President, Chief Executive Officer & Director, Emerson Electric Co
Mad Money: One-On-One with Emerson President and CEO Lal Karsanbhai
Jim Cramer interviews Emerson President and CEO Lal Karsanbhai on Mad Money on November 29, 2022.
---
Please like, share and comment on our video and make sure to subscribe to our channels.
Find career opportunities at Emerson: https://www.emerson.com/careers
For contact information: https://www.emerson.com/en-us/contact-us
Subscribe to our YouTube channel and be the first to access our videos:
https://www.youtube.com/subscription_...
Stay up to date with Emerson
Facebook: / emersoncorporate
Twitter: / emerson_news
LinkedIn: / emerson
Website: https://www.emerson.com
About Surendralal Karsanbhai
In a November 2022 interview on CNBC's Mad Money, Emerson Electric President and CEO Lal Karsanbhai discussed the company's transformation into an automation-focused firm. Karsanbhai stated that Emerson is "transforming itself into a high-growth, high-margin, high free cash flow automation company." He noted that over 70% of Emerson's sales are tied to sustainability-enabling technologies and that the company's R&D investment exceeds 6% of sales, with half of its 5,000 R&D engineers dedicated to software development. Karsanbhai described the company's growth strategy as including targeted M&A activity in a $230 billion total addressable market, with a focus on energy, life sciences, and industry sectors. Karsanbhai also addressed the company's portfolio evolution, moving from traditional products like valves and incinerators to composting and decarbonization solutions. He said that Emerson's focus on digital transformation, energy affordability, and security is critical for the future of energy and industrial sectors worldwide. Despite challenging market conditions, Karsanbhai stated that Emerson has successfully executed divestitures and maintained growth, demonstrating resilience and strategic focus.
Transcript (18 segments)
I
Interviewer0:12
Industrials keep putting up good numbers. I think they can keep working, which is why I want to take a fresh look at Emerson Electric. They transform themselves. They made a big industrial software addition and Emerson is now primarily focused on automation technologies. They pitch this new strategy and they rang the closing bell. Afterwards, we got a chance to sit down with the architect of this transformation. His name is Lyle Carson and he's the President of Emerson Electric. Take a look.
Lisle, this is an amazing transformation.
S
Surendralal Karsanbhai1:10
It has been a very active 22 months. We worked with our board of directors to execute that direction. Through uncertain economic times, we were able to deliver and transfer the portfolio. We had one clear thing in mind: to create a cohesive, high growth, high margin, high free cash flow automation company, a company that is connected in its main cores of automation with a technology staff that is unparalleled in the industry, diversity of customers and industry, and most importantly, do ten years of Emerson.
I
Interviewer2:10
You're absolutely right.
S
Surendralal Karsanbhai2:13
I think we identified four adjacencies today for M&A activity going forward. Obviously, $8 billion of after tax proceeds once we close the climate technologies proceeds with Blackstone. You mentioned that transaction again. It was a challenging time in the markets to do that. Our hats off to their commitment, but now we have a lot of optionality. Four adjacencies: technology alignment, customer alignment, and most importantly, end market diversification.
I
Interviewer2:46
When I look at the overall, I think of this. A company for people who are watching the show, they want to find a stock, a company that is doing something that makes me feel like you're helping everyone become a better corporate citizen. To me, you're the only company that's doing that that I know of.
S
Surendralal Karsanbhai3:20
It's a phenomenal set of cards that we have. If you think about four critical macro drivers over the next, let's say decade, you think about digital transformation.
I
Interviewer3:31
Right.
S
Surendralal Karsanbhai3:31
The use of data and how that enables customers to go to top quartile performance. You think about energy affordability and security. We all learned about that the hard way. Europe is struggling with that. We have a role to play there. Sustainability, whether that's decarbonization, which we're working very closely with our customers globally, or new energy disruptive measurement technologies.
I
Interviewer4:15
When I first met Emerson, you measured things. Now you're measuring things for the way the future is. Do you have software people? Engineers? Who's doing this internally for Emerson? You have good partnership and software exposure.
S
Surendralal Karsanbhai4:30
Phenomenal. Jim, we have 5,000 R&D engineers over Emerson. Half are software engineers, the other half are mechanical engineers. And 25% of our sales today are of products sold developed in the last five years. The vitality of the portfolio is very important to us, and we'll spend over 6% of sales in R&D.
I
Interviewer5:12
Your predecessor, what he talked to me were valves, heating and air conditioning, and the incinerator, the garbage disposals. We regard those as being wasteful. We now compost. To me, that's metaphorically your journey. You don't want to be in the home incinerator, but you want to be saving the environment.
S
Surendralal Karsanbhai5:37
Aligning the portfolio to growth secular macros is really what the investment was about. A plus B equals C. It makes sense from a customer, investor, and innovation perspective as well. That automation portfolio we sustainability enabling technologies.
I
Interviewer6:16
To me, I looked at every single one of the companies that claims to be automated. There are some that come on the show. They're fun. You're the only automation company out there. This is a remarkable transformation. You're not done. Should we expect to see more?
S
Surendralal Karsanbhai6:33
I am so excited, Jim, both mechanically and with M&A. We've done a lot in 22 months. We have a phenomenal management team, great board of directors, and I'm excited about the future.
I
Interviewer6:48
You've mentioned it's been tough times. The trajectory of your stock since you've gotten involved, congratulations.
S
Surendralal Karsanbhai6:55
Thank you.
I
Interviewer6:56
You're doing great things for the company.