Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll-Rand — Q4 2017 Earnings Presentation
33 slides from Trane Technologies's earnings presentation, Jan 31, 2018
Slide 1: Fourth-Quarter 2017 Results
Fourth-Quarter 2017 Results January 31, 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: 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 Differentiated products Margin improvement Reinvestment, dividends, Commitment to and services deliver and powerful cash flow share repurchas
Slide 4: Highlights
Highlights • Continue to execute our strategy with solid 2017 results and 2018 guidance • End markets remain healthy with strong organic bookings and revenue growth in Q4 across the businesses; market outlooks support continued growth in 2018 • Leading brands and services supported by business inves
Slide 5: Consistent Progress Against Key Metrics
Consistent Progress Against Key Metrics* 2017 Guidance Full Year 2017 Versus 2016 ~2% reported +5% reported Net Revenue $14,198M ~3% organic +5% organic Adj. Operating Margin* 12.2% to 12.6% 12.2% +10 bps Adj. Continuing EPS* $4.30 to $4.50 $4.51 +9% $1.1B to $1.2B $1.3B -2% Free Cash Flow* >100% ad
Slide 6: Key Takeaways Q4 2017
Key Takeaways Q4 2017 • Solid operating results – Adjusted continuing EPS of $1.02, up 21% year over year – Strong full year free cash flow of $1.3 billion (118% of adjusted net income) • Broad based strength in organic bookings and revenue – Industrial bookings up 12% with low-teens growth in Compr
Slide 7: Q4 2017 Strong Operational Performance Overcoming Headwinds
Q4 2017 Strong Operational Performance Overcoming Headwinds Net Revenue Adj. Operating Margin* Adjusted EPS* +21% $1.02 +8% +20 bps $3,618 $3,359 11.1% $0.84 +6% 10.9% Organic Q4 '16 Q4 '17 Q4 '16 Q4 '17 Q4 '16 Q4 '17 Highlights • Gains in volume, price and productivity offset by headwinds from mate
Slide 8: Q4 2017 Strong Organic Bookings Growth in Industrial and North America, Europe and China
Q4 2017 Strong Organic Bookings Growth in Industrial and North America, Europe and China HVAC Y-O-Y Climate C Y-O-Y Change in Organic* Bookings % Reported Organic* Commercial HVAC + high-single digits Change - N. America + low teens Q1 2016 1% 4% - low-single digits - L. America Q2 2% 3% - EMEA + hi
Slide 9: Q4 Organic Revenue Growth Led by North America and Climate Europe
C O N S O L I D AT E D R E S U LT S Q4 Organic Revenue Growth Led by North America and Climate Europe North America Europe Climate Climate Industrial Asia Industrial Climate Middle East/Africa Industrial Latin America Climate Climate Industrial Industrial Legend Revenue change Y-O-Y Q4 Reported Q4 O
Slide 10: Innovation, Operational Excellence and Productivity Remain Strong
ENTERPRISE Innovation, Operational Excellence and Productivity Remain Strong +20 bps 10.9% 1.0 (0.8) 0.6 (0.6) 11.1% (~50 bps) CHVAC Asia; China penetration of underserved markets 4Q 2016 Volume / Mix / FX Price/Material Inflation Productivity/Other Investment/Other 4Q 2017 Adjusted Operating Inflat
Slide 11: Q4 Broad-Based Revenue Growth; Material Inflation Headwinds
CLIMATE SEGMENT Q4 Broad-Based Revenue Growth; Material Inflation Headwinds Net Revenue Adj. Operating Margin* Adj. OI + D&A %** -70 bps +8% -80 bps 15.9% $2,760 15.2% $2,559 13.7% 12.9% +6% Organic Q4 '16 Q4 '17 Q4 '16 Q4 '17 Q4 '16 Q4 '17 Highlights • Broad-based revenue growth across all business
Slide 12: Q4 Solid Margin Expansion and Revenue Growth
INDUSTRIAL SEGMENT Q4 Solid Margin Expansion and Revenue Growth Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +160 bps +190 bps +7% 15.6% $858 $800 13.2% 13.7% +5% 11.6% Organic Q4 '16 Q4 '17 Q4 '16 Q4 '17 Q4 '16 Q4 '17 Highlights • Strong revenue growth in service and install, Industrial Pro
Slide 13: Strong Balance Sheet and Free Cash Flow
Strong Balance Sheet and Free Cash Flow $Mil YE 15 Q1 16 Q2 16 Q3 16 YE 16 Q1 17 Q2 17 Q3 17 YE 17 Cash 737 613 929 1,505 1,715 1,322 1,310 1,259 1,549 Debt 4,218 4,473 4,086 4,070 4,070 4,072 4,066 4,063 4,064 Net Debt 3,481 3,860 3,157 2,565 2,355 2,750 2,756 2,804 2,515 Free Cash Flow* 1,367 $1,3
Slide 14: Balanced Execution of Dynamic Capital Allocation Plan in 2017
Balanced Execution of Dynamic Capital Allocation Plan in 2017 • Strengthen the core business and extend product and market leadership 1 Invest for Growth • Invest in new technology and innovation • Strategic acquisitions of ~$460M spent / committed to date including Jan 2018 announcements 2 • Strong
Slide 15: Impact of The U.S. Tax Cuts and Jobs Act
Impact of The U.S. Tax Cuts and Jobs Act • U.S. Tax Legislation − ~$221M primarily non-cash net benefits related to U.S. tax legislation − Benefits from deferred tax liabilities revaluations and other items more than offset the “repatriation” tax • Revaluation of deferred tax liabilities from 35% ta
