TE Connectivity(US:TEL)2021-10-27 16:48Financial Data and Key Metrics Changes - In Q4 2021, the company generated sales of $3.8 billion, reflecting a 16% organic growth and a 17% increase on a reported basis year-over-year [16][41] - Adjusted earnings per share (EPS) for Q4 was $1.69, up 46% year-over-year, while adjusted operating margins were 18.5% [16][41] - For the full year, sales increased by 23% year-over-year to $14.9 billion, with adjusted EPS rising over 50% to $6.51 [16][46] Business Line Data and Key Metrics Changes - Transportation segment sales grew 16% organically year-over-year, with the auto business increasing by 12% despite production declines [32] - Industrial segment sales increased by 6% organically, with industrial equipment up 32% driven by factory automation [35] - Communications segment sales surged 36% organically year-over-year, benefiting from high-speed solutions for cloud applications [38] Market Data and Key Metrics Changes - Global auto production was approximately 2 million units lower than expected in Q4, with a forecast of 18 million units for the first quarter of 2022 [20] - Orders in Asia increased by 17%, Europe by 21%, and North America by 26% year-over-year [31] - The company expects strong double-digit growth in both Industrial and Communications segments despite a decline in auto production [19] Company Strategy and Development Direction - The company is strategically positioned to capitalize on trends in electrification and renewable energy, with a focus on content growth in electric vehicles [14][21] - The company aims to maintain a balanced capital deployment strategy, returning two-thirds of free cash flow to shareholders while pursuing acquisitions [49] - The company is committed to ESG initiatives, including reducing greenhouse gas emissions and increasing diversity in leadership roles [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment across various markets, despite ongoing supply chain challenges [12][20] - The company anticipates continued growth in content per vehicle, particularly in the electric vehicle segment, with expectations of reaching mid-80s in content per vehicle [54] - Management noted improvements in raw material availability, which should enhance production capabilities moving forward [22][68] Other Important Information - Free cash flow for the year was approximately $2 billion, with nearly 100% conversion to adjusted net income [17][48] - The company executed a significant acquisition in the Industrial segment, which is expected to contribute to growth in the future [17][41] Q&A Session Summary Question: Confirmation on auto outgrowth expectations - Management confirmed expectations for auto outgrowth at the high end of the 4% to 6% range for fiscal 2022, including supply chain impacts [52][53] Question: Orders and book-to-bill ratio - Management explained that while orders were down 9% sequentially, the scheduling of orders is a positive sign indicating customers are adapting to lead times [59][60] Question: Impact of supply chain pressures on fiscal 21 results - Management noted improvements in availability of certain inputs but acknowledged ongoing inflationary pressures, particularly on metals and freight costs [66][68] Question: Incremental margins and guidance for Q1 - Management indicated that Q1 guidance reflects a conservative approach due to the integration of the ERNI acquisition, which may impact flow-through margins [75][76] Question: Growth outlook in end markets - Management provided insights into expected growth across segments, highlighting strong demand in transportation and communications, while noting challenges in aerospace [82][84]