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Parker Hannifin Corp, USA
COMPANY PROFILE
Parker Hannifin Corp, USA Profile
Parker Hannifin is a global manufacturer of motion and control technologies for a wide variety of mobile, industrial and aerospace markets. The company has two reporting segments: Diversified Industrial, which it further breaks down into North America and International, and Aerospace. Included in the Diversified Industrial segment is a Filtration product group comprising a number of companies targeting a range of markets including aerospace, food and beverage, industrial machinery, life sciences, marine, oil and gas, power generation, process, transportation and water. Analysis
COMMENT
Parker posted net sales of US$12.7 billion in fiscal 2015, 3.8% lower than the year prior. Excluding the effects of acquisitions and currency changes overall revenue was essentially unchanged from 2014, with the former adding US$14 million in sales while the latter reduced them by US$547 million. It was a somewhat challenging sales year for Parker’s Diversified Industrial segment, particularly in its International division. Revenues in the segment’s North American operations edged up marginally on the prior year to US$5.7 billion, with the increase rising to 1.2% when positively adjusted for acquisition and currency effects. The gains reflected higher demand from distributors as well as from end-users in the car and light truck, heavy-duty truck, refrigeration and air conditioning and construction equipment markets, partially offset by lower demand in the farm and agriculture equipment market. In contrast, sales in the International division were down 10.3% to US$4.7 billion. The result was significantly impacted (US$487 million) by the strengthening of the US dollar against other currencies, with the year on year revenue decline reduced to 1.3% when adjusted for this and acquisition impacts. The division benefited from higher volume in the Asia Pacific region, but this was more than offset by lower volume in Europe (mainly due to the loss of sales from divested businesses) and in Latin America. Despite the overall lower sales, gross income was up 1.0% on the prior year at US$3.1 billion. The associated margin was 24.0% compared with fiscal 2014’s 22.9% with the improvement attributed to lower business realignment charges in the Diversified Industrial International operations and reduced product support costs in the Aerospace segment. Segment operating income was up 2.7% at US$1.8 billion, although net income eased 2.8% to US$1.0 billion.
Parker has recently relaunched its ‘Win Strategy’, first introduced in 2001, as it seeks to respond to the latest changes in its motion and control markets. The revamped strategy has set a number of financial, growth, customer experience and employee engagement goals. These include reaching an operating income margin of 17% within five years, holding a minimum 20% share in each of its markets and achieving an evenly balanced revenue contribution from its distribution and OEM industrial sales activities in every region of the world. As part of the refresh, the company has also launched a ‘Simplification’ initiative that is aiming to reduce complexity, improve speed and reduce costs in its operations. As part of these initiatives, Parker embarked on a series of cost reduction initiatives in fiscal 2015 including a voluntary retirement programme and this restructuring is continuing in fiscal 2016. The company is also increasing its focus on creating an online presence to support is sales and service activities, as well as on innovation strategies to support new product development. Reflecting the increasing emphasis on these areas it has recently created a corporate vice president for eBusiness, the Internet of Things (IoT) and Services. Services. In addition to its organic strategies, Parker intends to continue its long history of strategic acquisitions. ■
Key Figures (US$ million) Parker Hannifin Corp 2015
2014
12 711.7
13 216.0
5715.7 4741.4
Cost of Sales
Year ended 30.6 2013
2012
2011
13 015.7
13 145.9
12 345.9
5693.5 5287.9
5637.7 5110.3
5708.1 5335.1
n/a n/a
9655.2
10 188.2
10 086.7
9958.3
9387.5
Gross Profit
3056.5
3027.7
2929.0
3187.6
2958.4
Segment Operating Income Of Which: Industrial North America Industrial International
1838.4
1790.2
1791.5
2002.5
1823.0
955.5 583.9
946.5 572.5
908.7 602.5
960.3 752.2
n/a n/a
Net Income
1012.6
1041.4
948.4
1151.8
1049.1
Net Sales Of Which: Industrial North America Industrial International
Contact Details
Chairman and CEO: Address:
88
Filtration Industry Analyst
Thomas Williams 6035 Parkland Boulevard Cleveland Ohio 44124-4141 USA
