64 slides from Johnson Controls International's investor day presentation, Jun 13, 2016
Slide 1: Johnson Controls Power Solutions Analyst Day
Johnson Controls Power Solutions ANALYST DAY June 13, 2016
Slide 2: Legal Disclosures
LEGAL DISCLOSURES NO OFFER OR SOLICITATION This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdicti
Slide 3: Legal Disclosures / Forward-Looking Statements
L E G A L D I S C L O S U R E S / F O RWA R D L O O K I N G S TAT E M E N T S PARTICIPANTS IN THE SOLICITATION Johnson Controls, Tyco and certain of their respective directors, executive officers and employees may be considered participants in the solicitation of proxies in connection with the propo
Slide 4: Forward-Looking Statements / Required Disclosures
F O RWA R D L O O K I N G S TAT E M E N T S / R E Q U I R E D D I S C L O S U R E S Johnson Controls Cautionary Statement Regarding Forward-Looking Statements (cont.) or the combined company’s actual results to differ materially from those expressed or implied by such forward-looking statements, inc
Slide 5: Required Disclosures
REQUIRED DISCLOSURES Statement Required by the Irish Takeover Rules (cont.) Centerview Partners LLC is a broker dealer registered with the United States Securities and Exchange Commission and is acting as financial advisor to Johnson Controls and no one else in connection with the proposed transacti
Slide 6: Agenda
AGENDA 10:00 AM – 10:20 AM 10:50 AM – 11:15 AM 12:45 PM – 1:45 PM 2:00 PM – 4:00 PM POWERING THE FUTURE: POWERING THE FUTURE: POWERING THE FUTURE: OPTIONAL: JOHNSON CONTROLS THE AFTERMARKET EXPERIENCE STATIONS START-STOP Alex Molinaroli Chairman, President and CEO Ray Shemanski Market Drivers RIDE-a
Slide 7: Power Solutions Analyst Day - Alex Molinaroli
POWER SOLUTIONS ANALYST DAY Alex Molinaroli Chairman, President and CEO June 13, 2016
Slide 8: Power Solutions Today vs. Your Last Visit
POWER SOLUTIONS TODAY VS. YOUR LAST VISIT 2011 TO 2015 FY2011 FY2015 +3% CAGR Revenue* $5.9B $6.6B +8% CAGR excluding FX and lead Segment Income $0.8B* $1.2B +10% CAGR +12% CAGR excluding FX Segment Margin 13.2% 17.5% +430 bps +200 bps excluding and lead FX ROA** 22.3% 24.4% +220 bps *Segment Income
Slide 9: Megatrends Inform Strategies and Investments
M E G A T R E N D S I N F O R M S T R AT E G I E S A N D I N V E S T M E N T S Buildings & Urban Environments + Asia as global growth engine + China demand in urban clusters and districts + Increase in value of lifecycle cost + Convergence driving demand shift + Energy + Demographics to smart buildi
Slide 10: Strategic Growth Platforms
S T R AT E G I C G R O W T H P L AT F O R M S MARKET BY 2025 10
Slide 11: Energy
ENERGY MARKET BY 2025 Mega trends of urbanization, energy, and technology convergence shaping demand for alternative energy, energy storage and smart grids. JOHNSON CONTROLS DISTRIBUTED ENERGY STORAGE 11
Slide 12: New Johnson Controls Neighborhood
NEW JOHNSON CONTROLS NEIGHBORHOOD FY16 PROFORMA FINANCIALS NEW $21B $7B $22B Johnson Controls* DANAHER DOVER EMERSON $30B $30B $21B $39B $13B $13B $13B $56B 3M EATON HONEYWELL INGERSOLL- ILLINOIS TOOL WORKS TEXTRON UNITED RAND TECHNOLOGIES *Proforma FY16 excluding Adient and including Tyco merger 12
Slide 13: New Johnson Controls Neighborhood
NEW JOHNSON CONTROLS NEIGHBORHOOD FY16 PROFORMA FINANCIALS NEW $21B $7B $22B Johnson Controls* DANAHER DOVER EMERSON $23B $7B BUILDINGS POWER SOLUTIONS $30B $21B $39B $13B $13B $13B $56B 3M EATON HONEYWELL INGERSOLL- ILLINOIS TOOL WORKS TEXTRON UNITED RAND TECHNOLOGIES *Proforma FY16 excluding Adien
Slide 14: Power Solutions Is a Strong Asset in Our Multi-Industrial Portfolio
POWER SOLUTIONS IS A STRONG ASSET IN OUR MULTI-INDUSTRIAL PORTFOLIO MULTI- POWER INDUSTRIAL SOLUTIONS PEERS Revenue growth 7 - 8%* 3%+ Segment Margins 18.5 - 19%* 14 - 15%+ Market share 36% (#1) Americas #1 #1 or #2 Europe #1 China #3 to #2 by 2020 FCF Conversion 80 - 85% by 2020 90%+ ROA** 25 to 26
Slide 15: Our Continued Goal is to Lead the Industry and the Future
KEY MESSAGES + Thriving business in a fast-growing sector + 36% global marketshare with unique global footprint Our Continued Goal + Significant opportunity in China + Leading across the product technology continuum is to Lead the Industry Large and resilient aftermarket business + – and the Future.
