David Parry, Vice Chairman Scott Santi, Vice Chairman -...
Transcript of David Parry, Vice Chairman Scott Santi, Vice Chairman -...
2010 Investor Meeting – December 3, 2010
ITW’s Long-Term Organic Growth Perspectives
David Parry, Vice Chairman
Scott Santi, Vice Chairman
December 3, 2010
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2010 Investor Meeting – December 3, 2010
• Organic Growth Performance (2004-2008)
• Organic Growth Potential (2011-2015)
– Innovation
–Emerging markets
–New platforms
• Summary
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Today’s Topics
2010 Investor Meeting – December 3, 2010
Organic Growth Performance (2004-2008)
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2010 Investor Meeting – December 3, 2010
Organic Growth Performance
(2004-2008)
2004-2008 base growth CAGR: 3%excluding automotive OEM and construction: 4%
Added three scalable new platforms:– Auto Aftermarket– Test and Measurement– Electronics
ITW’s Organic Growth Rate Goal 2011-2015:5% to 6%
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2010 Investor Meeting – December 3, 2010
Organic Growth Potential (2011-2015)
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2010 Investor Meeting – December 3, 2010
Organic Growth Potential
(2011-2015)
Innovation
Emerging Markets
New Platforms
ITW Organic Growth Drivers
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2010 Investor Meeting – December 3, 2010
Organic Growth Potential
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Innovation
Emerging Markets
New Platforms
2010 Investor Meeting – December 3, 2010
Innovation: A Core Performance Driver
Throughout our History
– Over 19,000 active patents currently
– Ranked in top 100 companies for new U.S. patents
issued since 2002
– Worldwide patents issued last two years: 2,245
– ITW Patent Society members: 1,065
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2010 Investor Meeting – December 3, 2010
Focus Importance Effort Investment Impact
Innovation: A Significant Increase in Focus
and Investment from 2008 Forward
Working on positioning innovation internally on an equivalent level to our 80/20 business improvement process:
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2010 Investor Meeting – December 3, 2010
Building out centralized strategic innovation
process capability/resources
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Innovation: A Significant Increase in Focus
and Investment from 2008 Forward
– Deployed “top-down” to support the company‟s
best innovation opportunities
– Full-time/dedicated R&D and market research
capabilities
– Supplements (does not replace) traditional ITW
“bottoms up” division-led innovation strategies
and programs
Innovation Investment
15% increase in combined R&D,
marketing and product development
spend in 2010 vs. 2009
Expect similar increases over the next five years
2010 Investor Meeting – December 3, 2010
Innovation: A Look at Performance and
Potential in Selected Segments
• Significant Future Innovation Potential:– Service platform expansion
– Positioned to capitalize on trend
of lower energy/water
consumption
– Strong opportunity for a „game
changer‟ in cooking technology
– Customized product offerings
targeted at specific emerging
markets
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Food Equipment• Recent Successes:
– „Intelligent Concept‟ ware wash machines
achieve water and energy savings
– Proactive machine service on ware wash
2010 Investor Meeting – December 3, 2010
Polymers & Fluids• Recent Successes:
– Engineered tapes for the solar and wind
industries.
– Industrial use biodegradable lubricants,
adhesives and cleaners
• Significant Future Innovation Potential:
– Miniaturization, weight reduction and
multi-functionality in electronics and
health industries
– In-car hygiene and bacterial
protection
– Inorganic and sustainable polymers
replacing traditional materials
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Innovation: A Look at Performance and
Potential in Selected Segments
2010 Investor Meeting – December 3, 2010
Welding• Recent Successes:
–Offshore rig fabrication
system
–Welding arc monitoring
• Significant Future Innovation Potential:
–Welding workforce demographics
–Global productivity imperatives
–Changing regulatory environment
–Changing steel alloys/chemistries
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Innovation: A Look at Performance and
Potential in Selected Segments
2010 Investor Meeting – December 3, 2010
Test and Measurement• Recent Successes:
– Instron ElectroPuls – dynamic testing
– Loma metal detector – food quality and control
• Significant Future Innovation Potential:
– Increasing regulatory standards on global scale
– Automation of data collection and interpretation
– Broadening reach of quality specifications across industries
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ElectroPuls Loma
ElectroPuls
Innovation: A Look at Performance and
Potential in Selected Segments
2010 Investor Meeting – December 3, 2010
Automotive• Recent Successes:
– Patented capless fuel
system
– Plastic coolant regulator
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• Significant Future Innovation Potential:
– Sustainable materials
– Electric vehicle / hybrid vehicle products
Innovation: A Look at Performance and
Potential in Selected Segments
2010 Investor Meeting – December 3, 2010
Construction• Recent Successes:
– Duo-Fast Cordless
Roofing System
– Tetra Grip™ Sub Floor
Fastener
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• Significant Future Innovation Potential:
– Building Information Modeling (BIM) to
streamline construction processes
– Construction trade demographics
– Urbanization of population drives
infrastructure requirements
Innovation: A Look at Performance and
Potential in Selected Segments
Integrity™ Residential Design Suite (RDS) is a family of software
design tools that deliver BIM solutions from concept to construction
for the residential industry
2010 Investor Meeting – December 3, 2010
Organic Growth Potential
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Innovation
Emerging Markets
New Platforms
2010 Investor Meeting – December 3, 2010
Emerging Markets
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2010(F) Revenues
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ITW’s BRIC Growth
$608 million
4% of company
revenues
$1.27 billion
8% of company
revenues
≈ $3 to $4 billion
Brazil Russia India China
2010 Investor Meeting – December 3, 2010
Emerging Markets: China2010(F) Revenues $706M*
# of Units 43
# of Employees 4,700
• Key Market Segments
– Oil and Gas
– Shipyards
– Electronics and Telecom
– Industry (OEM and MRO)
– Auto Aftermarket
– Auto (OEM and Tier)
Beijing
Jiangsu
Tianjin
Guangdong
Shanghai
Total
• Strategy
– End market / value-added focused…must be able to
sustain meaningful differentiation
– Localization of manufacturing and R&D
– Develop local leadership and organizational
capabilities based on future potential, not current
size / scale
2 units
10 units
17 units
43 units
3 units
6 units
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*includes export sales into China
Hong Kong 5 units
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Emerging Markets: China
$15B to double offshore oil production capacity in
Bohai Bay and South China
Sea
Petrochemical refining capacity to increase 37%
70,000 KMs of oil and gas
pipeline over the next five
years
$220B invested to achieve 34%
increase in power
generation capacity by
2015
A 24% increase in steel to build sea bridges in
North and South China
2010 Investor Meeting – December 3, 2010
Emerging Markets: China
Welding
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Tien Tai Kunshan, Welding Consumables Company
• Started as a joint venture in 1999, acquired 100% of the company in
2003
• 600 employees
• Manufacture valued-added welding consumables such as flux cored
wires and stainless steel electrodes for marine, energy and general
industry segments
Beijing Miller, Welding Equipment Company
• Active sales presence since 1985
• Manufacture and market selected welding equipment for China market
2010 Investor Meeting – December 3, 2010
Emerging Markets: Brazil2010(F) Revenues $296M*
# of Units 15
# of Employees 990
• Key Market Segments
– Steel Industry
– Oil and Gas
– Industry (MRO/OEM)
– Hygiene
– Electronics
• Strategy
– Enhancement of local infrastructure
and capabilities
– Transfer of global technologies and
conversion to market needs
– Acquisitions to accelerate market
positioning
Sao Paulo 14 units
Porto Alegre 1 unit
Total 15 units
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*includes export sales into Brazil
2010 Investor Meeting – December 3, 2010
Infra-structure:
$50B
Trans-portation:
$50B
Ports: $20B
Olympics: $30B
World Cup: $10B
Military: $18B
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Emerging Markets: Brazil
GDP growth remains robust
2009 downturn was over quickly
Approximately 200 million
people; with a growing middle
class
$350B total investment planned over next 5 years:
ITW companies and acquisition
candidates averaged approximately
15% organic growth
2010 Investor Meeting – December 3, 2010
Emerging Markets: Brazil
Polymers & Fluids
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• First acquisition in 1998
• Five acquisitions in the last three years
• December 2010: Prolim acquisition
($60 million), our largest yet in Brazil
• Estimated revenues (including Prolim)
– 2010 $94 million
– 2011 $170 million
• Strategy:
– Continue to build local resources to
maximize market penetration
– M&A environment offers opportunity
ITW Chemical, Sao Paolo
Prolim, Taubate
2010 Investor Meeting – December 3, 2010
Emerging Markets: India2010(F) Revenues $218M*
# of Units 12
# of Employees 1,775
• Key Market Segments
– Steel Industry
– Oil and Gas
– Industry (MRO/OEM)
– Telecommunications and Electronics
• Strategy
– Global products to be locally supported and locally
manufactured
– Maximize and enhance the regional human resource
capabilities
– Partner with global and indigenous OEM and tier
organizations
Pune/Mumbai 3 units
Andhra 3 units
New Delhi 3 units
Chennai 2 units
Hyderabad 1 units
Total 12 units
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*includes export sales into India
2010 Investor Meeting – December 3, 2010
Steel industry
AutomotiveFood
processingAppliance
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Emerging Markets: India
India’s economic growth
9% to 10% y/o/y for next 10+ years–Population of 1.2B with growing middle class
–Significant investments in infrastructure
–Urban population expected to reach 590M by 2030
Strong opportunity to grow
business
Growth in key segments
2010 Investor Meeting – December 3, 2010
Emerging Markets: India
Industrial Packaging
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•Established in 1983
•$109M business with head offices in Hyderabad
•Manufacturing facilities in:
–Hyderabad
–Mumbai
–New Delhi
–New steel plant in Jamshedpur
•20% growth forecasted in 2011
•Key markets
–Metals
–Auto
