管理層發言
Hello, everyone. Thank you for joining us, and welcome to the Mettler-Toledo First Quarter 2026 Earnings Conference Call. I will now hand the conference over to Adam Uhlman, Head of Investor Relations. Please go ahead.
Thanks, Rebecca, and good morning, 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 is available for replay on our website at mt.com. A copy of the press release and the presentation that we will refer to on today's call is also available on our website. This call will include forward-looking statements within the meaning of the U.S. Securities Act of 1933 and the U.S. 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 will 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.
Thank you, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we reported our first quarter financial results, the details of which are outlined for you on Page 3 of our presentation. We are pleased with our first quarter results, and we delivered good performance in an increasingly uncertain market environment. Solid execution of our margin initiatives supported very good adjusted EPS growth. Our investments in innovation continue to provide tangible benefits and we are well positioned to capitalize on our customers' investments in automation, digitalization and onshoring in the future. While we recognize increased uncertainty in the macroeconomic environment, we remain confident in our agility and strong execution of our growth and margin expansion programs to achieve solid adjusted EPS growth this year. Let me now turn the call over to Shawn to cover the financial results and our guidance and then I will come back with some additional commentary on the business and our outlook. Shawn?
Thanks, Patrick, and good morning, everyone. Sales in the quarter were $947 million, which represented an increase in local currency of 3% or 1% excluding acquisitions, which contributed approximately 1.5% to growth. On a U.S. dollar reported basis, sales increased 7%. On Slide 4, we show sales growth by region. Local currency sales increased 2% in the Americas, 1% in Europe and 5% in Asia/Rest of World, including 4% growth in China. Excluding acquisitions, local currency sales were flat in the Americas and increased 3% in Asia/Rest of World. On Slide 5, we summarize local currency sales growth by product area. Local currency sales increased 1% in Laboratory, increased 5% in Industrial, including 1% growth in core industrial and 11% growth in product inspection. Food Retail grew 7% in the quarter. Excluding acquisitions and currency, Laboratory sales were flat, while Industrial increased 2%, including core industrial flat and product inspection up 6%. Lastly, service revenue grew 7% and 5% excluding acquisitions. Let me now move to the rest of the P&L, which is summarized on Slide 6. Gross margin was 58.7% in the quarter, a decrease of 80 basis points and was up 10 basis points, excluding unfavorable foreign currency and acquisitions. We continue to benefit from favorable price realization and supply chain optimization benefits that helped offset an incremental gross tariff headwind of 90 basis points. R&D amounted to $51 million in the quarter and was up 1% on a local currency basis over the prior period. SG&A amounted to $258 million, a 1% increase in local currency over the prior year and includes sales and marketing investments, offset by cost savings. Adjusted operating profit amounted to $246 million in the quarter, up 4% versus the prior year. Adjusted operating margin was 26%, a decrease of 80 basis points versus the prior year or up 40 basis points, excluding unfavorable currency. We estimate the gross impact of incremental tariffs reduced our operating profit by 4% and it was a 90 basis point headwind to our operating margin. Items below operating profit were $0.13 per share, better than our guidance and included benefits due to changes in interest rates and other income. Adjusted EPS for the quarter was $8.91, a 9% increase over the prior year. Incremental tariff costs were a gross headwind to EPS of 4%. On a reported basis in the quarter, EPS was $8.33 as compared to $7.81 in the prior year. Reported EPS in the quarter included $0.27 of purchased intangible amortization, $0.29 of restructuring costs and a $0.02 headwind related to the timing of stock option exercises. That covers the P&L, and let me now comment on adjusted free cash flow, which amounted to $120 million and was negatively impacted by the timing of tax payments, which were $58 million higher than the prior year. DSO was 35 days, while ITO was 4.2x. Let me now turn to our guidance for the second quarter and for the full year 2026. As you review our guidance, please keep in mind the following factors. First, while we have an immaterial exposure directly to the Middle East, the war has led to higher global energy costs and has increased uncertainty in our end markets, and we experienced customer delays in the first quarter. Second, we acknowledge improving global economic indicators and also see increased activity in our pipeline, which we believe will translate to better growth during the second half of the year. Third, our guidance