strong June and July order intake and do anticipate a modest recovery, albeit not enough to offset the slow start to the year.

  • Quoting activity for longer cycle energy continues to be strong, although decisions keep pushing out to the right.

  • Taking all of these factors into account, we are updating our Thermal Management sales guidance for the year to be down 2% to up 2% organically, from up 2% to 6% organically.

  • We expect margins to be flat to modestly down, and we continue to take actions to align our cost structure to this revised outlook.

  • Now onto EFS.

  • Sales of $151 million grew 3% organically driven by price realization of almost $7 million and improved product availability.

  • Return on sales of 27.6% was flat relative to last year and segment income increased approximately 2%.

  • We're pleased with the corrective actions the team put in place over the past year to improve operational performance and expect to see year-over-year margin improvement in the back half of 2019, as we increased capacity and implement new systems for transportation and warehouse management.

  • Looking at the back half of the year, we continue to expect sales to grow organically between 2% to 4%.

  • Going back to Thermal Management performance and looking at Slide 7. Over the past 3 years, industrial MRO and commercial have grown nicely, offset by weaker project revenue.

  • Overall, this segment has expanded margin, while growing segment income 25% since 2016.

  • This quarter, we saw weakness in commercial, reflecting a difficult comp and some softer demand, unfavorably impacting segment margin.

  • Looking ahead, we continue to expect attractive growth from industrial MRO, similar to what we have seen over the past few years.

  • And while the project business has been difficult to forecast, we are cautiously optimistic with some recent project wins.

  • Regarding commercial, we are driving initiatives to accelerate demand such as increasing our channel coverage and focusing on One nVent initiatives.

  • Turning to Slide 8, titled Balance Sheet and Cash Flow.

  • We retired 5% of shares outstanding in the first half of the year.

  • At the end of the second quarter, our net debt was approximately 2.2x EBITDA, with capacity to fund the pending Eldon acquisition.

  • We remain our -- we've maintained our targeted 100% conversion of adjusted net income to cash this year, and our strategy remains to invest in our core businesses, seek attractive bolt-on acquisitions and returning cash to shareholders.

  • As we think about our capital deployment plan for the remainder of the year, we will look to prioritize debt repayment.

  • Moving to Slide 9, titled Third Quarter 2019 nVent Outlook.

  • We expect third quarter organic sales growth for nVent to be down 1% to up 2%.

  • This range reflects the expected continued strength in EFS, continued softness in Thermal Management and takes into account a slowdown in the industrial vertical, particularly Enclosures.

  • We expect a currency headwind in the third quarter of approximately 1 point.

  • Our adjusted EPS guidance for the third quarter is $0.47 to $0.51.

  • Our guidance taking takes into account corporate and other costs that are relatively flat year-over-year and a tax rate of approximately 18% as we anticipate the finalization of the proposed U.S. tax regulations in the fourth quarter.

  • Turning to Slide 10, titled Full Year 2019 nVent Outlook.

  • We are updating our full year organic sales growth guidance to reflect flat to up 2%.

  • Recall, prior guidance called for organic sales of between 2% and 4%.

  • However, demand signals within the industrial vertical and softer sales in Thermal Management warrant a lower outlook for the back half of 2019.

  • We are also updating adjusted EPS expectations for the year to be $1.76 to $1.84.

  • This takes into account our first half results and our current outlook.

  • With this revised outlook, full year return on sales is expected to expand 30 to 60 basis points.

  • We are targeting approximately $25 million in productivity and cost actions through the second half of the year.

  • Our guidance excludes any impact from the pending Eldon acquisition.

  • We expect the Eldon acquisition to be accretive within 12 months and to generate returns exceeding our weighted average cost of capital within 2 to 3 years.

  • Given the anticipated late third quarter close and financing cost, we do not expect material impact to EPS in 2019.

  • This concludes my comments on guidance, and I will turn the call back over to Beth.

  • Beth A. Wozniak - CEO & Director

  • Thank you, Stacy.

  • Turning to Slide 11.

  • Our 2019 priorities have not changed.

  • We remain committed to executing our plans to drive growth and build shareholder value over the long-term and believe these priorities are consistent with that goal.

  • On capital allocation, I would like to walk through why we are so excited for the Eldon deal, our first acquisition.

  • Turning to Slide 12, this deal is a strategic opportunity to add a complementary portfolio to our Enclosures segment and positions us for accelerated global growth.

  • Eldon is a privately-held global Enclosures business that had approximately $90 million of revenue in 2018.

  • They have a diverse range of IEC products, which is a global electrical standard and is a great complement to our broad offering of primarily NEMA-based products.

  • Together, we can have solutions to serve global customers around the world.

  • In addition, Eldon has a strong offering, serving the commercial vertical, which adds diversification to our broad industrial portfolio.

