Specialty Materials - library.corporate-ir.netlibrary.corporate-ir.net/library/94/947/94774/items/188492/... · Honeywell Today *Pie Chart ... Caprolactam Resins • Nylon fibers

Specialty Materials

Investor MeetingMarch 16, 2006

1 Specialty Materials Investor Meeting - March 16, 2006

This report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management’s assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

Forward Looking Statements


10:30 Welcome

10:30 Specialty Materials Overview Dicciani

10:45 UOP Cabrera

11:30 Fluorine Products Preziotti12:00 Lunch

1:15 Depart Hotel – Bus 1 or Bus 2

2:15 Geismar Plant/Industrial Automation Showcase

4:00 Depart Plant - Bus 1 to New Orleans- Bus 2 to Airport

6:00 Cocktails and Dinner – Nola’s

Agenda

Specialty MaterialsDr. Nance DiccianiMarch 16, 2006


Automation & Control

Specialty Materials

Aerospace

Transportation

34%

15%

36%

15%

• 118,000 employees in nearly 100 countries

• A Fortune 75 company ~ $30 billion in sales in 2006

• One of 30 select companies in the DJIA

Honeywell Today

*Pie Chart – 2006E Sales


Fluorines

UOP

Resins and Chemicals

SpecialtyProducts

A High-Performing, Truly Specialty Materials Business

2006E Sales ~$4.4BSegment Margin 11.5 – 12.0%

Specialty Materials• Portfolio transformation essentially complete

• Value-added business in growing markets

• Focus on technology and patents

• 2006 margins > 5x 2002 • UOP a terrific add at a great

time

The New Specialty Materials


Resins And Chemicals

2006E Sales $1.1B

Ammonium Sulfate

Chemicals

Other

Caprolactam

Resins

• Nylon fibers and films• Agriculture• Specialty applications

• Wide variety of intermediate products

• Strong capacity utilization (93%)• Long-term customer

agreements• 2/3 of output shielded from raws

volatility• New markets: Hi-end turf and

resins for specialty films

Applications


• High growth (>2x GDP) markets• On technology roadmaps for most

of the top 10 semiconductor manufacturers worldwide

• Uniquely positioned - expertise and patents in chemistry and metallurgy

• Pioneer of industry standard “spin-on glass” material

• Leveraging portfolio into adjacent marketplaces

Specialty Products 2006E Sales $1.1B

• Semiconductor• Electronics• Optoelectronics• Displays

Customers/Applications

SpecialtyProducts

Electronic Materials

SpecialtyChemicals

PerformanceProducts



Performance Products

• Military and law enforcement• Pharmaceutical and food packaging• Coatings • Luminescent materials for safety and

security


SpecialtyProducts


SpecialtyChemicals

PerformanceProducts

• Strong demand for Spectra fiber and advanced composites for armor; adjacent markets in rope, cordage, cut protection

• Barrier films improve shelf life/safety of packaged food and drugs; alternative energy applications

• Growing market for luminescent materials for emergency egress and anti-counterfeiting



Specialty Chemicals

• High-purity solvents and DNA reagents for biotech research and drug discovery

• Strong branded product lines - Burdick and Jackson and Riedel-de Haën

• Ultracapacitor electrolytes for next generation energy storage devices

• Pharmaceutical and biotech• Healthcare• Semiconductor and Electronics• Coatings


SpecialtyProducts


SpecialtyChemicals

PerformanceProducts



Summary

• Portfolio transformation essentially complete

• Aligned with global trends

- Environmental regulation, energy efficiency

- Refining capacity utilization / expansion

- Electronics industry growth

- Growing global demand for safety and security

• Significantly reduced exposure to raw material volatility

• Well-positioned to expand globally

New Era For Specialty Materials

Carlos A. CabreraMarch 16, 2006


Agenda

• UOP Overview

• Industry Environment

• UOP Segments

• Honeywell/UOP Technology Opportunities

• Summary


• Leading supplier and licensor of processing technology, catalysts, adsorbents, process plants, and technical services to the petroleum refining, petrochemical, and gas processing industries

• $1.3 billion sales; mid-teens margins

• Strong relationships with leading refining and petrochemical customers worldwide

• 70+ processes in 6,000+ units in hydrocarbon processing industry

• 300+ catalysts, adsorbents - many processes

• ½ of world’s biodegradable detergents use UOP technology; 31 of 36 refining technologies in use today created by UOP

