Honeywell International Inc. (HON)

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Honeywell International, Inc. (HON)

BofA Merrill Lynch Global Industries Conference

December 06, 2011 3:15 pm ET

Executives

Andreas Kramvis - Chief Executive Officer of Specialty Materials and President of Specialty Materials

Analysts

Unknown Analyst

John G. Inch - BofA Merrill Lynch, Research Division

Presentation

John G. Inch - BofA Merrill Lynch, Research Division

It gives me great pleasure to introduce the management team of Honeywell. Andreas Kramvis is President and CEO of Specialty Materials. He has been with Honeywell for 11 years. He is a well-respected business leader, having spearheaded initiatives at ECC and other divisions within the company to drive productivity and performance improvement. I think this segment specifically is testament to the opportunity both at Honeywell and to Andreas's leadership.

And I do want to mention, there is a cocktail at -- right after this meeting. The drinks are free, I mean, you paid for them. But the drinks are free and on Bank of America, so that's even more incentive to stick around and get the scoop.

Okay, with that, let me pass the mic over to Andreas.

Andreas Kramvis

Thanks, John. Good afternoon. I'm just going to give you an update with what's happening on Specialty Materials, and then we'll have some time for Q&A. I guess, you've seen the statements plenty of times, so I won't leave it there for a long time.

Specialty Materials will do this year close to $5.7 million. Our business is really global. We are more than 60% outside the United States. We break the business down between 2 segments, Advanced Materials and UOP. And I'll dig into both those segments today and give you an idea of what's going on.

Our business has performed extremely well over the last few years, 2011 has been a terrific year. I guess, I didn't mention in the first slide that we're up 270 basis points in our margins. So that's a very strong position to be in.

What are we seeing going forward by segment is that our UOP business continues to be a strong business, following a strong 2011. We are seeing strength in our Resins and Chemicals business, a very global business. Our Fluorine Products business, which has been stellar in the year, we think that supply and demand will come in balance. But we have a lot of new products. And the other 2 businesses there, I think, the story is about the same. While the market is not as heated as it used to be, we have a very full pipeline of new products, and I'll be talking about those.

What are the key differentiators, and why are we performing so well? Well, I guess, everybody ascribes to something, but this is what we've been ascribing for the last few years. A very strong operating method for the business. It's fairly unique business decision week. We are extremely well equipped in labs, extremely well oriented to technology, something that's very difficult to copy and, of course, that's coming through in terrific new inventions and molecules. And we have been getting substantial productivity out of our plants.

Now traditionally, we've been comparing what we do with the green curve and the right curve being Honeywell. The green one being specialty materials of other companies. We've kind of introduced this time, the blue curve, which is the crown jewels of other multi-industry companies. I'm not quite sure you can make the small print at the bottom, but have included UTX Otis, Tyco from ADT, from Emerson Process Management, from Danaher Test & Measurement, et cetera. So we think -- well, I think the performance of this division is getting into the -- closing the gap with the best of the best.

Now it's -- when you hear about a division of a business or a group, you kind of think of one business. We're not really one business. And I think the plurality with which we are capable of managing these different businesses has led to the success we have. Some of our businesses, like fluorine products, Resins and Chemicals, are what we call new molecule and scale-up. These are large, long cycle businesses, fairly large investments where you bring out new molecules to the market and establish end applications around the globe.

Our technology leadership business is in UOP, where we again, we have terrific new product development, and then we work with others to commercialize and license. And then we have what we call our fast-cycle application business, which is on the basis of technology platforms, which we modify in a shorter timeframe, we're able to penetrate markets around the world.

Having this balance gives us a very good portfolio, which can really both look at the long-term, invest long term, but also get results short term and kind of meet the requirements for our shareholders.

So I'll go through each one of these businesses, give you a flavor with what's happening. Our Fluorine Products business major leads and we're a leader here. We call it heat transfer; really we're a refrigerants business. Our scientists have really invented what you're using in your homes and your cars today; major supplier, and also in insulation, with how your refrigerators are insulated, and homes.

As you can see, while the housing market hasn't been great and some of these markets haven't performed in markets, we have one, that blue line is winning around the globe. A lot of it is our ability to serve people and our labs to fit in new applications. But it's also that people know that this industry will have to move into from none other than depletion to low global warming.

Read the rest of this transcript for free on seekingalpha.com