Q4 2023 Park Ohio Holdings Corp Earnings Call

Participants

Matthew Crawford; Chief Product Officer, Member of the Management Team; Park Ohio Holdings Corp

Patrick Fogarty; Vice President and Chief Financial Officer; Park Ohio Holdings Corp

Christian Zyla; Analyst; KeyBanc Capital Markets Inc.

Dave Storms; Analyst; Stonegate Capital Partners

Presentation

Operator

Good morning, and welcome to the Park-Ohio Fourth Quarter and Full Year 2023 Results Conference Call. At this time, all participants are in a listen only mode. After the presentation, the Company will conduct a question-and-answer session. Today's conference is also being recorded. If you have any objections, you may disconnect at this time.
Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A list of relevant risks and uncertainties may be found on the earnings press release as well as in the company's 2022 10-K, which was filed on March 16, 2023, with the SEC. Additionally, the company may discuss adjusted EPS, adjusted operating income and EBITDA as defined on a continuing operations or consolidated basis. These metrics are not measures of performance or generally accepted accounting principles for a reconciliation of EPS to adjusted EPS, operating income to adjusted operating income and net income attributable to Park-Ohio common shareholders to EBITDA as defined, please refer to the Company's release recent earnings release.
I will now turn the conference over to your host, Mr. Matthew Crawford, Chairman, President and CEO. Please proceed, Mr. Crawford.

Matthew Crawford

Good morning. Thank you, Rob. Appreciate the intro, and welcome to our 2023 Fourth Quarter and Annual Conference Call. To fully appreciate the recent collective effort of our Park Ohio team. It's worth depreciating the more than 30%, our almost $400 million of revenue growth in the last two years, which is set all-time records across our diverse portfolio. And in the aggregate, this was done with little impact from acquisitions. The hard work was complemented by the strong brands and customer relationships, which have been built up over years and even decades due to innovation solid operating performance and customer satisfaction. 2023 was committed to metabolizing this rapid growth as we also completed our restructuring and enhanced our focus on improved operating execution and on our key financial metrics, thank you to our customers and to our entire team in line with our areas of focus.
Critical achievements also included a 230 basis point increase in our gross profit and operating cash flows of more than $50 million, which was used to pay down debt and grow our business 2024 is off to a fast start with what we believe to be a simpler and less capital-intensive business model. While we believe that we're entering a slower revenue growth environment, we anticipate ongoing pockets of relative strength in our diverse set of end markets, in particular, aerospace, defense and those industries, which are beneficiaries of government investments like semiconductor infrastructure and green energy.
In addition, we have strong backlogs heading into 2024, particularly in our IEG. group. Perhaps more importantly, we're laser focused on continuous improvement given the amount of restructuring and growth over the last two years, we need to continue to work aggressively to optimize our execution and reduce costs. Our allocation of capital will focus heavily on these initiatives as well as on organic growth opportunities in our best businesses, creating operating leverage in our best assets, continuing to grow gross margins and generating additional cash flow to deleverage. Our company are all of the greatest strategic importance during 2024. Thank you. I'll turn it over to Pat to cover the details of the results.