  • Eldon has invested in digital configurators in a modular platform.

  • When combined with our capabilities, enables us to quickly respond to customers and provide advanced and flexible solutions.

  • The purchase price is approximately $130 million.

  • And we expect the deal to close towards the end of the third quarter.

  • We have strong conviction that we can expand these margins over time to be similar to what you see in our Enclosures segment today.

  • We have a robust integration plan with an experienced team in place, dedicated to the acquisition.

  • We've met many talented employees at Eldon and we are excited for them to be a part of nVent.

  • This is a terrific deal for us and it's a great strategic fit.

  • Turning to our summary on Slide 13, our priorities have not changed.

  • We continue to execute on our strategy to drive long-term value.

  • Looking at the back half of the year, we're focused on driving growth, executing on our productivity and cost actions, delivering cash and closing and integrating the pending Eldon acquisition.

  • With that, I will now turn the call over to the operator to start Q&A.

  • Operator

  • (Operator Instructions) Your first question comes from the line of Deane Dray from RBC Capital Markets.

  • Deane Michael Dray - Analyst

  • Maybe we can start with the macro because it really looks as though the market on short cycle industrials has worsened here in the quarter and we've seen it from a number of your peers.

  • And maybe we can start with how have your assumptions changed about the second half?

  • You said you were encouraged in June and July orders, so some color there.

  • And then specifically, just reconcile, Enclosures industrials facing headwinds, but Thermal industrial MRO doing better, just kind of make the distinction about which markets they are actually addressing?

  • Beth A. Wozniak - CEO & Director

  • Okay, Dean.

  • So let me go through what we stated was we've seen increasing orders in Thermal Management.

  • And so when we look at Thermal it plays in that energy space and as we've been sharing with you the quotation activity has been very strong.

  • It's just been delayed.

  • And that's typically what we see is that we -- [already see] that's a longer cycle business for us.

  • So our Thermal business we're cautiously optimistic in the energy area is going to pick up.

  • On industrial MRO, that is just continue to be very strong for us.

  • And so whether that's on the industrial side or whether that's on the energy side for Thermal Management that has been good.

  • Where we see softness in short cycle and in industrial, as you said, Deane, it's what our peers have seen.

  • And this is where our Enclosures business plays.

  • So it's example, automotive would be an industry that we know has been down.

  • So what we saw for industrial in the quarter is softness coming from our distributors and just from the end markets and that progressed during the quarters, which is why we say we think we see a lower forecast on sales for Enclosures in the back half of the year.

  • On the commercial side, we've held our guidance for EFS.

  • Commercial still seems to be a good outlook, while softening, but we do expect as we improved our product availability and the actions we've taken in our EFS business that we can hold to our forecast for revenue as we put it in place at the start of the year.

  • So I hope that provide some color to you of what we're seeing.

  • Deane Michael Dray - Analyst

  • Yes.

  • It really does.

  • And then your comment about on Thermal seeing some project delays and push outs, that's all consistent with what Emerson has been saying too.

  • So these are themes in the market right now.

  • Can you flesh out the comments about some of the productivity initiatives for the second half?

  • Are these actual restructuring?

  • Will there be charges associated with it?

  • And maybe just give us some thoughts there, please?

  • Beth A. Wozniak - CEO & Director

  • Yes, so in the back half of the year, there's $25 million of productivity in cost actions.

  • So some of that includes momentum that we're getting within our EFS business and in some of our factories and logistics and distribution, but it also is realigning our cost structure and you will see some restructuring with respect to just a change in demand.

  • So as we look at the signals in the economy of what's going on, we have a playbook for us to be able to ensure our cost structures align.

  • Operator

  • Your next question comes from the line of Jeff Hammond from KeyBanc Capital.

  • Jeffrey David Hammond - MD & Equity Research Analyst

  • So can you just talk about our commercial piece of Thermal.

  • I don't recall you guys talking about a tough comp, and that seems to be kind of creeping up here.

  • And I just want to understand how much is just kind of weather and labor constraints that we've been hearing kind of through that channel versus real demand weakness?

  • Beth A. Wozniak - CEO & Director

  • So our Thermal Management business, we have products that are from heat tracing to fire-rated wiring as you recall.

  • And we had some jobs that were large institutional jobs and we just didn't see that were tough comps that we had in 2018 to where we were in 2019.

  • And as you recall in Q1, we also had seen a slow start to commercial with weather delays, et cetera.

  • We do expect in the back half, our commercial business will improve, but it really is lapping some -- we had a really strong -- we had a really strong first half in 2018 and we're just comping that.

  • As we look at the back half, we're continuing to build on some of the initiatives that we put in place with regards to positioning our Thermal product in channel.

