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nVent Electric plc (NYSE:NVT)
Q3 2019 Earnings Call
Oct 30, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the nVent Q3 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, J.C. Weigelt. Thank you. Please go ahead, sir.

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

Thank you, Shelby. And welcome everyone to nVent's third quarter 2019 earnings call. We're glad you could join us. I am J.C. Weigelt, Vice President of Investor Relations. And with me today are, Beth Wozniak, our Chief Executive Officer; and Sara Zawoyski, Incoming CFO and current Senior Vice President, Finance and Treasurer. On today's call, we will provide details on our third quarter performance, as well as our fourth quarter and full-year 2019 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, such as the risks outlined in today's press release and nVent's filings with the Securities and Exchange Commission. Forward-looking statements 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 Investors section of nVent's website. 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 A. Wozniak -- Chief Executive Officer

Thank you, J.C. Good morning, and thank you for joining us. I'd like to begin with the recent leadership changes we announced earlier. I want to congratulate Sara, on her new role as CFO for nVent, which will become effective this Friday, November 1st. Sara has held numerous segment's CFO roles, and led Investor Relations during her time at Pentair, with her most current role at nVent, being Senior Vice President, Finance and Treasurer. I'm excited to welcome Sara into this role. She has a deep understanding of our business, is a proven leader, and I'm confident in her ability to lead and execute on our strategy.

I also want to thank Stacy McMahan for her dedication and contributions as CFO during the spin and our first year and a half. Stacy played a key part in helping stand up nVent as an independent public company and building out the strong and capable global finance organization we have today. We wish her the best of luck in her new ventures.

Turning to our third quarter results and beginning on slide 3 of the deck. I'm very pleased with how we performed during the quarter, given the weak macroeconomic environment. EFS had a very good quarter with 3% organic sales growth and strong return on sales expansion. Enclosures had strong operational performance, and was able to hold return on sales relatively flat in a quarter, where sales declined. And although Thermal Management sales declined, we had strong order and backlog growth. Again, overall a good quarter, here are the numbers.

For nVent, third quarter sales were $560 million, declining 1% organically and within our guidance range. We continued to execute well on our growth initiatives and the team did a great job managing costs, driving modest return on sales expansion of 10 basis points to 20.5%. Adjusted EPS was at the midpoint of our guidance range at $0.49 per share, representing 7% growth versus last year.

EFS led with 3% organic sales growth, driven by both volume and price. The segment expanded return on sales by a 110 basis points during the quarter resulting from price, volume leverage and the expected productivity gains we discussed earlier in the year.

Enclosures' sales contracted by 1% organically, and while return on sales was down 20 basis points, the base business modestly expanded return on sales, with the offset being Eldon. Recall, we announced the closure of the Eldon acquisition in early September. The integration is going smoothly and we are even more excited about the growth prospects of our combined portfolio. As we speak with customers and channel partners, they're are very interested in our expanded portfolio, modular and digital platforms, and our ability to meet their needs globally.

Turning to Thermal Management, revenue declined in the quarter. However, it was encouraging to see high teens year-over-year order growth and strong double-digit backlog growth. During the quarter, we won a large LNG project providing a complete heat management solution for our liquid natural gas development. Sales from this project are expected to be realized in 2020 and 2021.

Overall, we are pleased with our third quarter results and execution. I now want to take a moment to speak about the broader verticals where we compete. We continue to see a declining industrial vertical and a slowdown in commercial. There remains uncertainty around the global macro environment including ongoing trade tensions. So we believe are impacting capex spend and pushing out projects.

Turning to slide 4. Our strategy continues to produce positive results. We are aligned and focused on growth, profits and cash. Here are some of our third quarter highlights. Our key vertical initiatives grew mid-single digits. We had continued growth with our top strategic channel partners. Our new product vitality continue to increase as we launch new products. We realized strong productivity gains across all segments, and we closed the Eldon acquisition during the third quarter.

Overall, another successful quarter driving the One nVent strategy. I will now turn the call over to Sara to provide detail on our third quarter performance and provide fourth quarter and full year updated guidance. Sara, please go ahead.

