2015 INVESTOR CONFERENCE – Honeywell International Inc.

Honeywell International Inc. · Mar 4, 2015 · 131 slides

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2015 INVESTOR CONFERENCE NEW YORK MARCH 4, 2015
Agenda 10:00 Introduction Dave Cote HOS Gold Andreas Kramvis Growth Through Acquisitions Roger Fradin High Growth Regions Shane Tedjarati Q&A Session 11:25 Technology Demos 1 11:45 Aerospace Tim Mahoney, Terrence Hahn Automation…
AEROSPACE Tim Mahoney, President & CEO Aerospace Honeywell Investor Conference March 4, 2015 0
Aero Key Messages Unprecedented Program Wins High Win Rate In All Businesses Unmatched 130B+ New Wins Strong HGR Penetration More Favorable Macros Dramatic Replacement Cycle, Flight Hour Growth Well Positioned On Higher Growth…
Aerospace Overview Financials Business Mix (B) 23% 18% 15.7 15.8 15.4 - 15.7 Comml OE* TS 15.6 8% 20.2% Intl Defense 19.6% - 29% 20.5% 18.2% 22% Comml AM 17.4% U.S. Defense/Services 2012 2013 2014* 2015E Sales By…
Aerospace 2018 Targets Sales Segment Margin (B) 17.8 20.2% 21.2% 15.4 - 19.6% - - - 19.7 18.2% 20.5% 22.1% 15.7 15.8 15.7 2013 2014* 2015E 2018T 2013 2014* 2015E 2018T Key Drivers: Key Drivers: Picking The Winners…
Aero Industry Business Review Aerospace Honeywell Investor Conference March 4, 2015 4
Growth Accelerates Revenue Growth 17.8 - 19.7B Software & Services 15.4 - 15.7B Software & Services Software & Services Turbo Software Upgrades/Subscriptions Connectivity Services/Upgrades Govt Services Expansion Turbo…
Commercial Aerospace End Markets Commercial OE Well Positioned On Growing Fleets - Key Fleet Growth Airbus, Boeing, Gulfstream, Dassault - Narrow Body Rate Increases, Driving Sales - Airbus A350, Gulfstream G280, Embraer Legacy…
Defense Returning To Growth US Defense Outlook Well Positioned On Growing Fleets - F-35, F18, Unmanned Aerial Systems And Tanker - Attack And Utility Helicopters - Tactical Missiles & Munitions Strong Installed Base / Service…
Honeywell Platform Position Aircraft In Entry Winning On The Right Competitor Development/ Total HON Value Into Value Platforms With The Right Ramp-up Mechanical/Avionics/Software/Services Service Products: Avionics, Boeing 737…
Growth Trajectory Aerospace Honeywell Investor Conference March 4, 2015 9
Enterprise Growth: Cockpit Leadership HON Winning 70% Of New Growth Integrated Cockpits Projected Growth 14-18 HON Growth 2.5x Competitor - 90% More Cockpits Delivered - 20% Higher Average Bizjet Cockpit Value - 5x More…
Enterprise Growth: Mechanical Leadership Product Product Group Groups Growth New Platforms Propulsion Engines (Served Sectors) 5 Year Market CAGR Gulfstream G280 Won All Medium-Large Business Jet Competitions Since 2001 7%…
Growth Through Upgrades And Mandates Installed Base Driving Upgrades Growth Organically Upgrades Sales 20% Software And 13% Services 1% 2009 2015E 2018T Global Safety And Efficiency Mandates Drive Sales Through 2020…
Growth: Leading The Connected Aircraft 3.2B Hardware Market Enablement & HON Competitors Full Portfolio Of Size Aircraft Integration Connected Products Across The Aircraft 2B Compelling Innovative Apps & Market Software…
Software Growth Engine Honeywells Large Growing Installed Base - By 2023: 24,000+ APUs (+7K), 32,000+ Engines (+6K), 8,000+ Cockpits (+4K) Core Software Productization Today 350M To - Reuse / Reapplication / Architecture 520M By…
