annual investor conference - eaton · © 2019 eaton. all rights reserved.. annual investor...

© 2019 Eaton. All rights reserved..

Annual investor conference

Brian Brickhouse, Group President, Electrical Systems & Services

March 1, 2019

2© 2019 Eaton. All rights reserved..

Key takeaways for today

• Eaton has a leading electrical business that serves

customers around the world and across many key

end markets

• Our broad portfolio and other areas of competitive

strength allow us to meet the needs of multiple

stakeholders in our complex markets

• Our focus on strategic growth initiatives will help us deliver

organic growth across our end markets, aligned to secular

growth trends


Eaton’s electrical businesses will deliver solid results in 2019

2019E Sales

$7.4B - $7.5B

2019E Op. Margin

18.6% - 19.2%

Electrical Products2018 Sales: $7.1B

8%

18%

2019E Thru thecycle

13%-16%

Operating Margin

2019E Sales

$6.3B - $6.4B

2019E Op. Margin

15.2% - 15.8%

Electrical Systems & Services2018 Sales: $6.0B

• Residential &

non-residential products

• Industrial controls

• Low voltage and

medium voltage

circuit protection

• Lighting

• Bussmann fuses

• B-Line structural support

• Wiring devices

• Life safety

• Power distribution &

control assemblies

• Power quality

• Utility power systems

• Harsh & hazardous

electrical equipment

• Software

• Services

Operating margin through the cycle is pro-forma, reflecting the spin of Lighting and the acquisition of Ulusoy Elektrik

10%

20%

2019E Thru thecycle

19%-22%


Our business is balanced both geographically and across key end markets

Geographic Mix

Revenue mix is pro-forma, reflecting the spin of Lighting and the acquisition of Ulusoy Elektrik

Commercial construction

28%

Machine builders

11%Industrial facilities

21%

Data center & IT17%

Resi8%

Utility15%

32%

Industrial

End Market Mix

United States

57% Rest of world

43%


We’ve used M&A to shape our portfolio to drive growth and improve margins

Commercial

Construction

Cooper

Cutler-

Hammer

Delta

Moeller

Westinghouse

Residential

Cooper

Cutler-

Hammer

Data Center & IT

Cooper

Delta

MGE

Phoenixtec

Powerware

Westinghouse

Industrial Facilities

Cooper

Delta

Moeller

Ulusoy Elektrik

WestinghouseMachine Builders

Cutler-

Hammer

Moeller

Westinghouse

Utility

Cooper

Ulusoy Elektrik

Westinghouse


We are further optimizing our portfolio with the spin of our Lighting business

Lighting business overview

Lighting competitive strengths Impact on Eaton Electrical

• Eaton’s electrical business will continue to be a global

leader in providing electrical solutions

• Eaton Electrical continues to focus on investing for growth

and driving synergies across the portfolio

• Lighting has separate sales force, supply chain,

manufacturing, engineering and technology

• Occupies a leading position in the North American

lighting market

• Innovation and technology leader in connected LED

lighting systems

• Strong relationships with lighting agents, electrical

distributors and end users across North America

• $1.7B in sales

• U.S. offices in Atlanta, GA and over 5,000

employees worldwide

• Portfolio includes lighting, controls and sensor networks

to serve industrial, commercial, residential and electric

utility customers

• Brands include Halo, Metalux, McGraw-Edison


The recently announced acquisition of Ulusoy Elektrikstrengthens our position in IEC power distribution assemblies

Main production facility in

Ankara, Turkey

The acquisition delivers value to our

business in a number of areas:

• Becomes a center of gravity for our IEC

medium voltage assemblies business

with a highly-capable, competitive

manufacturing base

• Complementary IEC assemblies

offering that fills gaps in our portfolio

• Improves our ability to serve the global

IEC medium voltage assemblies market

Business has very attractive 28%

EBIT margins

MV switchgear Substation kiosks Accessories & other


In addition to a broad portfolio, we have many other areas of strength that enable us to win in the marketplace

