Techtronic Indus Ltd Adr

I'm so glad. Full cinema. Morning, ladies and gentlemen. Thank you for coming. Thank you, our board of directors here and most of our senior management from the U.S. and Europe and overseas. Thank you. It gives me a great pleasure to welcome all of you to TTI's Group 2024 First Half Results Announcement. I would like to start by introducing Steve Richman and his present and recent promotion to TTI's group CEO. Steven, welcome aboard. Thank you very much. We had an outstanding first half with sales outperforming the market on delivering double-digit profit and growth. Our group vice chairman, Mr. Stephan Puth, will continue with our opening remark, but let me tell you one thing. We don't care what's out there. We only care about our shareholder, our investor, to deliver best results, and we don't care what happens, competition up or down, which has not happened in this case, the hour down, but our first and focal point are our investors. Thank you very much. Stefan, I hand you over.

Thank you, Chairman, and I'd like to thank all of you for attending today and for your continued support. With EBIT up 11.8%, net profit up over 15%, record first-half free cash flow of over $500 million, we're off to a great start to the year. Now we delivered exceptional revenue growth and we continued with very strong market share gains. But at the foundation of our success is great people. And we have spent years assembling what we believe is the greatest team of people in the industry. And it is this team what sets TTI apart from the competition. So with us today, We have, as our chairman commented, Stephen Richmond, our new CEO. We also have Shane Maul with us, who is our president of Milwaukee. He was here at the most recent results presentation. But we also have Alex Duarte, who is our senior group president of EMEA, which is our European business and the region. So the team has done an exceptional job, and I'm so excited to have them here today. And I'm going to pass the floor over to Stephen and then Frank as well, who's going to give you some highlight on the financials. And I hope you enjoy the presentation.

Thank you, Mr. Chairman and Seven. As Chairman and Seven mentioned, we've delivered strong first-half results. We have ourselves increased it by 6.3% to US$7.3 billion as compared to last year. Our Milwaukee business continues to extend our leadership position as the global number one professional tools brand and delivered an 11.2% sales growth in local currencies. Ryobi also outperformed the market and delivered mid-single-digit sales growth led by outdoor divisions' strong performance. Gross profit increased by 219 million to 2.92 billion US dollars, with margin increased by 67 business points to 39.9%. The improvements were from favorable sales mix of margin of creative Milwaukee business, aftermarket battery sales, introduction of innovative products, category expansion, and our focus in improving productivity and efficiencies at all manufacturing locations and stringent cost controls. As cross-margin increased it by 67 basis points and SG&A increased it by only 24 basis points, our EBIT increased by 11.8% to $626 million, with EBIT margin improved by 42 basis points to 8.6%. With the increase in EBIT and the reduction of net finance costs, while our effective tax rate has been comparable to that of last year, net profit increased by 15.7% to $515 million, with margins improved by 60 basis points to 7.5%. Earnings per share increased by 15.8% to 30.12 US cents per share. The Board declared an interim dividend of 108 Hong Kong cents per share, an increase of 13.7% over last year, representing a payout ratio of 46.3%, comparable to the payout ratio of the full year 2023. With We've continued our strategic investments in new product developments, technology, commercialization, and geographic expansion. SG&A, as a percentage to sales, increased it by 24 basis points to 31.5% as compared to same period last year, mainly due to the 54 basis points increase in R&D spent from 3.5% of sales to 4.1%. We have, however, been able to leverage down our selling expenses from 17.3% of sales to 17%. an improvement of 24 basis points. Administrative expenses also 6 basis points lower than that of last year as we rigorously controlled our spend. Our focus over the past 12 months was to reduce our net finance costs and we've been able to deliver this target. Net finance costs reduced it by 34% to $32 million. We project that we will be able to further improve this cost for the full year by paying down high-cost debt from the free cash flow generated from operations and utilization of our current facilities in the most cost-effective manner. Effective tax rates was at 7.3% as compared to 6.9% reported last year. We have a very strong tax team and been very proactive mitigating all the challenges in this ever-changing global tax environment. We believe the current level of effective tax rates is very sustainable mid-term. Our balance sheet continues to be very healthy and strong. Shared equity was at $6.25 billion, an increase of $559 million, or 9.8%, as compared to first half last year. Our current assets was lower as a result of our strategy to reduce inventory over the past 12 months. Our current liabilities, however, also reduced it by $755 million during the period. Net current assets as a result increased by 253 million or 10% versus first half 2023. To improve working capital efficiencies has always been our primary focus. Working capital as a percentage to sales improved by 409 basis points to 18.7% as compared to 22.7% reported last year. Total inventory reduced by $554 million, and improvements of 24 days to 104 days. Finished goods was 20 days lower at 81 days, and raw materials three days lower at 19 days. Trade receivables was at 60 days, six days higher than same period last year, while payables was at 96 days. The days mainly reflected the timing of sales and procurements. We do not anticipate any collection issues and will continue to leverage our volume and financial strength for the best trade terms with our suppliers. As our infrastructure and capacity expansion projects to support our future growth be mostly completed, CapEx for the period was at $100 million, 52.3% less than the $210 million last year. Our key target this first half was to continue to deliver positive free cash flows after we generated close to $1.3 billion in 2023. With very disciplined working capital management, higher EBIT and lower CapEx, we delivered record first half free cash flows of $508 million, an increase of $207 million when compared to first half 2023. We are well positioned to continue to deliver strong free cash flows in the coming years. Gearing, as a result, improved it to 9.2% as compared to 25.7% first half last year, or 17.1% end 2023. We expect gearing can be further improved by end of the year. We have continued to manage the cost efficiencies of our ball rings and been paying down high-cost stats over the past 12 months. When compared to first half 2023, our total gross stats reduced it by 1.15 billion, or 39%. and our total net debts reduced it by $889 million, a decrease of approximately 61%. After paying down the debts, high-cost short-term floating rate borrowings now account for 52% of our total debts, a reduction of $884 million, or 48.7%. We will continue to effectively manage our portfolio to deliver most efficient structure to support our growth and to further reduce our net finance costs to improve our product. And now I would like to pass the floor to our CEO, Mr. Steve Richman.