Growth Through HUE Before After iPad-Like Interaction Text Based Interface Fully Integrated Touchscreen Controller For Cockpit And Aircraft Systems Difficult To Upgrade Critical to 3B Avionics Program Win Limited Use Of…
High Growth Regions HGR Sales Key Growth Drivers (B) Global OEM Wins 3.6B - Becoming THE Chinese Competitor Building On C919 And Other Wins Local Sourcing, Engineering & Market Access - Russian Platform Wins: Irkut MS-21 -…
HON Operating System HOS Gold Aerospace Honeywell Investor Conference March 4, 2015 17
Honeywell Advantage HOS Gold HOS Gold Operating System: Outcomes Comprehensive Management Operating System Exceptional / Market Driven Performance Breakthrough Growth General Manager Ownership Improved + Sustained Strategy…
Aero And TS Unification Legacy Aerospace Transportation Systems Advanced Bearing Design Technology & Electrification Engineering Power + Thermal Management Transfer Sensing Controls Software Development Logistics, Production…
Honeywell Advantage Technology Aerospace Innovation Leading Performance Customer Value Gulfstream G280 Jet Engine Titanium Compressor 2.3L Gasoline Boeing 737 APU Turbine Aerodynamics 2.0L Diesel Apache AH-64 APU…
TRANSPORTATION SYSTEMS Terrence Hahn, President & CEO Aerospace Honeywell Investor Conference March 4, 2015 21
Golden Age Of Turbos Industry Wide Adoption 20B+ Industry At Maturity Turbo Market Regulations Driving Turbo Pen Up 10pts To 43% By 2019 Growth Limited Oil Price Impact Macro Puts And Takes Aero Technology Advantage 100…
Turbo Market Growth Regulatory Driven Fuel Economy Requirements Fuel Economy Benefit vs Vehicle On-Cost MPG Increase vs Standard On-Cost per Percent Gasoline Engine MPG Increase Start Stop 5% 38 MPG MPG MPG MPG 27% 41% 61% 11%…
Turbo Market Growth Gas And Diesel Honeywell Gasoline Growth Clean Diesel Today European Passenger Vehicle Emissions CAGR (NEDC Cycle) 2014-2018 20% Particulate Nitrogen Oxides Carbon Dioxide Matter (PM) (NOx) (CO2) g/km g/km…
Turbo Market Growth Gas And Diesel Global Turbo Penetration Global Turbo Market Penetration By OEM 100% 80 Maturity Pioneers 68% 77% 70% 60 Followers 31% 50% 40 43% Next Wave 16% 25% 33% 20 Global 33% 43% All…
Honeywell Advantage Global Presence Forecasted Turbo Market Penetration By Region Global Industry 67% 69% 41% 38% 23% 21% 2014 2019 2014 2019 2014 2019 CHINA NORTH AMERICA EUROPE 46% 48% 45% 42% 23% 24% 18% 17%…
Accelerating Growth Business Wins China And Americas Outpacing Industry Accelerating Penetration Growth In Gasoline 40% 75% 20% Win Rate Of Total Sales Sales CAGR* Growth * Source: Company estimate for OEM channel only,…
Summary Industry Wide Adoption 20B+ Industry At Maturity Turbo Market Regulations Driving Turbo Pen Up 10pts To 43% By 2019 Growth Limited Oil Price Impact Macro Puts And Takes Aero Technology Advantage 100 Launches In 2015…
Business Performance Optimization Aerospace Honeywell Investor Conference March 4, 2015 29
Aerospace Margin Expansion Segment Margin 21.2% - Footprint 22.1% IT Infrastructure Core / Non-Core HOS Gold VPD Platform OEF/FT Wins 19.6% HGR 18.2% Connectivity HUE 2013 2014* Growth HON Enablers…
Summary Favorable Macros Broad, Connected Portfolio With Technology Differentiation Large Program Wins Margin Expansion Innovating In Exciting New Areas Aerospace Honeywell Investor Conference March 4, 2015 31
AUTOMATION & CONTROL SOLUTIONS Alex Ismail, President & CEO Automation and Control Solutions Honeywell Investor Conference March 4, 2015 0
