Mettler-Toledo International Q2 2023 Earnings Call Transcript

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Provided by AlphaStreet
July 27, 2023
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Operator

Good afternoon, and welcome to the Mettler-Toledo Second Quarter 2023 Earnings Conference Call. My name is Briana and I will be your conference operator today. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I will now turn the call over to Adam Uhlman, Head of Investor Relations. Please go ahead.

Adam Uhlman
Head of Investor Relations at Mettler-Toledo International

Thanks, Briana, and good evening everyone. Thanks for joining us. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer; and Shawn Vadala, our Chief Financial Officer. Let me cover some administrative matters. This call is being webcast and available for replay on our website at mt.com. A copy of the press release and the presentation that we'll refer to today is available on our website. This call will also include forward-looking statements within the meaning of the US Securities Act of 1933 and the US Securities Exchange Act of 1934. These statements involve risks, uncertainties, and other factors that may cause our actual results, financial condition, performance, and achievements to be materially different from those expressed or implied by any forward-looking statements.

For a discussion of these risks and uncertainties, please see our recent annual report on Form 10-K and quarterly and current reports filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statements except as required by law. On today's call, we may use non-GAAP financial measures, a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8-K and is available on our website. Let me now turn the call over to Patrick.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Thanks, Adam, and good evening everyone. We appreciate you joining our call today. Tonight we reported our second-quarter financial results, the details of which are outlined for you on page three of our presentation. Our sales growth in the second quarter included strong growth in our service business -- service business as well as solid performance across our industrial product categories which was offset in part by softer market conditions in Laboratory and China. Focused execution of our margin expansion and cost control initiatives resulted in good growth in adjusted EPS despite currency being much greater than-expected headwind this quarter.

As we look to the remainder of 2023, there is increased uncertainty in the global economy and our end market. In addition, market demand in China has deteriorated. While we have reduced our growth expectations for 2023 due to weaker market conditions, we remain confident in the factors we can control, including execution on our best in class sales and marketing programs and our margin expansion and cost saving initiatives. Our team remains very agile in adapting to changing market conditions and I am confident that our efforts will deliver solid results this year.

Let me now turn the call over to Shawn to cover the financial results and our guidance, and I will then come back with some additional commentary on the business and our outlook. Shawn?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Thanks, Patrick, and good evening everyone. Sales in the quarter were $982.1 million, which represented an increase in local currency of 2%. On a US dollar basis, sales were flat as currency reduced sales growth by 2%. On slide number four, we show sales growth by region. Local currency sales increased 4% in Asia, Rest of the World, 1% in the Americas, and were flat in Europe. Local currency sales increased 3% in China in the quarter.

On slide number five, we show sales growth by region for the first half of the year. Local currency sales grew 4% for the first six months, with 3% growth in both the Americas and Europe and 6% growth in Asia and Rest of the World. Local currency sales increased 6% in China on a year-to-date basis. On slide number six, we summarized local-currency sales growth by product area. For the quarter laboratory sales decreased 3% and industrial increased 6% with core Industrial up 6% and product inspection up 5%. Food Retail grew 17% in the quarter as we benefited from significant project activity.

The next slide shows local currency sales growth by product area for the first half. Laboratory sales increased 1% and Industrial increased 6%, including 6% growth across both core Industrial, mix and currency. R&D amounted to $47.2 million in the quarter, which is a 6% increase in local currency over the prior period, reflecting increased project activity. SG&A amounted to $228.6 million, a 6% decrease in local currency over the prior year and includes lower variable compensation and benefits from our cost savings initiatives. Adjusted operating profit amounted to $307.7 million in the quarter an 8% increase.

Currency reduced operating profit growth by approximately 4%. Adjusted operating margin was 31.3%, which represents an increase of 210 basis-points over the prior year. A couple of final comments on the P&L. Amortization amounted to $18 million in the quarter, interest expense was $19.3 million, and other income amounted to $1 million. Our effective tax rate was 19% in the quarter, above our previously guided range of 18.5% for the full year. This rate is before discrete items and adjusting for the timing of stock option exercises in the quarter. We now expect our tax rate to be 19% for the full year.

Fully diluted shares amounted to $22.1 million, which is approximately a 3% decline from the prior year. Adjusted EPS for the quarter was $10.19, a 9% increase over the prior year or a 13% increase excluding unfavorable foreign currency. On a reported basis in the quarter, EPS was $9.69 as compared to $9.29 in the prior year. Reported EPS in the quarter includes $0.23 of purchased intangible amortization and $0.29 of restructuring costs. We also had a $0.02 benefit from tax items. The next slide illustrates our year-to-date results. Local currency sales grew 4% for the six month period, adjusted operating income increased 9% or 14% excluding unfavorable foreign currency and our operating margin expanded 190 basis-points.

Adjusted EPS grew 9% on a year-to-date basis or 15% excluding unfavorable currency. That covers the P&L and let me comment on cash flow. In the quarter, adjusted free cash flow amounted to $260.5 million, up $52 million helped by favorable working capital. Year to date, cash flow per share grew 44%. DSO was 35 days while IPO was 3.7 times. Let me now turn to guidance. As we look to the remainder of the year, there is increased caution across our customer base such as pharma and biopharma, chemical companies, and food manufacturing. And there is also a greater uncertainty regarding the global economic conditions.

In particular, conditions in China have deteriorated sharply as there is growing uncertainty around the pace of economic growth and limited government stimulus. This is particularly true with our pharma and biopharma customers who are delaying investment decisions in China, but also in the Americas and Europe. In Europe, the outlook remains uncertain in light of the ongoing war in Ukraine and soft general economic growth. Global manufacturing PMIs have also continued to trend lower and have been below the 50 growth -- no-growth index level for many months. Now turning to our guidance. We expect local currency sales to be down 3% to 4% in the third quarter with a mid-single-digit decline in Laboratory. This reflects deteriorating conditions in China as mentioned earlier, with particularly soft demand from pharma and biopharma customers.

We also expect modest sales declines across our industrial businesses in the third quarter. We are implementing actions to reduce our cost in response to the softer sales environment and manage productivity while maintaining various growth investments that are important for the future. We estimate our operating margin will increase in the 70 to 100 basis point range for 2023 based upon our disciplined approach to margin expansion, productivity, and cost-savings initiatives. We expect third quarter adjusted EPS to be in the range of $9.55 to $9.85, representing a decline of 3% to 6%.