Thank you, Frank. Let me kick this off with what Frank and Horst and Stefan stated. We had an outstanding first half of the year. Based on where competition is, where the markets are, it doesn't matter. Over 6.3% growth overall in the first half of the year. Led by our cordless domination with the best consumer brand and the best professional brand anywhere in the globe. Now, RYOBI had an outstanding first half. Mid-single-digit growth with a relentless focus on our consumer and driving innovation, it continues to flourish as a brand and products. And we'll spend more time talking about RYOBI today. On the Milwaukee front, we continue to win. And why do we win? Disruptive innovation. We drive productivity and safety. We're a solution brand to the professional contractors throughout the globe. The end result of that is 11% plus growth in the first half of the year. As our consumer brand and our number one professional brand both continue to dominate with outstanding first half results. Now, we've been on a journey over the past 16 years. That journey has showed continued success. As you heard from Frank, our sales, our EBIT, our profit, they all continue to flourish and grow. And we've done that in face of whatever market conditions we face, whatever competitor we have to deal with on a global basis, we continue to drive this kind of success. Now, the end result of all of that is our profit is still growing faster than our sales. Outstanding results in the first half. Gross margin. We've had a history of gross margin growth. increases year after year after year. And the first half of this year is the same situation. Now, why? How do we do it? Frank mentioned how. It starts with, number one, the Milwaukee brand. Now, the Milwaukee brand continues to outpace the rest of the TTI business. And everything that we do with Milwaukee, it's accretive from a gross margin perspective versus the rest of our business. That's number one. Number two, we're an innovation company, a new product company. That combination delivers outstanding results. And those results are not only demand. It's on top of demand. It drives gross margin improvement. And that success continues year after year and in the first half of this year. And number three, we don't give enough credit to our operations teams throughout the globe. They're relentless in driving productivity in our factories, in driving cost out, in doing the things necessary for gross margin improvement. Not only today, but they've done it every single year, and we're confident in the future. Unbelievable performance from a gross margin perspective. Now, a lot of questions about inventory. As Frank stated, we brought our finished goods inventory back to pre-COVID levels. Outstanding results by our supply chain team and our sales teams throughout the globe to be able to accomplish that. And it doesn't matter what market conditions we face, but we must understand that that 104 days, why is that so important? It's because our customers, our distribution partners count on us. They believe and understand that they have to service the consumer and the professional end user. And to do that, we have to deliver a service level that is best in class so they have confidence in our brands. They understand that if they buy our product, they're going to have availability, and they're going to be able to drive their sales, top line and also their bottom line. And we've done it consistently as a best-in-class formula. Now, that doesn't mean we aren't reaching for below the 104 days. We believe we have a path to get below 100, and that path is because our global manufacturing footprint, we're going to take those raw materials and drive that to every location to optimize that throughout the globe. And that will deliver this inventory plan for the future and below 104 days. Now, let me switch gears after those great results. Outstanding top line, outstanding bottom line, incredible cash. How does it all occur? Why are we confident from Horst and Stefan and Frank and the rest of the leadership team that this will continue? As Stefan said, it's really our foundation. And our foundation that delivers these results are twofold. Number one, it's people. Number two, it's culture. These are the bookends of our success. And we believe and have shown that if we have the right people involved, recruit, retain, and invest in the right people throughout the globe, then we will be able to deliver the kind of results that we have year after year after year. From the cultural viewpoint, we understand that a culture needs to continue to evolve, and we've done that. At the same time, that combination of people and culture, we have to have the culture that attracts talent. We want to be the brand of TTI where individuals throughout the globe say, I want to work for that company. And that's what we have done. And that's a core part of our culture. The last aspect of our culture, which is critical for our short and our long-term success, is understanding that there's regional differences. The globe is big. The culture can't be identical in Europe or in the U.S. or in Asia. It needs to understand that we have to have slight differences. And we've adopted that as part of our cultural mantra throughout the company. So we have people and culture as the foundation. All that ties together to the best leaders that any company has with experience that understands the markets, experience that understands the consumer and the professional, understands the distribution partners, how to manufacture, how to drive supply chain. And our leadership team that we could spend the entire afternoon talking about gets it. Now, the other core part of our leadership team is the bench strength underneath them. It's not just about them. They coach and they mentor and they develop high potentials and high performers in every area of the company, which is why we have the ability to be able to grow and succeed on an annual basis. It's that leadership team that does that. So let me touch base a little on the leaders here. And frame this up a little bit. We have an unbelievable leadership group. You're going to hear from two of them today. That leadership group understands in this aspect the global sales and commercialization aspect of our business. Years of experience understanding the consumer, the pro, and our distribution partners. They get it, and that drives top line and bottom line sales in every region throughout the world. We have other groups of leaders, and those groups of leaders own the businesses, the brands, Milwaukee and Ryobi and Hoover and the rest. And on top of that. We have the operational leaders, people that understand how to manufacture, how to drive new product development, how to drive supply chain, all aspects of the business in a significant way. And those leaders, with the amount of experience they have within TTI and outside TTI, make up hundreds and thousands of years of experience. And remember, The first group and this group, we've been together for years. This is not one year or two years. This is 15 and 17 years driving the success of TTI. And the last piece that drives it together is our financial leadership. Now, why is that so important? They partner with the operations teams, the supply chain teams, the sales teams, the regional differences teams. And that partnership lets everybody understand where we're winning and where we're losing. Where do we need to focus to be able to win in a bigger way? And those financial leaders are critical to our success. So the message we want to give overall is that we have an outstanding leadership group. We have an incredible bench strength to be able to win. And we have the people and culture throughout the organization to keep TTI growing and delivering outstanding results. Now let me switch gears a little bit. Let's talk about global manufacturing. There was a time that we did not have a global manufacturing footprint. Today we do, and we are well positioned within TTI with great operational leaders. No matter what economic situation occurs, what macroeconomics there are, what regional trends occur, we have the ability to manufacture and deliver product to our key customers and our consumers and our professionals anywhere in the globe in face of whatever market conditions that we may have. So now let me switch gears and talk about our two brands. And I'll talk about the macro of what the brand strategy is and why we believe we can