Eaton Restructures Amid Record Sales; Explores Acquisitions
February 5, 2024 by Joe Panettieri
Amid record revenues, Eaton has embarked on a restructuring plan and is seeking to potentially make acquisitions, the power management company disclosed during its February 2024 earnings call with Wall Street analysts. Eaton did not say if the restructuring plan involves layoffs or staff cuts.
Eaton, based in Dublin, Ireland, specializes in power management solutions that improve energy efficiency and uptime in buildings, industrial facilities, data centers and homes. The company's sustainability strategy includes a heavy focus on data center solutions for partners and customers.
Eaton generated record sales in Q4 2023, and record earnings for the full-year of 2023. Among the key takeaways: Sales were $6.0 billion in Q4 of 2023, up 11% from Q4 of 2022.
Key growth drivers include the energy transition, the electrification of the economy and digitalization, Eaton CEO Craig Arnold told Wall Street analysts during an earnings call on February 1, 2024.
Amid those tailwinds, Arnold said the company is embarking on a "multi-year restructuring program." Arnold said the restructuring program would involve:
$375 million of restructuring costs over the next three years.
$325 million of mature year savings in 2027.
The strategy includes approximately $175 million of charges in 2024 and $50 million of savings.
Offering additional context on the earnings call, Arnold added: "Things are going very well and we have perhaps more growth opportunities than we've ever had in the history of the company. But at the same time, we actually have more capacity today than we've had in a long time."
Eaton Cash and Potential Acquisitions
Tom Okray, CFO, Eaton
Meanwhile, Eaton finished 2023 with $2.6 billion in cash. The company plans to repurchase between $1.5 billion to $2.5 billion in shares outstanding. At the midpoint of $2 billion in repurchases, Eaton will have "plenty of dry powder to do strategic M&A," CFO Tom Okray told analysts.
Okray did not mention a potential timeline or focus for prospective acquisitions.
Previous investments and acquisitions include:
April 2023: Acquiring 49% stake in Jiangsu Ryan Electrical, a manufacturer of power distribution and sub-transmission transformers in China. Jiangsu revenue was roughly $100 million in 2022.
January 2022: Acquiring Acquiring Royal Power Solutions, a U.S.-based maker of electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets. The company paid $600 million for Royal Power Solutions, or 13.6 times Royal Power's estimated 2022 EBITDA.
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