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DEUTSCHE BANK GLOBAL INDUSTRIALS
AND BASIC MATERIALS CONFERENCE
Andreas Kramvis, Vice Chairman
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 developments that we or
our management intend, expect, project, believe or anticipate will or may occur
in the future are forward-looking statements. Forward-looking statements are
based on management’s assumptions and assessments in light of past
experience and trends, current economic and industry conditions, expected
future developments and other relevant factors. They are not guarantees of
future performance, and actual results, developments and business decisions
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 the
principal risks and uncertainties that affect our performance in our Form 10-K
and other filings with the Securities and Exchange Commission.
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Today’s Discussion
• Outperformance Continues
- 1Q15 EPS Up 10%; Raised Low-End Of Full Year EPS Guidance
• Businesses Well Positioned To Grow
- Aero: Significant Wins Ramp, Inflection Point For Growth
- ACS: Well Positioned In Improving Verticals
- PMT: Growth Inflection From Capex Investments
• On Track To Achieve 2018 Targets
- Seed Planting Benefits From Growth Investments
- Key Process Initiatives Delivering Margin Expansion
- Capital Deployment Upside
Continued Outperformance Across Portfolio
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
5-Year TSR Performance
(Indexed)
Total Shareholder Return
350
Honeywell
Peer Average
S&P 500
300
187%
250
109%
200
105%
150
100
2010
2011
2012
2013
2014
Peer Average Calculated Using Eight Industry Peers (COL, DHR, EMR, GE, ITW, MMM, TYC, UTX)
Outperforming Peers And Market
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
1Q 2015 Financial Summary
($M except per share amounts)
1Q14
1Q15
Sales
$9,679
$9,213
• (5%) Decrease
Segment Profit
$1,596
$1,721
• 8% Increase
16.5%
18.7%
$1,017
$1,116
• 10% Increase
$1.28
$1.41
• 10% Increase
26.6%
26.7%
Margin %
Net Income
 Core Organic (1) Up 2%
 220 bps Margin Expansion
Attributable to Honeywell
EPS
Tax Rate
Free Cash Flow (2)
$496
$256
• ($240M) Decrease
 Payment Of 4Q14 OEM Incentives
 Higher Cash Taxes
 Working Capital Timing
1)
Throughout this presentation, core organic growth refers to reported growth less the impacts from foreign currency movement, M&A and raw materials pricing in the Resins &
Chemicals business of PMT. The raw materials pricing impact is excluded in instances where raw materials costs are passed through to customers, which drives fluctuations in selling
prices not necessarily tied to volume growth. A reconciliation of core organic growth to organic growth is provided in the Appendix.
2)
Cash Flow from Operations Less Capital Expenditures
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Strong Margin Expansion And Earnings Growth
Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
HON Growth Factors: Next 5 Years
Aerospace
Unmatched
$130B+ New
Wins
• Significant Platform Wins: 737MAX, 777X, C919
• Upgrades Expand Growing Installed Base
• Leading Aircraft Connectivity Revolution
• Global Turbo Penetration Up ~10 pts
Automation And
Control Solutions
Software 4x
Sales
Growth
• Software Drives 4x Sales Growth Next 5 Years
• Double-Digit Growth In Connected Homes
• Strong Residential/Non-Res Tailwinds
• End-To-End Localization In HGRs
Performance
Materials And
Technologies
Robust
Backlog
• Robust Oil & Gas Backlog Secure
• 2016-17 Inflection As New Capacity Launches
• NPI Generates ~$3.2B Sales By 2018
