Cristina Mendez

Thank you, Judy. Starting with Q3 segments as performance that organic sales growth of 1.2% in the quarter was driven by service, which was up 7.7%. New Equipment organic sales were down 8.2%, driven by a greater than 20% decline in China, as market conditions remain weak. Excluding China, New Equipment sales increased low single digits. The decline in China was partially offset by low single digit growth in APAC, driven by strength in Japan on the one as well as low-single digit growth in the America's.
EMEA was roughly flat as a strength in Central Europe, New Equipment pricing was up low single digits in all regions outside of China. Similar to last quarter, China continues to be under severe price pressure with continued declines of approximately 10% year over year, although pricing was relatively flat sequentially. Services were $2.2 billion with organic sales growth of 7.7%, as we delivered on our expected acceleration from the mid-single digit growth in the first two quarters of the year. We grew in all regions and in all lines of business.
Maintenance and repair increased over 6% in the quarter, supported by continued strong portfolio growth. Maintenance pricing up around 4points, excluding the impact of mix on churn and then ramp up will be better volumes. Modernization organic sales accelerated in the quarter, up about 14%, bringing year-to-date organic sales to approximately 10%, with excellence growth in Asia Pacific, which was up 20%, including contributions widely across geographies.
Thirdly to Q3 segment operating profit performance on New Equipment operating profit of $84 million was down $20 million at constant currency, as tailwinds from pricing continues to flow from the backlog for the activity including the benefits of uplift, a lower commodity costs were more than offset by the impacts of lower volume and regional and product mix headwinds.
Operating profit margins came in at 6.4% we have to date, new equipment sales are down over $250 million and operating profit has declined by $20 million at constant currency versus the prior year. In China, new equipment has the new revenue has been for approximately $400 million that would imply a profit headwind of about $100 million, which we have largely mitigated through solid productivity and the benefit of commodity on pricing tailwinds.
Service operating profit of [$505 million] increase $40 million at constant currency as drop-through on higher volume, favorable pricing and productivity including benefits from at least more than offset unwanted wage inflation. As a result, operating profit margins remained strong at 24.8%, even while facing a difficult prior-year compare where margins expanded 90 basis points in the third quarter of 2023.
Year to date, operating profit margins have expanded 60 basis points to 24.6% with the benefit of our various uplift initiatives, we drove year to date adjusted SG&A was lower by $18 million, while improving as a percentage of sales by 10 basis points year over year. On a slight organic sales growth these cost initiatives are helping to mitigate labor inflation headwinds, supported by a sustained strong performance in the service segment we achieved total operating profit margins of 16.9% in the quarter.
Adjusted EPS grew 1% or $0.01 in the third quarter with our operational performance on a lower share count contributing positively. Moving to cash, we generated three $381 million of adjusted free cash flow in the third quarter, and we saw sequential improvement in cash from operations we see in the quarter.
We continue to work to drive cash flow into yearend despite the various macroeconomic challenges that we are facing across our business, most notably in China, due to the lower new equipment orders overall, year to date, we grew organic sales 1.2% with mid-single-digit or greater growth in all regions outside of China.
With service as the driver, we have delivered 60 basis points of margin expansion, 8.2% adjusted EPS growth while returning $800 million to shareholders through share buybacks. We move into the final quarter of the year with continued focus on operational excellence across the business while working to offset the macro headwinds we are facing.
Let me now turn it back to Judy to discuss our 2024 outlook.

