The operator introduces the participants of the conference call and reminds listeners that it will be recorded. Andrey Galiuk then begins the call and mentions that it will be available for replay on the company's website. He also mentions that there will be forward-looking statements based on current expectations, and that the actual results may differ due to various risks and uncertainties. Richard Tobin then takes over and discusses the company's encouraging results in the third quarter, with improved revenue and order rates, normalizing lead times and inventories, and a return to normal seasonality. He also mentions that the backlog is normalizing along with lead times as longer-dated orders are shipped.

The company's margins were strong in the quarter due to productivity, cost controls, and disciplined pricing. The recent portfolio moves, such as the acquisition of FW Murphy and sale of De-Sta-Co, align with the company's goal of focusing on higher-growth and higher-return businesses. The company's balance sheet and cash flow are strong, providing options for future acquisitions and capital return strategies. However, the company has reduced its EPS guidance for the full-year due to delays in biopharma recovery, temporary cost and supply chain issues, and a trend towards inventory liquidation. Overall, demand remains good and the company expects to balance channel inventories with demand by the end of 2023, with inventory position being critical for future financial results.

In the upcoming year, the company expects to see growth in bookings due to recovering end markets and a strong backlog. Consolidated revenue was down 2%, but bookings were up sequentially. Segment margins were at a record high of 21.7%, driven by productivity and portfolio improvements. The Engineered Products segment was down 3% organically, but order rates were up 12% due to strong demand in the waste handling business. Margins in this segment were up 260 basis points, and the company announced an agreement to divest one of its operating units, De-Sta-Co, at an attractive valuation.

The company's strong valuation highlights the quality and performance of its businesses, which have high operating margins and less cyclicality. The Clean Energy & Fueling segment saw flat revenue organically, with growth in LNG and hydrogen markets and a return to growth in aboveground retail fueling. Margins were at 20%, up 40 basis points due to cost actions and solid execution. Imaging & ID was down 4% organically due to slowing demand in China and a difficult comparable period, but margins remained strong at 26%. Pumps & Process Solutions was down 7% organically, with strong growth in precision components and hygienic dosing systems offset by softness in biopharma. Segment margin was 27%. Climate & Sustainability Technologies saw 2% organic growth, with strong growth in CO2 systems and heat exchanger shipments in North America and Europe, but demand headwinds in Asia.

In the fifth paragraph, the company discusses the strong margin performance of 18% in the quarter, driven by positive mix and productivity investments in their refrigeration business. They expect this trend to continue for the whole segment. In the next paragraph, the company provides an update on their revenue and bookings, with the US, Europe, and Asia all experiencing declines. The company also discusses their cash flow, which has significantly improved year-over-year and is expected to continue in the fourth quarter.

The forecast for 2023 free cash flow is 13-15% of revenue. In the fourth quarter, Engineered Products is expected to have moderate growth, with strong performance in aerospace and defense but a decrease in the waste handling business due to a recent strike. Margins are expected to improve due to positive price/cost trends and productivity investments. Clean Energy & Fueling is expected to remain steady, while Imaging & ID is expected to decline due to slowing demand in Asia and a subdued outlook for textiles. Pumps & Process is expected to stay flat, with growth in precision components but a decrease in polymer processing.

The biopharma industry has not fully recovered from the pandemic, leading to subdued growth in 2023. The company has adjusted its production and inventory levels accordingly and expects margin headwinds due to negative mix. The Climate & Sustainability Technologies division will also see a slowdown in the fourth quarter due to decreased demand for heat exchangers. However, the company is seeing strong demand for CO2 refrigeration systems and expects continued margin improvement. The updated EPS guide takes into account changes in demand, production, and costs related to acquisitions and divestments. The company's focus on reducing inventories and prioritizing cash flow is expected to set them up for strong operating margins in 2024.

Inorganic moves made during the quarter, including the acquisition of FW Murphy and sale of De-Sta-Co, align with Dover's portfolio priorities and improve margin growth and recurring revenue. The FW Murphy acquisition enhances Dover's position in the reciprocating compression industry and capitalizes on the growing demand for advanced remote monitoring and control solutions. This acquisition also complements Dover's clean technology and leading position in sealing and valve technology for alternative energy applications, particularly in the hydrogen market. The recent announcement of federal funding for hydrogen hubs has sparked interest in this market and Dover is well positioned to benefit from the expected investments.

Dover has made significant moves in the hydrogen market through acquisitions and organic investments in gas compression components. They have strong relationships with industry players and are well-positioned to capitalize on the growth of hydrogen. The recent EPA rule on refrigeration systems is expected to benefit Dover's CO2 systems business, which has a leading position in Europe and a growing presence in the US. They have invested in expanding capacity and implementing a platform-based product strategy to drive standardization and improve product quality. Dover's global CO2 business is currently at $200 million in revenue and is expected to see 30% growth in 2023. They are also introducing new CO2-based heat pump offerings for industrial and district heating applications.

The company has an active pipeline of orders and is seeing growth in its heat exchanger business, particularly in the area of sustainable technology. They have been a key supplier to hydronic heat pumps, which are being used to decarbonize residential heating. Legislative initiatives are driving the conversion from fossil fuel boilers to heat pumps, but recent uncertainties have affected near-term volumes. The company is confident in the long-term growth prospects for heat pumps and has expanded its capacity. The European residential heat pump market represents only a quarter of their heat exchanger business, and they have other growth vectors. The company thanks their global teams for their strong financial performance and moves on to the Q&A portion of the call.

