There was a big level of cash flow trapped in inventory, we are at it inventory are declining, as we put in our prepared remarks. We see also the ability to reduce the collection cycle. As our lead times are improving, we’re going to be able to collect faster. And we are now because of the value proposition of our offering, we’re able also to demand some prepayments. So some — so those are the levers. I mentioned supply chain financing as well. So that’s basically, Andrew, what is explaining the view on free cash flow and the path to be, over time, a 100% free cash flow conversion company.
Andrew Obin: Got you. And I just — just clarify if I got it wrong. I think you had $220 million in impairments and restructuring charges, whether incremental impairments in that number? And if yes, what were they?
Olivier Leonetti: Go again. We had impairment charges, correct. Go again on the second part of your question?
Andrew Obin: What assets do we impair?
Olivier Leonetti: So we had, first of all, some open blue assets associated with the FM System acquisition. Some of those assets are part of the FM portfolio. They are better. So we’re going to discontinue what we have in OpenBlue. We had an impairment associated with the business we have in Argentina. This business is impacted by high hyperinflation and also we had some restructuring charges. Those are the three key levers.
Operator: Thank you. And our next question today comes from Brett Linzey with Mizuho Americas. Please go ahead.
Brett Linzey: Hi, good morning. Thanks. Just wanted to come back to price, cost. You said positive for 2024. Could you just discuss the pricing component within that framework? And how are you thinking about incremental price actions this year? I’m just curious, did the cyber disruptions in any way limit your ability to capture price ask? Any color there?
Olivier Leonetti: So on price cost today, we see price cost to be positive we believe we’re going to be able to keep the level of pricing we saw in the second half of the year.
George Oliver: And when you project the full year, we see — still see strong — with the value propositions that we’re bringing to our customers in building solutions, strong value propositions that we’re pricing to and with the differentiation that we bring with our digital content that really drives margin. And then on the product side, we continue to have record launches of new product introductions, which ultimately we price to the value that we bring to the market. So we’re still seeing strong pricing across the portfolio.
Brett Linzey: Okay. Great. Thanks for that. And then just a quick follow-up on the capacity expansion. Encouraging to hear, I guess, maybe just a little bit more context. Is it just simply targeted on data center? Are there other geographies? And is there any way to size what that investment was?
George Oliver: Yes. It’s — I mean, let’s — there was a big segment here that’s targeted on data centers because of the position that we have and the strength that we have earned with the products that we’re bringing into that segment. So as I talked with Scott earlier, we see a significant demand here over the next multiple years that we’re positioned now to capitalize on in line with the customer relationships that we have. And so that’s going to continue. But when you look at applied, when you look at our overall commercial HVAC business, when we — what’s happened is across the board with the secular trends around decarbonization, sustainability, efficiency. We are uniquely positioned with our technology in the way that we develop technology.
We engineer and design right from the compressor to the end market, making sure that our equipment is optimized for the application that we provide. As a result of that, that has a broad base positioned us to be able to now capitalize on these secular trends broad-based, not just within data centers, but across many of the other verticals. And so as we think about the work that we’ve done to reinvest over the last three or four years in a position that we have, we have a very strong position across our applied portfolio that I believe beyond — well above the economic growth that we’re going to now be able to capitalize on because of that increased demand. So it’s pretty broad-based.
Operator: And this concludes our question-and-answer session. I’d like to turn the conference back over to George Oliver for any closing remarks.
George Oliver: Thank you all for your continued interest and support and Johnson Controls. As we stand here today, we are set up for success through our strong foundation as we continue to build on opportunities to enhance our business from our margin profile, free cash flow generation and growth through the digitization of our service offering. It is all about execution. And as we look ahead, I am confident in our global team’s ability to deliver value and results for our customers and shareholders as we enter fiscal year 2024. So with that, operator, that concludes our call today.
Operator: Thank you. This concludes today’s conference call, and we thank you all for attending today’s presentation. You may now disconnect your lines, and have a wonderful day.
