Lincoln Electric Holdings 25th Annual Diversified Industrials & Services Conference

Yeah. So Chris, that's a great place to start. Short-term thinking about what are the demand drivers and how we look at the industrial cycle. So we came into 2026 pointing to the strength of order activity, quoting activity within the automation business, and the backlogs that gave us visibility to a level of real volume growth in the back half of the year, pointing to potentially the end of the second quarter. Now, we've seen that. We typically have line of sight for 6 to 9 months or so worth of business and backlog out of automation, so we had confidence in that. And then we also saw consistency in the level of consumable volumes. So a little bit more than half of our business is consumables, and what that represents is what's actually being welded, what's the fabrication, the level of production going on in the market.

When we point to stability in consumable volumes, what we're telling you is that production activity, whether it's in general industries or heavy industries or automotive, that's what tracks to production, is the level of consumable volume activity. So we saw consistency, some stability in volumes, which is a good sign, and then we saw an inflection in the Americas Welding segment. Our consumable volumes in the second quarter were up mid-single digits. So what it's telling you is that you're seeing a level of industrial activity that's holding and growing. And typically, after you've seen some consistent production activity, then you see conviction of capital investment. So we had already seen automation investment, which is driven by production capacity needs, quality needs, safety, all that with the automation solution offers to our customers. And then we saw a significant inflection in standard welding equipment.

That's what we saw entering into Q2, and now we've consistently now in the third quarter. So that would progress to what we would typically would expect in the strength of an industrial cycle. Consistency in production, that consistency translates into conviction of capital investment, and so that's the tone. It's been strong across the Americas segment, and that's what I mean by consumables, standard equipment, and automation. We've seen strength in Asia. So when you think about the international markets, about 70% of our business is within EMEA, and then the 30% is Asia. We see good growth out of Asia. EMEA continues to be challenged, not only in core Europe, but also with the conflict in the Middle East. And then we've seen Harris starting to inflect some positive volume now in this third quarter.

Those are the drivers of demand that point to the kind of strength that we expect. That is all pretty much how we look to short-cycle activity. Long-term expectations, organic growth, we are talking about mid to high single-digit CAGR on the long-term strategy. We just launched this year our RISE strategy and set forward 2030 targets, and we expect the kind of organic growth that would be in the mid to high single digit, leaning with more significant growth, high single digits on the automation side of our business. That is kind of the lay of the land there, Chris.

The automotive end market is the only end market that we have not seen growth yet. We were down mid-single digit in the second quarter. As I mentioned, think about our consumable activity in automotive time to production. When the markets are telling you that production is down low to mid-single digits, you can see our consumable volumes are tracking that, and that is what our comments infer. We have seen, as you point to, high level of quoting activity, but we have not seen that turn into orders. We have seen broad growth in automation, in general industries, heavy industries, structural fabrication. We have not seen it yet in automotive. You are right, the last two years have been challenged. You had the whole decision-making around EV and ICE, and then you had all the dynamics, elections, and otherwise, and pause in investment, extending the life of existing platforms.

We're optimistic that the 2028, 2029 program launches would mean demand for us and some of our longer lead time items within our offering, and the next few months are going to be pretty important telling tale on that. Because there are the market indicators, Standard & Poor's updates that come every April and October. We want to see that align to what our commercial team is advising us on what's happening on quoting activity. We want to see that line up with real orders and real conviction across the industry that that 2028, 2029 program launch is going to mean meaningful investment.

We're seeing broadly outside of automotive, right? Automotive continuing to manage, but that's mid-single-digit decline, but you're seeing the strength of general industries, heavy industries, the kind of broader level of automation investment. That excites us. Pull back a few years ago, before we acquired this business called Fori Automation, which was 100% automotive. Now, that introduced capabilities and we then introduced as a solution within our automation offering with AGVs, material handling equipment, testing and positioning type equipment, which is very good capabilities in an automation offering. But it leaned into our mix of automotive to be almost half the business. So now we're tracking about 40% of our automation business tied into automotive. We'd like to see that more balanced, and it was prior to our acquisitions, like a third general industry, a third heavy industry, structural fabrication, and a third automotive.

So that's the kind of mix that would then foster adoption because we've introduced products and capabilities that would allow small mid-size fabricators to really embrace automation. So when you see us talk about cobots and other means of automation that makes it easier to weld, it's because we want to broaden out the adoption within our automation footprint.

Yeah, now look, I think what's important to think about is that the secular drivers for automation investment are not going away, and we still believe we're in the early part of industrial adoption and automation capabilities. So we see long-term growth in automation in the high single digits. As I walk through organic growth drivers, whether the Asia dynamics long-term being strong or Americas, we believe that that automation portfolio is going to yield high single digit type of growth and broad base, and we just see that continuing to drive. So it does give us, because some of these projects are longer cycle type projects, it gives us some visibility in what's progressing six, nine months, in terms of an investment cycle.