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Industrial Technologies Sector

Industrial Technologies Sector Jim Bolch Industrial Technologies – Products and Services Air Solutions Process Industrial Commercial Productivity Solutions Tools Material Handling Fluid Handling Energy Systems Combined Heat And Power (CHP) Process Environmental Agenda

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Industrial Technologies Sector

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  1. Industrial Technologies Sector Jim Bolch

  2. Industrial Technologies – Products and Services Air Solutions Process Industrial Commercial Productivity Solutions Tools Material Handling Fluid Handling Energy Systems Combined Heat And Power (CHP) Process Environmental

  3. Agenda • Business Overview • Global Channels/Emerging Markets • New Product Development • Recurring Revenue • Lean Operations

  4. Building on our Business Model + + Diversified Markets Global Footprint Installed Base 5% 17% 37% 63% 52% 26% North America North America European Served Area European Served Area Asia Pacific Latin America Well Diversified By Market And Geography With A Healthy Service Base

  5. Legend: Industrial Technologies Revenue & Operating Income Revenue$Millions Operating Income$Millions Operating Income 2001 – 2005 Performance • CAGR Organic Revenue – 8% • CAGR Operating Income – 48% • Strong Operating Leverage 12.9% 11.6% 7.6% 5.3% 3.7% Track Record Of Consistent, Profitable Growth

  6. North America European Served Area Asia Pacific 100% Latin America Diversified Business Base Geography 6% • Air Solutions • Strong Market Position • Diverse Global Business • Opportunities in Developing Economies • Strong Service Footprint 22% 41% 5% 17% 31% • Productivity Solutions • Strong North America Presence • Significant Growth Opportunities in Asia • Strong Brand Performance • Channel Development in Europe 2% 8% 52% 17% 26% 73% • Energy Systems • Primary Focus is US • Gaining Traction in Asia • Global Reference Sites • External Economics Improving

  7. % Recurring Revenue % North American Revenue 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2001 2006 F 2011 F 2001 2006 F 2011 F 250% 200% 150% 100% 50% 0% 2001 2006 F 2011 F Positioning for Consistent PerformanceThrough All Economic Cycles Factory Utilization* *Note: Factory Utilization in 2001 Indexed to 100%

  8. Global Channels/Emerging Markets • Macro Trends • Industrial customers moving to low cost countries • Energy efficiency and reliability are key • Service capability is essential • Developed Economies • Strong double digit growth in North America in 2005 and 2006 YTD • Simplifying channels to achieve sector & enterprise leverage • Market share opportunity in Europe • Strong installed base will continue to drive service business • Emerging Markets • 20% revenue CAGR 2001-2005 • 20% of total revenues in 2005 • Substantial footprint in China and India … and growing • Growing installed base will drive future service revenues

  9. Developed Economies - Industrial Technologies ChannelsPrior State Business Units Productivity Air Assembly Vehicle Commercial Industrial Process Industrial Hoist & Winch Channels Channels • Distribution • Company Stores • Strategic Accounts • NIS • Jobbers & WD’s • Garage Solutions • Nat’l Accts • Retail • Air Centers • Distribution • Dealers • Direct • Strategic Accounts Complex Business and Channel Structure

  10. Developed Economies - Industrial Technologies ChannelsFuture State Business Units Industrial Technologies Channels Strategic Accounts Distribution Direct Leverage Customer Relationships Across Products and Channels

  11. Emerging MarketsStrong Sales & Service Network in China Hei Long Jiang Inner - Mongolia Ji Lin Beijing Liao Ning Xin Jiang Tian Jin Gan Su Ning Xia He Bei Shan Xi Shan Dong He Nan Qing Hai Shan’Xi Jiang Su He Fei Tibet Shanghai Si Chuan Hu Bei Chong Qing Zhe Jiang Jiang Xi Hu Nan Chen Du Gui Zhou Fu Jian Yun Nan Guang Dong Legend: Guang Xi Existing Customer Center IR factory Guang Zhou Direct Footprint Expected to Double in Next 5 Years

  12. Emerging Markets - Investing in PeopleChina Customer Center Manager Development Program General Manager / Entrepreneur  Channel Development & Management  Finance Module for Branch Manager  Service Module for Branch Mgr Management & Leadership education Develop IR Managers  Business Acumen  Ingersoll Rand University Leadership Marketing for IR Manager Customer Center Manager Training School Sales and Service Leader  Customer Center Manager Finance for non-finance Manager  Branch Supervisor Module  IR Manager Other Career Development Sales/ Service Career Pathing Team Leadership  High Performance Culture

  13. New Product DevelopmentInvesting For Growth • $80 Million in net revenue from new products in 2005 • Incremental investment of $7+ Million in 2006 Key Focus Areas: • Products for Emerging Markets • Innovative Technologies • Product Line Simplification/Cost Reduction • Recurring Revenue

  14. New Product Development Oil-Free Nirvana Infinity Emerging Markets Growth Energy Efficiency Improves Customer Value Cordless Energy Systems Bringing New Technology to our Industrial Customers New Markets and Business Models

  15. Raw goods cost escalation Product enhancement VA/VE & Emerging market development New Product manufacturing (Western) Developing Economy Product Launch Product design (N. America/ESA) Product “modularity” for Developing Economy Low Cost Country manufacturing “Western” product specifications Emerging market engineering Emerging market product specification U.S./ESA Market Definition Emerging market definition Product Development TracksOptimizing for Market Effectiveness Traditional ProductCost Time New Approach Delivers Products With A Better Value Proposition For Global Markets