–Fibers
–Paper
–Food / beverage / agriculture
2010 Investor Meeting – December 3, 2010
Emerging Markets: Russia2010(F) Revenues $49M*
• Key Market Segments
– Steel industry
– Transmission pipelines
– Infrastructure
– Industry (MRO/OEM)
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*includes export sales into Russia
• Strategy
– Establish leadership and over-resource with
supportive team
– Continue to focus on infrastructure products
2010 Investor Meeting – December 3, 2010
• Built a solid foundation in BRIC countries
• Accelerating investment in localized production, R&D and
leadership capabilities
• Continued adherence to decentralized, close-to-customer
approach
• Vice chairmen to provide ongoing top-down strategic
oversight
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Emerging Markets: Summary
2010 Investor Meeting – December 3, 2010
Organic Growth Potential
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Innovation
Emerging Markets
New Platforms
2010 Investor Meeting – December 3, 2010
Three New Platforms for Growth
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Automotive Aftermarket
Test and Measurement
Electronics
2010 Investor Meeting – December 3, 2010
Consistent growth in both base revenues and bottom line
earnings
Significant sales outside of North
America
Well positioned in emerging
markets
Expect to continue to add acquisitions to enhance these
platforms
Strong management
teams aggressively implementing
the ITW Toolbox
Three New Platforms for Growth
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New Platforms for Growth:
Auto Aftermarket
• Started with Wynn‟s/Permatex
acquisition in 2005
• Adhesive sealants, car care, body
repair and lubrication product
categories
• Retail channels include auto
retailers, traditional distribution and
body shops
• Projected global market CAGR: 6%
2010 Investor Meeting – December 3, 2010slide 35
13+ acquisitions
to date
Permatex
Wynn‟s
Slime
Lebo
Krafft
Forte
QMI
Applied
Versachem
Versachem Chile
Qualtex
Quimica TF
Marvel
Revenue Growth
2010(F): $800M
Targeted 2015 revenue: $1.5B+
Market Dynamics
Emerging markets: 20% of total
worldwide vehicles now; 50% in ten
years
Aftermarket less affected by global
downturns
In U.S., average age of cars in 1999 was 8.8 years; now average age is 10.2
years
Acquisition Potential
Multiple niche markets available
in our targeted areas
New Platforms for Growth:
Auto Aftermarket
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2010 Investor Meeting – December 3, 2010
• Started with Instron acquisition in
2005
• Dynamic testing, non destructive
testing and industrial weighing
product categories
• Major end markets include R&D
facilities, food, oil and gas, steel
and transportation
• Projected global market CAGR: 7%
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New Platforms for Growth:
Test and Measurement
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14 acquisitions
to date
Instron
Ceast
Buehler
Magnaflux
QSA
Avery Weigh-Tronix
Loma
GSE
Quasar
Sonotech
Tiede
Bycotest
Wolpert Wilson
HyperG
Revenue Growth
2010(F): $750M
Targeted 2015 revenue: $1.5B+
Market Dynamics
Service and aftermarket revenue
opportunity from large installed base
Investment in innovation, research
and development
Increased focus on quality and
safety…growing regulatory standards
Acquisition Potential
Acquisition potential in niche
market sub-segments
New Platforms for Growth:
Test and Measurement
2010 Investor Meeting – December 3, 2010
Kester (consumable)
Speedline (equipment)
Vitronics – Soltec (equipment)
Stokvis Tapes and M&C Specialties
(consumable)
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New Platforms for Growth:
Electronics
• Started with Kester acquisition in
2006
• Highly engineered electronic
components and assembly
systems for the electronics industry
• Major applications in consumer
electronics, medical, automotive
and defense markets
• Projected global market CAGR: 7%
2010 Investor Meeting – December 3, 2010slide 39
5 acquisitions
to date
Kester
Speedline
Vitronics-Soltec
Stokvis Tapes
M&C Specialties
Revenue Growth
2010(F): $600M
Targeted 2015 revenue: $1.2B+
Market Dynamics
Miniaturization of electronic components
Ability to develop value-added assembly solutions incorporating both consumables and
equipment
Increasing penetration into micro processor
and industrial products
Acquisition Potential
Fragmented market place
offers additional
opportunities
New Platforms for Growth:
Electronics
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2010 Investor Meeting – December 3, 2010
GlobalMarket leader
Innovation
Ability to leverage our
core competencies
Potential to reach $1B +
in annual revenue
New Platforms for GrowthKey Characteristics
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2010 Investor Meeting – December 3, 2010
New Platforms for Growth
2011-2015
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2004-2008:
Successfully developed and scaled three new platforms
•Automotive Aftermarket
•Test and Measurement
•Electronics
2011-2015:
Goal is to add a minimum of six
new scalable platforms
2010 Investor Meeting – December 3, 2010
Summary
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Summary
With modest growth in developed world economies,
our organic growth rate target of
5% to 6% for 2011-2015 is very achievable
ITW Organic Growth Drivers
Accelerating innovation
Emerging market growth
Additional new platforms
2010 Investor Meeting – December 3, 2010
Q & A
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