Key Messages Portfolio Aligned With Favorable Macro Trends Favorable Non-Res Tailwinds, Resi Retrofit And Smart Homes End Markets High Growth Regions Expansion And Runway Global Leader Across Portfolio, Multi Channel Positioned To…
ACS Business Overview Balanced Portfolio 14.5B 6% ROW 52% Leadership Positions Sales 14% North High Growth America Technology Differentiation Regions* 15.2% 28% Multi Brand/Channel Segment Margin Europe * Priority HGR…
Great Positions In Good Industries Great Positions Automation And Good Industries Industry Position Control Solutions Env. & Combustion Controls ECC Building Automation, Room & Combustion Controls, Elec. Prod. 1 Security…
ACS End Market Alignment ECC HSG HFS HBS Macro Trends North America Construction Recovery Buildings IoT, Automation, And Energy Efficiency HGR Infrastructure And Projects Commercial Commercial Infrastructure Retail…
Whats New: Connected ACS High Growth Supply Marketing Engineering Regions Chain Accelerating Growth Expanding Margins HOS Gold Driving Breakthrough Objectives Footprint Consolidation, Supplier Rationalization Connected…
HOS Gold Driving Breakthrough Objectives New Operating Approach HOS Gold At Gas Detection 1.5x 2x Before Today Sales Profit Management 7 Independent 44 Integrated Operating SBUs, Gold Entities, System President Owned GM Owns…
ACS Breakthrough Pursuits Addressable New Breakthrough Strategies Market Tridium Open Software Platform 2B Growth In Buildings, Factories, And Data Centers Software And Data Monetization 4B Connected Buildings,…
Connectivity: The Next Mega Trend Connectivity Driving Explosive Growth HON Positioned To Win Connectable Thermostat % Of Unit Sales North American Thermostat Unit Sales 75% Honeywell 15% 2010 2015 2020 2025 Source:…
Software A Cornerstone For Growth ACS Building Blocks To Accelerate Growth ACS Differentiators Huge Installed Base With Brand Intelligent Products And Solutions To Unlock And Technology Leadership The Value Of Data Through…
Growing In Buildings % Of ACS Key Differentiators Massive Installed Base: 10+ Million Buildings Equipped With Smart Devices 45% Connected Buildings And Software Drives Double Digit Growth Industry Leading Open Software Platform…
Open Software For The Internet Of Things Tridium: Niagara Operating System Tridium In Action Problem Solution Manitoba Hydro Place Legacy Legacy ERP Systems ERP Systems 15M Operating Open Open Cost/Yr Protocols Protocols Savings…
Growing In Industrials % Of ACS Key Differentiators Intelligent Products Delivering Safety, Productivity And Performance 35% End To End Solutions For Connected Workers And Facilities Differentiating With Wireless, Voice, Mobility And…
Connecting Workers Transport And Logistics Grocery And Retail Won Last 300M USPS 84% 90% 24 of 30 Lifetime Win, Largest Deal In Top 25 Food Top 50 U.S. Postal Value Of Retailers Use Grocers Use Industry Deals Wins History…
Growing In Homes % Of ACS Key Differentiators Industry Leader With Over 15M Systems Installed Annually 20% Double Digit Growth From Connected Homes And Smart Devices Differentiating With Edge Devices, Software And Ecosystem…
Connected Homes - Platform For Growth Connectivity Opening Attractive Core Technology And Innovation Growth Opportunities SaaS World Class New 2015 New Products Offerings Partners Channels Partner Redacted Double Digit…
Growing In Europe Home Controls With HUE Before After evohome Multi-Zone Heating And Hot Water Control For Residential Applications Installation Time 1-2 Days 2-4 Hours User Interface Device Only Device + Remote Via App User…
