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Good day, ladies and gentlemen, and welcome to the Colfax first quarter earnings call.
[Operator Instructions] As a reminder, this call is being recorded.
I would now like to turn the call over to Kevin Johnson. You may begin.
Thank you, Michelle. Good morning, everyone, and thank you for joining us.
My name is Kevin Johnson, and I am Vice President of Finance at Colfax. With me on the call today are Matt Trerotola, President and CEO; and Chris Hix, Senior Vice President and CFO.
Our earnings release was issued this morning; and is available in the Investors section of our website, colfaxcorp.com. We will also be using a slide presentation to walk you through today's call, which can also be found on our website. Both the audio of this call and the slide presentation will be archived on the website later today and will be available until the next quarterly call.
During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statements that we might make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law.
With respect to any non-GAAP financial measures made during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and today's slide presentation.
Now I'd like to turn it over to Matt, who will start on Slide 3.
Thanks, Kevin. Good morning, and thank you for joining us today.
We're pleased to report our first quarter operating results. We had a good start to the year and ended Q1 with momentum to deliver significant earnings growth in 2018. I am pleased to see our ESAB business is continuing to deliver healthy, broad-based organic growth. Our efforts to improve customer service, commercial processes and the new product pipeline continue; and the business has a healthy outlook. After a challenging finish to 2017, the Howden business is showing signs of stabilizing, with recent results in line with expectations that we shared in February. Additional restructuring efforts are well underway, and we have a clear path to margin improvement in the second half of 2018.
We completed 5 acquisitions in 2017 and the Sandvik welding business acquisition in Q1 of 2018. I am pleased to report that these acquisitions are on track, performing well and delivering results that strengthen our businesses. I will share more detail in a few minutes on these acquisitions.
On Slide 4, you can see that the team at ESAB has delivered strong growth over the past few quarters. And in Q1, we took another step forward. We delivered healthy organic growth across most regions, with North America leading the way. In Q1, our margins bounced back as planned, up 170 basis points from Q4 of 2017. We continue to face steel cost escalation and are closely monitoring the potential impact from the recently announced tariffs. The team has been proactively addressing these pressures through price and productivity, and I expect the business to take another step forward this year on our path to mid-teens segment margins. We are making progress across a range of growth initiatives in both equipment and consumables, and the customers are excited by our strong 2018 lineup of new products and technologies.
On Slide 5, I want to share with you how the Colfax Business System helps us to drive growth with an ESAB example. Lean process improvement is often thought of as synonymous with manufacturing, but CBS is a holistic business system that helps us continuously improve across all of our business processes. Our fab tech sales team are expanding the use of value-selling tools to capture value for our innovation and to drive sales force productivity. These tools help teams to quantify and communicate value to customers and increase the cadence and efficiency of our sales teams. A terrific example is a North American team who I spent some time with recently. One of our regional teams there was able to increase weekly sales calls by 25% and grow the sales funnel by over 30% using these tools. The same tools and standard work are increasingly being used by our sales teams in all regions to sustainably grow our business.
Slide 6 frames our progress in the Air & Gas Handling business. The year started as expected. In the first quarter, the business had 2% core sales growth, plus another 17% from the STE acquisition, but orders were down as expected. We continue to achieve strong growth in our strategic industrial applications, and power markets have stabilized. The opportunity funnels in oil and gas and mining remain constructive and improving.
The Howden business has a clear path to improve margins through the year and deliver earnings growth in 2018. Our Q1 booked margins improved. Restructuring projects are on track, and the team are focused on a range of pricing and productivity actions. We also continue to identify projects to drive the core cost structure down further. Slide 7 is a more in-depth review of Howden orders by key end market. Our industrial markets continue to move positively. We had very strong industrial growth in 2017 and grew 6% in Q1 of 2018. Our strategy has included moving deeper into less-cyclical industrial applications through application development, dynamic resource allocation and attractive acquisitions like STE. Oil and gas is a longer-cycle business, and major order wins can significantly change quarter-versus-quarter comparisons. As you can see, 3 of the last 9 quarters included impacts from larger orders. Underpinning the business is a more steady base of orders with a range of $45 million to $60 million per quarter. The path to consistent future growth here is an uptick in that base, and the business could also benefit from future large project awards. We continue to see positive market trends, healthier opportunity funnels and a recent uplift in customer RFQ's and proposals. These trends suggest a return to consistent growth later this year or early next year.