Slide 16: Growth 2020 - Joe Walicki
GROWTH 2020 Joe Walicki President, Power Solutions June 13, 2016
Slide 17: Power Solutions Today vs. FY2020
P O W E R S O L U T I O N S TO D AY V S . 2 0 2 0 FY2015 TO FY2020 FY2015 FY2020 Revenue* $6.6B $9.3 – $9.6B 7 – 8% CAGR Segment Margin* 17.5% 18.5 – 19% +100 – 150 bps ROA** 24.4% 25 – 26% +60 – 160 bps * Mid-term outlook through FY20 from December Analyst Day ** Return on Average Net Operating Ass
Slide 18: Power Solutions Has a Lot of Experience Growing Its Business
POWER SOLUTIONS HAS A LOT OF EXPERIENCE GROWING ITS BUSINESS SEGMENT INCOME History of Profitable Growth* 2005 TO 2015 9 % 10-YEAR REVENUE CAGR 14 % 10-YEAR SEGMENT INCOME CAGR Strategic Plan for Future Growth 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 19: Power Solutions: Largely an Aftermarket Business
POWER SOLUTIONS: L A R G E LY A N A F T E R M A R K E T B U S I N E S S SALES LEADING GLOBAL BY MARKET CUSTOMERS 26 % OE 74 % AFTERMARKET 78 68 66 % AFTERM ARKET % AFTERM ARKET % AFTERM ARKET AMERICAS EMEA ASIA 4
Slide 20: Power Solutions Strategy
P O W E R S O L U T I O N S S T R AT E G Y OPERATIONALLY EXCELLENT GROWTH COMPANY OUR STRATEGIES JOHNSON CONTROLS Product & Technology DELIVERING OPERATING SYSTEM RESULTS 2020 Mature Markets Revenue Growth* 7-8% CAGR Emerging Markets Segment Income* 18.5% – 19% Components & Supply Chain Return on As
Slide 21: Playing to Our Strengths
P O W E R S O L U T I O N S S T R AT E G Y Scale – Product and Cost Leader Technology + Vertical integration + World class manufacturing and recycling + Complete product portfolio + Global footprint + Superior design and capacity PLAYING TO OUR Commercial Partnership STRENGTHS + Strong recognized +
Slide 22: Market and Technology Trends
MARKET AND TECHNOLOGY TRENDS + Evolving environmental, material POLICY & and safety regulations REGULATORY + Implementation cost + Non-compliance penalties VEHICLE TECHNOLOGY CHOICES + Legacy investments + Incremental new investments ECONOMICS CONSUMER + Comfort, safety and reliability + Consumer pr
Slide 23: Regulatory Targets Drive Technology Choices for OEs
R E G U L ATO RY TA R G E T S D R I V E TECHNOLOGY CHOICES FOR OEs Regulatory Targets Vehicle Technology CO2 STATUS & FUTURE TARGETS Choices PREVIOUS 2015 2021 2025 CONFIRMED PROPOSED + Engine improvements (e.g. turbo boosting) + Component and accessory electrification 123 2014 130 95 68 – 78 + Weig
Slide 24: Increased Need for Vehicle Electrification
I N C R E A S E D N E E D F O R V E H I C L E E L E T R I F I C ATO N F O R N E W F E AT U R E S & F U N C T I O N S TECHNOLOGY AND CONSUMER TRENDS Automated Driving Assist Technology New comfort, safety Active Safety Systems and efficiency features + Engine Transmission Technologies Autonomous driv
Slide 25: Product Portfolio - Full Range of Battery Technologies
P R O D U C T P O R T F O L I O – F U L L R A N G E O F B AT T E RY T E C H N O L O G I E S Johnson Controls offers a complete portfolio of battery products and technologies that support the full continuum of vehicle electrification Absorbent Flooded glass mat 12-volt 48-volt High-voltage lead-acid
Slide 26: Product Portfolio - Full Range of Battery Technologies