Judith Marks

Before discussing our updated 2024 financial outlook, let me first update you on our industry outlook, including giving some color on how we anticipate 2025 markets to shape up. On the positive side, we now expect the Americas to be roughly flat, up from the prior outlook as customer demand signals are showing signs of improvement. We expect China to down approximately 15%, and this takes our Asia outlook down to a roughly 10% decline. There is no change to our new equipment outlook in EMEA or APAC.
Overall, we expect global new equipment units to be down high single digits for 2024. Offsetting the pressure on new equipment markets the service market remains resilient, and we expect the global installed base to grow mid-single digits this year, as units that were booked a few years ago are coming off warranty and converted into the service space.
Looking towards 2025, we expect the global new equipment market to improve, despite the new equipment softness in China. We anticipate the combined Americas, EMEA and APAC New Equipment markets should be up low single digits in units.
China remains a question mark, but at this point, we currently anticipate a decline somewhere in the range of 5% to 10% in units, clearly dependent on the impact of Government stimulus measures, overall across all regions we currently anticipate a sequential improvement in new equipment market growth rates next year versus this year's rates.
On the service side, the installed base should continue to grow at around mid-single digits a clear demonstration of the resiliency of the industry. We anticipate the modernization market will continue to grow strongly in all four regions.
Turning to our financial outlook for 2024, we now expect sales of approximately $14.2 billion with organic sales growth of approximately 1.5%. Service remains strong across all lines of business for both growth and profit, and Christina will give more color on this in a moment. Our sales outlook is at the low end of our prior expectations, with the change driven specifically by China new equipment. Adjusted operating profit is now expected to be up approximately $105 million at actual currency and up about $140million at constant currency with the change for prior outlook, similarly driven by China new equipment.
We anticipate adjusted EPS to come in around $3, an $0.85, up approximately 9%, driven by strong operational performance and the benefit from a lower share count and continuous improvement in the reduction of our tax rate. We expected adjusted free cash flow to come within a range of $1.4billion to $1.5 billion and plan to return the cash we generate this tier to shareholders through dividends and $1 billion in share repurchases.
We continue to make steady progress with our uplift program, which is helping to drive a more efficient organization and deliver more value to customers while mitigating some challenges we face for the past few quarters throughout the globe. Overall, our service driven business model and overall company strategy remain on track, and we will continue to deliver value to shareholders, including the 9% EPS growth we anticipate this year.
Now let me hand it to Christina to discuss our outlook in more detail.

Cristina Mendez

Thank you, Judy. Taking a more detailed look at our outlook and starting with sales total on organic sales are expected to be up approximately 1.5%, driven by solid performance in our share of the segment. We expect new equipment organics has to be down mid to high single digits, driven by a decline in China due to the challenging market conditions that Judy mentioned earlier.
So that Asia is expected to be down high teams in 2024 with a strong high single digit growth in Asia Pacific, more than offset by severe declines in China. Our outlook for the Americas, EMEA and Asia Pacific are unchanged from the prior guidance. Overall, the New Equipment segment has performed weaker than we expected this year, driven by the market situation in China.
However, the rest of the world has performed better than we projected at the start of the year and we anticipate the combined growth of Americas, EMEA and APAC, the mid single digit up for 2024. Our service segment continues to perform quite well and has been largely in line with our expectations as we have gone through the year.
In line with our prior guidance, we anticipate service organic sales to grow a bit more than 6.5%. This includes maintenance and repair growth of approximately 6% and modernization growth of at least 9% at or above the high end of our prior range. We anticipate continued modernization sales momentum in the fourth quarter due to the timing of project execution from the backlog.
We expect these to be the 3rd year in a row of service organic sales growth of 6% or better, offsetting the severe headwinds we have faced in the equipment over the past years and demonstrating the power and resiliency of our business model.
At constant currency operating profit is expected to grow approximately $114 million in service, performance this year has been excellent year to date, and we expect operating profit margin plus and approximately 75 basis points for the full year driven by volume productivity aided by uplift and continued solid pricing. For new equipment, operating profit margins have now expected to contract 50 basis points versus the prior year. Tailwinds from productivity, including benefits from uplift, commodities and pricing from the backlog out of being more than offset by volume and mix headwinds emanating from lower China new equipment sales, as a result of continued market weakness.
So the updated outlook assumes a similar Q4 organic growth rate in new equipment through what we saw in the third quarter. And on constant foreign currency basis, we would anticipate a similar dollar decline in new equipment profit of around $20million to $25 million with a slightly larger headwind at actual currency. We expect overall adjusted operating profit margin expansion of 70 basis points driven by service performance.
The update to our outlook is exclusively driven by the change in new agreements as driven by China volumes. And we are mitigating these headwinds through service volumes for productivity and pricing.
Turning to cash flow, we expect to achieve adjusted free cash flow in the range of $1.4billion to $1.5 billion. The lower operating profit outlook, coupled with fewer downpayments from China new equipment or that volumes are impacting our expected cash flow for the year. We continue to focus on what we can control to improve working capital and we expect strong free cash flow ramp up in Q4 similar to last year.
Moving to the 2024 EPS breach, we expect to deliver adjusted EPS of approximately $3 and $0.85.This is $0.31 of EPS growth versus the prior year or approximately 9%, largely driven by operational performance. At constant currency we expect approximately $0.36 of operating profit growth outside of China, while we anticipate China to be a headwind of about $0.10 to $0.15 for the year.
Reductions in the effective tax rate, and a lower share count are anticipated to offset headwinds from higher interest expense (inaudible) change. Minority interest expense naturally move slower due to the weaker China performance.
Now will give you some additional commentary on two areas, first China and second, how we see 2025 shaping up at this point. On China, although we have largely been able to mitigate the significant China impact on adjusted EPS year to date in our EPS bridge was included a small range of China outcomes to give some additional color due to the continued uncertainty in the markets, as we exited Q3 the new equipment backlog in China is down mid (inaudible) and the book-and-ship business remains under pressure.
While Mark, has been said on the policy front in terms of possible as stimulus in the region, and we remain optimistic for a policy follow through, unless the revision begins to accelerate into year end, we could see it being up once of $0.05 additional headwind to EPS. Lower China volumes and mix impacts naturally puts pressure on the exit run rate margin for the equipment into 2025.
Now a bit about 2025, starting with service we expect the service business to continue performing well next year with mid-single digit or better top-line soon. While we expect to achieve approximately 75 basis points of margin expansion this year, we said at our Investor Day in February, the service business over the medium term would achieve 50 basis points or slightly more of margin expansion annually.
As about the two years combined, we would expect to be somewhere between 100basis points and 125 basis points of margin expansion within the service segment. For new equipment as in the past few years, excluding China, we feel good about the rest of the world combined growing low single digits or better in 2025.
While there's still a few months ago, which will determine exactly the orders in Q4 and our ending backlog heading into 2025, the backlog and this year down low single digits, that would be a fairly good starting guidepost for new equipment top line in 2025. As Judy mentioned earlier, China remains uncertain for the New Equipment segment for both sales and profit.
As without policy change and a stimulus action, we would expect our second-half margin rate in new equipment rate to persist throughout 2025. The monthly rate with the new agreement is being impacted by the meaningful shift in regional mix, with more than 75% of the new equipment revenue now being driven by sales outside of China, we will continue to work to offset the headwinds that this process through productivity while continuing to drive the uplift program and rightsizing our cost for aligned with the current market conditions.
In closing, our results from the first nine months demonstrate our ability to deliver on our service-driven business model. We continue to focus on what we can control, including growing our portfolio, executing on our expanding modernization backlog and continuing to drive productivity throughout the organization, including uplift in the cities.
We continue to drive results through the remaining of the year to set us up well to perform in 2025. With that, Krista, please open the line for questions. Thank you.

