Ralph Waldo Emerson's adage, "Make yourself necessary to somebody," holds true for Emerson Electric. The company makes a slew of electrical, electromechanical, and electronic products, many of which are used to control gases, liquids, and electricity. Its InSinkErator is a maker of food waste disposers and hot water dispensers. Emerson pursues an aggressive acquisition strategy coupled with select divestitures in building up its global presence. The company gathers its business units and divisions under five business segments. It has more than 235 manufacturing locations, with about 160 outside of the US. International markets make up 60% of Emerson's sales.
North America is Emerson's largest market, representing 46% of its total sales. Asia generates 22% of its revenue, while Europe accounts for 20%. Other targeted markets include Latin America (6%), and the Middle East and Africa (6%). The company has 230 manufacturing locations worldwide and a marketing presence in more than 150 countries. Of this amount, 155 are located outside the US.
The company operates through five primary segments. Process management (36% of total sales) provides products and services for precision measurement, control, monitoring, and other functions for oil and gas reservoirs, power plants, and plants for processing products that include food and paper. Its network power segment (20%) serves power and telecommunications networks and data centers with products that include embedded power supplies, control devices, and inbound power systems.
Emerson's industrial automation operations (20%) provide products that aid the manufacturing process, including motors, fluid controls, and materials joining equipment. Climate technologies (16%) offers products and services for residential heating and cooling, commercial air conditioning, and commercial and industrial refrigeration. Finally, commercial & residential solutions, its smallest segment (8%), sells professional tools, commercial storage products, food waste disposers, and appliances such as ceiling fans and compact electric water heaters.
Across all segments the company has dozens of brand names, including AMS, ASCO, Bettis, Dixell, Fisher, Go Switch, Kato Engineering, Liebert, Sealmaster, Stratos, Therm-O-Disc, and White-Rodgers. Consumer-facing brands include ClosetMaid, Flo Healthcare, InSinkErator, Lionville, MedDispense, and ProTeam.
Emerson's revenues decreased marginally by 0.5% from 24.6 billion in 2013 $24.5 billion in 2014. This was primarily driven by an 18% drop in network power segment sales and lower sales in Asia (7%) and Latin America (3%). The company's profits spiked 7% from $2 billion in 2013 to $2.15 billion due to a decrease in cost of sales fueled by divestitures. In addition, Emerson's operating cash flow has remained consistent the last few years, rising slightly from $3.65 billion in 2013 to $3.69 billion in 2014.
Emerson has a history of achieving growth through acquisitions and by divesting underperforming, non-core units. In late 2013 it sold 51% of its embedded computing and power business to Platinum Equity and in 2014 sold its connectivity solutions business for $99 million to Bel Fuse. In another large deal, in late 2014 Emerson announced it was selling its power transmission solutions operations to Regal Beloit for $1.44 billion. Emerson is selling the operations (part of its industrial automation segment) to focus on its core operations.
Mergers and Acquisitions
In early 2014 Emerson acquired the 44% of EGS Electrical Group (electrical products for industrial, hazardous, and adverse environments) it didn’t already own from SPX Corporation and integrated it into the industrial automation segment under the Appleton Group name. The transaction tightened Emerson’s focus on the growing oil, gas, and chemical industries as those markets have grown to more than half of ESG’s revenue.
In late 2013 the company paid $506 million and assumed $76 million in debt to acquire Virgo Valves and Controls (ball valves and automation systems) and Enardo (tank and terminal safety equipment) for its process management segment.