Sara Zawoyski -- Chief Financial Officer

Thank you, Beth. I'm pleased to be here. In the coming months, I look forward to reconnecting and meeting with many of you. And I'm excited about accelerating our One nVent strategy, delivering growth and productivity with a focus on returns.

So, let's turn to slide 5 titled, Third Quarter 2019 nVent Performance. Results overall met our expectations, as we delivered on both sales and profit commitments. Organic sales declined 1% on the low end of our guidance, driven mainly by Thermal Management while EFS grew 3%.

Adjusted earnings per share of $0.49 was up 7% year-over-year, and at the midpoint of our guidance range. Segment income for the quarter was $115 million flat versus last year on lower sales. Notably, return on sales expanded 10 basis points, with positive net productivity in the quarter. We realized about half of the $25 million in productivity and cost actions planned in the second half, offset in part by investments in R&D. Free cash flow was a solid $88 million in the quarter, up 7% versus prior year and over 100% conversion of net income.

Now please turn to slide 6, for discussion of our third quarter segment performance. Starting with Enclosures, sales declined 1% organically and grew 1% on a reported basis, with the addition of our Eldon acquisition. While, we saw industrial demand softened with sales down low-single digits, we continue to see good execution and positive offsets with our One nVent initiatives. Specifically, growth in data and networking solutions, commercial, rail and transit, as well as in our top channel partners.

In addition, our recent acquisition of Eldon added approximately $8 million in sales during the quarter. Enclosures segment income was flat year-over-year and return on sales declined 20 basis points to 18.1%. This includes the impact from Eldon, while our base Enclosures business saw modest return on sales expansion during the quarter. The team executed well operationally in the midst of a challenging quarter, with positive net productivity and almost 2 points of price realization. Year-to-date, Enclosures was up 2% in organic sales and expanded return on sales of 50 basis points.

Looking at the fourth quarter, we expect similar trends in the third quarter with a declining industrial vertical somewhat offset by growth in our One nVent focused verticals. We are expecting return on sales expansion as a result of productivity gains and cost structure actions.

Moving now to Thermal Management, sales of $148 million declined approximately 5% organically. The Commercial business returned to growth, while longer cycle -- longer cycle energy projects continue to push out to the right. Sales in industrial MRO slowed ending the quarter flattish relative to last year. However, we believe that this was timing related, and we expect to see better growth in future quarters.

While projects continue to be delayed, our optimism toward returning to growth improved throughout the quarter as a team won a number of larger projects that we expect to translate into revenue growth in 2020 and beyond. Importantly, orders grew high teens and backlogs grew high double digits year-over-year in the quarter. This marks the second quarter in a row with order and backlog growth. We made progress in Thermal Management to improve return on sales on a sequential basis by aligning our cost structure with current trends. Return on sales declined 50 basis points to 26.1%, driven by the impact of lower volume. Year-to-date, Thermal Management organic sales were down 2% and return on sales contracted by 50 basis points.

As we close out the year, we continue to expect longer cycle projects to be delayed. While uncertainties remain with the macro environment and timing, we are optimistic in the long-term growth prospects of this segment as bidding activity remains healthy and backlog growth. Now on to EFS, sales of $150 million, grew 3% organically driven by price realization of approximately 2 points and volume growth of 1 point, as volume contributed positively during the quarter.

Return on sales of 27.6% expanded 110 basis points with price, volume and productivity gains realized in the quarter. If you recall, we expected return on sales expansion in the back half of this year as the changes we made over the past few quarters in leadership, capacity and systems began to readout.

Year-to-date, EFS organic sales were up 3%, and return on sales expanded 30 basis points. Looking at the fourth quarter for EFS, we expect the commercial vertical to grow, although slower than recent quarters as macro-economic indicators adjust downward. We continue to expect strong return on sales expansion versus prior year.

Turning now to slide 7, titled balance sheet and cash flow. In the third quarter, we drew down on our revolver to fund the purchase of Eldon, and also paid down approximately $5 million in short-term debt. At the end of the third quarter, our net debt was approximately 2.4 times EBITDA, and we also returned $30 million to shareholders via dividends in the quarter.

