Caterpillar Inc. (CAT) Earnings Call Transcript & Summary

[Audio Gap] Tech & Mobility Conference. Really excited to have the team from Cat here this morning. I do want to just quickly note though, we -- at Citi, we regret the passing of a longtime friend, Tobias Levkovich. He -- some months ago, but he was a big supporter of this conference, actually covered Cat longer than I did back in his day. So anyway, so he -- if you were here, you would have asked a really good question, probably really pointed and a deep question. So someone's got to step up and fill his shoes. So with that, we want to hand it over to the team from Cat. Just some quick introductions before we do that. Joe Creed, directly to my right, is the Group President of Cat's Energy & Transportation segment. He joined Cat in '97, I believe, and has had a bunch of different positions, including a stint as interim CFO back in 2008; Rob Rengel, to his right, the Senior IR Manager; and then Ryan Fiedler, far right, is the new IR Director. So maybe, Rob, do you want to take it? I think you've got some really exciting language to go through. So why don't you do that.

Thanks, Tim. Everybody loves the disclaimer. We have to do it. So we may make forward-looking statements today. Those statements are subject to certain risks and uncertainties. For a full list of risks that could cause our actual results to vary materially, please see our most recent SEC filings, including our 10-K for 2021. We also may reference non-GAAP figures. For a reconciliation of those figures to the nearest GAAP figure, please see our most recent earnings presentation in the appendix. And that's all I've got, so let's get it started.