Currently, power generation orders are about 12% of Colfax, and Howden newbuild power is only about 4% of Colfax. The aftermarket part of the business operates at a relatively steady rate. The newbuild portion stepped down in the third quarter of 2017 as the Chinese government paused power investments, and we talked about that when it happened. Our order trends and funnel confirmed that the power markets have stabilized at this lower level, consistent with our guidance and our plan. While we are well positioned to service projected future power growth in developing markets, our Howden strategic focus is to diversify aggressively into industrial markets, retain and grow our aftermarket and serve mining and oil and gas investment growth in the coming years.
The integration of our recent acquisitions shown on Slide 8 is going very well. These new Colfax teams are focused on delivering the unique value drivers from each business while starting to improve the business with CBS and capture synergies. I have regular visits to the acquired businesses, and I'm pleased that we remain on track with our plans. Earlier this week, I visited our Simsmart and Ventsim teams. They have done a terrific job creating a full range of ventilation management solutions for mining. And we're celebrating a recent win on a reference project in Australia. I got to also check in on a Kaizen that they were doing to simplify their order-to-payment process to make sure that they're ready to scale to serve the large funnel of future opportunities. I recently visited Howden turbo, formerly STE. They have made a smooth transition to Colfax and are building momentum in the marketplace while driving supply chain and technology improvements in collaboration with other parts of Howden.
In all of these situations, we have the opportunity to leverage our market access and promote new products and technologies to a larger set of customers. Some of the businesses, like HKS and Ventsim, advance our data-driven advantage strategy through new technologies. In each case, our business platforms are strengthened by these acquisitions. Looking ahead, we continue to work an active pipeline of bolt-on acquisition opportunities and potential new platforms.
And now I'll turn it over to Chris to discuss the financial results.
Thanks, Matt.
I'll start my comments on Slide 9.
Total company sales grew 20% to $881 million with 6% of FX benefit and 9% contributions from acquisitions. Both of our businesses posted organic growth, with ESAB continuing to operate in healthy markets and Howden delivering revenue from backlog.
Gross profit grew $31 million in the quarter. And operating profit increased $5 million, reflecting the organic growth in the businesses and also acquisitions and a $7 million gain from the sale of a facility within the Air & Gas Handling business. Gross margins were down a couple points due to older, lower-profitability Air & Gas Handling projects being delivered from backlog and the effect of matching revenue with raw material inflation. As Matt mentioned earlier, we are seeing improved margins on new orders. And we expect this, in combination with restructuring benefits, to translate into improved margins as we progress through the year.
Embedded in adjusted operating profit but not adjusted EPS is $21 million of amortization and other acquisition-related noncash charges versus $13 million in the prior year quarter.
Adjusted EPS grew 23% to $0.48 as a result of higher operating profit, which included the facility sale gain. Results also included onetime tax benefits that reduced the expected tax rate from 24% down to 21%. For the rest of the year, we expect the adjusted tax rate to be 23% to 24%.
Slide 10 includes the first quarter results for our Fabrication Technology business. Segment sales of $533 million were up 16% in the quarter, 6.5% organically. We achieved growth in most regions, especially North America. And year-over-year pricing caught up with raw material inflation. Acquisitions added another 5% to top line growth and were accretive to the quarter's results. Adjusted operating profit grew 15% to $64 million in the quarter. Margins were in line with the prior year and improved 170 basis points sequentially from the fourth quarter. Our teams continue to dynamically manage raw material inflation. The new trade tariffs have had little effect on the business, and we are prepared to respond if we see a higher impact than anticipated.
The Air & Gas Handling segment, as shown on Slide 11, had a 27% improvement in sales quarter-over-quarter. Organic growth was 2%, FX 8%; and acquisitions contributed the balance. Adjusted operating profit was up slightly over the first quarter of 2017 and included the gain from a facility sale in China. We are consolidating one of our older facilities into the expansion of one of our best facilities, which will provide productivity benefits and support future growth in this important market. As expected, segment margins reflect the lower-margin projects that are clearing backlog in the first half of this year. We continue to expect margin improvement from healthier project orders and restructuring benefits, which will enable an improvement beyond Q1.