Patrick Fogarty

Thanks, Matt. We are pleased with our 2023 full year results, which met our expectations and believe we have built momentum to deliver improved results in 2024, we were able to deliver strong year-over-year results despite the impact of the United Auto Workers strike, which affected our fourth quarter results and reduced sales by approximately $25 million and earnings per share by approximately $0.2 per share. The major highlights during the year were as follows. First, we achieved record consolidated net sales from continuing operations of $1.7 billion.
We also achieved record sales in each business segment. Our GAAP earnings per share from continuing operations increased significantly compared to 2022, and adjusted EPS increased 74%. Our full year gross margins were up 230 basis points and EBITDA As Defined improved 33%. We also delivered strong operating cash flows of $53 million during the year and free cash flow of $25 million as a result, we paid down debt by $24 million and reduced our net debt leverage to 4.4 times, an improvement of 27% compared to a year ago. As we closed out the year, we completed the sale of our Aluminum Products business for approximately $50 million, which included $35 million of cash and $15 million of promissory notes, $1 million of which is contingent on certain new customer orders to be received by the end of 2024.
Before I comment on our current year guidance, and the acquisition of EMA GmbH. I'll review our full year and fourth quarter results in detail. Consolidated net sales from continuing operations in 2023 were a record $1.7 billion, up 11% compared to $1.5 billion a year ago. Each of our business units experienced strong year-over-year sales growth, which was driven by most end markets and a broad range of customers in our Supply Technologies segment, strong demand across most of our diverse end markets, new customer sales and increased demand related to new platforms utilizing our proprietary fastener products contributing contributed to the segment's growth in our Assembly Components segment.
Sales from each of our product categories, which include fluid related system is direct injection, rail products and molded and extruded rubber and plastic products increased year over year from strong demand from key automotive and light truck OEM platforms such as the GMC Yukon and the GM Silverado Also contributing to the sales growth in this segment were newly developed products, including air conditioning hose products, which are now in production and from customer price increases realized at each of our manufacturing plants. Sales growth in our Engineered Products segment was in line with our expectations, considering the record equipment backlogs that existed at the end of 2022 and supplemented by new equipment bookings throughout the year.
The booking trends continued to be robust throughout the year in both North America and in Europe and in all major induction heating and melting brands. GAAP EPS for the year was $2.72 per diluted share and adjusted earnings per share, which excludes primarily one-time expenses related to plant closure and consolidation activities, improved to $3.7 compared to adjusted EPS of $1.76 per share in 2022 a significant increase of 74% year-over-year.
Gross margins improved 30 basis points year over year to 16.4% of net sales. The significant consolidation activities in recent years helped drive higher levels of absorption in many of our operating plants, which will continue to have a positive impact on our gross margins. Margin improvement continues to be the focus of our operating teams heading into 2024. SG&A expenses were higher in 2023 due primarily to the higher sales levels, higher employee related costs and general inflation. But as a percentage of net sales, SG&A was comparable year-over-year at 10.9%. Our adjusted operating income was $90 million compared to $48 million a year ago, an increase of 86% year-over-year as we realized profit improvement in each business segment with the largest gains in our Supply Technologies and Assembly Components segments, resulting from higher sales levels and improved customer pricing. Interest expense was 45 million compared to $34 million in 2022.
The increase was primarily due to higher interest rates. Our full year 2023 income tax provision was $8.5 million on pretax income of $41.5 million for an effective income tax of 21%, which is in line with the US federal statutory tax rate. This year, we estimate that our effective tax rate will be in the range of 23% to 25%. Our EBITDA as defined was $134 million in 2023, an increase of 33% compared to $101 million in 2022. Operating cash flow generated during the year was $53 million, driven by strong operating cash flow of $29 million in the fourth quarter. Free cash flow was $25 million in 2023 compared to a negative free cash flow of $54 million last year.
But moving now to our fourth quarter results. Net sales from continuing operations of $389 million increased 2% year-over-year compared to $382 million in the prior year, driven primarily by higher demand in our Engineered Products segment, which was up 8%. As mentioned earlier, the UAW strike impacted our fourth quarter sales by approximately $25 million. GAAP EPS and adjusted EPS for the quarter was $0.54, which was affected by the impact of the UAW strike by approximately $0.2 per share. Our adjusted EPS of $0.54 in the current quarter compared to a loss of $0.09 in the 2022 fourth quarter. in the quarter. Operating income margins improved 70% compared to 2022. And we generated significant operating cash flows of $29 million and free cash flow of $22 million. EBITDA as defined was $29 million in the quarter, an increase of 12% year over year.
Turning now to our segment results and Supply Technologies. Net sales for the full year were a record $763 million, up 7% compared to $712 million in 2022. The increase was driven by higher customer demand across across most end markets in our supply chain business, with the biggest increases in powersports, heavy duty truck and commercial aerospace. In 2023, we saw a meaningful rebound in demand from commercial aerospace customers, which was up 26% over the prior year. Sales in this segment were also favorably impacted by increased demand for our proprietary fastener products as sales in that part of the segment were up 16% year-over-year.
