Rockwell Automation, Inc. (ROK) Earnings Call Transcript & Summary

Hello, and thank you for joining today's webinar. [Operator Instructions] Today's event will be record and will be available immediately after it is completed. You can access the recording utilizing the same link that you used to access the live event. After the webinar, we will also be sending you an e-mail with resources from today's event, including the slides, handouts and event recording. Additional information regarding today's topic can be found in the handouts panel of the Webinar platform. With that I'd like to introduce today's speakers, Jordan and Edwin.

Hello, good morning everybody. My name is Jordan Konst. I've been with Rockwell Automation for about 10 years in engineering, consulting, and sales roles, mostly in the automotive industry. I'd also like to introduce Edwin. He is with our Power and Energy Management Solutions Group as an expert in that in that field. Go ahead, Edwin.

Good morning. Thank you for the opportunity to present today. My name is Edwin Alsina. I'm a senior application consultant with our process team. My area of focus is power and energy management solutions and that includes everything from building management to utilities controls. We'll talk more about that topic today. Thank you.

Yes. All right. So today we'll be talking about Rockwell Automation's capabilities in the building management and really the broader sustainability solutions area. And so to start, I will first talk about Rockwell Automation's capabilities as an overview in that space. And I'll let Edwin really get into that. And also more specifically the need for sustainability and those kinds of solutions in the automotive space. And then I'll let Edwin take over, he'll talk about our services and our capabilities in that space, then specifically, building -- our building management solution and how it provides kind of an off-the-shelf type of solution that can be customized specifically to your business and optimizing your carbon footprint and sustainability. So to kick us off, I'd first like to talk about, this recent, in the last 5 to 10 years, this push towards a carbon neutral future and across -- this is really something that we see across industry, but the automotive industry is really a leader in that space. And we're seeing that for a couple of reasons. First, we're seeing that automotive -- the consumers of automotive are really demanding a carbon neutral offering. So not only the vehicle, but also the operations, the automotive suppliers themselves. And therefore that's being pushed down throughout the entire automotive industry vertical. So you'll see in many -- I'm sure many of you guys are aware that you'll see these automotive suppliers list in their corporate sustainability reports that they will be net zero by 2050 or oftentimes even sooner. And Rockwell Automation has many capabilities in that space to not only help you to optimize specific energy sources, but also really any utility that could contribute to that carbon-neutral future. So anything from energy, water, scrap and waste, really anything that leads to a consumption of carbon. So what are those pressure points driving a focus on energy and sustainability in the automotive industry? It's really -- first, it's -- there's huge energy demand out of their operations. And therefore there's a large energy cost for one. But there's also, of course, like I mentioned, the need for and the commitment to a net zero carbon future. Some things challenging that are like another recent trend of digitalization and electrification. So really kind of shifting focus and that kind of complicates a little bit, and increases that energy demand or specifically electricity demand. So we're looking at a couple of things. We're looking at how can we be more efficient with the energy that we're utilizing in our operations today and then also drive towards those renewable energy resources. And of course, government regulations also contribute to that push. Just some specific stats. Energy price volatility is up 150% over the last couple of years, and that's due to geopolitical instability. Again, that's another reason that this is a focus. Again, power consumption is also increasing, specifically electricity. So that's kind of another headwind. And therefore, we are really focused on that energy efficiency within our plants, the Scope 1 and Scope 2, specifically those types of emissions. And then we're obviously seeing in the news a lot of regulation increase on Scope 1 and 2 emissions as well. And that's probably not going anywhere. So that's really why we're seeing this focus. And we wanted to start out with hearing a little bit about what you are seeing. So what factors are driving the need for energy management and sustainability investments in your company. We want to know if you agree with what we're saying here. So we'll let you -- give you a chance here to answer, maybe about 30 seconds, and then we'll talk through those results and then I'll let Edwin get on to some of our solutions in this space. Okay. So it looks like quite a few are looking at the cost reduction that is a result of being more efficient with your energy that you're using today. Of course, also the price risk, that's a little bit on the lower end of only about 7% or looking at that energy price risk as a driver, enhancing the positive image and reputation, of course, we see that many of these companies are putting out their corporate sustainability reports, showing exactly what their initiatives are and what they're doing in the space to show consumers and their stakeholders that they are -- they do have a huge focus on this and they're really driving change. Enhanced competitiveness, again, a lot of the automakers are kind of enforcing a standard of trending towards net zero. And so in order to be competitive in that space as an automotive supplier, you really need really need to show how you're driving in that direction. And then overall sustainability goals. Again, that's a huge commitment across the industry. So great answers. Edwin, I will let you take it from there.

