Trane Technologies Plc · NYSE:TT
Trane Technologies — UBS Global Industrials & Transportation Conference 2018
40 slides from Trane Technologies's conference presentation, June 2018
Slide 1: UBS Global Industrials & Transportation Conference June 2018
UBS Global Industrials & Transportation Conference June 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 worldwide 53 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 Engineered Products1 Comp. Equipment 63% 56% North A
Slide 8: Robust Financial Model Drives Powerful Cash Flow
Robust Financial Model Drives Powerful Cash Flow 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. excellence) 4
Slide 9: Driving Sustained Growth and Operating Margin Improvement
Driving Sustained Growth and Operating Margin Improvement In Billions Revenue Adjusted EPS $15 $6.00 4% 11% $14 CAGR $5.00 CAGR $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2014 2015 2016 2017 2018F 2014 2015 2016 2017 2018F FCF% of Adj Net Income Adjusted Operating Margin 140% 18% +1.7 15% Ppts 12
Slide 10: Maximizing Shareholder Value (2014 – 2017)
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 Operating Margins ~14.5% to ~15% in 2020 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% of FCF on avg. - Competitive
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 Differentiated products Margin improvement Reinvestment, dividends, Commitment to and services deliver and powerful cash flow
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 Corporate Responsibility magazine for 7th consecutive year Employee Engagement 100 Best C
Slide 18: 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 19: First-Quarter 2018 Results
First-Quarter 2018 Results April 25, 2018
Slide 20: 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 21: Q1 2018 – Off to Strong Start
Q1 2018 – Off to Strong Start Many things are going well • End markets very healthy - strong organic order and revenue growth across segments / geographies / regions • Industrial segment continues to strengthen — growth / margin expansion ahead of expectations • China HVAC direct sales strategy perf
Slide 22: Q1 2018 Strong Organic Bookings and Revenue Growth Across All Businesses
Q1 2018 Strong Organic Bookings and Revenue Growth Across All Businesses Organic* Y-O-Y Change Climate Bookings Revenues Commercial HVAC + + - N. America + + - L. America + + - EMEA + + - Asia + + Residential HVAC + + Transport + + Total + 11% + 8% Industrial Compression Tech + + Industrial Products
Slide 23: Strong Performance Across Healthy End Markets
Strong Performance Across Healthy End Markets • Sustained growth in Global CHVAC markets - Strong equip bookings and revenues w/ outsized growth in parts / service • N.A. CHVAC mkt growth solid – equip/services/ contracting/controls. Institutional growth led by Education, Health Care Commercial • EM
Slide 24: Q1 2018 - Key Takeaways
Q1 2018 - Key Takeaways • Strong operating results – Adjusted continuing EPS of $0.70, up 23% year over year driven by gains in both Climate and Industrial – Markets broadly receptive to price increases, however persistent inflation remains significant headwind – Consistent with company expectations
Slide 25: Q1 2018 Strong Revenue Growth, Margin Expansion and Capital Deployment Delivering 23% EPS Growth
Q1 2018 Strong Revenue Growth, Margin Expansion and Capital Deployment Delivering 23% EPS Growth Net Revenue Adj. Operating Margin* Adjusted EPS* +13% +23% $0.70 +20 bps $3,385 $3,001 8.3% 8.5% $0.57 +8% Organic Q1 '17 Q1 '18 Q1 '17 Q1 '18 Q1 '17 Q1 '18 Highlights • Strong organic revenue growth in
Slide 26: Strong Growth in Both Segments Offsetting Inflation Headwinds
ENTERPRISE Strong Growth in Both Segments Offsetting Inflation Headwinds +20 bps 1.2 (0.4) (0.2) 8.3% (0.4) 8.5% Q1 2017 Volume / Mix / FX Price/Material Inflation Productivity/Other Investment/Other Q1 2018 Adjusted Operating Inflation Adjusted Operating Margin Margin Highlights • Price / cost impr
Slide 27: Strong Operating Income Growth in Both Segments Driving Adjusted Continuing EPS Higher by 23%
ENTERPRISE Strong Operating Income Growth in Both Segments Driving Adjusted Continuing EPS Higher by 23% +$0.13 $0.08 ($0.03) $0.02 $0.70 $0.57 $0.06 Q1 2017 Climate Industrial Other Share Count Q1 2018 Adjusted Adjusted Continuing EPS* Continuing EPS* Highlights • EPS growth driven by operational g
Slide 28: Climate Segment: Q1 Broad-Based Revenue Growth; Persistent Inflation Headwinds
CLIMATE SEGMENT Q1 Broad-Based Revenue Growth; Persistent Inflation Headwinds Net Revenue Adj. Operating Margin* Adj. OI + D&A %** 13.2% -60 bps 12.6% +12% -50 bps $2,610 10.6% 10.1% $2,324 +8% Organic Q1 '17 Q1 '18 Q1 '17 Q1 '18 Q1 '17 Q1 '18 Highlights • Broad-based revenue growth across all busin
Slide 29: Industrial Segment: Q1 Solid Margin Expansion and Revenue Growth
INDUSTRIAL SEGMENT Q1 Solid Margin Expansion and Revenue Growth Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +180 bps +190 bps 15.0% +15% $775 13.2% $676 12.3% +9% Organic 10.4% Q1 '17 Q1 '18 Q1 '17 Q1 '18 Q1 '17 Q1 '18 Highlights • Strong revenue growth in all products; North America and As
Slide 30: Strong Balance Sheet
Strong Balance Sheet $Mil YE 16 Q1 17 Q2 17 Q3 17 YE 17 Q1 18 Cash 1,715 1,322 1,310 1,259 1,549 1,175 Debt 4,070 4,072 4,066 4,063 4,064 4,351 Net Debt 2,355 2,750 2,756 2,804 2,515 3,176 Free Cash Flow* $1,378 1,278 $ Millions 1,020 829 2014 2015 2016 2017 Highlights • On target to achieve free ca
Slide 31: Balanced Execution of Dynamic Capital Allocation Strategy in 2018
Balanced Execution of Dynamic Capital Allocation Strategy in 2018 • 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 bolt-ons 2 • St
Slide 32: Topics of Interest
am) Ingersoll Rand Inspiring Progress™ Topics of Interest teeta bid trol!
Slide 33: Tariffs
Topics of Interest • Tariffs − We execute an in-region, for-region sourcing and manufacturing strategy − >95% of supplies are sourced in the U.S. for U.S. customers − Details around tariffs uncertain and negotiations are on-going; continue to monitor − Historically, the industry generally recovers p
Slide 34: Q1 Organic Bookings Up 9%; Revenue Up 8% Year-Over-Year
Q1 Organic Bookings Up 9%; Revenue Up 8% Year-Over-Year Organic* 2016 2017 2018 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Climate 6% 6% 4% 10% 6% 6% 3% 5% 7% 5% 11% Industrial (5%) (5%) (1%) (1%) (3%) 9% 5% 5% 12% 8% 5% Total 4% 3% 3% 7% 4% 7% 4% 5% 8% 6% 9% Organic* 2016 2013 2017 2018 Revenue Q1 Q
Slide 35: Appendix
am) Ingersoll Rand Inspiring Progress™ Appendix
Slide 36: 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 37: 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 38: 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 39: 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 40: 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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