Johnson Controls International Plc · NYSE:JCI
Johnson Controls International — Investor Day (December 2013)
67 slides from Johnson Controls International's investor day presentation, Dec 19, 2013
Slide 1: Strategic Review and 2014 Outlook
Strategic Review and 2014 Outlook
Slide 2: Forward Looking Statement
Forward Looking Statement Johnson Controls, Inc. will make statements in today's presentation that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this presentation other than statements of historical fact are statements that are, or could be, deemed "fo
Slide 3: Alex Molinaroli, President and Chief Executive Officer
Alex Molinaroli President and Chief Executive Officer
Slide 4: Who we are
Who we are Our Businesses $43bn in revenue across five market-leading businesses serving customers in more than 150 countries Building Efficiency and Global Workplace Solutions Automotive Seating and Automotive Interiors Power Solutions Our Vision A more comfortable, safe and sustainable world
Slide 5: Highlights
Highlights Good businesses in attractive markets with a heritage of growth and innovation Delivering on our commitments Clear vision to be a leading multi-industry company Businesses executing focused strategies for profitable growth The Johnson Controls Operating System is transforming ho
Slide 6: Strong heritage of growth and innovation
Strong heritage of growth and innovation $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Johnson Controls Revenue History ($bn) History of organic growth and innovation Tested through the crisis; return to growth Global expansion and d
Slide 7: Long-term track record of performance and shareholder returns
Long-term track record of performance and shareholder returns Last 10 Years Revenue CAGR Total Shareholder Returns 15.1% 14.1% 9.0% Multi-Industry Peer Group S&P 500 7.3% 5.8% Multi-Industry Peer Group(1) (1) Note: Reflects FY ’03 – ’13 revenue CAGR (reflects IBES Consensus FY’13E revenue for peers
Slide 8: Portfolio of strong global businesses
Portfolio of strong global businesses… $42.7bn FY2013 Building Efficiency Global Workplace Solutions Automotive Seating Automotive Electronics and Interiors Power Solutions $10.3bn $4.3bn $16.3bn $5.4bn $6.4bn
Slide 9: Serving attractive markets with solid growth trends
… Serving attractive markets with solid growth trends Commercial Buildings (2) Automotive (3) Energy Storage Global Markets Addressable Market Size Market Growth Rate(1) $85b $95b ~6-7% $27b 350mm aftermarket and OE batteries (1) 3-5 year forward estimate. (2) HVAC equipment, Controls, Technical Ser
Slide 10: Solid foundation of operating strengths
Full suite of integrated solutions Leadership in commercial building heating, ventilating and air conditioning (HVAC) equipment, controls and service markets World class technology and distribution (150 countries) Leading market position in China Managing 1.8 billion square feet of custome
Slide 11: Differentiating core capabilities
Differentiating core capabilities Technology Application Engineering Systems Integration Technology Platforms Innovation Studios Processes Manufacturing Continuous improvement / BBP Integrated Supply Chain Design Engineering People Diverse Leaders Accountable Trustworthy
Slide 12: Highlights
Highlights Good businesses in attractive markets with a heritage of growth and innovation Delivering on our commitments Clear vision to be a leading multi-industry company Businesses executing focused strategies for profitable growth The Johnson Controls Operating System is transforming ho
Slide 13: Strong operational momentum
Strong operational momentum $42.7 $2.7 $2.66 Revenue Segment Income EPS Executing well Record full year revenue and earnings Benefits of cost initiatives and commercial discipline seen in strong Q4 margins – 8.3% segment income margin, +130bps Y-o-Y – AE 4.3% segment income margin, +110bps Y-o-Y
Slide 14: Significant transformation activities underway: operational improvements
Significant transformation activities underway Operational improvements Operational improvement initiatives successfully launched “STEP” program in metals & mechanisms Building Efficiency North American customer growth strategy New Global Workplace Solutions operating model Energy Solutions
Slide 15: Significant transformation activities underway: organization evolution
Significant transformation activities underway Organization / functional evolution Aligned to create corporate best-in-class functions – Enterprise Corporate Development – Enterprise Strategic Marketing and Sales Global councils – Manufacturing, purchasing, engineering Created Enterprise Leade
Slide 16: Driving internal alignment: our strategies will evolve
Driving internal alignment Our strategies will evolve How we will play Data driven decisions Deliberate and explicit choices Play to win in markets we choose Company choices versus business unit only choices
Slide 17: Driving internal alignment: guiding principles
Driving internal alignment Guiding principles A true multi-industry company ─ More diversified portfolio ─ Use of capital will expand Execution culture Results accountable Customer focused and market responsive Thrive in a fast paced world Engaged and productive workforce Benchmark for
