Tyco International's Management Presents At BAML 2011 Industrial Conference (Transcript)

Tyco International Ltd. ( TYC)

BAML 2011 Industrial Conference

December 6, 2011; 11:20 am ET


Patrick Decker - President

Antonella Franzen - Investor Relations


John Inch - Bank of America Merrill Lynch


John Inch

We are almost at the halfway point of day one. So far the conference is I think been exceeding expectations and I think it’s really worth everyone’s participation in the questions. I just, gauging other conferences I know that the questions have been very robust and interactive, so I’m hopping you get a lot out of these sessions.

It gives me great pleasure to introduce the management team of Tyco Flow Control, Patrick Decker, has been President. Well certainly with Tyco Flow Control since ’03 and President since 2007, he is going to be the CEO of the newly emerged or soon to be emerged Tyco Flow Control and with me as well is Antonella Franzen, who has been Tyco’s IR and post separation, TBD right.

So what that, let me introduce Patrick.

Patrick Decker

Thanks John. Good morning everybody. I wanted to quickly just again put in perspective within the Tyco portfolio, who we are as Flow Control. Most of you probably are familiar with this chart. It shows the three current reported segments of Tyco International and Flow Control being about a just shy of a $4 billion piece of the total Tyco portfolio and again as John alluded to, obviously recently announced, we plan to spin out as three separate companies and expect that separation to be complete by the end of our fiscal year, which is end of September as a ADT North America Retail Business, a Global Commercial Fire and Security Business and the Flow Control business as you will learn about today.

Just giving you a quick snapshot of who we are as Tyco Flow Control, we got three primary platforms to the business. We are the global leader in industrial valves and control solutions around the world. We are also the global leader in industrial heat management solutions. Again, I will talk more in a moment around what exactly the heat management solution is that we provide and we are also the leader in the Pacific part of the world, in large scale water and transmission pipelines that also have an interesting environmental business based out of there as well.

We have arguably the broadest portfolio of products and services in the industry, both from a valve and control perspective, as well as thermal controls and you see a handful of the brands here that make up our portfolio. There are many other brands in our portfolio, these are probably the most well know within the industry and each of these if not all of them have been around for more than a 100 years, so very trusted brands in the industry.

Another element of our portfolio is our products are highly engineered and made to specification, depending upon the specific applications. Again, I’ll speak more to that in a moment.

You’ll also see a chart here momentarily that shows the breadth of our exposure or opportunities across a wide variety of industries. We are not concentrated in any one sector, so we’ve got good balance in the portfolio there, but we also compete in very large fragmented sectors. So to put it in perspective, there’s about $60 billion of spend in the sector for valves and controls and thermal control solutions. We estimate today that we got about 7% market share and we are the definitive market leader. So it gives you a sense of the size and scale of growth opportunity there.

And lastly, we already have a good position in emerging markets and that’s a little less than a third of our revenue is derived in the high growth emerging markets, but we clearly have opportunities to expand on that scale as a future growth opportunity.

Just to spend a few more minutes on each of the three pieces and talk a little bit about exactly what we do in these sectors, I’d like to put it in perspective first that when you look across all of our customers, whether it be in the energy space, whether it be in chemical, whether it be in mining, the food and beverage sector, you walk into their facilities and there are three primary concerns that those leadership teams have and problems they are trying to solve.

First and foremost is safety; second is their impact on the environment, either real or perceived, given the PR angel for this, but also the increasing regulatory environment they operate in around the globe, and third, they have to minimize down time in terms of maximizing their own profit generation. The value of the materials they are processing are so critical they can little afford down time.

And lastly, they are looking for somebody to partner with them over the course of the entire lifecycle of an installation. Not just the initial product sales, but who is there from the design before the installation is built, who is there on the installation and who is there to provide them with the after market service and repair and replacement. That’s something that each one of our three parts of the portfolio are very focused on, is serving that value proposition.

Speaking first of valves and controls, very large fragmented industry. There are literally thousands of valves manufactures around the world. But the part of the market that we focused on servicing is extreme pressure, extreme temperature and severe services and remote locations. It’s the kind of applications in demanding environments that the more mid range or commodity valve players are simply not qualified or specified to sell into and that’s very much our core focus. We also sell more than just the valve. We have actuation, which actually automates and controls the valve, as well control systems that we sell into as well.

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