Second-quarter earnings for several major HVAC manufacturers were impressive. Compared to last year, Carrier's second-quarter sales increased by 12% to $6.7 billion; Trane's revenues rose by 13% to $5.3 billion; and Lennox's core revenue grew by 8% to $1.45 billion. The CEOs of these companies were understandably enthusiastic while reporting these figures during their earnings calls.
Carrier’s CEO, David Gitlin, commented that Q2 was another strong quarter for the company, and “Importantly, our [residential] business in North America returned to year-over-year volume growth. Given strong orders and low inventory channel levels, we are now poised for a strong second half.” He added that looking ahead to 2025, Carrier is poised for “strong growth across a significant percentage of its portfolio.”
For most OEMs, the 2025 portfolio will feature a wide array of new HVAC equipment that uses an A2L refrigerant, such as R-32 or R-454B. For the rest of 2024, however, it seems there is still quite a bit of demand for R-410A equipment. That was anticipated, said Alok Maskara, CEO of Lennox, who noted that the company was always expecting to sell more R-410A units than R-454B this year.
“What we have to watch out for, honestly, is to think about, is there going to be a significant amount of pre-buy of R-410A product? And if there is demand, do the manufacturers have the capacity and ability to make additional R-410A products?” he said. “That’s sort of the uncertainty that concerns us right now.”
That said, Lennox has not yet issued a last call to buy R-410A products, said Maskara. “We are working with our distribution partners and dealers to truly understand what their demand requirements are and tailor our manufacturing according to that… we want to remain flexible to give our dealers and distributors what they want. So for us right now, our production is R-410A, and we’ll continue producing it until the time the dealers want it until the time the law allows us to do it.”
Like Lennox, Trane has also not started selling residential R-454B equipment, with both companies stating that it will be rolled out in the second half of 2024.
“As far as pre-buys go, we’re not anticipating in our residential business a large pre-buy towards the end of the year. We’ll see how that rolls out, but right now, we’re not forecasting that,” said David Regnery, CEO of Trane. “There’s just too much timing that you have to work on to make sure that you could sell through all your products in the year, and our focus really is on helping our independent wholesale distributors transition their inventory properly.”
Regnery added that the way Trane operations were designed, the company is still able to manufacture both R-454B and R-410A products.
“We have mixed model lines, which was a little bit more upfront cost, but we believe that investment will pay, because in the [residential] area, we’ll be providing components of R-410A for some time into the future to make sure that we could service our product over the useful life of that product,” said Regnery.
Regarding the mix of R-410A and R-454B equipment this year, Gitlin noted that the amount of R-454B will be lower than what Carrier had previously projected.
“We thought it could be closer to 20%. I think it's going to be less than 10%, maybe closer to 5% this year,” said Gitlin. “I don't think a lot of our distributors and dealers are in a major rush to put in the R-454B. We have our initial units out there. We're starting with the residential new construction piece, because they're not going to want mixed developments. But we think that as you get into next year, it's probably closer to 80% will be R-454B, maybe a bit more than that, but probably only about 5% this year.”
Carrier has also not yet issued a last call for residential R-410A orders, but Gitlin said the company has asked distributors for an idea of how much R-410A equipment they want for the rest of the year. He added that Carrier’s goal is to have the right products at the right price when they are needed. “I'm confident that if we continue to do the right thing for our customers, we'll continue to see outsized growth,” he said.
