ITT Corporation hopes its customers are pumped, moved, and energized about its products. A diversified manufacturer, ITT makes a range of industrial products through four operating segments: industrial process (pumping systems, valves, and services for oil and gas and chemical companies); motion technologies (brake pads and friction materials for transportation markets); interconnect solutions (ICS, connectors for fiber optic, RF, power, and other electronic products); and control technologies (hydraulic valves, actuators, and switches for aerospace companies). In 2011, ITT spun off two of its other key segments, Defense and Fluid, into independent, publicly-traded operating companies, Exelis and Xylem.
The industrial process segment's diversified customer base -- ranging from individual end users to large multinational companies -- includes such markets as oil and gas, mining, power generation, and chemicals. Offering aftermarket services, the segment operates eight Pump Repair and Overhaul outlets in the US, as well as facilities in Australia, Brazil, Chile, Saudi Arabia, Thailand, and Venezuela. Industrial process also provides services for plant optimization and efficiency improvement. The segment accounts for about 36% of sales.
Motion technologies, accounting for 30% of sales, serves the automotive, truck, trailer, bus, and rail sectors. Customers include Shanghai General Motors and Daimler-owned Mercedes in China. Aftermarket sales are also an important element of this segment's business. The segment is itself divided into two businesses, Friction Technologies (brake pads) and KONI (shock absorbers and damping equipment).
ICS, 20% of sales, serves the aerospace, industrial, defense, and oil & gas markets with products that allow the transfer of signal and power in electronic devices. Brands include Cannon, VEAM, and VIW. The products are focused primarily on two applications, harsh environments and telecom, computer, and consumer technologies. The company's smallest segment, control technologies, (14% of sales), supplies the military and industrial markets, as well as aerospace, with fluid handling, motion control, and shock isolation products.
ITT does about 38% of its business in the US, but operates in more than 30 countries and makes sales in 100+ countries.
Year-over-year 2011 sales for the company as a whole rose 11% on the back of strong sales in emerging markets and the company's core markets, including oil and gas, mining, transportation, and aerospace. By segment industrial process rose 10%, thanks in part to demand for aftermarket pump parts and service and pump units. Especially helpful for the segment was the North American chemical sector, which raised demand in response to cheaper natural gas. The segment also won six strategic account agreements in 2011.
Motion technologies surged about 16% on the back of demand for braking equipment by OEMs. Shock absorber equipment was another important contributor to the segment's growth. Interconnect solutions inched up 1%, supported by more demand from Boeing and regional jet OEMs, as well as strong sales of such new products as electronic vehicle-related connectors. The Middle East and Latin America oil and gas sectors also contributed to growth for the segment, as did demand from the defense market for radar and communication equipment. The segment struggled with lower demand from the smartphone market. Control technologies soared about 16% to meet demand from Boeing and Airbus. Strong sales of such oil and gas and energy products as Neo-Dyne switches and Conoflow regulators also boosted the segment's results.
ITT's six-pronged growth strategy is focused on improving the customer experience, investing in technology and research and development, expanding in growth markets, growing aftermarket sales, expanding margin through operations improvements, and using capital to grow organically and inorganically. To improve customer relationships the company uses the Value-Based Commercial Excellence (VBCE) process, which is used to price products and help customers resolve challenges. Most of ITT's products are made to withstand harsh conditions. Such a portfolio requires extensive R&D efforts, which have represented more than 3% of sales for the past three years.
To meet more demand from emerging markets, which accounted for 38% of ITT's 2011 revenue, the company has sited half of its manufacturing base outside the US and is developing more operations in the developing world, such as a new R&D center in China that will concentrate on braking technologies for the local market. The aftermarket accounts for 30% of 2011 revenue. Through end user sales channels and service personnel the company is seeking more opportunities for that business while also developing technologies that reduce aftermarket costs for customers. To improve operations in general the company relies on Value Based Lean Six Sigma (VBLSS), Global Supply Chain Services, and shared services. The company's capital deployment strategy calls for the acquisition of companies that make unique and differentiated products.
The 2011 transformation, which effectively split the company into three separate operating companies, significantly reduced ITT's operational size (In 2010, its Defense and Fluid segments accounted for almost 90% of its total revenue.) but preserved the company's presence in the aerospace, automotive, rail, energy, and industrial markets. It isn't the first time ITT streamlined its operations through a spinoff. Back in 1995, when it was known as ITT Industries, the company sold off its divisions that dealt in hospitality and financial services. The hospitality company, which owned the Sheraton hotel chain, was sold to Starwood Hotels & Resorts, while insurance company ITT Hartford became Hartford Financial Services. ITT kept the auto parts, defense and electric systems, and fluid control products businesses.