Question and Answer Session

Operator

Thank you we will now begin the question-and-answer session. (Operator Instructions.) your first question comes from the line of Nigel Coe with Wolfe Research. Please go ahead.

Nigel Coe

Thanks. Good morning. (inaudible), just wondering if the message has been you pricing pressure will offset by deflation repo cost, if the OV pressure we're seeing right now, whether that's really a function of lower China margins will just the mix of China, if the pricing is getting rational and whether there's a change in strategy yield over the next year, one to use within China?

Judith Marks

Yes. Thanks, Nigel, and good morning, the new equipment market in China remains weak, it was down 15% this quarter, similar to second quarter and that's how the year is actually going to finish. And we are constantly trading off volume, price, and liquidity to make sure that our China business remains strong as we go into 2025, we now believe that China segment for 2024 will be at about 415,000 units.
Our new equipment revenue is down fairly significantly double digit. Our service revenue is flattish to up slightly on our portfolio units are still up high 10s. So the pivot and the strategy we've been making to services working about a third of our revenue now in China is decreased were down $400 million in revenue year to date in China, we are going to put in our guide, we're going to be down by $0.5 billion of revenue in China this year and still have organic top line growth for the Company.
Now when we look structurally at China, our new equipment total contribution is really only down a couple of points. So we are still seeing the deflationary environment were optimizing commodities to the best of our ability and really trying for and focused on delivering come down a few points, even though pricing remains competitive, it has always been competitive in China on new equipment.
We are not seeing being irrational pricing we're seeing sustained competitive pricing and 415,000 unit market to me is still ahead healthy market in terms of segments size for us to secure the business we want. The MOD market is growing and is picking up nicely. And you'll see us some drive MOD margin expansion as we grow scale. There are MOD orders year to date in China are positive.
October was very positive, but for the quarter it was not at the level we wanted and there was a little bit of resistance as people were waiting to understand more about the equipment renewal incentives that had been announced early in the quarter with not a lot of specificity.
We're seeing that pickup that was prior to the bigger stimulus that was announced later in the quarter. Our service units are up yet again high 10s service revenue was up 1%. So our business in China is reshaping down $0.5billion, $500 million from that's the lowest revenue we've had in China since we've reported in 2017, which was in our Form-10, back three years.
And yet at the contribution, even that our China team has made it is not at that level of drop. So we're watching mixed carefully. Obviously, the other three regions are adding significantly to the mix and the margin and the top line on new equipment and service business, including in China, is doing very well.

