Annual Investor Conference · 2020-05-02 · Industrial connectors for harsh environments represent...

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Annual Investor Conference

Heath Monesmith, President & COO, Industrial SectorMarch 2, 2020


Today’s key messages

Repositioning industrial business through acquisitions and divestitures • More focused portfolio

• Aligned with key mobility secular trends

Well positioned for electrification transformation across industrial markets• Significantly shaping future technology and markets

• eMobility continues to gain traction

Growing our industry-leading margin businesses• Aerospace: Expanding addressable market and aftermarket

• Vehicle: Differentiated technology, competitive footprint, and partnerships


Industrial business portfolio

Market size

Aerospace eMobility Vehicle

Growth focus Organic & inorganic Organic & inorganic Organic

Mid-term growth

~$22 billion ~$33 billion ~$40 billion

2019 revenues

2019 operating profit %

$2.5 billion $320 million $3.0 billion

24.0% 5.3% 16.8%

Strong industrial business franchises focused on growth

eMobility market size is the estimated addressable market by 2030Aerospace 2019 revenues and operating profit % reflect new segmentationVehicle 2019 operating profit % excludes warranty claim


Targeting ~4% organic revenue CAGR by 2025

2020 baseline revenue

Aerospace Vehicle eMobility

$6B

$7B

2025 organic revenue

$9B

2025 Industrial Sector revenue

Target acquisition value


Electrification trends – the future

Enabling a more electric ecosystem

Data centers

Industrial

Commercial

Residential

Distributed storage

Microgrids

Electrical content on aircraft projected to be a $12B market by 2030

By 2030, global passenger car BEV and HEV sales will grow to 31M units/year EVs will represent ~57% of the global passenger car sales by 2040

By 2040, ~56% of light commercial vehicle sales will be from EVsMedium commercial vehicles will have ~31% sales from EVs

40% of global municipal buses to be electrified by 2025Electric buses expected to grow at a 10% CAGR over the next 20 years

Adoption rates potentially accelerated by vehicle technology advancements

Electric vehicles

Commercial vehicles

More electric aircraft

BEV – Battery electric vehicleHEV – Hybrid electric vehicle


Electrification of industrial markets


Our markets are demanding Eaton blended powerTM solutions

Electrical Mechanical Pneumatic Hydraulic

Aerospace products

Eaton uniquely positioned to win across all power categories

eMobility & Vehicle products


Electrified mobility platforms share a similar fundamental electrical power chain

Energy source1 Power management2 Connection & wiring3 Power consumption4

Passenger car Aerospace Commercial & utility

Electrical power chain

Electrical power adoption rates will vary by industry

Energy source1 Power management2 Connection & wiring3 Power consumption4

1

3 2

4

1

Passenger car Aerospace Commercial & utility

Electrical power chain

1

2

34

4

3

12


Power management ConnectionEnergy source

Connectors & wiring

Distribution & protection

Propulsion loads

Powergeneration

Power conversion

Power storage

Power consumption

Work loads

BatteriesFuel cells

InvertersConverters

Circuit BreakersPower dist. units

On-board chargersFuses

Elec. connectorsHarnesses

Generators Motor controllersMotors

Transmissions

Rotary actuationLinear actuation

eMobility

Aerospace

eMobility & Vehicle

Electric mobility power chain product landscape

vRepresentative products

Common technology platforms leveraged across multiple end markets


Power management

Distribution & protection

Power conversion

Power conversion

Power management

Distribution &protection

Leveraging key competencies to win across multiple end markets

Fundamental technologies required to play and win are similar across the enterprise

Industrial businessesMobile end markets

Electrical businessesStationary end markets

Inverters

Converters

Power electronics

Circuit breakers

Contactors

Fuses


ELEC

TRIF

ICAT

ION

Key performance criteria

Durability

Power density

Altitude

Safety & security

Redundancy

Intelligence

Important Significant Critical

Passenger car eVTOL

Commercial & utility

Future commercial concepts

Eaton has the technical and domain expertise to develop customized products

eVTOL - Electric vertical takeoff and landing

Performance criteria are application dependent


Eaton is uniquely positioned to capture electrification growth by leveraging core competencies

Pedigree in mission critical industries

Technology – unique combination of core technology and deep application expertise

Scale – leveraging financial capacity and supply chain

Global engineering capability with strong OEM relationships

Gaining early traction with customers as pivot to electrification accelerates


eMobility


eMobility Overview

Power distribution & protection

Power systems

Power electronics

Key product families

$320M2019 revenue

3% - 5%

Financial highlights

Commercial Vehicle &Pass Car

What we like

Off road

• Growth – High-growth market with large future addressable market (~$33B in 2030)

• Competitive advantage – Ability to combine Electrical and Vehicle core competencies to solve new challenges

