David Parry, Vice Chairman Scott Santi, Vice Chairman - …investor.itw.com/~/media/Files/I/ITW-IR/documents/presentations/4... · David Parry, Vice Chairman Scott Santi, ... –Deployed

2010 Investor Meeting – December 3, 2010

ITW’s Long-Term Organic Growth Perspectives

David Parry, Vice Chairman

Scott Santi, Vice Chairman

December 3, 2010

1


• Organic Growth Performance (2004-2008)

• Organic Growth Potential (2011-2015)

– Innovation

–Emerging markets

–New platforms

• Summary

2

Today’s Topics


Organic Growth Performance (2004-2008)

3


Organic Growth Performance

(2004-2008)

2004-2008 base growth CAGR: 3%excluding automotive OEM and construction: 4%

Added three scalable new platforms:– Auto Aftermarket– Test and Measurement– Electronics

ITW’s Organic Growth Rate Goal 2011-2015:5% to 6%

4


Organic Growth Potential (2011-2015)

5


Organic Growth Potential

(2011-2015)

Innovation

Emerging Markets

New Platforms

ITW Organic Growth Drivers

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7

Innovation

Emerging Markets

New Platforms


Innovation: A Core Performance Driver

Throughout our History

– Over 19,000 active patents currently

– Ranked in top 100 companies for new U.S. patents

issued since 2002

– Worldwide patents issued last two years: 2,245

– ITW Patent Society members: 1,065

8


Focus Importance Effort Investment Impact

Innovation: A Significant Increase in Focus

and Investment from 2008 Forward

Working on positioning innovation internally on an equivalent level to our 80/20 business improvement process:

9


Building out centralized strategic innovation

process capability/resources

10

Innovation: A Significant Increase in Focus

and Investment from 2008 Forward

– Deployed “top-down” to support the company‟s

best innovation opportunities

– Full-time/dedicated R&D and market research

capabilities

– Supplements (does not replace) traditional ITW

“bottoms up” division-led innovation strategies

and programs

Innovation Investment

15% increase in combined R&D,

marketing and product development

spend in 2010 vs. 2009

Expect similar increases over the next five years


Innovation: A Look at Performance and

Potential in Selected Segments

• Significant Future Innovation Potential:– Service platform expansion

– Positioned to capitalize on trend

of lower energy/water

consumption

– Strong opportunity for a „game

changer‟ in cooking technology

– Customized product offerings

targeted at specific emerging

markets

11

Food Equipment• Recent Successes:

– „Intelligent Concept‟ ware wash machines

achieve water and energy savings

– Proactive machine service on ware wash


Polymers & Fluids• Recent Successes:

– Engineered tapes for the solar and wind

industries.

– Industrial use biodegradable lubricants,

adhesives and cleaners

• Significant Future Innovation Potential:

– Miniaturization, weight reduction and

multi-functionality in electronics and

health industries

– In-car hygiene and bacterial

protection

– Inorganic and sustainable polymers

replacing traditional materials

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Welding• Recent Successes:

–Offshore rig fabrication

system

–Welding arc monitoring


–Welding workforce demographics

–Global productivity imperatives

–Changing regulatory environment

–Changing steel alloys/chemistries

13




Test and Measurement• Recent Successes:

– Instron ElectroPuls – dynamic testing

– Loma metal detector – food quality and control


– Increasing regulatory standards on global scale

– Automation of data collection and interpretation

– Broadening reach of quality specifications across industries

14

ElectroPuls Loma

ElectroPuls




Automotive• Recent Successes:

– Patented capless fuel

system

– Plastic coolant regulator

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– Sustainable materials

– Electric vehicle / hybrid vehicle products




Construction• Recent Successes:

– Duo-Fast Cordless

Roofing System

– Tetra Grip™ Sub Floor

Fastener

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– Building Information Modeling (BIM) to

streamline construction processes

– Construction trade demographics

– Urbanization of population drives

infrastructure requirements



Integrity™ Residential Design Suite (RDS) is a family of software

design tools that deliver BIM solutions from concept to construction

for the residential industry



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Innovation

Emerging Markets

New Platforms


Emerging Markets

18

2010(F) Revenues

2010 Investor Meeting – December 3, 2010 19

ITW’s BRIC Growth

$608 million

4% of company

revenues

$1.27 billion

8% of company

revenues

≈ $3 to $4 billion

Brazil Russia India China


Emerging Markets: China2010(F) Revenues $706M*

# of Units 43

# of Employees 4,700

• Key Market Segments

– Oil and Gas

– Shipyards

– Electronics and Telecom

– Industry (OEM and MRO)

