Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll Rand — Q3 2016 Earnings Presentation
27 slides from Trane Technologies's earnings presentation, Oct 26, 2016
Slide 1: Third-Quarter 2016 Results
Third-Quarter 2016 Results October 26, 2016
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: Strategic Foundation Continues to Underpin Top-Quartile Performance
Strategic Foundation Continues to Underpin Top-Quartile Performance Sustainable, Profitable Growth, Cash Flow and Shareholder Value Cash Flow / Sustained Operational Dynamic Winning Growth Excellence Capital Culture Allocation Well positioned in both Strong, recognized brands Leading market shares g
Slide 4: Q3 Industrial Segment Margin on Track with Prior Guidance
Q3 Industrial Segment Margin on Track with Prior Guidance • Sequential improvement in Industrial margins up 70 bps • Continuing actions to drive improvement going forward - Operational excellence initiatives - Restructuring and reducing costs - Increased focus on parts / service - Segmentation and f
Slide 5: Climate Segment: Thermo King Business is Resilient
Climate Segment: Thermo King Business is Resilient • Proof point: Q3 Operating margins increased despite a decline in Thermo King revenues • North America Trailer approximately 25% of Thermo King Revenues - Expect significant decline in N. America Trailer revenues in 2017, consistent with market exp
Slide 6: Climate Segment: North America Commercial HVAC Largely Aftermarket and Replacement Market Driven
Climate Segment: North America Commercial HVAC Largely Aftermarket and Replacement Market Driven • Equipment for new construction 18% of total N. America Commercial HVAC • Aftermarket and replacement businesses driven by large installed base of HVAC systems (Trane plus competitors) and need to impro
Slide 7: Q3 2016 – Continued Strong Overall Performance
Q3 2016 – Continued Strong Overall Performance • Robust growth, profitability and cash flow – Organic revenue up 3% – Adjusted operating margins up 30 basis points – Adjusted EPS up 17% – YTD OCF $1.1B; FCF $992M – 2016 FCF guidance raised to ~$1.3B, from $1B - $1.1B • Continued topline growth & mar
Slide 8: Continued Strong Operating Performance in Q3 Led by North America Commercial and Residential HVAC
Continued Strong Operating Performance in Q3 Led by North America Commercial and Residential HVAC Revenue and Operating Margin • Revenue up 2%, +3% organic • Operating margin 14.1%; adj. margin 14.3%, up +2% $3,487M $3,568M 30 bps Y-O-Y - Adjusted margins +90 bps at Climate with +3% Organic 47% oper
Slide 9: Sustained Strength in Q3 Bookings Led by N. America HVAC
Sustained Strength in Q3 Bookings Led by N. America HVAC Y-O-Y Climate Y-O-Y Change in Organic Bookings C % Reported Organic Commercial HVAC Up mid-single digits Change - N. America Up high-single digits Q1 2015 3% 5% - EMEA Down mid-single digits - Asia Flat, down slightly in China Q2 2% 4% Residen
Slide 10: Q3 Segment Organic Revenue Change by Region
Q3 Segment Organic Revenue Change by Region North America Europe Climate Climate Industrial Industrial Revenue Q3 Q3 Middle East/Africa change Y-O-Y Reported Organic Climate Climate +3% +3% Industrial Flat +1% Industrial Latin America Total +2% +3% Asia Climate Climate Industrial Industrial 10
Slide 11: Climate Segment Q3: Improved Margins with 3% Organic Revenue Growth
Climate Segment Q3: Improved Margins with 3% Organic Revenue Growth Revenue and Operating Margin Climate Organic Revenue +3% $2,838M $2,758M Commercial HVAC Up mid-single digits +3% - N. America Up high-single digits Organic - Europe Down low-single digits 15.5% Operating 16.6% - Middle East Up low-
Slide 12: Climate Segment: Reported Operating Margin Increased by 110 Basis Points in Q3
Climate Segment: Reported Operating Margin Increased by 110 Basis Points in Q3 Highlights • Strong revenue growth in Commercial and Residential HVAC • Material deflation • Ongoing productivity improvement from business operating system 0.3 0.6 0.2 Flat 16.6% 15.5% (0.1) Investment 0.1 Other/Rest Q3
Slide 13: Industrial Segment: Q3 Sequential Margin Improvement From Q2 Trough
Industrial Segment: Q3 Sequential Margin Improvement From Q2 Trough Revenue and Operating Margin Industrial Organic Revenue Compression Tech Up mid-single digits $729M Flat $730M - N. America Down low-single digits 1% Organic - EMEA Up high-teens - Asia Up low-teens 13.9% Operating 10.9% - L. Americ
