But at the same time, we have the flexibility to respond in the event that some of these customer forecasts and their outlooks are actually — they actually come to fruition. So yes, we took about $1.5 billion, 11% return on sales. We are absolutely still — see line of sight and committed to those goals and our forecasts have not changed.
Tom Okray: Yes. And just one other thing I would add, Julian and taking you back to the prepared remarks. In eMobility, the market grew 7%, we grew 18%. So we’re winning some good business there.
Craig Arnold: Yes. And to your point, Tom, it really is. And I think this was maybe your question, Julian, as well. It really is platform-specific. And our growth really comes from the launching of new eMobility platforms that we have content on. And that’s why our growth, we think will clearly be well above the industry’s growth rate.
Operator: Our next question comes from Steve Volkmann from Jefferies.
Steve Volkmann: Great. I want to go back to the cost-cutting program. The $325 million of benefits in 2027, should we think of that as kind of net in terms of the margin? Or will you have some increased investments that offset some of that?
Craig Arnold: No, I mean the way we talk about it, we’re going to spend $375 million of restructuring to deliver $325 million of mature year benefits. And that is the way you should think about it. We’ll spend those restructuring dollars over the next few years. And we had embedded as we talked about, in our 2024 guidance, $175 million of spending and $50 million of benefits but those benefits will fall through to the bottom line with — offsetting expenses.
Tom Okray: Yes. And I was just going to say and the cash associated with it is in our cash guidance as well.
Steve Volkmann: Understood. So my guess is it’s probably a little more Europe-centric since these things tend to be but any guidance on sort of where we’ll see these results most?
Craig Arnold: Yes, no, I appreciate the question. I think you can just think about it, it’s going to be pretty widespread. And you can think about the total kind of allocation of the benefits being pretty much aligned with the company, 2/3 will be in Electrical, 1/3 will be in Industrial. We’ll be focused on taking out rooftops in the company, driving some shared services, leveraging digital. But a lot of these benefits will really cut across the company.
Tom Okray: And what I would also say is you’ve described it as cost cutting and there is an element of that. But I really want to come back to it’s a smarter way of doing business as well. I mean we’ve got a number of sites. We’re a very complex organization with 5 reportable segments. And we’ve got opportunities with our central functions to be more efficient and take work off of the business units and allow opportunity cost for leveraging resources, leveraging talent, leveraging capital as well. So there’s — it’s not just pure cost cutting. It’s a smarter, more efficient way of doing business as well.
Craig Arnold: And it’s the way we help fund the growth, right? It’s the way we’re funding increases in investments, in R&D and other things that we need to do to grow the company.
Operator: The next question is from Nigel Coe from Wolfe Research.
Nigel Coe: Sorry about. Mute button problems. So to cover a little ground but coming back to this capacity issue — or capacity expansions. I mean the 9% to 11% growth in the Americas, Craig, I mean, it feels like given the backlog builds, obviously, orders continue to enter there, it feels like that could be relatively conservative. So just wondering if there’s any kind of capacity constraints that are gating that growth forecast? And are you assuming there’s going to be some backlog burn or conversion as we go through the year? Any sense there?
Craig Arnold: Yes, no. And I think I had mentioned also in my commentary, Nigel, that there’s certainly enough demand in the marketplace to post higher growth than we’re reflecting in our guidance. And we’re making investments to eliminate capacity bottlenecks. And we think by the time we get to the end of the year, we’ll be in great shape. But as you know, we’re participating in an industry where you have a lot of players in the value chain where you have fairly sizable labor constraints around skilled trades. And so I do think it’s going to be a governor on growth based upon these factors that prevents us and the industry from growing much faster than that. You think about this 9% to 11%, this is on top of some 30% plus growth over the last 2 years.
And so I would say that today, we’ll see what happens with in terms of the backlog growth and how much the backlog we can burn or can’t. Once again, difficult to really say, there’s a lot of variables in that. Once again, we thought we were going to burn backlog in 2023 and we actually increased it, right, some 15%. So the market continues to perform even better than what we imagined. But there are very real capacity constraints in the industry that we think become the governor around this 9% to 11% growth in our Electrical business in the Americas.
Nigel Coe: Yes, yes. I appreciate that. And then it just feels like data center is the — obviously, that’s probably going to be your strongest growth vertical in ’24. And I think you mentioned negotiations up 160% off a pretty high base. So just thinking about capacity in that single end market. I mean is that a concern? And does the $1 billion you put in [ph], does that cover the kind of growth that we should see coming through in ’24, ’25 then?
Craig Arnold: Yes, no, data centers will certainly be a very strong growth market for us in 2024 as well into 2025. We talked about in terms of our own forecast for the industry; we said the data center market, we think, grows at a compound growth rate of some 16% over the next 5 years or so. And that is certainly more than supported by orders. We grew from 20% in Q4. We — in revenue, orders in the rolling 12 were up 30%. Negotiations were a lot more than that. So we continue to see just an acceleration in the data center market in terms of rate of growth. And once again, because this industry, too, is capacity constrained, is labor constrained, we think which ultimately ended up happening, is the — as a growth cycle, that just extends or could be for a decade at very attractive growth levels.
Nigel Coe: Yes, exactly. That’s a long time. And ’24, do you think ’24 will be in that 20% there or even better?
Craig Arnold: Yes. I mean we’ll see. We’re not providing guidance per se for individual end markets today but you can certainly assume that within that 9% to 11%, that our assumption for data centers is going to be on the higher end of that.
Tom Okray: Yes. Just to add, the chart for the end markets, we have data centers and distributed IT growing strong double digit. So — and everything from an order perspective, as Craig said, points to very robust growth in 2024.
Nigel Coe: Yes, it’s vertical. Thanks, Tom and congratulations.
Operator: The next question is from Tim Thein from Citigroup.
Timothy Thein: Yes, great. I’ll just fire one in here. But I guess, to start, after spending some time with Mike Yelton, I guess, it was around this time last year, I guess, I can better understand why it was such a good move. But just on the — on the mix in Electrical, I would guess just given the strength in these big projects that there has been a trend, I guess, as Americas comment. But you’ve seen kind of this continued shift from more of the growth coming from systems versus products. How do you — in years’ past, there’s been times when that’s given you challenges in terms of kind of managing the profitability of that. But I guess, maybe your outlook in terms of that mix dynamic in ’24 and again, your confidence in terms of managing to the extent that continues, more of the growth coming from systems relative to products?