P R O D U C T P O R T F O L I O – F U L L R A N G E O F B AT T E RY T E C H N O L O G I E S Johnson Controls offers a complete portfolio of battery products and technologies that support the full continuum of vehicle electrification Absorbent Flooded glass mat 12-volt 48-volt High-voltage lead-acid
Slide 27: Projected Powertrain Demand in New Vehicles
PROJECTED POWERTRAIN DEMAND IN NEW VEHICLES GLOBAL POWERTRAIN MIX PROJECTED BATTERY UNITS (New OE Vehicles) (OE + Aftermarket, in million units) 600 4-7% 24% 10-16% 500 94% 50% 400 LEAD-ACID > 60V + Lithium- 300 50-60% Lithium- ion 12V / 48V ion 72% 200 Start- Start- Stop Stop Lead- Lead Acid Conven
Slide 28: Increasing Capacity to Support Global Growth and Capture Start-Stop Demand
I N C R E A S I N G C A PA C I T Y TO S U P P O R T G L O B A L G R O W T H A N D C A P T U R E S TA R T- S TO P D E M A N D INVESTING IN CAPACITY 2016 vs 2020 CAPACITY (MILLION UNITS) 50.0 +7M +10M +16M 17.0 2016 2020 13
Slide 29: Video: Zwickau AGM Plant
VIDEO: ZWICKAU AGM https://www.youtube.com/watch?v=PLCWlQlUPO8&feature=youtu.be Zwickau Plant – Germany https://youtu.be/PLCWlQlUPO8 https://youtu.be/PLCWlQlUPO8 14
Slide 30: Product Portfolio - Full Range of Battery Technologies
P R O D U C T P O R T F O L I O – F U L L R A N G E O F B AT T E RY T E C H N O L O G I E S Johnson Controls offers a complete portfolio of battery products and technologies that support the full continuum of vehicle electrification Absorbent Flooded glass mat 12-volt 48-volt High-voltage lead-acid
Slide 31: Low Voltage Systems and OE Electrification Choices
L O W V O LTA G E 1 2 V A N D 4 8 V S Y S T E M S OE ELECTRIFICATION 48V lithium-ion micro-hybrid CHOICES + Below high-voltage threshold, unlike xEVs that require expensive safety components, 0 systems and service procedures DECREASE IN CO2 EMISSIONS (%) Start-stop Low voltage: -5 48V lithium-ion mi
Slide 32: Leveraging Our Strengths to Establish Foundation in Distributed Energy Storage
L E V E R A G I N G O U R S T R E N G T H S TO E S TA B L I S H F O U N D AT I O N I N D I S T R I B U T E D E N E R G Y S TO R A G E B U S I N E S S OUR DEMAND FOR ENERGY STORAGE STRENGTHS OUR DES BUSINESS MODEL TOP MARKETS FOR STORAGE BY COUNTRY (MW INSTALLED; 2016 - 2021) Deep knowledge of batter
Slide 33: Video: Li-ion Holland, MI
VIDEO: LI-ION HOLLAND, MI https://youtu.be/XlC6wZaX7Tw 18
Slide 34: The Aftermarket - Ray Shemanski
THE AFTERMARKET Ray Shemanski VP & GM Aftermarket, Power Solutions June 13, 2016
Slide 35: Growing Power Solutions Through the Aftermarket
GROWING POWER SOLUTIONS THROUGH THE AFTERMARKET SALES BY CHANNEL AFTERMARKET SALES (UNITS M) BY REGION (UNITS M) 146M 186M* SA ASIA EMEA SA ASIA EMEA 2015 2020 SALES 109M 137M* BY MARKET NA NA 2015 2020 26% OE 74% AFTERMARKET *Mid-point of mid-term revenue outlook through FY20 per December analyst d
Slide 36: Mature Market Success - Extend to Emerging Markets
M AT U R E M A R K E T S U C C E S S – E X T E N D TO E M E R G I N G M A R K E T S PLAYING TO OUR STRENGTHS Deliberate and explicit choices that align with where we excel Partnerships Distribution + Strategic account management + Best practice for channel design & development + Globally most recogn
Slide 37: Differentiation Through Closed-Loop Recycling
D I F F E R E N T I AT I O N T H R O U G H C L O S E D - L O O P R E C Y C L I N G RECYCLING PROCESS Differentiation 99 % BATTERIES ARE DESIGNED FOR 99% RECYCLABILITY Advantages + Resilient supply of materials protected for market shocks and / or disruptions + Optimized logistics networks with distr