Slide 18: Highlights
Highlights Good businesses in attractive markets with a heritage of growth and innovation Delivering on our commitments Clear vision to be a leading multi-industry company Businesses executing focused strategies for profitable growth The Johnson Controls Operating System is transforming ho
Slide 19: Becoming a leading multi-industry company
Becoming a leading multi-industry company Rebalancing the portfolio Our Goals Our Tools to Execute Capital allocation decisions, including returning capital to shareholders Rigorous, analytical portfolio review processes Willingness to make strategic “additions” (M&A, organic investment) and “
Slide 20: Rebalancing the portfolio over time
Rebalancing the portfolio over time Today Future Power Buildings Automotive Power Buildings Automotive Automotive Experience percentage will be smaller due to growth investments and opportunities in Building Efficiency and Power Solutions Revenues Segment Income
Slide 21: Portfolio: shifting geographic mix
Portfolio: shifting geographic mix China will continue to be increasingly important 2009 2010 2011 2012 2013 2014 (e) 2015 (e) 2016 (e) 2017 (e) 2018 (e) Johnson Controls China revenues1 1) includes non-consolidated JVs at 100% $7.2b $2.9b $12.5b (est)
Slide 22: Portfolio management will be an on-going process
Portfolio management will be an on-going process Strategic Portfolio Review Decisions Execution Active portfolio management is now a part of how we manage Rigorous assessments of where Johnson Controls can win Will involve both additions and subtractions to the portfolio Decision criteria –
Slide 23: Focusing on fewer areas where we can win
Focusing on fewer areas where we can win Strategic portfolio review Disciplined strategic and financial portfolio management is a core capability we will include in our ongoing strategic planning
Slide 24: Executing portfolio changes
Becoming a leading multi-industry company Executing portfolio changes Completed $700mm HomeLink® sale Remaining Electronics sale in process Exploring strategic alternatives for Automotive Interiors Divested European refrigeration service business Divesting European headliners and visors bu
Slide 25: Increased return of capital to shareholders
Becoming a leading multi-industry company Increased return of capital to shareholders Announced $3bn increase in share repurchase authorization – Executed $800mm accelerated repurchase Announced 16% dividend increase
Slide 26: Highlights
Highlights Good businesses in attractive markets with a heritage of growth and innovation Delivering on our commitments Clear vision to be a leading multi-industry company Businesses executing focused strategies for profitable growth The Johnson Controls Operating System is transforming ho
Slide 27: Entering 2014: market outlook
Entering 2014 Market outlook Stabilizing markets – European automotive and commercial building markets bottoming – Signs of growth in some Building Efficiency markets (late-cycle business) • Orders up two consecutive quarters • Pipeline up five consecutive quarters Battery aftermarket in North A
Slide 28: Building Efficiency: strategic advantages
Building Efficiency Strategic advantages Johnson Controls makes buildings in 125 countries more comfortable, productive and safe Key offerings: Broad range of services, HVAC equipment, building controls and technologies Our offerings are necessary to provide comfortable and productive indoor env
Slide 29: Building Efficiency: strategic choices
Building Efficiency Strategic choices Where we will invest for profitable growth Winning in North America & China − Direct & indirect channels Delivering core products and attaining leadership positions in: − Chillers + parts − Controls + contracting − HVAC products and services − Industrial ref
Slide 30: Johnson Controls / Hitachi HVAC joint venture
Strategic choices Johnson Controls / Hitachi HVAC joint venture (Memorandum of Understanding) Combining the best of both companies Complementary commercial and residential HVAC technologies (including fast-growing Variable Refrigerant Flow – VRF) – More solutions for our customers Best in class
Slide 31: Automotive Seating: strategic advantages
Automotive Seating Strategic advantages Leading global provider Global presence Diversified customer and product portfolio Established market leader in growing Chinese market Investing in technology and advanced development Vertical integration of components 5% Non-Residential Complete Seat
Slide 32: Automotive Seating: global leader in seating and components
Automotive Seating The global leader in automotive seating and seat components Complete Seat Foam Johnson Controls Toyota Boshoku Faurecia Lear Bridgestone Lear Woodbridge Johnson Controls Cut & Sew Lear Prevent Johnson Controls Faurecia Fabrics 28% Global Market Shares FY2013 (including China) Sour
Slide 33: Taking Automotive Seating to new levels of performance
Taking Automotive Seating to new levels of performance Operational Excellence “Execute Flawlessly Everyday!” Commercial Excellence “Capture Value For Our Core Products” Product Excellence “Develop Winning Core Products” Global alignment and collaboration
