Emerson Electric Company · NYSE:EMR
Emerson Electric — Q2 2008 Earnings Presentation
15 slides from Emerson Electric's earnings presentation, May 6, 2008
Slide 1: Second Quarter 2008 Earnings Conference Call
Second Quarter 2008 Earnings Conference Call May 6, 2008 Safe Harbor Statement Our commentary and responses to your questions may contain forward-looking statements, including our outlook for the remainder of the year, and Emerson undertakes no obligation to update any such statement to reflect late
Slide 2: Second Quarter 2008 Highlights
Second Quarter 2008 Highlights z Second quarter sales up 12% to $6.0 billion with increases in 4 of 5 business segments – Underlying sales* growth of 6%, led by strong international growth – Excludes European appliance motor and pump business z Operating profit margin* improved 100 basis points to 1
Slide 3: Emerson Second Quarter Results
Emerson Second Quarter Results ($Mil excl. EPS) 2007 2008 Î Up 12% Sales $5,394 $6,023 • Increases in 4 of 5 business segments • Underlying* up 6%; FX +4 pts; Acq/Div +2 pts • Excludes European appl. motor & pump sales of $111M in Q208 and $119M in Q207 Operating Profit* $830 $990 Î Up 19% OP%* 15.4
Slide 4: Underlying Sales Analysis Second Quarter Results
Underlying Sales Analysis Second Quarter Results United States 1% Europe 2% Asia 18% Latin America 18% Canada 2% Middle East/Africa 19% Total International 10% Underlying Sales* +6% Currency 4 pts Acquisitions/Divestitures 2 pts Consolidated Sales +12% U.S. Slowed as Expected; International Sales Re
Slide 5: Emerson Second Quarter Detail
Emerson Second Quarter Detail ($Mil) 2007 2008 Gross Profit $1,939 $2,242 Î Up 16% Î Driven by leverage on higher sales GP% 35.9% 37.2% volume, cost containment actions Î Includes a mark-to-market benefit SG&A% 20.5% 20.8% relating to commodity hedging Operating Profit* $830 $990 Î Up 19% OP%* 15.4%
Slide 6: Cash Flow & Balance Sheet
Cash Flow & Balance Sheet ($Mil) 2007 2008 Operating Cash Flow $548 $748 Î Up 37% Î Driven by higher earnings and good working capital improvement Capital Expenditures ($155) ($179) Free Cash Flow* $393 $569 Î Up 45% Cash Flow/Total Debt 53.3% 67.0% Î Continued strong performance Inventories $2,388
Slide 7: Business Segment Earnings Second Quarter Results
Business Segment Earnings Second Quarter Results ($Mil) 2007 2008 Business Segment EBIT* $811 $925 Î Up 14% – Volume leverage and cost Margin 14.6% 14.9% containment programs – Price increases offset by material and other inflation Diff. In Accounting Methods $52 $57 Î Up $5 million Corporate & Othe
Slide 8: Process Management Second Quarter Results
Process Management Second Quarter Results ($Mil) 2007 2008 Sales $1,345 $1,597 Î Up 19% – Underlying* up 16%; FX +5 pts; Acq/Div -2 pts • U.S. up 13%, Asia up 20%, Europe up 12%, Middle East/Africa up 20% – Energy Sectors remain very favorable EBIT $239 $286 Î Up 20% Margin 17.7% 17.9% – Investments
Slide 9: Industrial Automation Second Quarter Results
Industrial Automation Second Quarter Results ($Mil) 2007 2008 Sales $1,057 $1,176 Î Up 11% – Underlying* up 5%; FX +6 pts • U.S. up 4%, Asia up 16%, Europe up 3% EBIT $151 $171 Î Up 13% Margin 14.3% 14.5% – Margin up 20 basis points – Primarily volume leverage Restructuring $3 $3 EBIT Excl. Rest.* $
Slide 10: Network Power Second Quarter Results
Network Power Second Quarter Results ($Mil) 2007 2008 Sales $1,191 $1,520 Î Up 27% – Underlying* up 11%; Acq +12 pts, FX +4 pts • U.S. up 10%, Asia up 22%, Europe down 1% – Strength from China power systems, UPS and precision cooling businesses EBIT $146 $187 Î Up 28% Margin 12.3% 12.3% – Core busin
Slide 11: Climate Technologies Second Quarter Results
Climate Technologies Second Quarter Results ($Mil) 2007 2008 Sales $945 $956 Î Up 1% – Underlying* down 2%; FX +3 pts • U.S. down 3% • Europe down 14% driven by the decline of heat pump compressor sales • Asia up 10%, with penetration gains achieved EBIT $141 $142 Î Flat Margin 15.0% 14.9% – Margin
Slide 12: Appliance and Tools Second Quarter Results
Appliance and Tools Second Quarter Results ($Mil) 2007 2008 Sales $1,014 $956 Î Down 6% – Underlying* down 6%; Acq/Div -1 pt; FX +1 pt – U.S. down 8%, Europe up 3%, Asia up 25% – Excludes European appl. motor & pump sales of $111M in Q208 and $119M in Q207 EBIT $134 $139 Î Up 5% Margin 13.2% 14.6% –
Slide 13: European Appliance Motor & Pump Business
European Appliance Motor & Pump Business z Actively pursuing sale of this business – Follows strategic initiative to divest certain slower growth businesses – Annual sales ~$450M and low single digit profitability – Results for this business reclassified from the Appliance and Tools business segment
Slide 14: Summary and Outlook
Summary and Outlook z Strong second quarter – Underlying sales* growth of 6% driven by international strength – Operating profit margin* improvement of 100 basis points – Order trends are in line with expectations – Good first half of 2008 z Expect Full Year Underlying Sales Growth* of 5% to 7% and
Slide 15: Reconciliation of Non-GAAP Financial Measures
Emerson Business Summary Reconciliation of Non-GAAP Financial Non-GAAP Measures Expected FY 2008 Sales Growth % Underlying Sales * 5% - 7% Currency / Acq. / Div. ~ 6 pts Total Sales 11% - 13% This information reconciles each non-GAAP measure in the presentation with the most directly comparable GAAP