Year-to-date, we have paid over $90 million in dividends, and repurchased over $230 million in shares, which represents roughly 5% of shares outstanding. We continue to expect full year free cash flow conversion of approximately 100% of net income, and our capital allocation strategy continues to be maintain investment grade metrics, invest in our core businesses, look for attractive bolt-on acquisitions, and return cash to shareholders.

Moving now to slide 8, titled Q4 2019 nVent Outlook. We expect fourth quarter organic sales for nVent to be down 2% to flat relative to last year. This outlook reflects continued softness in Thermal Management, and we expect the currency headwind of approximately 1 point in the fourth quarter. Our adjusted EPS guidance in the fourth quarter is $0.42 to $0.46. From a segment standpoint, this reflects positive performance in both EFS and Enclosures, offset by declines in Thermal Management.

Corporate and other costs are expected to be similar to third quarter, and the effective tax rate in the quarter is expected to be between 23% and 24%, as we anticipate the finalization of the proposed US tax regulations. Recall, this expected increase in our effective tax rate is a one-time impact, as we expect the tax rate in 2020 to move back toward 18% as we execute our mitigation strategies.

Turning to slide 9 titled, Full-Year 2019 nVent Outlook. We are tightening our full-year organic sales growth guidance to be flat to up 1%. At the segment level, we are now guiding each segment to be at the low end of the previously issued guidance range. With this revised outlook, full-year return on sales is expected to be flat to up 30 basis points mainly driven by a lower outlook in Thermal Management and the impact of the Eldon acquisition. We are also updating adjusted EPS expectations for the full year to be $1.74 to $1.78. We continue to expect Eldon to have no material impact to 2019 adjusted EPS due to the late third quarter close and higher financing costs.

For sales, we expect over $20 million during the fourth quarter. We continue to expect Eldon to be accretive within 12 months and to generate returns exceeding our weighted average cost of capital within two years to three years. Although preliminary, we expect Eldon to add approximately $0.03 to adjusted EPS next year.

This concludes my comments on guidance. And I will turn the call back over to Beth.

Beth A. Wozniak -- Chief Executive Officer

Thank you, Sara. Turning to slide 10, our 2019 priorities remain the same. We are driving growth in our focused areas, expanding return on sales, and effectively allocating our capital amid a more challenging macroeconomic environment. For context, we have seen slowdowns before, and looking at 2015 and 2016, sales in the nVent's portfolio were down low-single digits both years. However, we only saw a modest decline in return on sales due to our ability to align our cost structure with softer demand. We appreciate that each slowdown has its own dynamics. But today, strategy offers more diversification, and has a deeper focus in specific verticals.

Our One nVent growth initiatives such as commercial, and data, and networking solutions are outpacing the broader industrial vertical. We believe third quarter is a good indicator of our ability to execute our playbook on both cost and growth initiatives.

Turning to our summary on slide 11. Our priorities remain consistent as we continue to focus on growth and execution to drive long-term value. Our EFS results were a good example, as they reflect actions the team put in place over the past nine months to improve operational performance, which we expect to continue to read out in the fourth quarter. Our intent during these more challenging times is to protect return on sales and continue to invest in our growth initiatives, while also looking at structural actions to optimize our cost structure.

We believe third quarter results reflect positively on our ability to execute and protect return on sales. With that I will now turn the call over to the operator to start Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Jeff Hammond of KeyBanc.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Hi, good morning.

Beth A. Wozniak -- Chief Executive Officer

Good morning.

Sara Zawoyski -- Chief Financial Officer

Good morning.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Sara, good to hear from you again.

Sara Zawoyski -- Chief Financial Officer

Good to hear from you too, Jeff, thanks.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Just, I guess on Enclosures, just Beth, if you can give me a sense of how well you think you can hold the line on margins, if we go into this kind of low single-digit decline. What should the decrementals look like? And then more broadly, can you talk about what your restructuring you've initiated or you have planned and what that reads out in terms of incremental cost savings in 2020?

Beth A. Wozniak -- Chief Executive Officer

Sure. So with our Enclosures business, we think we're in a much better position than we have been just with the diversification of our focus on different verticals other than Industrial. And as we look at our factories, we have a good playbook and we have a variable cost structure that we think we're able to respond to that. And so from the decrementals, I mean 20% to 30%, but I think we want to manage that, and also there is sometimes timing which just flows in -- the movement of inventory in and out of the quarter, but I think we're going to have modest declines if we see significant slowdown, and that is our goal.