Nigel Coe

Okay. That's great color. Thanks very much. Just a quick one on service with the flat sales margins some years, obviously have kept firm service outlook unchanged was up sort of your plan for the quarter. And maybe just to obviously, there's a lot of mix would have been asked. So just maybe just a bit more color on terms of the operating leverage within services and whether the labor inflation is actually getting a bit worse for in terms of impacting the margins perhaps?

Cristina Mendez

Hi, Nigel. This is Christina, and so on service margins they are coming broadly in line with expectations on (inaudible). When you see sequentially, they are going off up 24.7 in Q2, 24.8 in Q4. And this is thanks to the flow through of Woodward volumes, and that there was a good ramp up of service as in the quarter coming mainly from the timing of repair and modernization.
And we also have a Woodward volumes of the approximately four point, excluding the impact of an extension on. We've also have productivity anomalies and all of these is compensating wage inflation that is broadly in line with expectation, various estate performance in service in line with expectations, and these can be an opportunity for Q4 as we see modernization is ramping up very nicely.

Judith Marks

Yes, Nigel, the other thing, if you recall, last quarter, we anticipated repair picking up in the second half of the year and MOD conversion kicking up in the second half of the year. Both of those contributing nicely repair was up 10% was really led by the Americas and MOD.
If you look at it really how we've performed on this on the item on the delivery side of MOD, we were over 13% in terms of sales, that's going to continue here with our backlog up 12%. We keep anticipating repair to come to normalize. So like a point above maintenance, but it looks like we'll wrap this year and fourth quarter again with strong repair similar to third quarter.

Nigel Coe

Okay. Thanks Judy.

Operator

Your next question comes from the line of Jeffrey Sprague with Vertical Research Partners, please go ahead.

Jeffrey Sprague

Thanks. Good morning, everyone, and hope everyone is well.
Hey, Judy, can you also just drill a little bit in a MOD China and a good service? my question is your kind of a little bit about laws globally are certainly risks (inaudible) historically a little bit below new equipment, the trajectory of both new equipment, as you realign the business for the playbook to exist in the same way, shape or form in China?

Judith Marks

Yes, it does, Jeff and good morning. So MOD margins in China look attractive like new equipment margins during the China relative to the rest of the world. So and we're seeing that play out this year as well. It's early days for MOD in China obviously, a younger portfolio for the portfolio that will accelerate and grow more rapidly when you think about CAGER versus anywhere else in the world.
So we're in a unique position to do MOD and industrialize MOD with our kits on from the start, there's not a lot of old units to modernize and MOD. So most of these are our Gen2 units, which means we're going to get the benefits of scale commodities.
We are already handling Gen3 MOD on our Gen3 line in our factories in China, very optimistic about MOD in China in terms of available segment in terms of demand, In terms of rapid growth. And again, what we've seen early orders in October and MOD is very promising.
Equipment renewal program that July time, it was for everything from of appliances to cars, but elevators and escalators were included, which we thought was very important. The challenges, obviously, with all these getting the rules out locally and that take has taken a little time. And the reason why our MOD orders weren't as strong as they needed to be in the third quarter, you're going to see MOD bounced back nicely. We've already seen it in October In China, more significant MOD orders as we came into this quarter globally are MOD orders were up for 7 or 8 quarters, double digit.
You will see a return to double digit in the fourth quarter and then the rest of the world, we saw some timing issues in MOD in the third quarter in terms of some major projects, there's a move to the fourth quarter, but we expect those to come in. And we did have a slight compare with a couple of projects in the Middle East from Q3 last year that were pretty significant MOD projects.
So we'll be back to double digit in the fourth quarter, which means the back backlog remains strong going into next year, now seen as we've proven the conversion, the MOD margin for the third quarter in a row globally was better than the new equipment margin. So the strategy we couldn't place last year to industrialize MOD, we're seeing that take hold and we're seeing MOD margins now greater than new equipment, and we do have line of sight to the 10% MOD margins we anticipate in the medium term.

Jeffrey Sprague

Really big picture on China it as we sort of stuck their growth going from, call it, [650,000] units to [14] of which characterizes (inaudible) is the right number. The second biggest market in the world is like India 75%sales growth. If China is overbuilt than the population is shrinking because of that number just to actually grow lower were a number of additional years.

Judith Marks

There's a potential for it to grind lower, Jeff, but it's going to grind lower at a lower rate. You've taken a third of the volume out from 615 to 415 and next year when we are looking at again, without stimulus impact down 5% to 10%. What that means is we're are actually going to see sequential growth improvement in new equipment in '25 at Otis over '24 because of the China, not decay are decreasing as much as it did this year.
So when we look at the comparison sit here this time next year, we actually and we'll give you the guide clearly in late January with all the specifics. But we actually see sequential top line growth improvement in '25. We're going to see it in service and we're going to see it in new equipment.