Slide 38: Video: Garcia Recycling
V I D E O : G a r c i a R e c yc l i n g https://youtu.be/PAn8UYY4Ff0 5
Slide 39: Growth in China Remains Attractive
G R O W T H I N C H I N A R E M A I N S AT T R A C T I V E Automotive Battery Market Forecast THE LARGEST AUTOMOTIVE (million units) BATTERY MARKET IN THE WORLD BY 2020 97 91 64 71 77 84 27 29 31 + 10 % AFTERMARKET CAGR TO 2020 26 + 90 25 OE 23 M CAR PARC OVER SAME PERIOD 62 66 51 57 Aftermarket 41
Slide 40: Investing in China for Leadership
INVESTING IN CHINA FOR LEADERSHIP Advantaged Global Network Distribution POWER SOLUTIONS FOOTPRINT 325 SHENYANG 6M units WHOLESALE DISTRIBUTORS SOP 2018 BINZHOU 7.5M units CHONGQING 6M units NEW JV WITH BOHAI PISTON 189 CITIES Planned 5th Plant CHANQXING PLANT 89 % OF CHINA CAR PARC 9.9M units 7
Slide 41: Video: Changxing, China
VIDEO: Changxing, China https://youtu.be/cpkIKKvKFdI 8
Slide 42: Investing in China for Leadership
INVESTING IN CHINA FOR LEADERSHIP Partnerships Product & Technology QUANTITY + QUALITY VARTA® Brand Strength 72% 63% 55% 47% + Product mix improvement via VARTA brand differentiation 28% 19% + PowerFrame® technology and AGM leadership + Introduce Consideration Preference Recommend 2014 2016 9
Slide 43: Accelerated Growth and Leadership in China
A C C E L E R AT E D G R O W T H A N D L E A D E R S H I P I N C H I N A Johnson Controls Sustain leadership China Aftermarket (Units M) through key differentiators 3 2 MARKET POSITION BY 2020 +38% 3x SALES UP MORE THAN MARKET CAGR THRU 2020 65 % VOLUME TARGET ACHIEVED YTD 2015 2020 10
Slide 44: Powering the Future: The Aftermarket
POWERING THE FUTURE: THE AFTERMARKET Partnerships Distribution Advantaged Product & Global Network Technology MATURE MARKETS EMERGING MARKETS 11
Slide 45: Technology - MaryAnn Wright
TECHNOLOGY MaryAnn Wright Group VP Technology & Industry Relations June 13, 2016
Slide 46: Vehicle (R)Evolution
VEHICLE (R)EVOLUTION 1976 1996 2016 POWER 190 260 404 (HP) FUEL EFFICENCY 11.2 10.7 16.3 (MPG) WEIGHT 5302 4462 4085 (LBS) 2
Slide 47: Increasing Vehicle Complexity
INCREASING VEHICLE COMPLEXITY >150 DIFFERENT ELECTRICAL DEVICES >1.5 MILES OF ELECTRICAL WIRING > 50 COMPUTER MODULES >100 MILLION LINES OF SOFTWARE CODING 3
Slide 48: Battery Is More Critical Than Ever
B AT T E RY I S M O R E C R I T I C A L T H A N E V E R Advanced Safety Systems Connected Vehicle Electrification Transmission & Technologies Driveline Interior Features Automated Driver Assist Technologies Engine Vehicle & Body Technologies Technologies INCREASED EFFICIENCY GREATER COMFORT & SAFETY
Slide 49: Technology Adoption Is Accelerating
TECHNOLOGY ADOPTION IS ACCELERATING + Safety functionality + Global CO2 / Fuel economy regulations + Connected vehicles + Autonomous vehicles 1900’s 2015 5
Slide 50: Electric Vehicle Adoption: Hype vs Reality
ELECTRIC VEHICLE ADOPTION HYPE VS REALITY US “Best Month Ever for EV Sales” D E C 2 0 1 5 — H U F F I N G T O N P O S T 0.7 % Of new vehicle sales CHINA China Electric Car Sales Increased 223% In 2015 M A R C H C L E A N 2 0 1 6 — T E C H N I C S 0.9 % Of new vehicle sales 1.2 European Union Sees Su
Slide 51: Vehicle Powertrain Continuum