Technically

differentiated products

Scale that allows us to

be cost competitive

Ability to provide a broad

electrical solution with our

extensive portfolio

Strong channel presence

and loyal partners

Ability to drive specifications due to

deep electrical application expertise

and large commercial team

Brand recognition

Extensive

footprint and large

team to serve our customers

manufacturing

service


Wants a supplier who can

leverage deep application

expertise to solve complex

electrical issues. Looks for

value-added technical

differentiation. Drives

product specification

Success requires meeting the needs of many stakeholders in a complex market

Electrical

contractor

Electrical

distributor

Wants products that

satisfy specifications,

are broadly available

through the channel,

and can reduce their

installation time

Wants to partner with

manufacturers with

broad portfolios and

products that satisfy

specifications to drive

more sales

Critical stakeholders

General

contractor

Electrical

distributorOwner

Engineer/

consultant

Eaton’s many stakeholders

We are closely aligned to our stakeholders’ needs

Electrical

contractor

Broader

community

Facility

usersArchitect

Owner


Our focus on strategic growth initiatives will help us drive above market growth

Intelligent and connected solutions

• Intelligent circuit protection

• Energy aware UPS

• Smart home solutionsInnovative business models

• PredictPulse™ data center monitoring

• Intelligent factory

Leading service capabilities

• Turnkey project management

• Power systems engineering

Expanding core markets

• Energy storage

• Microgrids

• Compact gas insulated switchgear

Accelerating project productivity

• Enhanced collaboration tools

• Prefabricated and modular products

• Automated designs

Channel programs

• Eaton Distributor Advantage Program

• Contractor programs

End-market focused initiatives

• Broad utility solution offering

• Comprehensive data center portfolio

Leading

service

capabilities

Accelerating

project

productivity

Channel

programs

Expanding

core markets

End-market

focused

initiatives

Innovative

business

models

Intelligent &

connected

solutions

Electrical Sector

strategic growth initiatives


Agenda

Industrial facilities and machine builders

Commercial and residential buildings1

2

3

Utility4

Data centers

Our strategy in action, aligned to secular growth trends


Since 2014, construction

job openings in the U.S.

have doubled, while

hires have only

increased

By 2023,

approximately

voice assistant

devices will be used to

control smart homes

The global modular

construction market is

projected to grow at

to $157B

by 2023

California Title 24 requires

solar on new homes

after 2020 & net zero

energy on new

commercial buildings by 2030

Construction project efficiency, integration of renewables and automation are opportunities for growth in commercial and residential

6.9%

CAGR

275M

14%


Contractors and distributors seek productivity improvements, while building users demand safety, efficiency and comfort

✓ Protecting people and assets

✓ Project efficiency

✓ Incorporating renewables

✓ Energy efficiency and comfort

Eaton’s application expertise and experience working with a multi-layered channel allows us to drive

project productivity and introduce innovative solutions for building owners

Customer requirements


Eaton offers a full product portfolio with industry-leading technology and total lifecycle services for commercial and residential buildings

Structural solutions

Backup power

protection

Hospital-grade

wiring devices

Lighting and

controls

Power distribution

and control

Services

Life safety and

mass notification

Facility power

monitoring

Automatic

transfer

switch

Lighting

controls

Meter breakers

Air

conditioning

disconnects

and spa panels

Temporary power

panels

Receptacles and

combination

devices

Indoor/outdoor

lighting

Surge protection

LoadcentersAFCI, GFCI and

thermal-magnetic

protection


Our smart electrical outlets, switches and dimmers integrate with broader smart home ecosystems

New DR Horton homes will

feature Eaton connected

wiring devices50,000

Why it matters to our customers:

• Integrates with leading home automation ecosystems

• Remote operation of lights for added home security

• Contractors able to install and commission without internet using

Z-Wave or Bluetooth technology, creating a smart home before

the homeowner moves in

• High-quality, modern aesthetics

Connected home wiring devices integrate lighting and plug loads into a

smart home ecosystem using Z-Wave Plus and Bluetooth BLE technology


Our innovative structural solutions help contractors do their jobs faster, reducing overall cost

Contractor hours

reduction vs.