Jeffrey Sprague

Great. Thank you.

Operator

Your next question comes from the line of Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell

Hi, good morning. One clarification on the sort of fourth quarter operating profit dynamics, you've guided the full year up about 1$40 million on a constant currency that in another nine months was up $96 million on So you have this sort of $40 million plus increase year on year in Q4. But I think new equipment down [20], [30] in Q4. So it's sort of a bigger uplift in service. It looks like just maybe help us understand kind of what's driving that. And it looks like the sort of general seasonality in the Q4 guide is a bit stronger than your normal seasonality on profits.

Cristina Mendez

Hi, Julian and this is Christina. And survey with analyses film, as you have said yesterday that we have grown operating profit at constant currency of about $96 million, which means margin expansion of$ 60 million.
And when you look into Q4, we expect service to continue performing very strong line to continue growing on the back of growth, the ramp-up of free bet on modernization and a good flow through off an operating profit. We say additional margin expansion, multi-unit suspect that the service to be above 25% in Q4.
It is not driven by seasonality, just driven by the performance of execution front we now have the top line and continually working on productivity. On the other side, on new equipment we expect Q4 to be more or less of same level on the topline decline as in Q3 approximately minus 8%.
And that means a flow through into operating profit margin below 5% because we have then volume on the mix effect. And additionally, we see price and commodities gradually fading out in Q4. Overall, we compensate the decline in the equipment with a very strong performance in service in order to deliver, as you rightly said, approximately $40, $50 million operating profit growth in the quarter.

Judith Marks

Yes, that 25% from margin is very achievable based on everything we're seeing.

Julian Mitchell

Thanks very much for that detail. And then maybe for the 2025 equipment margin outlook, Judy, you talked about the sort of new equipment margin when you're thinking about next year and realize it's early, but a good place holder might be, sort of margins next year in new equipment similar to this second half. So I think it's sort of the third quarter you're running at the third and fourth quarter. You're running a sort of mid-single digits. So yes, 6% Q3 and it sounds like 5% or less in Q4 for new equipment.
So you know, sort of flattish percent margin in 2025 new equipment as it looks today. Just help us understand kind of what's that assuming maybe for pricing and you plan main goal starting to enact further cost-out measures. There's the uplift program sort of working through in its second year. Anything happening on, they're trying to get sort of those off or new equipment margins.

Judith Marks

You're very accurate in terms of what you're seeing for '25 new equipment margins, again driven by the impact of mix as China contribution is less and the rest of the world is now, as Cristina said, over 75% of the revenue from new equipment. China is going to finish this year all in a little over 13% of our revenue.
So it's really changed the dynamic, but some uplift is on track. Last quarter, you saw we updated the outlook and the run rate, and that is holding well, and that will continue to deliver in 2025. And we've planned on that. Before I turn this over to Christina on maybe a little more color on why don't I just give you how to sales in the top line look for 2025.
So in new equipment from again, excluding China or new equipment backlog's up low single digits right now or new equipment backlogs down three the total. And we'll see where the fourth quarter ends up in terms of orders on new equipment and top line, we'd expect low single digit growth next year for everywhere outside of China.
And China, we would expect, along the lines that we saw this year. But will we have to wait and see we haven't preprogrammed any stimulus, we're all waiting to see what happens in the next week at the end of the week with the National People's Congress and we are prepared for the stimulus, whether it comes in new equipment or MOD, we have the capacity, we have capabilities both on our factory and in our field.
So new equipment all in the growth we think will be down low to mid-single digits. Some kind of plus or minus where the backlog comes in at the end of the year on service top line. So really strong service portfolio growth, we talked about this 4.2% a lot, and we've had eight straight quarters or two years of that.
With the largest service portfolio in the globe at $2.3 million unit, it's growing at almost $2.4 million by year end. We're adding 25,000 units every quarter to our service portfolio. And as we shared at Investor Day, our average service customer has four units. So we're adding 25,000 customers, which is why do we have such faced in our service driven business model that drives maintenance that drives repair and it drives additional density for us that gives us productivity, all of which support again this high margin service business and with our retention rate at almost 94% is also then drives that continuous relationship for 15, 20,30 years that gives us the modernization business.
Service next year as we look at maintenance and repair is going to be driven by that strong portfolio growth and very solid repair volumes. We've been getting price on service this year, as Cristina said, like for like pricing increased four points watching inflation, but we will get price next year. Will it be at the same level, depends where we are in the world with inflation, but we will get price on the maintenance side and the portfolio growth it will be a tailwind in '25.
Repair volume, very strong MOD of 10% growth, we still see solid repair backlog going into next year. I expect that to normalize what you've heard me say that every year. So, but we do expect that to normalize and MOD as we exit that right now, the third quarter backlog's up 12, and were looking at your 9% high single digit plus.
That's what you should expect next year or two, if not better, because the MOD backlogs growing. So I just wanted to give you some color on the portfolio itself and on the top line, which is why as we look out in '25 and even '26 beyond as we look at the medium term near term, new equipment in China doesn't get me concerned because we're still growing mid teen plus, if not high teen portfolio in China.
And the rest of the world is growing our portfolio low single digit. So we don't see that they're being a knock-on effect a few years out because we have time to work that we have time to do recaptures, and we are focused on improving our retention rates. Our conversion rates are doing much better in China and the like.
Let me turn it over to Christina for you on any other comments on prop.

