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Transcript of BofAML 2011 In Dust Rials Conference
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Bank Of America Merrill L nch 2011 Industrials Conference
z
Andreas KramvisPresident and CEO, Specialty Materials
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Forward Looking Statements
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. All statements, other than
statements of fact that address activities events or develo ments that we or
our management intend, expect, project, believe or anticipate will or may occurin the future are forward-looking statements. Forward-looking statements are
experience and trends, current economic and industry conditions, expected
future developments and other relevant factors. They are not guarantees of, ,
may differ from those envisaged by our forward-looking statements. Our
forward-looking statements are also subject to risks and uncertainties, which
can affect our performance in both the near- and long-term. We identify theprincipal risks and uncertainties that affect our performance in our Form 10-K
and other filings with the Securities and Exchange Commission.
1 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
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Specialty Materials Overview
$5.6-$5.7
Sales Segment Margin %
Recent HighlightsFinancials
Record 3Q 2011 Performance
- Sales u 25%, O . Mar ins 17.3%
($B) ~17%CAGR
$4.1.
15.8%
1~18.5% Securing Major Wins Across Portfolio
- Robust backlog; strong energy demand
.
2009 2010 2011E
Business Units Geographic Mix
Sunoco Phenol Acquisition Closed
- Secured critical raw material input
UOP
NorthAmerica
LatinAmerica
AdvancedMaterials
EMEA
2 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
St rong Per form anc e T hrough Cyc le
Asia Pacific
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Business And End Market Update
UOP
Continued global investments tomeet refined product demand
High win rates and execution of
Backlog conversion key growth driver
Continued high win rates on globalrefining & petrochemical capacity
Resins &Chemicals
backlog driving strong results
Overall tight caprolactam supply /demand, however China pricesmoderating
investments
Volume growth, phenol accretion
Continued tight supply / demand
FluorineProducts
g crop pr ces spurr ng er zer(AS) demand
Moderation from record pricelevels due to increased su l
env ronmen
Continued pricing pressure Emer in Re ion volume rowth
SpecialtyProducts
Continued strength in Armor, Aclar
New product wins
Successful new product launches
ElectronicMaterials
Pockets of softening demand
Weaker demand following 1Hinventory build due to supply
Moderate growth driven by mobiledevice market and new applications
3 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Envi ronm ent Posi t ive, How ever Uncer t a int y Overhang
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Key Differentiators
24%Operating Business
, .Segment Margin, Percent
20%
Approach &
Leadership
Decision
Week Peer Crown Jewels
12
16%Analytical
Capabilities &Innovation
Technology
Investments &
Honeywell SM
8%
Engine rocess Specialty
4%
2005 2006 2007 2008 2009 2010 2011E
PlantPerformance &ProcessTechnology
HOS &Plant Strategic
Plans Peer Crown Jewels based on UTX Otis, TYC ADT, EMR Process Management,DHR Test & Measurement, MMM Industrial Segments
4 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Driv ing Super ior F inancia l Per for m anc e
pec a y ase on pec a y em ca compan esReporting as of 11/29/11
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Three Business Models
New
Low-Global-WarmingPlatform
Molecule screening anddiscovery
FluorineProducts
Molecule &
Scale-UpNew Nylon Resins
Process scale-up important
Major plant investmentsbefore product launch
-Technology
Resins &Chemicals
TechnologyLeadershi
More From A Barrel Of Oil
Chemicals From NaturalGas & Coal
Technology licensing model
Invent, demonstrate and licenseUOP
Bio-Renewables ngo ng supp y o ca a ys s
Fast-CycleApp.
