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nVent Electric plc  (NYSE:NVT)
Q3 2018 Earnings Conference Call
Oct. 25, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Devin and I will be your conference operator today. At this time, I would like to welcome everyone to the nVent's Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I will now turn the call over to J.C. Weigelt, Vice President, Investor Relations. Mr. Weigelt, you may begin your conference.

J.C. Weigelt -- Vice President, Investor Relations

Thank you, Devin, and welcome to nVent's third quarter 2018 earnings call. We're glad you could join us. I'm J.C. Weigelt, Vice President of Investor Relations, and with me today are Beth Wozniak, our Chief Executive Officer; and Stacy McMahan, our Chief Financial Officer. On today's call, we will provide details on our third quarter performance, as well as our fourth quarter and full-year 2018 outlook.

Before we begin, let me remind you that any statements made about the Company's anticipated financial results are forward-looking statements subject to future risks and uncertainties. This is the risk outlined in today's press release and nVent's filings with the Securities and Exchange Commission. Forward-looking statements included here are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results.

Today's webcast is accompanied by a presentation, which can be found in the investor section of nVent's website. Any references to non-GAAP financials are reconciled in the appendix of the presentation.

We'll have time for questions after our prepared remarks, and now I will turn the call over to Beth.

Beth Wozniak -- Chief Executive Officer

Thank you, J.C. Good morning and thank you for joining us. nVent delivered strong results during the third quarter, with all segments growing organically in nVent's first full quarter post-spin.

Beginning on slide four of the earnings presentation, sales of $564 million grew over 5% organically, which was above the top end of our prior third quarter guidance. Return on sales was 40 basis points above the midpoint and adjusted EPS was at the midpoint of our previously issued guidance. Robust return on sales expansion in Electrical & Fastening Solutions and year-over-year expansion in enclosures helped drive third quarter return on sales of 20.4%.

Segment income for the quarter grew approximately 1%. However excluding corporate and other costs, segment income grew approximately 5%. Adjusted EPS of $0.46 was at the midpoint of our prior guidance, as the return on sales expansion we experienced was slightly offset by a larger than expected roughly $0.02 headwind from changes in foreign currency.

Turning to slide five. One of the larger strategic components of standing up the company is our One nVent strategy. We understand our strengths and where we have opportunities to align across the business as One nVent. Our goal is to scale our capabilities across the entire organization and let me provide examples of where this is working. One example is our channel partner relationships. Historically, these relationships were primarily at the segment level and very few of the larger channel partners knew all of our brands or that they were even part of nVent.

In some cases, we are a Top 10 supplier, but we never had brought strategic relationships across the portfolio. This is rapidly changing under our One nVent strategy. Today, we have a team that manages these relationships as One nVent. I have met with many of our channel partners and found them to be very receptive to working with us more strategically across all of our segments. Although early this initiative has grown sales high-single digits year-to-date and we see a long runway for growth and global expansion.

Another area showing early signs of success is our new go-to-market approach for key verticals. Teams have been created with a focus on selling nVent solutions that include products from each of our segments. One of these is data centers and networking solutions, which is very attractive from both the size and growth perspective. We see no signs of this moving, given the increased demand for the Internet of Things, hyperscale servers and increased CapEx spend from data-centric customers. Our business in this space has grown high-teens year-to-date led by our unique liquid cooling capabilities and Enclosures. Again, this is an example of how our focus team can drive stronger results when looking at market-back solutions at the nVent level.

Turning to slide six. Our focus on growth is paying off, as third quarter sales grew over 5% on an organic basis. Segment income of $115 million grew 1%. Adjusted segment income grew 5%, which excludes corporate and other costs. Recall, we believe this is the best way of assessing year-over-year profitability trends throughout the first year, as we are comparing to allocated corporate and other costs in 2017.

Transactional assets losses, which are included within our corporate and other costs impacted year-over-year income negatively by about $4 million or approximately $0.02 per share. Looking at the segment income walk (ph), we have historically included transactional FX impact in the productivity bucket. Year-to-date free cash flow of $151 million was in line with our target. Please note that we typically see stronger cash generation in the fourth quarter.

Now let's turn to slide seven for an overview of our Thermal Management segment. I'd like to take a couple of minutes to review the value proposition of our Thermal Management business, just as I did for enclosures on the July call. Our Thermal Management segment provides electrical thermal solutions that connect and protect people, critical infrastructure, industrial processes and buildings. With approximately 45% of sales originating outside of North America, it is our most global segment.