• UOP/HPS Synergies Drive Incremental Sales
Growth Momentum Continues Into 2016
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Aerospace: Growth Accelerates
Unprecedented Program Wins
• High Win Rate In All Businesses
• Unmatched $130B+ New Wins
• Strong High Growth Region Penetration
More Favorable Macros
• Dramatic Replacement Cycle, Flight Hour Growth
Honeywell Platform Position
Mechanical/Avionics/
Software/Services
Competitor
Value
Entry
Into
Service
Boeing 737 MAX
$25B
$2B
2017
Embraer L500/450
$24B
$3B
‘14/’15
Airbus A350
$18B
$6-$9B
2014
Boeing 777X
$18B
$5-7B
2020
COMAC C919
$16B
<$16B
2018
Aircraft In
Development/
Ramp-up
Total HON Value
• Well Positioned On Higher Growth Platforms
• HGR Market Growth Reinforced By Low Fuel Price
• Defense Returns To Growth In 2015
Gulfstream G500/600
$9B
Minimal
‘18/’19
• Global Turbo Penetration Continues
Bombardier CL350
$6B
<$2B
2014
Bombardier Lear
70/75
$4B
$0.5B
2013
Embraer E2
$3B
$2-$3B
2018
Irkut MC-21
$2B
<$2B
2016
• Upgrades Growth On Increasing Installed Base
Falcon F8X / F5X
$2B
$1B
’16/’18
• Jet Engine Technology Integrated Into Turbo
5 Unannounced
Wins
$12B
$1-$2B
2017+
Differentiated Technology
• Leading Technologies Across Portfolio
• Leading Aircraft Connectivity Revolution
Recently Announced
Over $130B In Wins – Beating The Competition
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Golden Age Of Turbos
Turbo Market
Growth
Honeywell
Advantage
Accelerating
Growth
• Industry Wide Adoption
$20B+ Industry At Maturity
• Regulations Driving Turbo Pen
Up 10pts To 43% By 2019
• Limited Oil Price Impact
Macro Puts And Takes
• Aero Technology Advantage
~100 Launches In 2015
• Global Engineering & Plants
Engine Platform Enabler
• Operational Excellence
HOS And VPDTM
• Business Wins Accelerating
>40% Win Rate
• China And Americas Expansion
75% Of Total Sales Growth
• Outpacing Industry In Gasoline
~20% Sales CAGR
Well Positioned For Growth In 2015 And Beyond
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
ACS: Great Positions In Good Industries
Great Positions
Good Industries
Env. & Combustion Controls
Building Automation, Room &
Combustion Controls, Elec. Prod.
#1
Non Residential,
Institutional And
Infrastructure
Security
Intrusion Detection, Access
Control, CCTV
#1
20%
Buildings
HSG
ECC
Industry Position
Automation And
Control Solutions
Fire Alarms, Fire Controls, Life
Care
#1
$14.5B
Building Solutions
Installation, Service, Security,
Energy, Smart Grid
#2
HSM
HIS
S&C
35%
Buildings
Non Residential
Manufacturing,
Processing, Worker
Safety And
Productivity
New And Retrofit
Residential Markets
Industrials
Sensing & Control
Pressure Temp., Flow Sensors,
Test & Measurement Equipment
45%
Industrials
Fire Safety
Homes
HBS
HFS
Homes
#3
Industrial Safety
Safety Products, PPE, Gas
Detection
#1
Scanning & Mobility
Scanning Engines, Mobility,
Voice Solutions, Printers
#2
% Of Sales By End Market
Well Aligned To Favorable End Markets
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
PMT: Investments Drive Future Growth
~$3B Top Line Growth Through 2018
Growth Inflection
$2.6B Solstice® LGWP Long-Term Contracts
Incremental UOP/HPS Sales Synergies
High Margin Sales From New Capacity Adds
HOS
GOLD
Investments Deliver
Strong Returns
Rich Portfolio Of New Product Innovations
HOS Gold Overdrives $200M+ Profit Upside
Robust Oil & Gas Backlog Secure
Winning In The
New Oil Dynamic
Leverage Mid/Downstream Focus
Rich Pipeline For Energy Sector Growth
Growing Faster Than The Market
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
HOS Gold – Growth And Productivity
What Is It?
