Gates Industrial (GTES) Goldman Sachs Industrials & Materials Conference summary

Margin expansion and cost initiatives

• Material cost-out program is the main driver for improved 2024 margins, with a three-year plan targeting further reductions through 2026.

• Manufacturing footprint realignment aims for $40 million in savings by 2026, with 40% realized by end of 2025 and the remainder by end of 2026.

• Margin targets for 2026 are 24-25% EBITDA, with upside potential from ongoing cost and efficiency programs.

• Focus remains on controllable factors, not relying on end-market inflection for margin improvement.

• Modernizing factories and proximity to labor pools are key parameters for footprint decisions.

Market positioning and tariff impacts

• Unique U.S. and Mexico manufacturing footprint provides resilience and potential market share gains if tariffs on Chinese or Mexican imports increase.

• Minimal direct exposure to Chinese imports; any tariff increases can be priced in.

• Local production offers both pricing and market share advantages over competitors reliant on imports.

Material science and 80/20 strategy

• Material science is leveraged to re-engineer supply chains and internalize more processing, targeting high-volume commodities for cost savings.

• The 80/20 principle is being deployed across the enterprise, with ongoing portfolio and pricing optimization and significant runway for further productivity gains.

• 80/20 is viewed as a continuous improvement process with no defined endpoint.