Earnings Call Transcript
LINCOLN ELECTRIC HOLDINGS INC (LECO)
Earnings Call Transcript - LECO Q4 2020
Operator, Operator
Greetings, and welcome to Lincoln Electric 2020 Fourth Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. And this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin.
Amanda Butler, Vice President of Investor Relations and Communications
Thank you, Michelle, and good morning, everyone. Welcome to Lincoln Electric's 2020 fourth quarter conference call. We released our financial results earlier today, and you can find our release as an attachment to this call's slide presentation as well as on the Lincoln Electric website in the Investor Relations section.
Chris Mapes, CEO
Thank you, Amanda. Good morning, everyone. I'm pleased to report that we ended a challenging year with good recovery momentum and solid positioning for growth in 2021. Lincoln Electric is guided by the golden rule, treating others as you would like to be treated. The challenges of 2020 exemplified how we live our values and lead our company. We’ve remained committed to delivering for our customers as an essential business. We focused on supporting one another internally and executing on our Higher Standard 2025 strategy to drive long-term value for all of our stakeholders. In 2020, I am proud to report, we achieved record safety and environmental performance. We safeguarded wages, benefits and bonus programs to minimize the impact of COVID-19 on our employees. We amplified our community engagement and outreach. We were recognized for our initiatives and our culture, being named as a top global employer in 2020. And we're again named as one of the world's most ethical organizations by Ethisphere. Turning to Slide 4, solid recovery momentum often April trough resulted in a 12% decline in 2020 organic sales by aggressively deploying our Lincoln cost savings playbook early in the year and executing on planned permanent cost reduction initiatives. We achieved $88 million of cost-saving benefits. These actions, combined with lower incentive compensation, largely offset the impact of lower sales. Our adjusted operating income margin compressed 50 basis points to 12.4% in 2020.
Gabe Bruno, CFO
Thank you, Chris. Moving to Slide 7, our consolidated fourth quarter sales declined 5.8% as a 2% benefit from price was offset by 7.6% lower volumes and a 20 basis points of an unfavorable impact from foreign exchange. Our gross profit margin increased 30 basis points to 33% as benefits from cost reduction actions and price management offset lower volumes. Price cost was positive in the quarter. Our SG&A expense declined 8.7% or $13 million, reflecting savings from cost reduction actions, which was partially offset by approximately $3 million in higher incentive compensation. SG&A as a percent of sales decreased 60 basis points to 19.7%. We expect 2021 SG&A expense to increase due to higher wage and incentive compensation. Reported operating income increased 90 basis points to $83.4 million or 12% of sales. Operating income results included $9.5 million of rationalization charges, excluding special items adjusted operating income increased 1.5% to $92.9 million or 13.4% of sales, a 100 basis point increase versus the prior year. Adjusted operating income benefited from $28 million in cost savings. Our fourth quarter effective tax rate was 19.8%. Due to our mix of earnings and discrete items, this compares with 20.6% in the prior year period. We expect our full-year 2021 effective tax rate to be in the low-to-mid 20% range, subject to the mix of earnings and anticipated extent of discrete tax items. Fourth quarter diluted earnings per share increased 4.9% to $1.08 compared with $1.03 in the prior year. Excluding special items, adjusted diluted earnings per share increased 7.8% to $1.24.
Operator, Operator
Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. To ensure that everyone has the opportunity to participate, we ask that you ask one question and a follow-up question and then return to the queue. Our first question comes from the line of Saree Boroditsky with Jefferies. Your line is open. Please go ahead.
Saree Boroditsky, Analyst
Hi, good morning. So you give guidance of high single-digit growth in 2021. We appreciate that. But could you just help us understand how much of this is price versus volume? And is this guidance pretty similar across the segments? Or is there anywhere where you see higher or lower growth?
Gabe Bruno, CFO
Yes, Saree. It's great to talk to you today. As Chris mentioned, we announced some price increases, but we expect most of the high-single-digit growth to come from volume increases. As we move through the year, we experienced our lowest point in the second quarter, so we anticipate more accelerated growth during this period, especially as we reflect on the pandemic's impact. This outlines our expectations for growth this year.