  • That's been one of our strategies that Thermal didn't have a good position in some of the distribution channels and we're looking at how we continue to drive demand at our contractors and drive digital marketing programs.

  • So there's a lot of effort to ensure that, that commercial business in Thermal that we got a robust funnel and we are executing on that.

  • Jeffrey David Hammond - MD & Equity Research Analyst

  • I don't know if I missed this, Eldon, did you talk about what the margin profile is today?

  • Was this kind of privately negotiated or auction?

  • What was kind of the multiple paid on it?

  • Maybe how does that make you think about pause and buyback just given the spend on the deal?

  • Beth A. Wozniak - CEO & Director

  • So Jeff we did not share that.

  • And Eldon is a privately held company.

  • And we do expect that we're going to be able to close this deal at the end of Q3.

  • And at that time, we're going to share more details for you.

  • This is a company that we've known for a long time.

  • And we're very excited about it because they've really got a great product portfolio.

  • They've invested in digital capabilities.

  • The one thing when we look at this business being complementary with ours, we think we have great synergy opportunities.

  • And so the opportunities just not only on the growth side, globally and into different verticals like commercial, but we think we've got hundreds of basis points improvement on the margin that we can make just as we look at a broader range of Enclosures opportunity.

  • Jeffrey David Hammond - MD & Equity Research Analyst

  • And just buyback?

  • Stacy Powell McMahan - Executive VP & CFO

  • Regarding buyback, Jeff, as I said in the prepared remarks, we are very pleased with our ability to retire 5% of our shares at a very attractive valuation.

  • And we are taking a pause on that, post acquisition and putting priorities to paying down debt.

  • Operator

  • Your next question comes from the line of Jeff Sprague from Vertical Research.

  • Brett Logan Linzey - VP

  • It's Brett Linzey jumping in for Jeff.

  • Just wanted to come back to the Enclosures segment, real good start to the year on margins, but a bit of downtick here in Q2.

  • Maybe just a little more color on the progression there.

  • The margin comp was arguably relatively easy with some of the inefficiencies last year.

  • Could you just give me a little bit of color on the pressure you saw in the quarter?

  • Beth A. Wozniak - CEO & Director

  • Yes, we still expect for the full year, we're going to continue to expand margins in Enclosures and really this is a matter of demand started softening in industrial and we saw that progress through the quarter.

  • And so we had to adjust our cost structure in some of our largest manufacturing plants.

  • And it was just a time lag in doing that and making those adjustments.

  • Remember, we had expanded margins through the first half 80 basis points in Enclosures, and we expect that we're going to continue to expand margins in the back half of the year and ensuring that our cost structure in our factories is aligned as we see the softening demand in industrial.

  • Brett Logan Linzey - VP

  • And so you're saying that some of those actions are in place now and they start to run rate here in the second half?

  • Beth A. Wozniak - CEO & Director

  • Yes.

  • That's correct.

  • Brett Logan Linzey - VP

  • Okay.

  • Great.

  • And then just shifting back to Thermal, maybe just talk about this stability of backlog.

  • Are you actually seeing any cancellations?

  • Or is it just more timing push outs?

  • And then, of the orders that you're seeing kind of near term here, mid-single-digits I think you said in the Q2, is -- do these get let out here in the second half?

  • Or are these kind of long-dated, any color there would be great?

  • Beth A. Wozniak - CEO & Director

  • Okay.

  • So we've not seen any cancellation of orders.

  • One of the dynamics that we have seen and I've shared this previously is that in the past we might get awarded a project from start to finish.

  • And we're also finding that some of our customers are releasing orders in phases, so the engineering effort and the product design effort to the project in installation and commissioning, so that's one of the different dynamics that we're also seeing is that it's getting released in phases.

  • Now, if you win the first phase of the project, it is a 95% probability that you get awarded the project.

  • So we're very confident there.

  • When we look at some of these projects, many of them are longer-term projects.

  • But we do see as we execute on the different phases of the project that the second half of the year, we're cautiously optimistic that we are going to see growth.

  • Operator

  • Your next question comes from the line of Julian Mitchell from Barclays.

  • Takeheiko Makishi - Research Analyst

  • This is Jason Makishi on for Julian.

  • Just talking about Thermal Management demand at the back half of the year.

  • I noticed you still kept 4% sort of range for the sales guidance.

  • So the primary -- am I correct in saying that the primary swing factor here is this project realization and everything else in terms of the growth drivers in Thermal, you have pretty good visibility to and should be relatively stable?

  • Beth A. Wozniak - CEO & Director

  • Yes.

  • You're correct.

  • Takeheiko Makishi - Research Analyst

  • Got it.

  • Okay.

  • And there's been a lot of talk about demand cadence throughout the quarter, and I know you talk about industrial demand softness got progressively worse, just a little bit on the commercial businesses.