Operating income in this segment totaled $59 million in 2023, up 29% compared to $46 million in the prior year. And operating margins were 130 basis points higher year over year at 7.7%. These increases were driven by the higher sales levels and the impact of profit improvement initiatives, which included increased product pricing, which helped offset higher product and operating costs.
In the fourth quarter.
Net sales were down 2% to $178 million compared to $181 million in the fourth quarter of 2022. The decrease was a result of the UAW strike at one truck assembly plant and slightly lower demand from certain end markets. Despite the lower sales year over year, operating income was up 36% year-over-year to $14 million in our Assembly Components segment sales were $428 million for the year, up 10% compared to $389 million in 2022, resulting from increased net price realization and increased volumes on new programs previously launched.
Excluding charges related to plant consolidation activities, adjusted operating income was $35 million in 2023, up significantly compared to $7 million a year ago, with the improvement driven by the higher sales levels, customer price increases and benefits from plant consolidations completed in prior years. These positive factors more than offset ongoing product inflation and other increased costs. Year-over-year margins in this segment were up 750 basis points. In the fourth quarter, net sales of $97 million were up 3% compared to $95 million in the fourth quarter of last year. And adjusted operating income improved $5 million year over year to $7 million compared to $2 million a year ago.
In our Engineered Products segment, full year sales were $469 million, up 19% compared to $393 million in 2022, driven by strong customer demand in both our capital equipment and forged and Machine Products businesses. Bookings of new equipment for the full year were $175 million in equipment backlog as of the end of December of 2023 was $162 million compared to similar levels a year ago. Strong backlogs drove a 21% increase in our capital equipment business during the year. In addition, revenues from our higher-margin aftermarket parts and service business grew 18% year-over-year.
In our forged and Machine Products business, full year sales increased almost 16% and at their highest level since 2019, driven by strength in several key end markets, including aerospace and defense. We continue to quote new projects in support of the defense industry, which was which has increased the production of certain munitions utilizing our forging presses technology, excluding charges related primarily to plant consolidation activities.
Our adjusted operating income in this segment for the year was $24 million compared to $23 million a year ago. The improvement was driven by the higher sales levels, implemented operational improvements and benefits from plant consolidation actions, all of which more than offset lower margins in our forged and Machine Products business. In the fourth quarter, net sales of $115 million were up 8% compared to $106 million in the fourth quarter of last year. And adjusted operating income was $4 million in the quarter compared to $6 million a year ago. And finally, corporate related expenses were $28 million in 2023 compared to $32 million a year ago with the decrease driven by lower professional fees.
Now I'll make a few comments related to our guidance for 2024. As indicated in our press release, we expect revenue growth to be in the mid-single digit range year over year, driven by stable demand expected in most end markets. We also expect year-over-year improvement in EPS and EBITDA as defined in our Supply Technologies segment. We expect demand from for most end markets to be stable from a unit demand standpoint and expect increased share over demand in the aerospace and semiconductor end markets, which should more than offset slightly lower demand in other end markets, primarily in heavy-duty truck. We also expect continued normalization of global supply chains and commodity prices. This year, we will continue to focus on margin improvement initiatives, which will include footprint optimization, reducing product costs and working capital reductions in Assembly Components.
Customer demand is also expected to be stable across all products. Our team is focused on operational improvement initiatives, including increasing our rubber mixing capacity, increasing throughput on all of our production lines and other value drivers all aimed at increasing gross margin in Engineered Products, we expect year-over-year growth in both capital equipment and forged and machine products. We begin the year with strong backlogs in each region. Key operating initiatives in 2024 will include increasing our marketing efforts in our global aftermarket business impacting each of our equipment brands, capitalizing on market trends around electrification defense in infants, infrastructure spending and the implementation of operational improvements in our forged and Machine Products business.
On February 29, we completed the acquisition of EMA induction GmbH, headquartered in Mecca Shane Germany, for approximately $14 million net of cash acquired. EMA is a leading manufacturer of induction heating equipment in high efficiency power converters and operates through its two locations in Germany and China. We expect EMEA to generate revenues of approximately $30 million over the next 12 months and will be accretive to our current segment margins and earnings per share. We also expect meaningful cost synergies and longer-term market synergies as we integrate into our business. Hema strengthens our global induction heating expertise in Germany and throughout Europe. And as a global and well respected brand to our product portfolio.
Now I'll turn the call back over to Matt.