includes a benefit from changes to U.S. import tariff rates in February, but also assumes tariffs in the second half of the year return to consistent levels with prior IEEPA rates. We have also not included potential tariff refunds from the U.S. government in our 2026 guidance, which could benefit cost of goods sold, and we have also not included potential tariff refunds to our customers, which would reduce sales. We will exclude these items from our adjusted EPS and organic sales growth in future periods. Fourth, our guidance includes higher costs due to inflation related to the war in the Middle East. We seek to mitigate these increases with cost savings initiatives and additional pricing actions, but have taken a cautious approach to guidance given the dynamic nature of the current environment. Lastly, we are very confident in our ability to execute on our growth and productivity initiatives and believe we are well positioned to gain market share regardless of the macro environment. Now turning to our guidance. For the full year 2026, our local currency sales growth forecast remains at approximately 4%. Our forecast includes a contribution from acquisitions, which will approximate 1.5% in the first half of the year and less than 1% for the full year. Adjusted EPS is forecast to be in the range of $46.30 to $46.95, which represents a growth rate of 8% to 10%. This reflects an increase from our previous guidance of 8% to 9% growth. At recent spot rates, foreign exchange is estimated to be a 2% benefit to sales growth and neutral to EPS. For the second quarter of 2026, we expect local currency sales to grow approximately 3%, including a benefit of approximately 1.5% from acquisitions. We expect adjusted EPS to be in the range of $10.70 to $10.85, a growth rate of 6% to 8%. Currency for the quarter at recent spot rates would benefit second quarter sales by approximately 2% and would be neutral to adjusted EPS. Some further comments on our 2026 guidance. We expect total amortization, including purchased intangible amortization to be approximately $78 million. Purchased intangible amortization is excluded from adjusted EPS and is estimated at $28 million on a pretax basis or approximately $1.06. Interest expense is forecast at approximately $70 million for the year. Other income is estimated at approximately $25 million. We expect our tax rate before discrete items will remain at 19% in 2026. Free cash flow is expected to be approximately $900 million in 2026, which is an increase of 5% on a per share basis. Share repurchases are expected to be in the range of $825 million to $875 million. That's it from my side, and I'll now turn it back to Patrick.
Thanks, Shawn. Let me start with some comments on our operating businesses, starting with lab, which had modest growth across most product categories and strong growth in bioprocessing, partially offset by a decline in pipettes due to soft demand from academia and biotech customers. We see a growing need for replacement across our pharma and biopharma customers and expect to see a gradual increase in activity in the second half of the year. Additionally, our team has remained very active in identifying opportunities across various hot segments like biopharma, new energy and semiconductor that will further fuel our growth in the future. Turning to Industrial. Core industrial sales were up 1% or flat excluding acquisitions, as we have seen cautiousness in customers' purchasing patterns across most end markets given the dynamic geopolitical and macro environment. Product inspection sales growth was solid as it benefited from innovation and our mid-market strategy despite continued challenges facing the food manufacturing industry. Lastly, Food Retail had strong sales growth against easy year comparisons. Now let me make some additional comments by geography. Starting in the Americas, where sales grew 2% or were flat, excluding acquisitions. Growth in our lab business included strong bioprocessing growth, while product inspection also had strong growth. Core industrial sales were soft this quarter and were impacted by customer delays related to increased market uncertainty. However, we remain optimistic for growth in the second half of the year. Turning to Europe, strong growth in our product inspection and food retailing was offset in part by softer market conditions, especially chemical. Finally, Asia and the Rest of the World had good growth this quarter and included 4% growth in China, led by our Industrial business. In markets outside of China, we again had very good growth in India, Southeast Asia and many other emerging markets, which remain an important component of our long-term growth strategy. In summary, I am pleased that our team continues to execute very well in a challenging market environment. We also continue to make important investments in innovations to secure our future growth. Our R&D accelerator and JetStream programs have helped us increase our pace of innovation while better meeting our customer needs. We are especially focused on bringing new innovations to high-growth segments such as bioprocessing. Our innovation helped