Dive Brief:
- Johnson Controls’ North America Building Solutions business grew its revenue 4% year over year, reaching $2.49 billion in the first fiscal quarter of 2024, according to the company’s Q1 2024 earnings presentation. The company attributed the revenue growth to double-digit growth in its applied HVAC and controls segment.
- The building solutions business increased orders 6% year over year in North America— excluding mergers and acquisitions and adjusted for foreign currency — with its backlog growing 11% year over year to reach $8.4 billion at the end of the quarter, according to Johnson Controls’ Q1 2024 earnings report.
- “Overall, there was broad-based demand in our [North American] healthcare, data center, government and education sectors,” Johnson Controls CFO Olivier Leonetti said on the company’s earnings call, noting that install orders increased 9% year over year, with “solid growth” in both retrofits and new construction projects.
Dive Insight:
In addition to the mid single-digit in sales and orders for its Building Solutions business, Johnson Controls’ grew the segment’s adjusted earnings before interest, taxes and amortization in North America by 11.5% year over year to $285 million, according to its earnings presentation. On the earnings call, Leonetti noted that the growth in the segment’s EBITA, up 20 basis points, was driven by “continued execution of higher margin backlog and strength in our higher margin service business.”
Sales in North America were driven in part by strong growth across Johnson Controls’ HVAC & controls segment, which grew by low teen percentages year over year, Leonetti said. Fueled by continued momentum in new construction, up 25% year over year, the firm’s install business also grew 4% from the same period last year, Leonetti said.
In addition to growth in its applied segment, which includes large commercial HVAC equipment, the firm’s OpenBlue building management system and controls, the company saw low single-digit growth in its sustainability infrastructure business, which helped offset mid single-digit decreases in fire and security sales.
Building a leading digital building solutions platform continues to be a core aspect of Johnson Controls’ strategy, Marc Vandiepenbeeck, who assumed the role of CFO Wednesday, said on the call. Vandiepenbeeck added that the company is pleased with the strength of its applied HVAC business, specifically as it serves the fast-growing data center market.
The company’s strong first-quarter earnings follow a mixed fourth quarter for the firm, including both an 8% year-over-year increase in sales for its North America Building Solutions business as well as a “significant disruption” from a cyberattack that impacted the Johnson Controls’ ability to release its fourth quarter and full fiscal year results.
“While it is challenging to comprehensively quantify the overall business impact as we recover from the incident, we are back on track,” Oliver said on the call.
“We entered the second quarter with a backlog that remains at historical levels, a healthy pipeline of opportunities, and strong momentum in our industry-leading service business,” Vandiepenbeeck added. The new CFO noted that while the company expects North America to be a strong contributor to second-quarter sales, management is issuing second-quarter guidance with the expectation of a flat year-over-year performance, due in part to a cautious macro outlook in China and ongoing declines in the global residential HVAC sector.