Thanks, Rob, and thanks, Tim. I want to jump up here for just a few prepared remarks, not too much, I promise. So before we just started, I appreciate the introduction, and it's nice to see everybody in person actually for a change. It's nice to be on the road again, despite my travels. I appreciate the flexibility of Tim to rearrange as I struggled to get out of Dallas yesterday. But I'm Joe Creed, Group President for Energy and Transportation at Caterpillar. And as Tim said, I'll have 25 years with the company here coming up in May. In 2013, I became -- I was promoted to Group CFO for Energy & Transportation. I spent a lot of my career in E&T with a finance background. In 2017 to 2018, I became Vice President with responsibility for Finance Services division. So that's the Corporate Finance team, not Cat Financial. And as Tim said, during that time, spent a few months as interim CFO for the company. In 2019, I became Vice President for the Oil & Gas and Marine division, and the Electric Power division, which are 2 groups that are in E&T in the segment that we have today before taking this role last year. So just a little bit about my background. And before we kind of jump into the Q&A, wanted to give a little bit of background on Energy & Transportation to those of you who may or may not be as familiar with our segment. E&T sells innovative product solutions and services to a really diverse set of customers and industries. And you see those industries on the slide. Those include power generation, oil and gas, transportation, which inside transportation, think rail and marine, and then a variety of industrial applications, including providing engines and powertrains for our Cat machines. Services offered throughout the life cycle of our products, cutting-edge technology and decades of product expertise are what set us apart. And we provide exceptional value to our customers and help them succeed. So E&T has a long history of success as well. Since 1925, we've built over 21 million engines and have installed over 750,000 generators worldwide. Our Solar branded industrial turbines have over 3 billion hours of operation, and there are over 30,000 Electro-Motive Diesel locomotives worldwide. Caterpillar and our dealers are laser-focused on offering industry-best service and support to our customers in the field throughout the life cycle of our product and oftentimes multiple life cycles of our product when you think about the durability and rebuild-ability of our products. Our goal is to support our customers in the field to make them more efficient and more sustainable while lowering their owning and operating costs. And one of the ways we do that is through remanufacturing, which also falls inside the Energy & Transportation segment. Reman not only offers great economic benefit to our customers, but it also offers a significant sustainability benefit as well when you consider much less material used when we can reuse the cores and make the parts like new again and much less energy used by not having to manufacture those components from scratch. In fact, we've recycled more than 8 million tons of material since 2010 through our remanufacturing. But Reman isn't the only sustainability element to our strategy. If you look at this slide, we're dedicated to understanding the unique challenges of our customers across the diverse industries that I mentioned. And we're investing in new technologies, services and products to help them achieve their climate-related objectives. And given the diversity of all the industries and customers we talked about, we're not going to have one technology that's going to satisfy all of those needs. So we're putting our expertise to work on multiple solutions that you can see on the slide. We tend to group them in these common themes. And the first I want to mention is renewable fuels, which enable increased use of reduced carbon options, including hydrogen and hydrogen blends; electric and hybrid powertrains, which employ an electric drive transmission and power components for mobile equipment; microgrids, which I kind of equate is similar but on stationary power applications where we integrate a variety of renewable resources and power sources with traditional power sources seamlessly integrated with our microgrid controls; and then a number of applications where we're investing in battery electric and hydrogen fuel cell power sources. In fact, we've already introduced a number of innovative low-carbon solutions, including a battery-powered zero emissions underground mining loader, which we had on display at MINExpo last year if of you happen to be there and got to see that. A battery-powered zero emission switcher locomotive, reciprocating engines and gas turbines that burn hydrogen blends, landfill gas, and other biogases. And then recently, at the end of last year, we made available Caterpillar-branded generators that can burn 100% hydrogen. I'm not going to cover all the examples that you see on this slide today, but this slide represents a number of announcements that we in E&T have made over the past year, year plus on advanced power and sustainable solutions, including if you look at the top row, second from the left, the acquisition of CarbonPoint Solutions. That adds small-scale carbon capture capability to our oil and gas and electric power solutions to support our customers. We also announced key collaboration agreements, one with Microsoft and Ballard to explore hydrogen fuel cell backup for data centers -- backup power for data centers. And then also with Chevron and BNSF, where we're going to explore hydrogen fuel cell power for line-haul locomotives. In addition to what we announced, and you see on this slide, you may have also seen a number of announcements made by the Resource Industries Group to help bring sustainable solutions to the mining customers. We in E&T are side-by-side partnering with them and also working with them to help bring these solutions to the market, not just in how we power the mining equipment but also given our breadth and expertise in distributed power, also site infrastructure. So Caterpillar, we're ready to take on any of the challenges. And most importantly, what we view as opportunities that come with the energy transition. We're committed to understanding each customer's unique needs and situation, and investing in new products, technologies and services that will help them in the more immediate term be more efficient and lower their owning and operating costs. And over the mid- to long term, invest in those technologies mentioned on the prior slide to help them achieve their climate-related objectives as they build a better and more sustainable world. So I appreciate the time for just a little overview. I just wanted to highlight some of the things that we're working on in our segment. And with that, I guess we'll maybe open it up for some Q&A.

Great. Right. And as we do this, if anyone has any questions, there's directions you can just type it in, and I'll see them here in the app. But maybe, Joe, we'll start with one that you may get once or twice today. Just remind us on the Cat's direct exposure to kind of the Russia, Ukraine area and not a big footprint for you from a factory standpoint, if at all, but just maybe just remind us what the exposure is there.

Yes. First off, my thoughts are with the people over there and our folks. We do have a factory in Russia and then a distribution center over there. The exposure is not huge relative to the size of Caterpillar. But obviously, it's an unfolding situation. So we continue to monitor it. And I think it's too soon to see what type of impact that it will have. We'll continue to monitor it. A lot of it unfolded, unfortunately, while I was in the air last night and trying to get here. So I'm catching up with it as you all are.

Yes. Got it. Maybe just looking back before we look forward, but a lot of the issues that impacted Cat just in terms of -- and others in terms of the supply chain bottlenecks and manufacturing inefficiencies that caused 4Q results to be below the company expectations. What -- from your -- from E&T, which obviously includes a lot of different businesses, which I'm sure some were impacted more than others. What was your group's -- was the impact for you? And what are -- what's the viewpoint into '22 in terms of -- and how quickly those issues can be resolved and what you're working through?

