Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll-Rand — Investor Day (November 2013)
58 slides from Trane Technologies's investor day presentation, Nov 12, 2013
Slide 1: Agenda: 2013 Analyst and Investor Meeting
Analyst and Investor Meeting November 12, 2013 1 1 Agenda: 2013 Analyst and Investor Meeting Overview Mike Lamach Innovation Paul Camuti Operations Todd Wyman Climate Didier Teirlinck BREAK: 15 minutes Res. HVAC Gary Michel Industrial Robert Zafari Financial Sue Carter Q&A 2 Safe Harbor This present
Slide 2: Positioning Ingersoll Rand to Deliver Shareholder Value
Analyst and Investor Meeting November 12, 2013 2 3 4 Positioning Ingersoll Rand to Deliver Shareholder Value Operational Excellence Balanced Capital Allocation Accelerating Revenue Growth Strong, recognized brands Well positioned in both geographic and end markets Sustainable, Profitable Growth and
Slide 3: Significant Progress 2009 to 2013
Analyst and Investor Meeting November 12, 2013 3 5 • Building capabilities and integrating business models • Enhanced innovation capabilities to deliver growth • Sustainable operating margin improvement – operational and functional excellence • Divested underperforming operations • Spinout of Securi
Slide 4: Capital Allocation and New Organization Structure
Analyst and Investor Meeting November 12, 2013 4 7 Capital Allocation Annual Dividend Per Share Share Repurchase, $B 2011 2012 2013 to Q1 2014 $0.84 $1.16 $2.0 Over $4.5 billion returned to shareholders in 3 years • Future dividends to reach peer payout ratios • 2013 dividend exceeded 2008 peak of $
Slide 5: "New" Ingersoll Rand: Foundational Strengths
Analyst and Investor Meeting November 12, 2013 5 9 • Leading global brands and market positions • Strong long-term growth drivers – Macro drivers are energy efficiency and sustainability – Large installed base drives replacement business and parts and service growth – Global footprint and exposure t
Slide 6: Ability to Capitalize on Industry Macro Drivers
Analyst and Investor Meeting November 12, 2013 6 11 Ability to Capitalize on Industry Macro Drivers Trends Opportunities Energy Efficiency/ Sustainability • Reduce energy costs • High-performance equipment: compression & thermal management, advanced controls Rising Food Costs, Spoilage and Safety Is
Slide 7: Growing Aftermarket Systems & Services
Analyst and Investor Meeting November 12, 2013 7 13 Growing Aftermarket Systems & Services Leveraging large installed base to grow aftermarket Total Revenues Commercial HVAC Industrial New Equipment 31% 2005 2012 7.2% CAGR 2005 2012 5.2% CAGR Aftermarket 31% of 2012 revenues; $3.9 billion in 2012 ~4
Slide 8: Operational Excellence
Analyst and Investor Meeting November 12, 2013 8 15 Manufacturing Facilities 94 67 49 2009 2013 2013 Post Spin Operational Excellence • Restructuring of manufacturing footprint largely completed in 2013 • Improved pricing processes: price exceeded material inflation for 10 consecutive quarters • Mat
Slide 9: Value Stream Expansion
Analyst and Investor Meeting November 12, 2013 9 17 Value Stream Expansion “OPEX”Growth “EX” Market Analytics Product Management Technology & Innovation Sales Force Capability Pricing • Rigorous analytics, market segmentation, customer insights • Generating, developing and launching offerings • Redu
Slide 10: Earnings Power in Cyclical Recovery and Summary
Analyst and Investor Meeting November 12, 2013 10 19 Ingersoll Rand Excluding Security 2008 to 2012 Revenue Change; Proforma, $M 2008 to 2012 ($320) ~($1,300) Recovering Equipment Non- Recovered Equipment ~$530 Significant earnings power in a cyclical recovery Equipment Aftermarket ~($770) ~$450 20
Slide 11: Innovation/Technology
Analyst and Investor Meeting November 12, 2013 11 Innovation/Technology Paul Camuti Senior Vice President, Innovation and Chief Technology Officer November 12, 2013 22 External Drivers that Impact Ingersoll Rand Energy Productivity Global Industrialization Sustainability and Climate Change Ubiquitou