Slide 12 includes our orders and backlog comparison. Backlog is up $22 million as a result of the STE acquisition and FX tailwinds, somewhat offset by lower organic orders. Broad-based improvement in general industrial orders was more than offset by the expected decline in power. And oil and gas-based orders came in within the recent historical range. We have a clear line of sight to sequentially improve orders in Q2. We also expect better year-over-year comparisons in the second half of the year as we lap last year's third quarter step-down in power.
Wrapping up on Slide 13. We expect to see fab tech market conditions remain constructive for the rest of the year. Air & Gas Handling performance will improve as we progress through 2018, supported by restructuring actions and an improved margin trajectory in orders. We have a high-quality M&A pipeline, which will enable us to strengthen our businesses and accelerate their growth. And we remain focused on adding a new platform.
Following our first quarter performance, we are raising our guidance $0.05 to $2.05 to $2.20, which represents growth of 18% or more.
That concludes our prepared remarks. Michelle, please open the call for questions.
[Operator Instructions] Our first question comes from Mike Halloran of Robert W. Baird.
So first, on the price cost side, it sounds like you guys caught up in the quarter, so maybe just a little thought on how the price cost curve is looking from your perspective, how conducive the environment is to pushing through price increases as needed and how inflationary pressures are hitting on the fab tech side and on a general basis.
Yes, Mike, we did get caught up on price cost in the quarter. And it's been some hard work by the team over a number of quarters here because steel has continued to escalate. It's hard work to get it through. This is a global business, different channels; and so you can't just kind of make one decision. You have to kind of work through it on the upside. That makes it a bit challenging but creates some opportunities on the other side potentially. What we are seeing is steel continue to escalate. Chris mentioned we had pretty limited impact so far directly from the tariffs, but the unfortunate indirect impact is that it appeared that steel was going to turn around and start moving down in a number of places in the world. And while that has happened in a few places like China, in places like North America and Europe it went up. And I think that's probably an indirect result of the threatened tariffs and some of the actual tariffs. And -- but we're hoping that in the coming quarters, as it's clear that many of those will not be in place, that then steel start to move down and we'll kind of get off this treadmill.
It makes sense. And then on the orders in the Air & Gas Handling segment, maybe give some color on the confidence in the better sequential trend as you get to the second quarter here. It sounds like you're thinking power is still stable. Is this really on the oil and gas side, continuing help on the general industrial, anything in mining? Just maybe some granularity or some color on how you see that trajectory laying out by end market there.
Yes, I think we do have good confidence that we're going to see sequential improvement. As Chris mentioned, on the power front we took the step-down there in the third quarter. That's very clear on the chart. And as we lap that in the third quarter, we'll no longer have the drag. We're not anticipating power to grow from there, but we expect it to stay in a more stabilized range, which will eliminate one large drag. Second of all, on oil and gas, Q1 of last year was 1 of the 3 quarters in the last 9 where we did have some larger projects in the mix. And so we're feeling some pressure there, but the underlying part of that business is more in a flat range. And so we expect, as we work through the year, to be in a better zone there. And we're also seeing very healthy funnels and opportunities. And so we'd certainly expect to see some growth in oil and gas in some of the coming quarters, but as I said, we won't be sure if that's sustainable growth until we see what's coming on the other side of that. So we're both driving for the orders but also monitoring the flow coming behind them. And then industrial remains in a healthy zone, and we've been performing well there. And so we put those together. We're certainly comfortable that things will improve as we work through the year. And we're really driving to get back to sustainable growth as fast as possible in this business.
Our next question comes from Jeff Hammond of KeyBanc Capital Markets.
Just on welding, one, just back on price cost. Is it fair to say we stay price cost neutral where we continue to flow through price and then that kind of keeps up with this inflation? Or can we get to a net positive? And then just if you can give us a little more color on the fab tech geographic breakdown in terms of growth momentum.
Yes, I think it's fair to say that we stay price cost neutral. And I would certainly always be looking for ways to drive value pricing beyond that, but given the amount of steel inflation there's been over the past number of quarters, at this point, again it's been a lot of hard work to stay price cost neutral or to get to price cost neutral. And we're going to be working hard to stay there in the short term. As far as growth rates in fab tech, pretty broad based in terms of growth around the world. There's obviously been the most significant acceleration in North America, but we're also seeing healthy growth in most other parts of the world, and we expect that to continue. The first month of the second quarter is continuing in line with that performance. So I think, the high-growth markets, some of them are kind of back into a strong growth mode. I think Europe is still in a positive zone, but North America is in a stronger zone than Europe.