A key part of our solution, which was invented by RAYCHEM over 40 years ago is the self-regulating heat tracing cable. Developed from the culture of quality and innovation, RAYCHEM heating cables remain the industry standard in electric heat tracing with applications from temperature maintenance to pipe freeze protection to floor heating. We have expanded our heating cable applications and introduced new technology, unique (ph) to nVent. For example, our hot water heat trace systems provide immediate hot water to residential and commercial buildings and our fire-rated wiring, which protects critical systems reduces smoke by 50% compared to standard cables.

Thermal Management has installed over 1 billion feet of heat tracing cables. That's more than 60 times around the equator. With products installed on the world's longest pipeline to the most iconic buildings in the world, such as The Shard in London, the Eiffel Tower in Paris and the Burj Khalifa in the Emirates.

Our growing install base allows us to capture years of MRO. Thermal Management offers more than just products, including an array of services along the full project development cycle -- life cycle under the TRACER brand, we can supply products, provide engineering design services and maintenance of the entire key tracing system. We are able to produce installation and total operating costs, providing value for our customers.

Our latest development is the ELEXANT smart control platform. The ELEXANT family of controls provides advanced heat tracing control and monitoring in industrial commercial and residential applications. ELEXANT is our next generation of controllers, focused on enhanced connectivity and data integration, incorporating a new intuitive user interface, that allows operators to get real-time feedback. Flexible communication options enable customers to easily integrate ELEXANT into their existing facility, allowing open communications between systems.

As a result, operators achieve a lower cost of ownership and improved reliability, making operations in the field easier and more productive than ever before. Our ELEXANT control solutions are expected to have international approvals for usage around the world. Thermal Management is truly a global organization with a complete line of heat tracing system, strong technical support and high safety standards. Our customers worldwide benefit from our expertise, products and services to meet all their heat management system needs.

Now please turn to slide eight for a discussion of our third quarter segment performance. Starting with Enclosures. This segment grew approximately 7% or 8% organically in the third quarter. This marks the fourth quarter in a row with high single-digit organic sales growth. We continue to outpace the industry with broad-based growth across many verticals and geographies. Our global channel strength is an advantage for us with more than 3,000 distribution points in North America alone. A broad product offering is a strength that we provide both standard products as well as highly engineered solutions to meet a variety of customer requirements. Previously, we guided our Enclosures business to be at the top end of the original guidance range of 3% to 5% organic growth for the full year. Given the strength year-to-date, we now expect Enclosures to grow 5% to 6% organically for the full year.

Turning to margin. Third quarter Enclosures return on sales expanded by 10 basis points year-over-year at 18.3%. We continue to make progress on our productivity goals and saw positive price during the quarter. Consistent with our comments on the July earnings call, we saw increased inflation relative to the previous quarters. We expect the fourth quarter to show the most expansion this year, given price realization and productivity measures that we've taken earlier in the year.

Thermal Management returned to growth this quarter, with a $157 million in sales, which was down versus last year on a reported basis. However, up 2% organically. We're encouraged by this growth especially in the face of a difficult comparison in 2017. Similar to prior quarters this year, the strength was driven from the commercial vertical and industrial MRO. Although the longer-cycle energy business remains down relative to 2017, we saw our strongest quarter to-date with some smaller project wins. We're seeing an increase in quoting and we are bidding competitively on a strong pipeline of business. We expect this to read out in our fourth quarter and into 2019. Overall, this business delivered return on sales of 26.6%. We now expect Thermal Management to increase return on sales by over 100 basis points this year.

Now on to EFS. Third quarter sales of $147 million increased 5% or approximately 6% on an organic basis. We continue to experience strong sales growth led by our Caddy product line, return on sales of 26.5% expanded a 130 basis points, as price plus productivity offset higher inflation during the quarter. In the fourth quarter, we expect this trend to continue.

Now, I would like to move to the topic of tariffs, which we have discussed on the past two calls. As you know, the situation keeps evolving and we are assessing all the developments. Now including the list three update, we see $2 million to $3 million of a direct tariff impact in 2018 and $6 million to $8 million annually. This includes the 10% to 25% tariff increase that takes place or takes effect in 2019. It excludes the indirect impact from higher inflation. Please note that this is a point in time estimate. We continue to take a number of mitigating actions including steel locks, pricing strategies and other actions within our supply chain.