  • Was that also something that got worse throughout the quarter?

  • Did you see a pickup in June and July as some of those extraneous factors normalized?

  • Beth A. Wozniak - CEO & Director

  • We actually saw the commercial demand very consistent to what we had in Q1.

  • And if anything -- our ability to service that from our EFS business, we have been constrained by our capacity, and so our availability in our EFS business improved and our ability to service that demand also improved.

  • So we look at commercial as still being very consistent for us.

  • And the only dynamic as we called out was Thermal, which is more tied to some very specific jobs that we lapped Q1 and Q2.

  • And as we look forward, we think that the Thermal commercial business will grow, and as we look forward, we think EFS, we did not change our guidance range there.

  • We held it.

  • So we expect that commercial we're going to be able to continue to deliver there.

  • Operator

  • (Operator Instructions) And our next question comes from the line of Robert Barry from Buckingham Research.

  • Robert Douglas Barry - Research Analyst

  • So I wanted to follow up on the Enclosures margin question.

  • I mean, you had decent growth in the quarter and you talked about taking cost actions.

  • So I think both of those things will help the margin.

  • Were -- does that 18.5% include restructuring costs?

  • Beth A. Wozniak - CEO & Director

  • No.

  • As I stated before, as we started to see demand soften in some of our largest factories, just a time lag for us adjusting and taking those actions and managing our inventory is why we didn't see that expansions.

  • In the second half, we expect margins to expand as we get to that run rate in our cost structure.

  • And as we look across all of our businesses, we're looking at both cost alignment and productivity to drive overall margin expansion for nVent.

  • Robert Douglas Barry - Research Analyst

  • Got it.

  • So I guess, things just really deteriorated severely in the back half.

  • I mean, I think in the middle of the quarter, you were at a conference indicating that things were going well in Enclosures and they would even lead the charge on margin expansion this year.

  • Beth A. Wozniak - CEO & Director

  • We still do think Enclosures will lead the charge on margin expansions full year for nVent.

  • And remember, through the first half, our Enclosures business has expanded margin by 80 basis points.

  • But what we saw in the quarter is just was all the -- it started with trade and tariff uncertainty as usual and we saw our distributors doing some level of destocking and just being very cautious on their purchases of our Enclosures, for example, in the industrial segment.

  • So that's what changed.

  • Robert Douglas Barry - Research Analyst

  • Got it.

  • What's the assumption for price in the second half?

  • Beth A. Wozniak - CEO & Director

  • Yes, we expect that we're going to continue to see price at around that 2% range.

  • So through the first half, we've realized price of 2%.

  • And we expect it's going to continue in that second half.

  • It may moderate a little bit.

  • But it's still going to be definitely above 1%, close to 2%.

  • Robert Douglas Barry - Research Analyst

  • Yes.

  • I mean I just question how achievable that is, if the end markets are softening.

  • Beth A. Wozniak - CEO & Director

  • Well, as you recall, we've done a lot of price increases over last year and the beginning of this year.

  • And for the most part, some of those prices have been holding.

  • And we expect that to continue as we go to the back half of the year.

  • Robert Douglas Barry - Research Analyst

  • Got it.

  • I guess just lastly, what is the other side of that equation looks like in the back half, like what is the inflation picture look like in the back half?

  • Will we start to see some, I don't know, smaller headwinds or maybe even tailwinds on the steel cost side?

  • How does the cost side of the price/cost equation look?

  • Stacy Powell McMahan - Executive VP & CFO

  • Rob, it's Stacy.

  • We had inflation of about $15 million in the quarter and about just over $30 million in first half.

  • We do see that getting modestly better, really lead by material inflation improving a bit.

  • But we do expect that as our price locks roll off in the quarter, we'll start to realize -- in the back half, sorry, we will start to realize a little bit more of that stock rate sort of impact.

  • It's going to be modestly better, not a lot better because of the impact of that deferred price lock unrolling.

  • Robert Douglas Barry - Research Analyst

  • So if these prices hold, then maybe the more significant benefit would come in early next year?

  • Stacy Powell McMahan - Executive VP & CFO

  • Perhaps, if macro factors continue the same way.

  • Operator

  • I'm now turning the call back over to your CEO, Beth Wozniak, for final comments.

  • Beth A. Wozniak - CEO & Director

  • Well, thank you for joining us this morning and your interest in nVent.

  • We continue to make progress with our strategy and believe we are focused in the appropriate areas to drive growth and expand margin, which we believe can ultimately drive shareholder value.

  • We are excited about Eldon because it's a great strategic fit and believe it complements our current Enclosures portfolio to help accelerate global growth and diversify our business into other verticals.

  • I thank you, again, for your support.

  • And operator, you may now conclude the call.

  • Operator

  • This concludes today's conference call.

  • You may now disconnect.