J.P. Morgan HVAC Conference May 28,...
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J.P. Morgan HVAC Conference May 28, 2009 Mike Lamach President and Chief Operating Officer
Transcript of J.P. Morgan HVAC Conference May 28,...
J.P. Morgan HVAC ConferenceMay 28, 2009
Mike LamachPresident and Chief Operating Officer
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Safe Harbor
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A number of forward-looking statements will be made during this presentation. Forward- looking statements are any statements that are not historical facts. These forward- looking statements are based on our current expectations and there can be no assurance that such expectations will prove to be correct.
Forward-looking statements are subject to changes in circumstances, risks and uncertainties, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Information about factors that could cause such differences can be found in our Form 10-Q for the quarter ended March 31, 2009 and in our other SEC filings. General U.S. and international economic and political conditions, the outcome of litigation and governmental proceedings, changes in government regulations and tax laws and our proposed reorganization from Bermuda to Ireland are examples of factors, among others, that could cause actual results to differ materially from those anticipated in the forward- looking statements.
These forward-looking statements are based on our current expectations and we assume no obligation to update these forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements.
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PF 2008 revenue: $16.4 billion
Portfolio of Leading Businesses
Air Conditioning Air Conditioning Systems and Systems and
ServicesServices
Climate Control Climate Control TechnologiesTechnologies
Security Security TechnologiesTechnologies
Key brandsKey brands
Market positionMarket position
Key productsKey products
Addressable mkt / Addressable mkt / PF 2008 revenue / PF 2008 revenue / % of total IR sales% of total IR sales
•• #1 US / #2 worldwide #1 US / #2 worldwide commercial HVAC commercial HVAC equipmentequipment
•• #1 worldwide #1 worldwide transport refrigerationtransport refrigeration
•• #1 North America #1 North America display casesdisplay cases
•• #1 North America #1 North America service providerservice provider
•• #1 North America air #1 North America air compressorscompressors
•• #1 worldwide golf #1 worldwide golf carscars
•• #1 North America lock #1 North America lock and doorand door
•• Commercial / Commercial / residential HVAC residential HVAC systems and servicessystems and services
•• Display casesDisplay cases•• Refrigeration systemsRefrigeration systems•• Rail & seagoing Rail & seagoing
containerscontainers•• Bus & rail HVACBus & rail HVAC•• Cold storage facilitiesCold storage facilities
•• Air compressorsAir compressors•• Fluid handling / Fluid handling /
Material handling toolsMaterial handling tools•• Golf / utility / Golf / utility /
transportation vehiclestransportation vehicles
•• Commercial locks Commercial locks and key systemsand key systems
•• Portable locks and Portable locks and accessoriesaccessories
•• Electronic access Electronic access systemssystems
•• $85 billion+ $85 billion+
•• $7.5 billion $7.5 billion
•• 46%46%
•• $30 billion $30 billion
•• $3.4 billion $3.4 billion
•• 21%21%
•• $26 billion $26 billion
•• $2.9 billion$2.9 billion
•• 18%18%
•• $26 billion $26 billion
•• $2.5 billion $2.5 billion
•• 15%15%
Industrial Industrial TechnologiesTechnologies
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Creating a New Ingersoll Rand
SafetyComfort
Efficiency
• EMS / food preservation• World class workplace safety
performance• Indoor air quality• Environmental stewardship
• Building and system knowledge• Optimized control and safety of indoor
environments• Ergonomic products• Acoustic performance
• Lower cost of ownership• Field service expertise• Energy management• Integrated building systems• Reliability
We are the world leader in creating and sustaining safe, comfortable and efficient environments
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SafetyComfort
Efficiency
To Deliver New Customer Value
Unique Customer Value
• High performance grocery stores• Energy efficient and secure schools• Broad portfolio of Building Services• Manufacturing/sourcing to improve
cost and performance • An Integrated Supply Chain
• Expanded parts and service coverage• Controls technology and applications
A stronger and unique customer value proposition
U. S. Energy Use By SectorU. S. Energy Use By Sector
Industrial33%
Residential Buildings
21%
Residential Buildings
21%
Transportation28%
Transportation28%
Est. Energy Consumption100 Quadrillion BTUs
Energy Consumed by HVAC as % of Total Sector
• Residential 40-50%
• Commercial 30-50%
• Industry 10-20%
Energy Consumed by HVAC asEnergy Consumed by HVAC as % of Total Sector% of Total Sector
•• ResidentialResidential 4040--50%50%
•• CommercialCommercial 3030--50%50%
•• IndustryIndustry 1010--20%20%
Operating HVAC Systems Uses 15-25% of Total US
Energy Consumption
Commercial Buildings
18%
Commercial Buildings
18% Source: DOE
Source: IEA
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72%72%
Improving HVAC System Efficiency is a Large OpportunityImproving HVAC System Efficiency is a Large Opportunity
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Global Commercial HVAC MarketGlobal CommercialHVAC Market Served
Commercial HVAC