– Auto Aftermarket

– Auto (OEM and Tier)

Beijing

Jiangsu

Tianjin

Guangdong

Shanghai

Total

• Strategy

– End market / value-added focused…must be able to

sustain meaningful differentiation

– Localization of manufacturing and R&D

– Develop local leadership and organizational

capabilities based on future potential, not current

size / scale

2 units

10 units

17 units

43 units

3 units

6 units

20

*includes export sales into China

Hong Kong 5 units


Emerging Markets: China

$15B to double offshore oil production capacity in

Bohai Bay and South China

Sea

Petrochemical refining capacity to increase 37%

70,000 KMs of oil and gas

pipeline over the next five

years

$220B invested to achieve 34%

increase in power

generation capacity by

2015

A 24% increase in steel to build sea bridges in

North and South China


Emerging Markets: China

Welding

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Tien Tai Kunshan, Welding Consumables Company

• Started as a joint venture in 1999, acquired 100% of the company in

2003

• 600 employees

• Manufacture valued-added welding consumables such as flux cored

wires and stainless steel electrodes for marine, energy and general

industry segments

Beijing Miller, Welding Equipment Company

• Active sales presence since 1985

• Manufacture and market selected welding equipment for China market


Emerging Markets: Brazil2010(F) Revenues $296M*

# of Units 15

# of Employees 990


– Steel Industry

– Oil and Gas

– Industry (MRO/OEM)

– Hygiene

– Electronics

• Strategy

– Enhancement of local infrastructure

and capabilities

– Transfer of global technologies and

conversion to market needs

– Acquisitions to accelerate market

positioning

Sao Paulo 14 units

Porto Alegre 1 unit

Total 15 units

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*includes export sales into Brazil


Infra-structure:

$50B

Trans-portation:

$50B

Ports: $20B

Olympics: $30B

World Cup: $10B

Military: $18B

24

Emerging Markets: Brazil

GDP growth remains robust

2009 downturn was over quickly

Approximately 200 million

people; with a growing middle

class

$350B total investment planned over next 5 years:

ITW companies and acquisition

candidates averaged approximately

15% organic growth


Emerging Markets: Brazil

Polymers & Fluids

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• First acquisition in 1998

• Five acquisitions in the last three years

• December 2010: Prolim acquisition

($60 million), our largest yet in Brazil

• Estimated revenues (including Prolim)

– 2010 $94 million

– 2011 $170 million

• Strategy:

– Continue to build local resources to

maximize market penetration

– M&A environment offers opportunity

ITW Chemical, Sao Paolo

Prolim, Taubate


Emerging Markets: India2010(F) Revenues $218M*

# of Units 12

# of Employees 1,775


– Steel Industry

– Oil and Gas


– Telecommunications and Electronics

• Strategy

– Global products to be locally supported and locally

manufactured

– Maximize and enhance the regional human resource

capabilities

– Partner with global and indigenous OEM and tier

organizations

Pune/Mumbai 3 units

Andhra 3 units

New Delhi 3 units

Chennai 2 units

Hyderabad 1 units

Total 12 units

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*includes export sales into India


Steel industry

AutomotiveFood

processingAppliance

27

Emerging Markets: India

India’s economic growth

9% to 10% y/o/y for next 10+ years–Population of 1.2B with growing middle class

–Significant investments in infrastructure

–Urban population expected to reach 590M by 2030

Strong opportunity to grow

business

Growth in key segments


Emerging Markets: India

Industrial Packaging

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•Established in 1983

•$109M business with head offices in Hyderabad

•Manufacturing facilities in:

–Hyderabad

–Mumbai

–New Delhi

–New steel plant in Jamshedpur

•20% growth forecasted in 2011

•Key markets

–Metals

–Auto

–Fibers

–Paper

–Food / beverage / agriculture


Emerging Markets: Russia2010(F) Revenues $49M*


– Steel industry

– Transmission pipelines

– Infrastructure


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*includes export sales into Russia

