Honeywell International Inc at Robert W Baird Global Industrial Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Arment - Robert W. Baird - Analyst : Awesome. And thank you for that, Ken West. It's a great overview and really helpful maybe if we actually want to keep one of those slides up just so everyone has a reference point. That's great. Thank you for that. So, you know, ESS has really been trying to solve some of the world's most challenging problems. I mean, when you think about it just energy transition and sustainability, maybe if you could just talk to, I know advanced materials is eventually leaving the portfolio, but you know, they're involved. Can you talk a little bit how you think about advanced materials and UOP on that kind of trying to solve some of those problems? And how do you think about it, you know, from an over the medium term and maybe over the long term? Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Yeah. So when you look at the two businesses, one of the synergies that we gain across the entire business portfolio is really our innovation pipeline and our ability to continue to develop and innovate new solutions. Now, many of these solutions that we're putting together today that meet sustainability needs like the Solstice low global warming molecule. Or if you take a look at our UOP portfolio, like some of our sustainable aviation fuel capabilities or SAF plants and [eco-finding] have been developed over the last decade. And as we brought those businesses together, you bring together a great hub of R&D knowledge and technology and those capabilities are able to extend and accelerate that speed of innovation going forward.

Question: Peter Arment - Robert W. Baird - Analyst : Wow, that's great. Let's talk a little bit about UOP. Maybe some of the key factors that you think are the drivers of growth for UOP. I think it's a fantastic business. I visited many years ago and were blown away by all the PHD's that work there and patents. And so I, I think you just need to kind of peel back then, a little bit for everyone on UOP is a tremendous business and franchise. Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions So, like I said in the opening comments, UOP has more than 100 year history of innovation and developing new technologies. But part of what is really unique about UOP is its support structure behind the scenes. This business has more than 100 pilot plants. When you think about a pilot plant. This is like a mini science experiment of what a refinery or petrochemical plant operates or even a renewable fuels plant. We operate these every day in a control system environment. Our engineers are watching every time one of our company has an issue, a concern wants to provide improved yield or improve operated rating capabilities at their plant. We can simulate that right on our pilot plants. We have these around the world, we operate them 24 hours a day and this is really a unique capability within the UOP business and it helps us extend that sir aftermarket services portfolio.

Question: Peter Arment - Robert W. Baird - Analyst : How should investors view the cyclicality of UOP or if there is such thing as the volatility of maybe the price deck of [oil]? Just how do you think about it? And, and does this maybe help dampen some of that cyclicality? Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Well, it does. So one of the things that is going to help dampen some of that cyclicality as we go into the future is continue to grow that aftermarket services chain. As we get an incremental part of our revenue from services and aftermarket products, reloads of catalyst technology training. We REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 1:20PM, HON.OQ - Honeywell International Inc at Robert W Baird Global Industrial Conference get paid for all of those items within UOP as that becomes a larger portion of the portfolio that takes out some of that volatility and cyclicality from large projects that may come in one year and not be there the next year.

Question: Peter Arment - Robert W. Baird - Analyst : Yeah, I can -- Honeywell's always had a big emphasis on breakthrough initiatives and, and that's a huge focus of kind of creating a lot of upward momentum for organic growth. How about within UOP? How do you think about kind of breakthrough initiatives? Things of that nature? Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Well, you know, you think about our sustainable technology services business which is part of UOP and that really was a clear breakthrough. This didn't start, you know, a year or two ago, this started with over a decade of work to develop new process technologies for products like sustainable aviation fuel where we're using, you know, used cooking oil and biomass to create aviation fuel. As we take a look at the technologies, many of these were started with technologies that were used in traditional refining, we can take those technologies and we can bridge them into expanded markets and new market opportunities.

Question: Peter Arment - Robert W. Baird - Analyst : And it go through the existing infrastructure that's out there over time or do you think there's going to be have to be a lot of investment on the infrastructure side? Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Well, this is that there will be investment in the infrastructure side for new facilities, but the beauty of this is you're creating a jet fuel that's going to have much of the same characteristics and same specifications as the jet fuel. You have today. So when you think about all the infrastructure needed for transportation and storage and distribution, all of that can be used across the portfolio.

Question: Peter Arment - Robert W. Baird - Analyst : How is the adoption factor when you think about those high growth regions? Is it following the same kind of path or is it a little slower than what you saw in kind of the Western societies? Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions It's actually faster and it's faster. For one reason, Peter, when we take a look at many of the companies, many of the high growth regions have auto manufacturers that are also exporting to Europe and the US and many of these companies, they don't want to run two refrigerants in their line. So if they already needed to have a low global warming option to go into Europe or to go into the US, it's advantageous to them to go ahead of those regular and to go ahead and convert.

Question: Peter Arment - Robert W. Baird - Analyst : I think you said the orders were up in UOP were up over 50%. Was that in the quarter or they were or they're close to a billion dollars? I forget the exact number that. Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions They were up, double digits is what I would say.