Slide 16: Guidance
am Ingersoll Rand Inspiring Progress™ Guidance
Slide 17: 2018 Forecast for End-Market Performance
2018 Forecast for End-Market Performance End Markets Organic Revenue Americas EMEA Asia Guidance Commercial HVAC Up mid-single digits Residential HVAC Up mid-single digits Transport Up low-single digits Compression-related & Up mid-single digits Industrial Products Golf / Utility / Consumer Up mid-s
Slide 18: 2018 Enterprise Guidance
2018 Enterprise Guidance FY Guidance Climate ‒ Revenue Reported 5.0% to 5.5% ‒ Revenue Organic 3.0% to 3.5% Adjusted Operating Margin 14.6% to 15.1% Industrial ‒ Revenue Reported 5.5% to 6.0% ‒ Revenue Organic 3.5% to 4.0% Adjusted Operating Margin 12.5% to 13.0% Total ‒ Revenue Reported 5.0% to 5.5
Slide 19: 2018 Guidance: Full-year Continuing Adjusted EPS $5.00 to $5.20
2018 Guidance: Full-year Continuing Adjusted EPS $5.00 to $5.20 Full Year Y-O-Y change in revenue • Reported 5.0% to 5.5% • Organic 3.0% to 3.5% EPS continuing $4.80 to $5.00 Restructuring – (add back) ($0.20) EPS continuing – adjusted $5.00 to $5.20 EPS – discontinued ($0.14) Share Count – Millions
Slide 20: Topics of Interest
am Ingersoll Rand Inspiring Progress™ Topics of Interest
Slide 21: Topics of Interest: China Direct Sales Market Penetration Strategy
Topics of Interest • China Direct Sales Market Penetration Strategy − Execution of strategy ahead of plan − Full year 2017 China HVAC organic bookings growing high-teens and organic revenues growing low-teens − Long-term market investments transforming go-to-market strategy in underserved China mark
Slide 22: Topics of Interest (Continued): 2018 Key Drivers of Margin Improvement
Topics of Interest (Continued) • 2018 Expected Key Drivers of Margin Improvement − Profitable volume growth in healthy markets − Improved pricing environment − China mix / price improvement − Continued productivity savings from investments, restructuring and the business operating system − Improved
Slide 23: Topics of Interest (Continued): Thermo King Performance
Topics of Interest (Continued) • Thermo King Performance − Thermo King business remains resilient − Low-single digit increase in 2017 total revenues despite decline in North American Trailer market w/ margins holding at a high rate − Growth in APU, worldwide truck, aftermarket and Asia offsetting No
Slide 24: Topics of Interest (Continued): Acquisitions
Topics of Interest (Continued) • Acquisitions − Approximately $460M spent or committed to date including January 2018 announcements − Mitsubishi Electric Joint Venture (pending regulatory approval) • Marketing, sales, support and distribution of ductless and variable refrigerant flow (VRF) HVAC syst
Slide 25: 2018 Outlook: Continue to Execute a Consistent Strategy that Delivers Strong Shareholder Returns
2018 Outlook: Continue to Execute a Consistent Strategy that Delivers Strong Shareholder Returns 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 de
Slide 26: Appendix
am Ingersoll Rand Inspiring Progress™ Appendix
Slide 27: Q4 Organic Revenue Up 6% Year-Over-Year
Q4 Organic Revenue Up 6% Year-Over-Year Reported 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Climate 6% 2% 4% 2% 3% 3% 4% 3% 3% 3% 5% 7% 4% 8% 6% Industrial 7% (1%) (2%) 5% 2% (7%) (4%) Flat (4%) (4%) (1%) 1% flat 7% 2% Total 6% 2% 3% 3% 3% Flat 2% 2% 1% 2% 4% 6% 3% 8% 5% 2013 Organi
Slide 28: Q4 Revenue Up 8% and Organic Up 6%
Q4 Revenue Up 8% and Organic Up 6% Segment Revenue Change 8% Climate 6% 7% Reported Industrial Organic* 5% Geographic Revenue Change 7% N. America Organic +7% Americas 6% Europe, Middle 17% East, Africa 9% Reported Asia 3% Organic* -1% *Organic revenues excludes acquisitions and currency 28
Slide 29: Q4 2017 Year-Over-Year Revenue Change
Q4 2017 Year-Over-Year Revenue Change Reported Organic* Climate - Commercial HVAC + Mid-single + Mid-single - Residential HVAC + High-single + High-single - Transport + Low-teens + High-single Total Climate + 8% + 6% Industrial - Compression-related Products + Low-single + Low-single - Industrial Pr
Slide 30: Innovation, Operational Excellence and Productivity Remain Strong
ENTERPRISE Innovation, Operational Excellence and Productivity Remain Strong +20 bps 1.0 (0.8) 0.6 (0.6) 10.5% 10.7% (~50 bps) CHVAC Asia; China penetration of underserved markets 4Q 2016 Volume / Mix / FX Price/Material Inflation Productivity/Other Investment/Other 4Q 2017 GAAP Operating Inflation
Slide 31: Non-GAAP Measures Definitions
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 re
Slide 32: 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
Slide 33: Ingersoll Rand
Li Ingersoll Rand.