Okay. So I'll talk a little bit about our organization and what we do, and then we'll go into the building management and sustainability solutions. So basically, there's 3 main business within Rockwell Automation. Allen-Bradley is our hardware platform. So anything from a push button to a control logic controller to medium voltage switchgear, those are Allen-Bradley hardware. The FactoryTalk is our software platform. So there, we have visualization information systems, plant maintenance and operations and our Lifecycle services is our engineering team. So we combine our hardware and software products and develop in those 3 applications for our customers. We design and develop and deliver these applications. Okay. Lifecycle Services is a global organization. We have about 2,600 employees worldwide. These are Rockwell automation engineers with experience in not only in our products and technologies, but industry experience. We have presence in over 45 countries. And we have like what we call a global delivery excellence team. And what that team does is they focus on applications that are common to our customers and develop standards for those applications. So we do have a core team for building management solutions, there's a global standard for that solution. So it doesn't matter what part of the globe you are. If you get a building management solution from us, it would be the same standard regardless if it is in the U.S. or any other part of the world. Okay. Our team, we call it power and energy management solution. We focus on building automations and utilities capabilities. So everything from power monitoring, including wages for water, air, gas, electricity and steam, to measure and identify where your energy is going, where -- what are your major consumers and so on. We have also center utility plant and balance of plant control solutions. And this is for your central utility, right? Your cogeneration, your chill water plant, steam, hot water, the main plant utilities. Electrical Solutions for demand management, loadshedding, emergency generation switchover and industrial HVAC solutions for your environmental control and monitoring of the condition within your manufacturing area. Okay. Our team is geared towards to support the entire lifecycle of the project. So if a customer needs helping in defining the initial scope and feasibility of doing a migration or a project or selecting a specific technology for the new facility. We do have the resources to team up with the customer organization and work on those user requirements. We can do the frontend engineering and detailed design of the solution. We work with our customers in doing all the programming implementation and detail configuration of the system. We do have installation and commissioning teams that do your field services for all the system installation, configuration and testing on site. And after the system is installed, we do operational maintenance to help you maintain, operate and train new resources in how to work on our system. So you are capable of doing operational maintenance by yourself. We stay with you and as we identify future opportunities for upgrades and migrations, we start this cycle again. Okay. So from the energy management standpoint, we start by metering all your utilities, to identify what are your major consumers, where your energy is going and how efficient is your plant? Okay. And we do that by installing either power meters to measuring meters or instrumentation or utilizing instrumentation that you may already have in your systems. We gather information about the different services incoming to the plant and the distribution of those services to identify opportunities for improvement and energy conservation. Okay. So the first step is to monitor and identify your major energy consumers, then we analyze that data and identify trends, define your plant baseline consumption and what systems, as they come in, they impact that baseline and identify optimization opportunities. And then we go on to implement control strategies to improve your system's efficiency and reduce your energy consumption. From our experience, the top consumers, when we walk into a plant, your mechanical refrigeration, air conditioning systems, they can -- depending on your operation, they typically take between 30% or 40% of your energy consumption. And what we see is by implementing improvement strategies, we can reduce our consumption anywhere between 5% to 30% depending on how efficient you run it today. So over the years, we have used our tools and technologies to develop solutions for these different types of mechanical equipment. Okay. Now we would like to get a quick poll here. See, from your operation what have you identified as your major energy consumers today. Select all that apply. Okay. It looks like pumps and motor is a big one, then your chillers and refrigeration systems are others. So your top hit is pumps and motors, but that's definitely a big hitter there. Okay. So the basis of our system is our Logix platform. We -- this is a modular system, distributed, so it can be fit for any plant configuration. We designed the system based on the volume and distribution of the system. So we use our Logix platform, either ControlLogix, CompactLogix, we use remote IO depending on your plant size and point volumes and how those points are distributed. Again, we have capabilities of interfacing with your intelligent devices like intelligent MCCs and intelligent meters, but we can also hardwire your systems into our system and control their operation and efficiency. Okay. We do have our own line of power meters, so depending power consumption meters, power monitor 500 and 1,000; 5,000 is more like a power quality meter. So you may want to consider some of that for your incoming service and they have 1,500 for your different loads. Okay. In terms of for programing our system, we use our process objects, and these are pre-engineered, predesigned, and tested objects that we build depending on the application to be in the different equipment modules. And that is the advantage of our team. We have used these tools and technologies and combine them together to provide solutions for this type of equipment, either your utilities, your main utilities, HVAC or your all-in-all plant systems operations. So these modules are combined together to make equipment and applications like HVAC controls like we see here, environmental monitoring of your process areas to maintain the area environmental conditions like your temperature, relative humidity, differential pressure, particularly that applies to your operation. We do static pressure control of your air distribution, and that be controlled to reduce your energy consumption and we schedule the equipment based on your operation. From the central utility plant, some of the logic that we have developed includes like a chiller dispatch system that's continually monitoring the demand of a new plant. We categorize your chillers and equipment that you have in your plant to select the best combination of units that will give you the best energy efficiency to meet that plant demand. So we do something similar with the pumps where we have your combination of pumps. We measure demand and differential pressure across that pump and we select the combination of pumps. You may have one pump running at 100% or 2 pumps running at 40%, 60%. We do that algorithm to select the best combination to meet that demand. On the condenser water optimization, we do like variable speed fans. We control -- we do like [indiscernible] control based on the outside air temperature and your system load to control that cooling towers to give you the best efficiency. And we assist in to look at your demand and