Report Published as on 11th July 2024
| Ticker | HON |
| Company Name | Honeywell International Inc |
| Shariah Compliance | Pass |
| DP-Ratio | 0.85% |
We have conducted a comprehensive review on Honeywell International Inc from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.
Honeywell International Inc. is a publicly traded, multinational conglomerate provides a variety of products and services across different industries globally. Their offerings combine physical products with software solutions.
Honeywell Operates In Four Main Business Segments
- Aerospace: Products and services for the aviation industry. This segment provides avionics, aircraft engines, flight management systems, and services for the commercial, defense, and business aviation sectors.
- Building Technologies: Energy-efficient solutions for buildings and businesses. They offer solutions for creating safer, more efficient, and productive buildings, including heating, ventilation, and air conditioning controls, fire safety systems, and security solutions.
- Performance Materials and Technologies: Specialty chemicals, electronic and advanced materials. This segment focuses on specialty chemicals, electronic materials, and advanced materials used in various industries.
- Safety and Productivity Solutions: Technologies related to safety, security, and productivity in buildings and industries. Honeywell provides industrial automation solutions, voice-enabled software, personal protective equipment, and other products to enhance worker safety and productivity.
The Main Sources Of Revenue For Honeywell International Inc.
- Aerospace Products: This is a significant source of revenue, encompassing products like auxiliary power units, propulsion engines, environmental control systems, integrated avionics, electric power systems, engine controls, flight safety equipment, communication systems, navigation hardware, radar and surveillance systems, and aircraft lighting.
- Building Technologies: Revenue comes from building automation, fire safety, and security systems, all upon delivery and installation.
- Performance Materials and Technologies: This segment generates revenue primarily through the sale of specialty chemicals, electronic materials, and advanced materials.
- Safety and Productivity Solutions: Revenue comes from personal protective equipment and industrial automation equipment sales.
Let us have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Operating Revenue: (In USD Millions)
for the year ended 31st December 2023
| Segments | Revenue | Non-Permissible Revenue | % of Non-Permissible Revenue | Non-Permissible Segment Classification | Comments |
| Aerospace | 13624 | – | – | – | – |
| Honeywell Building Technologies | 6031 | – | – | – | – |
| Performance Materials and Technologies | 11506 | – | – | – | – |
| Safety and Productivity Solutions | 5489 | – | – | – | – |
| Corporate and All Other | 12 | – | – | – | – |
| Total | 36662 | – | – | – | – |
Tricky Areas From a Shariah Perspective
Honeywell International Inc. operates across four diverse revenue segments: Aerospace, Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. These segments focus on providing advanced aerospace products, building management systems, specialty chemicals, industrial automation, and workplace safety solutions. Given the nature of its business activities, which revolve around technology, innovation, and manufacturing, Honeywell aligns well with Shariah principles. As long as the products and operations comply with Islamic principle regarding adherence to Sharia law, there shouldn’t be any contradiction.
Based on the above information, it is safe to assume that the business operations of Honeywell International Inc., would be Shariah Compliant.
Let’s have a look at the non-operating income of the company
Non-operating revenue of the company: (In USD Millions)
for the year ended 31st December 2023
| Segments | Revenue | Non-Permissible Revenue | % non-Permissible Revenue | Non-Permissible Classification | Comments |
| Interest Income | 321 | 321 | 100% | – | – |
| Pension ongoing income non-service | 441 | – | – | – | – |
| Other postretirement income non-service | 29 | – | – | – | – |
| Equity income of affiliated companies | 100 | – | – | – | – |
| Gain on sale of non-strategic businesses and assets | 5 | – | – | – | – |
| Expense (benefit) related to Russia-Ukraine conflict | 3 | – | – | – | – |
| Total | 899 | 321 | 35.71% | – | – |
It is clear from the table above that the non-operating income of the company includes interest income which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Revenue Description | Non permissible Revenue (USD Millions) |
| Total Revenue | 37561 |
| Non-permissible operating revenue | 0.0 |
| Interest Income | 321 |
| % of non-permissible revenue | 0.85% |
| Sector Compliance | PASS |
Dividend Purification Calculation:
| Revenue Description | Non permissible Revenue (USD Millions) |
| Non-permissible operating revenue | 0 |
| Non-permissible non-operating revenue | 321 |
| Total Non-permissible revenue | 321 |
| Total Revenue of The Company | 37561 |
| Dividend Purification Ratio | 0.85% |
Financial Ratio Screen:
(All figures in USD Million for the Quarter ended 31st March 2024)
| Amount | Remarks | |
| 3 years Average Market | 134849.44 | – |
| Total Debt | 25256 | – |
| Islamic Debt | 0.0 | – |
| Adjusted Debts | 25256 | – |
| LC Ratio | 18.73% | – |
Source: All the above information is based on the website of the company, Annual Report as on 31st December 2023 and the latest Quarterly Report for the period ended 31st March 2024.
Conclusion:
Given the above information, we at Ratings Intelligence believe that Honeywell International Inc. is a Shariah compliant company as per the Shariah screening criteria.