This includes a foreign exchange headwind of EPS of approximately 3%. Now turning to the full year 2023. Our local currency sales growth guide is now zero to 1% reflecting the factors mentioned earlier. This is down from our previous guidance of approximately 5% local currency sales growth. We now expect full year adjusted EPS to be in the range of $40.30 to $41.20, representing a growth rate of about 2% to 4% or approximately 5% to 7% excluding unfavorable foreign currency. This compares to our previous guidance of adjusted EPS in the range of $43.65 to $43.95. There are three factors to our revised adjusted earnings per share outlook.

First, the reduced local currency sales growth forecast for the year compared to our previous guidance, partially offset by our cost reduction efforts. Our reduced outlook largely reflects a lower laboratory sales forecast of a decline of low single digits, down from our previous mid single-digit outlook. Additionally, we now see pronounced weakness in our business in China, where we now expect our total business to decline mid single digits for the year compared to our prior forecast of high single digit growth.

Secondly, foreign exchange as mentioned earlier, is now expected to be a 3% to 4% headwind to EPS growth this year compared to 2% the last time we spoke, largely due to the weakening of the Chinese renminbi and the strengthening of the Swiss Franc versus the Euro. Relative to the impact on sales currency is expected to be a 1% headwind to sales growth for the full year and roughly neutral in the third-quarter. And third, we would now expect a higher tax rate of 19% in 2023 compared to our prior guidance of 18.5%.

Some final details and guidance, as you update your models. Total amortization including purchased intangible amortization is forecast to be $72 million. Purchased intangible amortization is excluded from adjusted EPS and is estimated at $26 million on a pretax basis, or $0.93 per share. Interest expense is forecast at $78 million for the year, we now expect free cash flow of approximately $850 million compared to our previous estimate of approximately $900 million and will also reduce our share repurchase program by a similar amount. That's it from my side and I'll now turn it back to Patrick.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Thanks, Shawn. Let me start with some comments on our operating businesses, starting with Lab. Where sales were softer than we expected for the quarter. While we continue to see robust demand from hot segments like Lithium-ion batteries, our pharma and biopharma customers have become increasingly cautious with their spending and have delayed investment decisions, particularly in China. As expected our Pipette sales were again weak in the second quarter as customers reduced inventories of tips and instrument sales declined.

Impact of lower Pipette sales was in line with our previous expectations and we continue to expect this headwind to ease in the second half of the year as comparisons become easier. As mentioned, we also see customers, especially in our key market segments such as pharma and biopharma delaying purchases. However, our pipeline and customer quoting activity has remained strong and we were pleased to see continued strong service growth across our Lab business in the second quarter. We hope for conditions to normalize soon, but we have not built this into our 2023 guidance.

Turning now to our Industrial business. We again saw strong demand for our automation solutions from our core Industrial portfolio this quarter. While we expect to continue to benefit from customer investments in automation and localization of supply chains globally, we are not immune to the increased uncertainty around the global economic outlook. Regarding Product Inspection it also had good performance this quarter, but our packaged food customers have also become more cautious about making investments in new equipment due to inflation and uncertain economic conditions and we would expect softer results for the remainder of the year.

Finally, food retail delivered strong growth this quarter due to robust project activity in the Americas. Our Food Retail sales can be lumpy and we would expect strong growth again in the third quarter. One final comment on the business. Service sales remained very strong overall and grew 13% in the quarter. We continue to be very pleased with the growth in this important and profitable part of our business. Now, let me make some additional comments by geography.

Sales in Europe were flat in the quarter, with growth in core industrial and product inspection, offset by declines in Laboratory Products. In the Americas, we saw good growth across our industrial and retail businesses, offset by declines in laboratory product offerings, especially pipettes. Finally, Asia and the Rest of the World had another quarter of good growth. China grew 3% with good growth in industrial, but sentiment particularly in Laboratory has become much more cautious as activity has slowed following the college reopening and there has been limited economic stimulus, as mentioned before.

As of today, we expect a significant decline in sales in China in the second half of the year, but our team in China will remain agile to capitalize on growth opportunities whatever [Phonetic] market conditions unfolds. Now, I would like to share with you some updated thoughts about our strategic priorities and how we are investing to drive growth over the long term. While market conditions have become increasingly challenged over the past year we have remained at very high level of incremental investment to support the long term growth of the organization and market share gains. The hallmark of culture is the agility and focused execution and our team continues to respond very well to unexpected changes in the environment to gain market share, expand profitability, make additional important growth investments for the future.

Starting with our sales and marketing programs we have developed increasingly sophisticated digital approaches with our Spinnaker program that more efficiently feeds our pipette -- our pipeline with new leads including high potential Top K alerts with a special focus on customers that we do not do business with today. [indecipherable] have been an important areas of investment and source of new customer leads as we look to increase potential customer interactions in a very efficient format.

You can directly show how our solutions address common customer pain points in very specific end use applications. We have had strong participation in our webinars, which positions us as plus subject matter experts in specific applications but also provides a good sales pipeline as customers seek unique solutions to challenging or new applications. This is particularly true in hot segments like Lithium-ion batteries, sustainable materials, and the semiconductor industry. Our data centric approach in nurturing and qualifying these leads allows our field sales team to prioritize their efforts on high potential business opportunities and increase our win rates.

We have also continued to invest very strongly in research and development over the past year to maintain and improve our technology leadership and support our growth potential. I am very excited about our pipeline of new and recently released products that enhance our customers productivity, but also ensure compliance with regulatory requirements. This has been a topic of increasing importance for our customers as of late and our innovative solutions like LabX, enhanced productivity through workflow automation while ensuring full data integrity and traceability across customer entire workflows.

Earlier this year, we launched a new thermal analysis instrument that allows customers to increase sample analysis throughput to new automation and software features. This is especially important in hot segments like [indecipherable] and the battery segment. Additionally, our Process Analytics business recently released a new conductivity census that is unmatched in the industry for measuring ultrapure water in the microelectronics industry helping increasing yields, for the semiconductor customers, while reducing the amount of very expensive ultrapure water required for their operations.

