Emerson Electric Company · NYSE:EMR
Emerson Electric — Q3 2021 Earnings Presentation
28 slides from Emerson Electric's earnings presentation, Aug 4, 2021
Slide 1: Emerson Q3 Earnings Conference Call
Emerson Q3 Earnings Conference Call August 4, 2021 Emerson recently released the PAC Edge industrial edge control platform designed to help discrete and hybrid manufacturers accelerate digital transformation projects by enabling users to quickly create and scale up performance-improving applications
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements in this presentation and our commentary and responses to questions that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later develop
Slide 3: ESG Moment: Greening by Emerson
ESG Moment: GREENING BY Emerson Emerson and PureCycle Technologies sign multi- year global agreement for digital technologies and services to enable large scale recycling of a very common, but rarely recycled, type of plastic Consumer Usage Emerson’s Chief Sustainability Officer, Mike Train with Dus
Slide 4: ESG Moment: Greening with Emerson
ESG Moment: GREENING WITH Emerson Collaboration with the Department of Energy (DOE) at The Helix Innovation Center is advancing next generation HVACR technologies and applications Driving residential integrated heat pump into expanded Domestic hot water geographies and applications Energy storage (P
Slide 5: Q3 Performance and Operations Update
Q3 Performance and Operations Update
Slide 6: Q3 2021 results – Strong operating performance as end markets recover
Q3 2021 results – Strong operating performance as end markets recover, 2020 EPS 2021 volume returned, and cost reset savings GAAP $0.67 55% $1.04 flowed through ADJ* $0.80 36% $1.09 Orders and sales continued to improve, reflecting ongoing recovery of key end NET SALES markets: underlying sales* up
Slide 7: Q3 2020 to Q3 2021 adjusted EPS bridge
Q3 2020 to Q3 2021 adjusted EPS bridge - Strong operational performance slightly offset by other headwinds $0.33 $0.01 $1.09 Share Repurchase $0.80 ($0.01) ($0.04) Pension $0.01, Stock Comp ($0.02) Tax ($0.10), Operations FX $0.06 Q3 ’21 ADJ EPS* Q3 ’20 ADJ EPS* ($0.05) $0.34 Non-Operating Operation
Slide 8: Third quarter P&L summary
Third quarter P&L summary ($M, EXCEPT EPS) 2020 2021 Change Sales $3,914 $4,697 20% Underlying sales growth 15%* Gross profit $1,618 $1,982 Primarily driven by leverage and cost reductions, despite material cost headwinds in Climate % of sales 41.3% 42.2% 90 bps Technologies SG&A expense ($934) ($1,
Slide 9: Earnings & cash flow
Earnings & cash flow ($M) 2020 2021 Change Adjusted Segment EBIT* $655 $921 40% Volume leverage and cost reset benefits drove strong margin expansion, somewhat offset by material cost % of sales* 16.8% 19.6% 280 bps headwinds in Climate Technologies business Stock compensation ($51) ($66) ($15) Corp
Slide 10: Q3 2021 Emerson Automation Solutions
Q3 2021 Emerson Automation Solutions REPORTED NET SALES UNDERLYING SALES CHANGE VS. PY Americas 9% 14% Europe 6% Asia, Middle East & Africa 7% $2,947M $2,589M Automation Solutions 8% Underlying Sales* 8% FX Impact 4 Pts 15.1% Adj EBIT%* 18.3% Acq Impact 2 Pts 20.4% Adj EBITDA%* 23.5% Reported Net Sa
Slide 11: Q3 2021 Emerson Commercial & Residential Solutions
Q3 2021 Emerson Commercial & Residential Solutions REPORTED NET SALES UNDERLYING SALES CHANGE VS. PY Americas 29% 32% Europe 37% Asia, Middle East & Africa 25% $1,327M $1,757M Commercial & Residential Solutions 29% Underlying Sales* 29% FX Impact 3 Pts 20.0% Adj EBIT%* 21.7% Acq Impact - 24.7% Adj E
Slide 12: Assembly Shortages
Supply & demand imbalances continue to drive inflation and availability headwinds impacting global operations COMMODITY INFLATION ELECTRONICS SUPPLY LABOR AVAILABILITY North America Cold-Rolled Steel Pricing Key Electronics Partner’s Forecasted Shortages Labor Constraints Most Acute in US $ / Ton 2,
Slide 13: Operations