• Company Analytically Broken Into
74 Gold Enterprises
• Brings All Best Practices Together
To Focus On Total Enterprise
• X-Matrix Implementation
• Breakthrough Goals Established
• Monthly Reporting, Operating Plan
And Strategic Planning Basis
• Provides Road Map For Exceeding
Performance Commitments
Big Company Cost Effectiveness And Technical / Functional Excellence
Married With
Small Company Speed And Customer Responsiveness
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
2018 Targets + M&A
Sales
Segment Profit / Margin
($B)
Segment Profit
Segment Margin
+$5-8B
~$1 EPS
From M&A
$39.1
$40.3
$39.0
$39.6
$46
$51
18.3%
18.6%
16.3%
2013
2014
2015E
2018T
• Sales Headwinds ~$1-2B Over 5-Year Plan
− Global GDP Growth, F/X
• Key Inflection Points In 2016 And 2017
• HGR Momentum Continues
2013
18.5%
20.0%
16.6%
2014
2015E
2018T
• HOS Gold Acceleration Across 74 Enterprises
• FT Drives Margin Expansion
• Growth From HOS Gold, HUE, HGR, Software
• Restructuring Benefits
Targeting Double-Digit Earnings Growth
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Why HON
• Making Big Commitments
• Meeting/Exceeding Commitments
• Strong 2015 Outlook
• Positive Early View On 2016
• On Track To Aggressive Long-Term Targets
• Capital Deployment Upside
Consistently Executed Strategy = Terrific Results
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Appendix
Reconciliation of non-GAAP Measures
to GAAP Measures
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Reconciliation Of Segment Profit To Operating Income And Calculation Of
Segment Profit And Operating Income Margins
2013
2014
$6,351
$6,696
(170)
(187)
(699)
(634)
90
(51)
(20)
$5,501
254
(249)
(49)
$5,831
Segment Profit
÷ Sales
Segment Profit Margin %
$6,351
$39,055
16.3%
$6,696
$40,306
16.6%
Operating Income
÷ Sales
Operating Income Margin %
$5,501
$39,055
14.1%
$5,831
$40,306
14.5%
($M )
Segment Profit
(1)
Stock Based Compensation
Repositioning and Other (1, 2)
Pension Ongoing Income (1)
Pension Mark-to-Market Adjustment (1)
OPEB Expense (1)
Operating Income
(1) Included in cost of products and services sold and selling, general and administrative expenses.
(2) Includes repositioning, asbestos, environmental expenses and equity income adjustment.
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Reconciliation Of Segment Profit To Operating Income And Calculation Of
Segment Profit And Operating Income Margins
1Q14
1Q15
$1,596
(52)
(220)
$1,721
(52)
(139)
61
(12)
$1,373
100
(9)
$1,621
Segment Profit
÷ Sales
Segment Profit Margin %
$1,596
$9,679
16.5%
$1,721
$9,213
18.7%
Operating Income
÷ Sales
Operating Income Margin %
$1,373
$9,679
14.2%
$1,621
$9,213
17.6%
($M )
Segment Profit
Stock Based Compensation (1)
Repositioning and Other (1, 2)
Pension Ongoing Income
OPEB Expense (1)
Operating Income
(1)
(1) Included in cost of products and services sold and selling, general and administrative expenses.
(2) Includes repositioning, asbestos, environmental expenses and equity income adjustment.
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Reconciliation Of Cash Provided By Operating Activities To Free Cash Flow
($M )
Cash Provided by Operating Activities
Expenditures for Property, Plant and Equipment
Free Cash Flow
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1Q14
1Q15
$688
(192)
$496
$421
(165)
$256
Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015
Core Organic Sales Growth Reconciliations
Honeywell
Organic sales growth
Raw Materials Pricing in R&C
Core organic sales growth
1Q 2015
PMT
Organic sales growth
Raw Materials Pricing in R&C
Core organic sales growth
1Q 2015
Advanced Materials
Organic sales growth
Raw Materials Pricing in R&C
Core organic sales growth
1Q 2015
1%
1%
2%
(1%)
4%
3%
(9%)
11%
2%
Throughout this presentation, core organic growth refers to reported growth less the impacts from foreign currency movement, M&A and raw materials pricing in the Resins & Chemicals
business of PMT. The raw materials pricing impact is excluded in instances where raw materials costs are passed through to customers, which drives fluctuations in selling prices not
necessarily tied to volume growth.
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Deutsche Bank Global Industrials And Basic Materials Conference – June 4, 2015