Cristina Mendez

Yes. Thank you, Judy.
And we commented yet on the profit side until had a very good analyses. So as you lead with copying them, the top line effect next year, low-single digit up. So that is sequentially is slightly better because of less decline or lower declining the equipment of now on the margin side, service will continue with margin expansion you'll recall that we set back in February in our Investor Day that service was going to well 50 basis point of us, one margin expansion. This year, we have over driven we are 75 basis point.
When you put together '24 and '25, we expect margin expansion of around 100basis points, 125 points in service. On the other side, the equipment, and we have the effect of volume, some makes it additionally, as next year, that commodities on price data, ways that we have benefited this year are going to gradually fade out.
So all of these together would mean that the second half of the margin rate is going to persist in 2025, and it would mean approximately 50basis points to 100 basis points of margin decline. But when you put everything together, we have a stronger service segment, a weaker new equipment. But overall EBIT profit is expected to grow mid-single digits next year.

Julian Mitchell

That's Great. Thank you

Operator

Your next question comes from the line of Joseph O'Dea with Wells Fargo. Please go ahead.

Joseph O'Dea

Hi, good morning. Thanks for taking my questions.
Can you elaborate a little bit more on Americas and Europe and the growth that you're seeing in the backlog and price versus volume? And just as we consider multi-family pressure and office pressure, but the growth that you're seeing and an outlook for growth into next year trend understand kind of market versus a share gain and other factors at play?

Judith Marks

Yes. Thanks, Joe, in the Americas is really the first quarter. We're seeing really early projects moving forward again, with green shoots the indicators, ABI, and Dodge, we'd like to think some are leading Some are lagging, you're going to see this all settle out over the next 12 to 18 months. We are definitely seeing improvement in the new equipment market segment in Q3 you saw orders were up 23%,we needed that.
We'd come back in the second half, and we delivered an actually in North America we increased our pricing. It was the best we did anywhere in third quarter it was low single digit, but it was the best anywhere in the quarter in the world.
Americas for the year, year to date were down 9.5% in orders. But if you eliminate that large infringe structure job we want in Canada in first quarter of '23. We have shown nice sequential growth quarter after quarter, and we're really seeing more new equipment market stability and again, we get this from our sales teams as they're talking to customers. The sentiment has gotten a lot better after the Fed would change the rates.
We've got a really strong backlog in the Americas, a good 18 months plus line of sight to perform, even though our backlog's down because our sales have been up significantly. Our new equipment sales in the Americas came in 6% for the quarter. It was harder than the prior low single digit mid-single digit for the full year we expect the fourth quarter to be mid-single digit as well.
Service sales in the America portfolio was up low single digit repairs were great in the third quarter, about 10% through their year to date and we anticipate that continuing into the fourth quarter. MOD orders for the Americas were up mid-single digit, both in the quarter and year to date and we expect that to continue.
And MOD sales were up low 10s for the quarter and year to date there were up high single digit. So we believe the Americas market, the market itself has stabilized and our performance is doing much better.
And when we look at this is a little different commentary than you've heard last quarter. When we look at the different verticals this quarter, we still have had the best verticals were infrastructure and industrial buildings, but all of the verticals were up this quarter in North America, which as there is a real inflection point.
If I go to EMEA on what we're seeing in the market itself is it's challenging, but we're performing very well. Middle East is doing very well, South Europe is strong, North Europe's a little weak, weaker. Spain and Africa are doing very well. And even Central Europe for us this quarter did very well despite the market uncertainty and environment in Germany, we're seeing pressure in France, but our backlog in EMEA is solid.
New equipment year-to-date is up 8%.So even no, the quarter was down in orders, strong first half by EMEA the team is performing very well. Our 12-month rolling EMEA orders was up 7.8%, and we're outperforming the market there. Ur backlog is up over last year in EMEA and our Gen3, 60 product is rolling out fairly well. So a little different commentary this quarter inflection we're seeing in the Americas, and we're outperforming in EMEA in a challenging environment.