Matthew Crawford

Thank you very much. Pat will now open the line for questions.
Thank you.

Question and Answer Session

Operator

At this time, we'll be conducting a question-and-answer session. (Operator Instructions)
Steve Barger, KeyBanc Capital Markets.

Christian Zyla

Good morning, everyone. This is actually Christian Zyla on for Steve Barger. Thanks for taking the questions. Gregg, first, my question, Rick, first question with your mid-single digit guidance, how much of that is price versus volume and what would need to happen to move the needle to grow above that mid-single digit range?

Matthew Crawford

Well, I mean, as I mentioned during my comments, I think we benefits from a hugely diverse business, both in terms of products, end markets and also global reach. But candidly, the majority of our business is in North America, which seems to be kind of the best place to be right now. So we're benefiting from that and we'll continue to.
And as I think I even mentioned on the on the third quarter call on unit volumes have leveled off?
There's no question. As we look through through that diversity of markets from a unit perspective, we'll be up and down. We're able to execute. I think at a high level commercially last year, we will benefit from that pricing in 2024, which is great, which means that, yes, a lot of the growth even if it's mid single digit, will be determined by how effective we were during up passing on price increases last year. So end markets are mixed with the exception. I think of where we are seeing some strong business in aerospace, defense and some of the end markets I discussed that are affected by government investment. So I think we'll do better than the average industrial business.
Having said that, unit growth is sideways and in some cases down depending on what market rent. So and some of our international segments, I think are sort of flattish. So most of the increases we're seeing currently are really benefiting from the pricing of last year. Everything else is a bit of a mixed bag with the exception of the areas I mentioned, which are material to our business to the upside on in terms of how we would anticipate doing better than that.
Yes, I think you hear about us talking about a lot. I think we've got tremendous opportunities on the innovation side on. We've talked a lot about our proprietary fastener line and the importance of some of our products to the journey on which increasingly people tend to agree with which we've been saying all along, which is the journey on the electrification and transportation runs through hybrids. We're an important as many of our more innovative products run through that journey. So we're excited about that. I think the strong backlog performing against the we're quoting in our in our on your products group more than a year on many of our products. I think our ability to continue to scale our business and deal with them and grow and deal with some of the labor challenges of '22 and '23 will allow us to execute at a higher level and maybe deliver on improved performance against those backlogs. So I think we've got a number of different ways. I think we can succeed, as I outlined.

Christian Zyla

It's also multicolored. Thank you. And just on Supply Tech, just on the semiconductor guidance for that business, a few of the equipment manufacturers talked about 1Q being the trough and then maybe a reacceleration in the back half of '24. Should we expect a similar cadence for you guys in that business? And then I guess, what's the overall cadence in Supply Tech given the exposure to Aero and some of those strong headwinds?

Matthew Crawford

And I'll let, Pat, think about that for a second, but I would just comment, semiconductor has been a little difficult to predict. Quite candidly, some of our key customers have been affected by some of the geopolitics and trade issues that are going on globally. Our customers are likely to do business in the US and Texas and California as they are in Singapore.
So I think that Tom predicting and again, these are very sophisticated manufacturers with very complex equipment. So on trying to isolate and determine what deliveries will look like month to month or quarter to quarter has been problematic for us. What we do know is that the investment trend is staggering, as you know. So I would be reluctant maybe Pat will talk about quarter to quarter but we do know the backdrop of backlogs and demand for our customers is staggering.

Patrick Fogarty

I would add that within the aerospace business, you know, we touch aerospace not only in Supply Technologies, but also in our forged and Machine Products business and in some cases in our capital equipment business. And we are seeing strong backlogs up stronger year over year and in certain cases, all around aerospace and defense. So we feel pretty good about about that end market as we head into 2024.
As Matt mentioned, semiconductors, a little tougher to gauge month by month, but we service some of the large equipment manufacturers all around the world. And so and when we make comments around where we see growth, we're talking about year-over-year growth not quarter to quarter. So hopefully that answers your question.

Matthew Crawford

Christian, I would just add more more broadly about your question. We have a lot better visibility. This should have the last few years, and I'm sure we're not the only one in the industrial space. So I would say that our level of confidence, given the economy that we and others see and the GDP forecasts that are out there broadly for the industrial space. And in some cases, for the the other important global markets, we're positioned to hit or exceed our goals, we have better comfort, better visibility than we have over the last couple years.

Christian Zyla

Got it. That's all great. Thanks. And just on Engineered Products, and I guess what happened in Engineered Products that pressured margins. And I think forged and machine products were up 12% year-over-year in 4Q. What was the year over year for capital equipment? And then as we think about '24 is one going to outpace the other as we think about the full year in terms of growth?