• Scale – Ability to leverage enterprise-wide engineering talent, supply chain, manufacturing footprint and OEM relationships

• Industry leader – Power protection industry leader

Targeting $2B to $4B in revenue by 2030

End market mix2020E organic revenue growth


Long-term market fundamentals intact

Longer-term EV market adoption rates continue to be in line with our projections

Multiple enablers continue to drive electrification adoption

OEMs continue strategic repositioning

IC engines still in ~84% of light vehicles by 2030

Strong EV growth balanced by continued demand for internal combustion engine vehicles

2019 2030E

6.4 7.8

2019 2030E

Internal combustion engineHybrid / plug-in hybrid

Battery electric vehicleContains internal combustion engine

EV market mix expectationsNumber of vehicles produced (in millions)

105

8698% 84%

99%92%

Light vehicle Commercial vehicle

EV - All electric vehicle architectures IC - Internal combustion


eMobility business continues to gain momentum

Achieved ~$460M in mature year wins since launch

Multi-billion dollar opportunity pipeline

Developing technology that can be leveraged across the enterprise in passenger car, commercial vehicle, off road, and aerospace applications

Focusing on execution

Vehicle domain knowledgeUnderstand vehicle dynamics

+Electric power capabilities Managing electrical power

Power electronics Power distribution & protection

Resettable circuit protection

Intelligent power distribution unit

DC/DC converter

Traction inverter

eMobility is our platform for advancing electrification across industrial businesses


Focusing on continued wins and flawless execution in 2020

• Volume ramp up: Successfully execute and launch booked program wins

• New business wins: Continue building the pipeline and win on key platforms

• Expansion in key growth markets: Expand capacity and capabilities in China and Europe

• Product development: Expand product portfolio, both organic and inorganic

eMobility

Volumeramp up

New business

wins

Marketexpansion

Product development


Vehicle


Vehicle overview

Clutches Torque controls

Valve & valve actuation


$3.0B

(7)% - (9)%2020E organic revenue growth


Well positioned for changing industry dynamics

16.8%

15.7% - 16.3%

• Regulations – Need for better fuel economy and emission regulations driving growth

• Industry leader – Leader in valves and advanced valve actuation

• Portfolio & partnerships – Strategic joint venture partnerships increase market access and speed

• Footprint – Investments in manufacturing drive best-in-class scale and cost competitiveness

• Customers – Established relationships with all global OEMs

What we like

2019 revenue 2019 operating margin %

Passenger car

Commercial vehicle

Other

End market mix

Vehicle 2019 operating margin % excludes warranty claim

2020E operating margin %


Proactively transforming our Vehicle business for consistent profitability and growth

Proactive transformation

By 2030, core vehicle business expected to be $3B+ business with 18% margins

Leverage technology to growICE vehicle content

Scale through partnerships

Exiting non-core businesses

Optimized footprint

Increased regulations drive growth• Fewer clean sheet designs• Favorable to incumbents

Expanding addressable market

ICE - Internal combustion engine


Transformation executed through strategic partnerships...

Enabling new market access, risk sharing, and margin expansion

Scale through partnerships

2008 2015 2017 2018

Global engine valve growth with Japanese & South Korean OEMs

Accelerates truck clutch growth in China

Drives growth in automated transmission globally

Penetrate light-duty transmission market in China


Multiple strategic actions executed are resulting in improved margins and lower volatility

Exiting non-core businesses

Successfully divested automotive fluid conveyance division

2019 • Global engineering and manufacturing facilities

• ~70% best cost country footprint

• ~90% in region production

Optimized footprint

...exiting non-core businesses and footprint optimization


-90%-80%

-30% -32%

Increasing regulations are driving demand for clean technology solutions

Passenger car & light truck

-32%

-50%+ -56%

NOx CO2

Emissions reductions

Commercial vehicle

Emissions reductions

Changing regulations creates an opportunity for solution providers

2016 - 2030 2016 - 2030 2016 - 2030 2016 - 2030 2016 - 2030 2016 - 2030 2016 - 2030

CO2

U.S. NOx reflects proposed reduction


Supporting growth by enabling OEMs to meet new regulations

eVaptive

• Enables advanced hybrid powertrains• Intelligent control capability • Supports on-board diagnostics• Customizable for multiple architectures

Electronically controlled fuel tank vapor venting system

• Improved fuel economy• Optimized air flow• Easy adaptability with existing

engine architectures

Optimizing or shutting off air injected into the cylinder

Advanced valvetrain

Market-leading position in the US 4% - 9% CO2 reduction


Commercial vehicle technology enables emissions reductions and improved fuel economy

• Lower NOx in city driving • Improved fuel economy• Enables advanced aftertreatment

Medium- and heavy-duty solutions with modular designs provide design flexibility to OEMs