Slide 12: 2014 Technology Trends Impacting Innovation Agenda
Analyst and Investor Meeting November 12, 2013 12 23 2014 Technology Trends Impacting our Innovation Agenda • Information and Communications – The internet of things – Wireless – Large scale data analytics • Materials – Light weight, high strength – Energy storage – Refrigerants • Additive Manufactu
Slide 13: Core Technical Capabilities Shared Across Businesses
Analyst and Investor Meeting November 12, 2013 13 25 Core Technical Capabilities Shared Across Businesses Compression Materials and Chemistry Thermal Management Smart, Wireless Devices Remote Services and Analytics Vibration/Acoustics Engineering Precision Machining Modeling and Simulation 26 Establ
Slide 14: A System to Drive Growth through Innovation
Analyst and Investor Meeting November 12, 2013 14 27 A System to Drive Growth through Innovation Building capability and our business operating system for: Innovation delivers growth and margin expansion • Offer choices, Portfolio Management • New offer development • External partnering • Market Ana
Slide 15: Delivering Growth Through Innovation
Analyst and Investor Meeting November 12, 2013 15 29 Delivering Growth Through Innovation Thermo King™ Precedent Temperature Control System C800 Oil-Free Centrifugal Compressor Series™ S CenTraVac Variable Speed 20 SEER Residential HVAC system Intellectual Property 2011 2012 2013F Invention Disclosu
Slide 16: Summary: Global Operations & Integrated Supply Chain
Analyst and Investor Meeting November 12, 2013 16 31 Summary • Integrating and operating the company with respect to growth • Our Focus: Delivering growth and margin expansion through innovation and technology • Building Innovation capability thru Product Management, Engineering, External Focus • Mu
Slide 17: Operational Excellence Strategy
Analyst and Investor Meeting November 12, 2013 17 33 Agenda Operational Excellence • Strategy • Landscape • Capability Building • Lean Transformation • Global Procurement • Materials & Sales, Inventory and Operations Planning • Quality • Advanced Manufacturing Engineering 34 Operational Excellence S
Slide 18: Total Cost Landscape
Analyst and Investor Meeting November 12, 2013 18 35 Labor & Overhead $2.5 B SG&A $2.5 B Total Cost Landscape 2013 Estimated Cost data • Lean Transformation • Indirect Leverage • Manufacturing Networks of Excellence • Functional Excellence • ERP Transformation • Global Procurement ‒ Rationalization
Slide 19: Lean Transformation
Analyst and Investor Meeting November 12, 2013 19 37 Lean Transformation • Less reliance on external coaching • Build out of internal resources – Regional and functional capability • Implement model value stream • Mature leadership immersion • Imbed continuous improvement through daily management an
Slide 20: Lean Transformation Results
Analyst and Investor Meeting November 12, 2013 20 39 Lean Transformation Results 2013 YTD results from value streams started in 2011 Past Due Days Cycle Time Inventory Turns Margin Expansion* Cost of Poor Quality 7%21% 6.7% 12%17% **Measured by Cost Leverage Expectation of continuous improvement cyc
Slide 21: Global Procurement: Core Synergy
Analyst and Investor Meeting November 12, 2013 21 41 16% Unique Buy Examples Gas & Diesel Engines Aluminum Fin Stock Compression Molded Plastics Refrigerants Global Procurement: Core Synergy 84% Common Buy Examples Electric Motors & Drives Power Storage Steel Castings Machined Parts Focus on rationa
Slide 22: Global Procurement: Supplier Quality & Development
Analyst and Investor Meeting November 12, 2013 22 43 FY 2012 FY 2013E Global Procurement: Supplier Quality & Development • Invested in additional 55 quality professionals − Technical expertise − Regionally deployed • Deploying standard work − On-site Assessment (OSA) − Advanced Product Quality Plann
Slide 23: Materials & SIOP and Quality
