john israelsson - ntma · john israelsson . roland martel . itw - 100 years of innovation and...

John Israelsson

Roland Martel

ITW - 100 Years of Innovation and Success

March 6, 2013

ITW Proprietary &

Confidential

Decentralized organization More than 150 divisions in 57 countries

60,000 employees

19,000 global patents & patent applications

7 7

Headquartered in Chicago,

Founded 100 years ago with an initial

focus on metal cutting tools

A diversified manufacturer of

advanced industrial technology

ITW Proprietary & Confidential

REVENUES BY GEOGRAPHY

3/12/2013 ITW Proprietary & Confidential 8

Asia Pacific and Other

20%

Europe, Middle East, and Africa

33%

North America

48%

Proprietary

operating process

that identifies the

key customer and

product profit

drivers in a

business and

structures the entire

business to fully

leverage them

Constantly

seeking ways to

deliver

differentiated

value-add for our

key “80”

customers

• Decentralized

• Flexibility within a

framework

• Results driven

• Autonomy plus

accountability

80

20

SUSTAINABLE

DIFFERENTIATION

ENTREPRENEURIAL

CULTURE 80/20 BUSINESS MODEL


ITW’s CORE CAPABILITIES

14%

Industrial Packaging Test & Measurement

and Electronics

Automotive OEM Polymers & Fluids

14% 13% 13%

11%

Food Equipment Construction

Products

Welding

11% 11%

Specialty Products

13%


8 BUSINESS SEGMENTS

PRIMARY BRANDS

MAJOR END

MARKETS

Steel, plastic and paper products and equipment

used for bundling, shipping and protecting goods

in transit including plastic stretch film and both

steel and plastic strapping

General Industrial

Primary Metals

Food & Beverage

Construction

BUSINESS SEGMENT 14% INDUSTRIAL PACKAGING

Acme

Angleboard

Mutiboard

Orgapack

Signode

Strapex


PRIMARY BRANDS

MAJOR END

MARKETS

Equipment and related software for testing and

measuring of materials and structures, metal solder

materials for PC board fabrication, and equipment

and services for microelectronics assembly

General Industrial

Auto OEM & Tiers

Electronics

Consumer

BUSINESS SEGMENT

Instron

Despatch

Loma

Speedline

Buehler

Kester


14% TEST & MEASUREMENT and

ELECTRONICS

Transportation related components and fasteners

Automotive OEM / Tiers

PRIMARY BRANDS

MAJOR END

MARKETS

BUSINESS SEGMENT 13% AUTOMOTIVE OEM

DaeLim

Deltar

Filtertek

Haugk

Shakeproof

Drawform


General Industrial

Construction

MRO

Automotive Aftermarket

BUSINESS SEGMENT

Densit

Devcon

Dymon

Slime

Krafft

LPS

TACC

Prolim

Rocol

Schnee-

Moorehead

Plexus

ITW Polymer

Technologies

Permatex

Adhesives, sealants, lubrication and cutting fluids;

janitorial and sanitation supplies; and fluids and

polymers for auto aftermarket maintenance and

appearance


13% POLYMERS & FLUIDS

PRIMARY BRANDS

MAJOR END

MARKETS

Commercial food equipment and

related service

Food Service

Food Institutional / Restaurant

Food Retail

BUSINESS SEGMENT

Avery Berkel

Bonnet

Foster

Gaylord

Hobart

MBM

Peerless

Traulsen

Vulcan

Wolf


13% FOOD EQUIPMENT

PRIMARY BRANDS

MAJOR END

MARKETS

Design and manufacture construction fastening

systems and truss products for the commercial,

residential and remodeling/rehab sectors

Residential Construction

Restoration Construction

Commercial Construction

BUSINESS SEGMENT

Paslode

Duo-Fast

SPIT

Ramset

Red Head

Buildex


11% CONSTRUCTION PRODUCTS

PRIMARY BRANDS

MAJOR END

MARKETS

Design and manufacture arc welding equipment,

consumables, and accessories for a wide array of

industrial and commercial applications

Energy

General Industrial

Automotive OEM / Tiers

Commercial Construction

BUSINESS SEGMENT

AXA Power

Bernard

Weldcraft

Hobart

Brothers

Miller

Stovkis Tapes

Tien Tai

Tregaskiss


11% WELDING

PRIMARY BRANDS

MAJOR END

MARKETS

Specialty Products includes beverage multi-pack, plastic reclosable

packaging, plastic consumables, and truck remanufacture and service

General Industrial

Food & Beverage

Consumer Durables

BUSINESS SEGMENT

Zip-Pak

ITW Foils

Diagraph

Fastex

Hi-Cone


13% SPECIALTY PRODUCTS

PRIMARY BRANDS

MAJOR END

MARKETS

25 Year CAGR Revenue 12%

25 Year CAGR Net Income 14%

Return on Average Invested Capital 14%

Return on Average Stockholders’ Equity 12%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

-

500

1,000

1,500

2,000

2,500

3,000

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Revenue Operating Income

$ millions $ millions$ millions


FINANCIAL PERFORMANCE

A HISTORY OF INNOVATION

1960

1970

1980

1990

The TetraGRIP system drives like a nail and

holds like a screw™. This unique system combines

a proprietary nail driven with a pneumatic nailer to

not only fasten subfloors more efficiently during

construction, but also to eliminate subfloor

nail squeak.