Lastly, our industrial business had great success with our new line of hygienic scales that help customers clean the scales up to 40% faster, but also help eliminate contamination risk in regulated environments like food and pharma. While individual new product launches are not material on their own given the diversity of our portfolio they provide a very important compounding element to our growth algorithm, expanding our technology leadership, enhancing our value propositions, and helping drive market share gains.

Going forward, we have a very exciting pipeline of innovative products that we plan to launch over the coming year that will further extend our leadership position. Turning now to our margin our pricing and SternDrive initiatives have been very effective in supporting our margin expansion this year. As a reminder, SternDrive is focused on improving productivity and driving operational excellence across our manufacturing and back-office operations. With our team executing several 100 projects of reduce material cost and improve productivity. We have excellent opportunities ahead of us with advanced data-driven approaches around value engineering, smart manufacturing, and common platform architectures that we expect to launch in the near future -- in the near future.

I hope this provides some context to our updated guidance for the year, but also shows the confidence we have in our ability to continue to execute on our long-term growth initiatives, expand our margins, and to deliver solid earnings growth this year and beyond. That concludes -- that is the conclusion to our prepared remarks. Operator, I'd like to open the line now for questions.

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Operator

[Operator Instructions] Your first question comes from Dan Arias with Stifel. Your line is open.

Dan Arias
Analyst at Stifel Nicolaus

Afternoon guys. Thanks for the question, Patrick or Shawn, maybe just to start on China growth there was actually a couple of points above US and Europe in the quarter is the deterioration that you're pointing to for the second half, showing up in the order book here in early 3Q or is it more just sort of reading the writing on the wall when it comes to the big-picture direction and things were headed there.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, hey Dan, this is Shawn. Maybe I'll start and I'll let Patrick add some color. But basically, as we are kind of largely related to how we're exiting the quarter, but probably even more importantly, how we were starting the third quarter and as you know, we don't typically carry a lot of backlog in our business, but certainly as we kind of start the third quarter, we started to really see a significant deterioration in conditions that we also started to see towards the end of Q2 and as kind of we mentioned before, it's largely in the area of lab. Our lab forecast for China is down very significantly in the third quarter. We are kind of like looking at like literally something that could be in excess of a 20% decrease.

Now, of course, as you know, we've had some extremely strong growth over the last couple of years, if you kind of look out, we grew 20% last year in Lab in China and almost 40% in Q3 in the year before that, but we're also seeing a little bit of slowdown in industrial as well and so overall, we're just kind of seeing a lot of hesitancy in terms of customers placing orders, not sure how much it's related to a lack of clarity in terms of like stimulus in the country. I mean, there is some -- some very recent talk of additional stimulus but that's something that we have not built into our guidance for Q3 or for the rest of the year and kind of just sitting here looking at this very sudden decrease and as we've said many times in the past things in China can change very quickly.

We feel like we're absorbing -- observing something that's a very negative quick pivot going in the wrong direction and with the fact that it's kind of just starting to happen. So significantly we don't feel like we're in a position to necessarily try to build anything in necessarily for the fourth quarter at this time. So we're kind of building in also a negative outlook for Q4.

Dan Arias
Analyst at Stifel Nicolaus

Okay, okay, just to finish that thought. Did you give a forecast for the year for China. If you did I missed it.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, so down -- down mid single digits for the full year and then for Q3, down mid-teens, and then so if you kind of step back and you look at that full year guidance were down mid single digits I mean that's a very significant difference than what we're looking at last quarter when we provided guidance. We we're looking at high single-digit for the full year and if you just kind of like [Phonetic] do the quick math on that, that's kind of I think more than half of our decrease and our guidance is related specifically to China.

Dan Arias
Analyst at Stifel Nicolaus

Yeah, okay, okay and then just maybe just moving to Lab and the destocking activity that you have going on in the pipette business, how much of what you're looking at, are you attributing to that, does it feel like that's tracking relative to your expectations last quarter. I mean, do you still think you can kind of normalize in the second half of the year or is the better way to think about it just that it takes the remainder of the year to sort of [technical issue].

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, that one is playing out pretty similar to what we expected. It was -- it was about a 2.5% headwind in Q1. I think we're saying that we expected something to be about a 2% headwind in the second-quarter. That's exactly what it was. So our 2% growth would have stayed in other words, our 2% growth would have been 4% if it wasn't for the decrease in pipettes and then our Lab business would have been plus 1% growth instead of a minus 3% decline if it wasn't for the decrease in pipettes. So that's playing out very similar to what we thought. For the second half of the year we're not expecting much of a headwind. Maybe a very little in Q3. I mean, pipettes could still be down low to mid single digit especially and China is going to be down significantly because of what they're lapping with testing, but I'd say overall is playing out pretty similar to what we thought it, how we thought it would.

Dan Arias
Analyst at Stifel Nicolaus

Got it, okay. Thanks, Shawn.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes, thanks, Dan.

Operator

Your next question comes from Jack Meehan with Nephron Research. Your line is open.

Jack Meehan
Analyst at Nephron Research

Thank you. Good afternoon. I had one more follow up on China. I was just curious, like what feedback you've heard from the region about what might have driven this kind of rapid deterioration, in you sense this is just demand related or is there any sense maybe there has been an uptick in local competition at all?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Yeah, Jack. Hello, this is Patrick speaking. Let me take this and since Shawn already commented first part of the question about China. Look, the change is I think mainly driven really by the lack of stimulus when after COVID -- after COVID reopening beginning of the year, there was really strong momentum in China, a lot of expectation on growth and the government would drive with additional stimulus. That really didn't happen and I think it also now led to the fact that a lot of customers really have become much more reluctant and waiting for the government to make a decision about the stimulus. So they are clear of how much they can spend and where they can spend the money.

We have not seen any significant change in competition locally in China [Indecipherable] the team is really confident in our product portfolio, we have a very experienced sales team and a great product portfolio. It helps us to compete efficiently in China. So it's really about the missing momentum and then I would say the missing confidence in the economy that really leads to the fact that a lot of customers, holding back investments and waiting for certainty about what's to come, and that's the major slowdown that we are facing right now and [technical issue] the fast drop-off that we have seen. We also didn't expect, sales team definitely didn't expect been going into Q2, but towards the end of 2Q that really became a big momentum and now in Q3 we don't see that changing and that's why we also [Indecipherable] that Shawn mentioned. We China minus double-digit in the third quarter and we don't really count on that improving in Q4 as well.