I'll let Sara answer you on the restructuring.

Sara Zawoyski -- Chief Financial Officer

Yeah. So overall we came into the back half, really targeting $25 million productivity and cost out actions. And as we said on the call, we're pleased with realizing roughly half of that in the quarter. And Jeff, it's really a combination of the operational efficiencies in some of the material productivity, but really getting ahead of the cost alignment work, doing that across really all of the segments. And it's looking at things like regional structures, something that maybe we managed by countries before and getting it more at a regional level, as well as looking at enterprise versus segment really looking at putting our integrated supply chain closer and back into the segments, providing some end to end velocity and customer focus, along with some efficiencies from a structure -- restructure standpoint.

So, as we think about that in the context of 2020, we'd really expect that carryover, if you will, to be in that $10 million to $15 million range from an overall cost structure carryover standpoint.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Okay, great. And then just on Thermal, it sounds like you get this LNG order in hand, and certainly the orders were better. And I know it's been frustrating to wait for inflection. But, as you look at some of these other projects that are getting delayed. Are they giving you any indication that those start to ship in 2020, that would give you more confidence in that out year -- outlook?

Beth A. Wozniak -- Chief Executive Officer

Well, what we have seen is projects have definitely shifted into 2020. We know this large LNG project starts to -- we start to execute and recognize revenue in 2020. So our view is, we will see Thermal Management return to growth, as we get into 2020.

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Okay. Thanks so much.

Beth A. Wozniak -- Chief Executive Officer

Thank you.

Operator

Your next question comes from Julian Mitchell of Barclays.

Julian Mitchell -- Barclays -- Analyst

Hi, good morning.

Beth A. Wozniak -- Chief Executive Officer

Good morning, Julian.

Julian Mitchell -- Barclays -- Analyst

And welcome to Sara. So I guess maybe first question on the -- I think the industrial picture is pretty clear, you did also talk about a softening in some commercial markets. So maybe talk about when you started to see that happening, what you are thinking about the outlook for that vertical in 2020. And in general, I guess taking a step back from just commercial was there any noticeable demand changes in recent months?

Beth A. Wozniak -- Chief Executive Officer

So, first of all, our EFS business is the segment that's most aligned with commercial and we're very pleased that we've seen 3% growth every quarter this year. But as we started to see the architectural billings index, the Dodge reports, we're just looking at the general macro environment, what we hear from our channel partners, there is a view that that is going to slow albeit growth that we're still going to see, but slowing -- it's slowing from where we've realized, perhaps, that 3% growth. And I think as we look at what's going on over the last quarter, I would say we just even with our channel partners, we just see just different pockets, right? Where there is some strength and where there is some weakness, but I have to say it's more or less than consistent at overall during the quarter and how we've just seen things weaken or soften particularly in industrial.

Julian Mitchell -- Barclays -- Analyst

Thank you very much. And then my second question just around that net productivity. You touched on, I guess the gross productivity just now, but the figure you give say on slide 5 in that useful margin bridge is a net productivity number with investments and so forth. So very good turnaround in that figure in Q3 versus the Q2 number. When you're looking at everything together in that net productivity bucket inclusive of investments and inflation. When you look at that Q3 number is that a good run rate you think looking ahead, that sort of 30 bps positive tailwind to year-on-year margins?

Sara Zawoyski -- Chief Financial Officer

Yeah, so that net activity really included a couple things. One, it included a ramp on productivity, largely driven by the cost out actions that we talked about earlier. We also did see a bit of inflation easing, if you will. So inflation was $11 million versus compared to $15 million in Q2. So we saw a bit of that inflation easing, and we also saw some investments that we continued along our digital initiatives and R&D. So net-net, we would expect that positivity, if you will, to read out as we look into Q4.

Julian Mitchell -- Barclays -- Analyst

Great, thank you.

Operator

Your next question comes from Jeff Sprague of Vertical Research Partners.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Good morning, everyone.

