TTI delivered US$13.7 billion of sales in 2023, up 3.6% in reported growth and 3.9% in local currency. Both our MILWAUKEE and Consumer group of businesses gained momentum in the second half of 2023.

MILWAUKEE delivered 10.7% full year sales growth in local currency, improving to 12.7% local currency growth in the second half, versus 8.7% in the first half. Our Consumer group of businesses also delivered positive sales growth in the second half and are well positioned to continue gaining traction in 2024.

Globally, all regions delivered above market growth in local currency in 2023. North America grew 2.9% and Europe delivered an impressive 7.3% growth. Rest of World, including Australia, Latin America, and Asia, delivered 7.6% growth.

Gross margin improved 14 bps to 39.5% in 2023. This improvement is a direct result of the continued success of the MILWAUKEE business, the growth of our aftermarket battery sales, and highly innovative margin accretive new product. This gross margin improvement is highly encouraging given our significant US$987 million inventory reduction versus last year.

Total SG&A increased 96 bps from year end 2022 to 31.3% of sales. Selling, distribution, and marketing increased 56 bps due to one-time promotional funding investments to drive sell through at our partners and reduce inventory in our channels. Research and development increased 34 bps versus last year. Amortization of intangible assets accounted for 28 bps of the increase, and we increased investments in research activities to bolster our new product pipeline.

Financial Performance

EBIT was at US$1.1 billion, 5.5% lower than 2022. In the second half of 2023, EBIT improved to US$575 million, a 1.1% increase versus the second half of 2022.

In 2023, we delivered US$976 million of net profit. The decline of 9.4% versus last year was partially driven by significant increases in interest rates over the period, resulting in higher interest expense. Earnings per share also declined 9.3% to US53.36 cents.

We reduced inventory an impressive US$987 million from year end 2022. This was split throughout the halves with a US$504 million reduction in the first half and an additional US$483 million in the second half. Although we have made vast progress on inventory, we believe we can continue reducing inventory days on hand in 2024 and the years ahead.

Capex spend for the year was US$502 million, lower than last year by 13.7%. This spend includes investments in new product, manufacturing capacity, automation, and productivity initiatives in China, Vietnam, Mexico, and the United States.

Working capital as a percent of sales improved from 21.2% last year to 17.7% in 2023. This reduction in working capital helped drive record free cash flow of US$1.3 billion for the year and we are well positioned to deliver strong free cash flow in 2024 and the future.

The Group’s net gearing, expressed as a percentage of total net borrowing (excluding bank advance from factored trade receivables which are without recourse in nature) to equity attributable to Owners of the Company, was at 17.1% as compared to 32.1% in 2022.

Our exceptional results over the past fifteen years have consistently surpassed overall market performance and we expect 2024 will be no exception, as we are poised to outperform the market yet again. Our strength in cordless innovation, new product development, operational excellence, and in-field marketing initiatives are unparalleled in the industry and give TTI an unassailable competitive advantage. We are grateful for the support of our largest partner, The Home Depot, and are honored to have received an unprecedented three Supplier of the Year awards from them in 2023.

Outlook

TTI is poised for continued market outperformance in 2024. We expect our Flagship MILWAUKEE business to sustain double-digit sales growth in 2024 and beyond, while our Consumer group of businesses will continue to outperform the competition.

Our global new product pipeline has never been stronger. We are relentlessly focused on developing innovative cordless products with advanced electronics, cutting-edge motor technology, and artificial intelligence. As the first mover in our industry on applying machine learning and artificial intelligence to cordless products, we have made the investments necessary to continue advancing this important technology in the months and years ahead. With demonstrably better features that improve productivity for end users, our products command a price premium, which in turn drives our virtuous cycle of outperforming the market while driving gross margin improvement.

Another key driver of our gross margin accretion is the productivity generated by our world-class manufacturing network. Since 2018, we have expanded our footprint beyond our manufacturing site in China to add start up facilities in Vietnam, Mexico and the United States. We believe our ability to rapidly adapt to change will serve us well, no matter what we face in the future.