  16. InfinityValue and Quality for Emerging Markets

  17. Cordless Tool Market Leveraging Our Strength in Air Tools for Industrial Markets Other • $2.7B Global Cordless Tool Sales • >10% YOY growth Engine 3% 7% Corded 32% Air 26% $405 $1,080 Asia Pacific Cordless European Served Area $1,020 32% North America $ Millions $108 Africa $81 Latin America Source: Fredonia Power Tool Report

  18. Product Innovation - Cordless Redefine the Market with Unique Value Propositions • Tools: • 1st cordless tools designed specifically for service & production industries • best in class durability, power, ergonomics & size • revolutionary controls and protection • Batteries: • patented battery interface • intelligent batteries • superior battery life • Chargers: • intelligent charger • complete compatibility – input & output • designed to handle future technologies

  19. 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 New Products – Best in Class 1/2” Impact Torque Ingersoll Rand Best In Class Snap-On 18V Ni Cad • Tool Durability • Battery Durability • Torque • Power/Weight • Power/Size Dewalt 18V Ni Cad ML 18V Ni Cad MIL 28V Lithium 0 50 100 150 200 250 300 350 (ft-lbs.) Mechanism Durability Battery Life Ingersoll Rand Ingersoll Rand Snap-On 18V Ni Cad Snap-On 18V Ni Cad Dewalt 18V Ni Cad Dewalt 18V Ni Cad ML 18V Ni Cad ML 18V Ni Cad MIL 28V Lithium MIL 28V Lithium 0 50 100 150 200 250 Cycles (Removed Bolts Tightened to 200 ft-lbs per Charge) Tool Weight Tool Length Ingersoll Rand Ingersoll Rand Ingersoll Snap-On 18V Ni Cad Snap-On 18V Ni Cad Dewalt 18V Ni Cad Dewalt 18V Ni Cad ML 18V Ni Cad ML 18V Ni Cad MIL 28V Lithium MIL 28V Lithium 6 7 8 9 10 11 12 13 Inches Lbs.

  20. Pro Series Pumps • Full range of diaphragm pumps for price sensitive customers (12% lower cost than prior product) • Increased productivity • Premium reliability • Specially designed for general industrial, construction, mining, and oil & gas markets • Manufactured in Asia to better serve emerging regions • 26% average increase per month on unit sales YTD • Spare parts revenue increasing proportionally as installed base becomes industry standard

  21. 250 kW MicroturbineFirst and only to achieve CARB 2007 Certification • CARB 2007 Benefits: • Qualifies MT250 as “ultra-clean and low-emission” • Only non-fuel cell Distributed Generation (DG) technology certified by CARB as meeting the stringent 2007 emissions limits • Required after January 1, 2007 in at least certain California Air Districts • Helps expedite permit process in other areas Air Quality Data Emissions Inventory Air Quality Model

  22. Energy SystemsInitial Microturbine Installations in China Manufacturing Facility Production Facility Hospital • Environmental: • Government mandates - interconnect and power rate subsidy • 100,000 MW of power from renewable energy by 2020 • Value drivers: • Power reliability • Energy cost • Environmental compliance • Infrastructure spending offset • Combined Heat and Power (CHP: • Annual GDP growth 7% • China 2010 Goal: Reduce energy consumption by 20%.

  23. Recurring Revenue Service Parts/Accessories Pay for Use Remanufacturing

  24. Recurring Revenue • Double-digit for 5 straight years • 37% total revenues Dramatic Growth Globalization • 49% outside US • 18% growth in Asia YTD • Recurring revenue service contracts • Accessories • Competitive parts & service • Energy savings • Performance enhancements Growth Drivers Driving Consistent Revenue Growth

  25. Recurring RevenueAligning with Our Customer’s Interests Ingersoll Rand Benefits Customer Benefits Customer Retention Asset Management Pay for Use Comprehensive Service Contracts Margin Enhancement Risk Management Break/Fix and PM Service Revenue Predictability Cost Management System Upgrades Customer Intimacy Energy Management Audits Volume Growth Energy Awareness Completes/Parts Predictable, sustainable service growth

  26. Remanufactured Equipment • Create a profitable used/remanufactured equipment business • Leverage existing repair facilities (US, Europe, and Asia) • Offer adjacent services • Calibration, Installation, Performance enhancements, Rental Target Segments • Air Compressors • Large system components • Dispense, Winch & Fastening Systems

  27. Lean OperationsKey to Customer Satisfaction and Margin Improvement • Rollout of Lean Policy across Sector as part of IRBOS • Common Certification / Selection Process for all Black Belt/Green Belts implemented in 2006 • Targeted at all activities in the value stream • Lean is a key enabler for: • Quality Improvement • Customer Satisfaction • Margin Expansion • Working Capital Reduction

  28. Lean OperationsTypical Manufacturing Example: Shanghai Air Compressor Plant Rotary Compressor Line Results • Distanced Traveled Reduction: 90% • Production Space Reduction: 40% • Cycle Time Reduction: 25%

  29. Industrial Technologies • Strong Organic Growth • Leveraging customer relationships • Well positioned in emerging markets • New product development • Profitability • Good leverage of existing assets • Simplification of sales channels • Lean operations drive improvements • Sustainable Performance • Strong financial track record • Diversified business base • Continued growth of recurring revenue

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