Monish Patolawala: So, Joe, the $700 million to $900 million, if we just break it down to broad buckets, 40% of it is around the supply chain simplification that Mike talked about. The remaining 60%, you can split between costs at the center of the company and costs at the BGs. From a P&L perspective, a couple of items that Mike talked about, again, on the go-to-market. There will be a couple of divisions in TEBG that will be combined. And then from a consumer perspective, we will serve our customers more from an area perspective and then realign them around portfolios. And the other piece on a go-to-market cost saving is, as we look at some of the countries, the way we serve using our digital capabilities, we will look at using our partnerships that we have with our third-party distributors in those countries and use a digital/export model to serve those customers in those countries, which will also allow us to take out rooftops and fully loaded P&Ls in those countries that will also allow us to save cost.
Joe Ritchie: Got it. That’s super helpful. And maybe my follow-on question, I didn’t hear it earlier, but how much pricing came through this quarter? What’s the expectation going forward on price/cost?
Monish Patolawala: Yes. So, depending on the business group, Joe, we had anywhere between low to mid-single digits. The average is low-single digits. The guide for the year is low-single digits. And at the same time, as we have said before, if we continue to see inflation, we will readjust as needed. The teams have done a good job, I would say, of looking at it product-by-product, market-by-market and making the right necessary price moves as required when they see inflation.
Joe Ritchie: Okay. Thank you.
Operator: Our next question comes from Julian Mitchell with Barclays. You may proceed with your question.
Julian Mitchell: Hi. Good morning.
Mike Roman: Good morning Julian.
Julian Mitchell: Good morning. Maybe leave aside the firm-wide restructuring for a second. And I just wanted to focus on the healthcare business as that’s meant to spin out in a matter of months. The margin is down pretty heavily year-on-year again, down sequentially as well and not a lot of organic growth. So, just trying to sort of understand how comfortable do you feel with that healthcare business kind of ahead of the spin? Are we seeing a big front-loading of investments, so it has kind of less to do post-spin? Just trying to understand kind of the approach there for this year and why those margins seem to be under such pressure.
Mike Roman: Yes. Julian and I will come to kind of the organic growth and margin. I would say we continued to see the healthcare procedures as an important driver of our healthcare performance. And there, we see some improvements. Monish highlighted in his prepared remarks some of the headwinds and challenges that are still – the labor shortages and some of the challenges and healthcare recovering to pre-pandemic levels. So, that’s important factor in driving our growth. If you look at our business, we also had some headwinds from the Russia exit in DR and so close to 2% organic growth. And we expect as procedures do recover that we will see improvements in our organic growth. On the margin side, Monish called out some of the headwinds, we have – still seeing some supply chain headwinds, still seeing some carryover from material, raw material and logistic inflation, energy cost inflation.
And we are making some investments, investing in – it is a prioritized area of growth for us, and we are making and really staying focused on those investments. So, it’s a – it is part of the performance in the quarter. But again, confident that as procedures improve, we will see growth and growth gives us the best leverage to the margin. We will see those margins improve as we see some of the supply chain healing and some of the actions that we are taking help impact that as well.
Monish Patolawala: Just one more to add is biopharma. As we mentioned in our prepared remarks, biopharma this quarter was also impacted due to the normalization of COVID-related demand. And as Mike mentioned, the healthcare business is – for us is a great business. We will see volumes grow as elective procedures grow, oral care procedures go and biopharma demand comes back once we get the normalization out of the way from an inventory level. And with all that put together, the margin rates will also go up as volumes come through. But this is again a segment Mike has called out multiple times an area where we see great opportunity, which means we will continue to invest in that segment to make sure we take advantage of long-term growth.
Julian Mitchell: Thank you. And then just my follow-up on electronics specifically, I think you mentioned, Monish, that was down sort of 35% in Q1 year-on-year. It looks like the second quarter is down maybe in the teens based on Slide 13 in electronics. How are you thinking about that sort of rate of improvement? What’s baked into the back half for electronics in your guidance? Do you think we should see year-on-year growth by the fourth quarter for electronics? Any sort of color there around how you are looking at that business through the balance of the year?
Monish Patolawala: Yes. That’s – you got it right. Right now, our second quarter is also going to get impacted continuing inventory challenges and destocking at consumer electronics, whether it’s tablets, notebooks, TVs. Our view is that as China stabilizes as we start seeing our comps ease compared to last year, fourth quarter should be on a much more normal run rate, which means on a year-over-year basis, it will show positive growth.
Julian Mitchell: Great. Thank you.
Operator: Our next question comes from Nigel Coe with Wolfe Research. You may proceed with your question.
Nigel Coe: Thanks. Good morning.
Mike Roman: Thanks.
Nigel Coe: Yes. Great. Thanks. So, just wanted to touch on the Mike Vale as Group President, just first of all, congratulations to Mike. But how does this change your role, Mike Roman, in terms of your focus areas? I mean Mike is obviously – seems like he is getting direct for the three segments. I mean how does this change your focus areas going forward?
Mike Roman: Yes. Nigel, I think it’s a reflection on really what are the strategies and actions that we are driving and the priorities that we are focused on right now and the importance of having leadership that brings the necessary focus as we go forward. And so it’s even looking back to 2022, the – some of the pivotal actions that we announced as we came through the year, they are the healthcare spend, our actions in terms of our supply chain changes, focusing our leadership now with the actions we are announcing today to go further and really make the changes in our – the next set of changes in our supply chain, moving forward with our new go-to-market models. Mike’s role is really focused on that. When I talk to Mike about stepping into this leadership role, it’s about really ensuring success as we drive these actions and changes forward, position us for the future, help the businesses working with the supply chain to be successful in integrating these changes and building for the future, help us to focus on the high-growth market segment.
So, it’s really about putting up – taking our priorities and putting a strong leadership support in place to drive that. These are important and really significant actions that we are putting in place and important that we have. We also are supporting our leadership with a dedicated project management office. These are significant changes. So, it’s really a strong statement about what’s most important both on the restructuring, but also on our strategies in terms of growth and executing for our customers.
Nigel Coe: Okay. That’s helpful. Thanks Mike. And then one for Monish, just a follow-up on Joe’s question on pricing. It seems like given the 1.3 percentage points hit to margins from raw materials, it seems like price/cost was positive this quarter. Just wondering if there had been any change in the way you are viewing the supply chains to raw material kind of dynamics for this year.
Monish Patolawala: Yes. No change. I would say it’s the same. So, price/cost was positive, and the teams continue to manage both. As we think about the second half, that’s where supply chains, our belief is supply chain start healing, which means we should be able to see better cost – product cost from our factories as well as the cost from sourcing. That should continue to help us build on margins, which goes back to where – what we have talked about at earnings, talked about it at last quarter earnings, currently too, that all of this is baked into our guide where we see supply chain starting to heal in the second half and even markets starting to heal in the second half because as you know, we have talked about volume gives us the best leverage. So, those are the two things we are counting on in the second half.
Nigel Coe: Alright. Thanks a lot and good luck.
Monish Patolawala: Thanks.