Matthew Crawford

Yes, I'll start and give sort of the big picture on this on I have said and continue to say so goes engineer products. So those Park-Ohio, this is traditionally our business with the highest margins. And this is also traditionally our business that has a really solid position on aftermarket sort of the razor razorblade model. So we are optimistic that for lack of a better word that business will lead the next leg up in our performance because clearly, by historical standards, they're not there. They're also buoyed by tremendous backlogs in the business. So the businesses there for us as to execute against.
I would be remiss if I didn't say that business continues, I think to be affected and we get better every day by some of the challenges that occurred to everywhere during COVID. And I am reluctant to continue talking about COVID, but the loss of knowledge and engineering in the day-to-day workforce and hourly workforce around assembly, complex equipment around forging our products on large ourselves on these or not positions you replace overnight and do so efficiently so on that is a journey. We're getting better every day, but again, we anticipate that that journey will lead us back to where it was, which is a leadership position in our business from a from every key financial metric.

Patrick Fogarty

Yes, Christian, I would add that our in our Capital Equipment business, we saw growth not only on the new equipment side of things, which I mentioned in my comments, but also in the higher margin, aftermarket parts and service business. So our margins were affected not from that side of the business. Our margins were affected by start-up costs, primarily in one of our forging facilities where we consolidated out of Chicago into our kitchen force facility and relocated several large pieces of equipment. And it's taken time to get the equipment to operate efficiently with new labor with a new workforce and those start-up costs have affected our margins.
Second, the second, secondarily, we had some downtime in some of our equipment in our Arkansas forging plant. So both of those situations affected our margins in that part of our business. Clearly, there is improvement being made every day and I expect margins to get back to historical levels over the course of '24 and into 2025. So somewhat isolated in terms of the margin impacts. But we feel we have a handle on it and things are improving every day.

Matthew Crawford

Yes, I would add one point on the pricing side. We spent a lot of time; I think talking about some supply tech and assembly components. Some of our auto base business in many ways on contractual non-contractual, those renegotiations, while challenging, were effective relatively quickly on the engineered products group is different. In many cases, they're quoting business.
They will not deliver on for more than a year. So to the extent pricing was rotated forward meaningfully during 2023, we may not see that as we honor agreements that were made in 2022 until into this year. So this isn't just an operational issue. This is also a pricing issue, and we've addressed that. We've increased standards. We've rotated things for our many, many, many months ago. So but again, when you're quoting things out 12, 13, 14 months, you don't always see the benefit of those commercial negotiations. The way you would and our Supply Tech and our automotive business.

Christian Zyla

Great. And last one for me. I appreciate all the color. Just EMEA seems to be another really good value deal, $40 million purchase price for about $30 million of sales. What are the margins on this business of which segment is going in? I'm sorry if I missed that. And then just what's the secret sauce for you guys? Yes, Southern fasteners was also a really good value deal. Like how are you able to find these good deals out there? Thank you so much.

Matthew Crawford

Yeah, thanks, Christian. I'm glad, but I don't want to miss the opportunity to say here. We like highly strategic, highly accretive acquisitions, but we are more selective than ever. Our priorities right now as an organization exists around funding the significant growth. We've had funding our value drivers, which make us more competitive and more and have more operating leverage and sustainable earnings on it. And then if we can find a great acquisition, our management team is tasked to find great opportunities that come from all four corners.
They typically come bubble up from inside our organization and where we could find something that is absolutely strategic for us and at the same time, meet our financial metrics, which means getting a value being highly synergistic on the cost and the go to market standpoint because it adds an adjacency or as a geography or adds key customers, that's what success looks like. So our standards very high right now to do the right kind of acquisitions because we do like them, but it's a pretty rigorous process. And right now that's not where it where our entire focus is.

Patrick Fogarty

Yeah, Christian, I comment on the margins. I'll only say that the EMSI. acquisition will be accretive to our segment margins on We are and have been over the past many years of doing deals, very disciplined in our approach. We have IRR models. We have return on cash flow. We have many, many metrics that we use to value a business. And in a lot of cases, the owners of these companies and in this case was a much larger private company out of Austria wanted to find a home for this business, which wasn't core to their business in an area of where their employees would be taken care of and would be able to grow with our business and it fit perfectly within that within the Engineered Products segment, our chin in their expertise lies in induction heating and various applications, not only in Germany but throughout Europe, covering a wide range of diverse end markets, including wind energy, including auto, including forging and foundry companies like ThyssenKrupp, are just one example of the strong OEM relationships that EMA brings to our induction business.

