Dive Brief:
- Johnson Controls reported a strong fourth quarter, with its North America Building Solutions segment showing an 8% increase in organic sales year over year, according to its earnings report.
- It attributed the growth to its service and installation businesses, led by double-digit growth in applied HVAC and controls.
- The company more than doubled its connected assets during the fiscal year, advancing its digital strategy as it gathers more intelligence through data, CEO and Chairman George Oliver said in a Dec. 12 conference call.
Dive Insight:
Despite a cyberattack in September, which impacted Johnson Controls’ ability to release its fourth quarter and full fiscal year results, Oliver said its operations are “back to normal”. He noted the company saw continued strength in its service business amid efforts to maximize its installed base. Against that backdrop, the company achieved 10% full year organic sales growth and 9% growth in its building solutions backlog, to $12.1 billion, due to demand for its commercial building solutions, it said.
Due to that large installed base, improved operations and a strong pipeline, the company sees a “long runway of continued growth for our service business,” Oliver said. The company’s building solutions orders in North America grew 8% year over year, led by a 20% year-over-year increase in HVAC and controls platform orders. These products, which include large commercial applied HVAC equipment, building management systems and controls, accounted for approximately 40% of Johnson’s fiscal year 2023 sales, it said.
In September, Johnson Controls rolled out a new security device performance service as part of its OpenBlue digital platform to help facilities managers more effectively monitor and assess the performance of security technology from various vendors. “We truly believe we are well-positioned to drive continued growth, delivering solutions across sustainable and healthy buildings while leveraging the increased adoption of OpenBlue to drive margin expansion,” Oliver said. “Our pipeline remains strong in our longer-cycle building solutions business as we continue to realize top-line growth.”
However, North America’s year-over-year comparisons showed the impact of the company still working out of a backlog from the last fiscal year, Johnson Controls CFO Olivier Leonetti said on the earnings call. Leonetti added that momentum in its building solutions performance segment remained strong, with a 9% increase in revenue and a 7% growth in service orders during the quarter. Leonetti further noted that the segment’s orders increased 11% for the full year, highlighting the company’s “transformation into a service-led organization.”
Demand remained strong for Johnson Controls’ commercial HVAC services, Leonetti added, and its “leading position” was further extended in FY 2023.
Looking ahead, the company projected flat year-over-year organic revenue in the first quarter of 2024 and mid-single-digit growth for the full fiscal year 2024. It attributed these projections to “normalized seasonality and cyber impact” in the first quarter, strong backlog conversion and high single-digit growth in its service business.
