Joseph Ahlersmeyer: Hey, good morning, everybody. Thanks for taking my questions.
Bob Pagano: Good morning.
Joe Ahlersmeyer: Yes. Great progress on the margin, continued here in the year. I think Slide 6 says it all, your ability to offset some of the headwinds here. Maybe if you could just talk about what you’re assuming at this point for raw material inflation or deflation in 2024? And then just talk also about how some of the early pricing is going, the pricing that you put in, in the first quarter of ’24?
Shashank Patel: From a raw materials standpoint, Joe, I mean we’ve assumed about a 2% to 3% inflation on raw materials. The biggest components for us are brass and copper. And we do, we do lock in as we talked about three months, four months ahead. So we got good visibility into the kind of April time period. And so far, that’s good for the first quarter. As far as pricing, we don’t talk about price until the quarter is done. And we’ve announced the price increases and then we’ll report on what the price realization was in Q1, when we do our call in early May. For Q4, the price realization was approximately 2%.
Joe Ahlersmeyer: Okay. Thanks, Shashank. And the CapEx guide, the step up, maybe if you could just give some building blocks to what that reflects. And congrats on bringing the ERPs down, as somebody that used to work in those 30 kind of makes me sweat. But is any amount of that capitalized over the coming years? Or is this going to be expensed?
Shashank Patel: No, there’s a good portion that you said, there’s about, there’s a good portion that will be capitalized in 2024. You see the step-up in CapEx. Part of that is M&A-related, but part of that is the ERP. So there will be a good portion of the ERP that will be capitalized in 2024.
Joseph Ahlersmeyer: Understood. All right. Thanks a lot, guys. Good luck.
Bob Pagano: Thank you.
Shashank Patel: Thank you.
Operator: Your next question comes from the line of Joe Giordano with TD Cowen. Your line is open.
Unidentified Analyst: Hi. This is [Zane] (ph) on for Joe. I just wanted to ask about the sequentials you’re seeing in inflation. Are you seeing the normalization sort of slow down a little bit and as inflation stayed relatively high in recent months?
Shashank Patel: So on the materials side, material started coming. I mean copper, steel, they have a different cycle, but they started coming down early last year. Quite frankly, over the last couple three months, they’ve gone up a little bit, but they do bounce around a little bit. On the compensation straw side, which is obviously the second biggest element of cost. We have seen a compensation side, a little bit softer, but there’s still inflation out there on the compensation side across Europe and the Americas.
Unidentified Analyst: Thank you for that. And are you guys, are the Red Sea issues impacting you guys at all?
Shashank Patel: Yes, they are. So from a freight, yes, go ahead, Bob.
Bob Pagano: No, go ahead, Shashank. You got it.
Shashank Patel: Yes. So we do get goods in Europe from China that used to go through Red Sea and obviously, now they’re going through the ports in South Africa. So there’s extra time as well as the cost for container cargo. You’ve read about it. They’ve gone up, certainly not at the levels we experienced during the pricing disruptions, but they have gone up significantly over the last six, eight weeks.
Unidentified Analyst: Great. Thank you so much for that.
Bob Pagano: Thank you.
Operator: [Operator Instructions] Your next question comes from the line of Adam Farley with Stifel. Your line is open.
Adam Farley: Yes. Good morning, everyone. My first questions are around European margins. Can you provide some color on what drove the positive mix in the quarter? And should we expect any positive mix impacts going forward?
Shashank Patel: So the positive mix in Q4, as Bob talked about, our OEM-driven business was down primarily because of heat pumps and ancillary equipment that tends to be lower margin, whereas our France business, which has higher margin, more on the plumbing side, that held up pretty well. So, we had favorable mix there. As well as from an op margin perspective, we did benefit from lower cost of raw materials in Q4. And that was, as I said the buys we had made early on in beginning, in the June, July time period. So, it’s a combination of those two factors that drove the op margin in Europe.
Adam Farley: Okay. Thank you for that, Shashank. And then on Americas growth, maybe just provide a little more detail on what markets are driving the continued growth in valve products? And then on the flip side, what markets drove the declines in gas connectors? Thank you.
Bob Pagano: Yes. So look, institutional, light industrial has been positive. Single-family is basically flattish. Multifamily is slight growth, and we’re expecting it to temper off in the second half of 2024. And then in general, the gas connectors are in — primarily in specialty-type applications. Some of it is destocking, and some of it is in residential niches, right? We’re talking generators, we’re talking gas appliances, things like that, that are moving up and down. And if you recall, we had available capacity and took a lot of share in prior years related to having our products, our gas connectors in North America produced and a lot of our competitors get them overseas. So we knew we’d give a little bit back in market share in that area, but we capitalized it in 2023.
Adam Farley: Okay, great. Thank you.
Bob Pagano: Thank you.
Operator: There are no further questions at this time. I will turn the call back to Bob Pagano for closing remarks.