Matthew Crawford

Christian, I would only add that Pat's point on many people are watching as we are very carefully some of the challenges in Europe and particularly Germany as it relates to their economy adding a brand like this and a team like this. These are Germany is still a hub for global manufacturing. While they may be in the technical talent may be in Germany, on this. They service German and global customers on Pat mentioned one, I mean, these are major companies that invest through the business cycle and invest globally. So it's not just being driven by the German economy, if you will.

Christian Zyla

Great. Really appreciate all the color. Thanks.

Operator

Dave Storms, Stonegate.

Dave Storms

And just wanted to start, it looks like free cash flow kind of at the high end of what you're guiding to last quarter. Any lessons here that we can expect going forward. And then just really strong focus working capital.

Patrick Fogarty

We've been working on the reduction of working capital for the entire year, and I think the fourth quarter benefited from slightly lower sales, which allowed us to harvest some of the receivables in the fourth quarter. But you help I would love to see our free cash flows be smoother and we expect that in 2024. But there was a lot of hard work and heavy lifting done by all of our businesses around reduction in working capital.
Just to give you an example, we grew our business year over year by almost $170 million and use only 8% of working capital. That's a huge accomplishment. We feel there's more room there and each of our businesses are focused on me.

Matthew Crawford

Let me add to that because I can't help myself up, but we I mentioned in my comments that we feel as though we entered the year as a less capital-intensive business. And Pat, I think addressed 2023.
Well, I can't resist the opportunity to say to you, Tom, without We don't need to spend much time on General Aluminum on this call, other than to say it consistently represented between 10% and 15% of our revenue and 30% to 40% of our capital CapEx. So on that is an opportunity, I think, to permanently change the profile of this business and to bolster the others, the cash flows of the business. that's very helpful.

Dave Storms

That's very helpful, thank you. And then just wanted to touch back on EMA for a second. What is the integration time line for this? Or are there still logistical hurdles or is it pretty much a plug-and-play acquisition?

Matthew Crawford

Yes, I don't think we'd want to comment explicitly on that. It's a pretty recent I would point out on the induction heating business is a complex equipment business and we are really happy to get the machine. We also do business in the German marketplace in the induction heating business, and we've got great teams making innovative products. So this is about, I think, growing our team, growing our talents on growing our customer list and growing the products we can serve our global customers with so this is on. We have a business that has a wonderful backlog. It's well positioned to succeed this year on. We don't don't fix what's not broken. Having said that, we're going to look, I think, to create a broader presence in the marketplace where where, again, we can sell more and more global customers with more and more innovative products.
So on to some extent, plug and play. But our goal is to make they're more successful because they are world-class in what they do at the revised CapEx per watt.

Patrick Fogarty

One additional commentary as I mentioned in my in my remarks that schema is a provider of converters, high-efficient power converters. They can retrofit their converters with other brands around the world. This is a huge opportunity. If you have operations in places like Spain and Italy, where you can market the ability to make those converters and install them locally, we feel that's just one of the opportunities that we have in this business. But there's others and most of them are driven around, as Matt mentioned, expanding our ability to sell our various brands through our group through the various local sales teams and that will take some time, but we're very optimistic that we'll be able to take advantage of that.