Analyst and Investor Meeting November 12, 2013 23 45 FY 2011 FY 2013EFY 2011 FY 2013E Materials & SIOP • Model for standard organization design • Functional expertise through training and certification • Implementing basic processes globally • Matured processes to be implemented with capability in s
Slide 24: Advanced Manufacturing Engineering: Core Synergy
Analyst and Investor Meeting November 12, 2013 24 47 Advanced Manufacturing Engineering (AME): Core Synergy • Drive capability in manufacturing Networks of Excellence (NOEs) • Initiated pilot with strong results • Expand to other manufacturing NOEs • Standard equipment, tools, materials & process •
Slide 25: Climate Solutions
Analyst and Investor Meeting November 12, 2013 25 Climate Solutions Didier Teirlinck Executive Vice President, Climate Segment November 12, 2013 50 Climate Solutions Summary Attractive Markets and Positive Market Indicators Growth Strategies and Initiatives • New products & innovations • Global serv
Slide 26: Climate Solutions
Analyst and Investor Meeting November 12, 2013 26 51 Climate Solutions Trusted expert Innovator Performance Specialist Trusted brands with extensive installed base and global market coverage Performance Innovation Commitment Knowledge 52 Enhance Building Results O p e ra te , M a in ta in a n d S u
Slide 27: Transport Refrigeration Solutions
Analyst and Investor Meeting November 12, 2013 27 53 Thermo King Trailer Large Truck Bus and Rail Comfort Marine Railcar & Intermodal Small Truck Delivering reliable, efficient refrigerated transport solutions, supported by extensive worldwide dealer network Transport Refrigeration Solutions 850+ wo
Slide 28: Market Drivers and Trends
Analyst and Investor Meeting November 12, 2013 28 55 Market Drivers and Trends Urbanization Efficiency and Sustainability Food and water scarcity Existing Building Solutions Food Safety Integrated Building Solutions Regulation Refrigerant Market drivers for continued long term growth 56 Market Indic
Slide 29: Growth Strategies and Initiatives
Analyst and Investor Meeting November 12, 2013 29 57 Growth Strategies and Initiatives Global Services Expansion High Growth Markets Growth Through Partnerships New Products and Innovations 58 New Product Introductions Series™ S CenTraVac Stealth™ Air-Cooled Chiller Wireless Communications Advantage
Slide 30: New Product Introduction
Analyst and Investor Meeting November 12, 2013 30 59 New Product Introduction FoundationTM Light Commercial Rooftop Unit • Specifically designed for the replacement market • High quality & reliability • Reduced first costs in replacement applications • Rapid delivery enables immediate / emergency re
Slide 31: Service and Business Model Innovation
Analyst and Investor Meeting November 12, 2013 31 61 Service and Business Model Innovation Replacement Coils Mobile Applications Delivering reliability, efficiency and lifecycle solutions Dashboarding (SaaS) CryoTech Business Model Intelligent Services Existing Building Solutions R’Newals™ (retrofit
Slide 32: Global Services Expansion: Trane Boost
Analyst and Investor Meeting November 12, 2013 32 63 Global Services Expansion: Trane Boost Cooling System Optimization Programs Results Poland, Pharmaceutical: • Saved 60% of pumping energy costs Germany, Manufacturing: • Comprehensive retrofit including free cooling reduced chiller hours by 20% an
Slide 33: High Growth Markets
Analyst and Investor Meeting November 12, 2013 33 65 High Growth Markets China test lab Localization: products & supply chains China manufacturing Local talent development Regionalization of organization Executing our global growth strategy 2009 2010 2011 2012 2013 2014 Czech Manufacturing facility
Slide 34: Growth Through Partnerships
Analyst and Investor Meeting November 12, 2013 34 67 Building a global network of partnerships, including GE and Samsung, for expanded integrated solutions Growth Through Partnerships Trane Building Solutions • Applications engineer expertise • Innovative systems controls • Comprehensive solutions f
Slide 35: Sales Productivity