Beth A. Wozniak -- Chief Executive Officer

Good morning.

Sara Zawoyski -- Chief Financial Officer

Good morning.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Good morning. Just a couple from me. I'm sorry, I missed the first 10 or 15 minutes if you covered any of this. But first on EFS, I wonder if you could give us a little bit of color on kind of the price versus volume dynamics. I think all your growth year-to-date has probably been price and just wonder how you see that kind of evolving into the fourth quarter and moving forward?

Beth A. Wozniak -- Chief Executive Officer

Yes, one of the is -- as we look at Q3, we saw price and volumes. So, if you recall, we had been struggling and had spoken about that earlier in the year with our product availability. So there was a lot of focus in terms of just leadership changes, capacity expansion, putting some new capital in our plans, and so this quarter we realized volume and price, and we expect that to continue as we go into fourth quarter.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

So was that what a point or so of volume and a couple on price? Is that --

Sara Zawoyski -- Chief Financial Officer

That's correct, that's correct. Few points on price, one point on volume.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Okay. And then just back to Thermal and actually, the prior question on commercial you've answered primarily around the EFS, I understand why but a little bit of color on what you're seeing on commercial's thermal, it sounds like it was OK in the quarter, but obviously that's a pretty high margin business and there is definitely some mixed signals out there. Do you have project visibility into the Q4 and the early part of next year in that business?

Beth A. Wozniak -- Chief Executive Officer

Well, I can say as we look into Q4, we expect our Thermal commercial business to be positive and we've been building our pipeline and funnel management, we've been improving on that. And we do expect Thermal commercial to be positive in Q4.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Okay. And Eldon basically no impact on 2019. But what's your early thought on kind of accretions, integration program, etc looking into 2020?

Sara Zawoyski -- Chief Financial Officer

Yeah, we have provided in our prepared remarks that we would expect preliminarily a $0.03 benefit from the Eldon acquisition that really includes some of the early sourcing synergies but also includes some of the technology investments that we would expect as part of the integration, as well as some carryover higher financing costs as well.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Thanks. I'll leave it there. Thank you.

Operator

Your next question comes from Deane Dray of RBC Capital Markets.

Deane Dray -- RBC Capital Markets -- Analyst

Thank you. Good morning everyone. Want to add my welcome and welcome back to Sara and best of luck.

Sara Zawoyski -- Chief Financial Officer

Thanks, Deane.

Deane Dray -- RBC Capital Markets -- Analyst

Hey, I don't know if this -- if you addressed this explicitly in Julian's question, but just, is there anything unique in terms of the cadence of the months in the quarter or was that organic revenue weeks evenly throughout?

Beth A. Wozniak -- Chief Executive Officer

Well, when we look at the quarter, I would say that we modestly saw it improve in September, but it's hard, you know what, there is just different dynamics in it, and it can vary from one distribute -- one channel partner to another. So I want to say generally consistent, a little improvement in September, but hard to call it that there is a trend, is that -- is that's really the root of the question.

Deane Dray -- RBC Capital Markets -- Analyst

It is. And then any insight or color on what you're seeing in October so far?

Beth A. Wozniak -- Chief Executive Officer

I'd say, I think what we see in October is consistent with what we saw in Q3.

Deane Dray -- RBC Capital Markets -- Analyst

Okay, good. And then on Enclosures just a specific data center vertical, give us an update there. There was an interesting article in the journal today talking about how the hyper-scale buyers are back and back into growth mode. Wondering if you're seeing any of that within your data center business, both power and cooling?

Beth A. Wozniak -- Chief Executive Officer

Well all year we've -- and year-to-date we are up almost high teens 20% in our data center initiatives and we expect that to continue. So with that news I think that just is a positive for us as we go into 2020.

Deane Dray -- RBC Capital Markets -- Analyst

Got it. Just last one for me, and when you think about how nVent would respond in a slow down and appreciate hearing the commentary about the decrementals. Are there levers that you can pull in terms of pulling back on some of these growth investments, I'd say in digital? Is there anything discretionary in terms of spending, other than just obviously corporate costs and so forth, but anything on the the growth investments that you would be able to throttle back?