our customers generate new insights, improve workflows through automation and digitalization and to capture more precise and reliable measurements. Our dedication to bringing new innovations to market helps us increase our value proposition, stimulate replacement demand, gain market share and support our price premiums in the marketplace. I'd like to share with you some exciting examples of new innovative products we have brought to market recently. First, our automated chemistry business recently launched our new EasyMax advanced automated lab reactor that helps scientists with their process development by automating scale-up experiments. EasyMax controls temperature, stirring, dosing and sampling that provides precise measurements with smart digital sensors for continuous unattended data capture, increasing throughput and ensuring consistent results. An embedded vision system continuously records experiments and captures critical events, automatically documenting visual context to speed up understanding of reaction behavior. By utilizing plug-and-play peripherals, researchers can instantly automate complex tasks such as pH-driven dosing or pressure-dependent sampling ensuring that every protocol is executed with robotic precision. Our lab business also recently introduced our InMotion PX One autosampler that fully automates density, refractive index and UV/VIS measurements, expanding our broad portfolio of automation solutions for the lab. The new autosampler eliminates manual sample handling, reducing variability while increasing measurement repeatability and minimizing contact with potentially dangerous or toxic substances. Our powerful sampling, rinsing and drying features reduce the time for measurement cycles and enable high throughput and full data integrity; an audit trail is enabled when connected to our LabX software. Our liquid handling business also recently became first to market with low retention pipette tips that do not use PFAS or forever chemicals. Our hydrophobic low retention pipette tips minimize retention of viscous liquids, proteins, enzymes and DNA without the use of forever chemicals, reducing both the environmental impact and compliance uncertainty associated with PFAS. Switching to our Industrial business. Our recent product inspection innovations have led to very strong sales growth and market share gains. We have further expanded our portfolio of X-ray solutions over the past year with additional coverage of the mid-market. We have also had excellent success with our high-end solutions including our proprietary dual energy X-ray solutions that utilize advanced photon counting technology for precise identification of physical contamination in food and pharmaceuticals. We have also recently introduced metal detection solutions that further expand our market leadership in metal detection. Our new M50 R-Series delivers a 20% increase in detection sensitivity and is engineered to increase productivity in modern production environments. I am very proud of our team's efforts to further build our portfolio of unique and highly competitive solutions. The breadth of our offering, the unique insights from our direct sales force and technical experts and the critical support of our service team with the largest service network of our main competitors are very important differentiators. These innovations will also ensure that we are well prepared to capitalize on the many significant growth opportunities over the medium term including increasing customer demand from automation and digitalization solutions as well as faster-growing segments like biopharma, semiconductor, new energy and others. We also look forward to capitalizing on future growth opportunities with customer replacement cycles and investments in onshoring and nearshoring activities over the coming years. We are also fully committed to delivering on our margin expansion targets and have ample opportunity to deliver strong margin expansion this year and beyond. While there is increased uncertainty related to the conflict in the Middle East, our organization has remained highly agile, and I'm very proud of their efforts to balance the need to drive productivity gains and deliver strong EPS growth while investing for the future. Now this concludes our prepared remarks. Operator, I'd like now to open the line to questions.
分析師問答
Your first question comes from Michael Ryskin with Bank of America.
Great. Let me just start with the high level on the full year guide. You reiterated the 4% LC sales growth, but I believe you bumped up the M&A contribution a little bit. I think it was previously 1% in the first half, 0.5% for the year, and now it's like 1.5% for the first half, a little less than 1% for the full year. So on the one hand, the deal's contributions trending nicely, and we'd love to talk about that. But I also want to see what's going on in the organic business. Is this something that you saw in the first quarter? Is this just adding a little bit of caution given the macro? And if you could expand a little bit on if it's more in lab or Industrial where you're taking down your assumptions, that would be great.