your energy rate and define one is better to do cogeneration versus buying power from the utility service. We have [ heat recording ] systems for steam generation, heating of water distribution systems, DI water and compressed air dispatch systems. Okay. From the power monitoring and control, we do like demand management and loadshedding. And this is based on tracking your demand. We establish operational -- we work with our main users and customers in defining the operational modes of the plant like one equipment needs to run when you're running this process, what is baseline load and loads these 2 run, which loads are critical, which are not. What routine process can be run during your on peak or off peak times to define some scenarios, and we program those different scenarios in our systems, and those can be triggered either by schedule or manually by the operators or they can be a response to an event like if we lose power, we need our emergency power generator to come in. And at that time, we need these critical loads to run and the system will do that automatically. Okay. So what capabilities are most important in energy management or building management solution for your site today? Monitoring and reporting, energy uses and greenhouse gas emissions, central utilities controls, chiller dispatch and compressor control, demand management and response solution or burner management and combustion controls. It seems like the majority is more concerned about energy reporting, energy monitoring. It is very important. It's like your starting point for your energy program. Okay. So energy reporting and monitoring is like the top area of concern and then compressor control and demand management are equally a central utilities are about the same here. Okay. All right. And I do agree. That is the most important step to start your energy program is understanding your energy consumption and your different systems, which one is your top consumers. Central utilities is definitely what you -- would be your main energy, right. So, all your energy come through here before it goes to your different systems or production lines. And compressor area is like one of the largest utilities that consume energy. It's easy to -- it is easy to waste control here. If you don't have a good measurement and you don't know your [indiscernible] you can be having like leaks in your system, you can be having different uses for compressor that people use. So those can be better controlled if you understand what your system baseline load is. With this, I'm going to showcase like a case story. This is a sample project that we completed recently. This facility is like an OEM for automotive, it's a semiconductor facility [indiscernible]. They -- we got engaged with the end user early on in doing like an assessment of their existing facility in their headquarter. During that process, they started this project of building a brand-new facility in Upstate New York. So we worked with their design team, their AMEs and the end users in defining the system requirements and developing the detailed design, later the implementation of the system. And that includes everything from the system, they call it the facilities monitoring and control system. It not only does building management, but it also does all their demand management and control. It has power monitoring. It does integrate their OEMs kits and their -- some of their process units. So they have like a common platform, a common frontend for all their plant systems. We were developing our standard BMS application. And based on the Logix platform, we use the works for the clients and the different operator workstations. We have also all the -- we did all the network design, programming, installation, commissioning and testing. So, the customer end now, we've one single platform for their process utilities and building management systems. Okay. This one is another greenfield facility. In this case, the customer had a specification of what they needed, what they want in their system. We built to their specification and proposed our solution. We showcased what we can do in terms of building management and energy improvements and we provided all the network design, the industrial data centers. It is also a facilities management control system. So it integrates the power demand, they have 2 utility plants. They have a building management for all the process area, about 1 million square foot facility, and we do all the HVAC controls, power management, they got chillers, boilers, and OEMs kits integrations. We -- this probably will be the turnkey. So all the installation, commissioning and testing was done by our team. Okay. We have a couple of more examples. And this is a horizontal, what we call a horizontal solution. So not only for automotive, but we also cover other industries. So you will see here some examples that are this central utility plant we've combined heat and power. It does have steam turbine chillers and electric chillers and like 8 megawatt cogen plant. They started at 4, now they doubled the size, so it's 8 megawatt nowadays. And again, we did already sign development, the customer managed to hire the installation contractor directly. So we did the commissioning and validation of the system. The second one is, it's a manufacturing facility. The customer acquired an existing building, innovated the entire building. We did a similar system that covers utilities, environmental monitoring, their OEMs kits and building management. And this last one was the one that I just showed earlier. Okay. A few more project experiences there. And you will see that there are like different sizes. Our system is modular. So basically you can start with a small part of your plant or you can start with one building and expand to other systems, other facilities. And it can be a multiple site system. But you don't need to start with a large system, you can start with a single system or an area of your plant. Okay. So what's our value proposition is, we offer like resources that are not only seasoning the technology, but they do have industry experience and knowledge. They understand the application. We offer one common platform for your building systems and utilities and new process. So we do have a high availability architecture. We offer redundancy not only at the server level, but at a controller level and networks and designed for redundancy. We have a redundant IO and those are all capabilities that are available depending on the criticality of your system. We do have a standard application, documentation and test procedures, and that will reduce your design time, your time to market and reduce risk. We -- our tools allow that when we are developing a system, to develop a single type for your visualization information and alarm system, so that reduce risk of losing information in translation there. We use open protocols for communicating with all our systems based on internet technology. We do have interface to communicate with other equipment manufacturers. So most of the industry standard protocols, we do have capabilities for reading and writing too. So when it turns to interfacing with your chillers, with your air compressors, we do have that capability. And we do have options when it comes to local support. You -- Rockwell Automation does have these support organization where you not only rely on Rockwell Automation, you do have all the other options when it comes to solution partners, distributors in your areas or you may have people within your organization that knows our system and have capabilities of doing the maintenance operation in-house. So all of these factors then summarizing to reduce risk, speed to market and a lower total cost of ownership. Okay.