Equipment(CAGR = 4-5%)
Controls Equipment& Services
(CAGR = 5-6%)
Parts & HVAC MechanicalServices
(CAGR = 7-9%)
CAGR ~ 7%
EnergyConservation
EnergyConservation
Regulatory ComplianceRegulatory Compliance Installed BaseInstalled Base
Key Drivers
Environment & Sustainability
Environment & Sustainability UrbanizationUrbanization
Long term prospects continue to be favorable
• Served market of $85B+ with attractive long term growth
• Equipment growth 4%-5%– Challenged by and benefiting
from environmental and regulatory climate
– Emerging markets/urbanization
• Services & contracting 6%-8%– Fragmented market creates
share gain opportunitySource: BSRIA, BCS Partners, Frost & Sullivan
$0
$50
$100
$150
2000 2004 2008 2012
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2,000
4,000
6,000
8,000
10,000
12,000
14,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008A 2009F 2010F 2011F0%
5%
10%
15%
20%
25%
30%
NA Residential HVAC Markets
Replacement % Of Eligible Installed Base – Historically ~ 25%
Replacement Market
RNC Market
Excellent Long Term Fundamentals, Pent Up Demand Building
HVAC Market Opportunity
• Our 2009 Outlook Anticipates Weak Market Demand Followed By DoubleDigit Growth In 2010/2011
• Even With Our Projected Market Growth Estimates For 2010-2011, We Expect There Will Still Be Considerable Pent Up Demand After 2011
Pent Up Demand
Mot
or B
earin
g U
nits
000
’s%
Replaced
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HVAC Plus Refrigeration
• Total Market $115 billion– $85+ billion HVAC– $30 Billion Refrigeration
• Global Leader in HVAC and Refrigeration with $11Billion in revenues in 2008
• Continued focus on systems and services throughout the building lifecycle, food safety and preservation
• Margin improvement through operating leverage at both Trane and Climate Control organizations
– Revenue Synergies– Cost Synergies
Services and Parts HVAC
Systems
RecurringRecurring
ReplacementReplacement
New Equipment
New Equipment
A global leader in commercial HVAC systems & services
RefrigerationRefrigeration
HVACHVAC
$11Billion Revenues
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Commercial HVAC Market SegmentsCommercial
– Offices, retail, lodging– $10B+ product opportunity serving hundreds of
thousands of customers– Trane equipment mix ~45%– Leverage IR Security Technologies, Hussmann
Institutional– Healthcare, Education, Government– $7B+ product opportunity serving tens of
thousands of customers– Trane equipment mix ~33%– Leverage IR Security Technologies
Industrial– Process Manufacturing, Life Sciences, Data
Centers– $6B+ product opportunity serving thousands of
customers– Trane equipment mix ~22%– Leverage IR Security, Cold Chain
Broad and diverse set of customers globally
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High Performance Grocery-HVAC and Refrig. Synergy
• Combined systems expertise of Trane and IR to deliver energy savings of 15%
– Trane high efficiency HVAC with CDQ™ dehumidification systems, building controls, remote monitoring
– Hussmann retail refrigeration– IR compressed air systems – Steelcraft doors, Interflex access
control
• Strong pipeline of opportunity with leading national chains
• $3B+ market opportunity
Trane – IR improves value to customer in emerging segment
Safety Comfort
Efficiency
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• Full portfolio of lifecycle and energy management services
• Extensive global capabilities– 250+ Service Locations– 4,300+ factory-trained and certified
service professionals– LEED accredited engineers
• Tremendous growth opportunity– Energy services– Portfolio expansion– Global expansion
• Building off strong performance– 2005 to 2008 CAGR 13%– 2009 to 2013 CAGR 10-12%
Trane Building Services
Great business with growth potential despite market downturn
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Integrated Systems Leadership
Chillers Airside Unitary ControlsAir Handling Units
Fan And Blower Coils
Variable Air Volume (VAV) Devices
Unit Ventilators
Water‐cooled Centrifugal
Air & Water‐cooled Screw
Air & Water‐cooled Scroll
Packaged Rooftop Units
Water‐source Heat Pumps
Ducted Split Systems
410A conversion complete in ‘09
Tracer
Tracker Light Comm’l
Factory or field mounted
Energy & Performance
Monitoring
More new products in next 18 months than last 20 years
Integrated Systems Leadership
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• Description– 15 – 130 ton air-cooled scroll chiller– HFC-410A refrigerant
• Global market size - $1B
• Customer benefits– Increased energy efficiency– Reduction in generated sound levels– Ease of Use with respect to
installation, commissioning, and servicing
– Increased ability to gain LEED points for certification
New Global Chiller Platform
First global chiller platform, launching in all regions
Integrated Systems Leadership
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New Airside System
• Description– High performance, consolidated
indoor/outdoor platform– Sizes from 3 to 120 tons
• Innovative design delivers $20M productivity annually
• Global market size - $850M
• Customer benefits– Exceeds best in class performance– High efficiency and energy recovery– Low leak rates, noise and vibration– Improved filtration and IAQ options– Easy to service and maintain
New design delivers performance, energy efficiency & cost savings
Integrated Systems Leadership
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New Controls Portfolio• Web enabled
– Meets market expectations for easy access from any PC on the web