Beth A. Wozniak -- Chief Executive Officer

Deane, I think we always have that ability, right to look at -- our focus is on what investments are going to give us the best return, right? That's how we start and so I look at all of that and it's always discretionary. You can always pullback on that, if we had a severe recession. And so that's one of the things that we manage. Now, our goal is to look at how do we optimize the organization, how do we manage that variable costs, because we think it's important for our long-term value creation that we make some of those investments, but we do have discretion in terms of timing and in terms of how we layer those in.

Deane Dray -- RBC Capital Markets -- Analyst

Thank you.

Beth A. Wozniak -- Chief Executive Officer

Thank you.

Operator

Next question comes from Robert Barry of Buckingham Research.

Unidentified Participant

[Indecipherable] calling for Rob. Good morning.

Beth A. Wozniak -- Chief Executive Officer

Good morning.

Unidentified Participant

When do commodity costs start to be a net tailwind for the company?

Beth A. Wozniak -- Chief Executive Officer

Your question is, when do you commodity cost stop being a headwind for the company?

Unidentified Participant

No, a tailwind. Sorry.

Beth A. Wozniak -- Chief Executive Officer

A tailwind?

Unidentified Participant

Yeah.

Beth A. Wozniak -- Chief Executive Officer

Yeah, I would say so overall, we're starting to see that material inflation even in the back half, and we would expect that continue to be the case into 2020. Yeah, I think there are some things to keep in mind is that we continue to see some general inflation out there, whether it be on the logistics side a little bit of tariffs, but overall, we would expect that to really taper from what we're seeing for the full year in 2019.

Unidentified Participant

Thank you. And what is the margin profile of the 3Q orders in Thermal and how are the backlog margins in Thermal versus --

Beth A. Wozniak -- Chief Executive Officer

So I want to make -- your line is a little hard to hear. But I think the first part of your question. And maybe I'll ask you the second part was, what do we see is the margins for Thermal with those projects. And let me answer it this way. And I think we've clarified this is that projects tend to be at a lower margin than just our commercial business and our MRO business but you know that blended margin rate, we expect our Thermal business to always operate in that mid, mid-20% range.

Unidentified Participant

Thank you.

Operator

Your next question comes from Joe Ritchie of Goldman Sachs.

Joe Ritchie -- Goldman Sachs -- Analyst

Thanks, good morning. Welcome Sara.

Sara Zawoyski -- Chief Financial Officer

Thanks, Joe.

Joe Ritchie -- Goldman Sachs -- Analyst

So maybe just kind of touching on this, this price productivity discussion. So I guess Beth when I kind of think through the next few quarters base metals are definitely right now seemingly coming down. And I'm thinking about whether across your portfolio, you're going to be able to maintain price in a deflationary environment. So, any thoughts around how that spread changes over the next few quarters?

Beth A. Wozniak -- Chief Executive Officer

Well, if we look at our price realization this year, we've been around 2%. And I think as we go into next year, our goal is always to maintain about a point of price and as we, some of our businesses, our EFS business has always been very successful there because of that value proposition that we have of coming up with new products and labor savings. And I think for Enclosures, that's a business where we think that we can maintain that well, not to the same extent as EFS, but we look for all businesses to get about a point of price.

Joe Ritchie -- Goldman Sachs -- Analyst

Okay, all right, good, that's good to hear. And then I guess maybe switching gears a little bit into Thermal and the announcement of that LNG project. Is there a way you can -- you can quantify how much revenue from that project is going to ship or you guys will earn next year?

Beth A. Wozniak -- Chief Executive Officer

I can't. We have some confidentiality obligations that at this point that I can't make any specific comments. But it will be a positive contributor in 2020.

Joe Ritchie -- Goldman Sachs -- Analyst

Okay, all right. And then maybe my last question just on EFS like it's nice to see the volume growth come back and we've, we've talked about some of the capacity constraints in that business over the last several quarters. And so I'd love to just get an update on where you stand in terms of from a capacity standpoint, automation standpoint? And then also just a commercial team getting back out there to be a little bit more aggressive in terms of driving volume growth.