Growing In HGRs HGR Playbook Becoming THE Local Competitor Sales Win In China To Win In Other HGRs 5x 1.5x Honeywell Fire China Competitor - Export From China To Other HGRs - Expanding In Tier 2/3 Cities And Beyond Local…
Growing In China Air Quality With HUE Before After Air Touch China Residential Indoor Air Cleaner Pricing Commodity Premium; High Margin Filter Replacement Difficult And Dirty In App Purchase, Home Delivery Device Feedback…
Runway For Margin Expansion Driving Productivity: HOS Silver Connected ACS Efficiencies Deployed Bronze Silver Sales 52% 100% Volume Leverage Fixed 26%…
Margin Expansion Segment Margin Gray: Prior Year Initiatives 20% Red: Connected ACS Initiatives Long Term Target 50+ bps Restructuring 75 bps Pipeline HOS Material Productivity 150 bps OEF FT/ERP 16.6% COEs Footprint…
M&A = Growth Upside Excellent Track Record, Big Upside To 5-Year Plan Automation and Control Solutions Honeywell Investor Conference March 4, 2015 21
Summary Sales (B) Key Messages 16.2 - 14.7 17.5 14.5 - 13.5 14.9 2013 2014 2015E 2018T Segment Margin 16.6% - 15.8% 18.3% - 15.2% 16.1% 14.7% 2013 2014 2015E 2018T High Confidence In 5-Year Outlook Automation…
PERFORMANCE MATERIALS & TECHNOLOGIES Darius Adamczyk, President & CEO
Key Messages 5% Organic Growth In 2014 Strong Year End Backlog Position Record 9.2B* Backlog Solstice LGWP Contracts Secured 2.4B In OEM Long Term Agreements HPS Margin Turnaround Leads Peers HPS Margins Up 200+ Bps YoY HPS/UOP…
PMT Business Overview Fluorine Products 10.2B Balanced Portfolio Specialty 1.0B UOP in sales Products 1.2B 3.2B Geographically Diverse 17.8% Resins & 1.7B Chemicals segment margin Aligned To Mega Trends 3.1B HPS UOP…
Accelerating In Attractive Markets Macro Aligned Market Addressable Trends Growth Rates Market Leadership Position Oil & 7% UOP 5 Bottom-of-the-Barrel upgrades 2B* Clean Energy & Efficiency Refining 20B HPS LEAP shortening project…
High ROI Investments Ongoing Capital and Revenue 1,250 (M) Substantial 1,100 YoY Growth 1,000 With 2017 Capital for Growth Projects Net Revenue from Growth Projects Inflection 400 250 100 2014 2015 2016 2017 2018 2019…
PMT Margin Expansion Segment Margin 50 bps Growth 150 bps 19.8% Volume Leverage - 21.1% HGR Penetration 100 bps NPI/Solstice LGWP HUE HOS Gold HOS Bronze/Silver 17.8% VPD 17.5% OEF/FT Repositioning Footprint…
2015 PMT Outlook Oil Price Impact Minimal Upstream Exposure 2015 Implications Backlog* Into 2015 (B) O&G 2015 Capex Revised To 715B*, Major Project Opportunities Remain 9.2 9.2 30% HPS And UOP Backlog Not Other 43% Linked To…
Revenue Across The Project Lifecycle Asset Lifecycle UOP And HPS Engagement Profile Design Construction Operation Upgrade CapEx Commitment Funding Already Approved For Ongoing Activities Year 1-3 Year 4-6 Year 7-25 Year 26-30…
Mitigating Oil & Gas Impact Current Oil & Gas Dynamic PMT Near Term Implications Average 10 - 15% Reduction Of Only 10 - 15% PMT Oil & Gas In Upstream Upstream CapEx 2015 vs. 2014* Booked projects holding, some project delays…
UOP Market Demand Oil and Refining Petrochemicals Gas Processing More Fuel, Tighter Specifications Global Consumer Demand Clean Fuel and High Value Feed 5% 8% 6% Refining Plastics Natural Demand & Fibers Gas exceeds transport…
UOP Innovation Winning In The Marketplace Oil and Refining HUE Gas Processing HUE From Stick-built To From Stick-built To Modular Refineries Modular NGL Recovery Customer Benefits Customer Benefits Faster (Up To 12 Mos.)…