Present From Project Concept Through Project Life

UOP Overview

Products

Licensing &

Services

Equipment

2005 Sales


Global Presence

Presence In 20 Countries

AsiaIndia

China

EuropeAmericas Sales / Service OfficesManufacturingResearch Alliances

2005 Sales by Region


Refining Landscape

Alkylation

C4-C6Isomerization

Market Position: 1

Fluid CatalyticCracking

Market Position: 1

HydrocrackingMarket Position: 1

CatalyticReforming

Market Position: 1

Fractionation

Crude Oil

COKE

Residual Hydrotreating

Coking (Alliance)

Gasoline

Jet Fuel/Kerosene

Diesel

Fuel Oil

HydrogenMarket Position: 1

Impure H2

Processes End Products

Process & Catalyst/Adsorbent/ServicesProcess Technology and ServicesAlliance

HydrotreatingMarket Position: 1

Coking

Fractionation

Petrochemical Feedstocks


Petrochemical And NG LandscapeProcesses

Aromatics Complex (Market Position 1)

Ethyl-Benzene

Styrene

Oleflex

Cumene PhenolPropylene

Propane

Ethylene

Naphtha

Kerosene

Synthesis Gas

Natural Gas Various Treating and ContaminantRemoval Technologies

Gas Processing (Market Position: 1)

End ProductsIntermediates

p-Xylene (Polyester)

Styrene (Polystyrene)

Phenol (Polycarbonate)

Propylene(Polypropylene)

Linear-Alkyl Benzene

Feedstock to Conversion Processes

(Building Blocks for Polymers)

Catalytic Reforming Parex Isomar

Tatoray

Molex Pacol Detal

Key: Process & Catalyst/Adsorbent/ServicesProcess Technology/Adsorbent/ServicesAlliance

On-Purpose Propylene (Market Position: 1)

Phenol Production (Market Position: 2)

LAB Production (Market Position: 1)

Styrene Production (Market Position: 2)

SyntheticDetergents

Plastics andChemicals

LNG

Pipeline Natural Gas

Methanol (MTO Feed)

GTL Liquids

Coal


UOP Revenue Points

Multiple Technologies, Products, Services

Training

Equipment& Systems

ProjectManagement

Design

Royalty

ProcessLicense

ContinuingServices

Start-UpServices

Adsorbents/Desorbent

InitialCatalyst Fill Catalyst

Reloads

AdditionalPaid-Up Royalty

Services Licensing Products Equipment

Proj

ect

Con

cept

Proj

ect

Life


70

75

80

85

90

95

2000 2002 2004 2006 2008 2010

Actuals

Oil Consumption

0

40

80

120

160

1980 1990 2002 2010 2015 2020 2025

Natural Gas Consumption

Million Barrels per Stream Day

Trillion Cubic Feet

Business Environment

• Demand for petroleum product remains strong worldwide

• Natural Gas - fastest growing energy source for next two decades

• Para-xylene demand expected to remain strong through 2008

• Demand for ethylene and propylene is forecast to grow at annual average rates of 4.6% and 5.1%, respectively, over the next 5 years

• Overall growth greater than 5% in every region

Long-Term Demand Benefits UOP


Refining Trends

Refining Capacity Utilization

80

85

90

95

1999 2002 2005 2008

Util

izat

ion

%

1.08

1.12

1.16

1.2

1.24

1990 1994 1998 2002 2006 20101.08

1.12

1.16

1.2

1.24

1990 1994 1998 2002 2006 2010

• Strong growth in oil demand coupled with tight refinery utilization has created a strong driver for refinery investment

• Continuing trend toward sulfur-free fuels

• High level of residue conversion required

Capacity Needs = Strong Business Environment

Crude Sulfur Content

Sulfu

r %

U.S.