Sure. If you think about -- and I'll stick particularly to E&T, our margins were under a little pressure in the fourth quarter. As you saw in the earnings announcement and Jim and Andrew talked about, but if you think about our business a year ago today, we weren't in a position where some of our industries were a little slower to come out of what -- of the downturn in COVID. So we waited a little bit longer before we could take some pricing action relative to the machine side of the business. So we're in a different position now. And we've made a number of announcements. I think you'll see us catch up as we go throughout this year from a pricing standpoint. And then if you flip that sort of the other way and think about the supply chain challenges that we've had, we're sort of on the front end of that in the process with Caterpillar as we obviously build the engines first in our factory, ship them to the machine factories where they assemble the machine. So we're sort of on the front end of feeling those supply chain constraints and costs. So we saw a little bit more airfreight than we like. But if you keep in mind, we're keeping our factories -- and Jim mentioned this on the call as well, we're keeping our factories and keeping our people ready to go so we can build the product when we have inventory coming in. So those constrained components when they get there, were able to assemble and get engines out to our customers, both internally and externally.

Got it. Got it. Maybe -- and we'll drill down into the individual segments, just from a high level, E&T was noted on the call as being a big driver in terms of the backlog growth for the company. Where are you seeing the most? Where do you have the most visibility? And what's a normal -- I don't know if you can quote the exact numbers, but what's the backlog coverage going to '22 compared to what I would call a normal year?

Yes, it's tough for us to say what a normal year is. We're so cyclical, so it really depends. But I would say relative to where we've been, we -- that is one of the highlights because if you think about the fourth quarter for us, we exited 2021, entering '22 with a very strong backlog, stronger than we've seen in quite some time when you look at it in total. And obviously, it's a little bit mixed. When you break it down, we're seeing a lot of strength in power generation. It continues to be strong for us, both on the retail side, which follows typically the general economy but also strength in data centers where we're very strong with our data center customers for backup power, and we see that growth continuing in the near term. Solar, we started to see more inquiries in bookings up in the fourth quarter, but that's obviously a little bit longer lead time. So it's in the backlog, some of that. But as we said on the call, we expect new equipment for Solar Turbines to be down in 2022 relative to '21, but I think we'll exit the year in a good place heading into 2023. So oil and gas, we expect to be a little bit better. Our customers continue to be disciplined with their capital as you see. So I don't see it running back to what it was prepandemic from an equipment sales standpoint, but you never know. That industry is very dynamic, so we'll do our best to react.

Interesting. One you didn't touch on there and maybe we just go through the individual segments, just starting with Transportation. Obviously, rail the lion's share of that. We had a number of your big Class 1 customers here in the last couple days, and they're all talking about CapEx trending higher, but -- and there's different pieces of progress rail we can maybe break down. Locomotives in North America has -- it's been some time for orders and deliveries there. What's the outlook? And maybe you could talk North America versus international on the new locomotive side.

Yes. From a new locomotive front, most of our activity over the last, I would say, 2 years, and as you're talking to the Class 1s, it sounds like, it's been international. We continue to pursue the international market, and I think there are deals that are happening out there that we obviously are participating in. When it comes to North America, I think traffic is picking back up. Parked locomotives is coming down and trending down, but we're still not at a point where we see a tremendous amount of sales opportunity in 2022. We are focused with our customers though, on repowers. We're also focused on the newer technologies that we talked about in my slides, battery electric, hydrogen, working with them on the power of the future and really trying to figure out the timing and pace and infrastructure needed and what the right solution is for them. So that's where the conversation has been primarily in North America, and then most of the new sales would be international in 2022.

Got it. Got it. So it sounds like if you have more railcars coming out of storage, services has -- sounds like services has kind of driven a lot of the strength. Does that switch whereby the -- you start to see some mix pressures if you do start to see if and when you do see locomotives pick up? Or is there not -- is that not a...

Yes, within rail, I don't see that as a tremendous headwind. I mean I'd welcome those orders, frankly. And the services business will continue to be strong, and obviously more traffic and more locomotives coming out of storage is good for our service business. So I would view all of that as a positive for us.