win day in, day out. Let's start with RYOBI. Now, all of you know RYOBI is the number one consumer brand in the globe. Number one. Number one cordless brand in the globe. Why do we win with RYOBI? Unbelievable amount of product development and an array of product to service the consumer and the value probe. No question about it. With that, we also have three platforms, three cordless platforms. The 18-volt platform has been forward and backward compatible for over 25 years. We have consumers that started 25 years ago buying Ryobi cordless that still buy it today. And we launch new products and new batteries. They adopt it immediately. A key to our success every single day. Now, when we talk about the DIY focus in Ryobi, it's because our people throughout the globe, from our salespeople to our product development people, have a relentless focus on that consumer. They understand what the consumer needs every single day, and they understand where the opportunities are, and that's what's most important. Let's think about this for a second. There's inside the house. There's outside the house with lawn and garden. There's in the backyard, and then there's lifestyle. And there's all the things you can do with RYOBI cordless, 18-volt platform that's the most entrenched platform in the globe and the consumer space for over 25-plus years. That's a competitive advantage. That's why we are winning in the consumer space combined with our new product introduction and the value and performance focus. Now, there isn't only the DIY side and the consumer side. There's also the value pro. The value pro is a big opportunity. Now, why is that value pro such a big opportunity? Because throughout the globe, especially in the Americas and Australia and parts of EMA, there's a pro that says, I want great product. But I understand that I can only afford a certain amount of dollars. But I want to have a product array, a cordless product array that will allow me to do all the work that I need to get done. And Ryobi and Ryobi HP allows that. that consumer, that value pro, to deliver on that expectation every single day. If that's in residential construction, in remodeling, in maintenance, in many different aspects of the business. And that's why the RYOBI brand continues to flourish with a value pro. Now, how do we tie it all together? It's distribution. When a horse first started the relationship with a Home Depot, It went from a small relationship to the most complicated and comprehensive partnership that we have. And that Home Depot relationship is one of the reasons RYOBI continues to flourish throughout the Americas. It's not thinking about today, it's thinking about the future. Bunnings, that same kind of relationship, that same kind of partnership. How do we grow together? How do we deliver to that consumer? And then Alex in the EMEA, we have multiple distribution points throughout the European sector to deliver the right product to the consumer overall. And the message is clear here. RYOBI is winning. It's winning because of value. It's winning because of innovation. It's winning because our partnerships with distribution and, of course, all the people that spend every day and every night with a Ryobi brand at TTI. Now let me switch gears and spend a couple of minutes on Milwaukee. First half, outstanding, 11% growth. Once again, as you heard from Horst and Stefan and Frank, we don't care where the market is. We don't care what the competition results are. Yes, they're down. Our viewpoint is clear. is if we focus on the user, if we drive productivity and safety, if we are a solution company, we continue to win. And that's where that first half is. Now, the growth of Milwaukee isn't just about the first half. It's the continued growth that we have had year after year after year. And that success has been based on the strategy that was created over 16 years ago. And that strategy is still the same today. It's the understanding of our user. And you're going to hear both Alex and Shane talk about this. It's the understanding of that user from the time they wake up in the morning to the time they go to bed at night, understanding what they do, what their pain points are. Becoming the brand of choice as a solution company, driving productivity and safety on the job, is who Milwaukee is today. And it's why our users embrace the brand. Now, when we talk about the opportunity, today we have over $100 billion opportunity in our core verticals. Now, those core verticals seem simplistic. From the outside, it looks like anybody can do it. You're going to focus on those users, you're going to deliver some products, and that will be success. But it's a lot more complicated than that. And that gives us a competitive advantage. Each one of those segments, each one of those verticals has sub-verticals. And our teams throughout the globe understand those sub-verticals. They understand the pain points with every sub-vertical. They understand what causes the issues for that user. And remember, these are high-paid users that want productivity and they want to be safe on the job site. And our teams do an amazing job of delivering the right product and the right sales and service and engagement focus on job sites and distribution partners throughout the globe. Now, it just doesn't stop there with Milwaukee. Why are we so confident? Because in the future, we're going to attack more verticals that we aren't in today. Here's a few of them. It's not all of them. It's a few of them. And when we dedicate the company, the new product development resources, the manufacturing resources, and all of our job site solution and sales teams to target them, we add on larger market opportunities for the future. Now, there's... The verticals, and there's how do we service them. As you know, when we first started servicing them, we had products like drills and fastening tools. We had some sawzalls. We had a few products to be able to offer to them. Today, under Shane's domain, we have a plethora. of cordless products in an M12 platform, an M18 platform, an MX platform, servicing all of their needs and every user, every vertical segment along the way. But it doesn't stop there. We've continued to add more and more categories, segments of business so that those users that are so difficult to serve, that worry about productivity every single day, We provide them the opportunity because we are the total solution company. But it doesn't stop here either. The opportunity is for us, as we have every single year, to add more category segments on, to delight that pro so they're solidified with a Milwaukee brand and then our job site solutions team and our sales team and our commercialization teams tie that all in a knot. And at senior levels, we drive that level of engagement to own the user day in, day out. It doesn't stop just there. We have to have world-class distribution partners. We talked about it with RYOBI. It's the same on the Milwaukee front. Everywhere in the globe, the best distribution, the best partners, the Milwaukee brand has. Now, why is that so important? We have our job site solutions team throughout the globe calling on these users. We have our sales team engaged with the distribution partners. We have our commercialization teams thinking about how do we win. And then we have our distribution partners, these world-class distribution partners that believe in Milwaukee because it drives their top-line growth because of the innovation. because of the solutions we provide, so they partner with us. They go out to the job sites and sell Milwaukee and push Milwaukee throughout the globe. All of this ties together to a win. A win for our distribution partners and a win for Milwaukee and a win for all of our users in the globe as we are the solution company driving productivity and safety every single day. So we have great results. Unbelievable results is... Frank and Stefan and Horst said for the front half. We have the leadership team and leaders throughout the company and the culture to continue to win and flourish. And our viewpoint overall is that in the Milwaukee side of the business and our other businesses, we will continue to dominate no matter what market conditions that we see. So on the Milwaukee front, let me turn this over to Alex now. And Alex is going to take you through how we've taken the European market from nothing, absolutely nothing, to dominance in the cordless arena and to become the brand of choice. Alex.