Slide 34: Automotive Interiors
Automotive Interiors Leading supplier of automotive interiors Global presence with good geographic balance Diverse customer base and product portfolio Market leading product and process capabilities Interiors are a key differentiating influence on consumers’ purchase decisions Non-Residentia
Slide 35: Automotive Interiors: high fixed cost business
Automotive Interiors A high fixed cost and capital intensive business Product cost highly dependent on plant utilization Viewing new business opportunities by region, by plant and by process rather than by customer Focused on winning the right business
Slide 36: Automotive Interiors: transforming the business
Automotive Interiors Transforming the business Build Best Cost Position Europe structural position Utilization of deployed capital Flawless in-plant performance Cost optimization in product design Leverage best business practices and strategic sourcing approaches Optimized Portfolio Decisi
Slide 37: Power Solutions: strategic advantages
Power Solutions Strategic advantages The world’s largest provider of battery power solutions for the vehicle original equipment market and aftermarket 36% global market share for SLI batteries World-class customer base in the automotive aftermarket Original equipment (OE) batteries for the top
Slide 38: Power Solutions
Power Solutions POWER SOLUTIONS GROWTH sonnson Controls
Slide 39: Power Solutions: strategic choices
Power Solutions Strategic choices HEV, PHEV, EV START-STOP MICRO-HYBRID INTERNAL COMBUSTION Continue to improve AGM performance to differentiate value and solidify customer base Serve basic segments with EFB Promote Start-Stop batteries as scheduled replacement item Pace capacity expansion t
Slide 40: Focused strategies to deliver profitable growth: China
Focused strategies to deliver profitable growth Across all Johnson Controls businesses: China Unique corporate and manufacturing presence – Extensive, deep relationships—JV partners – 106 locations – “Corporate HQ East” Delivering on growth and profit potential – Growing faster than the market –
Slide 41: Combined segment strategies result in compelling outlook
Combined, the segment strategies result in compelling outlook Driving top-line growth – Attractive industries, markets and geographies – Growing faster than our markets Driving bottom line profitability – Focus on productivity, execution and scale efficiencies – Managing integrated supply chains
Slide 42: Highlights
Highlights Good businesses in attractive markets with a heritage of growth and innovation Delivering on our commitments Clear vision to be a leading multi-industry company Businesses executing focused strategies for profitable growth The Johnson Controls Operating System is transforming ho
Slide 43: The Johnson Controls Way: Operating System
The “Johnson Controls Way” aka: Johnson Controls Operating System What is it? Why is it different? What will it mean? Central to how we run the company Leverage and build upon core strengths…operations and business processes, innovation and technologies, account management, leadership talent dev
Slide 44: Looking to the Future: Johnson Controls Advantage
Looking to the Future: “Johnson Controls Advantage” We will build competitive advantage by leveraging the Johnson Controls enterprise. Johnson Controls Operating System Strategic Portfolio of Business Units People Manufacturing Operations Commercial Excellence Corporate Development Shared Services F
Slide 45: The Johnson Controls Operating System: Global Manufacturing Operations
The Johnson Controls Operating System Example: Global Manufacturing Operations Increase organizational efficiency Increase profitability Drive customer satisfaction Attract and develop talent Improve quality Raise agility Enable and accelerate growth Business Models, Processes & Tools
Slide 46: R. Bruce McDonald, Executive Vice President and Chief Financial Officer
R. Bruce McDonald Executive Vice President and Chief Financial Officer
Slide 47: Setting the Stage: The Johnson Controls Financial Model
Setting the Stage – The Johnson Controls Financial Model Strong growth culture, focus on where we can win Significant focus on margin enhancement through cost reduction, commercial discipline and efficiency improvements, with specific initiatives underway Purposeful allocation of capital to en
Slide 48: Balanced Capital Allocation
Balanced Capital Allocation We expect over $5 billion in cumulative Free Cash Flow available over the next 3 years – Remain committed to investing in growth for our businesses – Strength of Free Cash Flow and our strong balance sheet creates strategic and financial flexibility – Invest capital whe
Slide 49: Balanced Capital Allocation Framework
Balanced Capital Allocation Framework Significant Free Cash Flow Available Key Objectives Balanced Capital Allocation Goals $1.6 $1.7 $2.0 FY14P FY15P FY16P $5.3 billion cumulative Maintain BBB+ minimum rating Target 30 - 35% debt to capital Maintain financial flexibility Investing in High ROI
Slide 50: Organic investments: capital investment trend
Organic investments Capital investment trend $0.8 $1.3 $1.8 $1.4 $1.2 FY10 FY11 FY12 FY13 FY14P ($billion) Building Efficiency Power Solutions Automotive Experience
