• Net Sales: $4 billion for the full year 2024.
• Automation Portfolio Sales: $911 million, on track for $1 billion target in 2025.
• Adjusted Operating Income Margin: 17.6% for the full year.
• Adjusted Earnings Per Share: $9.29 for the full year.
• Cash Conversion: Over 90% cash conversion ratio.
• Shareholder Returns: 23% increase, including $264 million in share repurchases.
• Fourth Quarter Sales: $1.022 billion, a 3% decline.
• Gross Profit Margin: 36.1% in the fourth quarter, a 100 basis point increase.
• Adjusted Operating Income Margin (Q4): 18.2%, a record for the fourth quarter.
• Fourth Quarter Adjusted Diluted EPS: $2.57, a record for the quarter.
• Cost Savings Actions: Increased annualized savings rate to $60 million to $75 million.
• Americas Welding Adjusted EBIT Margin: 19.1% in the fourth quarter.
• International Welding Adjusted EBIT Margin: 12.8% in the fourth quarter.
• Harris Products Group Sales Growth: 11% increase in the fourth quarter.
• Harris Products Group Adjusted EBIT Margin: 17% in the fourth quarter.
• Full Year Cash Flow from Operations: $599 million.
• Return on Invested Capital: 21.8%.
• 2025 Sales Growth Assumption: Low single-digit growth expected.
• 2025 CapEx Budget: $100 million to $120 million.

• Warning! GuruFocus has detected 2 Warning Sign with BOM:500253.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lincoln Electric Holdings Inc (NASDAQ:LECO) reported strong full-year results across key financial metrics despite challenging demand trends.
• The company achieved $4 billion in net sales, with a significant contribution from its automation portfolio, which is on track to hit a $1 billion sales target by 2025.
• Record profitability was achieved with a 17.6% adjusted operating income margin, reflecting strong execution of strategic initiatives and diligent cost management.
• The company maintained strong cash flow generation with over 90% cash conversion, contributing to a 23% increase in returns to shareholders through dividends and share repurchases.
• Lincoln Electric Holdings Inc (NASDAQ:LECO) successfully added three acquisitions, expanding its engineering and application expertise and differentiating its technology platforms.

Negative Points

• Fourth quarter sales declined by 3% to $1.022 billion, primarily due to an 8.5% decrease in volumes.
• The company faced a 6.5% decline in organic sales, reflecting manufacturing weakness and deferred capital spending across most end markets and regions.
• International Welding sales declined approximately 17% due to industrial weakness in portions of Europe, Turkey, and Asia Pacific.
• The company anticipates a low single-digit percent decline in volumes for the full year 2025, with challenges expected in the first half.
• Potential impacts from pending tariffs and trade policies present uncertainties that could affect the company's operations and financial performance.

Q & A Highlights

Q: Can you discuss the competitive dynamics in your Welding business, particularly regarding organic growth compared to your biggest competitor? A: Gabriel Bruno, CFO, explained that Lincoln Electric's automation business, which is heavily invested in heavy industries and automotive, differs from competitors. Despite softness in capital investment, the automation business is progressing well, with a 200 basis point improvement in EBIT margins. CEO Steven Hedlund added that Lincoln Electric has a stronger concentration of business with OEMs, impacting demand differently than competitors. The company believes it is gaining share in the distribution channel in the Americas.

Q: What does your guidance assume for first-quarter organic sales by segment? A: Gabriel Bruno, CFO, stated that while they don't provide detailed segment guidance, they expect more pressure on volumes in the first half of the year, with low single-digit declines. This is due to lower production levels among heavy industries and automotive OEMs, with expectations for improvement in the second half.

Q: Can you provide more color on your expectations for end markets and contributions from consumables, equipment, and automation? A: Gabriel Bruno, CFO, highlighted that general industries are expected to see low to mid-single-digit declines, with automotive showing stability in consumables but pressure on capital investments. Heavy industries are expected to remain under pressure, while energy is anticipated to be positive for the year. Construction and infrastructure may see low to mid-single-digit declines.

Q: How are industrial OEM customers responding to the new administration, and when do you expect OEM business to align with the distribution channel? A: Steven Hedlund, CEO, noted that it's early to have a definitive position, but the recent positive PMI in the US is encouraging. However, trade policy remains a wildcard, and the company is focused on agility to respond to potential challenges.

Q: Can you provide more details on the green shoots in automation order trends and confirm if automation will achieve modest organic growth this year? A: Steven Hedlund, CEO, mentioned that long-cycle projects, particularly in automotive, are starting to see customer decisions and project releases, which is encouraging. The company expects mid- and short-cycle portions to improve throughout the year.

Q: How do you plan to handle potential inflation caused by tariffs, and will you pass costs through to customers? A: Steven Hedlund, CEO, stated that while tariffs present a challenge, Lincoln Electric has a strong track record of managing price costs to protect profitability. The company is cautious about relying on price increases due to potential volume impacts but will use this lever if necessary.

Q: Is automation still a focus for acquisitions, or are you shifting to other parts of the business? A: Steven Hedlund, CEO, clarified that the entire business portfolio is a focus for acquisitions, not just automation. While automation has been a productive area due to its fragmented nature, the company continues to seek opportunities across all segments.

Q: What are customers saying about tariffs, and how might they impact demand and channel inventory? A: Steven Hedlund, CEO, noted that customers are also uncertain about tariff impacts, and the situation is dynamic. While there hasn't been significant pre-buying, the company is managing through the uncertainty and expects some demand in 2025, particularly in automotive.

Q: What led to the increase in annual savings, and what factors could impact achieving the high or low end of the range? A: Gabriel Bruno, CFO, explained that better-than-expected execution across discretionary spending and project management led to increased savings. The range will depend on factors like travel and customer engagement levels.

Q: Given the step-up in cost savings actions, how will this impact 2025, and will it roll off by the fourth quarter? A: Gabriel Bruno, CFO, confirmed that the $40 million to $55 million in incremental savings for 2025 is built into their assumptions, with savings expected to roll off by the fourth quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.