» Projecting growth:
Johnson Controls says profits will rise
Johnson Controls said Monday it’s targeting adjusted earnings growth of 13% to 19% in the fiscal year that started Oct. 1.
Johnson Controls International on Monday said it’s targeting adjusted earnings growth of 13% to 19% in the fiscal year that started Oct. 1, with sales growth of 2.5% to 4.5%.
Adjusted earnings would grow to $2.60 to $2.75 per share, from $2.31 last year, though the adjusted numbers come with a big asterisk: They exclude a variety of pension- and mergerrelated costs and onetime items linked to the company’s merger with Tyco International. After taking all those into account, the company’s bottom line in its last fiscal year was a loss of $868 million or $1.30 per share.
“Fiscal 2016 was a year of significant transformation,” Alex Molinaroli, chairman and chief executive, said in a statement. “As we transition to fiscal 2017, we are instilling our new company’s vision, mission and values throughout the organization to drive a strong performance and growth-oriented culture.”
The company is working to go to market as one company while combining the building fire and security business of Tyco with Johnson Controls’ building business that includes heating and cooling equipment and controls. Johnson Controls sold its automotive seating business, now known as Adient, on Oct. 31.
The company is targeting what it termed “megatrend” growth opportunities from going to market to help businesses save energy and greenhouse gasses and take advantage of the increasing “digitalization” of buildings, company leaders said during an analyst presentation in New York City.
Johnson Controls introduced financial targets for 2020, with annual sales growth of 3% to 4%, including $500 million in sales in 2020 coming from opportunities to sell Johnson products to Tyco customers and vice versa.
Adjusted earnings per share growth is pegged at 12% to 15% a year. The company continues to target about $1 billion in cost savings linked to cost-cutting
from combining the two companies, as well as the $150 million in tax savings linked to the shift of Johnson Controls’ headquarters to Cork, Ireland.
Through a process known as an inversion, Johnson Controls took Tyco’s corporate headquarters for tax purposes to take advantage of Ireland’s lower corporate tax rate.
In trading on Wall Street Monday, Johnson Controls International shares closed down 1.5% at $44.63. The shares have fallen 2% since the Tyco deal was completed.
Under new company president George Oliver, Tyco’s leader prior to the merger, Johnson Controls has reorganized its divisions under two businesses. One is building technologies and solutions, with $23 billion in sales last year. The other is power solutions, the battery business that had $7 billion in sales last year and produces lead-acid batteries and advanced batteries for vehicles. That business also is competing in the emerging market of energy storage for buildings.
The company’s growth strategy, as it has over the past five years, continues to target expansion in China as the world’s most populous country produces a growing middle class with purchasing power. China is expected to be the world’s largest market for automotive batteries by 2020, said Trent Nevill, Johnson’s president of Asia Pacific.
“Asia Pacific is a huge area for us to grow in,” said Nevill. In the coming years, 90% of the growth in the global battery market will be in Asia Pacific, with 55% of global growth coming from China, he said.
The company is opening its Asia headquarters in June to provide customers and government leaders in China and Asia a showcase to customers of its technologies that promote sustainability.
“It will be the greenest building in China,” said Nevill, boasting 42% energy savings and 44% water savings and earning a LEED platinum designation from the U.S. Green Building Council.
The company is working with Beijing Automotive to open its fourth car battery factory in China, he said. The company is a leader in smart-stop technology, which helps cars increase gas mileage and decrease emissions of greenhouse gasses.
By 2020, 60 million cars with the technology will be on the road across the world, and half of all the new cars coming off the assembly line at new-vehicle assembly plants will include the technology, the company forecasts.
The combined company has 130,000 employees, a sales force of 9,000, 10,000 patents and 165 factories across the globe, said Jeff Williams, vice president of enterprise operations at Johnson Controls.