Honeywell International Inc.

Company Profile

Publication Date: 2 Jun 2010

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Honeywell International Inc.

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Honeywell International Inc.
TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview..............................................................................................4
Key Facts...............................................................................................................4
SWOT Analysis.....................................................................................................5

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Honeywell International Inc.
Company Overview

COMPANY OVERVIEW

Honeywell International (Honeywell) is a diversified technology and manufacturing company. The

company has interests in aerospace products and services; control technologies for buildings, homes
and industry; automotive products; turbochargers; and specialty materials. Honeywell operates in
the US, Europe and other international markets. It is headquartered in Morristown, New Jersey and
employs 122,000 people.

The company recorded revenues of $30,908 million during the financial year ended December 2009
(FY2009), a decrease of 15.5% compared to FY2008.The decrease in revenues was due to sluggish
performance of all business divisions of Honeywell. The operating profit of the company was $3,437
million during FY2009, a decrease of 19.6% compared to FY2008. The net profit was $2,153 million
in FY2009, a decrease of 22.9% compared to FY2008.

KEY FACTS

Head Office Honeywell International Inc.

101 Columbia Road
Morristown
New Jersey 07962 2245
USA
Phone 1 973 455 2000
Fax 1 973 455 4807
Web Address http://www.honeywell.com
Revenue / turnover 30,908.0
(USD Mn)
Financial Year End December
Employees 122,000
New York Ticker HON

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SWOT Analysis

SWOT ANALYSIS

Honeywell International (Honeywell) is a diversified technology and manufacturing company. The

company has interests in aerospace products and services; control technologies for buildings, homes
and industry; automotive products; turbochargers; and specialty materials. A diversified product
base enables Honeywell to take advantage of opportunities within its divisions, while insulating the
company from segment specific threats. However, intense competition across all the operating
divisions of the company could erode its market share.

Strengths Weaknesses

Diversified product portfolio and well Modest presence in emerging markets

balanced revenue stream Sluggish performance of all business
Robust inorganic growth divisions
Strong research and development
capabilities

Opportunities Threats

Growth in US defense funding Intense competition

Growing demand for commercial airplanes Environmental obligations
Recovery of global automobiles industry Heavy dependence on few suppliers

Strengths

Diversified product portfolio and well balanced revenue stream

Honeywell has a diversified product portfolio. The company operates through four business divisions,
comprising of aerospace, automation and control solutions, specialty materials and transportation
systems. The aerospace division is organized by customer end-market, which includes air transport;
and regional, business and general aviation; and defense and space. It provides products and
services which include auxiliary power units, propulsion engines, environmental control systems,
engine controls, repair and overhaul services, hardware, and logistics.

The automation and control solutions division offers controls for heating, cooling, indoor air quality,
ventilation, humidification and home automation; advanced software applications; sensors, switches,
control systems and instruments for measuring pressure, air flow, temperature and electrical current;
security, fire and gas detection; personal protection equipment; and remote patient monitoring
systems. In addition it also offers building solutions for residential buildings and process solutions
for industrial plants.

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SWOT Analysis

Specialty materials division provides fluorocarbons, specialty films, advanced fibers, customized
research chemicals and intermediates, electronic materials and chemicals, and catalysts and
adsorbents. The company’s transportation systems division offers turbochargers, charge-air and
thermal systems, car care products, brake hard parts and other friction materials. Diversified product
portfolio enables Honeywell to tap diverse set of customers.

The company also has a diversified revenue base. Automation and control solutions, the largest
business division of the company, accounted to 40.8% of total revenues in FY2009. The other
operating divisions which accounted to the remaining part of the revenues included: aerospace
(34.8%); specialty materials (13.4%); and transportation systems (11%). A diversified revenue base
enables Honeywell to take advantage of opportunities within its divisions, while insulating the company
from segment specific threats.

Robust inorganic growth

Honeywell focuses on acquisitions to expand its business and to earn more revenues. In FY2009,
the company acquired RMG GROUP (RMG Regel + Messtechnik and all of its subsidiaries, together
RMG) for approximately $400 million. RMG is a global leader in natural gas measuring and control
products, services and integrated solutions. RMG aligns strongly with Honeywell’s extensive portfolio
of field instrumentation and control solutions. The acquisition strengthens Honeywell’s position in
the high-growth clean energy industry, specifically natural gas. The integration of RMG products
into the Honeywell portfolio enables it to provide more comprehensive solutions that can reduce
installed, operating and engineering costs and improve its customers’ performance. In addition, the
deal provides significant opportunity for Honeywell to grow within its existing customer bases in both
mature and emerging markets around the world.

Later in May 2010, the company acquired San Rafael, California-based Akuacom, a leader in
automated demand response technology and services for the smart grid. Akuacom deepens
Honeywell’s involvement in making the electrical grid smarter, secure and reliable. This acquisition
complements Honeywell’s experience in managing all aspects of utility-sponsored demand response
programs, from program design and load-control technology to marketing and customer support.
Therefore, acquisitions bring complementary technologies, support geographic expansion and
leverage existing infrastructure for Honeywell. In addition, acquisitions indicate an ongoing commitment
to the company's growth strategy, managing its assets conservatively, and making appropriate use
of cash flows.