Okay. And then just if we can kind of go back to the platform deal dynamics, like what are you seeing there? What's -- what have been kind of the holdups in terms of getting something done? And what's kind of the active pipeline on the platform side?
Yes, on the platform deal front, we've done a lot of strategy work, identified a number of areas that we are pursuing. We've been active in those pursuits. Ultimately, strategy and opportunity have to come together. And while on the one hand we are completely committed to identify and land the next platform and are, frankly, working on the next ones after that as well because that's our -- one piece of our fundamental growth strategy as a company. At the same time, we are also completely committed to have discipline in how we do that and to make sure that, when we do it, it'll be the right deal at the right price with the right opportunities for value creation over time. And today, we have been quite active, but some of the situations we've been involved in, in the end, were just not the right thing for us to do for our shareholders.
Our next question comes from Nathan Jones of Stifel.
If I have a look at Air & Gas Handling margins here, ex that, the gain on sale, margins were actually down slightly under 5%. I know you're running some low-price backlog through that from the set that you booked in the second half of '16, but that's still down a bit sequentially from the fourth quarter. Were there any other issues besides the pricing coming out of backlog there? Was there a price cost drag from steel inflation, any execution issues or anything else that dragged margins down a little bit further?
Nathan, we identified, I know, back throughout 2017 that we had this expected drag in the backlog and some of the more competitively bid projects. And we continued to signal throughout '17 that we expected that to be pressuring the first half of 2018. And then those -- as those clear the backlog, we'd see that improvement. So I'd say really that's the issue that we're dealing with here. We have a great line of sight on those projects. And as we -- and we see those clearing the backlog in Q1, more of them in Q2, but you'll see less pressure, I think, from that issue in Q2 than in Q1. And as we get in the back half of the year, that's largely behind us. And that gives us that additional springboard effect as we clear the margins, so we -- it's really principally that issue.
Okay, I think you guys were pretty clear that you're going to have low margins in there in the first half from the low-price backlog. I was just wanting to check to make sure there was nothing else in there. I would be interested in hearing a little bit more about the initiatives, the product development et cetera to support Howden's strategy to diversify more aggressively into industrial end markets. Any color you can give us on the progress you're making there?
Yes, sure, Nathan. We've got -- we've had for a number of years now a range of organic initiatives to drive aggressively into a number of industrial applications, areas like wastewater, areas -- some attractive opportunities in the steel area that are having some good growth right now, areas in the marine area. And we have environmental opportunities in the marine area. And we have organic traction on these in the last couple years. I think that's been visible in our core results, but then also both Roots and Siemens turbo were predominantly industrial businesses and so we brought a significant amount of industrial businesses there as well. And then finally, we've really been shifting our resourcing. A lot of these industrial growth opportunities are in high-growth markets. And we've been increasing our commercial and technical investments in the areas of the world that have the best industrial growth and peeling back in other areas where the segments that we've been serving before this are not in as-attractive times.
Our next question comes from Joe Ritchie of Goldman Sachs.
So my first question just focused on orders for a second. Obviously oil prices are up, and that's probably helping to instill some confidence for the remaining part of the year. I'm just curious. As you think about the types of projects that you're bidding on within the oil and gas complex, it'd be curious to hear any color on where you're seeing it specifically from a regional perspective as well as what types of projects you're seeing in the pipeline.
Yes, a couple things. So first of all, downstream, refineries have been running harder. And some of the aftermarket opportunities in the refinery sector have come back in a healthy way. In addition, some of the downstream refinery and petrochemical investments have -- some of them cut loose, but then there is a lot more of them that have become more active. I know they're around the world, but obviously there are some concentrations in areas like the Middle East and Asia. There's also a fair amount of investment in the environmental area. Desulfurization in order to be ready to meet the new marine standards is one of the things that a lot of customers are thinking about. We also -- in one of our businesses we've seen a lot of hydrogen compressor projects that are related to some of the alternative energy efforts there as well. So that gives you maybe a little bit of context and flavor of some of the different oil and gas things, some of which have been happening through this period. But then also somewhere there's larger stacks piling up in the funnels and in the quotes that give us some confidence that we're moving to a better place here in oil and gas.