Question: Peter Arment - Robert W. Baird - Analyst : Yeah, whatever. Are there different in terms of the volatility in the Middle East? I mean, is that a big factor when you, when you, when you think about UOP or because it's so diversified, we don't see as much, you know, volatility on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 1:20PM, HON.OQ - Honeywell International Inc at Robert W Baird Global Industrial Conference Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Well, diversification is definitely something that helps us, you know, less than 40% of the sales are in the Americas. We truly are in countries all around the world participated in over 90 countries. We see the Middle East as a great opportunity actually in some unrest in other areas have seen more energy projects that have moved to the Middle East and actually been started up. So while there are geopolitical uncertainties there and we all wish that some of these would calm down sooner than later. We've continued to see many of these projects move forward.

Question: Peter Arment - Robert W. Baird - Analyst : Right? Another opportunity for more margins. That's great. Maybe let's talk a little bit about the spin, you know, you talked a little bit about it in your opening remarks about kind of how it's set up to be, you know, a standalone. Maybe some people aren't familiar with the advanced materials and the ability to be a standalone. Maybe you could talk a little bit about how do you think about the business, how it be repositioned out into the marketplace? Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Yeah, so one of the unique things about advanced materials are those leading capabilities in providing products and solutions that in some cases you know, are, are unique and have a great value proposition for our customers. So that's enabled this business which will be, you know, around a $3.8 billion business to maintain, you know, mid 20s, EBITDA margins and to vary, actively compete for growth capital amongst the peers that they're going to have as they stand alone. Again, this is a business that I've been very proud of the success that it's had over the last five or six years. And as I take a look at it, it's continued to grow stronger and strengthen and have better outlooks in the future, but it doesn't align directly with the simplification that we have in the portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 1:20PM, HON.OQ - Honeywell International Inc at Robert W Baird Global Industrial Conference So even though it's a good business, right, sometimes you have to take a look at that and you have to make some difficult choices when you take a look at the overall portfolio of the company. And I think the advantages that the remaining Honeywell is going to have from the laser focus on these three mega trends and the synergies that we're going to gain across with the accelerator operating system over top all of those businesses is really going to propel the remaining business to have a great future. And I look forward to seeing a great future in the spin in the spun off business and advanced materials.

Question: Peter Arment - Robert W. Baird - Analyst : Correct. And just quickly on, on advanced materials. It's not just Solstice, but we were talking about spectra. And so maybe just to highlight that because that's another growth avenue for advanced materials. Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions It is there's a number of innovative products in this portfolio. So we talked about Solstice which is low global warming refrigerants and industrial products. It also provides a leading provider of health care packaging under the Aclar brand name. This is packaging that allows a single oral dose medicines to have stable shelf life over a period of time and a unique capability. But Specter is an exciting part of that portfolio. So spectra is an ultra-high molecular weight polyethylene. Wow, it's a mouthful. But when you say what that is it is a fiber material that provides bullet resistant capabilities. And quite frankly, we have, you know, some of the largest us military applications and law enforcement customers and we're able to provide leading low weight products that help protect our servicemen and law enforcement folks every day. So it's just another leading technology in there that's continued to innovate. I think they're on their fifth or sixth generation of Armor materials and that just shows the capabilities of that portfolio.

Question: Peter Arment - Robert W. Baird - Analyst : So given that you touch kind of you, you have a global business that you run. Maybe if you talk about just take us around the world a little bit how you see the different high growth regions, you know, in terms of how that's affecting your businesses. You know what you're seeing from each one of those markets, whether particularly China, India, some of those markets. Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Yeah, absolutely. Well, you know, the thing about China and India is there is going to be a continued increasing need for energy and products in both of those regions. I mean, you know, both countries have, you know, roughly three times the amount of people that are in and the population that's here in the United States as those populations continue to grow and we have a growing middle class, you're going to have a growth, consumption for energy and products. And both countries are looking at ways that they can do this in a sustainable way, whether it's more sustainable materials or whether it's a lower global warming footprint, energy solutions. So as we look at growing those energy needs, we're also we're going to maintain the energy requirements of today and we're going to help them grow incrementally into climate friendly options.

Question: Peter Arment - Robert W. Baird - Analyst : And then last in the last minute or so here, you know, would you think about just because you do have a lot of growth? I think in front of you, how are you thinking about from a CapEx and you know, supporting the businesses? How do you know, particularly given your, the acquisition of the LNG business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 1:20PM, HON.OQ - Honeywell International Inc at Robert W Baird Global Industrial Conference Kenneth West - Honeywell International Inc - President and Chief Executive Officer of Energy and Sustainability Solutions Yeah. So as we think as we go forward, there will be some growth capital that's needed to help continue to expand these businesses. We're actually going to put a project in over the next year in that LNG business because we're seeing great organic growth in that business as it's come on, it's going to be a nice creative part of the portfolio. But also as we think about ESS in the future, you know, the remaining portion of the business is going to be at Honeywell is far less capital intensive. It's much more of a licensing and engineering a process technology business. When you think about the manufacturing of catalyst, it's much more of a discrete and batch manufacturing process. So it's less capital intensive. And when you think about the business that we're going to spin off that business is it has a higher capital footprint in it and is going to require growth capital over the coming years. But as you take a look at the growth rates and the margin in that business, I think it's going to compete very well for growth capital out among its peers. So I think it's very well positioned in the future. I'm excited to be here. It's a pleasure for me to be able to be a part of this business and to lead this team and I'm very excited about the coming years.