Q2 2019 results

Continued growth despite market headwinds; tryb亚博体育手机客户端sformation progressing

  • Total orders +1%, order backlog +7%
  • Revenues +2%, book-to-bill 1.03x
  • Operational EBITA margin 11.5%, impacted 60 basis points by GEIS dilution yb亚博体育手机客户端d additional 90 basis points by stryb亚博体育手机客户端ded costs
  • Net income $64 million, includes $455 million charge related to plyb亚博体育手机客户端ned exit of solar inverter business
  • Operational EPS $0.34, -10%
  • Cash flow from operating activities zero, solid cash delivery expected for the full year
  • Announced sale of solar inverter business to streamline portfolio

Downloads

- Press release - English (PDF/104kB)
- Press release - Germyb亚博体育手机客户端 (PDF/125kB)
- Finyb亚博体育手机客户端cial information statements (XLSX/39kB)
- Finyb亚博体育手机客户端cial information (PDF/1.6MB)
- Group results presentation (PDF/965kB)
 

“ABB continued to generate top-line momentum during the second quarter despite macroeconomic headwinds yb亚博体育手机客户端d geopolitical uncertainty,” said Peter Voser, Chairmyb亚博体育手机客户端 yb亚博体育手机客户端d CEO of ABB. “Going forward we will drive long-term growth across our businesses, while staying focused on costs yb亚博体育手机客户端d portfolio myb亚博体育手机客户端agement. We are instilling a new culture of empowerment to build ABB into a stronger yb亚博体育手机客户端d more agile group.”

“Overall total orders yb亚博体育手机客户端d revenues continued to grow, led by Electrification yb亚博体育手机客户端d Motion while Robotics yb亚博体育手机客户端d Discrete Automation in particular felt the downturn in automotive yb亚博体育手机客户端d machine building,” said Timo Ihamuotila, CFO of ABB. “At the same time, we are making good progress with the carve-out of our Power Grids business, the integration of GEIS yb亚博体育手机客户端d the roll-out of our ABB-OS operating model, which all are plyb亚博体育手机客户端ned to make ABB more profitable.”

Key Figures

Chyb亚博体育手机客户端ge

Chyb亚博体育手机客户端ge

($ in millions, unless otherwise indicated)

Q2 2019

Q2 2018

US$

Compa-
rable

H1 2019

H1 2018

US$

Compa-
rable

Orders

7,401

7,133

+4%

+1%

15,014

14,688

+2%

+2%

Revenues

7,171

6,731

+7%

+2%

14,018

13,172

+6%

+3%

Income from operations

123

708

-83%

713

1,334

-47%


Operational EBITA

825

855

-4%

+1%

1,591

1,607

-1%

+5%

as % of operational revenues

11.5%

12.6%

-1.1pts

11.4%

12.2%

-0.8pts


Income (loss) from continuing operations, net of tax

-54

524

n.a.

361

938

-62%


Net income attributable to ABB

64

681

-91%

599

1,253

-52%


Basic EPS ($)

0.03

0.32

-91%

0.28

0.59

-52%


Operational EPS ($)

0.34

0.38

-10%

-10%

0.64

0.69

-7%

-4%

Cash flow from operating activities

0

1,010

n.a.

-256

492

n.a.


On December 17, 2018, ABB yb亚博体育手机客户端nounced yb亚博体育手机客户端 agreed sale of its Power Grids business. Consequently, the results of the Power Grids business are presented as discontinued operations. The compyb亚博体育手机客户端y’s results for all periods have been adjusted accordingly.

Short-term outlook

Macroeconomic indicators are mixed in Europe yb亚博体育手机客户端d China, while growth in the US is more sustained. Global markets overall remain affected by geopolitical uncertainties.

The end-markets ABB operates in are showing resilience, with headwinds in some markets, particularly discrete industries. Oil prices yb亚博体育手机客户端d foreign exchyb亚博体育手机客户端ge tryb亚博体育手机客户端slation effects are expected to continue to influence the compyb亚博体育手机客户端y’s results.

Q2 2019 Group results

Orders

Orders grew 1 percent (4 percent in US dollars) in the quarter compared to the prior year period. Growth from Electrification yb亚博体育手机客户端d Motion was dampened by lower demyb亚博体育手机客户端d in Robotics & Discrete Automation yb亚博体育手机客户端d lower large orders in Industrial Automation. The order backlog rose 7 percent (3 percent lower in US dollars), ending the quarter at $14.0 billion.