Thank you. Thank you, Stephen. Good morning, ladies and gentlemen. We have experienced outstanding growth with Milwaukee over the last 15 years. delivering a compound annual growth rate of 23% in a market that grew at best mid-single digits during that same period. As a result, we have captured high levels of market share, particularly in our core cordless business, which is our focus. Milwaukee has become the aspirational brand for professional end users across Europe. And today, I would like to explain why we are winning in the marketplace, but most importantly, why we feel so confident we can maintain this growth momentum for many years to come. Well, first of all, we benefit from our global Milwaukee new product development machine, delivering disruptive innovation to our target user groups. And that innovation translates into high levels of productivity and safety on the job site for professional end users that rely on our tools on a daily basis. The electricians, the plumbers, the mechanics, the general contractors, and many more use the verticals that Steve covered earlier. In our industry, the best product wins. And that's why we invest more in R&D than all of our competitors. We understand the benefits of new product innovation. Another key aspect of our strategy is the fact that we serve these professional end users exclusively through a network of approved industrial customers that provide a superior level of service to our end users while selling our premium Milwaukee solutions. And like our competitors that sell indiscriminately across multiple channels, mass marketing their products and devaluing their brands. In addition, our premium positioning allows us to heavily invest on our job site solutions program, where our teams work on a daily basis with end users on job sites across Europe to advise them on Milwaukee's solutions to enhance their productivity and safety. And every time we convert these end users to Milwaukee, we are driving incremental business to these exclusive distribution partners. In turn, these same customers reward us for our loyalty and unmatched support with incremental listings and increased business, driving our growth. And this business model is a major differentiator for Milwaukee in Europe and a key reason for our success. And our success is driven by a winning team. A team that has been meticulously assembled across every market of our vast region over the last 16 years. A team of highly driven, highly passionate, and highly competent individuals that live the Milwaukee culture that Steve talked about on a daily basis. Ranging from individuals with 25 plus years of industry experience like myself, to hundreds of new recruits that join us in the field through our graduate program. But they all have one thing in common. They all fit the Milwaukee DNA. EMEA is an incredibly complex region. Every country is different. Therefore, replicating such a winning team across our vast region would be very difficult for any competitor. But despite our success over the last 15 years, we believe we still have a lot to accomplish. We believe we still have a lot of opportunity to capture. A great example of that is our cordless market share. We have exponentially grown our cordless business over the last 15 years. Today, it is a very sizable business. We are a key player. And yet, we've only achieved cordless market share leadership in less than 10 markets across our vast region. This is why we feel so confident we can continue to deliver double-digit growth even in our core cordless business. especially as we keep pushing the boundaries of cordless applications through our disruptive innovation and converting end users from corded, petrol, and pneumatic products to our cordless solutions. But today, Milwaukee is much, much more than a power tool manufacturer. We've evolved to become a solutions provider to the core user groups that we serve. We've entered hand tools, a very large market complementary to power tools. We've entered storage with our pack-out global phenomenon. We've expanded into outdoor power equipment, where we are leveraging our superior cordless technology to accelerate the conversion of end-users from old petrol products to our new cordless solutions. And we've also entered personal protective equipment, which is a massive market, larger than power tools. And as we enter all these new businesses, we apply the same product development methodology that we use in our core PowerTool business, delivering disruptive innovation to our core user groups with dedicated resources. And to size this opportunity, as we enter these new businesses, we expand our addressable market opportunity. from our heritage $10 billion market in power tools to now over $50 billion in EMEA alone, given the large size of these markets that we've entered. That is one more reason why we feel so confident we can continue to deliver double-digit growth in the foreseeable future. And last but not least, our premium positioning allows us to deliver superior levels of gross margin. providing us with an almost unlimited ability to invest for growth. A great example of that is our job site solutions team that I just talked to you about. We have exponentially increased the size of our team over the last years. Today, we have hundreds and hundreds of colleagues out there on job sites across Europe on a daily basis, converting end users to the Milwaukee brand. And the sheer size and scale of that team today would make it very difficult, if not impossible, for our competitors to be able to replicate it, especially given their lower levels of gross margin. And for all these reasons, even as we celebrate 100 years of Milwaukee globally this year, we truly believe we are just getting started. I'll now hand you over to Shane Mould. Thank you very much.