Saree Boroditsky, Analyst
So as you consider additional price increases, will that contribute positively to your current guidance?
Gabe Bruno, CFO
Yes, it would be.
Saree Boroditsky, Analyst
Perfect. And then just one last thing on cash you put out guidance for over 90% cash flow conversion in 2021. I know you're coming off a strong cash generation year, but you typically average closer to 100%. So, is there any reason that you would expect to see less than that in 2021?
Chris Mapes, CEO
Saree, this is Chris. And look, I think the real challenge that we see with it is really twofold. First, it’s not uncommon when we're migrating into this point in the cycle where we see this type of growth that we're actually utilizing more cash to be able to support that growth within the business. And then the second element that is really driving maybe a slightly more conservative model on cash as we look at 2021 is that these supply chain challenges that are out there in the marketplace and we believe that those are going to exist for a considerable period of time. And because of that, we've set directions out to our operating units around the world to ensure that they're doing what they can to make sure our supply chain is resilient and that we have the parts and components and products that we need to drive our solutions to the marketplace, which probably will also increase some of our inventory levels throughout various times during the year and at this point in time we just don't have great visibility. So as we've thought about our cash utilization for the year, really, those are the two drivers. Not uncommon for us to be slightly under the target at this point in the cycle and servicing growth, and then the challenges with the supply chain have made us even a little bit more conservative.
Saree Boroditsky, Analyst
I appreciate the color.
Gabe Bruno, CFO
Saree, I'm just going to add, we ended the year with about 5 days more in inventory and that's intentional. And as Chris mentioned, there's just so much uncertainty in dealing with the pandemic and also supply chain risks that we feel it's wise to continue to maintain higher levels of inventories.
Saree Boroditsky, Analyst
I appreciate the color. Congratulations on the quarter. Thanks.
Operator, Operator
Thank you. And our next question comes from the line of Rob Wertheimer with Melius Research. Your line is open. Please go ahead.
Rob Wertheimer, Analyst
Hi, good morning all.
Chris Mapes, CEO
Hey, Rob.
Rob Wertheimer, Analyst
I recognize that this has been a challenging year, and you all have navigated it well. Can you talk about the progress being made in international markets, particularly in Europe? Do you believe you are gaining traction in terms of market share or other aspects? How do you think this situation is evolving and will develop over the next couple of years? Additionally, could you provide insight into how much of your unique operating system has been implemented in Europe and Canada? I'll stop there. Thank you.
Chris Mapes, CEO
Yes, look, thanks for the question, Rob. I would say I'm just enormously proud of the progress that our teams have made in the international business and especially in the European business over the last 12 to 24 months. I think that because of the deliberate approach that we've taken there, we had already started to work on a host of structural cost improvements in that market pre-pandemic and then certainly those cost improvements assisted us as we were moving throughout 2020 with the performance of the business. That team is still very focused on driving double-digit operating profit levels of performance. And we've said for a while that that was our target. And then once we set that target, we'd be talking to our shareholders about our next step as it relates to the Higher Standard 2025 strategy for that business. We've made good progress and as I think I've said on the call over the last few quarters, that progress has been made in many areas of the business. The most important focus for us has been in the customer service metric. And what are we doing to ensure that we have the solutions in the right place for our customers across that broad portfolio, across those markets. Even during the challenges of the supply chain with the pandemic our customer service metrics in both our consumables and equipment portfolios stayed very resilient. And we want to make sure that market knows that we're there for them as their supplier of choice. To your question as to whether we are starting to regain share in the market? I believe for a long time that share doesn't shift quickly. It's something that you need to go capture and then you need to be able to hold onto. And that'll show up over a longer set of quarters as it relates to our international business. But I'm confident that they're performing well and that we're on the right path with improvements in international.
Rob Wertheimer, Analyst
Okay, thank you for that response.
Operator, Operator
Thank you. And our next question comes from the line of Nathan Jones with Stifel. Your line is open. Please go ahead.
Nathan Jones, Analyst
Good morning, everyone.
Chris Mapes, CEO
Good morning.
Gabe Bruno, CFO
Good morning, Nathan.
