Max Mitchell: I think you framed it up 50% of what the expected leverage was. But I just want to make sure that this isn’t a worsening I do believe, I mean we clearly see improvement in the supply chain that continues. It’s gradual, and it’s slow and it’s moving. And so that’s what we continue to see. And it’s broader than just on-time delivery. It’s everything from a smaller sub-supplier that all of a sudden decides they’re going out of business. And you’ve got a second source in short order or there’s labor challenges. There’s retirements post COVID that you’re both internal as well as third-party that has lost talent. There’s the hiring process. So it’s just, it is not worsening. It continues to gradually improve. We’ve communicated that from the beginning of the year consistently.
I think we’re one of the few that openly has discussed this, and I think we’ve been spot on. It’s going to continue into 2024, and it will continue to improve over time. So these will – I fully expect them to lessen over time and that margin to read through.
Nathan Jones: Yes. I guess that is not worsening, but I also want to just make sure everyone understands that there are temporary cost inefficiencies in the system here in A&E and structurally, the margin profile is higher than where it’s sitting right now.
Max Mitchell: Yes. Without a doubt.
Rich Maue: Without a doubt, yeah.
Nathan Jones: And then, I guess, my follow-up question on PFT. If we’re expecting orders to be negative for the next few quarters, why would the initial outlook for revenue – core revenue growth to be roughly flat next year, why wouldn’t we expect that to be down a little bit?
Max Mitchell: Yeah. So I mean — so the market, we see the market being down. We’re going to continue to do what we need to do to help offset the best that we can, so a combination of share and price. But market overall is expected to be inflecting next year in a more significant way is what I would say. So we’re making some of that back. And then you have
Rich Maue: This is the positive news of the investments that we’ve had..
Max Mitchell: Right.
Rich Maue: New product rollouts that we’re having great success with the investment for growth. So we’re taking share. So it’s a combination of share in price. The two other factors.
Nathan Jones: Okay.
Max Mitchell: Nathan, just to be clear, right? One is there is the mathematical effect of shortening lead times, reducing the backlog, right? So you’re shipping more of the backlog above and beyond whatever the incoming orders are. That’s just kind of a natural process as supply chain continues to improve and lead times normalize. The second is that the short cycle piece of the business, which doesn’t really flow through the orders for next year specifically is going to be growing faster than the longer cycle part of the business, right. Wastewater in particular, it tends to be a very short cycle business, and that’s going to do mostly.
Nathan Jones: Makes perfect sense. Thanks for taking the questions.
Max Mitchell: Thanks, Nathan.
Rich Maue: Thanks, Nathan.
Operator: Thank you. Our next question is from the line of Damian Karas with UBS. Please proceed with your question.
Max Mitchell: Yes, Damian.
Damian Karas: Hey, Max. Just a couple of follow-up questions here on actually the BAM deal. So what could you tell us about line piping? I mean that’s not an area that I don’t think you’ve highlighted much in the past. So maybe just tell us a little bit about that? Any sense for the total addressable market? And maybe what kind of synergies are you expecting with this deal?
Max Mitchell: Yes, you bet. Thank you for the question. I appreciate it. So look, line fluoropolymer, we play with our Resistoflex brand. If you go to the website, you can check out Resistoflex. We don’t talk about necessarily individually as the brand, but it’s as a part of a complete solution with line pipe and valves, the Xomox brand, we have significant global share. So when you go in a bit of chemical package and you’re bidding the pipe — one follows the other in terms of the valves as well. So they’re part and parcel. So we have a significant presence in North America. We’re one of the number one — we are the number one player in North America. BAM has been a worthy competitor for many years. BAM has their strength in the din category of standards — European standard.
They have an extended size range and they have a dominant position in Europe as well as some other countries. And then we always run into each other and butt heads. Having the opportunity to fold BAM into Crane continue to keep it strategically separate as a brand allows us to avoid unnecessary overlap of where we’re focused. We’re really strategically positioned in terms of where we want to be with our end customers as well as the channels on a global basis. It has enhanced our positioning significantly. It’s a smaller deal, and it’s one that just fits perfectly into our core business and is going to allow us to do some great things here for our customer base as we’re moving forward. Sort of, market size. If I think of line pipe overall, about $1.4 billion, the fluoropolymer space is probably closer to $300 million, but you’re always up against others.
You’re trying to compete with — could be epoxy line, from a plastic line. They’re very specific performance characteristics at fluoropolymers allow you to have that are very unique in terms of their chemical resistance pressure ratings, temperature ratings and so forth. So that gives you a bit of insight in terms of the market size. We probably have — call it, 40% share North America, bound probably has 40% share. Europe, rest of world, we all compete. It just allows us to really serve our customers better holistically with the line product offering. So hopefully, that gives you a nice overview.
Damian Karas: Yeah. No, very interesting. And I guess on the M&A front, so you closed this deal, you mentioned you lost the deal. So I guess that suggests you still have on active. Is that on the PFT or A&E side, if you don’t mind? You’re not getting a
Rich Maue: Actives on A&E.
Max Mitchell: And there have been other — we talked about those three a quarter ago. Just to be clear, there are others that are now active that weren’t part of that three. I mean, just yesterday, we – three or four I would say live at this point, one of which is the former A&E deal, which we talked about, which hasn’t been resolved yet fully and then a couple of new ones that kind of are now getting a lot of activity?