• Open standard protocol support– Easy integration of Trane controls into
the customer’s environment
• Modular/scalable platform– Increased competitiveness and access to
more markets
• Wireless sensors and communications– Cost, convenience, comfort, confidence
• HVAC system applications– Building on established HVAC system
applications expertise
New controls platform, many new features will drive systems growth
Managing a portfolio of
facilities
Controlling building comfort and energy
Maintaining healthy & productive spaces
Tracer ES™
Tracer SC
Wireless Sensors
Integrated Systems Leadership
Tracer UC family
Optimizing equipment operating efficiency
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Building The IR Connected Home
Providing Comfort, Energy Management And Security
• Trane Energy Management Device For Offsite & Onsite Home Control
• Remote Access Via Cell Phone, Computer Or Web-Enabled Device• Entering Retail Channel & Leveraging Trane Dealer Network For
Growth• Significant Innovation Opportunity
• Change Temperature Set-Points• Set Heat-Cool Modes• Check System Status• Activate Energy Saving Mode
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Customer Satisfaction
World class performance
24/7 safety culture
Embedded in processes
Safety
Quality
IR/Trane synergies
Lean transformation & technology leverage
Region of use production & facility consolidation
Best in industry lead times
Synchronized supply & demand
Exceeding expectations
Lean Six Sigma culture
Quality Management System
Global supplier quality
Customer
• Low cost country, region of use– Drive to 35% LCC by 2012
• Drive continuous productivity– Annual improvement 4% to 5%
• Globally integrated supply chain
• Safety, Environmental, Health leadership
• World class product innovation and quality
Integrated Global Supply Chain
Delivering margin expansion
Operational Excellence
CustomerSatisfaction
Productivity
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• Continuous quality improvement– Greater than 10% reduction in Warranty
& Concession as Percent of Sales – Supplier PPM reduction– Preventive advanced quality planning for
new products/refrigerant changes– Recover costs of supplier caused
warranty– Early launch containment
Global Quality and Delivery
Systematic processes drive competitive advantage
• Continuous delivery improvement– Region of use manufacturing– Improved linearity– Shortened internal ship cycles– Transporter management– Six Sigma process improvements– Enhanced SIOP processes
Operational Excellence
0%
1%
2%
3%
4%
2003 2004 2005 2006 2007 2008 2009P 2010P 2011P
5 Yr 2005 50% Reduction Goal
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Productivity
• Sales – leverage customer relationships across Trane and Ingersoll Rand
• Services - utilize Hussmann service technicians to support light commercial HVAC customers
• Parts - leveraging extensive Trane retail network to distribute IR products
– Hussman & Krack refrigeration parts– Tools, lock, and compressors
Leveraging extensive Trane distribution network
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Trane Parts Centers
Distribution Network
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Integration Evolution
Moving Toward Integrated Business… Significant Growth and Profit Opportunities
Moving Toward Integrated Business… Significant Growth and Profit Opportunities
Identify Potential Synergies
Organize Teams / Implement Specific
Programs
Organize Business Activities around
Sustained Opportunities
• Cost Savings - Consolidation - Efficiencies
• Growth - Cross-selling - More complete
offerings - Expanded
distribution
• Corp HQ costs• Supplier rationalization• Procurement leverage• Manufacturing initiatives
• Define growth opportunities
• Parts, Distribution synergies
• Team selling• Customer Development
• Global G&A consolidation• Integrated manufacturing • Integrated technology• Shared knowledge/infrastructure
• Tailored equip / systems for: - Key vertical markets - Cold chain - Hi performance grocery store - Home security / automation - Optimum energy efficiency
• Expanded Service capability• Global expansionCompleted ‘08
$300M Identified
Completed ‘08
$300M Identified
Total Savings Achieved:’08: $105M vs $75M Goal
’09: ~$280M vs $200M Goal’10: ~$395M vs $300M Goal
Total Savings Achieved:’08: $105M vs $75M Goal
’09: ~$280M vs $200M Goal’10: ~$395M vs $300M Goal
Expanding Well Beyond GoalExpanding Well Beyond Goal
22Targeting ~$300 Million of Cumulative Savings in 2009Targeting ~$300 Million of Cumulative Savings in 2009
2008 Savings 2009 TargetSavings
2008 2009F
Carry OverIndirectMaterialInternational
$280-290M Cumulative
$10-15M Growth
$105$105
$175-185
$105
• Over 300 projects identified and approved
• Continued good progress in Q1
Synergy Forecast 2009
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Summary
• Strong industry and business fundamentals despite current economic challenges
• Balanced portfolio and outstanding customer relationships
– Architects, engineers. owners– Products, systems, services– Global reach and expansion
• Unprecedented number of new products launching in next 18 months
• Operational excellence and productivity synergies showing measurable benefits
• Expanded customer value proposition across IR businesses paying early dividends
• Well positioned to capture growth during and after downturn
02468
10121416
2004 2008 2012
Sales Growth
CAGR 5% to 6%
CAGR 8%
SafetyComfort
Efficiency
Strong business, well-positioned for future