Thank you, Alex. So as Milwaukee celebrates our 100th anniversary, we are confident about where we're heading in the future as we continue to deliver unique safety and productivity solutions deep within our core trades, unlike anyone in the industry. Milwaukee continues to expand into new categories and support new verticals as we expand our geographic presence, to continue to deliver double-digit sales growth and gross margin expansion as we move forward. Today, I will share with you how Milwaukee is unique in delivering safety and productivity solutions to the trades unlike anyone in the industry. And I will share with you how we are layering disruptive technology and innovative design to deliver the most compelling systems in the world. And I will share with you how we were uniquely positioned to take advantage of the hyper-growth segments that are reshaping construction and maintenance throughout the entire world. But first, let's talk about why safety and productivity is so important. Our core trades view their employees as their number one asset, and their safety and productivity is critical. We all know that the best people separate good companies from great companies. But in the construction trades, the number one constraint to project completion is labor. So with that, that is why Milwaukee's commitment is to focus on delivering safety and productivity solutions deep within the core trades, unlike anyone in the industry. This is not a marketing catchphrase that we share on a quarterly basis or twice a year. This is a core element of our strategy and why we have been so successful. You can see that commitment in the partnerships that we've developed with the labor who completes the work, with the trade organizations that employ the labor and the contractors that employ the labor, with the training facilities that are training the labor for the future. It's a partnership and commitment that we've invested in for well over a decade and continues to make us unique. You can see it in the product solutions that we deliver throughout our business. like our Bolt Type 2 helmets, that not only deliver superior protection, but also greatly reduce the risk of traumatic brain injuries on job sites throughout the world. And you can see it in the unique solutions in the power tool business, such as our M18 Fuel Overhead Rotary Hammer, which is a new-to-world solution, which leverages internal expertise in biomechanical research and design, where we collect objective data points on muscle fatigue and diabetes, fatigue analysis and motion tracking and posture analysis to deliver a new-to-world solution that not only enhances productivity, but greatly reduces the risk of repetitive injuries from overhead drilling in concrete, an application that is performed by thousands of tradespeople throughout the world. You'll see that Milwaukee remains unique in keeping the assets of our number one contractors throughout the world safe and productive every single day. But in order for us to continue to deliver safety and productivity solutions, we need to continue to invest in breakthrough cordless technology. Through consistent and bold investments in the work of our talented people, Milwaukee's been at the vanguard of introducing breakthrough cordless technology. From the introduction of the first high-powered brushless motor technology to the introduction of OneKey, what is today the industry's largest IoT-connected platform? to the introduction of the first tools, leveraging machine learning and artificial intelligence. Milwaukee has built a cumulative foundation of new technology to deliver Milwaukee intelligence. Milwaukee is leading today in lithium ion cell design and battery pack development and motor design and manufacturing. We're leading in leveraging breakthrough sensors and electronics. We're leading in delivering productivity and charging technology and connectivity on job sites throughout the world. We're connecting our physical solutions with our digital solutions by leveraging internal software development. And we are years ahead of the competition in leveraging artificial intelligence and machine learning in the development of solutions to solve the toughest problems on job sites throughout the world. Milwaukee is delivering solutions which is leveraging information to create a seamless user experience, to enable users to perform applications more safely, more quickly, and more accurately. But this is just the beginning, because Milwaukee will continue to invest in leveraged digitization and advanced capability to deliver the most intelligent solutions in the world. You can see the examples of this in the sophisticated solutions that we deliver throughout our business. Milwaukee has been partnering for over a decade with the leading semiconductor manufacturers throughout the world to advance our capability. You see that in the solutions that we deliver throughout our business. If you open up a Milwaukee tool, you will see accelerometers that protect the users from inadvertent kickback on the job site. You will see power electronics, which enable us to leverage the full capability of our cordless technology. You will see data encryption that protects our data, but also enables us to use it more effectively. And you will see connectivity that unlocks value to trades on job sites throughout the world. Milwaukee is the leader in layering new technology to deliver the most disruptive solutions in the world. Let's talk about one example. One example is the recent introduction of the next generation of M18 fuel technology. M18 set the standard for performance with a relentless investment in new technology. And today is the leading 18-volt cordless system in the world. But today, M18 is rapidly expanding beyond our current 280 unique solutions on that interface to continue to advance in compatible breakthrough cordless technology. At the foundation of this new technology is the introduction of our Red Lithium Forge battery packs. Last year, we had a tremendous success with the introduction of our 6-amp-hour Red Lithium Forge battery pack. This year, we're following that up with the introduction of two exceptional new battery packs, the 8-amp-hour and 12-amp-hour Red Lithium Forge battery packs. These battery packs deliver 50% more power, 50% than the previous generation. unlocking massive amount of capability to enable us to convert new categories even faster. But in order to take advantage of this tremendous performance of the battery packs, we needed to redesign our entire platform technology. So we introduced our new Power State Brushless Motors that leveraged the industry's first segmented brushless motor technology. It has never been leveraged in the industry before. This is providing us the most capable and most powerful battery pack that's ever been introduced in a handheld product. In addition, we're redesigning our electronics from the ground up with new hardware and software that enables us to have full