Got it. That's helpful, Matt. And maybe just following on there, your comments on orders improving sequentially and through the rest of the year. I'm just curious on 2 things. One, do you expect orders, organic orders, to be positive in 2018 based on what you see today? And then secondly, how do you guys think about the margin of what you're booking? Because there's been excess capacity in the space historically, and I'm just curious like whether the margins that you're actually seeing on the projects that you're bidding today are above-segment-average type margins.
Yes, so first, to your question about order growth. Obviously with a significant shrink here in Q1 that we had expected, we're going to have to see a lot of improvement in the back half of the year to get to order growth. We expect to have order growth in the back half of the year, but whether that gets us to order growth for this year or not is really going to be a function of the rate at which the oil and gas projects are coming and clearing the funnels. It's probably the single biggest leverage point in terms of whether we can get all the way to order growth this year or not, but certainly we're very focused on making sure that we're winning more than our fair share and we're driving growth in the areas that have growth opportunities like in industrial so that we can get to order growth as fast as possible. We've also tried to provide a little more clarity of the different chunks of the business through this call so that, as we have individual quarters that might have order growth, we can provide a clear signal as to whether we see that as a new and sustainable positive order growth trend or whether we're still monitoring whether the order growth will continue on the back side of that. So on the margin front there is no question that, given what we talked about earlier in terms of some of the pressure that we felt on larger projects that we consciously were competitive to go get, we have had a lot of focus on value pricing and on monitoring the pricing coming into the backlog and how those projects clear through. And so we have seen, as we talked about in the comments, here in the first quarter of the year we've got inbound order flow into our backlog that's in the margin range that's needed in order to show a strong margin performance through the year in Howden. And that's something that we'll continue to have significant focus on. And frankly, as we see some of the larger orders come through as possibilities, we're going to make some thoughtful calls about how we compete for them and which ones we play to win and which ones we walk away from to make sure that we can have healthy, profitable growth going forward in a consistent way.
Our next question comes from Jim Giannakouros of Oppenheimer.
Fab tech, given U.S. penetration remains a key focus there, remind us again what's the year-over-year incremental spend on related marketing, new product development et cetera; or if you're currently...
[Operator Instructions]
Can you hear me now? I'm sorry.
Yes, we can hear you.
So sorry about that. Given U.S. penetration of -- is a key focus in fab tech, right, you guys do have stepped up investments related to marketing, new product development et cetera. I was wondering if you could just kind of frame that for us. I mean, is that -- how much of that is a step-up in costs this year? Or margin implications there and also if this level of spend is currently a good run rate we should be thinking about going forward.
Yes, okay, yes. We don't get into the specific details there, but I'll give you a perspective on that, Jim. First, on the R&D front we have -- even through these tougher times in fab tech, we stayed committed to investing in the R&D pipeline. And you're seeing the fruits of it. We've had a significant flow of new products over the past couple years and this year and that continues. And that is -- in North America that's led to a significant change. Between the Victor acquisition and the new products we brought in, the feedback from the marketplace and from brand service we've done shows that we really made a step change in terms of our perception there in North America. And we started to take advantage of that in terms of being able to accelerate our growth in North America as well. And so we've been investing in R&D, yes. We're going to continue to invest in R&D in that business, and we'll make thoughtful calls over time about which parts of the business we invest in. And I think, if the healthier time continue as we're seeing, that will give opportunity for a little bit more investment in technology for the future. I think, certainly through the tougher times, our marketing efforts were compressed some as part of the broader cost-cutting efforts. And we've been starting to cautiously open up the regulator a bit and start to invest back into marketing and sales force investments in specific areas in the ESAB business. And so certainly over time that will be a small drag versus the maximum fall-through that we might get on the growth of the business, but we also are continuing to work on productivity investments in the business as well. So that's a little bit about kind of how we're thinking about it. North America is a key focus area for growth, but it's a very global business, and so we're placing our investments with a global lens in the areas that have the best opportunities for us to profitably grow that business over time. And we're pleased with the momentum. We see that -- the opportunity for that momentum to continue, and I think the team is really doing a nice job there.