Joseph O'Dea

That's really helpful commentary on and obviously, sort of mixed trends that we've seen some leading indicators. So appreciate it. And then just wanted to ask on cost structure as it relates to China and you're thinking about market sizing moving forward, obviously, some of the build out that you did there to serve that market. But as you think about it today and the potential for volumes in this range for a while, how do you think about costs? Are those things we could hear more about as we go into next year.

Judith Marks

You will definitely hear more about costs coming out in China and at this is for two reasons. one, we would do this based on the market. But second, with our uplift program, we're changing the way we work to be more customer centric to have common processes everywhere to have the ability to actually continue to drive significant growth in China. We're looking at everything from our operational footprint, we have moved our modernization into our new equipment factories. So any facilities that used to do modernization don't do that anymore. And we're obviously looking at it, our workforce I have to give Sally and the team incredible credit for operating under some pretty tough economic times right now.
We're trying to balance rational volume with pricing and with our customers abilities to pay, that's what's really driving our cash guide coming down. We're not going to take business just for the sake of volume to fill factories or to keep the field gainfully employed were taking what we believe is smart business that will put us in a strong position to continue to grow our service business in China and get ready for that MOD business to really take off, MOD in new equipment, where that crossover is going to happen yet.
But when you think about what we need the price of a unit MOD, about the same price of a unit in new equipment everywhere in the globe, including China, where our MOD margins are highest. And so as that picks up right now, we have [415] units in the New Equipment segment this year in China has that MOD market picks up. We will hit 415,000 units some time this decade, just as the MOD segment, when that's going to be, but we're actually going to have a larger market to serve in China and around the world than we have today.

Joseph O'Dea

That's very interesting. Thank you.

Operator

Your next question comes from the line of Chris Snyder with Morgan Stanley. Please go ahead.

Chris Snyder

Thank you, and I appreciate all the color on China potential range of outcomes that fear of acuity out would be interested in your perspective on the stimulus actions we've seen in tighter. So for, anything more that you're offering that could come here in the coming weeks or months? It ultimately just kind of what it means for China Construction Bank. You?

Judith Marks

Yes. Thanks, Chris. Listen, we are encouraged by what's been announced to date. The key is going to be the implementation methods. The regulations, we're in a regulated environment and how the local governments use the potential liquidity, debt (inaudible) the announcements that were made or positive give to us. It's now the how we believe the first indication of this. And we talk we have we've talked to the party secretaries because we're focused on economic development.
We want to grow in China, and we will grow in China. Despite this $0.5billion of revenue, our service and our MOD business continued to grow, and we'll stabilize this new equipment business. Our early look is with the stimulus with the aging population, and this is going to actually accelerate modernization more.
It's going to allow with the 5100 projects to get finished, which will give us more confidence in liquidity with some of our customers as well in our key accounts. But the first time we're going to know more, Chris, is there's a special meeting of the National People's Congress senior members next week within a readout next Friday, November 08.
So we'll see what happens there. I will be on the ground in China in November, it's important to be able to talk to our customers to be able to talk to our colleagues and thank them for the dedication under this stressful time. And they are delivering when you think about the decline we've had in the top line and yet our focus on continuing to deliver for our customers and grow our service business.
So I think we'll all know more. We do not anticipate that impacting fourth quarter financials even if rules come out, if it does, I'll be happy to share that with you in our fourth quarter earnings, we see this more as a potential for '25 and all the color, Christina and I have given you today because we're not going to guide for '25 yet. We have not in anticipated any positive impact of the stimulus on China.
So when we say down 5 to 10 next year for China, new equipment at the segment level, therefore for the units available in the market, that does not anticipate any stimulus, same with the modernization market and it's $10 million units available for service we added mid to our service growth this quarter was high 10s.
So now in China were up to [425,000] units in our surface portfolio. That's still 4% share. We have plenty more we can recapture plenty more to convert. So we are hopeful, but we need to understand the implementation rules. And most importantly, our customers and the local governments need to do that.

Chris Snyder

(inaudible) If we looked at the orders that America is obviously very sharp rate of change Q3 up 20% Are you starting to see the better customer demand in Q3? Or is that of Q3 order number really just a function of comps in that improvement is really maybe your Q4 the '25 driver? Thank you.