Jack Meehan
Analyst at Nephron Research

Got it. And then just in terms of some of the actions that you're taking to mitigate this pressure, is it possible to quantify just the magnitude of the cost-savings that are going to hit in the second half of the year and just where that's going to show up kind of across the income statement.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, sure so maybe the best way to look at it, Jack, is that we're kind of looking at our overall cost structure to be flattish for the full year. So if you kind of like -- think about that in terms of the second half of the year probably down low single digit in the second-half of the year and if we try to think about that, how it looks on the P&L, SG&A will be -- will be lower than the other lines. Of course, part of our costs are also above gross profit, which you don't necessarily have broken out separately, but I think as we look at the -- at our program, we are focused on productivity and other discretionary spending, but I think it's also important to emphasize too. We're still continuing very much to grow and invest -- invest in the business for growth.

I mean if you look at our R&D as an example, it's still up 7% year-to-date. We still expect to see growth in R&D for the second half of the year, but then kind of just stepping back from everything too I think we feel pretty like it's the right balance where we can still provide really good operating margin expansion on a full year basis in the 70 to 100 basis point kind of a range, and that's despite some unfavorable currency.

Jack Meehan
Analyst at Nephron Research

Great, thank you.

Operator

Your next question comes from Derik De Bruin with Bank of America. Your line is open.

Derik De Bruin
Analyst at Bank of America

Hey, good afternoon. Thanks for taking my question, so a couple of ones. So, I was surprised to hear you know your pharma biotech comments on things being down so much and the reason why I say that is I mean, we certainly have heard that purchases over $100,000, you're getting held up. So your items are often well below that. What's going on there? I mean, is it just a complete freeze or are you just getting a lot of pushback on pricing to play out the pricing question? What are your expectations now for the price in your guide?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Yeah, I'll start with it, Derik, and then I'll let Shawn chime in as well. Look, we're not seeing a complete freeze. It's not like total business is frozen for us. Of course, we see a decline and as we said, we see delays in orders. It's not -- and you're right I mean our products are lower capex or below capex spending. But that said, we see a slowdown in orders in pharma, biopharma and that's pretty broad-based, but it's not a complete going off the cliff, so to speak. But a significant decline that we're seeing and slowdown that we're seeing. And for us, of course, the question is as many others ask is how long will this take and why is that happening?

We want to hear for our sales team is well, we have a lot of quoting activity actually what we're seeing, but I'm happy -- really happy to see is that we have a strong sales team engagement. We have -- our sales team is out there with customers, talking about their plans. We get good leads. Leads are actually year-to-date. We see good momentum on the lead generation side, but they are not turning into orders as quickly as they used to do. Now, how long this will continue, will definitely also depend on when more certainty is coming back to the economy. I mean, that's what we're hearing from our sales teams.

I'm pleased with the coding activity. I'm monitoring that on a daily basis. I see how our sales team is interacting with customers and how often they're out with customers, discussing projects and investments, but the time to turn these opportunities into orders have definitely increased and that's part of the slowdown we're seeing in orders.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

In terms of the other part of your question, Derik, pricing actually was very good in the quarter. For the total group it was actually up 6%, which was a little bit better than what we had expected and as we kind of like look at the second half of the year, that's for the total company. And as we kind of look for the second half of the year, it's probably going to be a little bit better than what we were initially expecting as well too, probably up by about 4%, which would kind of put us in the 5% kind of a range on a full-year basis and what we've kind of continued to observe is that we feel like our value proposition is really resonated and increased over the last few years.

As the market like -- looks for opportunities in terms of productivity and digitalization, it really plays to the strength of our portfolio and I think our teams do an excellent job in terms of articulating that value proposition to the customer base and as you kind of mentioned, our imply with your question, our price points also tend to be pretty low as you know too and so that value proposition really resonates and it's easy to justify from a customer perspective. So we feel good about the pricing program, and how we think about it for the second half of the year.

Derik De Bruin
Analyst at Bank of America

Got it. Just as a follow-up. You're taking guidance down by about 4.5%, it looks like about 2.5% of that is China, so can you quantify what else is that and just like what's pharma, what's industrial, what's your just not having good feelings about that you just want to be conservative on?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

When you say -- when you ask that question, you're asking to break down the China piece or the rest of it? Okay.

Derik De Bruin
Analyst at Bank of America

The rest of the piece. Yeah, we know the China piece, it's the rest of the piece that I just want. What else is baked into that remainder -- remainder that's not the China cut?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, so, hey, I think we do see [technical issue] in the Americas as well as Europe. So for the Americas, we're now looking at more flattish growth for the full year. Our prior guide was like more like low-to-mid-single-digit. What we're kind of seeing there is, just -- it's more concern with our core end-markets. One of the things that's happening at the moment is we have -- our three largest core end-markets are under pressure, pharma, biopharma, food manufacturing, and chemical, and in the US food manufacturing is another -- we talked a little bit about pharma, but food manufacturing is also an area, especially in our product inspection business, where we see -- it came off a good quarter, but we also see some pressure for the second half of the year as these customers are under a lot of pressure.

If you look at Europe, we're probably modestly a little bit lower than what we were before, at least at the lower end of what we're guiding. We're thinking more like low single digit for the full year. Previously, we were in the low-to-mid-single-digit. The one thing -- we've actually been very impressed at how well the European numbers have held up this year, but we also acknowledge that PMIs have been down very low there and they've decreased recently and it's been for a long period, and of course, there is a lot of uncertainty in the region and of course our end-markets there are also under pressure. We think about Europe, like a good example is, in addition -- again to give you an example, other than pharma, biopharma, is the chemical industries under a lot of pressure.

I mean if you just look at the number of chemical companies that have reduced their forecast for the year, just recently, double-digits, there is a lot of concern there in terms of that customer base, particularly when it comes to Europe. So that maybe gives you more of a geographic overview. If we kind of break it down by business area, maybe I'll just kind of do the walk-through, so everybody kind of has that too, and of course, there is some overlap here because China is influencing some of these numbers, but I'm just going to kind of go through it. So we have -- we're looking at Lab down mid-single-digit in the third quarter and down low-single-digit for the full-year.

