Honeywell Portfolio Update Transcript

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

Question: Julian Mitchell - Barclays Capital Inc - Analyst : Hi, good morning. And congratulations on the news. Maybe just to try and understand first off. So you'd said, Vimal, around 10% of sales might be noncore, and you said that last year. And advanced materials comprises around that share of Honeywell. So as you've looked more at the portfolio and as you see a sort of richer environment for dealmaking in general, has that 10% kind of scope of potential divestments expanded a fair amount as you and the Board have reviewed the business this year? Should investors expect more divestments of scale to occur in 2025 alongside acquisitions?

Question: Julian Mitchell - Barclays Capital Inc - Analyst : Thanks so much. And then just a quick follow-up on the SpinCo. So I think some of the public peers are businesses like Arkema and Chemours who clearly trade at a valuation that's different to where Honeywell Total is today. Is the argument that advanced materials, when it spins out, it deserves a decent premium to some of those peers, largely because of the margin profile? Is that the way to think about it? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 08, 2024 / 12:30PM, HON.OQ - Honeywell Portfolio Update

Question: Steve Tusa - JPMorgan Chase & Co - Analyst : Hi, good morning. Congratulations.

Question: Steve Tusa - JPMorgan Chase & Co - Analyst : Any commentary on leverage or any liabilities going with the SpinCo? And then on the revenue for the RemainCo AM or ESS, I think it's like $2.8 billion in sales or something like that. You said it's going to get to $5 billion in the future. Can you just give us a little more color on like what timing the future means?

Question: Steve Tusa - JPMorgan Chase & Co - Analyst : And sorry, the liabilities, anything there? I didn't quite catch it at the end of your comment on the leverage.

Question: Steve Tusa - JPMorgan Chase & Co - Analyst : Okay, great. Thanks a lot.

Question: Andrew Obin - Bank of America - Analyst : Yes, hi. How are you? Good morning. Congratulations.

Question: Andrew Obin - Bank of America - Analyst : Just clarification to Steve's question. I think, specifically, we've been getting questions, PFAS liability. So does that mean that it's going to be a spread between RemainCo, and SpinCo, or like where does that end up? Sorry, just to understand.

Question: Andrew Obin - Bank of America - Analyst : I guess I'll follow up off-line. And then just a question about sort of UOP future and you've outlined your ambition for growing the business. But

Question: Andrew Obin - Bank of America - Analyst : Terrific. Thanks so much. And congratulations once again.

Question: Nigel Coe - Wolfe Research LLC - Analyst : Thanks. Good morning. So Greg, I just wanted to clarify your comment. Did you say strong non-investment grade rating? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 08, 2024 / 12:30PM, HON.OQ - Honeywell Portfolio Update

Question: Nigel Coe - Wolfe Research LLC - Analyst : Okay. So like a BB+ kind of range, okay. Got it. Okay. Great. Any kind of estimation or kind of ballpark on public company costs, onetime costs, breakage fees, et cetera? Anything there would be helpful.

Question: Nigel Coe - Wolfe Research LLC - Analyst : Okay. Great. And then, Vimal, it seems like the 10% you put out there, I think you mentioned that the majority of that or maybe more than 5% would have been some of these businesses within advanced materials. So would it be fair to say that we obviously taking account of the spin that perhaps the scope of the noncore is now like 15% or so. Would that be fair?

Question: Nigel Coe - Wolfe Research LLC - Analyst : Well, has the 10% become more like 15%, including the spend?

Question: Nigel Coe - Wolfe Research LLC - Analyst : Okay. Thank you.

Question: Sheila Kahyaoglu - Jefferies Group LLC - Analyst : Good morning, Vimal and Greg. Congratulations. Maybe if I could just ask what makes something that part of that 10%? What qualified this as a divestiture candidate? And given the organic growth, especially from Solstice just in the past, does it change your 4% to 7% organic growth framework? Was this business going to decelerate? Any thoughts on the growth profile?

Question: Sheila Kahyaoglu - Jefferies Group LLC - Analyst : Got it. Thank you.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Hey, guys. Good morning and congratulations. My first question, just on the spin rationale. So did you guys try to sell this business? Was there something around like the market concentration of the product to the portfolio that may be prevented you from doing so? Just any color on going down this path.

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Got it. Okay. That's helpful, guys. And then just a follow-up. So you talked about this improving basically the capital intensity, lower capital intensity of your RemainCo portfolio; again, less cyclicality. As I think about this business, I remember there's pretty significant fluctuations from a pricing standpoint. So when you think about that equation to overall, Honeywell, maybe just help me understand a little bit more how capital-intensive was this business? What's the resulting free cash flow potential improvement to pro forma Honeywell?

Question: Joe Ritchie - Goldman Sachs Group Inc - Analyst : Okay. Fair enough. Thank you.

Question: Peter Arment - Robert W. Baird & Co - Analyst : Yes. Thank, Vimal and Greg. Congratulations. Vimal, you've been super active since taking over the role. And I think one of the important slides that you guys are talking to on slide 10 is the kind of sales by business model where you've got a third aftermarket and some software products in the product portfolio. Can you talk a little bit about kind of as you think about the megatrends and how that kind of mix or the business model is going to continue to evolve? It's certainly, I think, very helpful to think of it from that context.

Question: Peter Arment - Robert W. Baird & Co - Analyst : Appreciate the detail. I'll leave it at one. Thank you.

Question: Joe O'Dea - Wells Fargo & Co - Analyst : Hi, good morning. Just any color on how you think about the dilution related to the transaction and the time line by when you would like to see offsets. I think you outlined a number of the tools that you'll have to do that with. But just any objectives you have out there in sort of that timeline to offset the earnings dilution from the spin? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 08, 2024 / 12:30PM, HON.OQ - Honeywell Portfolio Update

Question: Joe O'Dea - Wells Fargo & Co - Analyst : I appreciate that. And then also just in terms of how you think around expectation setting and whether this would mean a move to discontinued ops, or how you think about it within a guidance framework? And then just wanted to confirm, I think Sean made a comment about third-quarter EPS trending toward the upper half of guidance, but I wanted to make sure I heard that correctly.

Question: Joe O'Dea - Wells Fargo & Co - Analyst : Right. Thank you.

Question: Christopher Glynn - Oppenheimer & Co Inc - Analyst : Yeah. Thanks. Good morning. A lot of details so far. I was curious about the timeline to end '25, early '26, what -- were kind of long pulls there. I think you talked about keeping all options open during that interim. And so curious if that is a particular factor on the timeline or if it's more around internal systems separation? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 08, 2024 / 12:30PM, HON.OQ - Honeywell Portfolio Update

Question: Christopher Glynn - Oppenheimer & Co Inc - Analyst : Makes sense. Thank you.

Question: Phil Buller - Berenberg Group - Analyst : Oh, hi. Thanks for the question. I guess, the last two spins had a bit of a bumpy start to life after they were spun out. I was wondering if you've had any learning some of those processes, which might feed into this one, i.e., do you envisage owning a larger proportion of the shares for a period of time? Would you expect to receive royalties post the spin, which I think the case with Resideo? And as a follow-up, how should we think about or how do you envisage the dividend in absolute terms? I get the EPS dilution, but would you envisage the DPS being held steady given the improved cash profile of the RemainCo piece? Thanks.

Question: Phil Buller - Berenberg Group - Analyst : Thank you. And the dividend?