• Strategy

– Establish leadership and over-resource with

supportive team

– Continue to focus on infrastructure products


• Built a solid foundation in BRIC countries

• Accelerating investment in localized production, R&D and

leadership capabilities

• Continued adherence to decentralized, close-to-customer

approach

• Vice chairmen to provide ongoing top-down strategic

oversight

30

Emerging Markets: Summary



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Innovation

Emerging Markets

New Platforms


Three New Platforms for Growth

32

Automotive Aftermarket

Test and Measurement

Electronics


Consistent growth in both base revenues and bottom line

earnings

Significant sales outside of North

America

Well positioned in emerging

markets

Expect to continue to add acquisitions to enhance these

platforms

Strong management

teams aggressively implementing

the ITW Toolbox

Three New Platforms for Growth

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New Platforms for Growth:

Auto Aftermarket

• Started with Wynn‟s/Permatex

acquisition in 2005

• Adhesive sealants, car care, body

repair and lubrication product

categories

• Retail channels include auto

retailers, traditional distribution and

body shops

• Projected global market CAGR: 6%

2010 Investor Meeting – December 3, 2010slide 35

13+ acquisitions

to date

Permatex

Wynn‟s

Slime

Lebo

Krafft

Forte

QMI

Applied

Versachem

Versachem Chile

Qualtex

Quimica TF

Marvel

Revenue Growth

2010(F): $800M

Targeted 2015 revenue: $1.5B+

Market Dynamics

Emerging markets: 20% of total

worldwide vehicles now; 50% in ten

years

Aftermarket less affected by global

downturns

In U.S., average age of cars in 1999 was 8.8 years; now average age is 10.2

years

Acquisition Potential

Multiple niche markets available

in our targeted areas


Auto Aftermarket

35


• Started with Instron acquisition in

2005

• Dynamic testing, non destructive

testing and industrial weighing

product categories

• Major end markets include R&D

facilities, food, oil and gas, steel

and transportation


36




14 acquisitions

to date

Instron

Ceast

Buehler

Magnaflux

QSA

Avery Weigh-Tronix

Loma

GSE

Quasar

Sonotech

Tiede

Bycotest

Wolpert Wilson

HyperG

Revenue Growth

2010(F): $750M


Market Dynamics

Service and aftermarket revenue

opportunity from large installed base

Investment in innovation, research

and development

Increased focus on quality and

safety…growing regulatory standards


Acquisition potential in niche

market sub-segments




Kester (consumable)

Speedline (equipment)

Vitronics – Soltec (equipment)

Stokvis Tapes and M&C Specialties

(consumable)

38


Electronics

• Started with Kester acquisition in

2006

• Highly engineered electronic

components and assembly

systems for the electronics industry

• Major applications in consumer

electronics, medical, automotive

and defense markets


2010 Investor Meeting – December 3, 2010slide 39

5 acquisitions

to date

Kester

Speedline

Vitronics-Soltec

Stokvis Tapes

M&C Specialties

Revenue Growth

2010(F): $600M


Market Dynamics

Miniaturization of electronic components

Ability to develop value-added assembly solutions incorporating both consumables and

equipment

Increasing penetration into micro processor

and industrial products


Fragmented market place

offers additional

opportunities


Electronics

39


GlobalMarket leader

Innovation

Ability to leverage our

core competencies

Potential to reach $1B +

in annual revenue

New Platforms for GrowthKey Characteristics

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New Platforms for Growth

2011-2015

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2004-2008:

Successfully developed and scaled three new platforms

•Automotive Aftermarket

•Test and Measurement

•Electronics

2011-2015:

Goal is to add a minimum of six

new scalable platforms


Summary

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Summary

With modest growth in developed world economies,

our organic growth rate target of

5% to 6% for 2011-2015 is very achievable

ITW Organic Growth Drivers

Accelerating innovation

Emerging market growth

Additional new platforms


Q & A

44

Documents

David Parry, Vice Chairman Scott Santi, Vice Chairman - …investor.itw.com/~/media/Files/I/ITW-IR/documents/presentations/4... · David Parry, Vice Chairman Scott Santi, ... –Deployed