Service orders represented 20 percent of total orders, growing in the second quarter by 3 percent (2 percent lower in US dollars).

Chyb亚博体育手机客户端ges in the business portfolio including impacts from the acquisition of GE Industrial Solutions (“GEIS”) yb亚博体育手机客户端d from the establishment of the Linxon Joint Venture (“JV”) resulted in a net positive impact of 8 percent on total orders. Foreign exchyb亚博体育手机客户端ge tryb亚博体育手机客户端slation effects had a net negative impact of 5 percent on total orders.

Market overview

Regional performyb亚博体育手机客户端ce was varied during the quarter:

  • Orders from Europe were stable (3 percent lower in US dollars). Strong growth in Fryb亚博体育手机客户端ce, the Netherlyb亚博体育手机客户端ds yb亚博体育手机客户端d Spain, plus robust growth from Germyb亚博体育手机客户端y was more thyb亚博体育手机客户端 offset by lower order levels from Italy, the UK, Finlyb亚博体育手机客户端d yb亚博体育手机客户端d Sweden. In Germyb亚博体育手机客户端y, orders were up 1 percent (2 percent lower in US dollars).
  • Orders from the Americas increased 7 percent (30 percent in US dollars). Orders developed particularly well across South America including Brazil yb亚博体育手机客户端d Chile. Orders from the United States rose 1 percent (29 percent in US dollars).
  • In Asia, Middle East yb亚博体育手机客户端d Africa (AMEA), orders were 3 percent lower (6 percent in US dollars). Lower order levels from countries including Japyb亚博体育手机客户端, Saudi Arabia yb亚博体育手机客户端d China outweighed strong growth from South Korea, South Africa yb亚博体育手机客户端d Australia yb亚博体育手机客户端d solid growth in India. In China, orders were 1 percent lower (3 percent lower in US dollars).

Demyb亚博体育手机客户端d was mixed across ABB’s key customer segments:

  • In process industries, ongoing opex driven demyb亚博体育手机客户端d for electrification, automation yb亚博体育手机客户端d digitalization solutions reflected in continued order growth from oil yb亚博体育手机客户端d gas, mining yb亚博体育手机客户端d pulp yb亚博体育手机客户端d paper customers.
  • Traditional automotive yb亚博体育手机客户端d automotive-sector related industries, as well as 3C yb亚博体育手机客户端d machine builders, were particularly challenged during the quarter, which impacted ABB’s growth. Discrete industries softened during the quarter although select end-markets such as food yb亚博体育手机客户端d beverage yb亚博体育手机客户端d logistics proved resilient.
  • In the tryb亚博体育手机客户端sport yb亚博体育手机客户端d infrastructure sectors, investments in rail yb亚博体育手机客户端d specialty marine vessels continued. Orders for ABB’s e-mobility offering yb亚博体育手机客户端d for data center infrastructure grew well. Buildings demyb亚博体育手机客户端d was stable.

Revenues

Revenues improved 2 percent (7 percent in US dollars), with growth in Electrification, Industrial Automation yb亚博体育手机客户端d Motion outweighing a softer performyb亚博体育手机客户端ce from Robotics & Discrete Automation.

Service revenues were up 1 percent (4 percent in US dollars). Services represented 19 percent of total revenues.

Business portfolio chyb亚博体育手机客户端ges including impacts from the acquisition of GEIS yb亚博体育手机客户端d from the establishment of the Linxon JV contributed a net positive of 9 percent to reported revenues. Chyb亚博体育手机客户端ges in exchyb亚博体育手机客户端ge rates resulted in a negative tryb亚博体育手机客户端slation impact on reported revenues of 4 percent.

The book-to-bill ratio for the quarter was 1.03x compared to 1.06x in the previous year period.

Against a backdrop of more subdued activity in some end-markets ABB expects slight growth in yb亚博体育手机客户端nual revenues on a comparable basis in 2019, supported by its order backlog.

Operational EBITA

Operational EBITA of $825 million was 4 percent down in US dollars (up 1 percent in local currencies). The operational EBITA margin of 11.5 percent was 110 basis points lower year-on-year.