Nathan Jones, Analyst
I just wanted to follow-up on a price cost equation here. Digging back to 2018 and if I recall correctly, there was a lag between pricing getting through and costs going up. And some short-term margin pressure there. Is that something that you maybe expect to see over the next quarter or two, or have there been more proactive price increases taken this time than there were last time? And if there's anything that's changing your pricing model that allows you to gain that pricing more quickly now than you did a few years ago?
Chris Mapes, CEO
Nathan, we've been very good historically at managing price cost. But I agree with your assessment that quite frankly, many times there has been a lag by a quarter or two in that recovery. And I would share with you that I believe that the risks associated with that are pretty significant as we think about the business moving into 2021. And it's not so much about the cycle that we saw in 2018 but I'll take you a little further back to maybe the cycle that many of us managed through in the early 2000s and 2004 where we see rapid escalation in raw material costs, freight costs, packaging costs and it's really coming in from a host of areas within the business. And it's really probably going to be one of those cyclical environments that might require multiple activities from a commercial perspective to address that, which also then creates more challenges associated with lag. But look, I've got great confidence in our team and our ability to understand those issues and the ability for us to ensure we get recovery and that we perform in that cost price analysis. But I do think as it relates to the lag, there'll be some challenges that we'll be working through throughout the year.
Nathan Jones, Analyst
Fair enough. And then my follow-up question on the Automation business. You guys have been pretty clear that the second half of 2020 was going to be challenged just based on patents earlier in the year talking about increased orders now to drive growth beginning in the middle of 2021. Can you talk a little bit more about the velocity of things moving through the automation pipeline? And any impact that you would expect that lower automation revenue had on margins in the fourth quarter, please?
Chris Mapes, CEO
It definitely impacted our margins in the fourth quarter for our Americas business. However, I want to highlight that we saw improvements in orders during that time, particularly within our Automation business, which performed well. I hope we can maintain this momentum as we transition into early 2021. I believe that as we move further away from the economic disruptions of the second quarter caused by the pandemic—where many companies faced significant downturns and made decisions to conserve capital—we will start witnessing the organic growth that I anticipate Lincoln Electric will experience in the industrial markets. The automation sector is crucial for Lincoln Electric's presence in North America, and I expect to see increased capital expenditure. I think we have seen the lowest point for this business in the latter part of the year and in the fourth quarter, aligning with the positive order results we achieved. Therefore, I see encouraging signs as we anticipated, and now we need to maintain this order activity as we enter the beginning of 2021, but overall, I see many positive indicators.
Nathan Jones, Analyst
Could you share the auto growth in automation in the fourth quarter?
Gabe Bruno, CFO
I'll just comment, Nathan. So it was a step change to the positive. Choppy though, you still have activity that's choppy but I would just expect that we'll see contributions to the revenues by mid-part of 2021. We have a lag in our Automation business of between three to six months, but we're pretty optimistic about what we see.
Nathan Jones, Analyst
Great, thanks for taking my questions.
Operator, Operator
Thank you. And our next question comes from the line of Chris Dankert with Longbow Research. Your line is open. Please go ahead.
Chris Dankert, Analyst
Hey, good morning, guys.
Chris Mapes, CEO
Hi, Chris.
Chris Dankert, Analyst
In relation to automation, I'm interested in whether there are any opportunities or orders outside of the automotive sector as you review the order book. Have we seen significant interest from heavy industry, or are there other avenues worth pursuing, or is it still primarily focused on automotive?
Chris Mapes, CEO
Chris, I think that's really going to be one of the interesting dynamics associated that comes out of the pandemic. I really think the pandemic is going to challenge many industries maybe beyond the concentration that we've traditionally seen in automotive to really start to expand into the automation field because the challenges associated with keeping employees safe, the challenges associated with supply chains which have been just exacerbated with the pandemic impact all industries. And I will tell you that our order book improvement in Q4 was not automotive-centric relative to increases that we had. Matter of fact, a couple of very large projects that we had were non-automotive. So we are seeing that divergence from just seeing more of that activity around automotive. Automotive still strong for us; I don't want to imply that there's not automotive in the book, there is. But quite frankly, we're continuing to see that and I believe as we see improvements in the heavy industry market, that that general industry's piece will continue to climb as we move through 2021 and 2022. Also, those particular industries have always been prevalent in automation and I think that they'll start to recover as they make improvements in their CapEx spending moving in the early part of the cycle. But again, I think the pandemic and the disruption of the pandemic is only going to amplify the utilization of automation across the broad industrial segment space and probably over the longer term minimize the concentration that businesses see today around automotive in automation.