Got it. Interesting, you mentioned power gen to start, and that's very wide range from a backup generator to a big, large power plant. Maybe take us through a little bit more in terms of data centers have driven growth for quite some time. I'm guessing we're not at a point where you have replacement orders for those because [indiscernible] on a standby application. So is that basically, the runway for growth in data centers, what are you seeing there?

So through the pandemic, what we've seen is actually accelerate the need for data centers, and our customers accelerate their growth. Will that moderate? I mean it could a little bit, but we still see pretty good growth in data centers as new data centers continue to be built. Before we had a replacement cycle on replacing the installations we have. I think what you'll see is what we're working on with the alternative fuels and can we use biodiesel? Can we -- we're working on the fuel cell applications, so what are the solutions of the future to help our customers? I think that's where we'll focus if you talk about a replacement type of cycle. But right now, it's pretty focused on growth.

Just given the power gen as a whole tends to be a little bit more of a onetime nature of the sale, is that a segment where, in this environment where everyone is focused on price cost, where you have a little bit more flexibility to keep in line with the volatility in costs? Or how does that...

Yes. And it's been the higher volume base for us. So we've been able to keep up a little bit better there just because of the nature of that market hasn't been as depressed as some of the other ones in E&T. And you think about that as well as a first sale element to stand by, but we also have a big portion of our business is gas or prime power, in which case there is a big service opportunity that comes along with those. And as consistent with company strategy, we're very focused on growing services, and that's a great opportunity for us to sign long-term service agreements and CVAs at the point of sale, focused particularly with our dealers and prime power applications.

Interesting. Okay. On oil and gas, I guess we talked earlier about Russia, Ukraine one of the byproducts unfortunately, that is you have $100 crude here this morning. You mentioned the discipline from the E&P customers. And one of my colleague that covers those companies put a note out recently saying is capital discipline going to crack. And he was talking about the fact that E&P CapEx budgets have been trending higher than they expected. But it doesn't sound like you're seeing that flow down to you. So maybe just talk about customer sentiment there across your...

Yes, I think the customer sentiment is better than it was 12 months ago, right? I think we'll see -- we expect and we said in our comments, we expect the oil and gas, both new equipment sales and services, to continue to grow in '22 relative to '21. I think it's yet to be seen. Everything's unfolding. If things change, we'll be ready to respond, and we'll support our customers and take their lead on that. Right now, we're still seeing the discipline sort of remain in place. Is spending higher in 2022? We expect it to be. Is it back to what it was prepandemic or 2019 type of time frame? We're not seeing that just quite yet.

Got it. In North America, gas compression, historically, a big important market for Cat. What we're hearing from some of the packagers there on the rental side is lead times for 3500 and 3600 series engines, in some cases, out 40-plus weeks. That seems like activity there has picked up quite a bit. You mentioned you were behind the curve in late -- later on pricing actions. But I'm guessing that's coinciding with some price increases. So maybe just talk through that.

Yes, we're seeing those orders tend to pick up. I know you're hearing those quoted lead times from in particular gas compression. We tend to work with our customers there to try to marry up when the compressor gets there and when the engine gets there. So if you called us, I don't think our stated lead time would be that. I think we work with our customers to try to slot in what makes sense. Generally, we have a little longer runway on 3600 gas compression and those type of applications. But we are seeing it pick up, and that's a good thing for us. We had some really good years 2018, I believe, a couple of years ago, and it's been down, but it's still been pretty -- it hasn't gone all the way away, but it is picking up again this year, which I think is a positive sign.

And that historically, Lafayette's been a factory where the build rates can move up and down quite a bit. How's your ability in an environment like this where labor is more of a challenge? How are the fact -- that factory specifically able to kind of adjust to this?