We're looking at core industrial down low-single-digit and up low-single-digit for the full-year, and similarly products inspection down low-single-digit for Q3, up low-single-digit for the full-year. And then our retail business is actually doing quite well, very good project activity. We continue to see that, expect that in the second half. We expect that to be up high-teens in the quarter for Q3 and also for the full-year.

Derik De Bruin
Analyst at Bank of America

Great. Thanks, Shawn. That was really detailed. I appreciate it.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, thanks, Derik.

Operator

Your next question comes from Patrick Donnelly with Citigroup. Your line is open.

Patrick Donnelly
Analyst at Smith Barney Citigroup

Hey, guys, thanks for taking the questions. Patrick, I guess can you kind of look at these various headwinds, you've called out and you kind of assessed, and you talked a little bit, I think in the prior question about you're trying to figure out what could linger into '24. I guess when you kind of step back, which do you see being more temporary or transitory versus issues where you look and you are just kind of doing these cost controls that you look out and say, maybe this could linger into '24. If you could just kind of crack [Phonetic] it up for us to try to help frame that view would be helpful.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Sure, absolutely. Look, I mean, of course, it's too early to make a forecast for 2024 and I will do this in our next earning call when we report our Q3 and look at Q4, but to say what is transitory right now, I mean I would say the easiest thing to capture for us is what we have seen on the pipette side, the destocking of pipettes, we anticipated, it's normalizing again the consumption of pipetter is probably to pre-COVID levels in the second half. We see that uptick happening slowly but steadily, that is normalizing. When it comes to the rest of the industry, it's of course, very hard to predict to say how is the economy continuing to evolve from here. How long will pharma and biopharma be under pressure and also will -- that the rest of the economy, the journals outlined [Phonetic] the chemical industry self-performed this economic downturn that we're seeing. I don't get elongated [Phonetic] time with PMIs on the pressure. It just leads us to note [Phonetic] right now, we look at the second half and say, this is probably a good forecast for us given the information we have.

It's of course a significant downturn, but when it will turn, will it be early 2024 or mid-2024, I think that's too early to call -- to make a call there, frankly. I mean, we have pockets where we see really still very good momentum, and if we count on that, it continued to grow. If we take, what we call the hot segments, like the battery segment, like [indecipherable] performing extremely well, driving good growth almost across all of our businesses with emphasize on some of the Lab business is performing well, we still see pockets, good momentum in Industrial Automation and we also see increasing interest as I highlighted in the beginning of the earnings call.

Also in the semiconductor business, very successful with some of our [indecipherable] business, when it comes to ultrapure water, et cetera, so there are pockets of still good growth that we capture and really going hard after this. We have the right tools to see these pockets of growth and drive our sales store, [Indecipherable] direction, but how long the broader economy will be on the pressure, I think [technical issue] and really tell you how long it will take. We're looking at the second half and forecast of second half and then once we get through Q4, we will give you a whole guidance on 2024, but right now it's too early to be honest.

Patrick Donnelly
Analyst at Smith Barney Citigroup

Yeah, understood. And then Shawn, I guess, maybe a follow-up on that, just around the margins, you touched on a little bit, but I guess when you think about the pricing lever, that seems like it's still quite strong for you guys in terms of the boost for margins. You know again some of this cost-reduction activity, can you just talk about the moving pieces as we work our way through the second half? And then, I guess how nimble you want to be on the cost side going into next year and then pricing, I assume, is still going to be positive as we move forward. You guys always protect the margins pretty well, so just -- just curious how you think about it -- the moving pieces there would be helpful.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, sure, so. I mean, hey, I think we still have a really great margin story. I mean I think, as I kind of mentioned before, for the full year, we're still expecting to deliver an operating margin expansion in the 70 basis point to 100 basis point range. Frankly, we wouldn't be surprised if we end up closer to the higher end of that range and that's despite some unfavorable currency. And that probably puts us -- the operating margin by quarter might be down a little bit in Q3, might be up a little bit in Q4, but overall we feel very good about the ability to continue to expand for the full-year and then I think as we kind of go into next year, like Patrick said, it's a little bit early to look at that. Of course, we'll probably have some savings from some of the actions that we did this year.

There'll be some stuff that goes away as well. And as we think about pricing, we -- yeah, we still feel great about our value propositions, but it will also depend a little bit on the inflationary environment, and will -- as you know, will provide more thoughts and guidance and insights on all that on our next call in November.

Patrick Donnelly
Analyst at Smith Barney Citigroup

Okay, that's helpful. Thank you, guys.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes, thanks.

Operator

Your next question comes from Vijay Kumar with Evercore. Your line is open. Hey, guys, thanks for taking my question. I guess my first one on the third-quarter guidance, low-single-digit declines, just a 2% in Q2, that's 500 basis points change, I think about 300 basis points, the 500 is coming from China, are you seeing China down mid-teens in July and if the assumption, it's down mid-teens for the rest of the quarter, where is the remaining 200 basis points coming from perhaps from an end market perspective.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, hey, maybe I'll take that one, Vijay. So, I mean, we don't typically -- as you know, we typically don't go into too much detail on individual months, but absolutely, we -- I kind of alluded to it before, we -- what we experience and as we've seen July kind of start certainly heavily influenced how we're looking at the quarter and the rest of the year for China, and so yeah, very much we're looking at down mid-teens, and then especially weighted in our Laboratory business. If you look at our Laboratory business, as I mentioned before, we're lapping some pretty big comparisons there, but we're expecting the Lab business to be down even more significantly there.

If we kind of like look at the rest of the portfolio, it's kind of similar to how I answered to Derik, I'd say on the full-year results. I mean we're looking at low-single-digit growth in the Americas. There it's very much the same topic about core end-markets. There is this delay in pharma, biopharma that Patrick talked about. Of course, we also within that we talked about pipettes, but of course, we also have a smaller exposure on -- within single-use bioprocessing that we've talked about last quarter, like with PendoTECH as well. And then, similar to the prior answer, I mean, we're also looking at a decline in product inspection in the Americas in the third quarter as well with the pressure that we're seeing from food manufacturing companies.