Understood. And working capital, I mean, just given what you're seeing, it seems stabilizing trends in fab tech, the backlog you're booking et cetera. And obviously it feels like a very firm, stable environment for fab tech. Cash flow, working capital, should we be thinking that that's a source or a use of cash this year? And of course, puts and takes of the complements there would be helpful by segment.
Sure. As we think about the fab tech business, the working capital is going to be a function of the amount of growth that we have. We've -- it's a healthy, growing business that will absorb a little bit of working capital. At the same time, the team is making some good strides in improving some of the and -- some of the specific components of working capital, focusing on standard work to drive more consistent and better collection activities and continuing to look for opportunities in the inventory area as well. On the -- of -- on the Air & Gas Handling business, a key driver there is the level of orders, the payments that we get from customers with those orders. And so as the order trajectory changes, we expect to -- for that to be a potential positive for the company. And then it's just managing the global projects around the world to drive the right level of collection activity. I think, if you sum it all up and look at it together, right now it looks like working capital could be sort of net neutral to slight use of cash, depending on the growth rates that we have in the back half of the year.
The one thing I'd add there to Chris's comments: You talked about some of the improvements the teams have been driving. I was in one of our fab tech facilities just last week. And they showed how they've got a plan to realign one of their processes in a way that shortens the cycle time from 24 hours to 8. And there's a nice piece of working capital to drop out as they do that. And they showed me on -- the spot where they had cleared and took me through the different pieces of how they're going to do that. And so that team is working hard to identify these opportunities to, over time, drive working capital turns improvements in that business.
Our next question comes from Matt Trusz of Gabelli & Company.
So first, I was hoping to touch on in Fabrication Technology equipment mix has shown a sustained increase versus consumables over the last 4 or so quarters. Would you say this is reflective of channel wins specifically in North America? Or is this simply a change in the profile of mix as industrial demand continues to recover?
Yes, we have seen some good improvements in our equipment business. And we've also done a lot of innovation in the equipment business, and I think the two are certainly related. And I think we do think that there are -- we know that there are specific areas within that equipment market where we have gained some share on the back of those new equipment that we brought into the marketplace.
Okay. And then following up on the discussion a little bit about renewable or alternative energy, can you give us more detail about your exposure there? Just first, can you size it? What are the primary product lines? And then how quickly is it growing? And to what extent is it a real hedge against the coal challenges you're facing?
Yes, we've got some participation in renewable energies, and it's going to create some opportunity, as I mentioned, in an area like hydrogen, but we don't have a -- on the Howden side we've got some specific areas like Howden on the welding side. Wind power is certainly one of the growth areas there; and an area that we've got a good, strong technology position. So there is some opportunity there on the renewables side, yes, but I wouldn't position it as a big part of our business.
Our next question comes from Seth Weber of RBC Capital Markets.
Just I wanted to take another crack at the Air & Gas Handling margin question. I mean, do you think it'll be up year-over-year for 2018 versus '17? Because that would really imply pretty strong margin, absolute margin here in the second half at kind of low double digits for the second half. Is that really what we should be thinking about, full year up versus '17?
Yes. So first of all, we've been consistent in saying that we're going to grow Howden earnings. And we continue to say that we're going to grow Howden earnings, and we're on track for that. Second, we're seeing a clear path for meaningful improvements in our margins, as we work through the year; and should have a healthy year-over-year margin improvement in the back half of the year. Where that lands us on a full year basis, I think, is something that we'll kind of update you as we work our way through the year. But we're still very focused in Howden on getting margins up this year and then the path from there to the 15% commitment that we've made.
Okay. And then just on the developed market aftermarket business. I mean you talked about that last quarter as well. What do you think needs to happen there to start to see some growth in that business going forward?
Well, in the developed markets aftermarket, in areas like industrial and oil and gas I think there's been growth opportunities. There's been growth in power, as -- and oil and gas, as I just commented. Some of the growth has come back after some time when there was a little bit less of it. On the power front, I think our -- we don't really expect a long-term growth in the developed part of our power business. We expect that to be more flat to down, with the emerging part of the power business being the offset that gives us more of a flat power aftermarket. And kind of that's where we see things going here. We talked about that there were some specific headwinds down the back half of last year, but we've seen that stabilize here this year, and so we still see a power aftermarket overall as being a sort of a flattish part of our portfolio.
Okay, so that's the right way to think about it is kind of flattish going forward as well in the out-years.
Yes.
Okay, that's helpful...
