Operator: Our next question comes from Julian Mitchell with Barclays.
Julian Mitchell: I wish Lee all the best. Just wanted to circle back to my first question on the international sort of demand picture. So I guess, if you look at the last 6 quarters, you’ve had orders down in 5 of those 6. When you think about inventory levels, and it’s an extremely disparate set of countries and markets, that down 8 on orders you saw in the most [indiscernible] quarter and when you think about the duration of these orders downturn, I just wondered any perspectives on when you think we start to sort of pull out of that order slump. And if you think that down 8 marks the kind of low point of what we should see this down cycle in international orders.
Jennifer Parmentier: Well, Julian, orders, like you said, it’s been choppy for a while. In international, Q1 organic growth was in line with our prior forecast at segment level. As Lee mentioned, in Europe, destocking continues, softness in some broad-based end markets. Low recovery in China is impacting that region. And there’s Eurozone macroeconomic indicators that remain in contraction territory. So I would say, hard to tell there. But two, again, China, if you look at Asia Pacific, China recovery remains slow. There’s continued softness in construction in semicon and automotive. As we mentioned earlier, there is a bit of a tough comp for last year Q1 because they were rebounding from the Q4 shutdown. So in the guide, no big change for the first half, and the full year is largely in line with previous guidance, so at about negative 3%. This is the best view we have today.
Julian Mitchell: And then on the North America business, I think a lot of investors still get concerned when they see some of those big sort of mobile OEM customers talk about backlog down, and what does that mean for their inventories for suppliers such as yourselves and others. So maybe just remind us of the scale of that kind mobile piece within North America. And how do you gauge or what’s your assessment of that inventory level at some of those big machine or mobile customers?
Jennifer Parmentier: So as Lee mentioned, there’s a certain amount of rebalancing going on there as well as dealers are starting to get some inventory. But it kind of goes in line with the constant analysis we do on the backlog to make sure that there are no pushouts, there are no cancellations. And in discussion with some of our big OE mobile customers, they are adamant that the orders, the backlog are real. And some have even commented that if they happen to get a cancellation from one customer, they have another customer who will take that slot right away. So we still feel pretty positive about that. But again, as — if the supply chain is improving, it’s helping us. So I think we’re in a pretty good position there.
Todd Leombruno: Yes, Julian, I would just add. Lee brought this up earlier, but you think about the North America portfolio, that does include LORD. That does include the CLARCOR businesses. There’s a significant amount of aftermarket that we benefit from in the North America business, and I think that’s helped offsetting some of these larger OEM callouts.
Jennifer Parmentier: Longer cycle.
Operator: Our next question comes from Joe O’Dea with Wells Fargo.
Joseph O’Dea: First question is just related to field inventory. I think some of the corrections have been going on for several quarters now. And so what your views are, both at an OEM level and a distributor level and maybe even if you take it by region. But just how far along that process is? Are those headwinds actually starting to abate a bit?
Jennifer Parmentier: Yes. Well, I think as we’ve gone through the regions, what we’ve talked about here is that first, again, backlog coverage remains strong. Destocking is continuing. We probably saw a little more of that in North America in Q1 than we had anticipated, and it’s continuing. But as Lee pointed out, the overall channel sentiment is very positive. As I was just mentioning before, international, too, I mean, the backlog is strong, too, there. But the orders have been choppy. So to try and say where that’s going to wind up in the next quarter or 2, we’ll have a better update for you in February. But as Lee mentioned, this is — and international is really a story about China recovery remaining slow and the impact that it has on — and on Europe. So continued softness there in industrial markets, and destocking is continuing.
Joseph O’Dea: And then, Jenny, I wanted to ask on investment spend and just strategic focus as you think about opportunities over the next 1 to 2 years and really, in particular, on the industrial side of the business. But across the regions, across technologies, where you’re trying to direct the most emphasis right now because of the biggest opportunities that you see for returns on some of that spend?
Jennifer Parmentier: Well, our CapEx goal has increased from 1.5% to 2%. We were at 2%, a little bit above in fiscal year ’23. And we’re forecasting 2% for fiscal year ’24. It’s a pretty big increase from our 10-year average. And our focus is on safety, automation, robotics, some AI tools on AI-driven inspection, so things that are really going to help us increase our efficiency and our productivity. We’re investing in the supply chain. And then we’re investing in specific divisions where we have — we need to support secular growth. So, for instance, electrification projects with our customers. So when we look at this, the investing in the supply chain is something that we think will help us well into the future and make sure that we have not only those local-for-local strategy is intact, but dual sourcing strategies. And so that investment, we expect that to pay dividends well into the future.
