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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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industrial technologies products and services
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
Agenda
  • Business Overview
  • Global Channels/Emerging Markets
  • New Product Development
  • Recurring Revenue
  • Lean Operations
building on our business model
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

slide5

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

diversified business base

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
positioning for consistent performance through all economic cycles

% 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%

global channels emerging markets
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
slide9

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

slide10

Developed Economies - Industrial Technologies ChannelsFuture State

Business Units

Industrial Technologies

Channels

Strategic

Accounts

Distribution

Direct

Leverage Customer Relationships Across Products and Channels

slide11

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

slide12

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

new product development investing for growth
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
new product development
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

slide15

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

cordless tool market
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

product innovation cordless
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
new products best in class

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.

slide20

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
slide21

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

slide22

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%.
recurring revenue
Recurring Revenue

Service

Parts/Accessories

Pay for Use

Remanufacturing

recurring revenue24
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

recurring revenue aligning with our customer s interests
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

remanufactured equipment
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
slide27

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
lean operations typical manufacturing example shanghai air compressor plant
Lean OperationsTypical Manufacturing Example: Shanghai Air Compressor Plant

Rotary Compressor Line Results

  • Distanced Traveled Reduction: 90%
  • Production Space Reduction: 40%
  • Cycle Time Reduction: 25%
industrial technologies
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