Ingersoll Rand Hbs Case Rating
RE: Ingersoll Rand Credit Write-up
Operating Environment
Industry: Industrial goods - diversified machinery (Residential and commercial). Provides products, services and solutions to enhance the quality of air and security in homes and buildings, climate control and refrigeration along with Industrial technologies that help companies enhance energy efficiency, productivity and operations.
Industry drivers: Economic expansion, new innovative solutions.
Industry outlook: Neutral with moderate growth (within 1 year). August 2010 PMI reading of 56.3 signaled the 13th straight month of manufacturing sector expansion. However, world macroeconomic environment remains weak.
Downside scenario: • A sharp increase in costs of goods sold (E.g. ↑ in Steel prices where between 01/2007 to 06/2010 the price of steel coil rose from $500/tonne to $800/tonne) • If overall world economy continues to deteriorate. Ingersoll’s core businesses of refrigeration, industrial and security equipment’s are heavily dependent on demand from an expanding economy (E.g. if convenience stores ↑, D for refrigeration ↑) • If global competition increases (35% of sales are foreign & in highly competitive markets) or if major competitors (United Technologies/Textron) develops more efficient patents/cheaper products and cuts into market share.
Revenue/Earnings • Ingersoll is a leading company in the production/design/servicing of refrigeration, industrial and security equipments. Its brands are well known as high quality products to consumers. • Owns numerous patents and patent applications. Business is not dependent on any single patent/License or any group of them. • Has decreased exposure to cyclical, low growth and asset intensive businesses. • Concentration low (No customer accounts to > 10% of sales) • Ingersoll’s EBIT Margins for the past 4 years are (12.59 -’06, 12.42 -’07, (18.98) - ’08 & 6.53 - ‘09). Historically strong, in 2008, the
Operating Environment
Industry: Industrial goods - diversified machinery (Residential and commercial). Provides products, services and solutions to enhance the quality of air and security in homes and buildings, climate control and refrigeration along with Industrial technologies that help companies enhance energy efficiency, productivity and operations.
Industry drivers: Economic expansion, new innovative solutions.
Industry outlook: Neutral with moderate growth (within 1 year). August 2010 PMI reading of 56.3 signaled the 13th straight month of manufacturing sector expansion. However, world macroeconomic environment remains weak.
Downside scenario: • A sharp increase in costs of goods sold (E.g. ↑ in Steel prices where between 01/2007 to 06/2010 the price of steel coil rose from $500/tonne to $800/tonne) • If overall world economy continues to deteriorate. Ingersoll’s core businesses of refrigeration, industrial and security equipment’s are heavily dependent on demand from an expanding economy (E.g. if convenience stores ↑, D for refrigeration ↑) • If global competition increases (35% of sales are foreign & in highly competitive markets) or if major competitors (United Technologies/Textron) develops more efficient patents/cheaper products and cuts into market share.
Revenue/Earnings • Ingersoll is a leading company in the production/design/servicing of refrigeration, industrial and security equipments. Its brands are well known as high quality products to consumers. • Owns numerous patents and patent applications. Business is not dependent on any single patent/License or any group of them. • Has decreased exposure to cyclical, low growth and asset intensive businesses. • Concentration low (No customer accounts to > 10% of sales) • Ingersoll’s EBIT Margins for the past 4 years are (12.59 -’06, 12.42 -’07, (18.98) - ’08 & 6.53 - ‘09). Historically strong, in 2008, the