Chairman and Chief Executive Officer at Carrier Global
Thank you Sam and good morning everyone. I'll start with a summary of our Q3 results on Slide 2. Q3 was another strong quarter for us, particularly in light of the widespread supply chain challenges. Our growth continues to benefit from our ability to leverage broad economic momentum, our position at the epicenter of important secular trends and our strategic investments and execution on our growth initiatives. Demand and orders remain encouraging. We are experiencing record backlogs positioning us well for continued growth in Q4 and 2022. Our key challenge remains operational both in mitigating the continued inflationary headwinds and supporting customer demand. I will provide more details on the next slide, but I want to thank our team who has been working tirelessly to support our customers and I also want to thank our customers and suppliers who continue to partner with us as we address these issues. You see the efforts of the team reflected in our Q3 results. Organic sales were up 4% over Q3 of last year and up 7% over Q3 of 2019. Adjusted EPS of $0.01 was better than we anticipated, helped by a lower tax rate.
Given the rising input cost headwinds, we have been aggressive on price and controllable costs while preserving investments critical to differentiation and growth. Our HVAC team more effectively manage price costs and that was reflected in its segment margins of 19.1%. Our fire and security team also reacted aggressively, but it is our business that is most impacted by chip shortages. The Refrigeration story is mixed while the segment drove solid 14% organic growth and continue to gain traction on strategic initiatives, we did not react aggressively enough on both price and cost resulting in disappointing segment margins. I am confident that Tim and the team are taking the right actions to position us well for 2022. All in all, this is shaping up to be a strong year for Carrier, we are raising our top line expectations from 10% to 12% organic growth to about 13% over last year. Indeed, up 6% over 2019. We are also raising adjusted EPS range to the high end of what we previously indicated now projecting approximately $2.20, up 33% over last year. Despite inflationary challenges, we remain on track to deliver over 70 basis points of margin expansion this year while generating about $1.9 billion in free cash flow.
Turning to Slide 3, the supply chain challenges are significant. Between raw material escalation, supplier price increases chip shortages and logistics costs, full year input cost pressure has now increased from about $250 million in our July forecast to about $375 million. We are tackling this situation both tactically and strategically. Tactically, we have a virtual global supply chain war room that operates 24 hours a day. We have devoted significant additional resources into supply chain management, many of whom are on-site at our suppliers. We have redirected ocean freight routes to avoid extended port delays using a newly implemented digital tool. Strategically, we are taking actions to emerge from this period with a more resilient supply chain. For example, we are working to minimize single points of failure. 2020, had roughly 25% dual sourcing of critical components. We will end 2021 with over 35%. We are targeting 75%. Integrated circuits have our acute focus and we are working directly with our chip OEMs on securing supply.
We are also localizing certain commodities to remain low cost and reduce logistics cost and complexity. We have increased our investments in automation by 50% this year. We will have more than 3 million automated manufacturing hours by the end of this year and we have a plan to have 6 million by the end of 2026. Our investments in digital tools provide better visibility and drive more proactive actions across our factories and supply chain and we are deploying Carrier Excellence to drive productivity. For 2022, we expect inflationary headwinds, at a minimum to be offset by the price increases that we have already implemented and others that we will be announcing by the end of this year.
Equally important is our focus on managing the controllables on the cost side, including G&A. We remain committed to investing and playing offense on growth and you see our progress on Slide 4. Our North Star remains consistent to be the world leader in healthy, safe, sustainable and intelligent building and cold chain solutions. In healthy buildings, we have over $350 million in orders and a pipeline of over $550 million ahead of our full year expectations. We continue to see strong traction in key verticals including K through 12 with a pipeline that is 30% higher than Q2. We are very well positioned to address our customers' sustainability needs. Over 30% of our residential heating sales in North America are now heat pumps. We were honored to win a prestigious Innovation Award at the recent AHR Expo for our Infinity 24 heat pump with Greenspeed intelligence. The industry's most advanced heat pump with premium energy efficiency globally, 33% of commercial heating sales are now heat pumps, up from 15% 5 years ago and we project this to be 50% within 5 years. We plan to capture more than our fair share by driving differentiation.