As we enter the final quarter of 2018, it is great to see the team executing on the growth initiatives we laid out at our February Investor Day. While there is still work to be done, we've made great strides in standing up nVent, driving topline organic growth as evidenced by over 5% organic growth this quarter and improving enclosures margin.

Now I will turn the call over to Stacy.

Stacy McMahan -- Chief Financial Officer

Thank you, Beth and good morning everyone. Please turn to slide nine, titled fourth quarter 2018 nVent outlook. We expect organic sales for the fourth quarter to increase 2% to 4% and return on sales to be between 19% and 20%. The sales guidance takes into account continued strength within our segments as well as normal seasonality. As a reminder, we grew approximately 5% in the fourth quarter of 2017. We expect to see organic growth in each of our segments with accelerated growth in Thermal Management. We are also introducing adjusted earnings per share guidance for the fourth quarter of $0.44 to $0.48 per share.

Turning to slide 10, titled full-year 2018 nVent pro forma outlook. While there are some things that moved within our segments, we view the outlook for nVent to be consistent with our prior guidance and see organic sales growth of 3% to 4%, which is at the high end of our original 2% to 4% guidance. This is driven by strong performance in the third quarter as well as year-to-date performance in Enclosures, where we have adjusted sales guidance accordingly to reflect 5% to 6% annual organic growth. We continue to see a path to flat return on sales relative to 2017. Given our outlook for the fourth quarter, we are again tightening our full year adjusted earnings per share range to $1.73 and $1.77.

Turning to slide 11, which lays out our capital allocation philosophy. We paid down $50 million in debt late in the third quarter, as we continue to manage our current debt-to-EBITDA leverage multiple within our target of 2 times to 2.5 times. We view this pay down as a way to manage our net interest expense, while also maintaining flexibility for share repurchases and M&A. Growth has accelerated throughout the year and we are on track to meet or beat the high end of our original sales guidance. Our renewed focus on execution are paramount, as we end this year and look to 2019 to build upon our early successes.

Now Devin, please open the line for questions. Thank you.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Jeffrey Hammond with KeyBanc. Please go ahead, Jeffrey. Your line is open.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Hi, good morning.

Beth Wozniak -- Chief Executive Officer

Good morning.

Stacy McMahan -- Chief Financial Officer

Hi, Jeff.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

So, thanks for the good color on the tariffs. Just on price cost, I think you quantified in the productivity bucket $4 million transaction. What was the investment in that bucket?

Stacy McMahan -- Chief Financial Officer

Yes, Jeff. This is Stacy. We basically had about a third of the -- I'm sorry, excuse me. We had -- our investment was largely offset by that $4 million of tariff. And, we should -- excuse me, just a moment.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Yeah, I guess, what I'm trying to get to is, it seems like you had inflation of '17, price of '11 (ph). You've been saying post-productivity.

Stacy McMahan -- Chief Financial Officer

Right.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

You're trying to get the neutral and it -- so I'm just trying to, if you strip out investments in FX, are you kind of price productivity versus inflation neutral?

Stacy McMahan -- Chief Financial Officer

Yes, we did see price, we did see price productivity sort of the high to mid-single digits are millions. And after my investments, and have about -- about half of that and FX of about the other half of that roughly.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Okay, that's helpful. And then, just -- can you just talk about what price actions from here you're contemplating to continue to be able to push price and productivity versus inflation. And what also you're doing around supply chain, et cetera to drive that mix neutral.

Stacy McMahan -- Chief Financial Officer

On a price action, we have had several price increases through the year. And Enclosures, earnings -- EFS and Thermal Management. So we have seen across the segment's price actions and will continue to respond with price, going forward. In fact, we just recently announced their price in our EFS business to occur before the end of the year. So, we continued to track inflation and then take inflation-driven price increases.

From a productivity standpoint, we are continuing our efforts to enhance productivity, particularly in our new distribution center in the South for our enclosures business and that is gaining -- it's gaining attractions and then we saw some good success as we ended the third quarter. So, we expect that to continue as well.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Okay, great. And then Thermal, can you just talk about order activity in the quarter and it sounds like quoting and audit activity is picking up in that longer-cycle business and just how you think about the set up into '19 as that comes together. Thanks.