Strong research and development capabilities

Honeywell has a strong emphasis on research and development (R&D), focusing to deliver innovative
products and technologies, and improve the capabilities of existing products. The company's R&D
division identifies latest trends, and works closely with production units. Honeywell invested $1,330
million in R&D in FY2009. The company has research and development activities in the US, Europe,
India and China. Significant investments in R&D have also enabled the company to launch new
products on a timely basis.

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SWOT Analysis

In January 2010, the company launched the Honeywell Enovate PRO Contractor Program designed
to help contractors expand their business offerings in the area of air sealing and weatherization for
home and buildings. The program features new Honeywell products, including energy-efficient foam
insulation and sealants, as well as professional development training, ultimately helping program
participants to become authorized Honeywell Enovate PRO Contractors. During the same period,
it also launched the Enovate Insulating Foam Sealants designed specifically for heating, ventilation
and air conditioning contractors.

In addition, Honeywell completed the initial ground tests for the APU on the Airbus A350 XWB aircraft
in March 2010. Its HGT1700 APU features technological advances to increase safety and operability
while integrating the APU and air management systems, giving Airbus a more efficient system. Later
in March 2010, the launched a new printable thermal management material, Honeywell PCM45M-SP,
designed to help manage the tremendous heat produced by increasingly powerful semiconductors
in portable computing devices such as laptops and netbooks.

Strong R&D capabilities allow Honeywell to attain competitive advantage over its peers, maintain
technological edge over its competitors, and to stay ahead of industry trends. In addition, it allows
the company to differentiate its products from those of its competitors.

Weaknesses

Modest presence in emerging markets

Honeywell has moderate presence in fast growing Asian markets such as India and China despite
having operations in the Asia Pacific. This is signified by the share of international segment in the
total revenues generated by the company. The company derived about 14.7% of the total revenues
from locations other than the US and Europe for FY2009. Asian markets such as China and India
are fast growing markets, which are capable of enhancing the company's revenue growth.
Dependence on the US and the Europe makes Honeywell susceptible to economic risks in those
markets. Inability to develop international offerings may leave Honeywell at a disadvantage relative
to competitors with better geographic coverage. Moreover, this lack of market share in these emerging
regions may eventually cause Honeywell to be at a competitive disadvantage against rivals with
growing operations in fast growing Asian countries.

Sluggish performance of all business divisions

Honeywell has witnessed a decline in its sales in all business divisions. The automation and control
solutions division sales deteriorated 10% in FY2009 compared to FY2008, as a result of decreased
sales volume (reflecting slower global economic growth) and an unfavorable impact of foreign
exchange of 4%. Aerospace division’s sales declined 14.9% in FY2009 due to lower sales to its
original equipment customers; decreased sales of spare parts and lower maintenance activity; and
decrease in new business jet deliveries.

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SWOT Analysis

The specialty materials division witnessed 21.3% decline in its sales in FY2009 due to lower sales
volume, substantial price declines arising from pass through of lower raw materials costs and due
to customer deferrals of projects as a result of reduced demand for additional capacity in the refining
and petrochemical industries as well as lower catalyst sales. The sales of the transportation systems
division of the company decreased 26.7% in FY2009 compared to FY2008, due to the lower volumes
(driven by the ongoing challenging global automotive industry conditions) and the negative impact
of foreign exchange in the first nine months of FY2009.

As a result, the company generated revenues of $30,908 million during FY2009, a decrease of
15.5% compared to FY2008. Therefore, sluggish performance of all business divisions affected
Honeywell’s financial performance.

Opportunities

Growth in US defense funding

The economic crisis would not dampen defense spending in the US. Defense spending is a long-term
recession-proof industry which would not be affected by cyclical downturns and upturns. The
increasing threats to international security would continue and military spending would grow in future.
The US accounts for the biggest share of global military spending. The 2011 US budget allocates
$708.2 billion to the Department of Defense (DoD). Of this, the base budget is set at $548.9 billion,
while overseas contingency operations in Iraq and Afghanistan will receive $159.3 billion. Together,
this represents a 2% growth over total defense spending for 2010.

Sales of Honeywell’s defense and space-related products and services are largely dependent upon
government budgets, particularly the US defense budget. Sales as a prime contractor and
subcontractor to the US DoD comprised approximately 32% and 11% of Aerospace and total sales,
respectively, for FY2009. Therefore, increasing US defense spending could provide the topline
growth for the company in the short to medium term.

Growing demand for commercial airplanes

Air transport throughout the world is constantly changing in response to market opportunities and
challenges. The rise of new airline business models and rapid growth of air travel in the world's
emerging economies are stabilizing worldwide demand for airplanes. Boeing forecasts a $3.2 trillion
market for 29,000 new commercial airplanes over the next 20 years and takes into account the
industry's near-term realities, including a global economic recession, declining passenger and cargo
traffic, and unpredictable fuel prices. Passenger traffic is expected to grow at an average rate of
4.9% each year for the next 20 years. Asia Pacific region is forecasted to be the largest market with
a value of $1.13 trillion.