Emerson Supply Chain & Operations teams have adapted and excelled in a dynamic environment to continue meeting our customers’ needs QUALIFYING ALTERNATE INCREASING SUPPLIER LEVERAGING SECONDARY SUPPLY CHAIN SOURCES CAPACITY SOURCES Transferred 250 tools to 5 different Purchased second tool to Ramped
Slide 14: Guidance Update and 2021E Outlook
Guidance Update and 2021E Outlook
Slide 15: Updated 2021E guidance
Updated 2021E guidance May 5, 2021 August 4, 2021 Net Sales Growth 6% - 9% 9% - 10% Acquisition 1 pt 1 pt FX 2 pts 3 pts Underlying Sales* Growth 3% - 6% 5% - 6% PROFIT ITEMS: Automation Solutions (1%) - 1% Flat - 1% Commercial & Residential Sols. 12% - 14% 15% - 16% • Price-cost unchanged at Adj EB
Slide 16: Emerson trailing three month underlying orders vs. prior year
Emerson trailing three month underlying orders vs. prior year 60% Apr May Jun 55% Automation Solutions 2% 8% 17% 50% Commercial & Residential Solutions 39% 51% 43% 45% 40% Emerson 14% 21% 26% 35% 30% 25% 20% 15% 10% 5% 0% (5%) (10%) (15%) (20%) (25%) Orders data includes the Valves & Controls acquis
Slide 17: Emerson underlying sales growth outlook
Emerson underlying sales growth outlook 2018: 8% 2019: 3% 2020: (8%) 2021E: 5% - 6% 20% $17.4B $18.4B $16.8B ~$18.4B 15% 15% 10% 7%-11% 8% 8% 8% 7% 4.5% 4% 5% 3% 2% 2% flat 0% (2%) (5)% (7%) (10)% (9%) (15)% (15%) (20)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Note: 2018-2020 sales dollars a
Slide 18: 2021E Sales Outlook
2021E Sales Outlook: Global 2021E: 5% - 6% Automation Sol flat - 1% Automation Solutions expects to see Commercial & Res Sol 15% - 16% continued momentum in modernization The Americas and site-level spend, especially in the Automation Sol (~1%) Americas. Commercial & Residential Commercial & Res Sol
Slide 19: Automation Solutions project funnel and decarbonization opportunities
Automation Solutions traditional project funnel roughly flat since February - Addition of Decarbonization opportunities demonstrates increased focus and investment in this emerging space Additional Electrification $6.4B $0.4B $6.7B Opportunity $6.3B $1.5B (120 projects) (300 projects) (190 Projects)
Slide 20: Cost reset plan and peak profitability goals
Execution of our robust cost reset plan, combined with the ongoing market rebound, enables achieving peak profitability goals AND gives Emerson the headroom for accelerated critical technology investment EMERSON COST Spend Savings STRONG PROGRESS 2023 Targets On Track RESET PLAN 2019-2023 $600M $650
Slide 21: Q&A
Q&A § EMERSON
Slide 22: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) Comm & Res Q3 2021 Underlying Sales Change Auto Solns Solns Emerson Reported (GAAP) 14% 32% 20% (Favora
Slide 23: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) EBIT Q3 FY20 Q3 FY21 Change Pretax earnings (GAAP) $ 458 $ 784 71% Interest expense, net 45 37 (8)% Ear
Slide 24: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) Q3 Earnings Per Share Q3 FY20 Q3 FY21 Change Earnings per share (GAAP) $ 0.67 $ 1.04 55% Restructuring
Slide 25: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) Business Segment EBIT Q3 FY20 Q3 FY21 Change Pretax earnings (GAAP) $ 458 $ 784 71% Corp. items and int
Slide 26: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) Corporate and Other Q3 FY20 Q3 FY21 Change Corporate and other (GAAP) $ (22) $ (33) $ (11) Restructurin
Slide 27: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) FY2021E FY2021E May August Cash Flow Q3 FY20 Q3 FY21 Change Guidance Guidance Operating cash flow (GAAP
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures This information reconciles non-GAAP measures (denoted with a *) with the most directly comparable GAAP measure. (dollars in millions, except per share amounts) Emerson FY 2020 Underlying Sales Q1 Q2 Q3 Q4 FY20 Sales (GAAP) -% (9)% (16)% (8)% (9)% FX / Acq / Div -
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