Stacy McMahan -- Chief Financial Officer

The Thermal business is where we expected it to be and as we look at exiting third quarter, our orders were up high-single digits and some of that is in that longer-cycle business. So, that will show growth in Q4 and put us -- set us up for a nice 2019. We're also seeing backlog as a result, as you would expect, we're seeing backlog also increase.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Okay, perfect. Thanks, guys.

Stacy McMahan -- Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Deane Dray with RBC Capital Markets. Please go ahead, Deane. Your line is open.

Deane Dray -- RBC Capital Markets -- Analyst

Thank you. Good morning, everyone. And congrats on a solid quarter and it's nice to see clean results on a new story. So congrats to every one.

Beth Wozniak -- Chief Executive Officer

Thank you, Deane.

Deane Dray -- RBC Capital Markets -- Analyst

Just a follow-up on Jeff's line of questions on the tariffs and you really did cover what we were looking for. But just to make sure I've got this level set, that $6 million to $8 million annualized, that's a gross number. And then from that, you'll be using productivity and price realization to offset that. Is that the goal?

Stacy McMahan -- Chief Financial Officer

That is correct, Deane.

Deane Dray -- RBC Capital Markets -- Analyst

Terrific. And -- but that $6 million to $8 million was the direct and is it any way you can size or may be qualitatively talk about the indirect effects at this stage?

Stacy McMahan -- Chief Financial Officer

Yes, at this stage, as we've experienced the inflationary environment ending 2017 and well into 2018, we expect it to be slightly higher in 2019, where we are -- where our material inflation in 2018 is, went from -- what we expected at $32 million to $40 million. So we expect that to continue to extend into 2019.

Deane Dray -- RBC Capital Markets -- Analyst

Got it. And then just -- since 2019 has come up a number of times already and I know you're not ready to give anything formal with regard to an outlook. But maybe directionally can you talk about some of the broad targets that you think are meaningful for nVent in 2019, maybe from a sales perspective. Can you talk about free cash flow. You did close to a 100% this quarter and you highlighted that, that's not even your strong quarter, but what do you think for 2019 in the sales and free cash flow, please?

Stacy McMahan -- Chief Financial Officer

Okay. So, if we look at the trends going into 2019, continuing to see overall strong macro economic growth and maybe a slightly slower year than this year. We'll see how things go. We have an election coming up, et cetera. Currently, when we look at our Thermal Management business, as I discussed earlier, the order trends and the run rate and as we expected as we get into that longer-cycle business our Thermal segment will accelerate.

We still see on the Enclosures side, expected to see some good growth and continued margin expansion to challenge managing tariffs and ensuring that we're continuing with our price lock strategy. So, I think, we'll see 2019 as another solid year. We're not ready to give specific color on that yet, but we will in due course. When it comes to our cash flow, our goal is the same. 100% adjusted net income will be our -- what we expect in terms of free cash.

Deane Dray -- RBC Capital Markets -- Analyst

Okay. That's helpful. And just one last question, if I could. I know you've had a -- you're holding off on any M&A through the balance of 2018 to show that you can grow what you own, but now you get your balance sheet. I think, arguably below your target range, so that's in good shape. If you think about where that gets deployed in M&A, would that -- because you started off talking about some of these growth verticals, the data centers and network equipment were Enclosures is well positioned. Are there some bolt-on opportunities in there, given the kind of growth rates and your presence in those markets?

Beth Wozniak -- Chief Executive Officer

Yeah, as we think about M&A, it starts with strategy of course, and so we look at, what is that we're focused on in terms of mission critical solutions, in terms of creating value for our customers. So, we start with the core of our business, then we look at the verticals where we think there's opportunity and certainly, if there's areas where we can expand there and support in that data center market, that would be a consideration. But even looking at our business portfolio across all three segments, given a particular, how fragmented the space is, where we play -- we think there's just opportunities across the board.

Deane Dray -- RBC Capital Markets -- Analyst

Great, thank you.

Operator

Your next question comes from the line of Julian Mitchell with Barclays. Please go ahead, Julian. Your line is open.

Ronald Weiss -- Barclays Bank PLC -- Analyst

Hey, good morning everyone. This is Ronnie on for Julian.

Beth Wozniak -- Chief Executive Officer

Good morning.

Stacy McMahan -- Chief Financial Officer

Hi, Ronnie.

Ronald Weiss -- Barclays Bank PLC -- Analyst

Good morning. Back on the Thermal business, I guess could you scale the size of that longer-cycle energy business for us and what the margin profile is of that business?