Slide 51: Long-Term Strong Dividend Track Record Continues
Long-Term Strong Dividend Track Record Continues Dividends Per Share $0.52 $0.64 $0.72 $0.76 $0.88 2010 2011 2012 2013 Current Consecutive dividend payments since 1887 $3.1billion in cash returned to shareholders via dividends over the past 10 years 33 dividend increases in past 35 years – Rec
Slide 52: Taking Action on Share Repurchase
Taking Action on Share Repurchase Recent Announcement $3 billion increase in share repurchase program; total of $3.65 billion $1.2 billion completed in Q1 Remainder of approximately $2.4 billion expected to be utilized in fiscal 2015 and 2016 Share repurchases and dividend payments are expecte
Slide 53: Entering 2014: Good Momentum
Entering 2014 Good Momentum Stabilizing markets Operational improvements continue Continued margin expansion across the businesses Continuing to invest for long-term growth and margin expansion Lower levels of capital expenditures generating stronger cash flows Taking Actions Significant
Slide 54: Fiscal 2014 Underlying Key Assumptions
Fiscal 2014 Underlying Key Assumptions Automotive production FY 2014 North America 16.9m up 6% Europe 19.4m up 2% China 21.8m up 11% Construction spending Non-residential – U.S. +2% Non-residential – Europe +1% Non-residential – Asia +11% Euro - $1.35 in 2014 Tax Rate - 20% in 2014 (same
Slide 55: Fiscal 2014 outlook
Fiscal 2014 outlook Consolidated net sales Approx $43.8B (up 3%) Higher vehicle production in North America and China, stabilizing in Europe Continued growth in emerging markets across all businesses Segment income Growth* Approx 15% EPS Approx $3.15 – $3.30 Cost savings and commercial discipl
Slide 56: Building Efficiency 2014 financial outlook
Building Efficiency 2014 financial outlook Sales up 1% to 3% North America reorganization and market recovery Strong emerging market growth Improvements in residential/light commercial and Latin America GWS portfolio rationalization Margins 7.0% to 7.2% – BE (ex. GWS) 8.6% to 9.0% – GWS 2.3%
Slide 57: Building Efficiency mid-term outlook (through 2018)
Building Efficiency Mid-term outlook (through 2018) Organic Sales Growth 5% to 6% Late-cycle market recovery Growth in Energy Solutions and emerging markets Market share gains Margin expansion to 10% (ex. GWS) Operating leverage Continuous improvement and supply chain management Pricing
Slide 58: Automotive Experience 2014 financial outlook
Automotive Experience 2014 financial outlook Sales up 1% to 2% Higher volumes in North America with stabilizing volumes in Europe Continued, but slower, growth in emerging markets Margin 4.0% to 4.2% – Seating 4.8% to 5.0% – Interiors 1.0% to 1.2% – Electronics 5.9% to 6.0% Operational improve
Slide 59: Automotive Experience - Seating mid-term outlook
Automotive Experience - Seating Mid-term outlook (through 2018) Sales Growth flat Impact of lower capital expenditures Accelerating growth in Asia Targeted business hurdles Margin expansion to 7.0% Average annual expansion of 40 to 50 bps Improved Metals profitability Operational improve
Slide 60: Power Solutions 2014 financial outlook
Power Solutions 2014 financial outlook Sales up 7% to 8% Higher volumes across all regions and channels Continued acceleration in China Market share growth Increasing production of AGM batteries Margin 16.0% to 16.2% Operating leverage (+) – Significant volume increase – Improving China pr
Slide 61: Power Solutions mid-term outlook (through 2018)
Power Solutions Mid-term outlook (through 2018) Sales Growth 8% to 9% Growth in China and other emerging markets Market share gains Advanced battery technology Margin expansion 100 to 150 bps Improved product mix Manufacturing improvements Vertical integration
Slide 62: Portfolio Update: Electronics Divestiture
Portfolio Update Electronics Divestiture Progressing as expected Timing of closing uncertain – multiple jurisdictional regulatory approvals Discontinued operations likely in 2014
Slide 63: Portfolio Update: Interiors Strategic Review
Portfolio Update Interiors Strategic Review Interiors is a $4.2 billion low margin business with high capital requirements Industry-wide structural challenges and excess capacity Rationalizing investments and non-core divestitures We continue to explore our strategic options
Slide 64: Summary
Summary
Slide 65: Building blocks of sustainable shareholder value
Building blocks of sustainable shareholder value We believe we have the tools to deliver strong, sustainable returns Top Line Growth Core growth Strategic M&A Operational Efficiency Margin Enhancement Share Repurchase Consistent contribution to EPS Dividends Consistent, growing Sustainab
Slide 66: A commitment to profitable, sustainable growth
Johnson Controls A commitment to profitable, sustainable growth Focused on execution and delivering against our objectives Confident in our outlook for 2014, but taking nothing for granted Over the longer term, we have a clear vision for our portfolio and the right tools to achieve that vision
Slide 67: Driving sustainable growth and returns in attractive global markets where we can win
Driving sustainable growth and returns in attractive global markets where we can win