Carrier Global Corp. (NYSE:CARR)

Operating profit margin exhibited considerable fluctuation between 2020 and 2022. Initial performance was followed by a decline, then a substantial recovery. A review of the underlying figures reveals a complex interplay between operating profit and net sales.

Operating Profit Margin

The operating profit margin decreased from 17.66% in 2020 to 12.83% in 2021, representing a contraction of 4.83 percentage points. This decline suggests a weakening in the company’s ability to generate profit from its core operations relative to revenue during that period. However, a significant improvement occurred in 2022, with the margin rising to 22.11%, an increase of 9.28 percentage points from the prior year. This indicates a substantial enhancement in operational profitability.

Operating Profit

Operating profit decreased from US$3,083 million in 2020 to US$2,645 million in 2021, a reduction of US$438 million. This decrease contributed to the lower operating profit margin observed in 2021. In contrast, operating profit increased significantly in 2022, reaching US$4,515 million, representing a US$1,870 million increase from 2021. This substantial growth was a primary driver of the improved operating profit margin.

Net Sales

Net sales increased from US$17,456 million in 2020 to US$20,613 million in 2021, a growth of US$3,157 million. Despite this revenue increase, the operating profit margin still declined, suggesting that cost of goods sold and/or operating expenses grew at a faster rate than sales. Net sales experienced a slight decrease in 2022, falling to US$20,421 million, a reduction of US$192 million. However, the substantial increase in operating profit, coupled with a modest sales decrease, resulted in a significantly higher operating profit margin.

The observed trends suggest that while revenue growth is a factor, the primary driver of operating profit margin performance is the company’s ability to manage its operating costs and improve operational efficiency. The substantial margin improvement in 2022, despite a slight decrease in net sales, highlights the impact of effective cost control and operational improvements.