Chris Dankert, Analyst
Got it. Thanks so much for that.
Gabe Bruno, CFO
I'm going to say Chris, maybe just to add to what Chris just said. If you remember that the heavy industry cycle kind of peaked down early part of 2019. And we kind of went through the cycle throughout the year and then the pandemic hit, so that pullback on capital investment. But as you are monitoring the markets there is just more favorable expectations to progress in the heavy industries throughout 2021. You look at Ag, mining, construction. And so we're optimistic in the back half of the year and more so on where heavy industries could turn. But still, it will be comparing kind of the low part of the cycle when you go back to 2019.
Chris Dankert, Analyst
Thank you for the insights. It seems there are some intriguing opportunities beyond the automotive sector. I'm pleased we share a similar perspective. As we approach the first quarter, there are many factors at play. We have the $5 million to $6 million in temporary costs from 2020 coming to an end, counterbalanced by the permanent savings realized throughout the year. Could you clarify what you expect for SG&A costs in the first quarter? Are we looking at a return to the low mid-40s, around the $140 million mark?
Chris Mapes, CEO
Just, Chris, I view the situation more broadly. Currently, we're operating at a $12 million run rate. In the first quarter of last year, there were no permanent cost savings, and we had nearly $6 million in temporary savings. This year, we're expecting less in temporary savings for the first quarter. However, I'm planning to shift our discussions towards incremental improvements. We will maintain some cost savings in the first quarter as we operate under the ongoing pandemic environment. Looking at the full year, we aim for incremental growth in the mid to high 20s, though we anticipate some fluctuations in the quarters due to comparisons being uneven relative to 2020.
Chris Dankert, Analyst
Understood, well, thanks so much for the color. And best of luck, guys.
Gabe Bruno, CFO
Thank you.
Chris Mapes, CEO
Yes, Chris, in response to your initial question about automation, one of the advantages Lincoln Electric has with our financial position is that we are seeing growth in our automation business. This is an area where we are keen to invest further. Looking at our Higher Standard 2025 strategy, we aim to pursue acquisitions and explore other growth markets to continue expanding this business. I believe this can be a significant driver for us as we progress through 2021 and 2022.
Chris Dankert, Analyst
Exciting stuff. Thanks again.
Operator, Operator
Thank you. And our next question comes from a line of Mircea Dobre with Baird. Your line is open. Please go ahead.
Mircea Dobre, Analyst
Good morning, everyone. Thank you for taking the question. I want to go back to your comments on pricing and the fact that the guidance doesn't seem to embed a whole lot of pricing upside. And frankly, I guess I'm wondering why that is at this point, right? I mean it's pretty clear that raw materials are going off. So Chris you talked about the 2000s. I mean in the 2000s, you guys had fantastic pricing and that was high-single-digit pricing. So I guess, I'm wondering is it simply a factor of conservatism and the way you are structuring the guidance or is there more uncertainty than normal in the way you're kind of thinking about your ability to push prices?
Chris Mapes, CEO
Thank you for the question, Meg. I want to emphasize that we have confidence in our ability to recover from cost pressures within our business. Historically, we've demonstrated that our model effectively manages such recoveries, although there can be some delays. To address your question more directly, we are still early in this cycle. I feel this period resembles the early 2000s, where we will likely encounter multiple challenges related to commodity prices and other structural cost increases that need to be managed. We are currently experiencing some of these cost increases and have begun to tackle them in our global markets. We are in discussions about further actions, and I am confident that we will be able to recover these costs over the course of 2021. However, I cannot provide specific guidance on the effectiveness of this recovery beyond expressing our confidence in managing these cost increases throughout the year.
Mircea Dobre, Analyst
Thank you for that Chris. But to clarify here, and maybe a bit, is the competitive environment different as far as you can assess it? You think your competitors are going to take a similar approach too?