Develop.Next-Generation
Photovoltaic Materials
service ideas
Customizing existingtechnologies
SpecialtyProducts
5 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
St rong Tec hnology And Business Al ignm ent
SpectraFiber Fast time to market
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Fluorine Products: 2011E Sales ~$1.1B
Heat Transfer/200
250 US Housing Starts (1)
HON HVAC Refrigerant Volume
Structural
e r geran s
Industrial
Nuclear
100
150
Heat Transfer / RefrigerantsResidential / Commercial / Supermarket / Mobile
nc osures
02006 2007 2008 2009 2010 2011E
US Housing Starts (1)
Structural Enclosures
Nuclear Services
Applications
Insulation / Roofing / Weatherization Solutions forResidential / Commercial and Appliances
75
100
125
HON Foam Volume
Industrial Products
Conversion Capabilities and InventoryManagement
Differentiated Enabling Aerosol, Solvent and 0
25
50
6 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
(1) Source: American Chemistry Council
(2) Source: Actuals: The Association of Home Appliance Manufacturers; 2011 Estimate: Honeywell
Grow t h Exc eed ing Macros
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Next-Generation LGWP Solutions
Environment:
Aerosol /Insulation Panels
Foam Insulation /Solvents
StationaryAir Conditioning
>
MobileAir-Conditioning
GWP of 4 vs. 1430
Performance:
Safety:
.
Non-Flammable
Meets All Requirements
.
Non-Flammable
Improved Energy Efficiency
Same Energy Efficiency
Safer Than Hydrocarbons
Non-Flammable
Meets All Requirements
Cost-to-Serve:n se o ay ear rop- n ep acement
Solutions by Applications
Annual SalesOpportunity: ~$100M ~$200M ~$300M
Near Drop-in Replacement
~$300M
7 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Creat ing Nex t Generat ion Tec hnology Leader ship Posi t ion
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Resins And Chemicals: 2011E Sales ~$1.4B
Capro Demand >> Supply
- Asia Driving 60% of Global GrowthResins
Volume(kMT) AvailableCapacity(@90%) CPLDemandEstimate
Demand
Ammonium
Sulfate
Caprolactam
Caprolactam4,000
>Supply
enoIntermediates
Nylon 6 Resin
Key Ingredient in Making Nylon Resins and Fibers
Used in the Manufacture of a Wide Range of Products
3,500
mmon um u a e er zer
Phenol / Intermediates
Caprolactam Co-Product Used for Crops and Lawns
Phenol, Acetone and Co-Products From
Increased Competitive Advantage via HOS
Expanding Global R&D Capabilities
- Sulf-N 26, Fishing Filament for Asia,
8 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
St rong Global Franc hise
of Various Chemicals Flexible Packaging
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Specialty Products: 2011E Sales ~$1.2B
Attractive businesses serving nichesegments in larger markets
ElectronicMaterials
~$0.4B
PerformanceMaterials
~$0.8B
Solutions represent small % of total cost,but deliver high value or critical need
Global applications development
Performance Films
capabilities reduce customer conversioncycle-times and drive new market
creationHealthcare, Solar and Industrial Applications
High Strength, Light Weight Fibers
Military and Law Enforcement Armor
Rigorous sales pipeline processesclosely aligned with deployment ofglobal sales, technology and capital
Electronic Materials
Semiconductor Targets, Polymers and Chemicals
pec a y ves
High Performance Waxes and Lubricants Funding high return, incremental,
organic growth investmentsPotentialbolt-on ac uisition o ortunities
9 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
SMs Fast Cycle A ppl ic at ion Engine
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Fast Cycle Applications Engine
PerformanceFilms
Highest Moisture Barrier
Best Cost / Performance
High Growth Industries
High Strength Lightest Weight
Best Ballistic Performance
Small % Of Costs
Mission Critical ApplicationsArmor FishingRope
Additives High Value Add
Fragmented; Profitable NichesAdhesives Oral Care Asphalt
ElectronicMaterials
Niche Applications
High Barriers To Entry
Extending To New Markets
10 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Leverage Technology Pla t for m s To Create New Market s
em con uc ors
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UOP
egmen sFinancials
$1.9$1.6
Sales $B Petrochemicals
Refining
Gas &Hydrogen
Manufacturin
Geographic Mix Products
Adsorbents andAluminas
rocess ec no ogy an qu pmenLicensing, Services and Equipment for Refining,Petrochemical and Gas Processing Industries
Catalysts, Adsorbents and SpecialtiesMaterials for Process Technology and
LatinAmerica
EMEA
Renewable Energy and ChemicalsProcess Technology for Transportation Fuels andChemicals
ManufacturingNorth
America
Asia Pacific
11 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Indust r y Leading Technology And Solu t ions
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Current UOP Landscape
EmergingRegion Growth
Continued capacity investment driven by energysecurity needs and local demand
mp ca on oa ou re ee ng
ImprovedRefining Margins
Refinery utilization is increasing Product prices closing gap on crude US refiner upgrading investments to capitalize on U.S.
