Welcome to Lincoln Electric's fourth quarter 2025 conference call, where we'll be covering our fourth quarter and full year 2025 financial results, as well as our new 2030 targets. Turning to Slide 3, I am proud to report record 2025 performance. Despite challenged end markets, our sales increased 6% to a record $4.2 billion from acquisitions and price. We maintained last year's record adjusted operating income margin, increased adjusted EPS to a record $9.87, and generated strong cash flows from operations.
These achievements, combined with solid commercial and operational execution, culminated in top-quartile ROIC and total shareholder return performance versus our peers. Turning to Slide 4 to cover demand trends in the fourth quarter. Organic sales grew 2.5% from price, which was largely offset by weaker volume performance. The growth reflects price contributions in consumable and equipment, as well as relatively steady volume performance in our welding consumables in Americas and International Welding.
2025 was a challenging year for automation due to lower capital spending and project deferrals. Automation sales were $240 million in the quarter, an 11% decline versus a record prior year. On a full year basis, we achieved $870 million, which is a mid-single-digit % decline. We are encouraged by strong order rates and a solid backlog in our automation business in the fourth quarter.
| Metric | Period | Current guidance |
|---|---|---|
| Full-year sales growth | FY2026 | Mid-single-digit % range, with organic split 50/50 between volume and 2025 price carryover (New) |
| Incremental operating income margin | FY2026 | Mid-20% from volume growth and enterprise initiatives, resulting in modest full-year margin improvement (New) |
| Capital expenditures | FY2026 | Target range of $110 million-$130 million (New) |
| Interest expense | FY2026 | $50-$55 million, generally in line with last year (Maintained) |
| 2030 sales target | FY2030 | Above $6 billion with high single-digit to low double-digit % growth framework (New) |
| 2030 operating margin | FY2030 | 19% average across cycle, peak 20%+, with high 20% incremental margins (New) |
| Metric | YoY | Note |
|---|---|---|
| Q4 total sales | +5.5% to $1,079 million | 8.9% higher price, 1.9% favorable FX, and 1.1% from acquisitions, offset by 6.4% lower volumes |
| Q4 adjusted EPS | +3% to $2.65 | Operating income growth and a $0.07 share-repurchase benefit, partly offset by a higher effective tax rate |
| Americas Welding sales | +approximately 4% | 10.4% higher price and 60 bps favorable FX, offset by ~7% lower volumes from automation's tough comparison |
| International Welding sales | +approximately 7% | 5% Alloy Steel benefit, 5% favorable FX, and 50 bps price, offset by 4% lower volumes on European weakness |
| Harris Products Group sales | +11% | 18% higher price and 170 bps favorable FX, offset by 9% lower volumes on declining HVAC production |
| Automation sales | -11% to $240 million in Q4; -mid-single digits to $870 million for the year | Lower capital spending, project deferrals, and a record prior-year comparison |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Industrial recovery signals | Encouraging order trends emerging | Acceleration in December, OEM higher capex plans, and PMI pivoting to growth in January suggest early stages of industrial recovery | Improving |
| Automation | Order rates accelerating in late Q3/October | Strong Q4 order rates and backlog expected to drive mid-single-digit growth in 2026, ramping from Q2 | Improving |
| Consumable volumes | Resilient/steady | Steady and resilient, awaiting inflection to consistent growth that typically precedes capital spending by 1-2 quarters | Stable |
| Strategy framework | Higher Standard strategy concluding | New RISE strategy launched with 2030 targets and center-led operating model transition | Evolving |
| European demand | Challenged | Still challenged; 2030 targets not predicated on a significant European recovery | Stable to cautious |