Matthew Crawford

That's great.
Thank you very much. And then just one more thinking about 2023. And it seems like it was really a year of improvement operations, get an infrastructure and sorted on. How do you feel about that going into 2024, it sounds like you're on pretty good footing. But is there any other levers that you're thinking of pulling to continue that?
Yes. I I'll echo if you call it becomes. I think I in the last call on the broad strokes, I've been done, right. I mean, I can't I can't go to pause and thank the people in our forge group and our automotive group explicitly for the work they've done over the last couple of years of closing and relocating facilities. That work is done in the trenches it's hard. It's difficult isn't on-time. It's rarely on budget on the broad strokes have been completed. Having said that, we are only at the front end, I think, of really optimizing the consolidations and the restructurings we've done. So no, we absolutely anticipate.
And again, I know Pascal, if I kick me under the table for saying this, I am not upset that we're seeing a slower growth year. I'm not upset upset seeing that. We are not that we may see unit volumes flatten out because we need to do a lot of work I think I said this in the third quarter call, say it again, it's nice on paper to do a nice white paper and move thousands of jobs from, for example, with a couple of businesses in our automotive segment to south of the border on. There's certainly a lot more labor there, but there's still turnover. There's still training at the end of the day, while there may be some labor cost arbitrage that we've walked away from some tenured employees who are really good at what they do. So our journey on, um, increase decreasing costs, increasing productivity in these locations that have been affected in particular, but across the business are going to be in the details and they're going to be are the value drivers. And now we'd like to think bind over wallet here, but we're going to be focused on funding the $75,000 investments, the yields value drivers in the one hundreds of hundreds of thousands of dollars. That's where we need to be. We highlighted recently on a call our investment in rubber mixer that I think has given us not just a great return, but a competitive balancing in our in our rubber and plastic business. And that's where we're going to be focused this year. And there's a tremendous amount of opportunity there across the business and optimizing the restructuring dollars we have spent and just getting better at what we do is as the system stabilizes, particularly on the labor side, our next question is from Brian Sponheimer with Gabelli Funds.

Operator

Please proceed with your question.
Good morning, everybody, Matt, Brian, are you or Brian?
Great.
And so it seems like you guys excel at finding in niche businesses in various parts of the world that business the European business. I'm wondering if your scope just by virtue of your size is now potentially expanding your addressable net for where you can look to find businesses that you want to potentially add to this?

Matthew Crawford

You're right. Yes, that's a good question on, you know that in general, we operate very strong credible brands in reasonably to mid sized marketplace. We're not competing in a 50 or 100 billion marketplaces. Most of our business address markets that call it our 2 to 4 billion in size where we are a significant player or less where we have significant player. It's a known and understood appreciated brands or unique equipment. So I would just tell you I don't we don't think about scale. Maybe the way that you said, we think about scale and our teams, I think about scale in terms of what is really strategic to us. You know, no deal is too small. If it brings to us an adjacent new product we can take over our network. It brings us a new geography where we can infiltrate new products, you know, we know No. So we don't really think of scale. Maybe I know you're thinking about it financially what moves the needle, but the first question we ask here is how does this make our broader business more successful in three to five years? What does success look like? If we can answer that question with a resounding?
Yes.
Then we talk about if it moves the needle, then we talk about if we like the financials.
Sure, we'd love to buy a bigger business that checks all those boxes at the right multiple that would move the needle, but that's not how our process starts.
Yes, Andy alluded to again, Brian again, particularly in this environment. Brian acquisitions are no feeling sick of me saying this or not the first horse at the trough?
Yes.
Yes, I think it was it was whether the size of your business is allowing you to find more opportunities now that are adjacencies that fit.
And I guess along those lines, what is the why you have delevered a little bit still more? I would assume you'd want to work on there, but and what does the pipeline look like as far as some other other EMA. type sized businesses that are out there for you?
I'll let Pat address that, but don't think of our corporate development people is only sitting in this office, think of our corporate development people as the list that Pat is working with the people at Supply Technologies at Ajax, Taco are that these different businesses at our BMW to develop prospects. So their profile and how they think about opportunities are are a little bit different than that nine. Candidly, there is constantly managing growing and developing relationships with people that we may do business with today or in 10 years. So that's that's the extended corporate development team, so to speak.

Patrick Fogarty

Right, Alexia, Bryan, I know the pipeline continues to be to be strong and I think over the last five to 10 years of our growth and our our size has definitely broadened the net of at least those deals that come to us from from M&A, Keno investment banks. But we've got a great we've got great brands in and they're global. And so as a result of that, our people often come to us when when they're looking to sell their business. And so that hasn't changed. And that that goes back years and years of success relative to buying and integrating businesses.

Matthew Crawford

Excellent.
Well, good luck for 2024.
Thanks, Brian. Appreciate your support.

Operator

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Matthew Crawford for closing comments.

Matthew Crawford

Great. Thank you all for your time and support of great questions today.

Patrick Fogarty

So any closing comments?

Matthew Crawford

I might have that. I think I made as I responded to those to those very good questions. We appreciate a knowledgeable and hardworking and supportive investor base Thank you. And we look forward to, again refining our message and our goals as we as we move towards and through 2024. Thanks.

Operator

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your patience, patients.