HONEYWELL REPORTS 2Q 2016 RESULTS; ANNOUNCES SPLIT OF AUTOMATION AND CONTROL BUSINESS
MORRIS PLAINS, N.J. - In the second quarter of 2016, Honeywell reported sales of $10.0 billion, up two percent from sales of 49.8 billion in the second quarter of 2015. Net income for the period was $1.3 billion, compared to $1.2 billion a year ago.
"Sales in the quarter of $10.0B were in-line with our expectations driven by contributions from each of our business groups," said Honeywell Chairman and CEO Dave Cote. "In Aerospace, we saw continued momentum in Commercial Aviation Aftermarket and Transportation Systems. ACS had strong growth in Security and Fire, Buildings Solutions and Distribution, and its China business. And, PMT saw higher sales in Process Solutions and Fluorine Products, where we continue to outperform."
"In the second quarter, we also continued to smartly deploy capital to position our businesses for sustainable growth, to add to our Great Positions in Good Industries, and to drive shareowner value. Earlier this month, we announced the acquisition of Intelligrated, a leader in supply chain and warehouse automation technologies, for $1.5 billion. This business complements our suite of transportation and logistics technologies with warehouse execution software and other technologies enabling superior efficiency in warehouse and distribution operations. We also repurchased approximately $500 million of shares during the quarter, bringing our year-to-date total to $1.6 billion, and funded $97 million in new restructuring projects."
Automation and Control Solutions (ACS) Realignment
Honeywell also announced that it is realigning its ACS business segment into two new segments: Home and Building Technologies (HBT) and Safety and Productivity Solutions (SPS). Financial performance for the third quarter of 2016 will be reported based on this realignment. For 2015, HBT and SPS would have had estimated revenues of approximately $9.4 billion and $4.7 billion, respectively.
"ACS is coming off a strong quarter and has established momentum in key software-driven markets where our products and services give us a competitive advantage, especially given our recent acquisitions such as Elster, Xtralis, Intelligrated, and Movilizer," said Cote. "We have removed layers from our organizational structure and are well-positioned to implement a more focused segment reporting alignment that fits our HOS Gold approach to drive breakthrough strategies and speed up new product introduction. This new structure will also help us better serve our customers. Our success through acquisition and NPI has resulted in a much broader portfolio that has outgrown the existing ACS construct. Having two more nimble segments will promote greater customer intimacy and responsiveness. The separation into two businesses will also enable increased efficiency and speed of decision-making as well as a more comprehensive integrated suite of technologies for the respective end markets."
INDUSTRY SEGMENTS
Aerospace
Sales for the second quarter were $3.78 billion (2015: $3.83 billion) down 1 percent reported and down 2 percent on a core organic basis. The decrease in core organic sales was primarily driven by program delays and completions in the international, U.S., and services businesses within Defense & Space (D&S), lower shipments to Business and General Aviation (BGA) OEMs, and higher OEM incentives. This was partially offset by higher spares sales, higher repair and overhaul activities, and new turbo platform launches on passenger vehicles in Transportation Systems. The difference between reported and core organic sales was due to the favorable impact from acquisitions.
Segment profit was $791 million (2015: $777 million) up 2 percent and segment margin expanded 60 bps to 20.9 percent, driven by productivity net of inflation, and commercial excellence, partially offset by continued investments for growth including higher OEM incentives, and acquisition amortization and integration costs. Excluding the impact of acquisitions, segment margin expanded 80 bps.
Automation and Control Solutions
Sales for the second quarter were $3.89 billion (2015: $3.55 billion) up 9 percent reported. Core organic sales were down 1 percent in the quarter as a result of lower volume in Sensing & Productivity Solutions (S&PS) due to the USPS roll-out in the second quarter of 2015 partially offset by continued global growth in Security and Fire, strength in our Americas Distribution business, and further penetration of High Growth Regions. The difference between reported and core organic sales was due to the favorable impact from acquisitions, primarily Elster.
Segment profit was $615 million (2015: $567 million) up 8 percent and segment margin contracted (20) bps to 15.8 percent, primarily driven by acquisition amortization and integration costs. Excluding the impact of acquisitions, segment margin expanded 50 bps driven by productivity, net of inflation, the benefits of previous restructuring actions, and commercial excellence, partially offset by continued investments for growth.
Performance Materials and Technologies
Sales for the second quarter were $2.34 billion (2015: $2.39 billion) down 3 percent reported. Core organic sales were down 4 percent primarily driven by lower UOP gas processing, licensing, and equipment sales and lower market pricing in Resins & Chemicals, partially offset by higher projects, software, and services sales in Process Solutions (HPS) and stronger volume in Fluorine Products. The difference between reported and core organic sales was due to the favorable impact from acquisitions, partially offset by the unfavorable impact of foreign currency and lower raw materials pass-through pricing in Resins & Chemicals.
Segment profit was $490 million (2015: $509 million) down 4 percent and segment margins contracted 20 bps to 21.1 percent, driven by lower volume and continued investments for growth, partially offset by the benefits of previous restructuring actions and commercial excellence.
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