Johnson Controls International plc (NYSE:JCI)

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibits considerable fluctuation over the observed periods. It decreased marginally from $2,175 million in 2018 to $2,126 million in 2019, followed by a significant drop to $448 million in 2020. A recovery phase is evident from 2020 onwards, with NOPAT increasing sharply to $2,084 million in 2021, before declining somewhat to $1,860 million in 2022, and slightly improving again to $1,892 million in 2023. This suggests volatility potentially linked to external or operational factors impacting profitability during this time.

Cost of Capital

The cost of capital shows a rising trend from 13.31% in 2018 to a peak of 15.07% in 2021. Thereafter, it gradually decreases to 14.83% in 2022 and further to 14.46% in 2023. This pattern indicates increasing capital costs through 2021, possibly due to higher perceived risk or market interest rates, followed by a slight easing in the subsequent years.

Invested Capital

Invested capital declined steadily from $35,173 million in 2018 to $29,283 million in 2020, stabilizing around $29,300 million in the years following, with slight fluctuations and ending at $29,464 million in 2023. This trend may reflect capital divestitures, asset optimization, or operational restructuring to reduce the capital base.

Economic Profit

Economic profit remains negative throughout the period, indicating that the company's returns did not cover its cost of capital. The magnitude of negative economic profit peaked in 2020 at -$3,632 million and while it improved in 2021 to -$2,337 million, it continued to be negative with slight deterioration in 2022 and 2023, finishing at -$2,368 million. This persistent economic loss suggests challenges in generating value above capital costs despite fluctuations in operating profit and invested capital.

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.

Economic Profit

Economic profit remained negative throughout the period, indicating consistent economic losses. The value showed fluctuations, with a peak loss in 2020 at -3,632 million US dollars. Subsequently, losses decreased in 2021 to -2,337 million and then slightly increased again in 2022 and 2023, ending at -2,368 million. This pattern suggests cyclical pressures or challenges in generating returns above the cost of capital.

Invested Capital

Invested capital displayed a declining trend from 2018 to 2020, reducing from 35,173 million US dollars to 29,283 million US dollars. From 2020 onwards, invested capital stabilized, fluctuating slightly but remaining close to the 29,300 million US dollars level. This stabilization could imply a cautious investment approach or optimized asset usage in recent years.

Economic Spread Ratio

The economic spread ratio was negative in all years, reflecting returns below the cost of capital. The spread worsened significantly in 2020, deepening to -12.4%. After this, the ratio improved somewhat but remained negative, showing -7.97% in 2021 and hovering around -8.0% in the following years. The persistent negative spread underscores ongoing challenges in profitability relative to invested capital costs.

The financial analysis reveals several notable trends for the company over the observed period from 2018 to 2023. Economic profit consistently remained negative throughout this timeframe, indicating challenges in generating returns above the cost of capital. The economic profit experienced fluctuations, with the lowest point occurring in 2020 at -3632 million US dollars, signaling a significant decline during that year. Although there was some recovery after 2020, economic profit did not return to positive territory, ending at -2368 million US dollars in 2023.

Adjusted net sales demonstrate a more variable pattern. Sales peaked at approximately 31,447 million US dollars in 2018 but then sharply decreased over the next two years, reaching a low of 22,345 million US dollars in 2020. Following this decline, a steady upward trend is evident, with sales increasing annually and reaching 26,985 million US dollars by 2023. This suggests a recovery phase and potential growth in revenue after the 2020 low point.

The economic profit margin, reflecting the ratio of economic profit to net sales, remained negative throughout, underscoring ongoing profitability challenges relative to sales. The margin deteriorated significantly in 2020 to -16.25%, aligning with the nadir of economic profit and net sales. After 2020, the margin recovered partially but stayed negative, improving from -9.89% in 2022 to -8.78% in 2023. This partial improvement indicates better cost management or increasing sales efficiency, although the company is still not achieving a positive economic margin.

Economic Profit

Persistently negative, with a nadir in 2020 followed by partial recovery.

Adjusted Net Sales

Declined sharply until 2020, then consistently increased through 2023.

Economic Profit Margin

Remained negative throughout; worsened significantly in 2020, improving somewhat in recent years but still below zero.

Overall, the data suggest that while the company faced substantial financial challenges around 2020, reflected in diminished sales and deepened economic losses, there has been a gradual return toward operational improvement since then. Nevertheless, the ongoing negative economic profit and margin indicate that the company has yet to achieve sustained value creation above its capital costs.