Flowserve (FLS) Baird 2024 Global Industrials Conference summary

Business strategy and operational framework

• Launched the Flowserve Business System, focusing on people, operational, portfolio, commercial, and innovation excellence across seven business units.

• The new framework aims for consistent results, targeting growth, margin expansion, cycle resiliency, and stronger cash flow.

• Progress on operational excellence is strong; focus is shifting to portfolio excellence using a formal 80/20 process for product and customer segmentation.

• Data integrity and organizational redesign have enabled more advanced segmentation and change management.

• The company is embedding these processes into annual planning, aiming for continuous improvement rather than episodic change.

Financial targets and margin improvement

• Operational and portfolio excellence initiatives are expected to deliver 100–200+ basis points of margin expansion by 2027.

• Margin targets of 14–16% are on track, with incremental confidence from new initiatives.

• Margin improvements are expected to be visible over multi-quarter or annual periods, with product and portfolio excellence driving further gains from 2025.

• Sales incentive plans will shift to include margin components, aligning incentives with profitability.

• Free cash flow is improving, supported by working capital reduction and complexity reduction through 80/20 initiatives.

Market outlook and demand trends

• Revenue target of $5 billion with a 5% CAGR remains on track, supported by strong power, nuclear, and decarbonization markets.

• Decarbonization is growing at 30% annually, with global growth expected despite potential U.S. policy changes.

• Middle East and regionalization trends are driving infrastructure demand; aftermarket business is growing through improved service and responsiveness.

• The project funnel is healthy, with power and nuclear up 20% year over year.

• No significant project delays are observed; execution and funding are moving faster than in previous years.