Okay. Mike, this is Shawn. Maybe I'll take that. So yes, you're right. In terms of the acquisitions, we're really pleased with how they're performing. The teams are doing well with a very good focus on integration. It was about a 1.5% contribution in the first quarter. We expect a similar contribution in the second quarter. So, when you consider roundings, it's still going to be less than 1% for the full year, but it's going to be more than the 0.5% that we were thinking at the beginning of the year. Of course, that implies maybe a modest reduction in the organic number. I think that largely reflects a bit of uncertainty in the first half of the year. We're taking a cautious approach to the second quarter given the environment. But we still feel very good about growth for the second half. You see a lot of positive indicators externally in terms of the PMIs and global indicators looking positive. When we look at our own pipeline, we also feel good about that as well. If we get into the businesses themselves, maybe I'll go through it so everyone has the view. For the full year, we're looking at lab at low to mid-single digit, which is similar to before, but for the second quarter, we're also thinking low to mid-single digit. On an organic basis, that's maybe more like low single digit for the lab business. One of the things we're watching for Q2 is maybe a little bit more in Europe. On bioprocessing, we expect better results in the second quarter in Europe. For core industrial, for the full year, we're still at low to mid-single digit, but on an organic basis, it's low single digit. There are a couple of dynamics: our Chinese business is showing good improvement and we feel good about that, but we had some softness in the first half of the year in some Western markets. Product inspection is mid-single digit for the full year, a little better than before. On an organic basis, low single digit, which reflects the strong results we saw in Q1. For the second quarter, product inspection would be low single digit, down a bit on an organic basis, which reflects timing; we had a very strong start to the year, especially in the Americas, and we'll see some of the other side in Q2. Overall, the business is executing extremely well. For the Americas, we're thinking low single digit for the full year and flattish for Q2. Our retail business can be lumpy and that's a factor in Q2. In Europe, we're still at low single digit for the full year, with low to mid-single digit in the Q2 guide, which is a step-up reflecting the lab topic I mentioned earlier. China has been a bright spot in the quarter with very good momentum led by Industrial. We are increasing our growth expectations for China for the full year to mid-single digit, much of it driven by Industrial building into the second half. Our guidance for Q2 for China is low to mid-single digit, similar to what we saw in the first quarter.
Your next question comes from Luke Sergott with Barclays.
On the 2Q dynamics in the Americas, you mentioned some retail comps and issues there. Can you double click and give us a sense of what's going on and your outlook and how that's changed?
Yes. Retail is always a lumpy business. If you look at Q1, it was down double digit in the U.S., but we had really strong growth in Europe, so overall retail was up high single digit in the quarter. There is nothing specific to read into beyond that lumpy nature. When I step back, I feel good about how the team is competing. We've introduced a lot of new innovation in the last few years and it's well received in the market. The team actually won an award on one of the products. So a lot of good things are going on; it's just a very lumpy business.
Right. And then just a follow-up on China, the particular strength. We've heard this from peers as well, but you have a slightly more Industrial lean. How much of this is due to the middle market strategy within the PID business picking up and leading to what you guys have been seeing there over the last year and a quarter?
This is Patrick. We are very pleased with momentum in China, but the strength is not coming necessarily out of the product inspection business. It's really the core automation business in our core industrial business. There is strong momentum as a lot of investment is going on in automation across many end markets in China. That is the primary momentum building up and has contributed to our good Q1 growth. Additionally, in pharma, with recent pharmacopeia changes, we see good opportunities and momentum for our high-end balances and others, where customers are replacing equipment in their QA/QC labs and R&D labs. Those two vectors — industrial automation and pharma — are the important drivers, not primarily product inspection.
Your next question comes from Catherine Schulte with Baird.
Maybe first, you talked about increased activity in your pipeline supporting maybe some improved growth in the back half. Can you elaborate on that a bit? I know you typically only carry about 1.5 months of backlog, but talk through what you're seeing from a funnel indicator standpoint?