Beth A. Wozniak -- Chief Executive Officer

Yeah, we started to see from -- earlier, while beginning of the year that are -- we look at our product availability and our ability to service our customers within stated lead times and that has improved all year. And I, and over the course of Q2 and Q3, we've maintained the levels that we wanted to be at. There were still some systems that we put in place, a warehouse management system that has allowed us to be more productive for Europe and then we have some new stamping equipment that we received in the summer and that's getting online through Q4, that's going to make us more operationally efficient.

So there's just a lot of actions, and it doesn't stop, right. We're going to continue to ensure that we can drive velocity and get faster responsiveness to our customers. And as a result of that, we believe that's why we've been able to achieve 3% growth every quarter this year. It's why we saw that we were able to take have one point of volume and I would -- we would expect to be -- continue to be able to do that.

Joe Ritchie -- Goldman Sachs -- Analyst

Got it. Thank you.

Beth A. Wozniak -- Chief Executive Officer

Thank you.

Operator

Your final question comes from Justin Bergner of G.Research.

Justin Bergner -- G.Research -- Analyst

Hello. Good morning, Beth. Good morning, Stacy, and nice morning, Sara.

Beth A. Wozniak -- Chief Executive Officer

Good morning.

Justin Bergner -- G.Research -- Analyst

Had a couple of quick clarifying questions. I also hopped on the call little bit late, so the recent tax headwind is being absorbed in the fourth quarter on an adjusted basis, not just on a GAAP basis in your guidance.

Sara Zawoyski -- Chief Financial Officer

That's correct.

Justin Bergner -- G.Research -- Analyst

Okay. And then secondly on the EFS volumes, how much of the improvement in the volume might have been due to an easier comp, I mean you're going from sort of negative 1% in the first half to plus 1% in the third quarter, is that all sort of sequential improvement? Or is some of that coming off of an easier comp?

Beth A. Wozniak -- Chief Executive Officer

Well, I would say that we look at it as -- when we look at all our internal measures, we've had sequential improvements whether that's just our ability to get volume whether that's our productivity, whether it's our product availability. So from a operational standpoint, our view is that business is continuing quarter-over-quarter to improve.

Justin Bergner -- G.Research -- Analyst

Okay, that's helpful. And then lastly, given sort of the macro deceleration that you and others have observed in the last quarter, how does that inform future bolt-on M&A after Eldon? Are you going to likely to wait a few quarters or could you do something sooner rather than later?

Beth A. Wozniak -- Chief Executive Officer

Well, I think our view is, when we look at acquisitions, just like Eldon, we're looking for -- we're looking for targets that extend our strategy. And for us, it's really looking at how can we -- what's the value creation there, does it accelerate our growth, which we believe Eldon does that the product portfolio and the position that it has to allow us to serve customers globally, really accelerates our strategy. So in our view, I think that there are opportunities out there that is again if it's the right value equation for us, the potential to do a deal in 2020 exist.

Justin Bergner -- G.Research -- Analyst

Okay, thank you.

Beth A. Wozniak -- Chief Executive Officer

Thank you.

Operator

There are no other questions in queue. I'd like to turn the call back to Beth for any closing remarks.

Beth A. Wozniak -- Chief Executive Officer

Well, thank you for joining us this morning and your interest in nVent. As we look to close out the year, we are proud of the actions our team has taken to protect return on sales, and drive our One nVent initiatives in a more challenging environment. We see a lot of good momentum with our strategy. When I'm out with customers, channel partners and our sales team, I'm hearing positive feedback that our One nVent initiatives are having an impact.

I'm even more excited about the growth opportunity with Eldon and the team is making good strides with our integration plan. I believe we are focused in the right areas to drive growth and expand return on sales, which can ultimately drive shareholder value. I thank you again for your support. And operator, you may now conclude the call.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

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

Beth A. Wozniak -- Chief Executive Officer

Sara Zawoyski -- Chief Financial Officer

Jeffrey Hammond -- KeyBanc Capital Markets -- Analyst

Julian Mitchell -- Barclays -- Analyst

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Deane Dray -- RBC Capital Markets -- Analyst

Unidentified Participant

Joe Ritchie -- Goldman Sachs -- Analyst

Justin Bergner -- G.Research -- Analyst

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