With a healthy balance sheet, solid cash position, and strong growth outlook, we look forward to 2024 with confidence.

I am proud of the financial results we delivered in 2023. We grew sales 3.9% in local currency to US$13.7 billion, while increasing gross margin 14bps to 39.5% and reducing inventory US$987 million versus year end 2022. Free cash flow was an all-time record of US$1.3 billion and we are well positioned to generate consistently strong free cash flow in the coming years.

I am especially encouraged by our results in the second half of 2023, where we grew sales 10.2%. Our Flagship MILWAUKEE business grew 12.7% in local currency in the second half and we feel confident MILWAUKEE will continue to grow at double digit rates in 2024 and beyond. The Consumer Group of businesses also delivered excellent results globally and is on track to continue outperforming the market. TTI’s momentum has continued to build in the early months of 2024, and we are looking forward to sharing our first half 2024 results with you in August.

Cordless Leadership

Seventeen years ago, when Horst Pudwill and I developed our strategy, we agreed on two things. First, that we would hire and develop the very best people in the history of the power tool industry. Second, that we were going to be obsessively focused on cordless.

We made it our mission to convert users from products using legacy power sources like petrol, corded, manual, hydraulic, and pneumatic to our cordless solutions in the power tool, light equipment, outdoor products, and cleaning categories. Today, MILWAUKEE is the number one worldwide cordless Professional Power Tool brand with 460 products across our M12, M18, and MX FUEL leadership platforms, while RYOBI is the leading global DIY cordless brand in both Power Tools and Outdoor with 424 products across the 18V ONE+, 40V, USB LITHIUM, and 80V systems. We also have the broadest line of detachable battery floorcare products with our ONEPWR platform, featuring the world’s first battery-powered cordless Carpet Washer.

There is no other company in the world with our level of focus on cordless and this is why we win. Our leadership position in cordless globally has yielded a significant and growing aftermarket battery revenue stream with highly accretive gross margins. Unlike our competitors, we have not changed our battery interface or compatibility, which has allowed our bare tool business to flourish. Bare tools are individual products sold without a battery and charger, which presents a compelling value to users who are already invested in a battery system.

Our cordless strategy has also allowed us to grow the market overall through increases in Average Selling Price (ASP). With advanced electronics, brushless motors, and innovative battery technology, our cordless products offer users productivity and safety benefits that command a price premium. As an example, our MILWAUKEE M18 FORCE LOGIC Single Channel Strut Shear is the most productive way to shear strut on the jobsite. This piece of equipment makes precise cuts on-site, ensuring a smooth finish and reducing the risk of user lacerations and damage to high-value electrical systems. Priced at over US$3,500, this piece of equipment is driving the ASP higher while prioritizing safety and productivity.

Breakthrough Technology

The development of breakthrough cordless technology is the foundation of TTI’s success. Since we revolutionized the power tool industry with the introduction of advanced lithium-ion battery technology, we have continued to advance the capabilities of cordless products to levels beyond what is possible with legacy powered competitive product. We refer to our efforts to continuously advance technology in the power tool space as a “race without a finish line”. The latest result of these efforts is the introduction of Artificial Intelligence with Machine Learning into Power Tool development with products that not only set new industry standards, but also contribute to significant cost savings for users.

An example where the application of Artificial Intelligence with Machine Learning within our power tool development is especially impactful can be demonstrated on a renewable energy utility-scale solar panel installation site. A single solar field site can require millions of repeatable precise connections. Using the MILWAUKEE M18 CONTROLLED TORQUE IMPACT WRENCHES enable users to make these connections up to three times faster than current methods. Using this tool results in increased productivity that can save contractors up to US$1 million on just one job versus current application methods.