Yes. You're right that we normally point to our 1.5 months of backlog. Sitting here today, we've been tracking a lot of KPIs across the funnel from opportunities through orders. We reviewed the pipeline in detail with the executive team and the Board this week and feel better about growth in the second half versus the uncertainty in the first half. We expected the year to start a little slower when we initially guided despite positive indicators exiting last year. The geopolitics created more uncertainty in the quarter, but we're not seeing cancellations; we're seeing timing delays. When we look at the funnel, we need to convert opportunities to sales, but absent deterioration on a geopolitical scale, we're feeling pretty good.
Okay. Great. And then you called out some chemical softness in Europe. We've heard others call out similar dynamics. Can you unpack what you're seeing there, when that softness started? Is it Ukraine related? Is it Middle East related? Is it something else? And maybe talk through the outlook there.
This is Patrick. The softness is generally related to higher energy costs in chemical. Many customers are seeing the pressure of high energy costs in Europe and are more cautious with investments and expansions. It's a combination of the Ukraine situation and the Middle East impact on oil prices, which increased costs. That weakness in chemical affected our Process Analytics business where the biopharma side was strong but the chemical side was softer. This also impacted the lab business to some extent.
Your next question comes from Dan Arias with Stifel.
Shawn, can you talk about cost management in the current environment? It'd be great to hear about offsetting freight and fuel costs and input costs for the Rainin business. Maybe a refresher on sensitivity in general there and any impact you see here.
Thanks, Daniel. Our team is highly focused on these dynamic topics: fuel, transportation and input costs. We have a culture of agility that helps in these times. We are implementing cost measures and price mitigation where appropriate. We've been cautious in factoring mitigation into our guidance because we also expect tariff changes to provide some benefit. With the IEEPA tariffs shifting earlier in the year and then assuming a reversion to prior rates midyear, there's a near-term benefit offset by inflationary pressures. We view these headwinds and benefits as roughly in a similar range, and we will pursue mitigation that could provide upside.
Okay. And a follow-up on Mike's question. It felt like there was as much uplift as downtick. You have a track record of leaving room to beat and pricing power. Can you pinpoint where you found yourself needing to adjust the outlook?
Some of it is rounding. When we look through the pieces, the strong momentum in China and emerging markets like India is modestly offset by softness in some Western markets, particularly in the first half. The nuances across countries affected the organic rounding. It didn't change our ranges materially but resulted in modestly better expectations for China and slightly lower near-term expectations for some Western markets, especially the U.S. in Q1 customer behavior.
Your next question comes from Patrick Donnelly with Citi.
Maybe a follow-up. You talked about the chemical side, Patrick. Can you talk about the core industrial piece? It sounds like China is better. On the Western side, how have conversations changed with customers? What are you hearing given the macro backdrop, and what's the visibility for that business going forward?
Very good. China has taken a nice uptick in industrial automation. What is shifting in core industrial is increased demand for automation and digitalization rather than discrete balances. We see more engagement with systems integrators and other partners building automated manufacturing lines using our portfolio. We have an outstanding portfolio and see engagement in China and growing momentum in Europe and the U.S. Looking forward, buildout of U.S. manufacturing capacity in pharma and industrial segments should support Industrial momentum. Our industrial automation solutions through automation partners will benefit as customers build manufacturing lines, and our recent innovation investments are playing out well.
That's helpful. Shawn, on the guide, can you talk about price versus volume? I think the previous guide had about 250 basis points of pricing and about 100 basis points of organic volume. Can you update where you are and how you're thinking about price and input costs?
Price came in as expected in Q1, in the roughly 3.5% range. We feel good about the company's value proposition and willingness of customers to pay for innovation. For Q2, pricing will probably be in the 2.5% range or slightly better; it steps down as we lap midyear pricing taken last year. For the second half, we are holding a normalized 2% pricing expectation for now, though I see potential upside given inflation. For the full year, we're in the roughly 2.5% range on pricing.
Your next question comes from Vijay Kumar with Evercore ISI.
Patrick, on Q1 performance, lab seemed to have challenges. You called out the Middle East and customer delays. How did Q1 phasing play out? Do you see trends improving exiting Q1? What was the issue in labs and was it all tied to the Middle East?
