Johnson Controls International plc (NYSE:JCI)

The financial data reveals fluctuations in the key measures of profitability and capital efficiency over the observed period. The net operating profit after taxes (NOPAT) shows variability with a notable decline in the fiscal year ending September 30, 2020, followed by a significant recovery in 2021.

Net Operating Profit After Taxes (NOPAT)

NOPAT decreased sharply from $2,126 million in 2019 to $448 million in 2020, signaling a considerable drop in operational profitability during that year. Subsequently, there is a rebound to $2,084 million in 2021, although a gradual decline is observed over the following two years to $1,892 million in 2023. This pattern may indicate impacts of external or internal factors affecting earnings, with partial recovery but stabilization at a lower level than the earlier peak.

Cost of Capital

The cost of capital fluctuates moderately across the period, peaking at 15.05% in 2021 and showing a slight reduction thereafter to 14.44% in 2023. These variations suggest changes in the market environment or the company’s risk profile influencing the weighted average cost of capital.

Invested Capital

Invested capital demonstrates a declining trend from $35,173 million in 2018 to approximately $29,283 million in 2020, after which it stabilizes around the $29,400 million mark through to 2023. This lower level of invested capital post-2020 might reflect divestitures, asset sales, or a strategy to optimize capital allocation.

Economic Profit

Economic profit remains consistently negative throughout the observed years, ranging from -$2,341 million in 2019 to a low point of -$3,626 million in 2020. Despite a reduction in its negative value in some years, economic profit does not reach positive territory, indicating that the returns on invested capital have persistently failed to exceed the cost of capital. This highlights ongoing challenges in generating value over and above the company’s capital costs.

Overall, the data suggests a period of operational disruption around 2020, with partial recovery in subsequent years. Despite this, the company has not achieved economic profitability, and the cost of capital has remained relatively elevated. Invested capital adjustments appear to have been made, potentially as a response to these challenges, but they have not sufficed to improve economic profit to positive levels.

The analysis of the financial data over the six-year period reveals notable fluctuations in key profitability metrics.

Net Income Attributable to Johnson Controls

This metric demonstrates a pronounced volatility throughout the period. Starting at 2,162 million US$ in 2018, it rose sharply to 5,674 million US$ in 2019, representing significant growth. However, it then experienced a steep decline to 631 million US$ in 2020, indicating a substantial downturn. In the subsequent years, net income showed recovery, increasing to 1,637 million US$ in 2021, slightly decreasing to 1,532 million US$ in 2022, and rising again to 1,849 million US$ in 2023. The pattern suggests sensitivity to external factors or business conditions impacting profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a somewhat different trend compared to net income. It begins at 2,175 million US$ in 2018, slightly declining to 2,126 million US$ in 2019. A significant drop occurs in 2020 to 448 million US$, mirroring the decline seen in net income. However, a strong rebound is evident in 2021 with NOPAT surging to 2,084 million US$. Afterward, it shows a moderate decline to 1,860 million US$ in 2022 followed by a slight increase to 1,892 million US$ in 2023. The data indicates operational recovery after 2020 albeit with some variability in subsequent years.

Overall, both profitability measures were adversely affected in 2020, likely due to extraordinary or industry-wide challenges in that year. There was a notable recovery starting from 2021, although no return to the peak levels observed in 2019 is evident by 2023. The persistent variability suggests ongoing influences affecting business performance that merit further investigation.

The financial data reveals fluctuating trends in the taxation-related items over the analyzed periods, indicating variations in both reported tax provisions and actual cash tax payments.

Income Tax Provision (Benefit)

The income tax provision exhibits considerable volatility. Initially, there is a provision of 518 million US dollars in 2018, followed by a significant tax benefit (negative provision) of -233 million in 2019. The figure then rises to 108 million in 2020 and sharply increases to 868 million in 2021, indicating a peak in tax expenses for that year. In 2022 and 2023, the provision returns to negative figures (-13 million and -323 million respectively), reflecting tax benefits or credits in these periods. This irregular pattern suggests fluctuations in taxable income or changes in tax rates, regulations, or one-time items impacting tax expense recognition.

Cash Operating Taxes

Cash operating taxes also demonstrate a volatile trend but follow a somewhat different pattern compared to the income tax provision. In 2018, cash taxes paid amount to 1,210 million US dollars, but in 2019, there is a substantial tax refund or cash inflow reflected by a negative value of -806 million. The cash taxes paid climb back to 675 million in 2020 and increase slightly further to 861 million in 2021. This is followed by a sharp decline in 2022 to 159 million before increasing again to 395 million in 2023. These fluctuations may be attributable to timing differences in tax payments, adjustments for prior years, changes in tax obligations, or the impact of cash tax planning strategies.

Overall, both income tax provision and cash operating taxes show significant year-to-year variability rather than steady growth or decline. The divergence between accounting provisions and actual cash taxes in some years highlights different timing and recognition impacts on reported and cash tax expenses. The data indicates a tax environment with complexities that may arise from shifting legislative factors, tax planning activities, or episodic events affecting taxable income and cash flow related to taxes.