Chris Mapes, CEO
I really have no idea. I have complete confidence in our ability to execute our strategy based on the information I gather from the markets, including the steel market, public steel pricing, ocean and air freight trends, and wage improvements. Industrial companies cannot ignore the inflationary pressures that are present. I don't see any structural or dynamic changes in our markets compared to previous times when we faced similar issues. Most importantly, I have great confidence in the Lincoln team and our process to work with customers and recover those costs in our business.
Mircea Dobre, Analyst
Understood. For my follow-up, Gabe, out of the $88 million in cost savings for 2020, you mentioned that about $64 million were temporary. Looking at this slide, you have only indicated a $27 million labor cost headwind. How should we view the remaining temporary cost savings reversion? Is that accounted for in the guidance or will it occur in future years? Thank you.
Gabe Bruno, CFO
Yes, Mircea. Sense really, will be responsive to how we see markets rebound, right. So that's why we anchored an incremental conversation aligned with growth, temporary savings as we go into second, third quarters and anniversary, and we'll see that dynamic of how we restore that which will be dependent on activity in the market.
Chris Mapes, CEO
So that's why we return to a conversation about the volatility we experienced quarter-by-quarter in 2020.
Mircea Dobre, Analyst
Okay, so you have more control in terms of how those costs come back into the business, and they're more volume.
Chris Mapes, CEO
Yes.
Mircea Dobre, Analyst
Understood. Thank you.
Operator, Operator
Thank you. And our next question comes from the line of Dillon Cumming with Morgan Stanley. Your line is open. Please go ahead.
Dillon Cumming, Analyst
Great. Good morning guys. Thanks for the question. I just wanted to start at a high level. Chris, so you kind of alluded in the fact that you've seen several of this industrial cycle at this point. And I guess I just wanted to ask you another returning to an environment of year-over-year growth next year. How would you describe the breadth of kind of the recovery across your end market mix in this cycle versus the other ones? And I guess I am just looking at some of your comments in terms of energy being a bit weaker, construction that kind of saw a bit of a tone shift quarter-over-quarter. So, just wondering if you can talk about kind of how broad based the recovery is that you're expecting in 2021?
Chris Mapes, CEO
I think the recovery is going to be widespread. We're hearing from Lincoln Electric about sequential growth in all geographic areas and a continued improvement across our segments, which is very encouraging. While oil and gas aren't currently growing, we have seen stability in the marketplace, with oil prices stabilizing in the higher $50 range per barrel. There are discussions about potential increased demand as broader growth develops across markets. I wouldn’t suggest that this market is shrinking; rather, it's not progressing as quickly as we would like from a growth standpoint. I anticipate a significant push in heavy industries and believe we are at a point where reinvestment in mining, agriculture, and construction is necessary. We're also not currently discussing whether an infrastructure package will emerge in the U.S., which could serve as an additional growth catalyst. Overall, I see geographic growth and multiple segments positively progressing. With a few quarters of sequential improvement, these factors lead me to confidently express that there is a strong base of growth verticals that should support our outlook for organic growth in 2021.
Dillon Cumming, Analyst
Okay, great. That's helpful. Thanks Chris. Maybe switching over to the balance sheet quickly, 2020 was the first year in several years without any completed mergers and acquisitions, which is understandable. However, in light of the capital allocation priorities for 2021 that you mentioned, it seems that M&A wasn’t among the top three priorities. With that in mind, could you share your thoughts on the possibility of revisiting M&A next year? Will it still play a role in your strategy? I know there are attractive opportunities in the marketplace right now.
Chris Mapes, CEO
Yes, Dillon, I would share with you that M&A is always at the top of our capital allocation strategy. So we obviously want to have the capital to invest within our business. We're very committed to our dividend for our shareholders. But before we get into capital allocation vehicles like share repurchases or other items let me assure you we're always looking for acquisitions and our Higher Standard 2025 strategy specifically discusses our ability to execute on quality acquisitions that bring more solutions to our market place and we're actively looking. We haven't slowed down any of that process even during the pandemic. But as you can imagine that level of disruption has some individuals who might have thought that they were wanting to migrate forward and change their business by selling their business might have paused. But we're actively engaged with all of our businesses within Lincoln Electric and looking for those solutions and would love to execute on some acquisitions in 2021.