Shale GasDevelopment
.
Increased unconventional gas development creatingnatural gas liquids recovery/processing opportunities
Stimulated US petrochemical projects
Oil PriceVolatility
Limited impact due to short-term swings Long-term pricing drives investment economics
FinancialUncertainty
Financing challenges causing some project delays Renewed focus on most economically viable projects
12 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Mid EastUnrest
ps ream pro ec e ays Limited impact on downstream capacity additions
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UOP Positioning In Energy Supply Chain
Crude Oil
Process technology, catalysts, equipmentand services forfuel and petrochemical
Gasoline Diesel LPG
PetrochemicalFeedstocks
ee s oc pro uc on.
Process technology, catalysts, equipment
feedstock
Chemicals used toproduce:
Natural Gas
- ,propylene, phenol and LAB.
Textiles Plastics Detergents
Natural gas forresidential, commercialand power
rea ng ec no og es, a sor en s anservices to remove contaminants fromnatural gas prior to distribution.
Renewables Honeywell Green Diesel Honeywell Green Jet Oil for electricity
generation andtransportation fuels
Process technology, catalysts, equipmentand services to produce real fuels from arange ofbiofeedstocks, from forestresiduals to algae.
13 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Unique Technologies To Boost Supply Of K ey Produc t s
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Typical Refinery Process
trochem
d&Other
~10%
Produce more high-margin petrochemical
els
PFe
Produce more high-demand diesel
TransportationFu
~70%
Produce cleaner fuelsto meet regulations
Optimize refineries and
Typical
el
Process cheaper, butmore difficult-to-refine
ottomoftheBa
rr
~20%
heavier crudes
Upgrade bottom-of-the-barrel to higher quality,hi her mar in roducts
14 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
UOP Tec hnologies Cr i t ic a l To Ref iner y Invest m ent s
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UOP Industry Landscape - RefiningRefining
3,000
4,000
nBtu175
225
Oil Natural Gas 2012-2016
Equivalent
to 30 new
1,000
2,000
Qu
adrillio
kBP
125
0
Asia Mid-East CIS/Africa LatinAmerica
NorthAmerica
Refining Opportunity
Source: US Energy Information Administration
Summary
75
2007 2015 2020 2025 2030 2035
RegionalFactors
Environ.Reg.