Steve Tusa, an analyst, asks about Dover's more cautious outlook for the fourth quarter and next year. He notes that their previous predictions were wrong due to a lack of recovery in biopharma demand and unexpected market dynamics, such as the UAW strike on trucks. Dover's CEO, Richard Tobin, responds by acknowledging the challenges in biopharma and the recent reversal in heat exchanger demand. He also mentions that their plans for shipping from ESG have been affected, leading to a less robust quarter than expected.

The company is shifting its focus towards reducing finished goods in the supply chain and driving for cash in order to protect margins in 2024. They are adapting quickly to market demand and managing inventory to avoid oversupply. The market outlook for next year is uncertain due to potential headwinds and the withdrawal of liquidity, and the company does not plan on relying on government bailouts.

The speaker believes that monetary policy will play a big role in predicting growth for next year. They are confident that their company will not have excess inventory and will not have to lower prices to drive growth. They expect to see growth next year even in a slow economy, and have made investments to support this growth. When asked about restructuring plans for Fueling Solutions, the speaker mentions that it will protect margins in Q4 due to poor mix forecasts in the below-ground portion of the segment.

The company is allowing inventory to be drawn down below normal levels in order to protect production performance into next year. They have better visibility on inventory levels in distribution compared to OEMs. The tax rate is expected to return to normal levels next year.

The speaker believes that the company's backlog is no longer excessive and will likely be in balance with inventory by the end of the year. They do not anticipate a significant increase in bookings in the fourth quarter, with most coming from ESG at high dollar value. The speaker also mentions that there is a general caution due to reduced lead times.

The speaker believes that there will be a rush for bookings in Q4, but they expect a significant increase in Q1. They are aggressively reducing their inventory, which is below normal for their channel partners due to high interest rates. They are not willing to incentivize revenue through price or terms and will instead cut their own production in Q4.

In response to a question about the company's revenue trajectory, CEO Richard Tobin explains that they expect to see a positive turn in the first quarter due to inventory levels normalizing and increased throughput. He also discusses the impact of destocking in the biopharma sector and the growth potential in other areas such as Precision Components and MAAG. Despite challenges, the company remains confident in their performance and expects easy comps in the next year.

During a conference call, Citigroup analyst Andrew Kaplowitz asked Tenneco CEO Richard Tobin about the company's ability to maintain margins in a difficult economic environment. Tobin stated that they are always working on cost efficiency and structural cost reduction, and have the ability to flex their cost structure if needed. He also mentioned the importance of inventory position for pricing in 2024 and that they are not incentivizing demand through pricing actions. Tobin then discussed the performance of Tenneco's DCST segment, noting a slowdown in heat exchangers but strength in CO2 systems. He believes DCST will continue to grow in 2024 and expects strong margins.

Richard Tobin discusses the heat exchanger business and the inventory clearing process. He expects growth in the heat exchanger business next year and anticipates an increase in margins due to the trajectory of refrigeration and CO2. He also mentions the potential impact of seasonality and the expected decrease in margins from Belvac. An analyst asks about the timeline for inventory normalization, and Tobin explains that they are in control of their own inventory and expect to see a significant reduction by the end of the year.

During the quarter, the company saw a significant decrease in channel inventory, resulting in $600 million of free cash flow. The company plans to allow the inventory to clear instead of pushing for more revenue. They expect to be in balance in most end markets by the end of the year and are confident in their growth trajectory. In the DPPS segment, they expect flat growth and similar margins for the next quarter. When considering additional pruning of the portfolio, the company is unable to provide a specific percentage of revenue that may be affected.

The company's portfolio is constantly under review and there is no specific target for acquiring businesses of a certain size. The recent M&A activity is a positive and the company would like to continue this trend in the future. The capacity for heat exchangers is not affected by the current market imbalance and the company's visibility is limited due to the majority of sales being to OEMs. The slowdown in heat exchanger sales for the rest of the year was only recently discovered and will impact the company's performance.

The speaker is not worried about the capacity investment for heat pumps because they believe that the technology will continue to grow. While there has been a lot of capacity announced, it seems unlikely that it will affect the market. The company's free cash flow margin guide may decrease slightly due to the volatile demand and the need to liquidate inventory, but they are making progress in reducing raw materials and production to clear out WIP and finished goods. The main concern now is reducing receivables in order to meet the guidance for the year.

The company has been struggling to bring down inventories, but they were able to do so in Q3 and expect to continue in Q4. Receivables have increased due to timing of sales, but they expect to see robust cash flow in Q4. They are confident in their revenue growth outlook despite recent changes in backlog, as they are taking steps to manage inventory levels in the channel.

The speaker explains that the company had a good year in below-ground retail fueling and a bad year in above-ground. This is due to the time it takes to build and refurbish sites, as well as the increase in the cost of working capital loans for contractors. This has caused a headwind for below-ground retail fueling.

The speaker discusses the challenges they are facing in their business, including delays in getting work done and increased carrying costs for inventory. They also mention that certain regions, such as Europe and China, have not performed as well as expected, while the US has been affected by rising interest rates.

During a recent earnings conference call, Dover executives discussed the company's portfolio review and decision to sell the De-Sta-Co asset. They cited concerns about the asset's end market and geographical exposure, particularly in Europe and Asia. The executives also mentioned the potential for future stock buybacks, but noted that they are currently focused on finalizing the fourth quarter results and the acquisition and disposal of assets.

This summary was generated with AI and may contain some inaccuracies.