Dillon Cumming, Analyst
Okay, great, very helpful. Thanks for the time, guys.
Operator, Operator
Thank you. And our next question comes from the line of Walt Liptak with Seaport Global. Your line is open. Please go ahead.
Walt Liptak, Analyst
Hi, thanks. Good morning. Good quarter. I wanted to ask about just some of the recent trends in automation. As we turn the calendar, some capital budgets could be picking up and I wonder what the orders for automation looks like early in the year?
Chris Mapes, CEO
Yes, we agree with you, Walt, that based on what I've seen regarding capital spending, I anticipate improvements in 2021. The order trends have been very positive as we moved into Q4. We've observed broad and consistent improvement across our demand portfolio as we enter 2021. While we haven't specified any particular region or business, we've noted ongoing enhancements in those demand trends. I believe the factors driving this are still related to investments in automation. Our business is well-positioned, and I believe we are beginning to see, and should continue to see, a significant improvement in growth in that sector as we progress through 2021.
Walt Liptak, Analyst
Okay. All right. Thank you. And kind of a similar thought on the channel inventory. I wonder if we're starting to see the distributors build back some inventory. It sounds like you're building some safety stock in working capital. I wonder if you're starting to see that in the channel yet?
Chris Mapes, CEO
Yes. I can't necessarily point, Walt, that we're seeing it yet. I think there's still a lot of disruption in the supply chain. There could be pockets of it, but I can't say broadly that necessarily that has started to occur. But we made a strategic decision back in March of 2020 as we were starting to get more visibility into the challenges of COVID-19 and the pandemic. And globally back in March, we told our teams to ensure that they made product, if we had individuals and the components there to be able to make our products and increase our inventory levels. And I continue to support that strategy. I think that helped us minimize issues for our customers. As Gabe said, yes, we're entering 2021 with a higher inventory per day level than what we have historically, but I think that's a good utilization of our balance sheet in the market right now. And as this demand moves back into the marketplace and if there are challenges with the supply chains, Lincoln Electric will be in a better position to be able to execute on our strategy and service to our customers.
Walt Liptak, Analyst
Okay. Yes, it makes sense. Wanted to know about the share repurchase and I may have missed this, but can you review with us the size of the authorization that you have for share repurchase?
Gabe Bruno, CFO
Yes, we have a total about 11.5 million of shares authorized and we will be in the market and as we saw we're not suspended in terms of share repurchases, our maintenance level of spend is somewhere around $50 million and so that's part of our capital allocation strategy and we remained disciplined with that.
Walt Liptak, Analyst
Okay. Does that mean you'll be opportunistic or do you think you'll be in the market, that this year will be a bigger year for buybacks?
Chris Mapes, CEO
Yes, well, we're really not targeting a particular amount. And part of it has to go with an earlier question. I really want to make sure that we're looking at allocating our capital toward acquisitions. And as we're doing that and hopefully we're executing that in 2021, we can apply more of that capital toward that. We certainly will be back in the marketplace from a share repurchase perspective. I certainly would expect us to be at a minimum out there making sure that we don't have dilution relative to the incentive compensation, utilization of shares but we're not targeting a particular amount as it relates to our 2021 budget. Again, expecting and wanting to execute on more acquisitions and investments in the business as we're moving through the year.
Walt Liptak, Analyst
Okay. Makes sense. Thank you.
Operator, Operator
Thank you. And our last question comes from the line of Steve Barger with KeyBanc Capital Markets. Your line is open. Please go ahead.
Steve Barger, Analyst
Hey, good morning, everybody.
Chris Mapes, CEO
Good morning, Steve.
Steve Barger, Analyst
Chris, appreciate the comments on general growth and specific international improvements. Just looking at margin there it's been around 6% for quite a few years. So is the walk to double-digit a steady progression from here of say 100 basis points per year or more of a step function as volume picks up to the point where you could get there in 2022 maybe?
