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24 | 2015 Annual Report
Business Segments
Following is an analysis of segment results for 2015
compared with 2014, and 2014 compared with 2013.
The Company defines segment earnings as earnings
before interest and income taxes.
2015 SALES BY SEGMENT
Network
Power
19%
Climate
Technologies
18% Process
Management
37%
Commercial &
Residential Solutions
8%
Industrial
Automation
18%
PROCESS MANAGEMENT
CHANGE CHANGE
(DOLLARS IN MILLIONS) 2013 2014 2015 ‘13-‘14 ‘14-‘15
Sales $8,610 9,189 8,516 7% (7)%
Earnings $1,809 1,918 1,493 6% (22)%
Margin 21.0% 20.9% 17.5%
2015 vs. 2014 - Process Management reported sales
of $8.5 billion in 2015, a decrease of $673 million or
7 percent. Underlying sales decreased 2 percent
($221 million) as persistent low oil and gas prices
reduced capital and operating spending, especially in
upstream markets. Foreign currency translation had
an additional 5 percent ($481 million) unfavorable
impact while acquisitions ($29 million) provided a
slight benefit. The measurement devices, final control
and systems and solutions businesses all declined.
Underlying sales were flat in the U.S., up 1 percent in
Europe and decreased 6 percent in Asia (China down
9 percent). Latin America decreased 14 percent and
Canada decreased 1 percent, while Middle East/Africa
was up 2 percent. Earnings decreased $425 million
and margin was down 3.4 percentage points due to
lower volume and deleverage, unfavorable mix and the
impact of a stronger dollar on operations. Increased
rationalization of $72 million, higher costs related
to growth investments initiated in the prior year and
other items were offset by savings from cost reduction
actions. Underlying sales will remain under pressure
as the expectation of low oil prices will keep industrial
spending at reduced levels for most of fiscal 2016.
2014 vs. 2013 - Process Management reported sales
of $9.2 billion in 2014, an increase of $579 million, or
7 percent on solid demand in energy and chemicals
end markets and supported by acquisitions. Underlying
sales increased 4 percent ($299 million) on volume
growth, acquisitions added 4 percent ($328 million)
and foreign currency translation subtracted 1 percent
($48 million). The systems and solutions business had
solid growth and the measurement devices business
was up moderately. The final control business had
strong growth due to the Virgo and Enardo acquisitions.
Underlying sales increased 8 percent in the U.S.,
3 percent in Europe and 2 percent in Asia, with 5 percent
growth in China. Latin America decreased 1 percent,
Middle East/Africa was down 4 percent and Canada
grew 2 percent. Earnings increased $109 million on
higher volume, including acquisitions, cost reduction
savings and materials cost containment, partially offset
by unfavorable mix and other costs. Higher business
investment spending was largely offset by favorable
foreign currency transactions of $20 million.
INDUSTRIAL AUTOMATION
CHANGE CHANGE
(DOLLARS IN MILLIONS) 2013 2014 2015 ‘13-‘14 ‘14-‘15
Sales $4,885 4,990 4,121 2% (17)%
Earnings $ 777 802 600 3% (25)%
Margin 15.9% 16.1% 14.6%
2015 vs. 2014 - Industrial Automation sales were
$4.1 billion in 2015, a decrease of $869 million or
17 percent. Underlying sales decreased 4 percent
($192 million) on lower volume, reflecting weakness in
Europe and reduced industrial spending, particularly in
energy-related and commodity markets. Additionally,
the power transmission solutions divestiture deducted
7 percent ($418 million) and foreign currency
translation subtracted 6 percent ($259 million). Sales
decreased in the power generation and motors, drives,
electrical distribution and fluid automation businesses.
Hermetic motors decreased moderately while the
materials joining business was flat. Underlying sales
decreased 6 percent in the U.S., 4 percent in Europe
and 2 percent in Asia (China down 3 percent). Sales
decreased 7 percent in Latin America, 4 percent in
Canada and 10 percent in Middle East/Africa. Earnings
of $600 million were down $202 million and margin
decreased 1.5 percentage points, due to the power
transmission solutions divestiture, which negatively
impacted the earnings comparison $67 million,
lower volume and deleverage, and unfavorable mix,
partially offset by cost containment actions. Higher
rationalization expense of $15 million contributed to
the decrease. Market conditions will remain challenging
in the near term, with an expectation of moderately
improving conditions in the second half of fiscal 2016.