communication between the battery pack, the tool, and the charger, in addition to providing more efficiency and more capability to enable users to push the tools longer and farther than ever before. This has all culminated in our ability to deliver ten times the capability out of the M18 system than we delivered from the system in 2007. While our competitors are asking users to switch voltage platforms in order to get increased capability, Milwaukee is investing in compatible cordless technology that enables our existing system users to get greater capability without vacating our system. We're building a moat around our business and strengthening our network effect by adding increased capability. And you will see more of that as we invest and leverage this technology across M12, MX Fuel, and M18 as we look to accelerate our growth and convert more categories even faster. So let's talk about where our contractors put this technology to work. Through a relentless investment in technology and our partnership with the trades in the field, Milwaukee is leading in the hyper-growth segments that are reshaping construction and maintenance throughout the world. From data centers and megaprojects to infrastructure and renewable energy, Milwaukee offers the broadest range of solutions in addition to the partnerships that we've established with over 1,500 dedicated resources in the field working with the trades to execute these complex projects. One example is our entrenchment and megaprojects. Megaprojects are large, complex projects that are typically valued over 1 billion U.S. dollars, and they take years to develop and complete. Milwaukee's core trades represent a majority of the labor hours required to complete these projects. Milwaukee continues to offer the broadest array of solutions. And with our job site solutions team, we are engaged with these projects before they even begin, displaying how our safety and productivity solutions are unlike anybody in the industry as we take advantage of this massive growth opportunity. Another opportunity that we've been partnering for years is the data construction, data maintenance, and the power grid required to support the growth. Today, there's over 8,000 data centers throughout the world. But with strong artificial intelligence deployment and healthy cloud demand, there is a development pipeline to double data center capacity globally. In addition, the existing data centers need to be upgraded with new cooling capability and new electrical work in order to adopt the new technology. With a strong surging demand, in addition to slowing energy efficiency gains, the power grid required to support the data centers alone is expected to double by 2030. Double. In the U.S. alone, there's tens of billions of dollars of investment that will be required by the U.S. utilities in order to support the growth of data centers alone. And Alex is happy to know that in Europe, with the oldest infrastructure in the world, massive investment will be required. So that's where Milwaukee comes in. with the broadest array of solutions and productivity solutions that service the core trades, that support data center construction and maintenance, in addition to the partnerships that we've developed and the solutions to support the power utility contractor to not only build out the power requirements to support data centers, but to support the longer-term megatrend of the revitalization of the utility grid throughout the world. There is nobody positioned better than Milwaukee to take advantage of these hyper-growth segments of the world. And we're not even talking about renewable energy generation and electrification. We are positioned to take advantage of all of these long-term megatrends throughout the world. So we talked a lot about how Milwaukee continues to develop unique solutions deep within our core trades. And we do this with all of our core trades. A couple examples I want to share with you is one is the general contractor. For those of you who don't know what a general contractor is, they're responsible for the completion of the project from the very beginning to the very end. They typically employ directly, they employ labor in the areas of concrete, carpentry, and structural steel. But as the market continues to evolve, a large amount of general contractors are employing labor in the areas of mechanical, electrical, and plumbing work. all core trades that Milwaukee has been developing solutions for for well over a decade. But Milwaukee, regardless of the trades that these groups hire, our focus remains on keeping them productive and safe. An example is the introduction of the new M18 fuel duplex nailer, which leverages M18 fuel technology and proprietary fastener design to complete the application they're doing today to support concrete formwork seven times faster, while also greatly reducing the risk of repetitive injuries that are happening on job sites throughout the world. In addition, Milwaukee continues to deliver solutions deeper within the mechanical trade, Mechanical contractors are responsible for the heating, cooling, that's why it feels so nice in here, refrigeration and piping systems on projects. And Milwaukee has developed partnerships with the mechanical trade for well over a decade. Unfortunately, mechanical trades are relying on very antiquated and strenuous manual tools in order to complete applications like roll grooving. Milwaukee saw the opportunity to innovate. and we leveraged our capability in breakthrough sensors and mechanical design to deliver a product called the M18 Fuel Ringer Roll Groover, which brings intelligent automation to the job site. The user simply selects the material size, the material type, pushes a button, and it automates the application. This not only provides advanced productivity and safety, but also eliminates the grueling, strenuous work that the trades have to deal with on a daily basis. I think you will agree that Milwaukee is better positioned than anyone in the industry to continue to deliver safety and productivity solutions to our core trades throughout the world. We discussed how in this environment, how safety is so critical and how protecting the labor is so utterly important as that is a scarce resource throughout the world. Milwaukee continues to lead by layering disruptive new technology and innovative design to deliver the most compelling and capable systems in the world. In addition, Milwaukee is better positioned than anyone in the industry. to take advantage of the hyper-growth segments that are reshaping construction and maintenance throughout the world. But I think you've heard the tone so far that we're just getting started. Because we're only just beginning. We continue to invest in new categories. We continue to support new trade verticals. And we continue to position ourselves for new growth as we expand our geographic reach. Because one thing that I can assure you, that Milwaukee is just getting started. Thank you.