Judith Marks

There were certainly some counts from what I want to be clear about that. But now we are seeing between proposal activity and we had a lot of it., Chris, we get a downpayment when we when we sign up in order everywhere in the world, but especially in the Americas, and it's not something that is really negotiable or that we get back in the project gets canceled. So our customers have that commitment and conviction that their projects going to go.
And we had a lot that we're just really close, but waiting, waiting to hear what the Fed was doing, waiting to see what the economy was doing. But as for all the segments, we're talking commercial office, residential infrastructure and industrial to have turned positive in the market in the third quarter. It's more than counts.
Our team is performing, and you can expect that kind of positive performance regardless of comps, fourth quarter and into next year.

Chris Snyder

Thank you.

Operator

Our final question comes from Patrick Baumann with JPMorgan Chase. Please go ahead.

Patrick Baumann

Hi, good morning. Judy extended. Thanks for letting me squeeze in here, just had on one, maybe two, but first one on free cash flow, the $1.4billion to $1.5 billion this year. Can you talk about what working capital drag embedded in that and parse that out in terms of drivers on maybe size, the China downpayment drag you called out or anything else unusual depressing this year that it should flip around next year to give you better growth, sort of assume since you correct me if I'm wrong, but free cash flow growth next year should be better than kind of a mid-single digit. Do you expect on operating profits on? Just wanted to check on the dynamics there.

Cristina Mendez

Hi Pat, this is Cristina, and so yes, you're right. The production of the guide to $1.4billion to $1.5 billion is related to the down payments on the new equipment order situation in China. But overall, when you see our cash flow performance year to date, we have generated an adjusted net income of one $1.1billion to $1.2 billion on $900 million year to date cash flow. That means that you had to date, we have built up approximately $250 million working capital and there are two reasons for that.
one is the business mix on the one side, new equipment declining, especially because of China, and we don't get it on payments. But on the other side, we are growing in service and the collection timing service is later because we collect when we execute the job.
For example, on repair, we also have some payables impact because of the ramp-up of modernization because of payments to suppliers when we execute the projects. But we expect these business makes to stabilize now in Q4 will start collecting that will ramp up of top line in Q3 now in Q4.
And overall, the $200 million on that working capital is going to be unwound. So the expectation in the guide is to deliver in Q4 approximately $550 million cash flow, that is more or less the same level of cash flow we delivered last year in Q3.
And then to your question on into 2025, we should expect that as we have stabilized the business mix, cash flow, so pickup at a faster pace than operating profit growth.

Judith Marks

And Patrick, from a capital allocation perspective, we renewed $1 billion of share buybacks and $600 million roughly of dividend versus this one four to one five. We have the ability to do that because team's done a great job bringing our cash balance down probably since first time significantly since spin from a $1 billion to almost $800 million. So we are working every element of this to be able to share obviously, share this cash back with our shareholders

Patrick Baumann

Makes sense. And so conversion next year should be back above 100% of adjusted earnings.

Judith Marks

At least 100% will guide you in January.

Patrick Baumann

Makes sense. And then last one, just on service margins on if you could talk about the factors around why that margin expansion for next year, which would flow to something less than 50 basis points on relative to the 75 you're guiding for this year. Just any color on the factors that were better than expected this year that will reverse, next year to make it closer to 50 over the three-year period?

Cristina Mendez

We are yes. At the end, we are not guiding now is we're just providing some color of the trends on the 50 basis points is what we committed by being the Investors Day and this is going to come on. Of course, on top of that, we continue working on the same actions we have implemented this year in terms of price productivity and uplift, and we will target to overdrive, but they've for the time being it is what we can mention.

Patrick Baumann

Understood. And modernization business those margins are expected to continue expanding as part of that guide for next year.

Judith Marks

Yes, you'll see that in January, yes.

Patrick Baumann

Okay. Thanks so much for the call back to Mark.

Judith Marks

Thank you.

Operator

Ladies and gentlemen, which does conclude today's question and answer session. And I would now like to turn the call over to Judy Marks for closing remarks.

Judith Marks

Thank you, Krista. Our solid results in the first nine months of the year demonstrate the resiliency of our service driven business model. We remain focused on mitigating macro headwinds and further driving shareholder value in order to deliver a strong final quarter and beyond.
Our growth and modernization, maintenance and repair and the overall service portfolio validates that our flywheel continues to fuel profitable growth. As I close the call, I'd like to take the opportunity to thank Mike for his many contributions to Otis and wish him success in his new role. Stay safe and well everyone. Thank you for joining.

Operator

Ladies and gentlemen, which does conclude today's conference call. Thank you for your participation, and you may now disconnect.