NationalSecurity
Energy Demand Tracks GDP, However;
- EM capacity additions ~5x of NA/EU
- Demand mix, environmental, security,
5-8%Growth
Replacement
~1.4%
o er ac ors r ve re n ng grow
- Changing crude inputs require refineryupgrades
- Greater demand for energy efficiency and
15 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Under ly ing Grow t h Trends In UOP Sw eet Spot
Base OilDemand
RefiningGrowth
opt m zat on
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Boosting Diesel YieldRefining
UOP UnicrackingTM is highest yield, lowest
sulfur diesel technology
ec no ogy ea ers p
Forecast Product Demand 2010-2020
ese eman er ue s8000
l/Day
UOP UnionfiningTM improves quality to meetmore stringent fuel regulations
>2000
5000
Thousa
ndB
Hydrocracking and Hydrotreating Catalysts
optimize yields and profitability
Actual Customer ResultRe ulation Drivin Reduced Sulfur Content
Source: 2010 Purvin & Gertz GPMO-1000 Gasoline Diesel Kero / Jet Naptha Residual
Fuel Oil
$270Increase in FeedstockValue ($/MT)
60%Incremental Conversionto Higher Value Fuels
16 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
$2.3BCustomer ValueCreated
Source: 2008 HART World Refining Fuels Update
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Upgrading Lower Quality CrudeRefining
ec no ogy ea ers p
UOP UniflexTMdelivers industry leadingconversion (90%+) to transportation
Global Heavy Crude ProductionKBPD
10000
12000
14000
-
productsUOP Residue FCCprocess cost-
effectivel converts moderate to4000
6000
8000
Abilit To Refine Provides Mar in Lift Actual Customer Result
severely contaminated feedstocks intogasoline
0
1995 2000 2005 2010 2015 2020
Source: Purvin & Gertz 4Q10 Price & Margin Update
12
16
rgin,
$/bbl Light Sweet Cracking
Light Sour Cracking
Heavy Sour Coking
4-6%Increase in High-ValueFuel Conversion
0
4
8
iningNetCashM
50%Increase in RefinerMargins
17 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
-4
1990 1995 2000 2005 2010 2015 2020
Ref
$300MCustomer ValueCreatedSource: Purvin & Gertz
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Integrated Solutions To Optimize Refinery FlexibilityAnd Margins
Refining
apa es
rrel
~$15Less Complex, Small
More Complex, Large+200%
Configuration
Design BasisTraining &
Margin$perb
~$2
~$4 ~$5
+100%OptimizationStart-Up
Optimized For Dynamic Inputs And Outputs
Low Demand High Demand
Source: International Energy Agency
Actual Customer Result
ProcessDesign
Services
Front-EndEngineering
Design
Feedstock type, quality and cost
Out ut demand and rice
20%Increase in RefineryMargins vs. Base Design
Regulatory changes
1 yrReduction inConstruction Cycle Time
18 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Schedule and project cost
$2BCustomer Value
Created
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UOP Industry Landscape - PetrochemicalsPetrochemicals
40
50
MTA
-
Para-xylene used to manufacture clearplastic water bottles, polyester etc.
7%Growth
10
20
30
M
illion Demand driven by EM, primarily China
(11% CAGR) and Mid-East (13% CAGR)
Additional 12 Million MT of capacity0
1996 1999 2002 2005 2008 2011 2014
Propylene Supply/Demand Sector Drivers
requ re y ~ p an s
5%Growth
ropy ene o e ns are use n eproduction of polymers used for plastics
Demand driven by EM growth inpackaging and automotive
Traditional supply sources reducing due touse of ethane cracking (vs. naptha) in ME
Additional 14 Million MT of capacity
19 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Under ly ing Grow t h Trends In UOP Sw eet Spot
~
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Boosting Petrochemical YieldPetrochemicals
-
World leader in para-xylenetechnology with large global installed
Polyester Fibers
Globalization and shift tos nthetics from natural
base
Lowest cost, most energy efficient-
fibers
P.E.T. Bottles
single train in operation
Actual Customer ResultMargin Lift For Customers
penetration into existingnon-plastic applications
lue$
$450Increase in FeedstockValue ($/MT)~$450 / ton
MarketV
a
30%Improvement inEnergy Efficiency
20 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Crude Oil Transportation
Fuels
Para-xylene (P-X) $450MCustomer ValueCreated
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Boosting Propylene SupplyTodayPetrochemicals
World leader in on-purposepropylene(Oleflex) technology withCrude
Napthaor
Traditional Route to Propylene
Propylene
largest installed base
Lowest cost, most energy efficienttechnolo with lar est sin le train