The TetraGRIP nail is a barb-threaded fastener that

rotates as it penetrates the lumber, thereby creating

a strong bond with the floor joist and subfloor. The

unique shank design delivers superior holding power

and will not induce squeaks. The TetraGRIP

pneumatic nailer was designed to efficiently drive the

nail through its rotational motions, and deliver the

necessary power for a strong bond.

SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.

Enterprise Strategy

Enterprise Strategy: 2012 – 2017

27

ITW’s Unique

Core Capabilities

80/20 Business

Model

Sustainable

Differentiation

Entrepreneurial

Culture

Differentiated

Performance

Solid Growth

Strong

Returns

Best-in-Class

Operator Highly Disciplined Capital

Allocation Strategy

Key Enterprise Initiatives

• Portfolio Management

• Business Structure

Simplification

• Strategic Sourcing

Increasingly Challenging

External Environment


The external operating environment continues to evolve…

28

Operating Environment

Continued

globalization of

end markets

Slower growth

Fundamental

changes in the

competitive

landscape


ITW’s 80/20 business model is a proprietary operating process

that identifies the key customer and product profit drivers in a business

and structures the entire business to fully leverage them

Sustainable

Differentiation

Entrepreneurial

Culture

29

20% 80%

Revenue/Profits

20% 80%

Customers/Products

80/20

Business Model

ITW’s Unique Core Capabilities

80/20 Business Model



Sustainable Differentiation

ITW’s business model is

squarely centered on constantly seeking

ways to deliver differentiated value-add

for our key (“80”) customers

Sustainable

Differentiation

Entrepreneurial

Culture

80/20

Business Model

30 SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.

Platform: Engine Thermo Management

Customer/End Market: OEM/Tiers

• Key customer pain points:

– Need for improved fuel efficiency

– Increasingly challenging vehicle emissions

standards

• ITW solution: Ball Stat®

– Replaces conventional thermostats

– Improves vehicle fuel economy and reduces

CO2 emission

– Allows faster temperature start-up for more

efficient combustion

– 5 new and leveraged patents



Sustainable Differentiation

32

Decentralized Flexibility within a

framework

Results driven

Autonomy + accountability

Sustainable

Differentiation

Entrepreneurial

Culture

80/20

Business Model


Entrepreneurial Culture


Key Initiatives

Portfolio Management

33

Portfolio Composition: Commoditization Impact

Operational excellence alone is no longer enough

Shifting sustainable differentiation from a “desirable” to a “must have” attribute

Commoditizing businesses currently in our portfolio negatively impact the company’s performance

We will divest commoditizing businesses: up to 25% of portfolio


Key Initiatives

Portfolio Management

34

Disciplined portfolio

management strategy

Acquisitions focused on accelerated

growth platforms

Divest differentiation “challenged”

businesses


Key Initiatives

Business Structure Simplification

35

Simplify and scale up operating approach and

structure in order to improve focus and enhance

global competitiveness


Benefits

Profitable

Growth

More focused growth investments:

– Marketing

– Innovation

– Emerging markets

Improved

Margins

Significant margin improvement from:

– Reduced management infrastructure

– “Front to back” reapplication of 80/20 to the

scaled-up divisions

Culture ITW’s core entrepreneurial culture remains intact

Key Initiatives

Business Structure Simplification


37

Key Initiatives

Strategic Sourcing

Leverage scale to enhance profitability

and global competiveness

Transform sourcing into a core strategic function


Highly disciplined

and focused acquisition

strategy

Focus on accelerated

growth segments and platforms

Strong sustainable differentiation

potential Meaningful margin improvement potential from

80/20

Capital Allocation Strategy

External Investments: Acquisitions

38

Target: ROIC significantly above the cost of capital within 3 to 5 years


“We are moving to a different strategic view of our business, but not

destroying the culture that has made this a strong company.

We didn't get to be 100 years old by not changing.”

‒David B. Speer

Wall Street Journal, August 31, 2012

Summary

39

We will be the same ITW — only more

focused, more efficient and more streamlined

in order to deliver profitable growth and

strong returns in an increasingly challenging

external environment


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Confidential

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Confidential

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Confidential

john israelsson - ntma · john israelsson . roland martel . itw - 100 years of innovation and...

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