Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll Rand — Vertical Research Partners Industrials Conference 2017
33 slides from Trane Technologies's conference presentation, September 2017
Slide 1: Vertical Research Partners Industrials Conference September 2017
Vertical Research Partners Industrials Conference September 2017
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 sh
Slide 3: Ingersoll Rand Overview
Ingersoll Rand Overview Company Background Company Background Trades on NYSE • 145 years old - first • Incorporated in Swords, • 12th oldest continuously incorporated in 1905 Ireland listed company on NYSE • $13.5 billion in revenues • North American HQ in (since 1906) Davidson, NC • ~$23B Market ca
Slide 4: 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 5: Diversified Business With High Aftermarket Mix
Diversified Business With High Aftermarket Mix By End Markets Adjusted Operating Margins By Segment Non-Res 31% 11.9 Building 11.0 11.4 % Industrial (N. America) % % 23% 9.6% Non-Res Building 16% Climate (Overseas) 77% 2013 2014 2015 2016 Residential, 14% (N. America) By Geography Industrial 18% Pro
Slide 6: Climate Segment: Industry Leading Portfolio of Brands and Services
Climate Segment: Industry Leading Portfolio of Brands and Services $10.5B Group of Three HVAC and Transport Refrigeration Businesses Commercial HVAC Residential HVAC Transport Refrigeration 6
Slide 7: Climate Segment: Diversifying for Resilient Performance
Climate Segment: Diversifying for Resilient Performance Business Units Regional Mix Revenue Streams 4% Latin America Transport Commercial 11% Asia Pacific Refrigeration HVAC 30% Parts and Services Equipment 14% Europe, Middle East, Africa $10.5B Residential HVAC 71% North America 70% Equipment Comme
Slide 8: Industrial Segment: Industry Leading Portfolio of Brands and Services
Industrial Segment: Industry Leading Portfolio of Brands and Services A $3.0B group of five growth-oriented Strategic Business Units Industrial Material Fluid Small Electric Power Tools Compressors Handling Management Vehicles Leading Brands 7
Slide 9: Industrial Segment: Balanced Profile with Resilient Aftermarket
Industrial Segment: Balanced Profile with Resilient Aftermarket Business Units Regional Mix Revenue Streams 3% India Small Electric 5% Latin America Industrial Vehicles Comp. 18% Europe, ME, Africa 37% Parts and Service 19% Asia Pacific $3.0B Industrial Engineered Products1 Comp. Equipment 63% 55% N
Slide 10: Why Invest in Ingersoll Rand?
Why Invest in Ingersoll Rand? Multi-year top-tier • Business Operating System enables 2017-2020 performance record strong execution of company’s strategy Targets* Revenue CAGR • Our people think big and bold to ~ 4 - 4.5% Inspired excellence create impactful products and services and innovation that
Slide 11: 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 11
Slide 12: Operationally Integrated Company Maximized for Future Growth
Operationally Integrated Company Maximized for Future Growth Past Present Organic Growth Steady Leading Performance Profitable Top-Tier Innovation Measured Transformational Operational Excellence Beginning Core Competency Culture Siloed Collaborative Sustainability Obligation Growth Driver 12
Slide 13: Significant Ongoing Business Investments Support Top-Tier Growth and Profitability
Significant Ongoing Business Investments Support Top-Tier Growth and Profitability Business Investments Key Examples ● New low-global warming potential ~15% refrigerants ● Digital / controls / wireless technology ● Channel expansion ● Parts and services capabilities / offerings ● Sales and services
Slide 14: Continuing 146-Year Trend of Transforming Everyday Life through Innovation
Continuing 146-Year Trend of Transforming Everyday Life through Innovation More than 200 Products Introduced in Last 3 Years Product portfolio refreshed since 2012 85% Ingersoll Rand Trane Series E™ Club Car Thermo King Next Generation CenTraVac Onward SLXi Key emerging markets R-Series innovation s
Slide 15: Widely Recognized for Global Citizenship, Sustainability and Employee Engagement
Widely Recognized for Global Citizenship, Sustainability and Employee Engagement Citizenship Sustainability Employee Engagement Manufacturing Industry Top Quartile Corporate Responsibility magazine 2016 Dow Jones Sustainability Manufacturing 100 Best Corporate Citizens World and North America Indust
Slide 16: Executing a Consistent Strategy that Delivers Profitable Growth and Powerful Cash Flow
Executing a Consistent Strategy that Delivers Profitable Growth and Powerful Cash Flow 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Differentiated products Margin improvement Reinvestment, dividends, Commitment to and services deliver and powerful ca
Slide 17: Leading Brands and Business Operating System Driving Top-Tier Revenue and Earnings Growth
Leading Brands and Business Operating System Driving Top-Tier Revenue and Earnings Growth In Billions Organic Revenue Adjusted EPS $15 $6.00 $14 3% $5.00 16% CAGR CAGR $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2013 2014 2015 2016 2013 2014 2015 2016 Cash Flow ROIC Adjusted Operating Margin 30% 1
