Pentair (PNR) 15th Annual Global Materials & Industrials Conference summary

Transformation strategy and 80/20 initiative

• Transformation journey focuses on pricing, sourcing, operational, and organizational excellence, aiming for margin expansion and reduced complexity.

• The 80/20 initiative, launched in January, has delivered better-than-expected early results, helping prioritize high-value customers and products while reducing less profitable complexity.

• 80/20 insights are being used to reallocate resources from low-value segments to core growth areas, with tools now available for business leaders to drive performance.

• The initiative is expected to be completed across the business by the end of summer, supporting both margin and organic growth targets.

• Management is willing to accept minor short-term revenue declines if it accelerates long-term growth and margin improvement.

Market outlook and segment performance

• Pool segment expects high single-digit growth in 2024 despite the overall market being down mid-single digits, with positive trends anticipated for 2025 and 2026.

• U.S. residential exposure remains significant, with 2024 expected to be flat after a weak 2023, but positive growth is anticipated next year.

• Commercial Water Solutions, especially in restaurant and beverage filtration, is well-positioned for growth, supported by synergies from recent acquisitions.

• Pool automation is a key growth driver, with new pools approaching 100% automation adoption and significant opportunity in retrofitting existing pools.

• The business is focused on high-end pools, which have proven more resilient and profitable, especially in the Sun Belt region.

Financial targets and margin guidance

• Committed to achieving 24% margin by 2026, with a 200 basis point contingency to potentially reach 26%.

• Pool segment targets 35% margin by 2026, leveraging transformation levers and 80/20 to drive further improvement.

• Double-digit EPS growth is expected for the year, supported by ongoing transformation and 80/20 benefits.

• Price increases are expected to offset cost inflation in 2024, with a balanced approach to managing input costs.

• Record earnings are projected even at lower pool build rates, reflecting operational efficiency and margin focus.