And then Europe, we're still expecting Europe to be more low-single-digit in the third quarter, but acknowledging that we have different uncertainties that we talked about before. If we kind of like look at the business in terms of overall by business to the third quarter, we're looking at -- well, actually I already mentioned it, so I don't need to mention it again, but in terms of the different areas, I mean Lab being down more so than the other areas in terms of the guidance for Q3.

Vijay Kumar
Analyst at Evercore ISI

Understood. And then one maybe, on the stimulus that you mentioned. If -- what specifically have you heard about from links about stimulus and if there is a stimulus, how long does it take for it to flow through to customers placing orders in purchasing and on the cost actions here, what is the pacing of cost actions, what kind of benefits are you expecting? It looks like, EPS is down more than revenue maybe perhaps not much beneficial in 3Q, but what the magnitude of the cost actions -- the benefit from cost actions to take in Q4?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, hey, so a lot there. So the first thing you were talking about was the stimulus, so in terms of the stimulus, like we don't have any probably more insights than anybody else. I mean, there were some comments coming out-of-the government I think in the last week with an intention to stimulate. I don't think any specific details have been provided, so it's hard to kind of comment on that at this point in time and so I think we will have to see how that plays out and how long that takes to really -- how directly that affects our end-markets and how long it takes to get into the economy, but like I said, right now we haven't built anything in for our forecast for the second half of the year, so we'll kind of see how it plays out.

In terms of EPS, I mean, we do have unfavorable EPS in, I mean -- I'm sorry, foreign currency, we do have unfavorable foreign currency that's been hurting us throughout this year and as we kind of mentioned in the opening remarks, it's also kind of impacted us much more significantly than our last time we provided guidance. So, I think we were initially looking at a 2% headwind last quarter, and now we're looking at something more in the 3% to 4% range and I think if we go back to our original guidance for the year, I don't think we were expecting very much headwind at all from foreign currency, so that's certainly something that's affecting us so. I think it's important to kind of also consider that as you kind of look at the EPS growth for the second half of the year.

So if you kind of like look at Q3, if you exclude foreign currency, will be anywhere from at the high-end of our guidance, flattish, and to the lower-end of our guidance, minus 3%. And then for the full-year, we would be growing 5% to 7% in a year where sales are much more modest than the 0% to 1%. So we feel like -- we still feel good about that. In terms of the ability to still expand margins during the course of this year and then at the same time being able to continue to invest in the business, which we've talked about, which is important to us to protect the medium and longer-term as well too. But otherwise, no other specific comments I would say in terms of details.

Vijay Kumar
Analyst at Evercore ISI

Understood. Thanks, guys.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes, thanks. Your next question comes from Matt Sykes with Goldman Sachs. Your line is open.

Matt Sykes
Analyst at The Goldman Sachs Group

Hi, good afternoon, thanks for taking my questions. Maybe my first one. Patrick, you've spent a lot of time and focus on the services portion of the business and you called out some pretty strong growth this quarter for that -- for that segment. Could you maybe talk about what your assumptions are for the full-year for services growth? And just maybe help us understand a little better about the customer dynamic and caution as it relates to services, assuming it's a little more defensive, just maybe talk about how you expect that business to perform in this type of environment. Yeah, very good question. Hey, I couldn't be more pleased with the performance of our service business, as you probably recall, we grew 14% in the first quarter. We grew 13% now in the second quarter, so outstanding performance of the service team. Actually, that's also a business, just a reminder to everybody on the call is where we still also hiring people, so we're adding more service technicians to our team because we see good business momentum and we see good demand for our customers. We use the opportunity over the last year or two to also extend our service offering, our portfolio, we increase the emphasis in service sales at the point-of-sales, making sure that we sell more service contracts. We restructured the coding process. Services is obviously included in the coding. We train the service team more efficiently on selling -- the sales team more on selling services, so I think if at all really now pays out in the growth we're seeing in services. And we're looking at the full-year also more strong outlook here. I thin,k for the full year, we're forecasting high-single digits, at least in terms of service growth. Shawn, am I correct on this one?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah, might even -- high-single digit for Q3; and yeah, probably it might even probably might even be high-single digit, might even be low-double digit, maybe close to 10%, but yeah, high-single to 10%, yeah.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Good. And again, that's driven by the ongoing momentum. And we see -- at the moment, we see really stronger demand than in the product category, and we don't see a lot of pushback on pricing. And so, I would really see continue to see that momentum continue. Of course, we're also having tougher comparisons as we move into the next couple of quarters as Q3 and Q4, last year also had been already quite strong on service growth..

But the underlying momentum is strong. We have an extremely strong service team, and we continue to invest in services that we will continue to build out that team and make sure that we can serve our customers in the best possible way and deliver an outstanding customer experience. That is really what is differentiating us as Mettler-Toledo from many of our competitors that compete directly with us in the field is the strength of our service organization.

Matt Sykes
Analyst at The Goldman Sachs Group

Great. And then, just thinking of some other potential offsets just given some of the challenges in the lab business. You talked about sustainable materials, batteries and semis. Can you maybe help us understand sort of the sizing of that business and what kind of you're seeing in terms of growth sort of globally, but maybe also by region. Just so, we can kind of better understand what some of the offsets could be over the course of the year?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Yes. I'll let Shawn break it down in terms of the size. But I mean, this is what we call the hot segments, right? And it's really -- at the moment, strongly driven by lithium-ion battery segments, we see strong -- a really good momentum building up in the semiconductor business with the reshoring and homeshoring of some of the semiconductor plants that is gaining momentum in sustainable materials that are gaining importance.

And that is, again, we call these pockets of growth in itself, they are, of course, not super significant in terms of size, but the growth momentum is important for us to compensate and offset some of the weaknesses that we see in other areas.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. In terms of the size, Matt, I don't have a specific number for you, but I mean these are still relatively smaller end markets for us in the kind of low-single digit kind of a range. But from a growth perspective, they certainly help a lot in terms of growth given the higher growth relative to the rest of the portfolio and the longer-term opportunities here.

And what's kind of neat about these hot segments is that, we can provide solutions very end to end. A lot of them, it starts in R&D. It goes all the way through development and to manufacturing. And so, we benefit in some cases, more so in our analytical instrument business, but we also see benefits through a large portion of our portfolio.