Analyst and Investor Meeting November 12, 2013 35 69 Sales Productivity Structured sales management to: • Increase ability to “win” at each stage of customer’s buying process • Earn the business on the right terms and in the right time Selling efficiency and effectiveness through sales management pr
Slide 36: Residential Solutions: 100 Years of Trane
Analyst and Investor Meeting November 12, 2013 36 Residential Solutions Gary Michel Senior Vice President President, Residential HVAC North America November 12, 2013 72 100 Years Of Trane – On to the Next Century After 100 years, it’s hard to stop a Trane! Solidify the Core Position for growth • Ope
Slide 37: Residential Solutions Revenue Profile
Analyst and Investor Meeting November 12, 2013 37 73 100 Years Of Trane: Looking Forward • Powerful strategic brands with highest brand preference • Leading reliability and quality • Proven channel leadership with highest dealer satisfaction • Leading energy efficiency and sustainability Positioned
Slide 38: Channels to Market
Analyst and Investor Meeting November 12, 2013 38 75 Channels to Market • Strategic end-user relationships • Strong builder programs to leverage HVAC sales • Nexia is the leading home intelligence platform in residential new construction • Strong relationships in retail and e-commerce • Nexia drivin
Slide 39: Strategic Priorities and Innovation Roadmap
Analyst and Investor Meeting November 12, 2013 39 77 Strategic Priorities • Operational excellence • Total market focus • New product designs with rapid and effective commercialization • Nexia diagnostics and controls • Energy efficiency leadership — Variable Speed — Ultra high efficiency systems •
Slide 40: Variable Speed Systems
Analyst and Investor Meeting November 12, 2013 40 79 Variable Speed 17 to 20 SEER applications providing consistent, efficient comfort at an affordable price point: • Maintains consistent indoor temperature within ½ degree • Reduces humidity levels • 50% more efficient in cooling, 30% more efficient
Slide 41: Ameristar and Nexia Home Intelligence
Analyst and Investor Meeting November 12, 2013 41 81 Ameristar • Launched April 2012, with continued strong growth —Market share ranks in top half of all HVAC brands • Broad product portfolio —13, 14 SEER systems —Plans to expand portfolio up to 16 SEER • Over 200 points of distribution, expanding r
Slide 42: Residential Summary and Operating Margin
Analyst and Investor Meeting November 12, 2013 42 83 Residential • Powerful strategic brands with highest brand preference • Leading reliability and quality • Proven channel leadership with highest dealer satisfaction • Leading energy efficiency and sustainability Positioned for a successful second
Slide 43: Global Industrial Businesses
Analyst and Investor Meeting November 12, 2013 43 Global Industrial Businesses Compressed Air Systems and Services Club Car Power Tools Fluid ManagementMaterial Handling * Figures are management estimates of the addressable market sizes, 2013 $30B market with high growth, high margin opportunity 85
Slide 44: Industrial Outlook and End Market Distribution
Analyst and Investor Meeting November 12, 2013 44 Industrial Outlook and End Market Distribution Growth above trend from innovative products and services Industrial Production Index Region Trend United States Brazil Mexico Eurozone China India Sources: Consensus Economics; MAPI; management estimates
Slide 45: Four Strategic Growth Paths
Analyst and Investor Meeting November 12, 2013 45 Grow Global Services Grow Technology Leadership • Customer-driven innovation • Market-leading reliability, efficiency and controls technology • Core module and system integration engineering centers • Region-of-use capabilities • Enhanced customer va
Slide 46: Grow Technology Leadership: Air Equipment
Analyst and Investor Meeting November 12, 2013 46 Grow Technology Leadership: Air Equipment New products delivering share gain and margin expansion R-Series Oil-Flooded Rotary Compressors: Platform Completion R90-110 R132-160 R55-75 R37-45 R15-37 Centac Oil-Free Centrifugal Compressors: Platform Exp