Okay, I believe you all understand from the whole group up here and the rest of TTI the confidence level that we have in the business, the leadership, our approach to the business overall. We'd like to open it up now to Q&A.

Good afternoon. So if you would just wait for the microphone and state your name and firm before asking your question, please just limit it to one question to give as many people an opportunity. Thanks. Eric, first question.

Thank you, Ross. Congratulations for the management again, you know, for good results. So I think most people, most investors are concerned about, you know, the second half outlook, you know, given the macro change, right, in the U.S., you know, job creation slowed down, you know, PMI slowed down. But, you know, how you, you know, give us more confidence about the second half outlook in terms of the Or the momentum, you know, continue the aggressive strategy for Newport launch? Or you have to, you know, set back, you know, for cost control or, you know, slow down the Newport launch, slow down the investment? What do you think for the second half?

You know, let's cover Milwaukee first. From a Milwaukee standpoint, not only in the U.S., but throughout the globe, as you heard from Shane and Alex, our focus is on multiple verticals. The big projects throughout the globe are where we live every single day, and those contractors that still are having difficulty finding people to do work are there. And that gives us confidence that even though for the past year plus residential has slowed down, and downtown commercial construction has slowed down, these other projects and other verticals continue to flourish, and they're not stopping at all from the Milwaukee standpoint. On the consumer front, clearly. We have taken share. We've expanded to product categories like cleaning and like lifestyle to be able to continue to build the brand and continue the kind of focus that we have. And no matter what market conditions exist, we've continued to win not only in the Americas but throughout the globe.

Okay, thank you. Karen, next question.

I'm currently from J.P. Morgan. So my question is regarding competition. I heard, you know, we don't really care about competition, but we do still like to get some idea, particularly I think two things here. First, Stanley Black and Dacre at the most recent briefing, they talk about they're going to grow sales at two to three times of GDP. Is it because overall power toward demand is bending or is standing back and data gaining market share? How do we look at that? So that's the first question. Second of all, we heard that Makita is actually retreating from the U.S. Can we comment about that, too? Thank you.

The first question, number one, as you can tell, we view ourselves as a solution company. And that, based on what that user needs that they have, driving productivity and safety. Shane, you want to talk about why that's so different than our competitor in terms of Stanley Black & Decker?

Yeah, I think it's a different approach. I can't comment on how they view themselves taking market share. I think the numbers speak for themselves with respect to our growth in terms of what we've been able to accomplish. But if you look around the room, the approach that we take in terms of driving broad solutions deep within our core trades and how we approach the core trades gives us confidence, not only from a product development perspective that we've We're not in the beginning stages of this. We're very mature in some of the verticals that we serve, that we're able to pivot resources in the field commercially to make sure that we're taking advantage of the biggest opportunities out there. But our perspective is that we continue to take more share than anybody in the industry. But more importantly, if you look at some of the solutions that I mentioned this morning, we're creating market unlike anybody in the industry. We're developing new-to-world solutions that never existed before. So for us, when we talk about taking market share, it's a great bullet point to discuss. But when you're disrupting and creating new solutions that never existed before in your creating market, that's why we're so confident with the growth as we move forward. And we're really focused on how do we solve the problems that are approaching the trades? Because it's the truth. Labor is a scarce resource. So whatever we can do to make them more productive and safe is where we're going to win. And I think As Alex shared, the numbers in Europe, the numbers speak for themselves, and we'll continue to create market and increase the size of the prize as we move forward. I missed the questions on Makita.

The second question on Makita is in North America, there are numbers and we're trenching in the marketplace. It really goes back to the strategy that I talked about and Alex talked about and Shane talked about, which is that relentless focus on the user has created a groundswell of demand where we're the brand of choice for productivity and safety and solutions overall. Their approach to the market has been very, very different. And that approach has put them in a position where they could no longer win. And I think that has led to their... that they have taken this year.

Hi, I'm Jacqueline Du from Goldman Sachs. It's our pleasure to meet the whole management team, where I'm particularly interested in Milwaukee and especially the three end markets, data center, power grids, and renewables. So just want to get a sense, what's the revenue contribution from those three end markets, roughly? And what's the contribution to incremental growth? and in terms of your upcoming solutions in the pipeline, how significant you are looking at those three end markets. And also, let's say, if the solution is specifically dedicated to data center application, is this transferable or can be applicable to other end markets? So that's the question.

Let me cover it in a macro, and then I'll turn it over to Shane. At a macro level, these aren't new opportunities for us. So we've been involved in data centers with mechanical and electrical alternative energy for multiple years, all of those for 10 years plus. And the users that do the work, we've become partners with them, which started over 16 years ago down that path. So what you're seeing is the continuation of the journey. With specificity, we don't talk about the size of each one of those pieces and how we're expanding it with our competitors. What we will tell you is they're vast, they're growing, and we believe and our users tell us that we dominate them today in every single sector. Shane, you have anything to add there?

Yeah. I think in the area of data centers and solar as an example, as Steve spoke about, a lot of the trades that we're delivering solution towards may have been working on a commercial job site or another industrial sector prior to moving to data centers and the labor shifted. So with that, a majority of the applications are leveraging the solutions that we already deliver today in terms of cutting wire, terminating wire, Where it's different and we take a different approach is where we'll develop unique solutions for a data center, such as an M12 torque wrench that provides a specific torque rating on a lug that's used in data centers. Or in a solar site, they're still pulling wire, they're still cutting wire and terminating wire, but they need a specific tool with the ability to drive a specific torque range on a fastener for a utility-scale solar project. where we'll have a broad array of solutions and develop very unique, specific application solutions for that segment of work to differentiate us from our competitors. And I think that's as evidenced in a lot of the categories that we went through. And if you have hours of time, I'd sure love to sit down and show you. But we have a lot of examples where we just dive deeper to understand the problems that they need to solve. And that's why we're investing heavily in areas like our internal development, product development, leveraging artificial intelligence and machine learning. This is not a splash, let's just talk about it because it's cool to talk about it. We were working on machine learning before any of you entered anything in the chat GPT. We've been working on machine learning for over six years. So we leveraged that capability because the problems that the trays were asking us to solve in solar, in data centers, required that capability. So hopefully I answered your question, but that's where I think we're unique is that we leverage a lot of our solutions, and they are applicable to different segments, but where we differentiate is have very specific solutions that make us unique and make our platform unique.