Yes, most of our challenges are really outside of our 4 walls right now and supply chain related, and there are various things from component shortages to a supplier has a COVID breakout to transportation challenges to a lot of the things that you see on the news, basically all of them. And it's not one thing from our ability to produce inside the factory, I'm confident we have plenty of headroom there to continue to grow. So we're trying to push that build rate up as we speak, but we're working daily. We have a team put together to work daily with our suppliers to see if we can help continue to get more supply so we can continue to increase our build rates.

Got it. Let's shift to well servicing. Pressure pumpers have -- kind of feast or famine in terms of their spending, but we're definitely seeing rig count increases and day rates going up. Talk about that market coming out of what was a '17/'18 was quick to respond, so a lot of overhaul activity in new units. But now this focus seems to be a lot more on ESG-focused commitment, e-frac, and some of these other dual-fuel engines, which I know Cat is a strong player in. So talk about how you participate in this environment and then what you think the cycle looks like in terms of the recovery compared to maybe historical period?

Yes. I think it will follow -- I mean we're seeing a little more discipline with our customer base than in the past. There's been a lot of consolidation in the industry and move around over the past couple of years. So as you mentioned, there's a lot of horsepower out there. Customers are focused a lot on repowers, but as you think about, and rightfully so, the focus is more of a shift to e-frac and ESG carbon -- lower carbon solutions. And that's really right in our wheelhouse with our Tier 4 DGB, we can substitute up to 85% natural gas for diesel, condition field gas, which helps reduce flaring. The acquisition of Weir's Oil & Gas business, SPM-branded pumps has brought us our 5,000-horsepower pump that's perfectly suited with our Gas 3500 gen sets for an e-frac application. So it's part of the strategic rationale behind that acquisition. It also from a -- from a fracking standpoint, if you think of a DGB fleet that has Cat engines, Cat transmissions, now SPM-branded pumps and flow iron, we are integrating that drivetrain all the way from the trailer to the wellhead monitoring it, figuring out the most optimal places to run it efficiently and so making customers more efficient today gives them better fuel consumption, better cost, but also a better carbon footprint with that. So we've been integrating engines and drivetrains for 95 years at Cat, and we've taken that logic to the oil and gas business and really start to integrate that whole solution. And I think that's going to drive a lot of benefits for our customers.

Interesting. And just on the DGB, I think on the Tier 4 side, do you have a competitor there on the -- in terms of Tier 4?

I mean there are others who have DGB capability. I mean obviously, we feel very confident in our Tier 4 DGB and our customers are giving us great feedback on it, and we're seeing a lot of uptake there. So we can...

I just say that because that's all I ever hear from the field is Cat. So I just didn't even know if there was another.

Yes. I mean there are others out there, and our competitors continue to work on those solutions. But right now, we feel really good about the solution we have.

Interesting. Any questions from the audience? Okay. We'll move on. The -- go back -- if we can go back to Solar. Obviously, a lot of attention, rightly so, just given the margin profile of that business. Can you talk about guessing that the new unit side is kind of catching down to midstream budgets a year ago that were getting cut pretty significantly. On the customer services piece or the aftermarket side is your sense that there was -- in that environment when budgets were getting cut, was there some maintenance that maybe got deferred that you're seeing a bit of a catch-up now or assuming first strings are loosening a bit?

Yes. We saw that happen mostly in 2020 when you think about the immediate impact of COVID. I think the uncertainty around that, a lot of customers really tightened budgets. We had a really, really strong year in bounce-back in services with Solar last year in 2021, and we expect that to continue to be good in 2022 as they tend to catch up on maybe some of that delay in maintenance. And you're absolutely right on the new equipment side. We're just sort of catching up. Those are long lead-time orders. When we get them, we're seeing compression North American gas transmission opportunities in the U.S., but we're also seeing international activity as well, which we hadn't seen for quite a while, which is also a positive thing.

Interesting. As we think about the -- you had a slide talking about all the investments underway around sustainability and electrification. Presumably, your group is bearing a lot of the -- shouldering a lot of that investment cost. Maybe talk about, A, if -- where you're seeing more traction with customers; B, is this -- should we think about this as kind of a step-up investment that's likely to persist, or...