HPS Market Demand Global Projects Software & Services Products & Channels Low Risk Global Execution Optimize Plant Efficiency Infrastructure Management 17B 9B 12B Addressable Addressable Addressable Market Size Market Size Market…
HPS Innovation Winning In The Marketplace Control Room Smart Field HUE Of The Future HUE Devices Orion Competitor SmartLine Competitor Console Alternative Transmitter Alternative Operator Interface Differentiation SmartLine…
Compelling ROI Shorter Project Execution Innovative Solutions To Manage Cost And Schedule LEAP (Lean Execution Automation Projects) Start Finish PHYSICAL FUNCTIONAL Traditional Schedule Define Design Manuf Config Test Install…
HPS Growth Turnaround Continues Top Quartile Performance Growth Consistent Margin Expansion 200 HON 400+ bps YoY Margin Rate Change (bps) % HPS Margin Rate Comp Comp 1Q12 4Q14 2 3 -10% 20% Comp 1 -200 YoY Orders…
UOP And HPS Selling Collaboratively Oil & Refining Gas Asian Greenfield Refinery Project Large Middle East Gas Field UOP Awarded Licensing HPS Awarded Full Automation Scope HPS Provided Process Training Simulator Expand To Include…
UOP And HPS Innovating Together New Process Lifecycle Tools Under Co-Development New Design & Build Operate & Optimize Business LEAPTM For UOP Processes Software as a Service For Processes Reduces Total Project Cost And Schedule…
Software High Margin Growth Lever Software Sales By Category 20% CAGR 15-18 Process Optimization Under Advanced Development Solutions Performance Connected Cyber Security Yield Plant Business KPIs Process Cyber threat…
ADVANCED MATERIALS Ken Gayer, Vice President & General Manager Fluorine Products
Fluorine Products Profile End Market Sales Value To Customers Nuclear Energy Efficiency Industrial 13% 14% Appliance Safety In Use 8% Air-Con 28% Construction 12% Environmental Compliance Supermarkets 7% Auto 18% Ease Of…
Fluorocarbon Regulations 1930s 1990s 1990s 2000s 2010s 1987 Montreal Protocol 1996 Kyoto Protocol 2011 EU MAC Ozone Depletion Global Warming Vehicle Refrigerant Concerns Concerns…
LGWP Growth And Environmental Impact Low Global Warming Potential Sales And Profit Growth Capacity Status Solstice LGWP Sales +600 bps Margin Expansion Legacy Business Segment Margin % 900M R&D and New Capacity Through 2017…
Opportunities For Continuous Innovation Retail Refrigeration Building Air-Con Insulating Foam HON Differentiator HON Differentiator HON Differentiator Drop-in Replacement Low/No Flammability Manufacturability 1B 1B 2B…
Resins And Chemicals 2 Prong Strategy Operational Excellence Rigor New Higher Margin Products Caprolactam, Nylon 6, Resins, Intermediates, Fertilizers Largest Manufacturing Site By Category New Resins Capacity Online Q4 2015…
Specialty Products Aclar Growth Story Pharma Packaging Aclar Value Proposition New Markets 5% 8% Addressable Medicines 5 Year Sales 1.3B Market Size Growth CAGR Healthcare & Industrials barrier packaging CAGR 2014-2020…
PMT 2018 Targets Sales Segment Margin 19.8% 12.3B 18.6% 21.1% 10.3B 17.5% 17.8% 18.9% 13.3B 9.9B 10.2B 10.5B 2013 2014 2015E 2018T 2013 2014 2015E 2018T Key Drivers Key Drivers 3B Organic Sales Growth Trajectory…
HOS Gold Driving Breakthrough Results HOS GOLD UPSIDE POTENTIAL Toolkit To Grow Faster 14 Enterprises Accountable To Expand Margin And More Profitably Than The Market & Peers 200- Profit () 400M* Velocity Product Development VPD…
