Trane Technologies Plc · NYSE:TT
Trane Technologies — Credit Suisse 6th Annual Industrials Conference 2018
38 slides from Trane Technologies's conference presentation, November 2018
Slide 1: Credit Suisse 6th Annual Industrials Conference
Credit Suisse 6th Annual Industrials Conference November 2018
Slide 2: Safe Harbor
Safe Harbor This presentation includes “forward-looking statements” which are statements that are not historical facts, including statements that relate to the mix of and demand for our products; performance of the markets in which we operate; our share repurchase program including the amount of sha
Slide 3: A Global Leader in Energy Efficiency and Productivity
A Global Leader in Energy Efficiency and Productivity Two Segments Key Metrics (Revenues 2017) Manufacturing locations 53 worldwide Employees ~46,000 Industrial $3.0B $11.2B Climate Market cap ~$23B # of countries we sell products 100+ 3
Slide 4: Diversified Business With High Aftermarket Mix
Diversified Business With High Aftermarket Mix Segment Distribution Regional Mix Revenue Streams 4% Latin America Industrial 13% Asia Pacific 33% Parts and Services Europe, Middle 15% East, Africa $14.2B 68% North America 67% Equipment Climate All figures are FY 2017. 4
Slide 5: Leading Brands and Market Positions
Leading Brands and Market Positions Commercial HVAC Residential HVAC Transport Refrigeration ● World leader in HVAC ● Leader in heating and air ● World leader in refrigerated conditioning solutions transportation Industrial and Process Fluid Handling Golf and Utility Vehicles ● Leader in compression
Slide 6: Climate Segment: Diversified and Resilient Performance
Climate Segment: Diversified and Resilient Performance Segment Mix Regional Mix Revenue Streams 4% Latin America Transport Commercial 11% Asia Pacific Refrigeration HVAC 31% Parts and Services Equipment 14% Europe, Middle East, Africa $11.2B Residential HVAC 71% North America 69% Equipment Commercia
Slide 7: Industrial Segment: Diversified and Resilient Performance
Industrial Segment: Diversified and Resilient Performance Business Units Regional Mix Revenue Streams 3% India Small Electric 5% Latin America Industrial Vehicles Comp. 17% Europe, ME, Africa 37% Parts and Service 19% Asia Pacific $3.0B Industrial Products1 Engineered Comp. Equipment 63% 56% North A
Slide 8: Robust Financial Model Drives Powerful Cash Flow
Robust Financial Model Drives Powerful Cash Flow (2014 – 2017) 1. Attractive, diversified 2. Leading brands, market positions end markets – outgrowing market rates $4.5 billion free cash flow over the last 4 years 5. Investing for growth 3. Focused on margin and profitability expansion (growth / op.
Slide 9: Driving Sustained Growth and Operating Margin Improvement
Driving Sustained Growth and Operating Margin Improvement In Billions Revenue Adjusted Continuing EPS $16 $6.00 $15 6% $5.00 11% CAGR CAGR $14 $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2014 2015 2016 2017 2014 2015 2016 2017 FCF% of Adjusted Net Income Adjusted Operating Margin 140% 18% Target 1
Slide 10: Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value
Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value (2014 – 2017) $6.6 Billion Capital Share Mergers & Dividends Expenditures Buyback Acquisitions • ~$900M Capex • ~$1.4B dividends paid • $2.9B • ~$1.4B on 22 • ~22% CAGR dividend • 44 million shares acquisitions through p
Slide 11: Ingersoll Rand 2020 Targets
Ingersoll Rand 2020 Targets* Year-End 2017 to 2020 Targets Revenue Growth ~4% to ~4.5% CAGR Adjusted Operating Margins ~14.5% to ~15% in 2020 Adjusted Continuing EPS Growth ~11% to ~13% CAGR Based on ~22% tax rate Free Cash Flow (% Net Income) >=1.0 times Balanced Cap Deployment of Excess Cash ~100%
Slide 12: Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow
Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flo
Slide 13: Global Mega Trends Play to Our Strengths