Great job.

Thank you.

Sorry, yes. Of course, no problem. Yes, we'll get started with some questions. We've got a couple. We'll start with this one. Do you have plant PAX objects for power metering? I think I'm asking that correclyt.

Yes, absolutely. So when we use one of our Allen-Bradley power meters, we have objects already for those -- and not only for our Allen-Bradley power meters. We also have objects for OEM equipment like the [ SEL ] relays and meters. So we have capabilities of connecting to them and see all the configuration parameters and all the power quality data that the meter has.

Wonderful. Another one. Why would I consider a Rockwell solution over commercial DDC controlled building management solutions?

Well, our solution has a few advantages compared to a DDC system. Primarily our solution is an open platform. It's not a proprietary protocol. So we -- you will find more people training and with knowledge of Rockwell automation. We even train new plant personnel to maintain and operate their system. So our systems are open. We do have interface with most OEM equipment. It is an open platform. When you compare a DDC system as a lower first cost, but you pretty much rely on that supplier throughout the lifecycle of that season. And you have multiple systems. You need one system for your building automation. You probably need another system for your utilities and a third system for your process. With Rockwell automation, you can have the same platform in those 3 systems and only learn, maintain, and operate a single platform. And all that combined with the options that you have for operation and maintenance, resulting in a lower total cost of ownership.