Matt Sykes
Analyst at The Goldman Sachs Group

Great. Thank you.

Operator

Your next question comes from Catherine Schulte with Baird. Your line is open.

Catherine Schulte
Analyst at Robert W. Baird & Company

Hey guys. Thanks for the questions. I guess, first in China, is the weakness concentrated in any product categories within your lab business? Or is it more broad-based? And are you seeing the consumables and services side of the business holding up better there?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Look, Catherine, I'd take this, it's really broad-based in the market segment. I can't point to any specific product categories. It's pretty broad-based and again focused on pharma and biopharma. But as for the single product category, I would point you that there is more effect.

Catherine Schulte
Analyst at Robert W. Baird & Company

Okay, then. Maybe on the.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And specific to consumables, Catherine, consumables are actually down more so because of all the testing that was still going on in China with COVID last year.

Catherine Schulte
Analyst at Robert W. Baird & Company

Yeah. Okay. Got it. And maybe on the packaged food side, you've been talking about caution in that category for several quarters now. At what point do you start lapping some easier comps there? And is there anything to point to in partner [Phonetic] inflationary environment that when you might start seeing improvements there?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

I think we will not face any easier comparison, because we have performed pretty well last year in this business, and we are almost confident, but we are confident that we have taken market shares well.

Yeah. In the Americas, especially, we have been quite strong. And this is also why we see probably in the second half this year tougher comparison with a fair bit of a slowdown in growth. We had pointed more reluctance of investment in Europe in the beginning of the year, also end of last year. And we continue to see that going on. And Europe is just not the same investment environment right now in the packaged food industry. A lot of the customers are actually under pressure when it comes to their margins, so they're trying to push out their investments as well.

That said, we had -- just recently had a big trade show in Europe Interpack, and we have seen great interest in our product portfolio. We also launched a set of new products, also midrange products in the x-ray category and others. And that helps us, of course, to also really effectively compete in that segment and drive our future growth. We are actually quite sure that we're taking market share in the segment right now.

Although the growth is not outstanding, I think, we are outcompeting our competitors. And it's a business that we, again, invested in over the last two years in expanding the portfolio, especially pushing more into the midrange to compete there more effectively, but also now launching pretty soon some new higher-end solutions.

Catherine Schulte
Analyst at Robert W. Baird & Company

Great. Thank you.

Operator

Your next question comes from Josh Waldman with Cleveland Research..

Joshua Waldman
Analyst at Cleveland Research

Good evening. Thanks for taking my question. Maybe, Patrick, just to follow up on product inspection. I mean, it sounded like it held in the quarter, but seeing signs of softening from CPG, food and pharma seems like it's pulling back. Just curious what level of orders you've seen kind of entering the third quarter and maybe how the guide reflects those maybe softer end markets. It seems like the guide, I mean, only moved down modestly, if I'm correct.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Yes. That's right. The guidance is down modestly. Again, it's mainly in the U.S. where we see also tougher compares, but also the environment for the customers there is becoming a bit more difficult. And it looks like they are slowing down their investments. Shawn, anything else if we could say in terms of the guidance for PI?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

No, I mean, I think also, if we look at Q2, we actually did better than we expected. So maybe Q2 was better, but the second half is a little bit worse. And it's kind of like what Patrick says. If you just kind of like look at -- if we kind of just look at how -- what we're hearing from customers and from the organization, especially in the U.S. but also in Europe going into the quarter, we're just seeing a more negative situation than what we experienced in the second quarter.

Joshua Waldman
Analyst at Cleveland Research

Got it. And then I guess a follow-up or a question on process analytics. I wonder what you saw in Q2 from a demand perspective or growth perspective and then your assumptions on the second half. I mean, we've seen some of the Bioprod [Phonetic] peers, CDMO peers and chemical accounts talk on incremental softness. Is this something you're seeing show up in the business? Or do you think that business will hold in more resiliently?

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. I'll start and I'll let Patrick add some color -- additional color if he'd like. But in terms of process analytics, we had very, very modest growth in the quarter, but there were definitely different storylines kind of under the covers.

On one hand, we did have a very significant headwind in terms of bioprocessing specific more so to the single-use technologies and downstream bioprocessing. We also see softness in pharma and biopharma or more biopharma, I should say, coming off some very strong comparisons in previous years. But then kind of offsetting some of that is also have been good growth in some of these hot segments like semiconductors, it's an important segment for the process analytics business.

But nonetheless, we have a more modest expectation here for the second half as well, too, just given more pressure that we talked about in general with pharma and biopharma.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Yes. Good -- Shawn, if I might add to yours. Of course, we're seeing some headwind there in biopharma mainly. And you mentioned also the single-use sensor offering [Phonetic] that we have with PendoTECH for the end market segment. But on the other hand, on Ingold's reusable sensors, we are not having the same stocking dynamics that we have seen with PendoTECH, but that actually is still a good ongoing recurring business. And I also want to add here, I know we talk a lot about innovation, but we also launched last year a new unbreakable sensor that is now really a great success story for us in the dairy business, and we continue to launch it into new market segments. It really is differentiating us from our competitors. So I am very positive about the product portfolio and how it will help us to also gain market share there even in difficult market environments.

Joshua Waldman
Analyst at Cleveland Research

I appreciate the detail, guys.

Operator

Your next question comes from Rachel Vatnsdal with JP Morgan. Your line is open.

Rachel Vatnsdal
Analyst at JP Morgan Cazenove

Great. Thank you for taking the questions. So I want to follow up on some of those comments around pharma and biopharma customers. Can you just walk us through, are you seeing any difference in buying trends between your large pharma customers and some of those smaller biotechs. And then, can you detail us how are those conversations about decision-making on spending difference between the two? And then, as a follow-up just, can you remind us how small is your emerging biotech exposure?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

So overall, our small biotech exposure is really small. I mean, that's not the majority of our customer base. The major customer base for us in pharma and biopharma are larger customers. And to your second part of the question about the decision slowdown? I guess there's not a specific particular reason we could point to. We're just saying, what we're seeing is that delay in decision-making. What is the real root causes of that might be different for different businesses. But I think overall, pharma just has become more cautious with spending, and that affects us across the board with our product portfolio.

