Ivo Jurek: Yeah. Absolutely. Look, our guidance for 2024 CapEx is still very much within the frame of what we guide for the long term, which is 2% to 3% of revenue. So we’re not anticipating that we’re going to be breaking through the ceiling of our investments. We are very much focused on ensuring that while we are investing in NPI and our material science, we’re also investing in manufacturing process engineering and equipment that gives us the biggest opportunity to leverage driving productivity forward. So as you said, IRRs obviously, are very important on any project that we do. And generally speaking, these IRRs are in excess of 30%. So those are very good projects. When we talk about optimization of footprint that I have highlighted in the prepared remarks, look, it’s a great set of opportunities that we have ahead of us in India.
We are very bullish on what is happening in India, the infrastructure builds that are happening in there, the demands that we see for heavy-duty equipment, which is very positive. And so we believe that over the midterm, we want to be ready to ensure that we capitalize on the India opportunity just like we have done in China. Brazil in similar vein, has very unique set of operating dynamics, you got high tariffs. And the opportunities that we see there are quite robust, and we feel that being to close proximity to our customers with local manufacturing is the right thing to do. Those are kind of maybe a couple of projects that we’ve highlighted out there. But I would say more broadly, we want to be very pragmatic about making sure that we stay contemporary with our manufacturing processes, and we can leverage the NPI and then ultimately position ourselves to a situation where we can accelerate our organic growth, which, as you know, has not been insignificant.
We have delivered organic growth, very much in line with the high multiple premium industrial peer set.
Brooks Mallard: Yeah. The one thing I’ll add to that is, if you remember, I’ve said this multiple times before, even as we’re working on some of these enterprise initiatives and these bigger footprint optimization projects, they still fall well within the 2% to 3% guidance that we give on CapEx every year. So we don’t feel the need to ramp up CapEx to an abnormal level in any given year, we can handle all these investments and all these enterprise initiatives well within the framework work of what our capital spending is on a year-on-year basis.
Operator: Your next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open.
Andrew Kaplowitz: Hey. Good morning, everyone.
Ivo Jurek: Good morning.
Brooks Mallard: Good morning.
Andrew Kaplowitz: Brooks, I just wanted to flush out the enterprise initiatives a little bit more in terms of how they ramp up in ’24, — are they kind of linear? And then you obviously just talked about factory optimization. You’ve talked about 80/20 in productivity. Is it kind of equally split when we look at that $0.07. And do you have even more of an impact as you go into ’25, for instance, than ’24?
Brooks Mallard: Yes. So yes, so let me — I want to be a little bit careful here because there’s a lot of moving parts here. First of all, in 2024, I think our enterprise initiatives will definitely lean more toward the material cost outside than some of the more factory productivity side, and we’ll be working through the footprint optimizations. And I think those are definitely more 25, 26 in type things. And so we definitely lean more towards the material savings side the factory productivity in a down volume environment is tough, right? I mean it’s a tough nut to crack. We’re going to get some. But as volume comes back, that’s when the factory productivity will really start to stack up. And then the 80/20 work we’re going to do in terms of strategic pricing and in terms of going out and driving better value demand from our end customers is going to be a big driver as well.
So I would say kind of the summary of that is definitely more weighted toward material cost in 2024 on the enterprise initiative side.
Ivo Jurek: And in ’25, you should start seeing some benefits from some of the footprint optimization that we’ll be talking more about, obviously, — we — again, as Brook said, lots of moving pieces on the footprint optimization, notification of employees and so on and so forth with a number of terrific projects that we are quite bullish about. And we anticipate that ’25 should be a beneficiary of the restructuring there.
Andrew Kaplowitz: Very helpful guys. And then I just want to go back to the seasonality question again for — like if I look at historically, Q1 is almost always a decently sequentially versus Q4. At the midpoint, you guys have a kind of flattish I think global auto production is supposed to be down in Q1 versus Q4, but you guys, as you know, are not big in first-fit anymore. Is there anything else sort of going on or is it just sort of this pragmatic view around destocking Q1, that you already mentioned that keeps you where your guidance is for Q1?
Brooks Mallard: Yeah. Well, I mean, I think there’s a nuance here as you move from Q4 to Q1, we have a — we’re taking a pragmatic view on volume. So we have volumes down, and that’s partially offset by FX, because FX is a little bit of a tailwind as we move from Q4 to Q1. And so it’s really more of a pragmatic view based on how we think the demand environment is going to play out to the first half of 2024. And so that’s really the best visibility we have right now in terms of what’s going to go on with demand.
Ivo Jurek: Yeah. And Andy, I would also probably suggest that people start thinking about as the operations have recovered to normalize. And again, as I said on the call, in the prepared remarks, we are pretty much back to pre-COVID level of operational cadence. Our customers are taking advantage of the fact that we are much more predictable in how we have fulfill demand. Lead times have been normalizing. And we want to ensure that our service levels remain high and that just gives everybody an opportunity to really just order more in line with what the underlying demand is. And that’s kind of how you should think about it.