Tel: +1 216 896 3000 Web: www.parker.com
January 2016
Parker Hannifin Corp, USA Profile
Parker Hannifin is a global manufacturer of motion and control technologies for a wide variety of mobile, industrial and aerospace markets. The company has two reporting segments: Diversified Industrial, which it further breaks down into North America and International, and Aerospace. Included in the Diversified Industrial segment is a Filtration product group comprising a number of companies targeting a range of markets including aerospace, food and beverage, industrial machinery, life sciences, marine, oil and gas, power generation, process, transportation and water. Analysis
COMMENT
Parker posted net sales of US$12.7 billion in fiscal 2015, 3.8% lower than the year prior. Excluding the effects of acquisitions and currency changes overall revenue was essentially unchanged from 2014, with the former adding US$14 million in sales while the latter reduced them by US$547 million. It was a somewhat challenging sales year for Parker’s Diversified Industrial segment, particularly in its International division. Revenues in the segment’s North American operations edged up marginally on the prior year to US$5.7 billion, with the increase rising to 1.2% when positively adjusted for acquisition and currency effects. The gains reflected higher demand from distributors as well as from end-users in the car and light truck, heavy-duty truck, refrigeration and air conditioning and construction equipment markets, partially offset by lower demand in the farm and agriculture equipment market. In contrast, sales in the International division were down 10.3% to US$4.7 billion. The result was significantly impacted (US$487 million) by the strengthening of the US dollar against other currencies, with the year on year revenue decline reduced to 1.3% when adjusted for this and acquisition impacts. The division benefited from higher volume in the Asia Pacific region, but this was more than offset by lower volume in Europe (mainly due to the loss of sales from divested businesses) and in Latin America. Despite the overall lower sales, gross income was up 1.0% on the prior year at US$3.1 billion. The associated margin was 24.0% compared with fiscal 2014’s 22.9% with the improvement attributed to lower business realignment charges in the Diversified Industrial International operations and reduced product support costs in the Aerospace segment. Segment operating income was up 2.7% at US$1.8 billion, although net income eased 2.8% to US$1.0 billion.
Parker has recently relaunched its ‘Win Strategy’, first introduced in 2001, as it seeks to respond to the latest changes in its motion and control markets. The revamped strategy has set a number of financial, growth, customer experience and employee engagement goals. These include reaching an operating income margin of 17% within five years, holding a minimum 20% share in each of its markets and achieving an evenly balanced revenue contribution from its distribution and OEM industrial sales activities in every region of the world. As part of the refresh, the company has also launched a ‘Simplification’ initiative that is aiming to reduce complexity, improve speed and reduce costs in its operations. As part of these initiatives, Parker embarked on a series of cost reduction initiatives in fiscal 2015 including a voluntary retirement programme and this restructuring is continuing in fiscal 2016. The company is also increasing its focus on creating an online presence to support is sales and service activities, as well as on innovation strategies to support new product development. Reflecting the increasing emphasis on these areas it has recently created a corporate vice president for eBusiness, the Internet of Things (IoT) and Services. Services. In addition to its organic strategies, Parker intends to continue its long history of strategic acquisitions. ■
Key Figures (US$ million) Parker Hannifin Corp 2015
2014
12 711.7
13 216.0
5715.7 4741.4
Cost of Sales
Year ended 30.6 2013
2012
2011
13 015.7
13 145.9
12 345.9
5693.5 5287.9
5637.7 5110.3
5708.1 5335.1
n/a n/a
9655.2
10 188.2
10 086.7
9958.3
9387.5
Gross Profit
3056.5
3027.7
2929.0
3187.6
2958.4
Segment Operating Income Of Which: Industrial North America Industrial International
1838.4
1790.2
1791.5
2002.5
1823.0
955.5 583.9
946.5 572.5
908.7 602.5
960.3 752.2
n/a n/a
Net Income
1012.6
1041.4
948.4
1151.8
1049.1
Net Sales Of Which: Industrial North America Industrial International
Contact Details
Chairman and CEO: Address:
88
Filtration Industry Analyst
Thomas Williams 6035 Parkland Boulevard Cleveland Ohio 44124-4141 USA
Tel: +1 216 896 3000 Web: www.parker.com
January 2016