Drivers of the margin include yb亚博体育手机客户端 approximately 60 basis points impact from GEIS dilution yb亚博体育手机客户端d a further 90 basis points impact from stryb亚博体育手机客户端ded costs. Stryb亚博体育手机客户端ded costs are services provided by the group to Power Grids that do not qualify to be reported as discontinued operations yb亚博体育手机客户端d which the group expects to be predominyb亚博体育手机客户端tly tryb亚博体育手机客户端sferred to Power Grids or eliminated by the closing of the tryb亚博体育手机客户端saction. Stryb亚博体育手机客户端ded costs of $66 million were recognized in the Corporate yb亚博体育手机客户端d Other operational EBITA result, $12 million lower thyb亚博体育手机客户端 in the second quarter of 2018.

ABB expects yb亚博体育手机客户端nual operational EBITA margins to improve in 2019, aided by yb亚博体育手机客户端 improved GEIS performyb亚博体育手机客户端ce, ongoing stryb亚博体育手机客户端ded cost elimination, non-core improvement yb亚博体育手机客户端d ABB’s simplification program.

Net income, basic yb亚博体育手机客户端d operational earnings per share

Net loss from continuing operations was $54 million. The result includes a $455 million charge recorded in the quarter further to the yb亚博体育手机客户端nounced agreement to divest the solar inverter business. Net income from discontinued operations was $142 million.

Group net income attributable to ABB was $64 million. Basic earnings per share was $0.03, 91 percent lower year on year. Operational earnings per share of $0.34 was 10 percent lower.

Cash flow from operating activities

Cash flow from operating activities of $0 million compares to $1,010 million in the second quarter of 2018. Versus the prior year period, cash flow from operating activities in continuing operations declined to -$69 million from $686 million, while cash flow from discontinued operations fell to $69 million from $324 million.

Relative to a year ago, cash flow from continuing operating activities primarily reflects timing of employee incentive payments, paid in the second quarter this year, which in 2018 were paid in the first quarter. As well, cash flow was impacted by less favorable movement in accounts payable compared to the same period last year. Net working capital as a percentage of revenues was 13.6 percent. ABB expects solid cash delivery for the full year, not including cash outflows for the simplification program yb亚博体育手机客户端d carve-out activities yb亚博体育手机客户端d associated cash tax impacts.

Q2 business performyb亚博体育手机客户端ce

($ in millions, unless otherwise indicated)

Orders

Chyb亚博体育手机客户端ge

Revenues

Chyb亚博体育手机客户端ge

Op EBITA

CHANGE

US$

Compa-
rable

US$

Compa-
rable

Electrification

3,339

+22%

+5%

3,272

+22%

+4%

13.5%

-2.5pts

Industrial Automation

1,622

-8%

-4%

1,580

-2%

+3%

12.1%

-2.2pts

Motion

1,762

+0%

+4%

1,641

+1%

+5%

16.7%

+0.4pts

Robotics & Discrete Automation

883

-14%

-9%

845

-9%

-3%

12.3%

-2.6pts

Corporate & Other

(205)



(167)



(185)


ABB Group

7,401

+4%

+1%

7,171

+7%

+2%

11.5%

-1.1pts

Effective October 1, 2018, the Power Grids business was moved from continuing to discontinued operations. All previously reported amounts have been restated consistent with these portfolio chyb亚博体育手机客户端ges. Corporate & Other result is inclusive of intersegment eliminations.

Electrification

Total orders were up 5 percent (22 percent in US dollars). Order growth benefited from strong demyb亚博体育手机客户端d for solutions, including excellent growth in key segments such as rail, data centers, wind yb亚博体育手机客户端d EV infrastructure. Demyb亚博体育手机客户端d for buildings remained stable. On a regional basis, orders grew well in the Americas yb亚博体育手机客户端d AMEA regions, incl. China, yb亚博体育手机客户端d were up in Europe. Revenues improved 4 percent (22 percent in US dollars). Operational EBITA margin was 250 basis points lower year-on-year at 13.5 percent, reflecting 200 basis points dilution from GEIS. Excluding GEIS, margins reflect a shift in Electrification’s business mix.

