Graco (GGG) Gabelli Funds 35th Annual Pump, Valve & Water Symposium summary

Key industry and macroeconomic themes

• Anticipated changes in legislation, regulation, and tariffs are expected to impact industrial markets in 2025, with ongoing uncertainty around inflation and supply chain adjustments.

• Global infrastructure investment remains robust, with the IIJA providing significant funding for bridges, highways, grids, and water systems over the next several years.

• Digital transformation and AI are driving productivity and influencing capital allocation and M&A activity, which is expected to strengthen into 2025.

• Input costs for oil, copper, and steel are stable, though new tariffs on steel and aluminum may increase costs.

• Water infrastructure faces aging assets, regulatory tightening, and a need for technology adoption to address labor shortages and contamination concerns.

Company strategy and operations

• Focus on niche, business-to-business markets with stable competition and recurring revenue, leveraging technology across multiple applications.

• Organic growth is prioritized, supported by consistent investment in product development and state-of-the-art manufacturing, with 80% of production in the U.S.

• M&A remains a key growth lever, exemplified by the recent COROB acquisition, which expands geographic reach and product capabilities in paint and coating machinery.

• Financial flexibility is maintained to pursue opportunistic share repurchases, with a long-term track record of value creation through buybacks.

• Recent organizational restructuring aims to drive higher organic growth by aligning business segments more closely with customer needs and market opportunities.

Manufacturing, labor, and public company considerations

• Advanced manufacturing is achieved by consolidating production and sharing platforms, enabling cost-effective automation even at lower volumes.

• Labor costs are a small portion of total costs, with most inputs sourced globally; competition is primarily with similarly sized, specialized firms.

• Being public supports employee engagement through stock participation programs and fosters long-term workforce stability.

• Tariff impacts are limited for domestic operations, but supply chain dependencies and global trade uncertainties remain areas to monitor.