David Gitlin
Chairman & Chief Executive Officer at Carrier Global
Thank you, Sam, and good morning, everyone. Let me first welcome Ed Dryden to Carrier who comes to us from RTX's Collins Aerospace to lead our Refrigeration business, bringing extensive experience, driving business growth and delivering results. Ed succeeds Tim White, who has moved into a new Chief Product Officer role, responsible for program execution and our increased focus on global platforms, both reporting to me. Welcome, Ed, and thank you, Tim.
Pivoting to 2Q, another strong quarter. Q2 organic sales -- or, excuse me, Q2 organic orders were up roughly 30% year-over-year and HVAC organic orders were up over 40%, with very strong order intake in data centers. Better than expected and continued strong sales growth in our Global Commercial and Light Commercial HVAC businesses helped offset weakness in our RLC businesses in Europe and China. Importantly, our Resi business in North America returned to year-over-year volume growth, and given strong orders and low inventory channel levels, we are now poised for a strong second-half.
Also, we continue to execute well, as reflected by another quarter of significant margin expansion. Q2 adjusted operating margins expanded by 200 basis points to 18.1% and adjusted EPS was again up double-digits, fueled by strong productivity driven by our Carrier Excellence business operating system.
While we perform, we continue to transform. We closed on the sales of our Access Solutions and Industrial Fire businesses, KFI closed on its sale, and we expect to close the Commercial Refrigeration transaction around the end of Q3. We are also making great progress on the sale of our Residential and Commercial Fire business.
Strong free cash flow in the quarter of about $550 million and our progress on the business exits have contributed to our significant net debt reduction in the quarter and have positioned us to initiate a multi-billion dollar share buyback, $1 billion, targeted for the second-half of this year.
As you can see on Slide 4, we continue to stay laser-focused on and make great progress towards our North Star, being the global leader in intelligent climate and energy solutions. Each word of our vision has meaning, and we are purposeful in our investments to prioritize the key elements of our strategy. As a global leader, we have gained share across all major segments. Connectivity is a key enabler to provide scalable intelligent solutions. We now have almost 40,000 connected chillers, on track to 50,000 by year-end. Our Abound intelligent building platform now monitors over 1.1 billion square feet, and we currently have over 150,000 paid subscriptions for our Lynx Cold Chain platform.
We have also established an AI Center of Excellence. Internally, we are targeting increased productivity for everything from contract reviews where we have seen improved productivity of up to 90% to call centers. Externally, we now provide services to customers combining classic and Generative AI, analyzing data alongside service and maintenance records to deliver more real-time and proactive chiller maintenance. We continue to innovate and launch differentiated sustainable solutions. In Q2, we introduced a low GWP variant of our award-winning AquaEdge water-cooled chiller. Likewise, we are the first to offer 3-ton to 10-ton entry-tier rooftop units using our highly differentiated EcoBlue fan technology with low GWP refrigerants. All these offerings provide our customers with energy savings, while reducing their greenhouse gas emissions.
We play a key role in enhancing grid resilience. For example, Viessmann Climate Solutions recently launched a battery energy storage system with expanded capacity from 15 kilowatt hours to now 75 kilowatt hours, importantly, expanding our addressable market. The solutions concept relates to the unique value propositions that we provide to our customers and greater recurring revenues they provide to us.
You see examples of our continued traction on aftermarket on Slide 5. Aftermarket growth in Q2 was 9%, and we are confident that this year, we will deliver another year of double-digit growth. We have further refined our playbook with new digital tools that we have cascaded globally, driving both better execution and new solutions for our customers. We are confident that our proven formula works as we continue to target double-digit aftermarket growth forever.
Moving to Slide 6. About a year ago, we announced that we would be transforming Carrier into a more focused, pure-play, higher-growth company with significantly higher exposure to the secular tailwinds around sustainability, electrification and energy resilience. I am proud to report that our team continues to do what we say we're going to do. We are successfully integrating with Viessmann Climate Solutions, a truly world-class organization. Our divestitures remain very much on track, and we are deploying the proceeds as committed. Our first three exits will yield over $7 billion in gross proceeds. Our Commercial and Residential Fire exit is also progressing well, supported by excellent business performance. We plan to announce a signed agreement before the end of Q3, with a transaction close around year-end. Given our progress, we have reduced net debt by over $5 billion in the second quarter and plan to initiate our multi-billion dollar buyback that I mentioned earlier.
With the portfolio transformation tracking to plan, we are heads down focused on working with Viessmann Climate Solutions to realize the full potential of this tremendous combination, and you can see our progress on Slide 7. This is truly a world-class team and business. Our heat pumps are unquestionably differentiated, providing superior electricity savings for our customers. Noise attenuation, energy efficiency, ease of installation, reliability and aesthetics are all best-in-class. We have added 1,500 direct-to-installer relationships this year and continue to expand our network. The successful launch of our new, larger capacity heat pumps will give us a point of growth this year, and we expect more than that next year.
Viessmann Climate Solutions has gained share in heat pumps across all primary countries where it sells, with particular strength in Germany. We have also realized positive price year-to-date. We have identified hundreds of millions of dollars of run rate synergy savings. The most immediate opportunity is leveraging our respective channels. For example, in Europe, we have already delivered our first Carrier branded air conditioning units and our Beretta branded boilers through the Viessmann channel. Given that only 20% of homes in Europe have air conditioning, roughly 12% in Germany, we see a unique opportunity for us to grow in the cooling-only space.
We are also leveraging our combined technology strengths. Examples include deploying Viessmann's One Base Digital platform across all residential applications, and at a systems level, working to provide unique home energy management solutions for North America using Viessmann's battery and systems integration capabilities. We remain on track to achieve $75 million of cost synergies this year and over $200 million by year three, with particular progress on supply chain logistics and value engineering.
The team is also taking tough but necessary additional cost control actions. All of this set us up for higher conversion rates. We are also clear-eyed that the residential market in Europe has been weaker than we expected. VCS Q2 sales were down about 30% year-over-year, roughly one-third of which was driven by lower solar PV sales. And our revised outlook for 2024 assumes about a 15% drop in year-over-year sales, with a typical seasonal pick-up in the second-half. Importantly, we still have deep conviction in the long-term strategy and growth profile of the business. The EU remains steadfast in its target for 55% reduction in greenhouse gas emissions by 2030, and the shift to heat pumps must play a critical role. Over 25% of greenhouse gas emissions in Europe come from boilers and homes. Heat pumps are clearly the best alternative to fossil fuel home heating, so we remain confident in this continued long-term transition.
The reality in our industry is that the macro surrounding certain geographies and verticals will not be strong every year. And the great thing is that we have been very purposeful about constructing our portfolio to provide focus, resiliency, balance, growth, and increased exposure to key secular trends, all of which you see on Slide 8. We love our positions globally. We are number one or two in most segments with prospects to achieve the same ranking in other targeted segments. Not only do we believe that we have the right presence in the right markets, we have the global scale in engineering operations, aftermarket and other functions to benefit the entire portfolio. The combination of our portfolio and our performance culture gives us confidence that we will continue to consistently deliver on our commitments. As we look ahead to 2025, we are poised for strong growth across a significant percentage of our portfolio.
With that, I will turn it over to Patrick. Patrick?
