Honeywell(US:HON)2023-02-09 16:00Financial Performance - In 2022, Honeywell achieved a sales growth of 3%, with 6% organic growth and 7% organic growth excluding lost Russian sales, driven by strong demand in Commercial Aviation, Advanced Materials, and Building Products segments [12]. - Honeywell's operating cash flows for the year were $5.3 billion, with a record backlog of $29.6 billion as of December 31, 2022, indicating strong demand in end markets [14]. - The company deployed $7.9 billion to capital expenditures, dividends, share repurchases, and mergers and acquisitions, which was approximately $2.6 billion in excess of operating cash flow for the year [12]. - Net sales increased by 3% in 2022 compared to 2021, driven by a 10% increase in pricing, partially offset by a 4% decline in volume and a 3% unfavorable impact from foreign currency translation [90]. - Organic sales growth, excluding the impact of lost Russian sales, was 7% in 2022, compared to 4% in 2021 [91]. - Gross margin increased by approximately $0.6 billion, with the gross margin percentage rising to 32.8% in 2022 from 32.0% in 2021 [94]. - The effective tax rate for 2022 was higher than the U.S. federal statutory rate of 21%, primarily due to a 320 basis-point increase from restructuring and state taxes [103]. - Net income attributable to Honeywell decreased primarily due to higher repositioning charges impacting earnings per share by $0.86 after tax [105]. Segment Performance - Honeywell Building Technologies generated $6,000 million in revenue for 2022, with $3,638 million from products and $2,362 million from building solutions [22]. - The Performance Materials and Technologies segment reported a full-year revenue of $10,727 million, with $2,404 million from UOP, $4,731 million from Process Solutions, and $3,592 million from Advanced Materials [24]. - Safety and Productivity Solutions achieved a revenue of $6,907 million in 2022, with $2,952 million from Sensing and Safety Technologies, $1,619 million from Productivity Solutions and Services, and $2,336 million from Warehouse and Workflow Solutions [25]. - Aerospace segment net sales increased by $801 million, with organic sales growth of 8% [108]. - Honeywell Building Technologies segment net sales increased by $461 million, with organic sales growth of 14% [113]. - Performance Materials and Technologies segment net sales increased by $714 million, with organic sales growth of 11% [117]. - Safety and Productivity Solutions segment sales decreased by $907 million, primarily due to lower organic sales of 9% [121]. Capital and Investment - The company expects to spend approximately $1.0 billion on capital expenditures in 2023 for growth and capacity expansion [180]. - A quarterly dividend rate increase of 5% to $1.03 per share was effective in Q4 2022, with intentions to continue dividends in 2023 [180]. - Cash used for investing activities decreased by $968 million, mainly due to a reduction in cash paid for acquisitions [175]. - Cash used for financing activities decreased by $1.9 billion, driven by a $3.1 billion reduction in long-term debt payments [176]. - As of December 31, 2022, the company held $10.1 billion in cash and cash equivalents, down from $11.5 billion in 2021 [165]. - Total borrowings as of December 31, 2022, were $19.6 billion, with fixed rate notes comprising $17.1 billion of this total [168]. Strategic Focus and Future Outlook - Honeywell plans to continue deploying capital to high-return opportunities, including software and services and sustainable technologies, to position the business for future growth [13]. - The company expects macroeconomic factors to remain turbulent in 2023 but is well-positioned with a robust backlog for future growth [13]. - Backlog was $29,558 million at December 31, 2022, an increase from $27,682 million in 2021, with an expectation to recognize approximately 62% as revenue in 2023 [27]. - The company is focused on driving profitable growth through innovative products, expanding margins, and executing disciplined portfolio management [16]. - Future growth is dependent on the ability to develop new technologies and products that achieve market acceptance in competitive markets [143]. Sustainability and Corporate Responsibility - Honeywell aims to be carbon neutral by 2035, having implemented over 6,300 sustainability projects since 2010 [43]. - The company has developed a strategy to electrify its global fleet of over 7,500 vehicles by 2035, with the first fully electric light-duty vehicles delivered in 2022 [43]. - Honeywell's Performance Materials and Technologies segment is focused on developing solutions for a lower carbon economy, including renewable fuels and carbon capture [45]. - Honeywell maintains a commitment to uphold environmental, social, and governance principles as part of its corporate citizenship strategy [16]. - Stakeholder interest in environmental, social, and governance (ESG) practices is increasing, prompting the company to enhance its ESG reporting and set new goals [155]. Risks and Challenges - Supply chain constraints for certain raw materials are expected to continue into 2023, but the company believes its mitigation strategies will reduce the impact [33]. - The company faces risks related to foreign exchange fluctuations, which could expose it to financial loss despite hedging activities [135]. - The company may face challenges in executing or integrating acquisitions, which could impact expected returns and operational performance [142]. - Cybersecurity incidents could potentially result in financial loss, reputational damage, and increased costs due to the sophistication of threats [149]. - The company faces risks from climate change that could disrupt operations and increase costs for materials and insurance [157]. - Changes in government regulations can significantly impact the company's sales and margins across its business segments [160]. Employee Engagement and Diversity - Honeywell's commitment to human capital management is reflected in its diverse hiring practices and talent acquisition strategies [53]. - The company has established a Global Inclusion and Diversity Steering Committee to enhance its commitment to diversity, with a diverse Board of Directors and executive leadership team [62]. - The company has implemented a Voice of the Employee feedback survey to improve employee engagement and workplace culture [54]. - Employee well-being initiatives include comprehensive mental health benefits and Employee Assistance Programs available globally [55].