Beth Wozniak -- Chief Executive Officer

No, the way we've characterized our Thermal business is, there's a third of that business, it's roughly in a commercial and residential space. There's a third of it that we look at as, more or less MRO -- industrial MRO and then a third of it into that project side, which is both industrial and energy. And when you look at that, there is lower margin as you expect in that project business, but there's a balance there. We're certainly focused. One of the changes that we made to our strategy was to ensure that as we looked at projects that we really focused on high product content and MRO pull through.

So the mix of projects we've shifted and you can see that at in our margin profile over the last two years to those more profitable projects where we get that established installed base. So as we go forward, I think, we'll still see some margin expansion in our thermal business, but not to the levels we've seen over the last two years certainly.

Ronald Weiss -- Barclays Bank PLC -- Analyst

Got it. And then switching over to Enclosures, I guess, the Q4 guide implies a bit of a slowdown there. Is that more or less just a function of the tough comp in the fourth quarter. Is there anything kind of one off we should be thinking about?

Beth Wozniak -- Chief Executive Officer

No that's exactly right. Our Enclosures business, as I mentioned, we've had four very strong quarters and that started last year in fourth quarter. So it's really just year-over-year comparison.

Ronald Weiss -- Barclays Bank PLC -- Analyst

Okay. And then one last one on pricing, 2% price in this quarter. I guess, with the EFS pushup, is it fair to assume that the tailwind from pricing on the topline should be a bit higher than that in Q4 from Q3?

Beth Wozniak -- Chief Executive Officer

I think, that's a fair assumption Ronnie.

Ronald Weiss -- Barclays Bank PLC -- Analyst

Okay, great. Thanks guys.

Beth Wozniak -- Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Joe Ritchie with Goldman Sachs. Please go ahead, Joe. Your line is open.

Evelyn Chow -- Goldman Sachs -- Analyst

Hi, good morning. This is Evelyn Chow on for Joe.

Beth Wozniak -- Chief Executive Officer

Good morning, Evelyn.

Evelyn Chow -- Goldman Sachs -- Analyst

Maybe we can first start -- just thinking about Enclosures a little. Obviously, growth has been very impressive in this segment and it sounds like there are some exciting leverage to the data center. Could you just break that for us. How much of this business actually is sold into data centers and is there opportunity to expand the scope of your participation in that end market?

Beth Wozniak -- Chief Executive Officer

Yeah, for our Enclosures business, it represents, say about 10% of the overall Enclosures business. And as we go forward, because we've got a focused go-to-market and selling organization on it, there's a couple of things that we're doing, is really selling more of what we have and whether that's direct or through channel partners and doing that globally and then pulling through products from our other two segments. So, leak detection from our Thermal Management segment for example, or some of our fastening solutions and cable management capabilities from our EFS business.

So yes, we see opportunities to expand that. It's had a really strong growth this year. We expect it to continue to have really strong growth as we go forward, because a lot of the team that we put in place in driving this really just got established this year. So there's a lot of momentum. And I think, that we're going to capitalize on as we go forward.

Evelyn Chow -- Goldman Sachs -- Analyst

Makes sense. And then I just wanted to return to price cost for a moment. I think you noted that in EFS, price once again offset inflation. So where else in the portfolio then are your inflationary pressures most acute?

Stacy McMahan -- Chief Financial Officer

I would say in the Enclosure segment, where the steel inflation has hit them hard. And essentially we have that had pursued a strategy of locking steel prices out for three, six, nine months. And as those locks roll off, we get an inflationary adjustment in prices and we experienced some of that in driving the Q3 inflationary number, where -- which was 17 million. I want to stress that the material inflation piece of the inflation reported, we have covered 100% by price across nVent. That we're able to have execute price strategies that cover that material inflation, where we've seen a lot of inflation is more in the freight and the labor side. And that's what we're really working on that productivity programs to try to offset.

Evelyn Chow -- Goldman Sachs -- Analyst

Makes a ton of sense. And then maybe just one last one on capital deployment. Looks like you paid down a bit of debt this quarter. I think your intentions with M&A are pretty clear. How should we think about your framework for the buyback, especially noting that, there may be a bit of an opportunity in the market right now?

Stacy McMahan -- Chief Financial Officer

Yeah, we do look at a lot of factors when we have to declare a capital. But certainly we think the stock is currently a very good buy and recall that we have a $500 million repurchase authorization. So we standby ready to execute.

