Specialist
Former director at Carrier Global
Agenda
- Carrier Global’s (NYSE: CARR) product offerings and competitive advantage
- Potential divestiture of Carrier Global’s fire and security segment and industry impact
- Technological innovation and regulation update
- HVAC (heating, ventilation and air conditioning) industry demand update
Questions
1.
Are there any macro trends that you’re monitoring that could largely impact Carrier Global in 2023, or anything else that we should be aware of?
2.
Are there any specific trends in fire and security that we should monitor there as well, perhaps that would separate it from the larger HVAC [heating, ventilation and air conditioning] core business?
3.
Could you briefly outline Carrier’s product portfolio, highlighting the top revenue-generating segments and products? I know the company’s fire and security business accounts for around 17% of overall revenues, but could you help us fill in some of the gaps?
4.
On 11 April 2023, Carrier announced it is exploring a sale or a spin-off of its fire and security segment. What might be the company’s rationale in wanting to part with the fire and security business? How are you thinking about this?
5.
How should we go about quantitatively assessing the value of Carrier’s fire and security segment given current market conditions in 2023?
6.
Can you give us a ballpark figure for how much EBITDA could be grown if Carrier were to move to a lower-cost manufacturing area?
7.
What products – in fire, security or both – are typically in highest demand vs highest margin? How should we think about the different revenue streams within fire and security?
8.
Would a sale or a spin-off be more beneficial for Carrier in the long term? You mentioned that to you at least, the most value would come from selling fire and security as a pieces play, not as a whole. How should we go about thinking about what would be most beneficial to the company?
9.
If there does end up being a sale of Carrier’s fire and security divisions, especially if in the pieces that would make the most sense to you, who in your mind would be an ideal customer for the relative pieces? Who would make the most sense to want to be into this business?
10.
What might be some challenges to selling, even if it was to be a spin-off of fire and security?
11.
What are fire and security’s most valuable assets? Could you also give us a sense of fire and security’s product market share across brands?
12.
Could you outline the commercial refrigeration business unit? What are the margins and typical volumes across commercial refrigeration, on an annual basis?
13.
Could you give us a sense of the typical demand drivers for commercial refrigeration? What demand environment do you expect in 2023?
14.
Alongside Carrier’s announcement potential sale or spin-off of the fire and security, there’s a commercial refrigeration sale and spin-off too. Could you give us some context to that? You mentioned that fire and security and commercial refrigeration should be comparable in revenue, but you noted the commercial refrigeration might have more intrinsic value. Could you just elaborate on that?
15.
What type of margin pressure are we seeing from competitors?
16.
You noted that demand for fire and security, as well as residential HVAC, could soften in 2023. Is now the best time for Carrier to explore a sale of these units, given recessionary pressures and interest rates?
17.
Is there any way for us to estimate how much fire and security volume demand could soften and maybe slip, given recessionary pressures if they are to continue?
18.
If there were to be a sale of the fire business unit, or just the security business unit and those products, could you give us a sense of where there could be cost efficiencies or reductions implemented from within those business units as separate pieces? If a company comes in and buys the fire business unit, do you expect all of the diversified products to stay in the portfolio?
19.
Do you see Carrier strategically shifting to lower-cost manufacturing areas in 2023? Is that happening in reality? It’s something that you’ve noted had been under consideration for years, but is that strategy of moving to lower-cost areas impacting EBITDA estimates for Carrier in 2023 and 2024?
20.
As you’ve noted, Carrier has been busy – the company also recently announced a USD 13.17bn deal to buy the German heat pump and boiler manufacturer, Viessmann. Is this a deal you favour? Where are the synergies? How does this help Carrier become a pure-play climate solutions company, if it is able to sell or spin off the fire and security and commercial refrigeration divisions?
21.
Could you highlight who Carrier, with its acquisition of Viessmann, will be competing with in the European HVAC manufacturing industry? Could you highlight the key challenges the company has traditionally faced in Europe?
22.
Could you assess the prospects for Viessmann heat pump products in the US? Would there be issues integrating Viessmann products into the Carrier portfolio, or as you highlighted, is this more of a play towards the replacement side of the business in Europe?
23.
Carrier seems to be strategising to grow its aftermarket presence. What might be leading or incentivising increased growth in the aftermarket for the company and its competitors in 2023 and 2024?
24.
Is there anything that inhibits or may be a limiting factor to growth in the aftermarket?
25.
We’ve had a lot of discussion around Carrier potentially moving towards a pure-play climate solutions type of company, and away from its diversified product portfolio. Why might the company be strategising to prioritise its core HVAC business? What type of unrealised revenue or growth should we expect in 2024 or 2025, assuming all the acquisitions and divestitures do go through to make a pure-play Carrier that is focused purely on HVAC? Double-digit EBITDA growth over the next decade has been speculated. Is that feasible to you?
26.
You noted that supply chain is a large cost for Carrier. Could you give us a ballpark figure for how much cost is actually relevant for supply chain? What cost does the supply chain represent, in terms of suppliers?
27.
Could you assess the health of Carrier’s supply chain? There were some very newsworthy conversations around manufacturers and supply chains moving out of the pandemic. Are there any particular vulnerabilities to the company’s supply chain that you would note? How has it healed over the past several years since we’ve moved out of the pandemic?
28.
In the HVAC industry, Carrier obviously has formidable competition with companies such as Trane, Lennox and Daikin. How would you rate the company’s HVAC competition? What are its key strengths vs competitors, or even key weaknesses?
29.
Could you give us a sense of how much lower-cost Daikin’s products are relative to Carrier’s? You noted that that’s a strength for Daikin and a weakness for Carrier.
30.
Could you estimate how much market share Daikin has been able to take from Carrier and other competitors? Do you expect Carrier’s M&A activity to lead to significant market share shifts in 2023 or 2024 in the company’s favour?
31.
Do you think Carrier’s M&A strategy, and moving manufacturing locations to Mexico, will result in market share takes from Daikin and other competitors in 2023 and 2024?
32.
Is there anything a typical analyst might not know about Carrier or the HVAC or fire and safety industries that we should know?
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