Michael M. Larsen
Senior Vice President and Chief Financial Officer at Illinois Tool Works
Thank you, Scott, and good morning, everyone. In Q2, quarterly revenue grew 9% and exceeded $4 billion for the first time since 2012, with strong organic growth of 10.4%. The MTS acquisition contributed 3% to revenue. Foreign currency translation was a 4% headwind. Despite $0.10 of year-over-year EPS headwind from foreign currency translation and $0.05 of higher restructuring expense, GAAP EPS was $2.37, the second highest quarterly EPS ever. By geography, North America grew 14% and international grew 6%, with 6% growth in Europe and 3% growth in Asia Pacific. China organic revenue was down 4%, and we estimate that the China lockdowns reduced our organic growth rate by about one percentage point at the enterprise level, which we fully expect to recover in the second half.
Operating margin was 23.1% with operating leverage of 200 basis points and 90 basis points of enterprise initiatives. Margin headwinds included 50 basis points each from the MTS acquisition and higher restructuring expense related to 80/20 front-to-back projects. And the margin dilution impact from price cost was 160 basis points. Free cash flow was $420 million, an increase of 69% versus Q1. So we remain committed to intentional working capital investments to support growth, mitigate supply chain risk and sustain service levels for our key customers. The routine resolution of a U.S. tax audit resulted in a onetime tax benefit of $0.16. And as you may recall, Q2 last year had a $0.35 onetime tax benefit.
As a result, our Q2 tax rate this year was 18.3% as compared to 10.1% last year. Excluding these onetime tax benefits, the effective tax rate was 23.9% this year and 23% last year. Please turn to Slide four with a look at price/cost and the beginning of the improvement trend on margin dilution that Scott mentioned. Thanks to our business's decisive price actions throughout this inflationary cycle, we have stayed ahead of inflation on a dollar-per-dollar basis. And the seemingly endless barrage of cost increases over the last 12 months appear to have leveled off such that we are beginning to recover the margin dilution impact. Based on all known costs and price increases, this positive trend is projected to continue such that the margin impact is expected to be neutral in the second half. Throughout this two-year inflationary cycle, while we have more than covered cost increases on a dollar-for-dollar basis, we have absorbed as much as 250 basis points of margin dilution impact.
As raw material cost inflation begins to moderate on a year-over-year basis, we are confident that we're going to recover this margin impact, hopefully, starting in 2023. Moving on to the segments. Automotive OEM delivered solid organic growth of 6% with 18% growth in North America. Europe was down about 1% and China was down 11%. At this point, and consistent with our prior guidance, we do not expect a meaningful improvement in the chip shortage situation impacting auto production until 2023. In effect, our guidance assumes that automotive production remains around current levels for the second half. While we are getting positive signals from several of our customers in terms of preparing for a Q3 and Q4 ramp-up in auto production, we are taking a more conservative approach to our guidance per our usual process.
And even with revenue around current levels, keep in mind that the year-over-year comps ease in the second half, which sets the Automotive OEM segment up as a meaningful contributor to the overall organic growth rate of the enterprise through the balance of the year. Operating margin was 17% when excluding 270 basis points of 80/20 front-to-back restructuring impact this quarter. As supply chain issues get resolved down the road and auto production ramps up, we're confident that we'll see some strong organic growth rates for an extended period of time and a return to the segment's historic margin rates in the low to mid-20s. Let's turn to Slide five for Food Equipment, which led the way this quarter with an organic growth rate of 25%, record quarterly revenues of $614 million and operating margin of 24.7%.
North America grew 27% with double-digit growth in every major category and end market. Both restaurants and institutions were up around 40% and retail growth was in the mid-teens. International revenue grew 23%, with Europe up 25% and Asia Pacific up 11%. Orders remain very strong in this segment. Test & Measurement and Electronics revenue grew 15%, with organic growth of 1%, which, as you know, is uncharacteristically low for this segment and entirely due to the timing of a large equipment order from an Electronics customer in Q2 last year. Adjusted for that order, segment organic growth would have been about 7%, which is a more accurate representation of how strong the order intake is.
Test & Measurement organic growth was 8%, with continued strong demand for capex as evidenced by Instron growth of 5% as well as continued strength in semiconductor-related end markets. Moving to Slide six. On another positive note, Welding's organic growth was also strong at plus 22%, with equipment up 24% and consumables up 19%. Industrial grew 29% and the Commercial business was up 19%. North America, which is about 80% of our sales, grew 25%. Oil and gas was up 8%. Sequentially from Q1, revenue was up 8% with continued strong order intake. Operating margin improved 80 basis points to 29.3%. Polymers & Fluids grew 10% organically, with Polymers up 25% on continued strength in MRO and heavy industry applications. Automotive aftermarket was up 4% and Fluids grew 3%. On a geographic basis, North America grew 8% and international was up 13%.
While sequential revenue grew from Q1, we did see some slowing demand in our automotive aftermarket business as consumers are dealing with rising inflation and gas prices. On to Slide seven. And Construction delivered strong organic growth of 15%, with continued strength in North America, which was up 29%. U.S. residential grew 34% and commercial was up 20%. While Europe and Australia and New Zealand were up 5% and 4%, respectively, the international businesses started to show some signs of slowing in their order rates towards the end of the quarter. Specialty was the only segment that didn't grow, with organic revenue down 2% as supply chain constraints caused a delay in the delivery of some larger international equipment orders that are now on track for the second half. On a geographic basis, North America was up 5%, while International was down 13%. Okay. Let's turn to Slide eight for an update on our full year 2022 guidance, which remains unchanged.
Per our usual process, our guidance is based on our actual results year-to-date and a projection of current levels of demand through the balance of the year. As a result, our organic growth projection of 7% to 10% remains unchanged. The acquisition of MTS is projected to add 3% to revenue, and based on current foreign exchange rates, the headwind from foreign currency translation is now 4% versus our prior expectation of 1.5%. We are maintaining our full year GAAP EPS guidance range of $9 to $9.40. And compared to our prior guidance on May three, the onetime favorable tax benefit of $0.16 in Q2 is offset by $0.20 of additional EPS headwind from foreign exchange, which is now embedded in the outlook. Our operating margin guidance is unchanged at 24% to 25%, with about 100 basis points contribution from enterprise initiatives.
Price/cost margin dilution impact is unchanged at 100 basis points, which implies that the second half margin dilution impact is about neutral as compared to 200 basis points of headwind in the first half. Finally, there's no change to free cash flow generation or share repurchases of $1.5 billion, and our tax rate for the full year is expected to be in the range of 22% to 23%. We've often talked about the fact that ITW is a company that can deliver top-tier results in any environment, and this year is no exception. We're obviously not immune to the macro challenges and uncertainties that may lie ahead, but we remain confident that ITW is very well positioned to continue to deliver differentiated best-in-class performance as we leverage our diversified high-quality business portfolio, the competitive strength of ITW's proprietary business model and our team's proven ability to execute at a very high level in any environment. With that, Karen, I'll turn it back to you.