Letter to Shareholders
We launched Trane Technologies in early 2020 clearly aligned around one purpose: to boldly challenge what’s possible for a sustainable world. We were then quickly met with extraordinary circumstances. We put our purpose into action from the start—taking immediate steps to take care of each other and to continue serving the essential needs of our customers and the world.
Even as we responded to the uncertainty caused by the global pandemic, we leveraged our strong financial position and continued to invest in our businesses. We simplified, streamlined and focused our organization as a global climate innovator. We engaged team members from around the world in developing new Leadership Principles, which define what we value most.
Leading in a Changing World
As the pandemic intensified, we recreated every facet of our production lines to keep our people safe. We prioritized the essential needs of our customers, including hospitals, warehouses, data centers and schools. We brought decades of experience in indoor environmental quality to the forefront with ready-now solutions, new innovation and the launch of our Center for Healthy and Efficient Spaces.
We also continued to partner with pharmaceutical companies, logistics providers, food producers and grocers on end-to-end cold chain transport and storage. When we learned of vaccines in development that required even colder solutions—negative 70 degrees Celsius—we leveraged our new ultra-cold Super Freezer. This product, along with our wide range of other cold chain solutions, continues to support safe and efficient distribution and storage of the vaccine and other perishables around the world.
Bold Action and Innovation
These emerging needs only amplified the importance of our long-term sustainability strategy. Climate change is adversely affecting weather events, air quality and human health, with a disproportionate impact on those who suffer from socioeconomic inequalities. With 15% of the world’s carbon emissions coming from heating and cooling buildings and another 10% from global food loss, we are in a leadership position to be the change.
We have put a stake in the ground with aggressive 2030 commitments, including our Gigaton Challenge, which commits to eliminating one gigaton of carbon emissions from our customers’ footprints. We also have committed to carbon neutral operations, gender parity in leadership, and workforce diversity reflective of our communities. We are uniquely positioned to provide innovative solutions that deliver on these commitments and accelerate the world’s progress.
We launched more than 50 new solutions in 2020 to do just that. In transport refrigeration, our new Advancer trailer unit cools faster, requires 30% less fuel per trip and uses 60% less energy to manufacture. And, the new Sintesis Balance, a fully electric HVAC unit, offers zero emission heating and cooling when paired with a renewable energy source. We continue to accelerate digital connectedness to enhance system performance and energy efficiency, reaching more than 20,000 connected buildings and over 1 million pieces of connected equipment in 2020.
Strong Performance Culture
We delivered resilient financial performance in a challenging year, demonstrating the strength of our sustainability strategy. Strong execution, transformation actions and cost-containment enabled us to expand profitability on a modest revenue decline. Revenue was $12.5 billion, and adjusted EBITDA margins* expanded by 20 basis points, delivering exceptional free cash flow* of $1.7 billion, or 158% of adjusted net earnings* and $507 million in dividends.
Underlying our strong financials is an operational flywheel, where relentless, high levels of business reinvestment enable continuous outperformance over the long-term. In 2020, we added significant fuel to this flywheel by reimagining the company. Our business transformation will deliver $300 million in annualized savings by 2023, which fundamentally improves our cost structure and our margin profile, while enabling us to accelerate investment in market-leading innovation to further outgrow our end markets—consistently. As a climate innovator with a focused sustainability strategy, outstanding cash flow generation, and balanced capital deployment, we are well positioned to continue delivering long-term value to our shareholders.
“As a climate innovator with a focused sustainability strategy, outstanding cash flow generation, and balanced capital deployment, we are well positioned to continue delivering long-term value to our shareholders.”
At Trane Technologies, we want to create a better world. We are challenging the status quo and taking decisive action now to create a sustainable future where communities thrive, where equality is foundational, and where the environment is protected for future generations. It’s this type of passion and purpose that sets Trane Technologies apart, and is how we will change the industry, and ultimately change the world.
Thank you for joining us. Please stay safe.
Michael W. Lamach Chairman and CEO
*These are non-GAAP financial measures. Reconciliation of non-GAAP financial measures can be found preceding the 2021 Notice and Proxy Statement.