Global Mega Trends Play to Our Strengths Global Mega Trends Our Strengths • Climate change • Reduce energy demand and greenhouse gas emissions • Urbanization • Improve efficiency in: • Natural resource scarcity – Buildings • Digital connectedness and – Industrial processes technologies – Transportat
Slide 14: Significant Ongoing Business Investments Support Growth and Profitability
Significant Ongoing Business Investments Support Growth and Profitability Business Investments Key Examples ● ~70 major new products throughout the world in 2017 ~20% ● New low-global warming potential refrigerants ● Digital / controls / wireless technology ● Channel expansion ● Parts and services c
Slide 15: Growth and Profitability Opportunities from Ongoing Business Investments
Growth and Profitability Opportunities from Ongoing Business Investments Subset of Incremental Opportunities Contributing to 2020 Targets* ~$200M ~$400M ~$300M ~$100M Climate Variable Refrigerant Flow Energy Services Digital Customer Experience Auxiliary Power Unit ~$40M Operating Income ~$100M ~$17
Slide 16: Business Operating System Delivers Results
Business Operating System Delivers Results 1 Drive innovation and productivity 2 Proven & unique system to accelerate profitable growth 3 Committed to sustainability and energy efficiency 4 Focus on employee engagement 16
Slide 17: Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion
Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement Citizenship Sustainability Diversity and Inclusion 2017 Dow Jones Sustainability World and North America for 7th consecutive year Employee Engagement Fortune World’s Most Admired list for 6th ye
Slide 18: Third-Quarter 2018 Results
Third-Quarter 2018 Results October 24, 2018
Slide 19: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurcha
Slide 20: Q3 2018: Continued Strong Financial Performance
Q3 2018: Continued Strong Financial Performance • Continued strong growth − Broad-based organic order and revenue growth across virtually all product categories / segments / geographies in healthy end markets • Improving profitability − 100 bps adjusted operating margin expansion, 50 bps Climate, 19
Slide 21: Q3 2018 Strong Organic Bookings and Revenue Growth Continues in Both Segments
Q3 2018 Strong Organic Bookings and Revenue Growth Continues in Both Segments Organic* Y-O-Y Change Bookings Revenues Commercial HVAC + + CHVAC Organic EMEA Bookings: - N. America + + - L. America + + Europe MEA + - - EMEA - + - Asia + + (Strong Europe growth offset by decline in Residential HVAC +
Slide 22: Strong Growth Sustained in Healthy End Markets
Strong Growth Sustained in Healthy End Markets • Global HVAC markets remain positive – strong service / equip revenue and bookings growth across virtually all regions • N.A. CHVAC market growth robust – led by education with strength across all major Commercial verticals HVAC • EMEA CHVAC – continue
Slide 23: Strong Growth Sustained in Healthy End Markets
Strong Growth Sustained in Healthy End Markets • Global trailer mkt remains strong – robust bookings in healthy end markets • Strong N.A. APU penetration / growth continues Transport • Overall, N.A., EMEA and Asia markets showing continued growth • Global Transport business diversified and resilient
Slide 24: 2018 Strong Financial Performance Continues
2018 Strong Financial Performance Continues • Continued robust EPS growth – Adjusted continuing EPS of $1.75, up 22% year over year driven by gains in both Climate and Industrial – Raised adjusted continuing EPS guidance to $5.55 - $5.60 • Strong Q3 organic revenue and bookings growth in both segmen
Slide 25: Q3 2018 Strong Revenue Growth and Margin Expansion Delivering 22% Adj. Cont. EPS Growth
ENTERPRISE Q3 2018 Strong Revenue Growth and Margin Expansion Delivering 22% Adj. Cont. EPS Growth Net Revenue Adj. Operating Margin* Adj. Continuing EPS* +10% +100 +22% Organic bps $4,031 $1.75 $3,671 15.1% 14.1% $1.44 +10% Q3 '17 Q3 '18 Q3 '17 Q3 '18 Q3 '17 Q3 '18 Highlights • Strong, broad-based
Slide 26: Strong Operating Performance in Both Segments Driving Adjusted Continuing EPS Higher by 22%