Sustainability

It is our mission to create a sustainable future by reducing our environmental impact through responsible business practices and environmentally friendly products. We are dedicated to developing cordless products that not only deliver high performance, but also minimize energy consumption, improve safety, and reduce noise pollution with zero carbon emissions in use. As an example, the ONEPWR cordless carpet cleaner launched in 2023 contains high efficiency motors that provides the same cleaning performance as corded alternatives using up to 6 times less energy. We also recently launched a RYOBI 60-Watt Foldable Solar Panel, providing users with renewable energy that can charge a RYOBI 18V ONE+ 2Ah battery in under 1 hour.

World Class Manufacturing and Supply Chain

The investments we have made in expanding our manufacturing network beyond our world-class facility in China to Vietnam, Mexico and the United States have served us well. We operate our manufacturing network with a high degree of flexibility and agility, while striving for continued productivity advancements each year. In 2024, we will continue to raise the bar on delivering productivity gains while maintaining consistently high customer service levels and driving down inventory levels in the network.

Geographic Expansion Success

Expansion into new geographic markets is another important component of TTI’s success. One great example of the deployment of this strategy can be found in Europe, where we have grown from a very small presence in 2008 to the cordless leadership position in the professional channels that we hold today. In addition, our performance in Canada, Australia, and New Zealand has been highly impressive, reflecting our commitment to cordless leadership on a global scale. Our businesses in Asia and Latin America are also developing well, and we are excited about our strategic plans to continue expanding our global presence in these regions.

Exceptional People

To win in our vast served markets, we are obsessively focused on hiring the best people. This involves recruiting, training, retaining, and investing in top-tier talent, while maintaining a culture of high performance, innovation, and transparency. In 2008, we introduced the TTI Leadership Development Program to bolster our organizational growth by creating a pipeline of strong talent. Since its inception, this program has successfully hired over 10,500 LDPs to fuel our growth. Today, TTI has the strongest and deepest management team in the industry, many of whom have been integral to our success over the last decade.

Breakthrough Leadership

One way we develop our winning team is through our intensive “Breakthrough Leadership” senior management training program. In these sessions we gather top leaders from around the globe to discuss company objectives, vision, strategy, organizational development, and leadership among other topics. More importantly, throughout these sessions we reinforce our high-speed, high-performance culture and energize the leadership to pursue and inspire breakthrough thinking in their own organizations. Alexander the Great once famously said, “I am not afraid of an army of lions led by a sheep; I am afraid of an army of sheep led by a lion”. At TTI, our philosophy is to take this one step further and “build armies of lions, led by lions”. Breakthrough Leadership is just one of the tools we use to build this culture.

Just Getting Started

Our outstanding performance over the past fifteen years has consistently outpaced the overall market and 2023 was no exception. It is an exciting time to be in a leadership position in the cordless power tool industry, and we believe we are just getting started. The investments we have made in new product development, manufacturing, geographic expansion, and in-field marketing initiatives have created a strong foundation for our continued growth and strong financial performance.

I would like to thank our Chairman, Horst Pudwill, and Vice-Chairman, Stephan Pudwill for their outstanding leadership, vision and mentorship in 2023 and look forward to many years of partnership ahead. The best is yet to come at TTI!

I am pleased to present the Techtronic Industries (TTI) Environmental, Social, and Governance (ESG) report for the 2023 reporting year. TTI is the industry leader in advancing clean battery-powered technology in power equipment, outdoor products, and floorcare and cleaning products.

As we continue to develop our associates, optimize operations, and expand relationships with our partners, TTI’s commitment to designing powerful cordless products that prioritize user safety, noise reduction, and energy efficiency remains steadfast.

Sustainable Products

At TTI, we firmly believe that the future of power equipment is in cordless battery-powered technology. Cordless battery-powered energy is the most energy-efficient option when compared to legacy alternatives. This includes petrol, electric corded, hydraulic, and pneumatic-powered tools, as well as NiCad, NiMH, and lead-acid batteries.