• Improved fuel efficiency• Lower cost from fewer components• Lower idle NOx

Precise recirculation of exhaust gases

Advanced valvetrain

Exhaust gas recirculation pump

Up to 5% CO2 & Up to 90% NOX reduction Up to 5% CO2 reduction


Established incumbent supplier on ICE vehicles, with a rapidly expanding addressable market in electric vehicles

Well positioned to serve multiple evolving markets

INTERNAL COMBUSTION

ENGINES

ELECTRIC VEHICLES

Fuel emissions Valvetrain

Differentials & gears

Fuel tank isolation

valve

Power distribution and protection

Power electronics

Clutches

Transmissions48V mild

hybrid

Engine brake

ICE - Internal combustion engine


Aerospace


Aerospace overview

Connectors Conveyance & ducting

Fuel & hydraulic pumps


$2.5B2019 revenues

1% - 3%


Expanding strong Aerospace franchise to include electrical solutions

24.0%2019 operating

margin %

22.7% - 23.3%

• Pedigree - Highly regulated industry where pedigree matters

• Differentiated technology - Strong intellectual property and patent protection

• Attractive aftermarket - Large installed base and strong aftermarket position create predictable, high-margin revenue streams

• Market leader - In hydraulic, conveyance, fuel systems, and connectors

• Electrification - Focus on more electric aircraft

What we like

Comm. OE

Aftermarket

Military

End market mix

FiltrationOther

Aerospace 2019 revenues and operating profit % reflects new segmentation

2020E organic revenue growth

2020E operating margin %


Focusing on sustained profitable growth

Organic growth Manufacturing excellenceInorganic growth

Strengthening our existing portfolio and expanding into

new growth markets

Sustaining profitable organic growth with emphasis on

aftermarket, innovation, and differentiated technology

Global manufacturing presence and additive manufacturing

delivering industry-leading performance


We recently acquired a leading Aerospace connectors business

Acquisition rationale

Well positioned for more electric aircraft trendOpportunity to leverage electrical business channel

Leading position in aircraft electrical connectorsStrong customer relationships

Highly engineered solutions Deep application knowledge

Attractive margin profileOpportunity for manufacturing synergies

Electrification

Market leader

Differentiated technology

Financial performance

~$360MAnnual revenue

Closed in Q4

Souriau-Sunbank

Leading provider of highly engineered, harsh environment

interconnect solutions

Souriau-Sunbank positions us to grow in attractive connectors market


Eaton is well positioned to grow share in aerospace and electrical markets

Industrial connectors for harsh environments represent an attractive market for Eaton’s portfolio

$10BHarsh environment connector market

Aerospace & defense Electrical

Electrical represents transportation, energy, and datacom markets

Growth

Breadth

Technology

• Aligned to industry megatrends• A&D market growing at 5% CAGR • 10K+ connectors on some platforms

• Broad portfolio necessary to serve diverse end markets

• Critical link in electrical systems• High reliability required


OE content growth ensures aftermarket long-term business viability

Strong position on new and upcoming platforms drives long-term organic growth

$0.9B

$1.7B

$2.6B

$3.6B

$4.4B

2015 2016 2017 2018 2019

Cumulative OEM new program wins (life of program value)

Commercial Defense & space


Accelerating Aerospace aftermarket growth

Retrofits

• Growth opportunity, independent of market conditions

• Potential to win share on in-service aircraft

• Providing customer value through safety, reliability, affordability & extended product life

Repairs Spares

• Driving reduced turn-around-times through Industry 4.0

• Investing in additive manufacturing solutions for repairs

• Establishing tube and duct repair capability in China

• Enhancing customer responsiveness

• Offering tailored solutions aligned with customer needs

• Maximizing Eaton’s opportunity for military growth

M-1 hydraulic motor

• Replacement of incumbent hydraulic motor

• Critical to performance due to increased weight

Targeting over $1B Aerospace aftermarket revenues by 2025


Gaining traction with additive manufacturing

Blue Origin New Glenn

• 18 additive manufactured landing gear manifolds

• Reduced weight, cost, and development time

Airbus A330NEOjet pump

Trainer aircraftram air scoop

Blue Origin New Glenn manifolds

Leveraging Eaton’s broad base additive capabilities

Materials knowledge

Process experience

Component pedigree

Systems engineering

Commercial Military Space

Eaton has additive expertise, production capability and market credibility for aerospace applications


Today’s key messages

Repositioning industrial business through acquisitions and divestitures • More focused portfolio

• Aligned with key mobility secular trends

Well positioned for electrification transformation across industrial markets• Significantly shaping future technology and markets

• eMobility continues to gain traction

Growing our industry-leading margin businesses• Aerospace: Expanding addressable market and aftermarket

• Vehicle: Differentiated technology, competitive footprint, and partnerships

Annual Investor Conference · 2020-05-02 · Industrial connectors for harsh environments represent...

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