And let me add one piece to what Shane expressed. Now you're a contractor, you're an electrical contractor, and you work on data centers. Milwaukee comes up with a solution that is unique that helps drive productivity and safety. So what does that mean to them? That means it's more efficient for them to be 100% in the Milwaukee platform between M12 and M18 than it means to just buy that one product. We get all of those other products along with it. And that's been our strategy from day one for the past 16 years. It applies to safety. It applies to storage. It applies to power tool accessories. And it clearly applies to our systems of M12, M18, and MX as well.

Way in the back, John Choi. Okay.

Thank you. I'm John Choi from Daiwa Capital Markets. Congratulations on the great set of results. I got two questions. First is on the gross profit margins. This obviously first half we had a pretty strong gross profit margins, you know, achieving close to 40%. So looking ahead, you know, as we are kind of positioning ourselves as solution provider, does that mean that we have more meaningful upside in terms of profitability? That's my first question. Second question is about your supply chain footprint. I understand with the geopolitical risk going on here and there, as we have been diversified significantly over the past eight years since 2016, how do we see ourselves combating any potential tariffs or how we position ourselves versus competition? Thank you.

Great. Frank, you want to cover the gross profit? Sure. So overall, as I stated, there's three facets to what we are doing to continue the gross margin increase overall. Number one, it's Milwaukee's outpacing the rest of the TTI business, and it's accretive. Number two, we're still, as you heard from Shane and from Alex, a new product machine delivering that disruptive innovation. And those products are accretive, not only in the Milwaukee front, but also in the RYOBI front and our other consumer businesses. So we clearly have confidence from those. And the last is productivity inside our facilities and factories. And all of that ties together why we are confident about the overall increase.

And I think the gross margin will not stop at 40%. We will continue to improve our gross margin, but having said that, we'll continue to reinvest back into technology, in innovations and the like. That's how we see it.

And that investment, as you heard today, is absolutely critical for the brands that we have built year after year. The second piece of the global manufacturing footprint, at one point in time, All of our manufacturing or the majority of the manufacturing was in one location. Over the past years, as we had the first macroeconomic and political issue, we expanded that footprint to multiple countries throughout the globe. Today, we've done it in a way where we have manufactured in the U.S., in Mexico, in Vietnam, in the PRC, in the European sector. And it's given us that flexibility with our supply base also brought to those locations to have the ability to adapt to any macro political situation that may occur.

Okay. We have time for, I think, two more, and then we'll wrap it up. Johnson?

Thank you all. Johnson Wang from Jefferies. Thank you, Steve, for showing the slide on ValuePro. So I'm quite interested on the ValuePro segment that you highlighted. So how big is the ValuePro segment as a percentage of the overall RYOBI business? And in the first half, did it grow faster than the 6% for RYOBI, or was it a little bit slower? And if we compare the price points of similar products of ValuePro drill versus a Milwaukee drill, how much cheaper is that similar type of drill. And then as a follow-up on the consumer business, Ryobi was great, but there were also other segments, hard, rigid, or flex, that kind of dragged the overall consumer business so that the overall first half growth was actually negative. How are we tackling those businesses that are quite sluggish? Are we going to see a turnaround?

So let's cover your first one about the value probe. There is no question when... Interest rates are low and residential is booming. the value pro increases, no question about it. So consequently, when we talk about the value pro today, it's less than it was during boom periods of residential construction, remodeling, downtown commercial structure, and those areas today. So it's less than 20% today, but we also see that when interest rates come down, that that part of the business continues to boom in a significant way. The great news is in the Ryobi brand, the overall consumer pieces you have seen with all the areas of consumer from lifestyle to outdoor to inside the home continues to be very, very strong overall. As you asked about the rest of our business and the what about the rest of the business in terms of not delivering the same type of results as the RYOBI business, in many of those businesses and overall, we're clearly looking at how do we drive profitability. There's challenging times with different distribution partners out there today based on what they are seeing and consequently driving profitability and figuring out approaches in 2025 to be able to continue to grow those businesses with the distribution partners through innovation is clearly part of our mantra that we're putting in place for next year's cycle.

Okay, we have time for one last question in the middle there from CLSA.

Thanks for the last question. This is Xiaofeng from CRSA. The first question regarding supply chain. Obviously, we're in the election year. If anything happens in November, this is the exact order. It will be 60% tariffs from China. What is the flexibility internally for you to switch around the production capacities? That's the first question.

Yes, we have, as I stated, our global manufacturing footprint and our supply chain footprint on our brands allows us to have the flexibility to manufacture in multiple locations throughout the globe today. We're a very, very different company regarding the foundation that was set many years ago versus where we were 20 years ago as a business. So we are prepared today. and have the agility to adapt to any of those situations that may occur.

The second follow-up question, I'm not going to try to beat the dead horse about gross margin expansion, but just do you internally have a target or long-term target in terms of gross margins? This is going to be the number. If I can make it, I'll be super happy.

No, we don't. But we will continue to reinvest in making sure that our gross margin continues to improve. So we saw the chart. We've been increasing that for 16 or 17 years. So there's no reason why we should stop here.

Okay, very good. Why don't we wrap up the Q&A session? I think I'm going to hand it back over to Chairman Putwill for some closing remarks. Thank you.

Thank you. I hope you all enjoyed the presentation. We have an exceptional junior management team, some of whom you met today, and a portfolio iconic global brand that we have a second to none. In short, we are extremely well positioned to continue our strong momentum In 2024, no clouds on the sky, and 2024 will be another strong year and beyond. I was assured by you. I would like to thank all of you for your ongoing support and confidence in our company, and I'm looking forward to seeing you all. at our four-year result announcement end of February, beginning of March. Thank you very much for attending.