Slide 18: Business Model Delivers Powerful Free Cash Flow
Business Model Delivers Powerful Free Cash Flow Free Cash Flow ($ millions) $1,345** $1,151* ~$1,200 $985** $810 $862 Post Security Spin 2013 2014 2015 2016 2017F Cash flow stable and recurring: $4.3B 2013 - 2016 * Reported – includes Allegion security business and excludes restructuring and one-tim
Slide 19: Capital Deployment 2013-2016: Focused on Maximizing Shareholder Value
Capital Deployment 2013-2016: Focused on Maximizing Shareholder Value $6.3 Billion Capital Share Mergers & Dividends Expenditures Buyback Acquisitions • ~$900M in Capex • $1.2B in dividends paid • $3.1B • Spent $981 million – 17% CAGR • 53 million shares on 10 acquisitions • Long history of repurcha
Slide 20: Strategy and Execution Deliver Differentiated Shareholder Returns
Strategy and Execution Deliver Differentiated Shareholder Returns Total Shareholder Returns Outperformed S&P 500 Index, S&P Industrials and Peer Average 600% 500% ~500% 400% Ingersoll Rand 300% ~280% Peer Average 200% ~190% S&P 500 ~160% 100% S&P Industrials 0% (100%) 2009 2010 2011 2012 2013 2014 2
Slide 21: Ingersoll Rand Targets 2017 to 2020
Ingersoll Rand Targets 2017 to 2020* 2017 to 2020 Targets Revenue Growth 4% to 4.5% CAGR Operating Income Growth ~10% CAGR Operating Margins ~14.5% to 15% in 2020 EPS Growth 11% to 13% CAGR Based on ~22% tax rate Business Unit Operating Margins - Climate ~16.5% in 2020 - Industrial ~15% in 2020 Cash
Slide 22: Strong Free Cash Flow of ~$4 Billion 2018 to 2020 Drives Dynamic Capital Allocation
Strong Free Cash Flow of ~$4 Billion 2018 to 2020* Drives Dynamic Capital Allocation Strong Cash Flow Business Investment D&A CAPEX Free Cash Flow 1% - 2% of W/C Revenues FCF >= Maintain W/C Net Income 2018–2020 at 3-4% of Earnings Revenues 4% to 4.5% 2018-2020 • Competitive dividend; Revenue CAGR
Slide 23: Dynamic Capital Allocation Focused on Delivering High Returns
Dynamic Capital Allocation Focused on Delivering High Returns; 2017 Plan to deploy ~$410M for Dividends and $1.5B for Share Repurchase and Acquisitions • Strengthen the core business and extend product & market leadership 1 Invest for Growth • Invest in new technology and innovation • Acquire produc
Slide 24: M&A Framework – Clear Criteria
M&A Framework – Clear Criteria Business Criteria Financial Criteria Strong position – no major gaps to fill IRR > WACC Strengthening our core or extend leadership in product, channel or technology ROIC: Accretive < 3 years Must be clear strategic fit for Ingersoll Rand EPS accretive < 3 years and cl
Slide 25: Why Invest In Ingersoll Rand?
Why Invest In Ingersoll Rand? 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 excellence and improving
Slide 26: Appendix
Appendix am Ingersoll Rand Inspiring Progress™
Slide 27: Continuing Top-Tier Performance Expected 2017 to 2020
Continuing Top-Tier Performance Expected 2017 to 2020 --- as of July 26, 2017 Not an Update Organic Revenue Growth Adjusted Operating Income Growth ~10% ~4% to 4.5% CAGR CAGR ~4.5% ~7% 2017 Guidance 2017-2020 2017 Guidance 2017-2020 Adjusted Operating Margin % Adjusted EPS Growth ~11% to 13% ~14.5%
Slide 28: Climate Segment: Continued Growth and Margin Expansion
Climate Segment: Continued Growth and Margin Expansion --- as of July 26, 2017 Not an Update Revenue Growth* Margin Expansion* Key Margin Drivers ~4% 2017 Adj. 2020 CAGR ~14.9% ~16.5% • New product development ~$12.4B margin improvement ~$11.1B • Productivity through + ~160 bps operational excellenc
Slide 29: Industrial Segment: Solid Growth and Margin Expansion
Industrial Segment: Solid Growth and Margin Expansion --- as of July 26, 2017 Not an Update Revenue Growth* Margin Expansion* Drivers Revenue drivers ~4% 2017 Adj. 2020 • Compressor Technologies & Services: CAGR services, oil-free compressors and $3.3B ~11.6% ~15% energy efficient equipment • Indust
Slide 30: Our Climate Businesses
Our Climate Businesses COMMERCIAL HVAC Air conditioning systems, services and solutions. Innovative solutions geared toward making high performance buildings reliable and safe, as well as healthy, comfortable and efficient RESIDENTIAL HVAC Heating, cooling, thermostat controls and home automation fo
Slide 31: Our Industrial Businesses
Our Industrial Businesses COMPRESSION TECHNOLOGIES AND SERVICES SMALL ELECTRIC VEHICLES Rotary, centrifugal and reciprocating air compressors, Golf, commercial and utility and treatment products with Comprehensive multi- vehicles for transportation year service agreements, audits, parts, and accesso
Slide 32: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions. Organic bookings is defined as reported orders closed/completed in the current period adjusted for the impact of currency and acquisitions. • Currency impacts on net re
Slide 33: Non-GAAP Measures Definitions
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 liabili
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