Asia

Europe

Refining Capacity Regional Forecast

90% Utilization

Million barrels/day

8.5%83.476.9Totals

5%2.22.1Africa

20%97.5Middle East

4%54.8FSU

12%7.46.6L. America

9%16.615.2Other AP/India

56%74.5China

-3%15.415.8Europe

2%20.820.4N. America

%20102004


Process Technology & Equipment (PT&E)

70+ different processes in 6,000+ units in petroleum refining and petrochemical industries• Engineered products

• Packaged process units and systems

• Proprietary equipment

• Control systems and instrumentation

• Consulting services

• Technical support alliances

• Technical personnel training & development

• Knowledge sharing systems

Product Line Breadth And Depth


• Refining • BTX• Petrochemicals

PT&E – Industry ParticipantsCompany Segment

• BTX• Methanol-to-Olefin • HC

• PC• Refining• HC w/Chevron

• Refining

• Natural Gas Treatingwith Membranes

• H2/PSA, Gas

All


• Catalysts to support UOP’s licensed technologies as well as other refining and petrochemical technologies

• 300+ catalysts supplied around the world • Catalyst manufacturing in U.S., UK and Japan• Reloads represent 80% of catalyst sales

Catalysts, Adsorbents & Specialties (CA&S) Catalysts

Molecular Sieves & Adsorbents

• Diverse applications including drying & purification; natural gas, refrigerants, insulated windows, mercury removal, pollution abatement and deodorization; separations

• Portfolio of 150+ products• Manufacturer in U.S. Italy, Japan and China

Leading Catalyst And Adsorbent Supplier



CA&S – Industry ParticipantsCompany Segment

• Refining• Petrochem

• FCC HC• Resid HT• Molecular Sieves

• BTX• Petrochem

• Molecular Sieves• Adsorbents


• Molecular Sieves• Adsorbents

All


Technology Development

“For more than 85 years of sustained technical leadership and innovation

for the petroleum refining and petrochemical industries; and for the invention and commercialization of

adsorbents, catalysts, process plants, and process technology.”

2003 National Medal of Technology Recipient

• UOP developed every major step change in refining technology since 1914

• Widely recognized as a global leader in technology development

• R&D expertise in materials science, catalysis, process development

• Capabilities in – New materials synthesis– Advanced characterization– Multi-scale modeling from molecular

to process scale– Nanotechnology– Advanced sensing and process

control

Track Record Of Technology Innovation


HON/UOP Opportunities

SM/UOP

ACS Aerospace

TS

Process Knowledge

WirelessSensors

Catalysts and

Adsorbents

Catalysts and

Adsorbents

Process Control& Simulations

Clean AirProducts

AirHandling

Cross-Portfolio Technology Opportunities


Summary

• Recognized leader in technology and products for refining and petrochemicals

• Strategy closely aligned with favorable global trends

• Global presence and close customer relationships

• UOP a great addition at a great time

Great Position In An Expanding Market

Fluorine ProductsRichard PreziottiMarch 16, 2006


Agenda

• Industry and Business Overview

• Fluorocarbon Regulatory Environment

• Fluorine Products Position/Strategy

• Business Growth Story

• Geismar Plant Profile

• Technology Strategy

• Summary


Fluorine Industry And Value Chain

• $10B Space Growing 4-5%/year- IP intensive – application and process- Capital intensive- “F” properties – increasing applications

• Honeywell a beneficiary of:- Increasing regulation- Demand for energy efficiency- Urbanization- Higher standards of living

FluoropolymerFilms

CAF2(Fluorspar)

HydrogenFluoride

(HF)Fluorocarbons

FluorinatedGases

UraniumHexafluoride

Growing Space; New Applications Increasing

$3B

$4B $3B

Overview

Fluorocarbons,HF & Gases(Honeywell

Focus)SpecialtyFluorines

Fluoropolymers

Honeywell Value Chain


Headquarters: Morristown, NJ

2006E Sales: $0.9B

• Geismar, La.• Baton Rouge, La.• QingPu, China• Metropolis, Ill.• Danville, Ill.• Amherstburg, ON• Denver, Col. (JV)• Monterey, Mexico (JV)

Business Overview

• Hydrofluoric Acid• Fluorinated Gases• Uranium Hexafluoride• Fluorocarbons for:

– Refrigeration & A/C– Foam Insulation – Aerosols and Solvents– Medical Applications

Facilities

Major ProductsStatistics


Regulatory Environment – Ozone Depletion

• 1996 - Montreal Protocol phases out CFC production in developed countries

• 2003 - U.S. HCFC allocation rule- U.S. phaseout of HCFCs for foam

and aerosols

• 2004 - HCFC new A/C equipment phaseout in Europe and Japan

- Europe HCFC foam phaseout

• 2010 - U.S. A/C new equipment HCFC phaseout

Regulation Drives HFC Growth

Global Fluorocarbon DemandKey Milestones

0

200

400

600

800

1,000

1,200

2002 2004 2006 2008 2010

HFCsHCFCsCFCs

‘000

Met

ric T

ons

2002 Ozone Protection Award• Developed HFC-245fa• Screened hundreds of potential

foam blowing agents• Significant investments made in:

- Research- Toxicity testing- Applications development- Manufacturing processes- Plant construction

11% HFC CAGR


Fluorine Products Position/Strategy

• Vertically integrated in HF – largest global manufacturer

• Extensive IP portfolio• Strong process manufacturing

capability• Fluorine technology and

applications expertise• Sole U.S. supplier of nuclear

conversion services

Position

• Capture global regulatory-driven HFC growth

• Category expansion for foam applications

• Develop new applications/next-generation F-products

Strategy

Diverse Integrated Fluorine Business

$0.9B

Refrigerants

HF

Foam

Nuclear Services

Fluorinated Gases

2006E Sales


00.20.40.60.8

1

2002 2006

Fluorine Products Growth

2002 - 2006• Global Refrigerant/HCFC A/C new

equipment phaseout in Europe and Japan

• Foam conversion from HCFCs to HFCs in U.S., Europe and Japan

• Value Pricing

Future• Continued global expansion• 13 SEER drives increased refrigerant

charge• U.S. A/C new equipment HCFC

phaseout• Foam category expansion driven by

demand for energy efficiency• Renewed interest in nuclear energy• Next-generation products (LGWP)

Strong Growth Track Record

Sales GrowthGrowth Drivers

14.5% CAGR

($B

) $0.5

$0.9

2002 2006

North America

Europe

LARAsia

North America

Europe

LAR Asia


0

200

400

600

800

'03 '04 '05 '06 '07 '8 '09 '10 '11 '12 '13 '14

Genetron® RefrigerantsPosition

• Energy efficiency- 13 SEER in U.S. increases refrigerant charge

• U.S. A/C conversion to HFCs• Production shift to China and Southeast Asia• Lower price to consumers

- Increased A/C penetration globally- Increased HFC units for Europe and Japan

Growth Drivers

• Global strength in HFC blend IP• Leading asset position for HFC blend

components- Largest HFC-125, 143a manufacturer

• Strong U.S. HCFC position in regulated market

• Strong OEM relationships and aftermarket positions in U.S., Europe, Japan

• Co-producer HFC-125 supply agreements• Unique U.S. auto A/C aftermarket

distribution through Honeywell Consumer Products Group

Auto A/C: 1%

Refrigeration: 6%

A/C: 12% CAGR

*HON Internal Estimate

Leading Global Refrigerants Franchise

RefrigerationHFC507HFC404a

Air ConditioningHFC410aHFC407c

HFC-125

M lb

s.

Global Demand


Enovate® Blowing Agents

• Energy efficiency requires better insulation materials

• HFC-245fa blown rigid closed-cell foam has superior insulation properties vs. other materials

• HFC-245fa value proposition– Liquid blowing agent– Higher R-value– Non-flammable

Growth Drivers

Position• Exclusive NA IP position for HFC-245fa in foam

applications• Only world scale HFC-245fa manufacturing

facility – Geismar, La.• Extensive foam applications and formulation

expertise• Major U.S. appliance manufacturers under long-

term contracts• Strong relationships with foam systems suppliers

Appliance 40%Construction 60%


Growing Category For HFC-245fa – Residential SPF

Insulation Share

Foam

Fiberglass

Other

100% = $4B

1%

88%

11%

1% 245fa blown foam = $8M sales

SPF Blown to 19 R-Value

Insulation Value Chain

Creating Demand Pull Through

Homeowner• Less energy use for

heating and cooling• Structural integrity• Indoor air quality• Noise reduction

Builder• Reduction in call-

backs/warranty reserves• Up-sell opportunity

Tremendous Opportunity For Growth

R-Value Fiberglass19

17.4

13.7

Label Perfect Real

HON Blowing Agents Formulators Spray

ContractorsBuilders New Home

Buyers

Value Proposition

Public Relations, Branding

“One Honeywell” Approach• ACS builder program


Nuclear Conversion Services

• Rising oil and natural gas prices• Concerns over global warming gases

– byproducts of fossil fuel-generated electricity

• Newer generation of nuclear reactor technology

• New power plants planned in China, India, Russia and eventually U.S.

