Business Segment/ Overview
Honeywell International Inc. is a company situated in the United States and functions through various segments namely: Aerospace, Buildings & Cities, Chemicals & Materials, Healthcare and Pharma, Industrial & Manufacturing, Retail and safety.Aerospace segment comprises of: Airlines, BendixKing, Business Jets, Customer Portal, Cybersecurity, Defense, Helicopters, Sensors and Switches and Space. Building and Cities segment comprises of: Airports, Building Solutions, Commercial Security, Gas Detection System, Hospitality, Metro, Refrigerants & Blowing Agents, Sensors & Switches, School Security and Tridium. The Chemicals & Materials segment comprises of: Additives, Gas detection systems, Personal protective equipment (PPE), Portable gas detection, Research chemicals, Fluorine Products, Specialty chemicals and Spectra. The healthcare and Pharma segment consists of: Hospitals and Facilities, Packaging and Composites, Productivity and Scanners, Aclar, Life Sciences, Research Chemicals, Personal Protective Equipment and Sensors for Medical Applications. The Industrial & Manufacturing segment comprises of: Electronic Materials, Gas Detection, HF Acid, Mobile Solutions, Performance Additives, Personal protective equipment (PPE) and Workflow Automation. The Retail segment comprises of: Automation & labor management, Cloud solutions, Direct store delivery, General retail In-store connectivity, Multi-Site Energy Management, Refrigeration Voice-directed workflows. The safety segment comprises of: Gas Detection Systems, Hearing Protection, Industrial Safety,
Materials, Fire & Life Safety Systems, Personal Protective Equipment, Portable Gas Detection, Process Solutions and Worker Safety.
For all its segments, Honeywell is focused on several initiatives to spur growth, including R&D activities to develop new technologies. The company aims to become an industrial software company offering products for the connected plane, home, building, and factory. Other initiatives that target lower costs are process improvements in its manufacturing and administrative operations and cost control efforts for asbestos and environmental remediation and pension and retirement benefits.
Honeywell's strategy for growth includes both acquisitions and the divestiture of under-performing units. In order to streamline its operations, Honeywell in late 2018 completed the spin-off of its turbo charger unit and home heating and security businesses to create two new publicly traded companies. The new business featuring its turbo charger technology (formerly the Transportation Systems business) is now Garrett Motion, Inc. Its former Homes and ADI Global Distribution business is now Resideo, a company providing home comfort and security systems. After the spin- offs, Honeywell believes its remaining portfolio will consist of high-growth businesses each aligned to the global megatrends of energy efficiency, infrastructure investment, urbanization, and safety.
Mergers and Acquisitions
In late 2019, Honeywell acquired Rebellion Photonics, a Houston-based provider of innovative, intelligent, visual gas monitoring solutions that maximize safety, operational performance, emissions mitigation and compliance in the oil and gas, petrochemical and power industries. The acquisition will become part of Honeywell's Safety and Productivity Solutions business, which provides a wide range of gas detection technologies, safety gear, mobility solutions and software to help workers stay safe and productive.In the same year, Honeywell acquired privately held TruTrak Flight Systems, a leader in autopilots for experimental, light-sport and certified aircraft. The acquisition will become part of Honeywell's BendixKing business, helping to deliver affordable technologies to the experimental and general aviation markets. This market has grown by double digits over the past five years.
COVID-19 Impact Analysis
The global coronavirus outbreak has created an increasing number of challenges to individuals, families, communities and companies. Throughout all the recent developments, Honeywell is working hard to uphold the commitments to support business. The company very focused on protecting the health and safety of our workforce while maintaining the ability to keep serving customers.
Impact on Supply Chain
Honeywell continues to monitor the COVID-19 coronavirus situation and its impacts globally. We are prioritizing the health and safety of our employees and will work with customers and suppliers to evaluate and address any potential supply chain disruptions.
Many country, regional and localgovernments already have, ormay soon implement, certain requirements, such as general shutdowns, restricted travel, localized quarantines or mandated health screenings. Honeywell continues to comply with all instructions from official bodies.
Honeywell International Inc (Honeywell) invents and manufactures technologies that address challenges in energy, security, safety, productivity and global urbanization. An established market position, substantial operational capabilities in Safety and Productivity Solutions, and improved performance of the Performance Materials and Technologies business line are its strengths, even as declined performance of the Honeywell Aerospace business line could be a cause for concern. The company could benefit from the strategic contracts, positive outlook for chemical industry in the US, and strategic initiatives. However, raw material price fluctuations, regulations, and regional and economic influences could affect its
Operational Capabilities: Safety and Productivity Solutions
Substantial operational capabilities allow the company to better serve customers and become their preferred partner. Honeywell provides a wide portfolio of personal protective equipment, software and solutions, including connected products that track the locations and status of workers and foremost responders in risky locations. The company’s solutions enhance productivity and safety for more than an half a billion workers per annum.