Over the six-year period, the company's total reported debt and leases showed a variable trend. Initially, a significant reduction occurred from 12,091 million US dollars in 2018 to 8,304 million in 2019, indicating substantial debt repayment or restructuring. Following this decrease, the debt levels gradually increased each year, reaching 10,252 million US dollars by 2023. Despite the rise after 2019, the total debt at the end of 2023 remained below the 2018 figure, suggesting a net decrease over the longer term.

Shareholders’ equity attributable to the company displayed a continuous downward trend from 21,164 million US dollars in 2018 to 16,545 million in 2023. The decline was most pronounced during the first three years, dropping steadily to 17,447 million in 2020. After 2020, the equity levels stabilized somewhat but continued to decrease slightly through 2022 and 2023. This consistent reduction may reflect accumulated losses, dividend payments in excess of earnings, or other equity-reducing activities.

Invested capital mirrored the trends observed in equity but showed less volatility. It decreased from 35,173 million US dollars in 2018 to a low of 29,283 million in 2020, then remained relatively stable around the 29,400 million mark through 2023. This suggests limited new investment or expansion in capital assets, or possibly asset disposals, during the period. The overall contraction in invested capital aligns with the reduction in equity and fluctuating debt levels, indicating consolidation in the company’s capital structure.

In summary, the company experienced a notable reduction in debt in 2019 followed by a gradual increase toward prior levels. Equity consistently declined throughout the period, while invested capital showed a reduction followed by stabilization. These patterns may indicate a strategic refocus on managing liabilities and capital expenditure, alongside pressures on equity value.

The financial data presents a summary of economic profit, invested capital, and economic spread ratio over a six-year period ending in 2023. The review highlights notable trends and implications derived from these figures.

Economic Profit

The economic profit figure consistently shows negative values throughout the period, indicating that the company has generated losses in terms of economic profit each year. The losses peaked in the year ending September 30, 2020, with a decline to -3,626 million USD, which suggests a significant deterioration compared to previous years. Although economic profit improved somewhat after 2020, the values remained negative, fluctuating between approximately -2,331 million USD and -2,509 million USD in subsequent years, culminating at -2,362 million USD in 2023. This pattern suggests persistent economic underperformance.

Invested Capital

Invested capital shows a general declining trend from 2018 to 2020, decreasing from 35,173 million USD to 29,283 million USD. Following this decline, the invested capital stabilized with minor fluctuations around 29,300 million USD through 2023. The stabilization after 2020 indicates that the company may have ceased divesting or restructured its capital base to maintain a consistent asset base.

Economic Spread Ratio

The economic spread ratio, expressed as a percentage, illustrates a negative and worsening trend from 2018 through 2020, descending from -7.11% to a low of -12.38%. This sharp drop reflects increasingly unfavorable returns relative to the cost of capital during this period. Post-2020, there is a moderate improvement, with the ratio rising back toward about -8%, though it remains clearly negative across all years. This ongoing negative spread suggests that invested capital is continuously yielding returns below the company’s cost of capital, highlighting structural profitability challenges.

In summary, the company exhibited persistent negative economic profit and an economic spread ratio that consistently underperformed relative to capital costs. While invested capital was reduced leading up to 2020 and then stabilized, the overall economic value generated for the company remained negative. The year ending in 2020 represents a nadir for economic profit and spread ratio, likely reflecting significant operational or market challenges, with partial recovery observed thereafter but not sufficient to restore positive economic returns.

The financial data over the six-year period reveals several notable trends concerning economic profit, adjusted net sales, and economic profit margin.

Economic Profit

The economic profit consistently remained negative throughout the observed years, indicating that the company did not generate a surplus over its cost of capital during this period. The lowest economic profit was recorded in 2020, with a marked decline to -3626 million US dollars. Subsequently, the economic profit improved somewhat but remained negative, stabilizing around -2300 to -2500 million US dollars in the later years. This suggests ongoing challenges in creating value beyond capital costs, despite some recovery after 2020.

Adjusted Net Sales

Adjusted net sales demonstrated a downward trend from 2018 to 2020, falling from approximately 31.4 billion US dollars down to around 22.3 billion US dollars. This decline could reflect market pressures or operational setbacks affecting revenue generation. However, from 2021 onwards, there is a clear recovery trajectory, with sales gradually increasing each year, reaching nearly 27 billion US dollars by 2023. This upward movement suggests some success in regaining sales momentum in recent periods.

Economic Profit Margin

The economic profit margin remained in negative territory over all years, confirming the persistent negative economic profit as a proportion of sales. The margin worsened significantly in 2020 to -16.23%, coinciding with the lowest economic profit and sales figures. After 2020, the margin improved but stayed below -8%, reflecting ongoing difficulties in achieving profitability relative to invested capital. The gradual narrowing of the negative margin after 2020 aligns with the sales recovery but indicates that profitability improvements have been limited.

Overall, the data suggests significant financial challenges peaked in 2020, likely influenced by extraordinary or adverse conditions during that year. Although adjusted net sales have shown a positive recovery since then, the economic profit remains in deficit, highlighting continued inefficiencies or cost management issues that prevent the company from achieving economic value added. Future focus should likely be on improving profitability alongside sustaining revenue growth to enhance economic profit margins.