On lab, we had a slower-than-expected start with headwinds mainly in research and academia affecting pipettes. Our pipette business was negative in Q1. In Europe, delayed customer investments also affected lab. Bioprocessing remains very strong globally; we're well positioned with our LabX workflow and portfolio. After the slower start in Q1, we expect conditions to gradually improve through 2026. In China, pharmacopoeia changes and buildouts for GLP-1 manufacturing present opportunities where we are well connected. So we expect lab momentum to improve, and the pipeline includes lab projects for the second half.
When you think about the back half step-up, is that assuming academia and government improves? Are you assuming delayed orders from Q1 catch up or a step-up in bioprocessing? You mentioned automated chemistry performing well. What are the moving pieces by product?
The bigger drivers are industrial automation solutions. Core industrial is expected to be strong, lab will improve, but academia is not expected to see a large rebound; we forecast more flattish trends rather than declines for the rest of the year. We launched new pipette products including the Vero pipette and PFAS-free tips. Industrial momentum, especially in China, and product inspection strength will drive the step-up. These are the key pieces.
I agree. Softer market conditions will gradually improve and there are internal initiatives that will help as well.
Your next question comes from Kallum Titchmarsh with Morgan Stanley.
Can you talk through demand on the service front and any stats on attach rate on the installed base? A refreshed view given past bullish commentary would be helpful.
We're proud of the service growth: 7% in Q1, with 2% driven by acquisitions and 5% core growth. The core growth in this environment shows strength in our service ties with customers. We see headroom to grow by connecting more of the installed base not currently covered by service contracts and increasing attach rates at point of sale. Attach rates vary by product: product inspection has a high connect rate because customers cannot afford downtime, while lab and academia have lower rates. We have dedicated programs to increase connect rates and are seeing improvement. We remain focused on driving customer loyalty; our NPS scores in service are outstanding versus the industry, and we expect more growth in services.
Great. Any update on reshoring? Talk through customer discussions and timelines.
Reshoring is exciting but still in early innings. About 50% of our business relates to manufacturing and another roughly 20% to QA/QC; manufacturing expansion is the biggest opportunity. While reshoring initiatives are in the news and some companies are building capacity in the U.S., these shifts take time. It's a great opportunity for us to support customers building capacity with our automated and digitalized solutions over the medium term.
Your next question comes from Josh Waldman with Cleveland Research.
Patrick, can you comment on how durable you expect recent higher growth in product inspection to be? Any reason to think mid-single-digit growth for 2026 could be sustainable into 2027 given upgrade cycle opportunities across mid-market and dual X-ray? Have you started to map what you think the upgrade cycle could be?
We're optimistic. Product inspection includes a constant replacement component in many areas and we are excited about expanding in the midrange market. We shifted strategy about one to two years ago to expand our midrange portfolio and are attacking that market successfully. We continue to innovate in checkweighing, metal detection and X-ray photon counting technology to drive sensitivity and open more applications. The portfolio has a long runway and we see substantial headroom to continue growing.
Good to hear. Any product-level color in core industrial — pockets of acceleration or deceleration? Where did delays hit? A portion of this business ties to component sales to bioproduction equipment OEMs; can you remind us the size of that business and trends?
The portfolio performs well overall, with higher growth in areas supporting automation and digitalization. There can be lumpiness in parts of the portfolio, such as project activity in dimensioning solutions for logistics. About 60% of core industrial is sold to a combination of pharma, food manufacturing and chemical; chemical is currently the softest of the three due to higher energy costs. We saw some caution across broader end markets in Industrial, which aligns with our expectations for a slow start to the year. In the medium term, onshoring, replacement cycles and hot segments like batteries in China should create broader opportunities.
Your next question comes from Doug Schenkel with Wolfe Research.
Two topics. First on pacing: were there product categories or geographies that got notably better or worse in April versus March? Second, specific to China grants: elaborate on the grant proceeds recognized in the quarter so we don't overweight that item.
