Anurag Maheshwari: Yes, so on price cost as you mentioned Nigel, we are, you know, either neutral or positive right? In China definitely pricing the new equipment side is coming down, but we are driving hard on material productivity, and the — it’s a deflationary economy over there as well. So a combination of that and this pricing discipline in the market, you put all of that together. Right now, price cost is favorable, and we are able to offset the China mix as you saw in third quarter with a new equipment margin being at 7.2%. And even if you look at the fourth quarter implied outlook its — new equipment margin is going to be about 7%, even though China is going to be down. So and a couple of reasons one is obviously the price cost in China.
Second, pricing in all the other markets that has gone up over the past 12, 15-months, which is in our backlog, has started flushing through to the P&L. We again saw this quarter another $10 million pick up of pricing. We’re going to see that similar in the next quarter, and commodities are tailwind. So if I look at pricing in the backlog overall, which is probably up 50 basis points to 70 basis points, and if we snap the line on commodity today, right, we should still see another $40 million or so tailwind next year. You add these two things together, I think it more than kind of makes up for the China mix for us to believe that a new equipment is at a sustainable margin rate.
Nigel Coe: Okay, great. And I know there’s about three questions in there, but if I can get one more as a follow-on, just to follow-on Jeff’s question on the uplift program at that point in time. So obviously the $150 million run rate, I’m assuming that’s an exit $25 million run rate. What would you feel comfortable in a dialed in for FY ‘24 in terms of cost savings and what sort of restructuring would be associated with that savings?
Judy Marks: Well, we’re not going to guide yet for ‘24 uplift savings. So we just need to be, yes, we’re not prepared to do that yet. We’ll get back to you, obviously, when we do our ‘24 guide to let you know what’s going to be in that late January. In terms of restructuring, I think we’ve been…
Anurag Maheshwari: Exactly. So first is, you know, program’s off to a great start, as Judy mentioned. We’ll give an update next year. In terms of to achieve the $150 million of savings, the restructuring cost is about $150 million. It’s a one-on-one, right? It’s going to start this quarter, but obviously we’re going to start seeing the savings coming in next year.
Nigel Coe: That’s great. Thank you very much.
Operator: Please stand by for the next question. The next question comes from Julian Mitchell with Barclays. Your line is open.
Julian Mitchell: Hi. Good morning. I just wanted to start off with the global new equipment revenue outlook. So you’ve been, you know, feeding off a good backlog there and the organic sales maybe flat to up 1% year-on-year in new equipment in the back half of the current year? I just wondered though when you look at the sort of 12-month rolling on new equipment orders down 4%, year-to-date down 6%, last quarter down 10%, and then we think about sort of the nature of how quickly the backlog wears off. It’s very fast in China, slower the rest of the world? Is it sort of base assumption as we start out next year that new equipment sales are down then as those weaker orders feed through?
Anurag Maheshwari: Yes. Hey, thanks for the question, Julian. Yes, so firstly, you know, our backlog is up 2% right now on the new equipment side. We do think that even if orders are down low to mid-single-digits in the fourth quarter, our backlog is going to be flattish to slightly up. And the reason is because we tend to book more orders than revenue over the past couple of years, some of them being major projects. So our assumption is that backlogs should be flattish to up by end of the year. Now within that, America’s, Europe, and Asia Pacific, if you put that together, that backlog is up low to mid-single-digit. And that represents roughly about two-thirds of a new equipment revenue. So that should be kind of up low to mid-single-digit next year, let’s say low-single-digit.
The big variable, of course, is one-third of the revenue, which is China. Right now China backlog is down low-single-digit. It could be down mid-single-digit by end of the year. And what happens to the market over there? It could be flattish, it could be down 10%, it could be up, right? So that we do not know as to where that’s going to happen. But let’s assume that the market goes down next year and then China is probably down 5%. So that would mean that our new equipment revenue could be flattish. So — but if I put things in a perspective, it could be flattish, it could be up 2%, it could be down 2%. But 2% or 3% of new equipment revenue is about a couple of $100 million of revenue. And if we look at our margin, it’s about $14 million, $15 million, $18 million of profit, so it’s just $0.02 or $0.03 of EPS.
If you look at what we did this year, we more than overcame that through the service business, which is why we, you know, our guide bent up every quarter because of lack of service. So we think we should be able to make that up next year through our service business.
Julian Mitchell: That’s very helpful. And thanks, Anurag. And maybe just my follow-up would be around the service margins perhaps. So, you know, one element is, you know, if I just, maybe it’s some incorrect math’s, but it looks like the service margin in Q4 in the guide is down sequentially off flat sales and sort of flattish year-on-year, despite a big increase year-to-date. So just wanted to check if that’s right and if it’s just conservatism or what have you? And then secondly, on the service margin, how are we thinking about sort of price cost or price net of material cost and service wages playing out? Is that, sort of, getting larger into next year or narrowing as a tailwind? Just any context around that, please.
Anurag Maheshwari: Oh, absolutely. So I’ll break it up into two separate questions over here. So first is, yes, the guide implies 24% margin for service in the fourth quarter, which is eventually down 80 basis points, but we’re going to exit the year at what we guided for the full-year, which is 24%. It’s a very healthy margin rate. It’s from last year where we actually, it’s a tough compare because last year we grew margins by 60 basis points, 70 basis points in the same quarter. And the reason there’s a difference between the 24.8% and 24% is largely two things. It’s the mix, we — I mean, we are very encouraged. I mean, the performance in third quarter margin was fantastic. I mean, if you look at the portfolio maintenance side, portfolio is growing, pricing is sticking, we are flushing more backlog into revenue, and the repair business, which we thought after two years of very high growth was going to slow down, is not, and it’s because of the strategy of the team of penetrating more of the portfolio, and that mix was high in the third quarter and obviously productivity which helped us get to the 24.8%.
