Pentair(US:PNR)2023-01-31 17:59Financial Data and Key Metrics Changes - Sales increased by 9% to $4.1 billion, segment income rose by 12% to $768 million, return on sales (ROS) expanded by 40 basis points to 18.6%, and adjusted EPS increased by 8% to $3.68 [23][59]. - For the full year, sales grew by 9% with core sales up by 6%, and segment income grew by 12% [58]. Business Line Data and Key Metrics Changes - Consumer Solutions sales grew by 12% with core sales up by 4%, while Industrial & Flow Technologies saw core sales growth of 10% [58]. - In Q4, Consumer Solutions sales declined by 1% with core sales down by 11%, while Industrial & Flow Technologies reported strong core sales growth of 11% [32][36]. Market Data and Key Metrics Changes - The Pool segment had approximately $1.6 billion in revenue in 2022, expected to grow sales mid-single digits over the long term [39]. - Water Solutions segment sales are expected to increase mid-teens at the midpoint, with commercial business up approximately 40% and residential down approximately 10% [70]. Company Strategy and Development Direction - The company has split its Consumer Solutions segment into Pool and Water Solutions to improve transparency and customer service [29]. - The focus is on transformation initiatives aimed at driving significant margin expansion, with a target of expanding ROS to approximately 23% by 2025 [65][72]. Management's Comments on Operating Environment and Future Outlook - Management expects 2023 to be a catch-up year for excess demand realized in 2020 through the first half of 2022, with a return to more normalized demand in 2024 [50]. - The company is confident in its business model and transformation initiatives, which are expected to drive long-term shareholder value [49]. Other Important Information - The company generated $283 million of free cash flow from continuing operations in 2022, with a plan to maintain disciplined capital allocation and focus on debt reduction [37][63]. - The company has identified over 400 basis points of targeted margin expansion by 2025, up from the previously discussed 300 basis points [65]. Q&A Session Summary Question: Can you provide an update on the residential portfolio within the Consumer Solutions group? - Management indicated that the residential portfolio still represents roughly 40% of the overall Water Solutions segment and remains focused on the trade and professional channel [77]. Question: What is the guidance for Pool sales in 2023? - Management expects Pool sales to be down low double digits in 2023, reflecting an inventory rebalancing year across the pool industry [92]. Question: How do you see the pricing environment affecting your guidance? - Management expressed confidence in the pricing actions already taken, anticipating that price will slightly exceed inflation, while also acknowledging potential channel discounts [106]. Question: What are the expectations for free cash flow conversion in 2023? - Management has high confidence in achieving free cash flow conversion of 100% of net income, driven by improvements in working capital [129]. Question: Can you elaborate on the synergies from the Manitowoc acquisition? - Management believes there are significant cross-sell opportunities with Manitowoc Ice, aiming to ensure that every ice machine has a Pentair filter [135].