traditional conduit

trapeze methods

50%+


• Reduce installation time by an entire shift per building with hands-

free brackets and by 50% with our new conduit trapeze support

versus traditional strut

• Our conduit trapeze support requires 75% fewer materials per job

• One hands-free bracket product can handle multiple box sizes,

meaning fewer parts to manage on-site

Hands-free brackets reduce required handling with a snap-on

feature. Conduit trapeze support can be used in versatile

applications to eliminate material and reduce installation time


Eaton’s smart evacuation system uses embedded intelligence to direct people away from danger

of programmable scenarios,

customizable to each structure


• Modern buildings are expected to provide even safer environments

for building users – this intelligent system ensures faster and safer

evacuations in crowded, high-risk areas where users may not be

familiar with their surroundings

• Eaton technicians ensure compliance with standards and mitigate

existing risks using a cost-effective solution

Eaton is enabling superior building safety with an intelligent system of

connected, adaptive emergency signage that uses real-time data to

direct people away from danger

Hundreds


Agenda



2

3

Utility4

Data centers



All five hyperscale

operators power their

data centers with at

least renewable

energy

By 2022,

of IT assets in

enterprise data centers

will have the ability to

run autonomously

By 2021,hyperscale

data centers will

account for

of all data center traffic

25 billion “things”

will create data by 2021,

growing at a

33% CAGR

Several dynamic trends have created new opportunities for growth in the data center space

50%

55% 50%


✓ Reliable power

✓ Resource optimization

✓ Commissioning speed

✓ Ease of operations

Eaton’s broad portfolio, application expertise and innovative products allow customers to

maximize their data center value


Data center operators want reliable power and a partner who can help them rapidly optimize resources


Eaton offers a full product portfolio with industry-leading technology and total lifecycle services for data centers

Components for electrical

and mechanical subsystems

Facility power distribution

Facility/power monitoring

and management

Monitoring consoles

White space power

distribution

Airflow and thermal

management solutions

Turnkey power

containers

Power conditioning,

quality and backup

Design, build, planning

and support services

Wire and cable

management

Racks,

enclosures

and cages

Indoor and

outdoor lighting


PredictPulse™ data center monitoring and control reduces the risk of costly downtime

Reduces risk

of UPS

component

downtime

75%


• Eaton is first to offer cloud-based monitoring with predictive analytics

• Prevents costly data center outages by monitoring UPS component

health and providing service alerts before an event occurs

• Reduces downtime by providing our technicians with better information

to speed up repairs

• Achieves cost savings by extending UPS product life by two years

Our 24/7 service uses cloud connectivity to monitor real-time data from

over 300 sensor points on a data center UPS and employs predictive

diagnostics to ensure functionality

Innovative

business

models



• Data center operators are looking for ways to lower total cost of

ownership and utilize their existing assets to generate revenue

• Reduces energy charges by avoiding peak time usage

• Eaton technology demonstration with Microsoft won the Data Center

Dynamics 2018 Global Award for Mission Critical Innovation

Energy Aware UPS allows data centers to cut operating costs and sell energy back to the grid

Typical energy

savings for a

30MW data center10%

Eaton offers the first dual-purpose UPS that enables data centers to sell

energy services to utilities. Customers can generate incremental revenue by

using their UPS and Lithium-ion batteries to help stabilize the grid while also

lowering their own energy bills with smart energy consumption



• The electrical system is often the longest part of data center

construction projects. Eaton’s faster lead times get customers’

sites up and running as quickly as possible

• By configuring switchgear in the factory and sending settings

through the cloud, Eaton is identifying problems earlier and saving

multiple days of on-site configuration

New digital innovations have improved our design, manufacturing and commissioning processes, reducing our switchgear delivery time

Commissioning time

saved for a data

center customer30%

We have shortened deployment times by using standard digital customer

designs as a starting point for customization and pushing configuration

settings from the cloud to our power distribution assemblies

Previously Now

factoryexperts

Technical expert

spent multiple days

on site

Configuration done

remotely through

the cloud


Agenda



2

3

Utility4

Data centers



In 2017, the 3-D printing

industry grew

to $7.3B

By 2020, industrial

companies will spend

By 2021,

of G2000 manufacturers

will have transitioned to

intelligent

manufacturing

of Fortune 100

Industrials are looking to drive profitability through digital technologies and energy efficiency

$907B

20%

per year

on the Industrial Internet

of Things

2/3

21%

companies have

renewable energy

targets


Industrial facilities and machine builders prioritize safety, but also require solutions that help maximize profits

