Otis Worldwide (US:OTIS)2022-01-31 17:40Financial Data and Key Metrics Changes - Net sales increased by 2.2% to $3.6 billion in Q4 2021, with organic sales growing for the fifth consecutive quarter, up 2.8% [23] - Adjusted operating profit rose by $11 million, with adjusted EPS up 9.1% or $0.06, driven by operating profit growth and a lower adjusted tax rate [24][37] - Free cash flow generated was $1.6 billion, representing approximately 115% to 120% conversion of GAAP net income [21] Business Line Data and Key Metrics Changes - New equipment orders increased by 7.3% in Q4 and 13.2% for the year, with significant growth in Asia Pacific and the Americas [11][25] - Maintenance portfolio grew by 3%, the best growth rate in over a decade, with a focus on digital connectivity [16] - Modernization orders were up 18.3% at constant currency, with service organic sales growing 4% [30] Market Data and Key Metrics Changes - The new equipment market is expected to grow mid- to high-single digits in the Americas, low single digits in EMEA, and down mid- to high single digits in Asia, particularly due to uncertainty in China [18] - Service growth is projected to be broad-based, with maintenance and repair expected to increase by 4% to 6% [42] Company Strategy and Development Direction - The company remains committed to shareholder value creation, completing $450 million in debt repayment and repurchasing $725 million of shares [10] - The focus on ESG initiatives continues, with the introduction of energy-efficient products and digital solutions [14][17] - The company aims to increase connectivity to approximately 60% of units under service by the medium term [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong recovery experienced in 2021, expecting momentum to continue into 2022 despite market dynamics remaining fluid [18] - The outlook for 2022 includes organic sales growth of 2.5% to 4.5%, with adjusted EPS expected to be in the range of $3.20 to $3.30 [20][39] - Management highlighted the importance of project timing in the Americas affecting revenue guidance for 2022 [53] Other Important Information - The company achieved a 115 basis points new equipment share gain, building on the previous year's growth [33] - The adjusted effective tax rate was reduced by 190 basis points, contributing to profit growth [37] - The company plans to recommence share buybacks once deleveraging is complete [72] Q&A Session Summary Question: Guidance for new equipment sales in the Americas - Management explained that the low single-digit guidance reflects project timing on major projects that will drive revenue later in 2022 [53] Question: Trends in China and backlog conversion - Management clarified that the guidance for China reflects a cautious approach due to the book and ship business, which is a significant portion of revenue [64][66] Question: Capital allocation strategy post-deleveraging - Management confirmed that they are on track to complete $500 million in deleveraging and will resume share buybacks once this is achieved [72] Question: Expectations for new equipment margins - Management indicated that commodity headwinds are expected to be a first-half issue, with margins improving in the second half of the year [68] Question: Sustainability of market share gains in China - Management expressed confidence in the sustainability of market share gains, citing strong performance and effective cash management [105][106]