Eric D. Ashleman
Chief Executive Officer, President and Director at IDEX
Thank you, Mike. Beginning with our overview on Slide 6. The past 1.5 years have been one of the most dynamic and unpredictable ever experienced, but our IDEX team stepped up again in Q2 and delivered during an extremely challenging environment. Thank you to the IDEX employees around the world who are working so hard. Our commercial performance is very strong as we recorded record orders and backlog in the quarter. Order trends continue to improve sequentially, and all three segments are materially above pre-pandemic level. Our day rates are very strong, and our OEM order patterns are robust. Only large industrial projects, many of them in FMT, continue to lag a bit. We're beginning to see the move into planning funnels, indicating support for continued phases of organic growth in the back half of 2021 and next year. Our #1 operating challenge for the quarter was supply chain and logistics disruptions. IDEX is generally a short-cycle business with quick lead times. We typically operate at the component level further down our customers' bill of materials. We're also not very vertically integrated. We depend on a tight network of supplier partners, often located close by our operating units to quick turn our solutions with a minimum visibility. For these reasons, the challenging conditions of tight material supply and bottleneck logistics tend to lag other industrial companies.
Our agile model does support a quick calibration to today's reality, and it helps us exit quicker than many on the backside of the supply side constraint. Overall, we believe these disruptions have hit a plateau. We don't see things getting worse, and the challenges will continue to be highly variable. At the same time, we don't anticipate these disruptions getting better soon, but most likely they will not subside until the end of this year or early next year. We anticipated rising inflation as the global economy recovered, but like many did not imagine the sharp rate of increase. This narrowed our spread between price capture and material costs, although we remain positive overall. Our teams leveraged the systematic investments we made a few years ago in pricing management and aggressively deployed 2, sometimes three pricing adjustments with precision. We are on track to expand our price/cost spread to typical levels as we travel through the back half of the year. While we spend a lot of time talking about our business's ability to capture price, one area that I don't want to miss is our continued focus on operational productivity. Our teams continue to drive margin improvement through 80/20 simplification, lean effort and through sound capex deployment.
Our robust project funnels continue to be another weapon to combat rising costs. The one project that exemplifies the spirit deserves mention as we discuss Q2. Our energy market now starting to show some signs of recovery off the bottom are still lagging the overall group. Our teams are aggressively executing a facility rationalization project to consolidate our scale and focus our human resources in close working proximity. Ultimately, this is a long-term value driver for that group. But in the quarter, the project created headwinds for us as equipment was delayed and inventory positions were less than ideal to support production transfers. We expect the project to be back on track and completed by the end of the third quarter. Overall, I am confident in our path through these choppy recovery as we continue to apply relentless focus from outstanding teams to deliver solutions that matter from high-quality businesses that are very well positioned within their application steps. Moving on to Slide 7. We deployed just over $575 million in the first half of the year with our acquisitions of ABEL Pumps, Airtech and a small investment in a digitalization technology start-up within the Fire & Rescue space. We continue to build out processes and capabilities to explore additional strategic investments we want to make across IDEX. Our funnel for potential acquisitions is stronger than it has been in the past, and we are more aggressive in pursuing opportunities that enhance our business solutions, fit well with our style of competition and drive IDEX-like returns. It's early days in our integration of ABEL and Airtech, but we're happy to see that each business is performing well with excellent growth prospects in the near and long term.
While we've stepped up our M&A game, we're also investing in our existing businesses with a 45% increase in capital spending through the first half of the year. We're in the process of expanding IDEX facilities in China and India. We project significant ongoing growth opportunities across Asia, and these investments are critical to support our local-for-local approach as we move to the next level of competitive advantage. We're also focused on our digital strategy with our largest investments tied to our areas of higher integration and scale as we seek to drive higher impact for our customers. Lastly, as I mentioned previously, we're focused on operational productivity as market dynamics are changing as well as investing in new technology to support growth. This is on both the capex and opex side. Some of these investments are targeted at new applications in high-growth areas, like components to enable new global broadband satellite networks, building batteries for electric vehicles and providing key products to support the build-out of incremental capacity in semiconductor manufacturing. These investments are combined with targeted spend in areas to support automation and efficiencies across the shop floor. This strategic approach to both inorganic and organic investment is already paying off and sets us up for ongoing success for years to come.
Turning to our commercial results on Slide 8. As I mentioned, order strength continued in the second quarter both compared to prior year and sequentially, resulting in a backlog build of $65 million in the quarter. As we look across our segments, all rebounded well from the pandemic and delivered strong organic order growth. Sequentially, Fluid & Metering technologies and Fire & Safety diversified products saw increased orders compared to the first quarter. Our Health & Science Technologies segment also saw increased sequential orders if we exclude the impact of a COVID testing application debooking that occurred in Q2. Order intake across all segments was also above second quarter 2019 levels. FMT lags HST and FSD due to lower levels of investment in the oil and gas market as well as concentration in the industrial market, which saw a pre-COVID pullback in the second half of 2019. These commercial results give us confidence in our ability to deliver double-digit growth in the second half of the year and continue to highlight the resilience of our businesses and the criticality of our solutions to customers. On Slide 9, we provide a deeper look into our primary end markets. Our focus is shifting from recovery to growth as most of our businesses are now performing above pre-pandemic levels.
Even with pockets of concern around supply chain disruptions and COVID in certain geographies, we're optimistic about the outlook of our end markets and our ability to execute within them. In our Fluid & Metering technology segment, industrial day rates were strong. Supply chain challenges remain. But overall, the market trajectory was at or above 2019 levels with only large projects lagging, as I mentioned earlier. Agriculture continued to drive strong growth, driven by aging farm equipment and record crop prices. Our water business was stable. We continue to monitor the impact of the federal infrastructure package on U.S. municipal spending. Energy and chemical markets continue to trail 2019 levels, primarily due to limited capital investment in the sector as well as a longer project close cycle. One item to highlight for FMT is the impact of our FMD acquisition last year. It's now in our organic figures. And with its backlog burn last year and significant pullback in customers' capital investments, it impacted FMT's organic sales by 11%. In other words, FMT's organic sales for the quarter would have been 19% instead of 8%. Moving to the Health & Science Technologies segment. We're seeing recovery and pivot to growth across all our end markets. Semiconductor, food and pharma continued to perform well, driven by strong market demand and winning share through our targeted growth initiatives. The overall automotive market continued to face supply chain-driven challenges but we outperformed the market due to our product concentration in higher-end European vehicles.
Our AI and life science markets continue to perform well as the pandemic impact eased and investments have increased. The industrial business within the segment saw a similar result to FMT. Finally, in our Fire & Safety/Diversified Products segment, dispensing rebounded as large retailers freed up capital and worked through pent-up demand for equipment. Our BAND-IT business was adversely affected by U.S. automotive production pullbacks due to microprocessor shortages in the second quarter. However, we continue to achieve new platform wins and believe we're well positioned to outperform the market as supply chain constraints ease. In Fire & Rescue, we have yet to see larger tenders come back and emerging markets remain slow. We continue to closely monitor market conditions and expect some choppiness in the second half of the year. That said, we're confident in the future trajectory of our end markets as well as our ability to execute on our strong backlog and have raised our organic growth expectations for the year. With that, I would like to turn it over to Bill to discuss our financial results.