New Contract Wins Will Help Johnson Controls Manage Economic Headwinds

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Johnson Controls‘ (NYSE:JCI) Global Workplace Solutions (GWS) has received a contract to maintain and improve services at Shell’s Albian Sands mining operations in Canada. [1] The contract holds significance for Johnson Controls as this is the first time that the company will provide facilities management services to a mining operation.

Such contracts are lucrative because they get extended if the services provided are up to clients’ expectations, which helps ensure recurring income. Last month, GWS extended a similar contract with Agilent Technologies for the third time with an expanded mandate. On the whole, these service contracts for providing a range of facilities at corporate real estate will help Johnson Controls partially offset the challenges that it presently faces from the overall weak global macro-economic environment.

We currently have a stock price estimate of $28.68 for the company, approximately in-line with its current market price.

See our complete analysis for Johnson Controls here

The services contract from Shell

Shell has provided Johnson Controls GWS the mandate to maintain and improve services to the buildings and trailer complexes, which occupy more than 600,000 square feet, at its Albian Sands mining operations in northern Alberta, Canada. The contract also focuses on health, safety, environment and security aspects of its employees. This is the first time that GWS will provide services to real estate, related to mining operations, but the contract could pave the way for more such contracts with other mining companies. Currently, GWS maintains 11,000 of Shell’s fuel retail sites in 24 countries as well as several real estates in the U.S., Brazil and the Netherlands.

Contract Extension with Agilent

At the end of last month, GWS extended a similar facilities management service contract with Agilent technologies for the third time, which takes the relationship to 2017. [2] GWS started providing services to Agilent in 2003 in the U.S. Under the third-generation contract, GWS has the mandate to provide services covering maintenance, repairs, cleaning, energy management, workplace projects and real estate transaction management to Agilent sites in 29 countries globally.

Overall, such contract wins will help add to Johnson Controls’ top-line growth, especially at a time when the company is facing severe growth challenges due to the slowdown in Europe, which has forced it to cut its outlook for 2012.

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Notes:
  1. Johnson Controls to provide maintenance services for buildings at Shell’s Albian Sands mining operation in Canada, September 5 2012, www.johnsoncontrols.com []
  2. Johnson Controls Global WorkPlace Solutions and Agilent Technologies extend successful relationship for a third time, August 21 2012, www.johnsoncontrols.com []
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