Graco Inc. (NYSE:GGG) Q4 2022 Earnings Call Transcript

Thomas Johnson: Hi, thanks. I just wanted to revert back to the contractor segment here. I know in your comments, you had noted limited pro paint product availability as a headwind in the EMEA business? So it would just be helpful, if you could get some incremental color on exactly how that headwind has impacted the business and maybe what you’ve seen in terms of improvement or easing availability there?

Mark Sheahan: Yes. So I think the comment was about EMEA, as you said. And in the quarter, we were actually down, but if you were to back out the Russia business that we had a year ago and currency, it was actually sort of a flat environment for us in Contractor EMEA. But as you noted and we mentioned, part of that, we also believed, it would have been a better quarter for us and a better year if we were able to get some of the more higher-end pro units over to Europe in a more timely manner. As you probably know, we’ve been battling electronic components and different aspects of the things that go into our higher-end sprayers throughout the year. And our team over in EMEA believes that if we had better flow of those products, they would have posted better numbers.

Thomas Johnson: Great. That’s very helpful. And then just in terms of what you’ve seen from improvements in availability and kind of — I know — not looking for region level outlook. But obviously, is it fair to assume that those headwinds on a year-over-year basis will be easing in 2023 for that business and region?

Mark Sheahan: Yes. I think we saw a pretty good improvement as we got through the back half of last year. We’re still faced with some component shortages in things like electronics, but I would characterize that overall is we’re in a better spot today than we would have been in the past.

Thomas Johnson: Great. Thank you. That’s all for me.

Mark Sheahan: Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Walter Liptak from Seaport Research.

Walter Liptak: Hey, good morning, guys.

Mark Sheahan: Good morning.

Walter Liptak: Yes, thanks for the clarity about EMEA and the Contractor part of the business. I wonder if you could just talk maybe a little bit more generally about EMEA and what you — we’ve seen some macro data get a little bit better recently. What’s been your experience there on industrial and process?

David Lowe: Well, I would say that if we’re talking EMEA on the — I’ll call it, macro data side, certainly, the economic outlook picture for Germany, which is Europe’s largest industrial market, I would say, bodes — maybe to call it a bright spot’s an exaggeration, but is a favorable attribute. Our people on the ground in Europe indicate that we have had a milder winter than I guess than some people were projecting and which we’ve had in prior years, and that really helps. So the fact that energy prices have stabilized. And I think that also the work that the Europeans are doing around conservation, some new sources of natural gas and even extensions of nuclear and coal probably helped people in our space quite a bit. In terms of natural gas prices, we’re down about 50% from peak our people tell us.