I mean we're -- obviously, we being the power provider, both to the internal machines and the large external customer base we have that we review, we are going to be the ones who bear the brunt of the upfront investment in all of these new technologies. I will say that we've been investing for quite some time on alternative fuels, burning biodiesel natural gas. I mean the MWM acquisition brought in, they're 150 years old and a ton of expertise that was brought into the company and now blended into our engineering group, which is why we are able to put out a generator that can burn 100% hydrogen right now. So we've been investing in a number of the technologies you have there. Will we accelerate? I think, yes, over the last 2 years, you're going to see the time frames of our customers have sort of come in on these types of solutions. So we continue to work with them on the pace that they need -- they feel they need to go, and we want to support them. And we will, inside E&T's business see a little bit of that investment. Will it go up? I think over time, likely a little bit, but you'll just see a lot of shift as well between programs we've been running to programs like this.

Your services being a big focus for Cat, the target of doubling it by '26, I think -- how do you think about that opportunity for the 3 operating segments, E&T within that? I would think that, certainly, the oil and gas with all the overhaul and rebuild activity or opportunity and then the old legacy Progress Rail was almost all services. But you have power gen where I think the opportunity is probably lower. But -- so high level, the potential for your group to participate to that target of doubling services?

Yes, we're laser-focused on it. It's important part of the company strategy, and it's important part of E&T strategy. And you're right, I think it depends on the application in the industry and application within the industry. As I mentioned, in electric power, when you go to the standby portion of that industry, you're right, the aftermarket opportunity is fairly muted. It's a for-sale type of business. They run a low number of hours per year. We're still focused on it. We think through e-commerce and other things, we can still service those customers and take care of them. But on the prime power side, there's room to grow for us. In oil and gas, those types of applications where those engines get run pretty hard, and they consume a lot of parts. There's a lot of overhaul, second, third life. Reman is a big opportunity for us to help our customers as well. And then if you really break down even inside marine, certain applications are less aftermarket prone, but where we're really strong with our 3,500 engines and others, the tug market, tug and salvage and those engines, they run pretty hard, and they consume parts and go through overhaul. So we have our share of that growth to get. I'm confident we're going to go get it, and we're focused on working with our dealers and customers to take care of them.

Shifting back to the comment on the supply chain and the challenges that you face there. As I look at Cat investment in inventory, I think it's $14-ish billion of inventory, which we've never seen, is -- from your perspective, is there a thought that maybe we just were going to run with higher levels of inventory going forward just because supply chains have become less predictable, and thus, we're just -- we're going to have more safety stock just more permanently?

Yes, I think it's a little soon for us to really say what that normalized -- we're obviously, we'll have to take a look at it. The world is a little different now than it was a couple of years ago. A lot of what you're seeing now in our inventory is the fact that we may have 1 or 2 components that we can't get, but we have the rest of them coming in so that when we get those, we can build the engine. So I would expect a lot of that to subside as the supply chain gets better, not sure when that is. We're not seeing anything immediate right now. But over time, as supply chain gets better, I expect some of that to come down. The longer-term impact of looking at footprint and where do we have exposure and do we want to carry more safety stock, I think that's stuff the teams will continue to work on. We did carry some inventory strategically heading into this challenge just trying to be ready but the challenges continue to mount and we kind of burned through that. We were able to last a little longer maybe than we would have in the past. So that's something we're going to continue to look at in the long term. But right now, we're focused on trying to get as many engines out the door as we can right now.

Got it. Good. Maybe we'll give you a bit of a break. Ryan and Rob, maybe talk through maybe you start with CI, just your outlook for '22 as you go around the world. I mean China has been pretty well telegraphed in terms of the headwinds you're facing there. Maybe talk us through what you're hearing from dealers and what's kind of baked into the outlook for some of the other key geographies on the CI side?