Rachel Vatnsdal
Analyst at JP Morgan Cazenove

Great. And then maybe just a follow-up here on pricing. You said that you'll take roughly around 5% pricing this year. You also had above the average pricing contribution last year as well. So how should we think about that pricing translating into 2024? Will you guys go back to your normalized range? Could it go below? What are really the expectations there? Thank you.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Hey Rachel, I mean, of course, it's early still to provide too many insights in terms of how we're thinking about 2024. But maybe what I would say is that we still feel very good about our value propositions. We still feel very good about our program. We continue to invest heavily in R&D to continue to enhance those value propositions. And depending on the inflationary environment, I would expect us to be probably more in a normalized situation kind of going into next year, but I think we'll kind of have to see how the inflationary environment plays out.

Operator

Your next question comes from Liza Garcia with UBS. Your line is open.

Elizabeth Garcia
Analyst at UBS Group

Good evening, guys. Thans so much for squeezing in. So I'll try and keep it brief. Just circling back since we're talking about China. I think you called out growth actually on the industrial side of the China business. And I know the focus has been on the biopharma and pharma piece, obviously, you detailed quite a bit there. Can we just talk about your expectations on the other businesses in China for the balance of the year and kind of what you're seeing there and how to think about that? And then, I'll have a follow-up really quickly.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. Okay. Thanks, Liza. Yes, so I'll take that one. So the growth in the second quarter, I mean, was more mid-single digit for industrial. So, we're pleased on that. As you know, we've been kind of lapping some big comparisons in that part of the business as well. As we kind of like look to the second half of the year, though, we're looking at the industrial business to be down probably mid-single digit. We are seeing some decline in that part of the business as well.

And I think it's important to remember, like some of these customers are also exposed to a lot of the same end market exposures that we're exposed to in laboratory as well, too. So when we say pharma and biopharma is down, it's also affecting our industrial business also. And so, maybe not down as much as what we're seeing pronounced in the lab business, but still down in the second half of the year and probably more flattish on a full year basis.

Elizabeth Garcia
Analyst at UBS Group

Great. And yeah, I mean you guys were talking about -- obviously, you mentioned SternDrive and that initiative. But I believe there's another wave of Spinnaker that supposed to be underway or kind of coming under that should be launched, I believe, right now. I guess kind of how to think about that and kind of the levers that you have. Spinnaker has obviously been great in terms of market share and how to think about what Mettler can deliver over the next couple of quarters with the next wave.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. So in terms of Spinnaker, we continue to innovate in Spinnaker -- Patrick, can you hear? We can continue to work.

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Can you repeat the question, something is wrong.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Okay. Your live though. You're live, yeah. So in terms of -- Liza, can you still hear me?

Elizabeth Garcia
Analyst at UBS Group

I hear you great.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Hey, I think Patrick just lost the ability to hear the question. So I'll just kind of answer it. So in terms of Spinnaker, we continue to innovate in terms of Spinnaker. And we are in the process of launching a new wave. We're going to share some of the details on that until we kind of roll it out a little bit further, but certainly -- there is something that we're just at the very beginning of doing and kind of very excited about and I think there's some really interesting opportunities for us. Kind of going forward to continue the journey that we have in Spinnaker.

Elizabeth Garcia
Analyst at UBS Group

Great. Thanks so much.

Operator

Your next question is from Tim Daley with Wells Fargo. Your line is open.

Timothy Daley
Analyst at Wells Fargo Securities

Hey. Thanks. So Shawn or Patrick whoever can answer here. But it's pretty clear the guide discounts, any year-end budget flush in pharma/biotech. But again, Patrick, given your experience, you got up to [Phonetic] Mettler from your prior lives across the life science industry. Or Shawn, yourself, given the historical experience you have at Mettler. Can you guys game theory for us, if you will, potential macros [Phonetic] or factors that would influence the outcome for a potential year-end budget flush if macro conditions stabilize or don't considerably fall off by the end of the year, and that's a potential outcome.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Hey, Tim, this is Shawn. I'll take that one. So hey, of course, we didn't -- it's always difficult to be able to judge exactly what his budget flush and quantify it from year-to-year, especially in our business. We did not build in anything specific for budget flush. And I think just like you said, just kind of implicitly, looking at our guidance, we have a much more cautious view in terms of pharma and biopharma as we kind of exit the year?

And if you could just kind of like look at how we're thinking about Q4 in general. It's not quite the same, but it's pretty similar to how we're thinking about the third quarter. So certainly, if pharma and biopharma had a more robust end-of-year spend, that certainly could be an upside to how we're looking at things.

Timothy Daley
Analyst at Wells Fargo Securities

All right. Got it. And then, just again, sorry to beat the dead horse here in China. But just now, given that is a pretty critical piece of the investment -- the long-term thesis for growth within lab, the standardization of Western facilities. Just curious, is there a pullback from Western companies because of geopolitical potential risk there? Has there been any change in impetus that whole standardization of one global facility format, which utilize the Mettler products within it? Or is that still -- is just temporary stuff playing on us?

Patrick Kaltenbach
Chief Executive Officer at Mettler-Toledo International

Thank you. I hope you can hear me. I mean, we just got to disconnected over here -- Okay. Well, I'll take that question. Look, with regard to multinational pulling out of China and what we're seeing here, right, as for now, I think we don't see a significant impact yet. But the way I want you to think about it is if multinationals pull out of China and do some reshoring, homeshoring, whether they go from China to India, whether they go back to Europe or to the U.S., we also see this, of course, moving forward as a potential opportunity for us to capture these investments as the investments are happening then, and we have definitely the right market-sensing tools and market-sensing solutions in place to capture these opportunities earlier, then guide our sales team and our -- to these companies as they are going -- if they are going to reinvest either in the U.S., in Europe or somewhere else if they're pulling businesses out of China.

But as of now, I would say, that this is not the major driver for the slowdown in China. That's not what is driving it for us. For us, it's really the overall sentiment, the lack of confidence in the market and the rate multiple [Phonetic] stimulus until the companies they really decide on how much budget they have and how much they can invest, moving forward.

Timothy Daley
Analyst at Wells Fargo Securities

Got it. Thank you. Appreciate it.

Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. Thanks

Operator

There are no further questions at this time. With that, we will end the conference call. [Operator Closing Remarks].

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