Emerging markets key for Emerson climate tech unit
NEW YORK, Jan 25 (Reuters) - Constantly changing business conditions -- when India and China heat up, the U.S. housing business slows to a crawl -- make juggling one of Tom Bettcher's key job descriptions.
Managing often-conflicting business trends is all part of a day's work for Bettcher, the business leader of Emerson Electric Co's (EMR.N) Climate Technologies division.
The $3.6 billion division makes components used in heating, ventilation and air conditioning (HVAC) equipment for customers like United Technologies Corp's (UTX.N) Carrier unit, Johnson Controls Inc's (JCI.N) York division, and Trane Inc TT.N, which is being bought by Ingersoll-Rand Co Ltd (IR.N).
Compressors, the heart of an air conditioning unit, make up the bulk of its sales.
The division's ability to grow sales and profits at a time when its biggest market -- North American residential -- is declining illustrates how industrial companies have transformed in recent years, and why many U.S. multinationals are still promising double-digit earnings growth for 2008.
"Emerging markets are huge for us," Bettcher told Reuters at an industry trade show in New York this week. Demographic trends support long-term growth, he said, as does the push toward a more efficient use of energy.
The U.S. was responsible for 57 percent of division sales last year, but that ratio is expected to tighten in 2008. Housing starts, a leading indicator of demand for home air conditioners, suggest 2008 will be worse than 2007.
"It would be nice to say we had a tough year in '07; now we're going to bounce back," Bettcher said. "None of us are expecting that."
Climate Tech accounted for about 16 percent of St. Louis-based Emerson's sales and operating profits last year. Emerson has said the division can grow sales by 6 to 8 percent a year throughout an economic cycle.
"This year, we'll be close to that," Bettcher said.
Spreading risk may cushion the company should the U.S. tip into recession, since different countries and industries rise and fall at different times. A commercial HVAC slump may hit just as the U.S. residential segment rebounds around 2009.
"We expect this U.S. market to come back," Bettcher said.
CHASING GROWTH
Bettcher spoke a few days after returning from Eastern Europe, where the company has built a plant near Brno, in the Czech Republic, drawn by its low-cost, educated labor and proximity to European markets.
Of the division's 36 factories, only 14 are in the United States. Two of its nine engineering centers are in China, one is in India and one in the Philippines. Continued...
