A reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again you can find on our Investor Relations website at lincolnelectric.com. Sales increased 8% driven by pricing benefits from our M&A strategy and resilient demand for short cycle portions of our product portfolio in the Americas Welding and Harris Products Group segments. While we are still navigating a period of challenged capital spending in our automation portfolio and sluggish demand in the EMEA region, our results demonstrate the strength of our operating model. This resulted in both higher gross profit and operating income margins, a 15% increase in our adjusted EPS performance and record cash flow generation with 149% cash conversion.
In the third quarter and into October, organic sales increased 5.6% on higher price and narrowing volume declines. Volumes reflected ongoing stabilization in the demand for our short cycle consumables, most notably in Americas and the Harris Products Group segments as well as in our North American industrial gas distribution channel. An encouraging area of improvement was the low single digit percentage volume growth we achieved in welding equipment in the Americas which has shown continued momentum in October. Our automation portfolio continues to be challenged from deferred capital spending in the automotive and heavy industry sectors.
We were encouraged by a broad increase in automation order rates in late September and through October. Looking at end market organic sales trend, we continue to see three of our five end markets representing approximately 60% of revenue achieving steady to higher organic sales growth in the quarter. While largely price driven, we did achieve volume growth across general industries, the HVAC sector, and in midstream energy construction infrastructure. Organic sales were steady in the quarter from a high single digit % increase in Americas, which was offset internationally in heavy industries.
| Metric | Period | Current guidance |
|---|---|---|
| Top-line and margin assumptions | FY2025 | Maintained, with modest sequential operating margin improvement from Q3 to Q4 (Maintained) |
| Interest expense | FY2025 | Low $50 million range due to Alloy Steel borrowings (Increased) |
| Cash conversion | FY2025 | Above 100% to align with performance (Increased) |
| Q4 automation sales | Q4 2025 | Approximately 15%-20% higher sequentially but still below prior-year level (New) |
| Annual dividend payout rate | Early 2026 | 30th consecutive increase of 5.3% (Increased) |
| Metric | YoY | Note |
|---|---|---|
| Total sales | +7.9% to $1,061 million | 7.8% higher price, 1.7% from acquisitions, and 60 bps favorable FX, partially offset by 2.2% lower volumes |
| Adjusted EPS | +15% to $2.47 | Margin expansion, a lower adjusted effective tax rate of 21.1%, and a $0.07 share-repurchase benefit, less $0.01 FX headwind |
| Americas Welding sales | +approximately 9% | 9.6% higher price and 1.4% Van Air contribution, offset by ~2% lower volumes |
| International Welding sales | +1.6% | ~4% Alloy Steel benefit and 2% favorable FX, offset by 4% lower volumes on challenged European demand |
| Harris Products Group sales | +15% | Nearly 12% higher price and 2% higher volumes on HVAC strength and expanded retail presence |
| Automation sales | Below prior year at approximately $200 million | Deferred capital spending in automotive and heavy industry plus project timing shifting to Q4 |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Automation orders | Multiple quarters of wait-and-see customer posture | Broad-based acceleration in late September and October, expected to benefit 2026 more than Q4 | Improving |
| Short-cycle consumables | Stabilizing | Continued stabilization and volume growth, viewed as a leading indicator of capital investment ahead | Improving |
| European demand | Challenged | Still challenged, with cautious optimism on defense spending commentary but no order translation yet | Stable to cautious |
| Price-cost and pricing | Neutral price-cost; mid-single-digit pricing maturing | Neutral position achieved; Americas price fully matured in Q3 and expected to hold sequentially in Q4 | Stable |
| Cycle positioning | Navigating downturn | Well positioned for recovery, expecting a slow build of volume growth rather than a sudden surge | Improving |