Slide 47: Grow Technology Leadership: Power Tools and Material Handling
Analyst and Investor Meeting November 12, 2013 47 IQV12 Cordless Mini Tools Grow Technology Leadership: Power Tools Increasing investment in our high margin power tools business QX Series Precision Cordless Tools • Cordless flexibility • Traceability • Connectivity “The operators like the QX tool. T
Slide 48: Grow Technology Leadership: Fluid Management and Club Car
Analyst and Investor Meeting November 12, 2013 48 Electronic Interface PumpsL and H Series Peristaltic Pumps Grow Technology Leadership: Fluid Management Situation and Focus Areas Entering the $12B electric-driven and intelligent pump market • Equipped for remote monitoring and control • Enables gro
Slide 49: Grow Global Services: Air System Optimization
Analyst and Investor Meeting November 12, 2013 49 Air System Optimization Grow Global Services: Air System Optimization Winning customers through efficiency and lifecycle value improvement Goal: Deliver air at the right quality, pressure and flow - at the lowest Total Cost of Ownership and highest l
Slide 50: Industrial Segment Summary
Analyst and Investor Meeting November 12, 2013 50 Industrial Segment Summary A well-founded and consistent strategy • Superior customer experience • Innovation and technology guided by strong mega trends spanning all businesses and regions • A global services business that fosters deep customer conn
Slide 51: Update Security Company Spinoff
Analyst and Investor Meeting November 12, 2013 51 101 Agenda • Spinoff of Allegion Security business • Reorganization and new segment reporting • Reset of financials for 2013 • Balance sheet and cash flow • Capital allocation • Outlook for 2014 to 2016 102 Update Security Company Spinoff BOCOM Syste
Slide 52: New Organization Structure and Post-Spin Proforma
Analyst and Investor Meeting November 12, 2013 52 103 New Organization Structure • Focus on core Climate and Industrial businesses • Expected charge to complete reorganization $0.15 to $0.20 per share – Spending completed in Q1 2014 – One year payback expected New structure to accelerate growth and
Slide 53: Balance Sheet and Cash Flow
Analyst and Investor Meeting November 12, 2013 53 105 Balance Sheet and Cash Flow $ Millions YE 12 Q1’13 Q2’13 Q3’13 Cash 882 833 2,201 1,084 Debt 3,233 3,236 4,782 3,527 Net Debt 2,351 2,403 2,581 2,443 Solid balance sheet and cash flows Available Cash Flow 918 1,100 ~800 900 to 1,100 2012 2013F 20
Slide 54: Working Capital Performance and ROIC
Analyst and Investor Meeting November 12, 2013 54 107 Working Capital Performance Excluding Security Annual Working Capital % of Revenues 2010 2011 2012 2013F 2016F 0.8% 2.4% 2.6% ~2.5%2.3% 108 4.9% 6.4% 6.6% 7.3% ~10% 2010 2011 2012 2013F 2016F Return on Invested Capital Excluding Security Improved
Slide 55: Debt Maturity Profile and Capital Allocation
Analyst and Investor Meeting November 12, 2013 55 109 8 0 750 350 0 125 0 700 0 150 0 306 37 500 0 100 200 300 400 500 600 700 800 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2043 Debt Maturity Profile Putable Annually in Nov/Feb 8 8 8 8 8 8 500 Manageab
Slide 56: Capital Allocation and Total Shareholder Return
Analyst and Investor Meeting November 12, 2013 56 111 Capital Allocation Shareholder Value Balance Sheet • BBB Rating • No maturities until 2015 M & A • Focused on core businesses • Value accretive on a risk adjusted basis Share Repurchase • Complete current $2B authorization • Anticipate new author
Slide 57: Ingersoll Rand Post-Spin Pro-Forma Targets 2014 to 2016
Analyst and Investor Meeting November 12, 2013 57 113 Ingersoll Rand Post-Spin Pro-Forma 2013F Targets 2014 to 2016 Revenue $12.2B to $12.3B Revenue Change 2% to 3% 4% to 5% CAGR Operating Income Growth +8% to 9% 13% to 15% CAGR Operating Margin Change +50 bps to 60 bps 85 to 100 bps annual Adjusted
Slide 58: Analyst and Investor Meeting November 12, 2013 58 115
Analyst and Investor Meeting November 12, 2013 58 115