We take immense pride in our commitment to creating powerful, innovative, safe, and sustainable products. Some of this year’s new product highlights include:

• Our MILWAUKEE BOLT Safety Helmets, equipped with advanced safety features that meet the ANSI/ISEA standards, have unparalleled safety and greater durability compared to other competitive products on the market.
• In 2023, we launched the industry’s first cordless carpet washer, the HOOVER ONEPWR SmartWash Carpet Cleaner. This product offers a highly energy efficient option for everyday users, without the inconvenience and risk of handling cords.
• We also introduced our RYOBI 60-WATT Foldable Solar Panel, providing users with a renewable energy source for charging phones, tablets, power banks and RYOBI batteries.

Environment

Our dedication to the environment is demonstrated through continued investments in research and development that drive energy efficiency and minimize waste, noise, and our carbon footprint. These investments in clean technologies and sustainable practices reflect our determination to contribute to a more environmentally conscious future. This year we made some notable achievements including:

• Establishing a target to achieve a 90% waste-diverted-from-landfill rate by 2030.
• Continually expanding our Green Energy Agreements that supply our operations with 100% renewable energy in Wisconsin, Mississippi, and across Europe.
• Installed solar panels at our Asia Industrial Park (AIP) facility in Dongguan, China and in Australia at our sites in Dandenong South, Victoria and Eastern Creek, New South Wales.

We have made notable progress towards our decarbonization target of reducing our absolute Scope 1 and Scope 2 greenhouse gas (GHG) emissions by 60% by 2030. In 2023, we improved our emission intensity by 8%, resulting in an absolute total CO2e emission reduction of 7,886 tonnes. This reduction marks our second consecutive year of decreasing our emission intensity and absolute emissions. Our 2021 Scope 1 and Scope 2 emissions have been verified as our baseline and moving forward, we will verify these emissions each year. Our commitment to the Science-Based Targets initiative is on track and we anticipate sharing these targets in 2025.

Social

Through collaboration, partnership, and community engagement initiatives, we strive to create a positive impact within communities across the world by developing people, developing communities, and preserving the environment.

TTI’s relentless pursuit to attract and invest in top-tier talent is a key driver to our growth and success. Our industry leadership is supported by our continuous efforts to maintain an inclusive, diverse, and safe environment for all.

Our investment in the growth of our people shines through initiatives such as our esteemed Leadership Development Program (LDP), which has been a cornerstone of our success for the past 16 years. This program has inspired similar programs for other departments and has played a pivotal role in our evolution, cultivating a culture of leadership development. We are proud to continue recruiting, developing, and promoting exceptionally talented individuals into leadership roles, while also providing them with the necessary tools and resources to grow both professionally and personally.

We believe that our success is intrinsically tied to the success and safety of our people and the communities we serve. Our commitment to safety is evident as we have implemented strategic protocols and technology to further drive down the rate of work-related recordable injuries.

Governance

Sound governance practices are critical to our success at TTI. We hold ourselves to the highest sustainability and governance standards while aligning with evolving corporate, regulatory, and social standards. We ensure that our board composition is fit for our business needs, with the balanced skills, experience and diversity of perspectives and backgrounds that are vital for effective risk management, oversight of internal controls, leadership and in turn the achievement of our short term and long term goals that drive shareholder value.

This year, we continued to strengthen our governance structure by upholding global standards and frameworks, including the Global Reporting Initiative (GRI) standards, Sustainability Accounting Standards Board (SASB), United Nations Sustainable Development Goals (UNSDGs), and Task Force on Climate related Financial Disclosures (TCFD). Our sustainable business model is an indispensable element of our strategy, and we believe it is vital to our long-term success.

I am incredibly proud of the progress we have made this past year. I would like to thank our teams for their unwavering dedication, exceptional talents, and hard work. I am confident that, together, we will forge a future where TTI not only dominates the industry but also catalyzes a profound shift towards an even more sustainable future.