Edward Breen: No Steve, it’s pretty much as we said last quarter – shelter will be up sequentially first to second, mostly because of seasonality, but that clearly had bottomed out already. Water, by the way, we just had our manager of our water business over in China the last two weeks, and they’re saying they’re going to start placing more orders towards the back end of this quarter, so that feels the same. Same with the healthcare medical packaging business towards the end of this quarter, beginning of next quarter. The only two that are delayed on–they’ve bottomed, by the way, but they haven’t recovered yet, but this is no change from what we said before, is our biopharma business looks more like the back half of the calendar year, and our Kalrez business looks like a second half recovery, so pretty much in line.
By the way, the one other bright spot I liked, we had been negative on growth in China through last year, and we had 3% growth in China, so that market has been slowly turning back up for us. And by the way, that 3% was predominantly because the electronics business turned – we were up 15% in E&I in China in the first quarter, so that’s turned nicely for us. Our semi customers in China were ordering at about that–it was about that same rate, sales rate of about 15% growth, including the local China semi customers, not the multinationals, so that was good to see.
Steve Tusa: Okay, and then just last quickly, any updates on price-cost spread for you guys? I know it’s less important these days, but any update there? Thanks.
Lori Koch: Yes, we did have a little more favorability than what we thought in Q1, that we believe will hold for the year. That contributed partially to the Q1 beat. If you look at the Q1 beat, it was about $110 million or so on revenue and then about $70 million on earnings, so obviously we got some upside there outside of volume, and that was primarily better price-cost spread.
Steve Tusa: Great, thanks a lot.
Edward Breen: Thanks Steve.
Operator: Your next question comes from the line of Scott Davis with Melius Research. Your line is open.
Scott Davis: Hey, good morning, Ed, Lori and Chris.
Edward Breen: Good morning Scott.
Scott Davis: This may be hard to define explicitly, Ed, but you’ve mentioned a couple quarters in a row the AI chip and data center benefit in E&I. Help us understand materiality – when you think about new chip designs and such and the content of your product that’s going to be needed, does it structuring raise the growth rate, do you think over, call it a five-year period, or is there enough stuff to cannibalize and it kind of nets out to a slight positive, but perhaps–I don’t know, I just have no idea, so I’ll ask you.
Edward Breen: Yes, so the AI–so the data center size for us is about $700 million of our revenue, and $250 million of that, ballpark – it’s kind of hard to tell exactly, Scott – but about $250 million of that is AI specific, and that is growing north of 20% right now, that base. I do think it’s skewed–look, I think we’re going into a supercycle in semiconductor here over the next decade because of all this AI, and remember the AI now, everyone’s going to push it down into your devices, so it’s going to be a pretty broad-based growth market. My gut is next year, I don’t want to get into forecasts yet for 2025, but I’ve got to imagine the E&I business is going to grow high single digits in 2025. We’re expecting fab utilization to exit–starting the year in the low 70s, exiting the year in the low 80s, and I would think we’re probably in the low 90s by the middle of next year, and that would give us that high single digit growth rate, and then the AI chips, by the way, really help us because it’s a higher margin business in our mix, so it should tee up for a really nice 2025.
But that market’s going to continue to grow north of 20% here, and it’s got a long cycle coming up.
Scott Davis: Okay, so material for sure. Just to back up a little bit in water solutions in China, I know it’s not–it’s a little minutiae, but was there a pre-buy or some sort of–I don’t want to call it channel-stuffing, because that’s not what I mean, but was there some sort of weird behaviors that that customer ended up with so much excess inventory, or was it purely just the macro turned a little sideways or down on the folks, and they were caught with extra inventory?
Edward Breen: Yes, it wasn’t one customer, Scott, just to clarify – I don’t know if you meant it that way. We have many distributors, but four–
Scott Davis: No, I didn’t mean it like that.
Edward Breen: –four main distributors in China that do the bulk of our business, that we don’t do direct, by the way – we do a lot of direct business, too. I think what–I mean, what they verbalized to us, obviously, and again our team was just there with them this past week, is industrial production slowed down, they were ordering at a higher rate, and they had to go through a destock. The destock, by the way, is not as long as some of the other destocks. It looks like if it’s ending here at the end of this quarter, it was about five, six months of working their inventories back down, so we think we’re in pretty good shape going into the third quarter here. Again, we expect orders to start coming in, kind of in the June timeframe to start picking up there. It was more of the macro, I guess I would say, Scott.
Scott Davis: Okay, fair enough. Thank you Ed, Lori, Chris. Appreciate it. Good luck this year, this quarter, next quarter. See you.
Edward Breen: Thanks.
Operator: Your next question comes from the line of John Roberts with Mizuho. Your line is open.
John Roberts: Thank you, just one from me. Maybe Lori, you could give us an update on adhesives, Multibase and Kevlar. I would have thought they’d be down, like your industrial segment, and they’ve got some auto exposure there, which was probably weak, but actually corporate sales were up 1% year-over-year. What’s going on there?
Lori Koch: Yes, so we continue to see strength on the EV side of auto, so as you had mentioned, overall auto builds are weaker right now but there’s still a lot of upside within the EV side, so that was up double digits in the quarter and we expect that to stay for the year. A lot of the upside in the volume in the quarter came from Kevlar, which is in the photovoltaic space, so we had really nice volumes within Kevlar that gave us the 1% organic for the quarter.
John Roberts: Thank you.
Operator: Your next question comes from the line of Chris Parkinson with Wolfe Research. Your line is open.