An established market position enables the company to meet customer’s demands. Honeywell’s aerospace products and services are found on almost all commercial, defense and space aircrafts, and its building products, software and technologies found in more than 10 million buildings worldwide. With the completion of approximately 6,000 efficiency projects across the world, including upgrades at more than 150 US government facilities and campuses and expected to decrease customers' energy, the company is one of the leading energy-saving technology and services providers.
Business Performance: Performance Materials and Technologies
The company's Performance Materials and Technologies business line is the major contributor to its revenue. In FY2019, this business line accounted for 29.5% of the company's revenue and grew 1.5% YoY. This increase was due to increase in catalyst sales; increase in maintenance and migration services, and fluorine products. Over the past three years, this business line recorded a CAGR of 2.4% was due to positive foreign currency translation impacts; increase in engineering revenue and improved catalyst volume; increase in maintenance and migration services, and fluorine products; and higher projects revenue and field products sales. Its operating profit
grew 4.5% YoY to US$2,433 million.
Weaknesses Business Performance: Aerospace
The company's Aerospace business line continued to report a decline in its performance. In FY2019, this business line accounted for 38.3% of the company's revenue, and fell 9.3% YoY. The fall in due to spin-off the transportation systems business for this decline. Over the past three years, this business line recorded negative growth of 3%, which was due to due to spin-off of transportation systems business and also increase in inflation. Its contribution to operating profit decreased
3% YoY to US$3,607 million in FY2019.
Opportunities Positive Outlook for US Chemical Industry
The company could capitalize on the expansion in the US chemical industry, which is expected to register substantial growth in the future. According to the American Chemistry Council (ACC) estimates, the US chemical industry expanded at a slower rate in 2019 due to trade challenges and slower growth in several majorend-use markets. According to ACC, in FY2020, growth in majorend-use industries will be mixedwith the largest gains in construction materials, oil and gas extraction, refining, semiconductors, and aerospace. The US-based chemical manufacturing industry has an advantage in the global markets due to the availability of abundant energy and feedstock. In 2020,a small decline of 0.4% is expected due to fall in energy investment and growth will resume as the industrial sector recovers in 2021.The US chemical business is a US$553 billion sector and one of country’s most significant manufacturing industries, which accounts for more than 10% of all US exports and 14% of the world’s chemicals.
Collaborations and contracts could enable the company to enhance its capabilities and secure operational benefits. In April 2020, the company and Ontic entered into a license agreement for aircraft windshield wiper product lines currently manufactured at Urbana, Ohio, the US. In March 2020, the company secured atwo- year contract with the consideration of US$72.8 million to address logistics requirements of the
U.S. Navy’s aircraft repair activities. In February 2020, the company and Nexceris formed a strategic alliance for addressing lithium-ion battery system safety. In the same month, the company secured a US$3.51 billion contract to provide embedded GPS inertial navigation system modernization services to the US Air Force aircraft. In January 2020, the company collaborated with CounterPath Corporation to develop Smart Talk, aUnified Communications software solution.
Global Urbanization Trends
Global urbanization trends could benefit the company’s operations. According to the 2018 Revision of World Urbanization Prospects produced by the Population Division of the UN Department of Economic and Social Affairs, 55% of the world’spopulation lives in urban areas and this is expected to increase to 68% by 2050. A shift in residence of the human population from rural to urban areas, along with the overall growth of the world’s population could add another 2.5 billion people to urban areas by 2050, of which 90% of this would take place in Asia and Africa. With more than 80% of global GDP generated in cities, urbanization trends are expected to contribute to sustainable growth by increasing productivity, allowing innovation and new ideas to egress.
Threat Raw Material Price Fluctuations
The fluctuations in the prices of raw materials could increase the cost of operation of the company affecting its financial performance. Frequent changes in pricing and imbalances could affect the company’s operations and profitability. The company uses raw materials such as ferrous materials, non- ferrous materials, and other electrical accessories. Its operations and revenue are dependent on the price of and demand for raw materials such as steel, iron and other non-ferrous metals.
Regional and Economic Influences
Industry and economic conditions could affect the company’s operations. Factors influence Honeywell’s business include strength of economies and customers’ confidence in local and global macroeconomic conditions; industrial and federal, state, local and municipal governmental spending; availability of commercial financing for customers and end-users; change in trade policies; and unemployment rates. These could affects supplier stability, customer buying patterns of aftermarket parts, factory transitions and global supply chain capacity constraints.
The company’s operations are subject to state and federal regulations related to minimum wages, working conditions, citizenship, overtime, employment laws and regulations, transportation and other laws and regulations. Changes in laws, regulations and their interpretations could alter the business environment. In particular, the company is subject to the regulations by the US Department of Transportation (USDOT), and under the Occupational Safety and Health Act of 1970 (OSHA). The company may incur capital and operating expenses in the ordinary course of business in complying with the USDOT,
OSHA and other laws and regulations.
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