Yes. Edwin, I believe there's also some advantages in using PLC control, PLC-based control because the control loops in a PLC allow you to optimize the utilization of, let's say, a bank of compressors or boilers or something like that. I mean, could you expand on that a little bit as well or?

Yes. So we have developed -- over time we have developed applications for optimization and dispatch of these mechanical equipments. So you will use this pre-engineered modules that are already pretested with these applications that are already designed for these type of solutions. Also our Logix platform has a higher win time between failures, and that result in a longer lifespan when compared to a commercial grade piece of hardware.

Yes. So with compressor and fleet management, you can optimize the energy consumption of those utilities and get a much faster return on your investment over your traditional DDC control solutions.

Yes. And I think we do have a case where we did an optimization. And this was for some ammonia compressor for a refrigeration plant. We do have a logic that our team developed for optimization of the compressor dispatch. This particular plant, they did have like a large number of units. I'll say that they have 24 compressor units. And by the time we tested and implemented our solution, they were operating down to 6 compressors. The maintenance operator at the plant called our engineers, that there's something wrong here. This can't be. We're operating with only 6 compressors. But the system was meeting the plant demand and the system requirements. So the system was working properly. What I did is by optimizing those systems, you didn't need those 24 compressors.

Wonderful. Let's do -- can you help me to identify which sites will provide the best return on my BMS investment? How would -- and how would I do that?

Absolutely. We have -- we've worked with our customers in evaluating their plants, defining an energy program where we look at all the facilities and based on square footage, production and energy consumption and identify the highest target to go and assess those first and start their energy program with those higher consumers when they will get the most return of their investment in an energy system.

Yes. So we have some kind of high-level rule of thumb measurements that we can help you to identify those high energy density sites. But we can also do walk through assessments and basically look through your operations and determine where those low-hanging fruit savings, energy savings will be. And that can -- based on that, we can write up a report that says, here's kind of the highest priority list of investments you should make to reduce your energy consumption and improve your energy efficiency throughout your operations. So not only are you meeting your sustainability targets, but then you're also getting a return on your investments.

Wonderful. Do we provide -- a couple of questions came in at the same time. Let's do this. What reporting tool is used as part of the system? Are there report templates?

We have a couple of options here. We got like out of the box for our building management system, we use MS SQL report. And that we use for audit trails and user interactions on our management and things like that. There is also a FactoryTalk Energy Manager, and that is a program that is currently in development and will be released later this year. And that provides like energy dashboards of your consumption, of few different equipment, and even your different sites. So that will give you like your key performance indicators in terms of energy and energy consumption and power quality.

Great. Do we provide training for plant PAS -- training plant PAS, specific training on the PLC code, et cetera, for in-house automation?

Yes. We have -- there's 2 levels of trainings like when we deploy a project, we do in-house trainings for the plant personnel in showing them like the system design and the operator interfaces, navigation and functionality of the system, what they can do for the different levels of authority, operator, user, engineer and administrator. But there's also technology training that is available to our customers, and this is open for anybody, you can layer our technology and engineering tools and prepare yourself for designing engineering and maintaining, operating your system.

Wonderful. Let's -- we'll finish off with one last question here. How do you engage Rockwell automation to help us in our region?

So your first point of contact would be your local account manager. If you know who your account manager is, you have Rockwell automation account manager that visits you and talk to you in a regular basis. That will be your main point of contact and he will direct you to the right -- he will contact the right resource to come and talk to you about energy and building automation. You can always go on our website or contact through your distributor or you can go on our website and find our sustainability energy management page. You can always contact Jordan and myself, and we'll be happy to direct you to the right resource.

I will also add, at the end of this presentation, there will be a survey for you to fill out and you can request to be contacted that way as well. Well, we will end with that. If we did not get to your question or you would like more information or any follow-up, like I said, please fill out the form at the end of the webinar, and someone will be in touch with you shortly. I'd like to thank Jordan and Edwin for a wonderful presentation. So much information, but you guys did wonderfully. And I hope everyone enjoys the rest of their day. Thank you all so much.

Thank you.