Senior Vice President & Chief Financial Officer at Carrier Global
Thank you, Dave, and good morning, everyone. Please turn to Slide 8. In short, Q4 was very much in line with our expectations and the guide we provided. Reported sales were $5.1 billion with 5% organic sales growth driven by about 8% price with volume down a couple of points. I'll provide a bit more detail on a future slide but in essence, we saw continued strong organic growth in HVAC, Fire & Security, and global truck and trailer, which was partially offset by a very weak quarter in container and to a lesser extent, commercial refrigeration.
The Chubb divestiture reduced sales by 10%; and acquisitions, substantially all Toshiba Carrier, increased sales by 8%. Currency translation was a headwind of 4%. All segments were price-cost positive or neutral in the quarter. Q4 adjusted operating margin was about flat compared to last year driven by a 70 bps margin headwinds related to the TCC acquisition. Strong productivity almost completely offsets the margin headwinds related to the lower volume and the TCC acquisition.
Adjusted EPS of $0.40 was consistent with the upper end of our full year guidance range. For your reference, we have included the year-over-year Q4 adjusted EPS bridge in the appendix on Slide 20. $1 billion of free cash flow in the quarter was also as expected and we generated about $1.4 billion for the full year.
Moving on to the segments, starting on Slide 9. HVAC reported sales included a 16% benefit from the TCC acquisition. HVAC organic sales were up 9% driven by low-single-digit growth in residential, over 40% growth in light commercial and mid-teens growth in commercial HVAC. Sales growth was driven by both price and volume.
Residential movement was down about 10% in the fourth quarter and quarter-end field inventory levels ended up higher than the flat year-over-year levels we targeted. Residential HVAC growth was driven by price as volume was down mid-single digits. Commercial HVAC had another very strong quarter with double digit sales growth in applied equipment, aftermarkets and controls. All regions grew double-digits.
Adjusted operating margin was up 60 bps with volume, price cost and productivity more than offsetting a 100 bps margin headwinds related to TCC. Full year operating margin for this segment was 15.2%, in line with the guide we provided post the TCC acquisition, which had about a 70 bps dilutive impact on 2022 for this segment.
Transitioning to Refrigeration on Slide 10. Organic sales were down 7% and currency translation was also a 7% headwind. Within transport refrigeration, North America truck and trailer sales were up low-teens and European truck and trailer was up high-teens. This continued strong performance was more than offset by container, which was down about 50% year-over-year driven by demand softness as well as a tough comp in the prior year. This is the second consecutive down quarter for the container business and historical downcycles for this business have lasted about four quarters.
Commercial refrigeration was down high-single-digits year-over-year as our European food retail customers continued to be pressured by inflation and energy prices. Adjusted operating margins for this segment were up 60 bps compared to last year, despite lower sales with the margin headwind of lower volume more than offset by productivity and price cost.
Full year operating margin of 12.8% was slightly ahead of our 12.5% guide and expanded over 70 bps compared to 2021, despite lower sales as our refrigeration team managed price cost and delivered strong full year productivity to offset the impact of lower volume.
Moving on to Fire & Security on Slide 11. As expected, the Chubb divestiture had a significant impact on reported sales. Organic sales growth was 6%, driven by price with volumes down low-single-digits. Operating margin was short of our expectations for this segment due to continued high supply chain and logistics costs and operational performance challenges. As a result, full year operating margin of 15.2% for this segment was short of our 16% operating margin guide.
Slide 12 provides more details on backlog and orders performance. As our backlogs normalized in some of our shorter cycle businesses such as Residential HVAC, we expect order trends to adjust accordingly. We've seen that trend over the last few quarters and in Q4, particularly. As you can see on the left side, total company organic orders were down roughly 10% for the quarter and up compared to 2019 and 2020. Backlog ended the year up mid-single-digits compared to last year with backlog growth in HVAC and Fire & Security partially offset by backlog reduction in Refrigeration.
As expected, Residential HVAC orders were down in Q4. Light commercial demand remains robust as orders were up mid-teens in the quarter. The backlog is up well over 2 times for that business. Commercial HVAC saw double digit orders growth for the eighth consecutive quarter. The commercial backlog is now up 35% compared to last year and extends well into 2023. Refrigeration orders were down roughly 10% in the quarter, driven by market weakness in container and commercial refrigeration that was only partially offset by global truck and trailer.
