Johnson Controls International plc executives said the company is ahead of schedule when it comes to realizing cost savings from last year’s merger with Tyco and the chances for new revenue opportunities continue to improve.
Alex Molinaroli, Johnson Controls chairman and chief executive officer, said the company realized $70 million in cost and productivity savings, praising the company’s employees for their work. The company, which is based in Ireland for tax purposes but operates out of Glendale, said it realized $50 million in savings during the first quarter of the fiscal year.
“It would be very easy for our employees, with all that’s going on, to not stay focused on the task,” he said.
George Oliver, Johnson Controls chief operating officer, said the savings were ahead of internal projections and improved earnings by 7 cents.
He also pointed to examples in New England and Texas where the company was able to take advantage of cross-selling opportunities between Johnson Controls and Tyco.
“This is going better than we thought” Molinaroli said. “I am really bullish about this … it was a big strategic question a year ago.”
Johnson Controls reported adjusted net income of $473 million, up 11 percent from the combined results of Johnson Controls and Tyco last year. Adjusted earnings improved from 45 to 50 cents per diluted share and adjusted revenue was up 3 percent to $7.24 billion.
Non-adjusted results included a $148 million loss or 16 cents per share and revenue of $7.27 billion. The company’s comparisons to the previous year are complicated with a number of moving parts, including the spinoff of its automotive seating business, the merger with Tyco last year and the sale of Scott Safety announced during the quarter and closing on the sale of a Tyco business in South Africa.
Proceeds from the sale of Scott Safety and the South African business will be used to pay down a portion of the $4 billion in debt created during the merger.
“The pay down of the debt is coming at a much faster pace than we expected six months ago,” said Brian Stief, Johnson Controls chief financial officer.
Asked if Johnson Controls was looking for other businesses to sell or spin off, Molinaroli said the teams at Johnson Controls and Tyco are continuing to evaluate how different businesses connect to the combined company’s focus moving forward.
“We are looking across our portfolio,” Molinaroli said.