Slide 14: Industrial Segment: Q3 Reported Operating Margin Lower Primarily on Volume / Mix
Industrial Segment: Q3 Reported Operating Margin Lower Primarily on Volume / Mix Highlights • Weak industrial markets impacting mix / margins • Positive price realization 13.9% (2.0) 0.5 (1.0) (0.5) 10.9% (0.2) Investment (0.3) Other/Rest Q3 2015 Volume/ Mix / FX Price/Material Productivity/Other In
Slide 15: Strong Cash Flow, Balance Sheet and Return of Cash to Shareholders
Strong Cash Flow, Balance Sheet and Return of Cash to Shareholders $Mil Q1 15 Q2 15 Q3 15 YE 15 Q1 16 Q2 16 Q3 16 Cash 734 780 652 737 613 929 1,505 Debt 4,521 4,372 4,550 4,218 4,473 4,086 4,070 Net Debt 3,787 3,592 3,898 3,481 3,860 3,157 2,565 • 2016 FCF target increased to ~$1.3 billion, excludi
Slide 16: Dynamic Capital Allocation Focused on Delivering High Returns
Dynamic Capital Allocation Focused on Delivering High Returns Strategic Business Maintain Balance Sheet Dividend Payout Investment at BBB Metrics Consistent with Peers $1.60 $1.28 $1.16 $1.00 $0.84 $0.64 2012 2013 2014 2015 2016 2017F Digital No meaningful debt Increased to $1.60 in Oct., +25%
Slide 17: 2016 Forecast for Mixed End-Market Performance
2016 Forecast for Mixed End-Market Performance End Markets Organic Revenue Americas EMEA Asia Guidance Commercial HVAC Up mid-single digits Residential HVAC Up high-single digits Transport Down low-single digits Compression-related Down mid-single digits & Industrial Products Golf / Utility Flat/Up
Slide 18: Raising 2016 Enterprise Operating Margin Guidance to High End of Range
Raising 2016 Enterprise Operating Margin Guidance to High End of Range FY Guidance Prior Guidance Climate ‒ Revenue Reported ~ 3% 3% to 4% ‒ Revenue Organic ~ 4% 4% to 5% Adjusted Operating Margin ~14.5% 14.0% to 14.5% Industrial ‒ Revenue Reported ~ -4% -6% to -5% ‒ Revenue Organic ~ -3% -5% to -4%
Slide 19: 2016 Guidance: Full-year Continuing Adjusted EPS Increased to $4.17 to $4.22
2016 Guidance: Full-year Continuing Adjusted EPS Increased to $4.17 to $4.22 Full Year Q4 Y-O-Y reported revenue change • Climate ~ 3% 2% to 4% • Industrial ~ -4% -6% to -8% • Total ~ 1% Flat to 1% EPS continuing $5.62 to $5.67 $0.86 to $0.91 Gain on Hussmann sale $1.52 ----- Restructuring – add bac
Slide 20: Summary: Top Quartile Performance with Industrial Improving
Summary: Top Quartile Performance with Industrial Improving • Continued strong 2016 results driven by execution of our business operating system • Top quartile organic growth, EPS growth and cash flow percentage of net income • Commercial HVAC business is strong driven by aftermarket parts services
Slide 21: Appendix
LEY Ingersoll Rand. Appendix
Slide 22: Q3 Organic Revenue Up 3% Year-Over-Year
Q3 Organic Revenue Up 3% Year-Over-Year Reported 2014 2015 2016 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Climate 5% 6% 2% 4% 2% 3% 3% 4% 3% Industrial 3% 7% (1%) (2%) 5% 2% (7%) (4%) Flat Total 4% 6% 2% 3% 3% 3% Flat 2% 2% 2013 Organic* 2014 2015 2016 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Climate 6% 9% 5% 8% 5% 7% 4% 5% 3%
Slide 23: Q3 Revenue Up 2% and Organic Up 3%
Q3 Revenue Up 2% and Organic Up 3% Segment Revenue Change 3% Climate 3% Reported Flat Reported Organic* Industrial 1% Geographic Revenue Change N.A. Organic +4% 4% Americas 4% Europe, Middle -3% East, Africa -2% Reported Organic* Asia 0% 2% 23 *Organic revenues excludes acquisitions and currency
Slide 24: Q3 2016 Y-O-Y Revenue Change
Q3 2016 Y-O-Y Revenue Change Reported Organic Climate - Commercial HVAC + Mid-single + Mid-single - Residential HVAC + Low-teens + Low-teens - Transport - Low-teens - Low-teens Total Climate 3% 3% Industrial - Compression-related Products + Mid-single + Mid-single - Industrial Products - Low-teens -
Slide 25: 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 26: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Free cash flow in 2016 and 2015 is defined as net cash provided by operating activities, less capital expenditures, plus cash payments for restructuring. In 2015 this definition also excluded the cash impact of the IRS agreement which occurred in the third and fourth qu
Slide 27: am) Ingersoll Rand.
am) Ingersoll Rand.