Summary 3B Top Line Growth Through 2018 Growth Inflection 2.4B In Solstice LGWP Contracts 400M From UOP/HPS Sales Synergies 1B High Margin Sales From New Capacity HOS Investments Deliver 3.2B From New Product Innovations GOLD…
FINANCIAL REVIEW Tom Szlosek, Senior Vice President & CFO Financial Review Honeywell Investor Conference March 4, 2015 0
Key Messages Track Record Of Meeting And Exceeding Expectations - Delivered Again In 2014 - Outperformance Not Reflected In Current Valuation Confident In 2015 Outlook - EPS Guidance - Double-Digit Growth For The Sixth Consecutive…
2014 Results Vs. Guidance (B, except EPS) Sales Segment Margin EPS Free Cash Flow (Ex-Pension MTM) Up 4% Up 70 bps +12% +16% 3.8 - 3% Organic 5.35 - 4.0 40.0 - 16.6 - 5.55 40.4 16.9% 40.5 17.0% 5.56 3.9 39.1 16.3% 4.97…
Actual Performance Vs. External Guidance Meet Organic Sales Growth EPS (Ex-Pension MTM) Exceed Guidance Actual Guidance Actual 2010 1% - 4% 7% 12% - 19% 12% 2011 5% - 8% 8% 20% - 27% 35% 2012 4% - 6% 3% 5% - 11% 11%…
Performance Vs. 2014 Long-Term Targets Sales Segment Margin (B) 45.0 18.0% 41.0 16.0% 1.5B Of Tailwinds 3.0B Of Headwinds 16.6% 13.3% 40.3 30.0 2009 2014 2014T 2009 2014 2014T + Net M&A Above Targets + Sales…
Peer Comparison: Net Income/EPS (5-Year) Net Income CAGR EPS CAGR 16% 11% 11% 9% 17% 6% 9% 10% 7% 4% (1) Peer 1 Peer 2 Peer 3 Peer 4 HON Dil. Share Count (7%) (5%) (9%) (2%) 5% Note: Reflects 2009 2014 Fiscal Year…
5-Year TSR Performance Vs. Peers (Indexed) Total Shareholder Return 350 Honeywell Peer Average S&P 500 300 187% 250 109% 200 105% 150 100 2010 2011 2012 2013 2014 Peer Average Calculated Using Eight Industry…
Valuation Metrics Today 20.7 17.9 17.0 2015 P/E 15.0 HON 3rd Lowest Ratio Range Average HON 2.16 1.81 1.70 2015 PEG 1.42 HON 4th Lowest Ratio Range Average HON 34 23 21 2015 FCF Multiple HON 4th Lowest 14 Range…
2015 Planning Update HON Impact Topic What Were Seeing / Expecting Exposure - Neutral + Backlog Firm Despite CapEx Budget Reductions Oil Price Declines Medium Diverse Offering, Downstream Positioning Limits Exposure UOP/HPS…
Impact Of Oil Price Declines HON Impact Business What Were Seeing / Expecting Exposure - Neutral + Upstream UOP/HPS Exposure Limited (10-15%) (E&P) Low Backlog Firm Despite CapEx Budget Reductions First Derivative UOP/HPS…
Currency Impact Foreign Currency Exposure Hedging Strategy Long CCY Short CCY Broadened Approach In 2015 All Other - Premised On Strengthening USD 13% CZK 6% - Now Incorporating Translation Hedge INR EUR 7% 45% GBP 8% Focus…
2015 Financial Guidance Summary (B, except EPS) Sales Segment Margin EPS Free Cash Flow (Ex-Pension MTM) Up 1 - 2% Up 100- Up 7 - 11% Up 8 - 10% 4% Organic 130 bps 40.5 17.6% 5.95 4.2 40.3 16.6% 5.56 3.9 41.1 17.9% 6.15…
1Q15 Update Prior Outlook Current Outlook Whats Changed Sales Change (1%) - (2%) (2%) - (3%) Reported Sales Of 9.4B No Change To Organic Growth Organic 3 - 4% 3 - 4% F/X Headwinds Comml OE Shipment Timing Margin Change Up 110…
2018 Organic Growth Targets Sales Segment Margin (B) 46 18.5% 40.5 - - - 51 17.6% 40.3 20.0% 41.1 16.6% - 39.1 16.3% 17.9% 2013 2014 2015E 2018T 2013 2014 2015E 2018T Sales Headwinds 1-2B Over 5-Year Plan HOS Gold…
HON Growth Factors: Next 5 Years Unmatched Significant Platform Wins: 737MAX, 777X, C919 130B+ New Wins Upgrades Expand Growing Installed Base Aerospace Leading Aircraft Connectivity Revolution Global Turbo Penetration Up 10 pts…