• Fuel demand outstripping supply

Growth Drivers

• Only U.S. supplier of conversion services

• Facility licensed by Nuclear Regulatory Commission

• High purity process• Recognized player with more than 50

years in conversion services

Position

Future Market Dynamics Are Favorable

Uranium mining/

processingEnrichmentConversion

U308

HoneywellMetropolis, Ill

FuelRodsFuel

FabricationUF6 LEU


Hydrofluoric Acid

• World’s largest producer • Leader in safe transport and delivery• ISO-certified manufacturing facilities in

Geismar, La., Amherstburg, Ontario, Canada and Seelze, Germany

• Unmatched technical expertise for every phase of HF life cycle

• Innovative solutions to improve utilization, safety and performance for customers worldwide

Position

• Feedstock for fluorochemical manufacturing• Petroleum Alkylation• Quartz processing• Glass etching• Semiconductor manufacturing

Key Applications

FluoropolymerFilms

CAF2(Fluorspar)

HydrogenFluoride

(HF)Fluorocarbons

FluorinatedGases

UraniumHexafluoride

Honeywell Value Chain


Geismar Plant Profile

• World’s largest HF plant• HFC multi-products plant

– 134a, 245fa, 124 and 125• Aclon fluoropolymer resin

Production Assets

Industrial Controls/Security Showcase

World Class Fluorine Manufacturing Facility

• Fully integrated controls and security systems• Advanced process control• Valve process performance management• Alarm system management• Upward capability to advanced statistical process

analysis• Perimeter and interior card access/biometrics• Integrated radar system monitors vital waterway and

approach to dock


Fluorine Products Technology Capability/Strategy

Capability

• More than 50 years of experience with fluorine chemistry– Fluorocarbon and fluorochemical applications development– Process development to support world-class manufacturing– Lab to pilot plant scale equipment

• 459 global “F” patents granted• 440 global “F” patent applications pending

Issues that DriveOur Technology Development Strategy

• Climate change• Energy efficiency• Globalization

• Focus on environmentally improved “F” materials

• New applications for existing “F” molecules

• New “F” molecules for existing and new applications

World Class Fluorine Chemistry Capability


HFCs And Climate Change

• Signatories required to meet GHG reductions –average of 5.2% below 1990 levels

• Dependence on emissions trading to meet caps

• US did not sign, but state & regional plus voluntary industry initiatives underway

• EU F-Gas Regulation entry into force in 2007• Emphasis on responsible use of HFCs

• HFCs expected to contribute ~4% of expectedglobal warming

• HFCs “visible” - high global warming potential/kg• CO2 is the main contributor - but difficult to

regulate

Atmospheric Model Calculations Kyoto Protocol Update

EU F-Gas Regulation

• Mobile A/C Directive- 1/1/2008 40 g/yr maximum leakage requirement- 1/1/2011 ban on gases with GWP>150 for new

vehicle types/platforms- 1/1/2017 ban on gases with GWP>150 for all new

vehicles

CO2 Is The Problem – But HFCs Now Targeted In Europe


H 134a CO2

Boiling Point, Tb -30oC -26oC -79oC

Flammable No* No* No

GWP100 < 10 1300 1

*ASHRAE Std. 34 & SAE J1657

Fluid “H”: Potential LGW Alternative to HFC-134a In Auto A/C

Vapor Pressure

Pres

sure

, bar

Temperature, oC

Physical Properties

CO2

• Natural refrigerant – leading 134a replacement candidate

• High pressure means higher A/C system costs per car, plant retooling and in-field servicing issues

CO2

• Near drop-in for 134a- Lower per vehicle cost- Minimizes system redesign and capital costs

• Next Steps- Manufacturing process development- Full toxicology screen- Customer fleet testing

Fluid “H” Value Proposition

Initial Unoptimized Customer Testing … Performance Close To 134a!


Summary

Great Position In Expanding Market

• Integrated industry leader with scale

– Largest global HF, HFC-125, HFC-143a, HFC-245fa producer

– Sole U.S. producer of nuclear conversion services

• Extensive applications and manufacturing process IP portfolio

• Strong customer relationships – OEM and aftermarket

• Favorable global dynamics driving demand

– Increasing regulation – need for environmental products

– High cost of energy – need for energy-efficient products

– Urbanization

– LCR A/C production reduces prices and increases unit demand

Documents

Specialty Materials - library.corporate-ir.netlibrary.corporate-ir.net/library/94/947/94774/items/188492/... · Honeywell Today *Pie Chart ... Caprolactam Resins • Nylon fibers