Yes, absolutely. So CI in North America was relatively strong last year. Residential has been really supportive, right? We've seen housing starts continue to look strong. You can look at estimates for a number of houses that need to be built, and you're talking in the millions. So still supportive for us. We expect it to be in 2022. The nonresidential side though, that had been coming off a little bit slower. That's starting to come back a bit. We see momentum there. And as we look forward to the infrastructure bill impact, that should be a benefit for us so, especially late this year into next year. And when you look at that bill, you're looking at funding over 5 years, and you're going to have some tail there, too. So it looks pretty positive from a North America perspective. China, Tim, just one quick note there, it's about 5% to 10% of our overall enterprise sales over time. So it's something people focus on. It's not a huge piece for us. It's been real strong for 2 years. Probably we expect this year that it's going to be more back to 2019 levels. And you see some housing issues there. We'll see what happens with monetary stimulus because, as you know, they can move pretty quick on things. But the rest of Asia-Pacific there is pretty strong for us. We're seeing supportive stimulus infrastructure spend. Construction confidence has been strong. That's kind of similar to what you're seeing in Europe, Asia and the Middle East as well. So there, you started to see some of the infrastructure spend come into place, the high-speed rail, HS2 in the U.K., we do a lot of the infrastructure build related to that. That's going to be helpful as well. So pretty positive there. The other area in Latin America, good construction confidence. There's inflationary concerns there. You're looking at Brazil, Chile, Peru. Those are probably some concern areas, so you've got puts and takes there. But overall, when you look at our end-user demand outlook, relatively strong really everywhere except for China, which I talked about. And then as I think you know, mining has been improving kind of steadily sort of a gradual increase. Commodity price is supportive there. Parked trucks are very low, which is helpful. And we have been seeing -- you've seen our order backlog grow as a significant increase in the third quarter. And so really feeling pretty positive there. Over 500 large mining trucks out in the field now. So you look at us versus others, we feel very good about our product there.

Just coming back, Rob, to CI specifically, and it's not totally apples-to-apples, but you as the largest player in that market on the CI side in North America, a #2 or #3 player in that market guide specifically to pricing and just talking about guiding to 8% or 9% pricing in that business. They don't play in a meaningful way in China. So I'm sure that's part of it. But how do you square the differences in terms of -- it's quite a gap between what they're at least guiding to relative to what you published in that segment?

Well, yes, we don't really address where the competitors are at. I think when you look at any of those numbers, you want to look at, okay, let's see, where's the stack? How does that look, right? So over time, we've been able to take price just in general. Last year, we were a little bit behind as we came into the end of the year. There are things like premium freight that impacted us, manufacturing inefficiencies. And what we said going into this year, though, we expect price to more than offset our manufacturing costs. And so you're going to see some of those increases. And by the way, last year, we took 3 increases. That's kind of unprecedented for us. So we're catching up. We expect a lot of that to continue to flow through this year, and we'll take additional price action. When you look at price, there's always the -- there's the balance there, right? So we're looking at providing value to our customers -- of course, we want to have some share potential. We've got services business on the back side. So we feel pretty good about our prospects going forward there.

Got it. And just -- we got a minute left here. Just circling back on mining, what's the sentiment that Denise and team is picking up from the field in terms of -- for a long time, expecting this kind of gradual ramp in deliveries and spending. Is that -- what are you seeing across as you think about kind of the outlook for RI, and we're not likely to see that kind of hockey stick recovery, but just what's the latest view there?

Yes -- no, I mean you hit on it, we do still expect it to be kind of a gradual recovery there. I mean those CEOs of the big miners, they remember back to the 2012 time frame when the CapEx was just going out of control. And obviously, a lot of people lost their positions at that time so much more capital discipline. But at the same time, there is -- we see looking forward, there's going to be a need for commodities. Talk about the energy transition that Joe had mentioned, copper, nickel, cobalt, those types of things that would support electric vehicles. Those we look at as tailwinds going forward. So yes, we feel pretty good about the business.

Good. All right, guys, we get -- shot clock says 8 seconds, so we'll wrap it up there. Thanks a lot for coming.

Thank you, guys. Thanks, everyone, for being here.