On granularity, we generally avoid month-by-month commentary and won't provide detailed month-to-month color. The guidance and segmentation we provided by product area, division and region give directional insight from Q1 to Q2 and to the full year. Regarding the China grant, it's a local government grant encouraging expanded capacity in the Shanghai area for local manufacturing and research. This aligns with our China-for-China strategy. The $6 million includes CapEx-related and OpEx-related elements, with OpEx largely on the research side. There will be timing differences between when we receive the grants and when we spend against them. From a cash flow reporting perspective, we'll exclude both receipts and related spend from our free cash flow going forward.
Your next question comes from Tycho Peterson with Jefferies.
I want to hit on the customer delays again. Can you quantify how large those were and how you think about the path to recoup? And the chemical softness, is this pushout or are CapEx budgets getting cut with longer-term implications?
We don't have a specific quantification for customer delays; it was a general theme in some Western markets earlier in the quarter. We saw timing delays rather than cancellations and feel more confident about conversion into the second half. On chemicals, we will see how it plays out; it's the softer end market among the big three for us. China chemical showed low- to mid-teen percent growth for us, mostly in specialty chemicals. Some sectors in chemical also participate in hotter segments and are not uniformly negative. We also expect easier comps in chemical in the second half.
Okay. And then a follow-up on Europe: PMIs have been expansionary for some months. Could Europe come back sooner?
We'll see. In the short term, we're still taking a cautious profile and will monitor developments.
Your next question comes from Evie Koslosky with Goldman Sachs.
In the past, you've talked about exposure to the semiconductor industry with the ultra-pure water business. Can you remind us what your exposure is as a percentage of revenue and how that business trended to start the year?
Percentage, is it like low single digits?
Yes. Evie, this is Patrick. Ultra-pure water and related semiconductor exposure is a low single-digit percentage of total revenue. It's doing extremely well with buildouts in semiconductor and related data center cooling applications. We have a strong go-to-market team and good customer connections, so it's a growing opportunity even though its revenue share is still low single digits.
Great. And on bioprocessing, you saw good growth. What demand are you seeing for bioreactor sensors as people drive automation in facilities? How is your portfolio competing relative to the broader market?
We're competing extremely well in bioprocessing. We continue to launch new products, such as a new glucose sensor. Our integrated digital sensor management systems and intelligent sensors are highly differentiated. Demand for bioprocessing automation remains strong globally, and we expect continued growth with drug manufacturing buildouts like GLP-1.
Your next question comes from Brandon Couillard with Wells Fargo.
Patrick, did you break out lab versus Industrial within China in the quarter? Any pockets of lab doing better like bioprocess, or are they generally similar and flattish?
In the quarter, China was up 4%. Industrial was up high single digits and this is the third quarter in a row with good Industrial growth in China; the second quarter in a row of high single-digit growth. Lab was down slightly with different dynamics by product category. The market for lab is softer than Industrial, but we are optimistic for improvement into the second half.
Specific to lab, pharma and biopharma are doing well. Small-molecule pharma or chemical pharma is softer and impacted some product categories, including AutoChem. There is also some timing where customers wait on new product launches. We recently launched new pipettes and other products, which can affect short-term comparisons. Overall, pharma and bioprocessing remain strong while some small-molecule areas are softer.
Your next question comes from Casey Woodring with JPMorgan.
I wanted to clarify the incremental tariff piece. Is the March change in Harmonized Tariff Schedule codes included? Please unpack the tariff component a bit more.
Yes. There are two dynamics. We have a near-term benefit from lower tariff rates implemented in February, which will show up in Q2 to some extent, but we assume tariffs revert to prior IEEPA rates midyear. At the same time, inflationary pressures are higher. We're working on mitigation actions but have been cautious incorporating all mitigation into guidance. The way we view it is that inflationary headwinds largely offset the tariff benefits, with potential upside from mitigation in the second half.
This concludes the Q&A session. I will now turn the call back to Adam for closing remarks.
Thanks, Rebecca, and thanks, everybody, for joining us this morning. If you have any follow-up questions, please feel free to reach out to me, and I hope you all have a great weekend. Take care.
This concludes the call. Thank you for attending. You may now disconnect.