Chris Mapes, CEO
I think there are two key points to address, Steve. First, I would refer you to our Harris business. A few years ago, when we presented to investors, we committed to making steady, consistent structural improvements to enhance its margin profile. We have successfully executed that year-over-year improvement, and the Harris business is now a high-performing segment within our Lincoln Electric portfolio. Regarding our International business, I anticipate a more significant change in the short term over the next 24 to 36 months due to some aggressive structural actions we've implemented. Following this, I envision us moving quickly into a consistent operational flywheel approach, where we make incremental improvements annually. So, while I see a step opportunity in the next 24 to 36 months, I believe we will start generating steady improvements in that portfolio in the long term as we reach our targets for the International business.
Steve Barger, Analyst
Got it. Thank you. And part of the Higher Standard 2025 strategy is to expand differentiated solutions. When you think about that organically, is that primarily driving efficiency or output quality into existing products, or does the R&D group have anything that's truly new or something that can get you into a new category?
Chris Mapes, CEO
Oh, I would tell you both, Steve. I think that there is an opportunity for you to enhance the solutions that are currently there as our customers continue to identify other ways that they're looking to make improvements in their fabrication technologies. But if you also just look very quickly even at the last year or two at Lincoln Electric; look, we brought some new solutions to the market place whether that's our HyperFill product, which is new twin wire technologies that really no one else in the world is operating, or the new PIPEFAB product that we brought to the marketplace. I can go down a list of new solutions that are there and let's not forget and it's in the very, very early innings. But we're investing in that additive space for something that I believe can be important to the business whether that's two, three, or five years out. So we've got an R&D strategy that not only enhances current technologies but identifies new solutions as well as potential longer term breakthrough solutions that might allow us to continue to migrate into other markets. Look, as a very small side comment, one of the exciting things about our additive business, which is still very, very small inside Lincoln Electric, very de minimis from a revenue basis. But quite frankly recently, we've had some very interesting products and solutions that we've been delivering into the space market, a market that quite frankly we had very little visibility to over the last few years. Again, that's a really small piece of the business but as it relates to your question where we're trying to develop solutions and processes to enter into other spaces or other areas of markets.
Steve Barger, Analyst
That's really great detail. Thank you. And then well, I guess as you transition back to growth in 2021, are there any other takeaways you have from the automation and how that performed in the downturn? Anything you can do to mitigate cyclicality there?
Chris Mapes, CEO
So, I think there are some things; Mike Whitehead, who runs that business for us is doing a really nice job of trying to leverage across that portfolio. So one of the things that we've seen is that quite frankly when we have large projects how can we ensure that we have the processes and tools in place for our controls engineers to be able to work on multiple projects across multiple businesses at any point in time. How can we ensure that as we're servicing our customers we're also leveraging the various groups within Lincoln Electric? I was at an automation site just in the last six months and we had four or five of our automation businesses that had resources at that site working with that customer on the solution. That wouldn't have been that way a few years ago, so some of those things are certainly emerging. I know Mike and his team have some other ideas to continue to make improvements in the automation business to minimize the impacts that we can have in the cycle. But I'll also share, Steve, that when I think about the automation business because of the criticality of some of the human capital requirements unique to automation that when I think about the business it's always going to be the one that probably performs a little bit more challenged in a down economic cycle versus consumable versus equipment. But we have made improvements and think we can make some more improvements as we're moving that business forward.
Steve Barger, Analyst
Understood. Since I'm last on the call, I’d like to ask one more question. Gabe, regarding the organic framework of high-single digit growth and the easier comparisons in the Americas, as well as some of the benefits from automation we've discussed, should we anticipate that leading to double-digit growth in the Americas compared to single-digit growth internationally? How should we think about growth in these two segments?
Gabe Bruno, CFO
Steve, I would like to focus on the overall perspective regarding organic increases. You are correct that the automation improvements we expect to see starting in mid-2021 will benefit our Americas segment. We want to maintain that overall framework.
Steve Barger, Analyst
Got it. Thank you.
Operator, Operator
Thank you. This does conclude the question and answer session. And I would like to turn the call back to Gabe Bruno for closing remarks.
Gabe Bruno, CFO
Thank you, Michelle. I'd like to thank everyone for joining us on the call today and for your continued interest in Lincoln Electric. We look forward to discussing the progression of our strict strategic initiatives in the future. Thank you very much.
Operator, Operator
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.