United Technologies’ China Sales to Lead Emerging Markets
United Technologies Corp. (UTX) expects Asian sales will increase about 7 percent to 8 percent in the next decade as construction of skyscrapers in China boosts demand for elevators and air conditioners.
Growth in the U.S. may be 2 percent to 3 percent and little-changed in Europe, Chairman and Chief Executive Officer Louis Chenevert, 55, said in an interview in Singapore yesterday. Developing countries account for about 20 percent of Hartford, Connecticut-based United Technologies’ sales, he said.
Almost 60 percent of all the new tall buildings in the world are going to be in China, and that will stoke demand at United Technologies businesses such as Carrier air conditioners and Otis elevators, Chenevert said. The company’s Pratt & Whitney unit is building a plant to make fan blades and turbine disks for plane engines in Singapore as Asia’s economic growth enables more people to fly and boosts the need for new aircraft.
“We see a lot of continued growth momentum,” Chenevert said. “You have to be where the growth is.”
Otis, the elevator-making unit, opened a new plant in China’s Chongqing in September, boosting its presence in a country that makes up about half of worldwide elevator sales. The company’s orders from the nation for elevators and chilling systems are expected to grow in “high single digit” this year, he said.
China’s orders for Otis, the parent company’s third-biggest business in terms of sales, posted a 17 percent increase in the fourth quarter. That comes after three quarters of declines.
The company got 52.65 percent of its sales in the year ended 2011 from the U.S., according to data compiled by Bloomberg. Europe accounted for 21.80 percent and Asia Pacific 16.25 percent.
United Technologies fell 0.3 percent to close at $89.54 in New York. The company yesterday said it plans to buy back as much as $5.4 billion in stock as it resumes share repurchases after a yearlong pause following the Goodrich Corp. acquisition.
The plan of Li Keqiang, set to become China’s next premier, to build rail, road and sewage systems to support an urban population that exceeded rural residents for the first time in 2011 may spur $6.4 trillion of investment by 2020, the Southern Metropolis Daily reported in December, citing the draft of a government plan.
Fast-growing China finished 22 buildings taller than 200 meters in 2012, 33 percent of the global number, according to the Chicago-based Council on Tall Buildings and Urban Habitat.
The 492-meter World Financial Center in Shanghai is the tallest tower in China and the third in the world. The 632-meter Shanghai Tower in the city’s Pudong business hub is set to be the world’s second-highest building when construction is completed in 2014.
United Technologies last month reported fourth-quarter profit that beat expectations as the acquisition of aerospace- parts maker Goodrich buoyed performance. Earnings excluding discontinued operations were $1.04 a share, compared with the $1.03 average of 22 estimates in a Bloomberg survey. Sales rose 14 percent to $16.4 billion.
United Technologies also expects demand in Asia for its aircraft engines, especially for the company’s geared turbofan technology, Chenevert said. Pratt & Whitney unveiled the technology in 2008.
The geared turbofan, which the company has said reduces fuel burn by as much as 15 percent, curbs noise by using a gear to slow the engine’s outer fan.
The jet-engine unit garnered about 3,000 orders for the geared turbofan through the end of 2012, according to a Dec. 21 statement. The company last month won an order to build engines for redesigned Embraer SA (EMBR3) jets. The two new engines Pratt & Whitney will produce for Embraer will provide from 15,000 pounds to 22,000 pounds of thrust, according to the planemaker.
The engine-maker doesn’t see opportunities to provide the geared turbofans for wide-body aircraft as the Airbus SAS A350 is already designed and it’s probably too soon for Boeing’s 777 to be revamped considering the current orderbook, Chenevert said.
United Technologies, through its UTC Aerospace Systems unit, also provides the auxiliary power unit for Boeing 787 planes, which contain the lithium-ion battery that burned on Japan Airlines Co.’s Dreamliner on Jan. 7. The global fleet of Dreamliners have been grounded for more than three weeks now after an All Nippon Airways Co. (9202) plane made an emergency landing in Japan.
“We make the electrical system on the plane which has been validated through tens of thousands of hours of testing,” Chenevert said. “We’ll support the investigation, but we don’t make the batteries, we don’t make the chargers, we don’t make the boxes. At this point we feel very confident of what we deliver to the company.”
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