ENTERPRISE Strong Operating Performance in Both Segments Driving Adjusted Continuing EPS Higher by 22% +$0.31 $0.07 ($0.02) $0.05 $1.75 $1.44 $0.21 ($0.04) Tax rate $0.02 Interest Q3 2017 Climate Industrial Other Share Count Q3 2018 Adjusted Adjusted Continuing EPS* Continuing EPS* Highlights • EPS
Slide 27: Strong Volume Growth and Positive Price vs Material Inflation Spread Driving 100 bps Margin Expansion
ENTERPRISE Strong Volume Growth and Positive Price vs Material Inflation Spread Driving 100 bps Margin Expansion +100 bps 14.1% 1.3 0.1 flat (0.4) 15.1% Q3 2017 Vol / Mix / FX / Acq Price / Material Productivity / Other Investment / Other Q3 2018 Adjusted Operating Inflation Inflation Adjusted Opera
Slide 28: Q3 Continued Strong, Broad-Based Revenue Growth and Improved Margins
CLIMATE SEGMENT Q3 Continued Strong, Broad-Based Revenue Growth and Improved Margins Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +10% +50 +30 Organic bps bps $3,239 $2,939 18.6% 18.9% 16.5% 17.0% +10% Q3 '17 Q3 '18 Q3 '17 Q3 '18 Q3 '17 Q3 '18 Highlights • Strong revenue growth – across regi
Slide 29: Q3 Strong Margin Expansion and Revenue Growth
INDUSTRIAL SEGMENT Q3 Strong Margin Expansion and Revenue Growth Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +9% +190 +180 Organic bps bps $792 17.1% $731 15.3% 14.6% 12.7% +8% Q3 '17 Q3 '18 Q3 '17 Q3 '18 Q3 '17 Q3 '18 Highlights • Strong revenue growth in equipment and services with partic
Slide 30: Continued Execution of Balanced Capital Allocation Strategy
Continued Execution of Balanced Capital Allocation Strategy • Strengthen the core business and extend product & market leadership 1 Invest for Growth • Invest in new technology and innovation • Strategic acquisitions pipeline primarily focused on technology, product and channel; pipeline remains act
Slide 31: Topics of Interest
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Slide 32: Topics of Interest
Topics of Interest • Effectively Managing Tariffs and Inflation − We execute an in-region, for-region sourcing and manufacturing strategy which limits our direct tariff exposure − Sec. 232 and sec. 301 list 1, 2 and 3 tariffs, estimated China retaliatory impacts and their derivative inflationary imp
Slide 33: Topics of Interest (continued)
Topics of Interest (continued) • 2019 Visibility − Healthy end markets and backlog heading into 2019 − Overall, good economic indicators for major markets and geographies − Expect revenue growth to exceed GDP rates through consistent strategy execution and operational excellence to drive solid lever
Slide 34: Summary: Expect Continued Strong Financial Performance
Summary: Expect Continued Strong Financial Performance Strategy ● Strategy tied to attractive end markets supported by global mega trends Brands ● Franchise brands and businesses with leadership market positions Innovation ● Sustained business investments delivering innovation and growth, operating
Slide 35: Appendix
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Slide 36: Q3 Organic Bookings Up 11%; Revenue Up 10% Year-Over-Year
Q3 Organic Bookings Up 11%; Revenue Up 10% Year-Over-Year Organic* 2016 2017 2018 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Climate 6% 6% 4% 10% 6% 6% 3% 5% 7% 5% 11% 17% 12% Industrial (5%) (5%) (1%) (1%) (3%) 9% 5% 5% 12% 8% 5% 8% 7% Total 4% 3% 3% 7% 4% 7% 4% 5% 8% 6% 9% 15% 11% Organic* 20
Slide 37: Q3 Non-GAAP Measures Definitions
Q3 Non-GAAP Measures Definitions Organic bookings is defined as reported orders closed/completed in the current period adjusted for the impact of currency and acquisitions. Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions. • Currency impacts on net
Slide 38: Q3 Non-GAAP Measures Definitions
Q3 Non-GAAP Measures Definitions Working capital measures a firm’s operating liquidity position and its overall effectiveness in managing the enterprises’ current accounts. • Working capital is calculated by adding net accounts and notes receivables and inventories and subtracting total current liab
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