Emmanuel Caprais: Yes. And so if we look at our Connectors orders, they were up 3% this quarter. And for the full year, we expect them to be roughly flat. And a lot of the strength is coming obviously from aerospace, defense that are way up in the double digits, and energy also. Energy has been a good story for us. So I think that it’s true that we are seeing weakness in European distribution. But I think the strength of our portfolio and the commercial actions we’re taking are able to nicely offset that weakness and still in Q3 come out with growth in terms of orders.
Operator: Our next question will come from Joe Ritchie of Goldman Sachs.
Joe Ritchie: Maybe just hitting on that last point that Vlad brought up on the Connectors business. So how much is the European Connectors business down — how much was it down this quarter? Because obviously, that’s probably going to create a pretty easy comp for you guys as we head into 2024.
Emmanuel Caprais: This quarter, Connectors was down in the low double digits, and this is mostly driven by industrial. So we expect that probably in terms of the destocking, we’re going to be nearing the end of that destocking. And then sometime in 2024, we’ll see an improvement.
Joe Ritchie: And Emmanuel, is that better than where you were last quarter on the connectors side, specifically in Europe for the industrial connectors side?
Luca Savi: I’m not so sure because also you have to think about in Europe some seasonality in Q3 with August. So it may not be the case.
Joe Ritchie: Okay. All right. No, that’s helpful. And then I guess just a longer-term question. The — just the Industrial Process margins continue to surprise to the upside. I know that you guys are continually focused on continuous improvement as you kind of think through 2024 and margin expansion potentially for this business. Can you maybe just talk about some of the levers and how you’re thinking about this business longer term?
Luca Savi: Sure. I think that when it comes — of course, when it comes to IP, we will have to share with you guys our new long-term target, which we will do sometime next year. When we look at this business, there is investment that needs to be made, some that we are making right now. We are investing both in S&OP process so that we really have stronger fundamentals in the long term. But some of the levers that you have on the other side is, for instance, the closing of the foundry. We’re making progress on the closing of the foundry. We’ve closed already one line. We will finish the closing by Q1 2024, and this will allow us to be more cost-competitive in our products as well as reduce some of our lead times. Leverage on the purchasing side, on the supply chain, this is one of the other levers.
The VA/VE, we continue our value analysis, value engineering of all the family of products. And then I would say, the continuous reduction in terms of our cost structure. I would say these are the levers that we have in our hands today, Joe.
Operator: Our next question will be coming from Jeff Hammond of KeyBanc Capital Markets. Our next question will be coming from Bryan Blair of Oppenheimer.
Bryan Blair: You’ve highlighted green energy transition momentum in IP seems to be quite strong. Bornemann wins some Habonim applications now Svanehøj, hopefully, I’m pronouncing that correctly. What is the current scale of that, I guess, aggregated revenue stream for green energy or energy transition for IP? And where should we expect that to go over time?
Emmanuel Caprais: Yes. So we are really excited by this because we really were able to create a new leg for IP. That is really disassociated with — from any consideration on the price — on the actual price of energy because it’s really driven by regulation. Today, our green projects year-to-date is a little bit more than $80 million. And then so if you think about the way this number has evolved, in 2022, it was around $20 million. So really strong growth that is really driven by the technology differentiation we have in our Bornemann product line, but also, as you were mentioning, Habonim with their play in hydrogen. So very happy with that growth, and that’s a market potential that it represents.
Bryan Blair: I appreciate the detail. And just to level set on the auto aftermarket. You mentioned flattish Q4. So that stabilization is encouraging. Where do you expect, with that outlook, full year organic sales decline to shake out? And if we were to just kind of snap the line on destocking impact and have that lap year-on-year, what kind of growth would that imply for 2024?
Luca Savi: So when you look at 2023, the total aftermarket will be probably down for the full year 6%; 5% would be the OES; and roughly 10% the independent aftermarket. That is for the full year of 2023. And I think that out of that base, we will start growing again in 2024. When it comes to exactly the growth for 2024 now, it’s a little bit early to tell, I would say.
Operator: Our next question will be coming from Nathan Jones of Stifel.
Nathan Jones: I’ll just — I’ll follow up on Bryan’s question there on the aftermarket. You said 5% down OES and 10% down independent aftermarket. Do you have a view on what of that is inventory destocking versus what of that is actual softer end-market demand?
Emmanuel Caprais: It’s mostly inventory destocking. The aftermarket is pretty stable in Europe. I think it’s up 2% to 3%. And so it’s mostly our specific customer, which had been ordering a lot last year, and that is working through that excess inventory they have.
Nathan Jones: Got it. That’s helpful. You guys had previously talked about wanting to expand the pump business into Europe and the two acquisitions that you’ve done, they have done that. Does that continue to be a priority for you? What are the other areas of priority strategically for capital deployment into M&A?
Luca Savi: When you look at the categories for the M&A, it’s really — you’re talking about the flow and you’re talking about the Connectors business. And you have a little bit of rail. And if you look at the acquisitions — the two acquisitions we made this year, it’s really Micro-Mode on the Connectors side and now Svanehøj in flows.