Evelyn Chow -- Goldman Sachs -- Analyst

Okay. Thanks guys. I'll get back in queue.

Operator

Your next question comes from the line of Scott Graham with BMO Capital Markets. Please go ahead, Scott. Your line is open.

Scott Graham -- BMO Capital Markets -- Analyst

Hey, good morning, nice quarter.

J.C. Weigelt -- Vice President, Investor Relations

Thank you, Scott.

Beth Wozniak -- Chief Executive Officer

Hi, Scott.

Scott Graham -- BMO Capital Markets -- Analyst

I just wanted to -- most of my questions have been answered. I just wanted to answer as to which are even kind of partial follow-ups. On the Enclosures in the fourth quarter, that's a business that as we've talked about is really kind of it, right in the wheelhouse (ph) of improving industrial economy. I was just kind of wondering, if maybe there's some conservatism baked into that your fourth quarter thinking?

Beth Wozniak -- Chief Executive Officer

Well, when we look at Enclosures again, the one comment was, we saw very strong mid to high-single digit growth for the last four quarters and it started in Q4. So part of it is just overlapping that quarter as we see it on the top line. And then we do expect nice margin expansion for Enclosures. We skewed all the productivity and actions we've been taking accelerate going into Q4. And, the market is still very robust for Enclosures, so I think, it'll be a solid quarter for us, as we look at the performance of that segment.

Scott Graham -- BMO Capital Markets -- Analyst

Got you. Another question is maybe more 40,000 foot. I mean, is there a organic sales growth level call it, 3%, 4% where you really start to see leverage on the SG&A line?

Beth Wozniak -- Chief Executive Officer

Good question. On that front, let me answer that for you. We do -- our SG&A is settling out, as we have launched the new company and we're settling into a more normal rhythm. And so, once the sort of anniversary these, the difference between 2017 allocated costs from a corporate level to stand-alone corporate cost. I think, you're going to start to see where we build leverage. We also have in place a very definitive goal to pull down our G&A investment and be able to then leverage some of that into investing in innovation and growth. So I think, you'll start to see leverage as we start to stabilize our cost structures and anniversary the comparables to when we were part of Pentair.

Scott Graham -- BMO Capital Markets -- Analyst

Got it. And maybe kind of the same sort of question on gross margin as well. Can you give me a number there, does 4% do it for you on the cost of sales line on leverage?

Beth Wozniak -- Chief Executive Officer

Yeah, 4% would be a very -- a nice number to work with for us on the -- in terms of gaining leverage and productivity.

Scott Graham -- BMO Capital Markets -- Analyst

Got you. And the last question is I know, we had some issues couple of quarters running with plan consolidation this kind of thing. Didn't hear a peep about that this quarter. Can we assume that is now behind us?

Beth Wozniak -- Chief Executive Officer

Well, Q4 is where we start to see really a lot of that benefit comes through from the actions we took in place.

Scott Graham -- BMO Capital Markets -- Analyst

Right.

Beth Wozniak -- Chief Executive Officer

So the last piece that we were optimizing was our logistics and our Southern distribution center. We talked about just saying higher inflationary freight. So, as we get into fourth quarter, we think, we will have some of those optimization measures in place.

Scott Graham -- BMO Capital Markets -- Analyst

Very good. That's all I have. Thank you.

Beth Wozniak -- Chief Executive Officer

Thank you.

Stacy McMahan -- Chief Financial Officer

Thank you.

Operator

There are no further questions. I'll now turn the call back to the presenters.

Beth Wozniak -- Chief Executive Officer

Well, thank you for joining us this morning and your interest in nVent. We've made tremendous progress during our first six months as a public company. Third quarter performance are over 5% organic sales growth and 20% return on sales are metrics, we're proud of. As I noted earlier, there's still plenty of work and opportunity for us. Our teams are energized. They're focused and executing a sound strategy to deliver growth and the financial commitments we made to our shareholders. Thank you again for your interest and support. Operator, you may now conclude the call.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 36 minutes

Call participants:

J.C. Weigelt -- Vice President, Investor Relations

Beth Wozniak -- Chief Executive Officer

Stacy McMahan -- Chief Financial Officer

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Deane Dray -- RBC Capital Markets -- Analyst

Ronald Weiss -- Barclays Bank PLC -- Analyst

Evelyn Chow -- Goldman Sachs -- Analyst

Scott Graham -- BMO Capital Markets -- Analyst

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