North America truck and trailer continued to have strong orders in the quarter, up over a 100% compared to last year. Global truck and trailer backlog is up high single-digits as the strength in North America offset order weakness in Europe. container orders were down about 50% compared to a very strong fourth quarter last year. Commercial refrigeration orders remained weak and reflects market softness.
Finally, demand for our Fire & Security products was mixed. Orders were positive in roughly half of the businesses, including Residential Fire and Access Solutions. Fire & Security products backlog is up almost 30% year-over-year with double-digit growth in all the businesses except Residential Fire in the Americas.
Overall, we enter 2023 with strong backlogs and continued strong order trends in commercial and light commercial HVAC and North American truck and trailer. Businesses experiencing softer order intake includes container, commercial refrigeration and residential HVAC.
Now, moving on to our '23 guidance on Slide 13. We expect reported sales of about $22 billion, including organic sales growth of low-to-mid single-digits. Almost all the organic growth will be priced as we expect volume growth to be flattish. We expect currency translation to be about a point headwind while acquisitions, primarily the impact of Toshiba Carrier, will contribute about 6% to the growth.
Adjusted operating profit is expected to be up compared to 2022 with operating margin at about 14%, including a 50 bps dilutive impact from Toshiba Carrier. We expect high-single-digit to low-double-digit adjusted EPS growth in 2023. I will provide more color on that on the next slide.
We expect a 23% adjusted effective tax rate and full year free cash flow of about $1.9 billion or about 100% of net income. Our free cash flow guidance assumes approximately $75 million of cash restructuring payments, and about $100 million tax headwind since Congress has not renewed the full expensing of R&D.
As shown on the right side of the slide, we expect mid-single-digit organic growth in HVAC as continued strong growth in light commercial, commercial HVAC and aftermarket more than offset flat residential. Reported HVAC sales growth should be in the low-teens -- in the low-double-digits, given the additional contribution from seven more months of consolidating Toshiba Carrier.
In Refrigeration, we expect flattish organic sales as continued strong growth in global truck and trailer is offset by container and commercial refrigeration. For Fire & Security, we expect low-single-digit organic growth. We expect the HVAC segment operating margin to be similar in 2022 despite absorbing about 100 bps of pressure from the consolidation of Toshiba and expect operating margin expansion in Refrigeration and Fire & Security.
Let's move to Slide 14, adjusted 2023 EPS bridge at our guidance midpoint. Our operating profit is expected to be up about $200 million, despite flattish volume growth. Price cost and gross productivity combined are an expected operating profit tailwind of $500 million with $200 million coming from price cost and $300 million coming from gross productivity.
Annual merit adjustments and investments amounts to about $200 million in total and we expect about a $50 million additional headwind of TCC integration costs. There are some other minor, smaller moving pieces but that all adds up to roughly $200 million in increased adjusted operating profit. Core earnings conversion which excludes the impact of acquisitions, divestitures and FX is about 35% at the guidance midpoint.
Moving to the right on the bridge some modest savings on net interest expense and a lower share count offset the expected higher tax rate and currency translation headwinds. That gets us to our midpoint of about $2.55 for next year or 9% growth compared to 2022. As usual, we provide estimates of other items in the appendix on Slide 19.
On Slide 15, you'll see that our capital allocation priorities remain the same. In 2023, we expect about $400 million in capital expenditures. We recently announced another significant dividend increase and our dividend pay-out ratio is above 30%. Finally, we target $1.5 billion to $2 billion in share repurchases in 2023.
Before I turn it over to Dave, let me provide some additional color on the first quarter. We expect a $0.06 headwind from a higher effective tax rate of about 25% compared to 16% last year. In addition, we expect our first quarter to be the weakest quarter from an organic revenue growth perspective with organic sales growth flat and volumes down. This reflects continued growth in the HVAC and Fire & Security segments and a decline in the Refrigeration segment driven by container and commercial refrigeration.
We expect residential HVAC to be down mid-single-digits in Q1. Recall that our Q1, '22 residential HVAC sales were up an industry leading 23%, so certainly a tough comp for that business. Overall, we expect revenues in Q1 to be a little over $5 billion and adjusted EPS to be between $0.45 and $0.50. We expect first half adjusted EPS to be about 45% to 50% of full year earnings, the reverse of 2022. And as usual, free cash flow will be more weighted to the second half. We expect organic revenue growth to sequentially improve after Q1 with easier comps in the second half of 2023.
With that, I'll turn it back to Dave for Slide 16.