Air travel to, from and within the Asia Pacific region will grow from a 32% share of the world air travel
market to 41% over the 20-year period. The operating results of Honeywell’s aerospace division,

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SWOT Analysis

which generated 34.8% of its consolidated revenues in FY2009, are directly tied to cyclical industry
and economic conditions, including global demand for air travel as reflected in new aircraft production,
the deferral or cancellation of orders for new aircraft, delays in launch schedules for new aircraft
platforms, the retirement of aircraft, global flying hours, and business and general aviation aircraft
utilization rates and etc. Honeywell is well positioned both geographically and technically to service
the huge aircraft market in the future. Hence, the company is well positioned to capitalize on the
growing commercial airplanes market.

Recovery of global automobiles industry

In 2008 and in 2009, the global automotive industry was deeply impacted by the economic slowdown
with problems such as production overcapacity, high inventory, and low profitability. However, the
industry is expected to recover in 2010, posting strong growth thereafter. Improvement in credit
availability and increase in consumer confidence, catalyzed by the government stimulus packages
around the world and growing demand in Brazil, Russia, India, and China, and other emerging
economies will help aid the recovery of global automotive market. India and China represent the two
most important growth markets for the ailing global auto industry. The expected recovery in global
auto sales will be fuelled by an estimated 11.8% growth in Indian auto sales in 2010 and an expected
9.9% increase in China. Buoyed by the booming markets of India and China, global auto sale is
expected to grow 4.3% in 2010 to 66.1 million units. Auto sales in the US are expected to gain 8.3%
from 2009 to 11.27 million units in 2010.

In addition, an improving economy coupled with record large fleet capacity reduction efforts will cut
deeply into excess capacity by the end of the year, leading to new truck orders. The production of
Class 8 heavy trucks is projected to rise 18% in the first half of 2010. By mid-year, rising demand
for truckload freight services will pressure carriers to order new equipment. Honeywell’s transportation
systems division’s operating results, which generated 11% of its consolidated revenues in FY2009,
are impacted by global production and demand for automobiles and trucks. It also depends upon
consumer demand and spending for automotive aftermarket and car care products. Therefore,
recovery of global automobiles industry would increase opportunity for Honeywell to increase its
revenues.

Threats

Intense competition

Honeywell is subject to active competition in substantially all product and service areas. Competition
is expected to continue in all geographic regions. Competitive conditions vary widely among the
thousands of products and services provided by the company, and vary by country. Depending on
the particular customer or market involved, Honeywell’s businesses compete on a variety of factors,
such as price, quality, reliability, delivery, customer service, performance, applied technology, product
innovation and product recognition. Brand identity, service to customers and quality are generally
important competitive factors for the company’s products and services, and there is considerable
price competition.

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SWOT Analysis

Other competitive factors for certain products include breadth of product line, research and
development efforts and technical and managerial capability. However, a number of Honeywell’s
products and services are sold in competition with those of a large number of other companies,
some of which have substantial financial resources and significant technological capabilities. In
addition, some of the company’s products compete with the captive component divisions of original
equipment manufacturers. Intense competition across all the operating divisions of the company
could erode its market share.

Environmental obligations

The company's operations are subject to strict environmental regulations. It is subject to various
federal, state, local and foreign environmental laws and regulations in all of the jurisdictions in which
it operates.These laws and regulations cover the discharge, treatment, storage, disposal, investigation
and remediation of some materials, substances and wastes. The company was responsible for
remedial response and voluntary cleanup payments of $318 million, $320 million and $267 million
in FY2009, FY2008 and FY2007, respectively, and is currently estimated to be approximately $285
million in FY2010.

Honeywell is involved in environmental investigations or remediation at some of its current and

former facilities, and at third-party sites. A violation of these laws and regulations could result in
imposition of fines and penalties or the termination of the company's contracts. Such regulations
could put cost pressures on the company and affect its cost structure.

Heavy dependence on few suppliers

Honeywell's operations require significant amounts of important parts and raw materials.The company
depends on suppliers, third party contract manufacturing and commodity markets to secure raw
materials, parts, components and subsystems. Honeywell is exposed to the volatility in the prices
and availability of these materials, especially for a few key raw materials such as natural gas, benzene,
ethylene, fluorspar and sulfur used in their specialty materials business; steel, nickel, other metals
and ethylene glycol in the transportation systems business; and nickel, titanium and other metals in
the aerospace business. In some instances, the company depends upon a single source of supply,
manufacturing or assembly or participates in commodity markets that may be subject to allocations
of limited supplies by suppliers. As this effort progresses, the company is exposed to an increased
risk of disruptions to its supply chain, which could have a significant effect on its operating results.
In addition, if Honeywell is unable to procure these parts or raw materials, the company's operations
may be disrupted, or it could experience a delay or halt in certain of its manufacturing operations.
Supplier capacity constraints, supplier production disruptions, supplier financial condition, price
volatility or the unavailability of some raw materials may have an adverse effect on Honeywell's
operating results and financial condition.

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