For example, earlier this year we launched our new air cooled chiller heat pump platform in Europe. It's global warming potential is 70% lower than our previous chiller and improves our customers energy efficiency by up to 30% versus legacy technologies. Our chiller and heat pump sales for this platform, were up 30% year-over-year through Q3 contributing to share gains. On abound, it is the connective tissue for intelligent connected buildings for example, I recently visited with Dr Scott Boden from Emory at its newly opened state of the art health care facility. Carrier and Emory are innovation partners in this healthy, intelligent and sustainable facility with the full suite of Carrier technologies, HVAC building automation systems, fire detection, access and video management, digital solutions and Abound which ties it altogether. Our progress on LYNX is equally encouraging. Our truck trailer and shipping fleet customers are increasingly adapting our subscription base connected fleet monitoring digital solutions. We have seen mid teen growth in our subscription portfolio year-to-date and we have a strong order book and pipeline.
We recently signed an agreement with one of the largest refrigerated truck fleets in the United States to provide subscription based telematics and refer fleet monitoring. The customer will benefit from increased efficiencies, less downtime and lost products and overall lower energy consumption and costs. We continue to see progress on our 3 pillars of growth with share gains, VRF expanded geographic coverage and increased digitally enabled aftermarket and recurring revenues, which I'll discuss more on Slide 5. Q3 aftermarket revenues were up about 12% year-over-year and we are tracking to double-digit aftermarket growth this year. We have launched a broad portfolio of aftermarket solutions including spare parts, preventative maintenance, break fix repairs, midlife modifications and upgrades, remote monitoring and other digital services. Digital enablement is foundational. In addition to Abound, we recently launched Breeze a new e-commerce platform, focused on capturing high-margin part sales with our national account customers in residential and light commercial HVAC. Our service coverage levels are at all time highs.
In commercial HVAC, we remain on track to have 60,000 chillers under service contracts this year. In refrigeration, we signed a 3-year BluEdge service contract with ScottsRL, Australia's largest national refrigerated transport fleet. Tangible progress on these strategies is driving strong organic growth in 2021 and positions us well for continued topline sticky growth in 2022 and beyond. Another component of our growth is acquisitions. As you can see on Slide 6, we are making great progress in this area as well. Our strong balance sheet enables us to play offense on capital deployment, including M&A both focusing on digitally enabled recurring revenues. For example, Nlyte is complementary to our ALC building management system offerings in the fast growing data center vertical. Nlyte software optimizes rackloads and monitors power and heat generation. ALC has market-leading technology which automates the cooling systems to effectively and efficiently dissipate that generated heat. Together, we provide an integrated solution to monitor and control both the power and the cooling systems to optimize datacenter operations. Similarly, BrokerBay is complementary to our super business, super leverages the mobile credentialing capabilities used across our broad security portfolio to give us high market share and locks that support residential real estate showings enabling 45 Million property showings in 2020. Agents love our technology and have been pushing for more digital offerings such as scheduling real-time communication and actionable insights.
BrokerBay brings a highly differentiated real estate management cloud ecosystem that adds the sought after capabilities. Together, we provide a one-stop shop to improve agent productivity. Early customer response has been tremendous. Last week, we announced the acquisition of Denmark based Cavius an innovative residential alarm company. Cavius has a complete range of smoke, heat, flood and carbon monoxide alarms, including the world's smallest photoelectric smoke alarm. In combination with Kidde, we can further enhance our innovative residential fire safety product offerings and strengthen our connected technologies innovation pipeline globally. The market opportunity is very attractive as fire safety regulations expand across the globe. We continue to build out our M&A pipeline and we will remain focused on our strategic priorities. With that let me turn it over to Patrick. Patrick.