On-purposePropylene
Unique UOP OleflexTechnology
Mar in Lift For Customers
in basic engineering design
Actual Customer Result
Field
Propane
~$550 / tone$
$550Increase in FeedstockValue ($/MT)
MarketV
al
30%Improvement inEnergy Efficiency
21 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
Propane Propylene$200MCustomer ValueCreated
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New Routes To Propylene / EthylenePetrochemicals
UOP pioneering methanol-to-olefin (MTO)technology to produce olefins fromfeedstocks other than etroleum
-
CrudeNaptha
or
Propylene
Traditional Route to Propylene
Successful demonstration plant inBelgium with partner Total Petrochemicals
Beachhead ro ect win in China with
On-purposePropylene / Ethylene
Unique UOP MTOTechnology
Margin Lift For Customers Actual Customer Result
Wison Clean Energy Company
Coal Methanol
~lue$
$590Increase in FeedstockValue ($/MT)~$590 / ton
MarketVa
40-60%Reduction in ProductionCosts
22 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
$450MCustomer ValueCreated
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Recent UOP Wins
on s x on-purpose propy ene ec no ogy con rac s, nc u ngfive in China
Cornerstone win with Chinas Wison Nan in Clean Ener
Company Ltd to license MTO (methanol-to-olefins) technologyWon contracts to provide gas processing technology for floatingpro uc on, s orage an o oa ng vesse s
UOP adsorbents are now being used to remove radioactive
contaminants from seawater in Ja an followin the dama e to theFukushima incident
Received approval forGreen Jet Fuel use in passenger flights and
jet fuel. Other firsts included the first commercial US flight, firstestablished route and the first China flight on renewable jet
23 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011Leading Tec hnologyWinning In The Marke t p lac e
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SM Global Reach
India
LatinAmerica
g row eg ons
China /
SE AsiaMidEast
FSU
Africa
~$2.8B in 2012~45% of Total Sales
ew xpan e eg ona ec n ca a es an or uppor
New/Expanded Technology Development Capabilities
New/Expanded Procurement Capabilities
24 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
New/Expanded Project Engineering Capabilities
High Grow t h Regions Dr iv ing ~60% Grow t h Throu gh 2016
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Operational Excellence
Volume Conversion Cost
le,AL
Example
HOSBronze
100%Gold
82008 2011 2008 2011
3% 9%Mobi
Catalysts
X HOS
50% Bronze
HOS Deployed
Disci lined Decision Makin2007 2011 2007 2011
10% 1%Orange,
Wax Additives
Bronze
0%2011 2013 2015
HOS Preparation
Strategic Plans across all plants
Daily monitoring rigor
26% 16%
Pottsville,PA
Aclar Film
HOSBronze
2008 2011 2008 2011
- Systematic debottlenecking of existing assets
- Never replace in kind
- Fund attractive rowth o ortunities
24% 18%
pokane,WA HOS
Bronze
25 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011Max imiz ing Ex is t ing Manufac t ur ing Assets
2008 2011 2008 2011
SSemicon Targets
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Technology Excellence
Next-Gen SolutionsTechnology Advantage
Industry leading R&D investments 1,000+ technologists, including 400 PhDs
IP portfolio
2,700 U.S. patents
Rich pipeline with breakthrough technologies
Green Jet /Diesel
PhotovoltaicMaterials
AsphaltAdditives
Natural GasClean-Up
Pipeline Focus, Health And Velocity
One Honeywell Centers of Excellence
East-to-West and East-for-East capabilities
Contribution To Growth
Methanol-to-
Olefins
LGWP (4th
generationreplacements)
High Purity LiPF6for Vehicles
Waste Biomassto Fuels
324
# ActiveProjects
4.0 200
Yr 5 Gross SalesPotential ($B)
Current YrLaunch Sales ($M)
Replacement
2011 2016
213
2.1 100
34% 90% 100%
New50%
Replacement50% New
75%
26 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011
2009 2011 2009 2011 2009 2011
Del iver ing Resul t s TodayRic h Pipel in e Fuels Grow t h
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Summary
Business Continuing To Drive Industry Leading Returns
- Strong performance through downturn and recovery
-Outlook positive, outperforming targets
Technolo ies Ali ned With Macro Trends
- Innovation engine feeds robust new product pipeline
-
Investing For Long-Term Growth
- Funding development and scale-up of breakthrough technologies- Significant value creation potential
27 Bank of America Merrill Lynch 2011 Industrials Conference December 6, 2011St rong Franchise, Ex t ending Market Leadersh ip