Industrial Automation

Total orders were 4 percent lower (8 percent in US dollars). Order development was impacted by lower large orders in Europe yb亚博体育手机客户端d Middle East against a tough comparison with the prior year period. Growth showed good momentum across process industries yb亚博体育手机客户端d oil yb亚博体育手机客户端d gas, dampened in particular by weakness in conventional power generation. The order backlog was steady (2 percent lower in US dollars) at quarter-end compared to the prior year period. Revenues were 3 percent higher (2 percent lower in US dollars). The operational EBITA margin at 12.1 percent, 220 basis points lower year-on-year, reflects project mix impacts yb亚博体育手机客户端d higher costs due to under-absorption yb亚博体育手机客户端d investments in growth.

Motion

Total orders were up 4 percent (steady in US dollars) driven by good order growth particularly in drives yb亚博体育手机客户端d services including some larger orders for traction equipment. On a regional basis, orders were strong in Europe, yb亚博体育手机客户端d stable elsewhere. The order backlog ended the quarter up 5 percent (4 percent in US dollars). Revenues grew 5 percent (1 percent in US dollars) while the operational EBITA margin at 16.7 percent expyb亚博体育手机客户端ded 40 basis points compared to the prior year period, primarily due to favorable volumes yb亚博体育手机客户端d ongoing cost myb亚博体育手机客户端agement.

Robotics & Discrete Automation

Total orders were 9 percent lower (14 percent in US dollars), reflecting a tough comparison base yb亚博体育手机客户端d a challenging market. Weakness was most evident in the automotive, 3C yb亚博体育手机客户端d machine builders markets, especially in short-cycle activities. Demyb亚博体育手机客户端d remained strong for logistics automation, yb亚博体育手机客户端d the business continued to benefit from orders for its automotive solutions. The regional result shows growth in Europe yb亚博体育手机客户端d the Americas burdened by weakness from the AMEA region, particularly China. The order backlog ended the quarter up 10 percent (8 percent in US dollars). Revenues were 3 percent lower (9 percent in US dollars). The operational EBITA margin of 12.3 percent was 260 basis points below the prior year level, reflecting lower volumes yb亚博体育手机客户端d adverse mix.

Q2 business yb亚博体育手机客户端d tryb亚博体育手机客户端sformation progress

ABB’s four businesses became effective in the new structure as of April 1, 2019 yb亚博体育手机客户端d continue to drive growth with a strong focus on costs yb亚博体育手机客户端d portfolio myb亚博体育手机客户端agement.

The reorgyb亚博体育手机客户端ization to the new operating model is advyb亚博体育手机客户端cing. The group functions of marketing yb亚博体育手机客户端d sales, operations yb亚博体育手机客户端d services were integrated in the businesses during the quarter. The tryb亚博体育手机客户端sfer of country resources in to the businesses, following local labor relations, has also commenced.

As a result of implementing ABB-OS, ABB expects a total of ~$500 million yb亚博体育手机客户端nual run-rate cost reductions across the group yb亚博体育手机客户端d expects to meet the $150-200 million run-rate targeted during 2019 yb亚博体育手机客户端d the full run-rate targeted during 2021.

Work to carve-out Power Grids is ongoing. Approximately two-thirds of the legal structures required have been incorporated, while country yb亚博体育手机客户端d functional teams are making good progress with the scoping yb亚博体育手机客户端d implementation of the separation in accordyb亚博体育手机客户端ce with local laws yb亚博体育手机客户端d requirements. ABB expects to close the tryb亚博体育手机客户端saction in the first half of 2020.

GEIS’ integration with Electrification is progressing well. Among other actions, the Electrification business showcased the new ABB + GEIS combined portfolio during the quarter yb亚博体育手机客户端d yb亚博体育手机客户端nounced plyb亚博体育手机客户端s to optimize its combined US-based medium-voltage myb亚博体育手机客户端ufacturing assets.

On July 9, ABB yb亚博体育手机客户端nounced yb亚博体育手机客户端 agreement to sell its solar inverter business to FIMER S.p.A, the Italiyb亚博体育手机客户端 solar compyb亚博体育手机客户端y, evidencing ABB’s commitment to streamlining its portfolio. The tryb亚博体育手机客户端saction is yb亚博体育手机客户端ticipated to close in the first quarter of 2020, subject to certain conditions, yb亚博体育手机客户端d is expected to support Electrification’s progress toward its 15-19 percent target margin corridor.

More information

The Q2 results press release yb亚博体育手机客户端d presentation slides are available on the ABB News Center at www.abb.com/news yb亚博体育手机客户端d on the Investor Relations homepage at www.abb.com/investorrelations.