But we've also got significant amount of aftermarket that's not in power. And we've got healthy growth opportunities there, both market based and initiatives that we've been driving.
Our next question comes from Joe Giordano of Cowen.
He might be on mute.
Joe, are you with us?
Our next question comes from Andrew Kaplowitz of Citi.
It's Vlad on for Andy. So maybe can you just give us some color on whether your expectations around organic growth by segment have changed at all. I think you were guiding a flat to plus 2 in air and gas previously, and plus 3 to 5 in fab tech. Is that still generally your expectation? Or do you see fab tech maybe trending a little stronger and air and gas potentially more towards lower end?
Yes, I'd say that our expectations are -- remain roughly in-line. There's a potential for some upside on the fab tech business, but I think we're sticking with the original projections that we've put out. And for the Air & Gas Handling business, I think we still have a similar expectation for that business as well.
Okay, great. And then maybe just stepping back. And now that you've had some time integrating the Siemens turbomachinery business, can you just talk about how that business is performing versus your expectations in your deal model and where you see maybe potential incremental opportunities now that you've had a chance to dig deeper into the business?
Yes. In the first quarter, that business performed right in line with our expectations in our model, and so we're really pleased with the start there in that business. Some of the opportunities that we've been driving there, one, there are some really attractive collaboration opportunities in wastewater between Siemens turbo and Roots and some parts of the rest of the Howden organization. And so we've got some active market and technology collaborations there. We've also got the opportunity around the world. We've picked up the aftermarket and the market presence around the world from Siemens on that business. And certainly the first few quarters here have been about just kind of getting things set up and aligned, but we think over time we're going to be able to put some extra focus on aftermarket growth and on new project growth in some of the high-growth areas of the world that maybe had been a kind of a small part of a larger whole and now we're going to have more focus on it and have opportunity to grow there as well. And we're -- also, that Frankenthal plant is going to play a very important part in our supply chain as we continue to kind of reshape and drive efficiency in our supply chains in terms of what we do in Europe and what we do in developing regions. So we see just great opportunities. And I'm real happy with the talent there, with how they've gotten really excited about us. And so we really feel like it's -- that's going to be a key part of the industrial growth story and diversification story that leads us to healthy, sustainable, profitable growth over time in Howden.
Our next question comes from Julian Mitchell of Barclays.
This is Ronnie on for Julian. I just want to go back to the guidance point for a second. It sounds like everything kind of came more or less in line for Q1. You just stated that the growth rates for the year are more or less the same, so I guess, where did the assumptions change to kind of take up the guidance at the midpoint by that $0.05 from a couple months ago?
Yes, as we mentioned in the prepared remarks, we had a little bit of tax benefit, and we chose to -- in Q1 that we chose to roll into the full year. And you also had the gain on the sale of a facility in China. And so we took those 2 elements, rolled them into the full year performance and maintained our expectations for the full year.
Okay, got it. And then if we go back to the portfolio, I want to go on kind of a different direction to the third platform addition. If you look at the portfolio today, are there pieces that you can maybe sell off? And you guys have shown with the fluid handling deal last year that you're willing to make bigger moves like that, so I'm just curious in some of the more structurally challenged areas of the business if there's potential for additional selloffs this year kind of looking into the future.
Yes, well, first, as you commented on, we're committed to improving the portfolio over time. And I think we showed with our fluid handling divestiture that, if we get to a point where there is a piece of the portfolio that we're not ready to invest in and grow and scale and there's an opportunity to redeploy that into something more attractive, we're ready to do that. So for sure, that was an important decision for our company. And as we deploy the proceeds from that, I think it'll make our company stronger for the future. This year, we're really focused on growth. We've got a lot of good organic growth, things cooking. We've got a number of bolt-ons that we've done, that we're focused on making sure they're successful. We've got a number of new ones in the pipeline, and we're focused on doing the right ones of those. And we're focused on finding the right next platform. And for sure, we've got a lot of work going on in Howden to make sure that we're making the tough calls and doing the tough restructurings to make sure that, that business -- given some of the shifts in the environment that we went through last year, that, that business has a very healthy path forward. But our deal activities are really focused on growth right now.
Okay, great. And if I could just squeeze one more in: Of that $25 million of savings for the year, was anything realized in Q1?