✓ Safety in high-risk areas

✓ Reliable processes

✓ Extend equipment service life

✓ Lower operating costs

✓ Meet regulatory requirements

Eaton’s expertise in industrial solutions helps customers master power capabilities and safety systems

integral to uninterrupted operations and maximized production, even in the harshest environments



Eaton offers a full product portfolio with industry-leading technology and total lifecycle services for industrial facilities

Enclosure solutions

Structural solutions

Control and

instrumentation

Services

Power distribution

and protection

Filtration

Monitoring and

communication

Lighting

solutions


Arc quenching switchgear uses innovative technology to provide industry-leading arc protection that minimizes equipment damage

Reported arc flash

incidents in the U.S.

each year

1,800 - 3,250


• Industry leader in safety; reacts to electrical arc over 10x

faster than other solutions

• Arc elimination provides advanced equipment protection,

making it possible to return switchgear to service within hours,

not days or weeks

• No ducts, plenums or special construction required

In 2018, Eaton launched arc-quenching switchgear that provides

industry-leading protection against arc faults and dramatically

reduces downtime after an arc fault incident



• Eaton’s decades of expertise in power management makes us an

authority on power optimization, adding to our customer’s bottom line

• Our insight into the plant’s power genome provides important diagnostics

information – even about equipment not specifically being monitored

• Provides information on utilization levels to optimize equipment

purchases and reduce carbon footprint

Eaton’s intelligent factory solution optimizes energy use, minimizing operating costs

Saved in annual

power expense20%

Last year we tested our Intelligent Power IoT solution in our own facilities, monitoring

equipment at two sites. Now we’re evolving, expanding to five more plants and will

introduce this power savings solution to customers this year


Eaton’s IoT enabled panelboard provides greater reliability and safety to harsh and hazardous sites

Of refinery shutdowns are

due to electrical equipment20%


• Embedded circuit breaker intelligence visualized with our Power

Xpert Dashboard gives users real-time and historical metering as well

as diagnostics at their fingertips

• IoT capabilities enable predictive maintenance of the panelboard and

remote operations, keeping people out of combustible areas

• Overload alerts notify users when circuit nears a threshold,

minimizing downtime for critical processes

We’ve combined our connected and intelligent circuit protection

with our harsh and hazardous expertise to bring our customers a

smart panelboard for use in combustible applications


Agenda



2

3

Utility4

Data centers



Key trends are driving utilities to make smart grid investments beyond their typical capital spending

2/3+

In 2017, U.S. utilities

deployed

of demand response

programs for every

1GW of new capacity

added to the grid

~0.6GW

In 2017, renewable

capacity additions

accounted for over

of net global electricity

capacity growth

One large U.S. utility

reported more than

650 million attempted

cyberattacks in 2017

2/3 7.8 hours,

The average 2017

power outage in the U.S.

lasted

up from approximately

4 hours in 2016


With the added complexity of renewables and cyber attacks, utilities want solutions that ensure reliable power

✓ Reliable power

✓ Incorporating renewables

✓ Enhanced cybersecurity

✓ Automation

Eaton’s broad portfolio, technically differentiated products and application expertise make

us the best partner for utilities



Eaton’s digital solutions for utilities optimize grid operations while making them more reliable and more automated

NOVA NX-T recloser

with Form 7 control

CYME grid

automation software

Next generation

demand response

• Advanced intelligence

highly customizable for

improved grid productivity

• Embedded cybersecurity

with built-in encryption

• Two-way communication

and dynamic control at

the individual load level

so that demand response

customers maintain a

high quality of service

• Uses digital twin

technology to analyze

capacity for adding

renewable generation

sources while maintaining

power reliability


Incremental

growth above

market by 2023

We will leverage our broad portfolio, application expertise and innovative products to outgrow the market

$500M+


Key takeaways for today

• Eaton has a leading electrical business that serves customers around the

world and across many key end markets

• Portfolio shaped by M&A

• Attractive profitability

• Our broad portfolio and other areas of competitive strength allow us to meet

the needs of multiple stakeholders in our complex markets

• Technology differentiation, channel strength, manufacturing scale and footprint, and

deep domain expertise

• Our focus on strategic growth initiatives will help us deliver organic growth

across our end markets, aligned to secular growth trends

annual investor conference - eaton · © 2019 eaton. all rights reserved.. annual investor...

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