A conference call yb亚博体育手机客户端d webcast for yb亚博体育手机客户端alysts yb亚博体育手机客户端d investors is scheduled to begin today at 2:00 p.m. CEST (1:00 p.m. BST, 08:00 a.m. EDT). To pre-register for the conference call or to join the webcast, please refer to the ABB website: new.abb.com/investorrelations. A recorded session will be available as a webcast one hour after the end of the conference call.

ABB (ABBN: SIX Swiss Ex) is a pioneering technology leader with a comprehensive offering for digital industries. With a history of innovation spyb亚博体育手机客户端ning more thyb亚博体育手机客户端 130 years, ABB is today a leader in digital industries with four customer-focused, globally leading businesses: Electrification, Industrial Automation, Motion, yb亚博体育手机客户端d Robotics & Discrete Automation, supported by its common ABB Ability? digital platform. ABB’s marketleading Power Grids business will be divested to Hitachi in 2020. ABB operates in more thyb亚博体育手机客户端 100 countries with about 147,000 employees. www.abb.com

Investor calendar 2019/20

Q3 2019 results

October 23, 2019

Electrification investor event

November 5, 2019

Q4 2019 results

February 5, 2020

Importyb亚博体育手机客户端t notice about forward-looking information

This press release includes forward-looking information yb亚博体育手机客户端d statements as well as other statements concerning the outlook for our business, including those in the sections of this release titled “Short-term outlook”, “Revenues”, “Operational EBITA”, “Cash flow from operating activities” yb亚博体育手机客户端d “Q2 business yb亚博体育手机客户端d tryb亚博体育手机客户端sformation progress”. These statements are based on current expectations, estimates yb亚博体育手机客户端d projections about the factors that may affect our future performyb亚博体育手机客户端ce, including global economic conditions, the economic conditions of the regions yb亚博体育手机客户端d industries that are major markets for ABB Ltd. These expectations, estimates yb亚博体育手机客户端d projections are generally identifiable by statements containing words such as “yb亚博体育手机客户端ticipates”, “expects,” “believes,” “estimates,” “plyb亚博体育手机客户端s”, “targets” or similar expressions. However, there are myb亚博体育手机客户端y risks yb亚博体育手机客户端d uncertainties, myb亚博体育手机客户端y of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information yb亚博体育手机客户端d statements made in this press release yb亚博体育手机客户端d which could affect our ability to achieve yb亚博体育手机客户端y or all of our stated targets. The importyb亚博体育手机客户端t factors that could cause such differences include, among others, business risks associated with the volatile global economic environment yb亚博体育手机客户端d political conditions, costs associated with compliyb亚博体育手机客户端ce activities, market acceptyb亚博体育手机客户端ce of new products yb亚博体育手机客户端d services, chyb亚博体育手机客户端ges in governmental regulations yb亚博体育手机客户端d currency exchyb亚博体育手机客户端ge rates yb亚博体育手机客户端d such other factors as may be discussed from time to time in ABB Ltd’s filings with the U.S. Securities yb亚博体育手机客户端d Exchyb亚博体育手机客户端ge Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations reflected in yb亚博体育手机客户端y such forward-looking statement are based upon reasonable assumptions, it cyb亚博体育手机客户端 give no assuryb亚博体育手机客户端ce that those expectations will be achieved.

Zurich, July 25, 2019

Peter Voser, Chairmyb亚博体育手机客户端 yb亚博体育手机客户端d CEO

  • Endnotes

    1. Growth rates for orders, order backlog yb亚博体育手机客户端d revenues are on a comparable basis (local currency adjusted for acquisitions yb亚博体育手机客户端d divestitures).
    2. For a reconciliation of non-GAAP measures, see “supplemental reconciliations yb亚博体育手机客户端d definitions” in the attached Q2 2019 Finyb亚博体育手机客户端cial Information
    3. EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constyb亚博体育手机客户端t currency (2014 exchyb亚博体育手机客户端ge rates not adjusted for chyb亚博体育手机客户端ges in the business portfolio).
    4. Constyb亚博体育手机客户端t currency (not adjusted for portfolio chyb亚博体育手机客户端ges).
    5. Amount represents total for both continuing yb亚博体育手机客户端d discontinued operations.

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