VEHICLE POWERTRAIN CONTINUUM Electric Vehicle TESLA MODEL S 40% + Plug-in Hybrid Electric CHEVROLET VOLT 20% + Hybrid Electric FUEL SAVINGS TOYOTA PRIUS Start-Stop BASELINE 5% FORD F-150 Conventional Powertrain HONDA ACCORD CONVENTIONAL START-STOP xEVs VEHICLE TYPE 7
Slide 52: Vehicle Powertrain Continuum - Market Opportunity
VEHICLE POWERTRAIN CONTINUUM Electric Vehicle TESLA MODEL S 40% + Plug-in Hybrid Electric CHEVROLET VOLT 20% + Hybrid Electric FUEL SAVINGS TOYOTA PRIUS MARKET OPPORTUNITY Start-Stop BASELINE 5% FORD F-150 Conventional Powertrain HONDA ACCORD CONVENTIONAL START-STOP xEVs VEHICLE TYPE 8
Slide 53: Battery Product Continuum
BATTERY PRODUCT CONTINUUM Electric Vehicle LITHIUM-ION ENERGY 40% + HIGH VOLTAGE Plug-in Hybrid Electric LITHIUM-ION 20% + ENERGY Hybrid Electric FUEL SAVINGS LITHIUM-ION POWER Micro-Hybrid 15% 48V LITHIUM-ION LOW VOLTAGE Advanced Start-Stop 12V LITHIUM- ION 8% Start-Stop AGM Baseline 5% Conventiona
Slide 54: Independent Third Party Validation
INDEPENDENT THIRD PARTY VALIDATION Sales of vehicles with 48V systems IDTECHEX FORECASTS OEMs cannot hold off getting 48V are expected to increase from > 300M 48V into production much longer because less than 1,000 in 2015 to just over it will be needed on mainstream 7 million in 2024, representing
Slide 55: Modeling Accelerates Technology Development
MODELING ACCELERATES TECHNOLOGY DEVELOPMENT Thermodynamics 10000 (CHARGING IS NEGATIVE) AVAILABLE POWER (W) 5000 Time (seconds) 0 Voc -5000 -10000 -15000 500 1000 SOC MATERIAL MODELS CELL SIMULATIONS PACK MODELS 60 Efficient 55 Frontier All Techs 50 v Y FE [MPG] X1 45 Ev X3 40 X2 X4 35 30 2000 4000
Slide 56: Analyzing Vehicle Technology Options
A N A LY Z I N G V E H I C L E T E C H N O L O G Y O P T I O N S EUROPEAN MID-SIZE PETROL CAR 125 120 118 G/KM 2015 BASELINE 115 110 CO2 RATING (G/KM) 105 100 95 94 G/KM (2021 TARGET) 90 85 80 72 G/KM (2025 TARGET) 75 0 500 1000 1500 2000 2500 3000 3500 AUTOMAKER COST (2025€) 12
Slide 57: Virtual Prototype
VIRTUAL PROTOTYPE 13
Slide 58: Leveraging Powertrain Expertise to Optimize 48V Products
L E V E R A G I N G P O W E R T R A I N E X P E R T I S E TO O P T I M I Z E 4 8 V P R O D U C T S + 48V LITHIUM-ION AGM Development vehicle 1st Generation 48V battery Optimized 48V battery 14
Slide 59: Leveraging Powertrain Expertise to Optimize Advanced 12V Products
L E V E R A G I N G P O W E R T R A I N E X P E R T I S E TO O P T I M I Z E A D VA N C E D 1 2 V P R O D U C T S + 12V LITHIUM-ION AGM Development vehicle 1st Generation 12V advanced battery 15
Slide 60: Building on the Capabilities We Developed from the Vehicle Programs
B U I L D I N G O N T H E C A PA B I L I T E S W E D E V E L O P E D FROM THE VEHICLE PROGRAMS https://youtu.be/PLCWlQlUPO8 16
Slide 61: Our Global Presence
OUR GLOBAL PRESENCE 15K WORLDWIDE EMPLOYEES >50 MANUFACTURING, RECYCLING AND DISTRIBUTION CENTERS 17
Slide 62: R&D Network
OUR GLOBAL PRESENCE R&D NETWORK 18
Slide 63: Strong R&D Partnerships
S T R O N G R & D PA R T N E R S H I P S UNIVERSITIES NATIONAL LABS 19
Slide 64: Power Solutions Full Product Continuum
POWER SOLUTIONS FULL PRODUCT CONTINUUM Electric Vehicle LITHIUM-ION ENERGY 40% + HIGH VOLTAGE Plug-in Hybrid Electric LITHIUM-ION 20% + ENERGY Hybrid Electric FUEL SAVINGS LITHIUM-ION POWER Micro-Hybrid 15% 48V LITHIUM-ION LOW VOLTAGE Advanced Start-Stop 12V LITHIUM- ION 8% Start-Stop AGM Baseline 5