Yes, I think, as we communicated previously, the expectation is that we will get those benefits of -- more in the back half of the year that in the front half given that the initiatives were starting largely in Q4 and ramping in Q1 and Q2 of this year. So you'll see more of that benefit in the back half than in the front half of the year.
Our next question comes from Joe Giordano of Cowen.
Can you guys hear me?
Yes. Welcome back.
Yes. Sorry. You might have been asked this. I had to connect like 3 different times. There's a problem with the host, so apologies if this has been asked and answered already, but Chris, can you give me some color as to what the short-term investment loss was? And can you give the rationale to back that one out but keep the facility sale into earnings there?
Yes. First off, our approach, as you know, in these cases is to always provide full transparency and visibility so folks can make their own decisions and evaluations on the earnings of the company. The -- but to answer your questions specifically: The short-term loss was on the CIRCOR shares that we took as a result of the sale of the fluid handling business. And so we -- our view is that, as those shares move around until they're monetized, that's really just part of the overall divestiture equation. As you know, we sold that business for a healthy multiple. And part of the consideration we took was the shares. So eventually we'll monetize that. There'll be a little bit of volatility on the value of those over time, but it still represents a good value equation, we think, for the -- for our shareholders. Second, the gain there on the sale of the property, as you know, that -- with CBS we're always driving continuous improvement through all of our operations, and occasionally that's going to enable us to free up some real estate that we've got. And if that's the case, then we'll recognize the value of that gain in our results, but we'll call it out if it's material, like we've done this quarter. I put that in contrast with restructuring actions that we've taken which are not part of CBS and ongoing continuous improvement, which occasionally will also free up a facility. And in that case, we tend to lump it in with the overall restructuring and overall restructuring activities. You saw a significant gain last year that we had on a facility sale that was related to a big restructuring project where we did call that out and carved it out from our adjusted earnings and included as part of net restructuring.
Okay, so the short-term loss is like a noncash mark to market that you'll take each quarter until you monetize. That's how we should think about that.
That's right.
Okay. How do you feel in -- I guess, in particular, let's talk oil and gas and general industrial. How do you feel like you're doing versus the markets in both of those? You saw a step down towards the lower end of the recent kind of range in oil and gas. General and industrial, up and off a good year, but it's fairly modest. Like how -- do you feel like you're taking share, holding share in those markets? How do you think you're doing?
Yes. We think in general industrial we've been taking share, penetrating areas that we hadn't been before. And certainly last year was a year of some significant penetration and traction that gave us a larger position in general industrial. And then we're growing again on top of that here in the first quarter this year. And we see that as continued positive progress given the nature of how we're growing that business. In oil and gas I think we've been certainly holding our own there through a challenging period. I think there was a period in there where we got more than our fair share, but right now I think we've been holding our own; and looking to make sure that -- as these projects come through, that we're winning more than our fair share of the most attractive ones through the next coming quarters.
And last for me, on the fabrication side, I think, can you talk about how your businesses in like Latin America and Russia are doing? How big are those now? And how are they performing?
Yes, we don't break out the exact sizes of those businesses, but I would say they're -- versus other industrial businesses I've been in, they're pretty significant chunks of the puzzle. Both of those businesses have healthy performance right now, and we expect that to continue. I've commented on [ future ] calls one of the real positive surprises after -- I joined the company knowing that ESAB was in a bit of a tough spot a few years back. And as I got around the world, I found we had terrific leaders in ESAB in these high-growth regions around the world. And we've been able to drive healthy growth in those areas, and that's what we were seeing here. Obviously, somewhere like Russian -- Russia, what happened in the political arena can create risks at any given point in time, but we've done a nice job navigating through that and serving the parts of the market that we can serve very well and having a very successful position there. Serving in Latin America, there are some ups and downs from the different political things and inflationary things that go on down there. I think we've done a nice job there. And right now I think we're in a mode where kind of most of our high-growth markets around the world are back into a nice, positive growth range that we would expect can continue for a while.
Have you had to write-down anything in either of those markets? I know we've seen more like project-based stuff having to be written-down by other companies, so I'm just curious.
No, we've not had any write-downs there other than, like most companies, having to write-down our Venezuela investment a couple of years ago.
There are no further questions. I'd like to turn the call back over to Kevin Johnson for any closing remarks.
Thank you again for joining us today. We look forward to updating you on our next call.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.