UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October 2016
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
P.O. Box 1831,
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
⬜
Note:
Regulation S-T
Rule 101(b)(1) only permits the submission in paper of a Form 6-K if
submitted solely to provide an attached annual report to security holders.
Indication
by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
⬜
Note:
Regulation S-T
Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws
of the jurisdiction in which the registrant is incorporated, domiciled or
legally organized (the registrant’s “home country”), or under the rules of
the home country exchange on which the registrant’s securities are traded, as
long as the report or other document is not a press release, is not required to
be and has not been distributed to the registrant’s security holders, and, if
discussing a material event, has already been the subject of a Form 6-K
submission or other Commission filing on EDGAR.
Indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If
“Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
This
Form 6-K consists of the following:
1.
Press
release titled “ABB: Next stage of unlocking value” issued by ABB Ltd dated
October 4, 2016.
2
ABB: Next stage of unlocking value
·
Shaping four focused, market-leading, entrepreneurial divisions:
·
Electrification Products
·
Robotics and Motion
·
Industrial Automation
·
Power Grids
·
Continued Power Grids transformation under ABB ownership:
·
“Power Up” program aiming at growth, lower risk, earnings
accretion
·
De-risked EPC business model
·
Partnership with Fluor for substations
·
Partnership with Aibel for offshore wind
·
Divesture of cable business expected in Q1 2017
1
·
Raised margin target corridor 200bps to 10-14%, effective 2018
·
Realizing full potential as digital champion
·
“ABB Ability”: fully integrated digital offering across customer
segments; cements ABB’s leadership in the Fourth Industrial Revolution
·
Far-reaching partnership with Microsoft to develop
next-generation digital solutions
·
IoT pioneer Guido Jouret took office as Chief Digital Officer
effective October 1
·
Strengthening global ABB brand
·
Consolidation of 1000+ brands under the ABB master brand
·
Prerequisite for full value creation of digital offering
·
Writes ABB’s heritage as a pioneering technology leader into the
future
·
White-collar productivity target increased by 30% to $1.3bn;
timeline and costs unchanged
·
All other financial targets confirmed
·
Second share buyback program of $3bn planned 2017 through 2019;
capital allocation priorities unchanged
ABB today launched Stage 3 of its Next Level strategy to
unlock value for customers and shareholders. The core elements of this include:
shaping ABB’s divisions into four market-leading, entrepreneurial units,
including continuing to transform the Power Grids division under ABB’s
ownership; realizing ABB’s full digital potential; accelerating momentum in
operational excellence; and strengthening ABB’s brand.
ABB CEO Ulrich Spiesshofer said, “Over the last two years, ABB
has become faster, leaner and more efficient. We have continuously improved
margins and further strengthened our cash generation. In Stage 3 of our Next
Level strategy, we are building on our successful transformation momentum and
strengthening our position as a pioneering technology leader and global digital
champion. With our four simplified, market-leading, entrepreneurial businesses,
combined with “ABB Ability”, we address customers’ needs in the Energy and
Fourth Industrial Revolutions in a more focused and agile way.”
1
Subject to regulatory clearances and
fulfilment of the closing conditions.
Peter Voser, chairman of ABB’s
Board of Directors, said, “The successful execution of our Next Level strategy
to date has led to significantly improved operational and financial performance
and a more externally focused, simpler ABB. The entire board worked with the
management and external advisors on all elements of Stage 3, which will unlock
value for customers and all shareholders while ensuring the company’s long-term
success. The continued transformation of our Power Grids division under ABB’s
management is the best of all carefully assessed options for shareholders. We
firmly support the management team and the action plan presented today.”
Driving growth in four
market-leading entrepreneurial divisions
ABB
is shaping and focusing its divisional structure into four market-leading
divisions: Electrification Products, Robotics and Motion, Industrial Automation
and Power Grids, effective January 1, 2017. The divisions will be empowered as
entrepreneurial units within ABB, reflected in an enhancement of its
performance and compensation model focusing on individual accountability and
responsibility. They benefit from sales collaboration orchestrated by regions
and countries as well as from the group-wide digital offering; ABB’s leading
G&A structure and costs; common supply chain management; and corporate
research centers. ABB will continue to strengthen its divisions through active
portfolio management. This includes pursuing strategic additions, transforming
business models and pruning non-core businesses.
“Entrepreneurial
spirit is the base for our future operating model,” said Spiesshofer. “Our four
market-leading businesses, led by empowered entrepreneurs, will drive
sustainable value creation, supported by regions and Group oxygen such as ABB
Ability and our leading G&A cost level.”
Electrification Products
Electrification
Products (EP) will be the partner of choice for electrification of all
consumption points.
By
bringing together all electrification components, mainly by transferring
businesses from the existing Discrete Automation and Motion (DM) division, EP
will be the global #2 in that segment, offering a one-stop shop for customers.
The
electric vehicle charging, solar, and power quality businesses will be
transferred from the DM division to serve as growth platforms within the
Electrification Products division. The necessary investment to continue the
growth momentum of these businesses will initially have a dampening impact on
the division’s profit margin.
The
growth of power consumption is outpacing overall energy consumption, as more
people have access to electricity and new forms of electricity consumption,
such as e-vehicle charging, are driving demand. There are significant
opportunities to digitalize and innovate around our current offerings.
Robotics and Motion
Robotics
and Motion will be the partner of choice for robotics and intelligent motion
solutions.
ABB’s
leading offering in industrial motors and drives as well as its strongly performing
robotics business are the building blocks of this newly shaped division which
succeeds the former Discrete Automation and Motion division.
By
focusing on the fast-growing robotics market and leveraging ABB’s technology
platform and global scale, the company is ideally positioned to move from its
current #2 position in robotics to #1 in this highly attractive market. ABB
will benefit from its strong position in the Fourth Industrial Revolution, its
global reach and service platforms.
ABB will continue to invest in
and shape its #1 position in industrial motors and drives by focusing on
fast-growing segments and moving into light industry and emerging growth areas
like Asia.
Intelligent
services and a leading digital offering are already a strong pillar of the
division’s performance and open significant growth opportunities. ABB will
strengthen divisional profitability through continued focus on operational
excellence and value chain optimization.
Industrial Automation
Industrial
Automation will be the partner of choice for industrial automation.
This
division succeeds the former Process Automation division.
ABB
will drive digitalization across industry sectors, building on its #1 position
in process control through software and services. ABB has a unique combination
of domain expertise that allows it to master the control room in a wide range
of industries such as pharmaceuticals, mining, shipping and oil & gas. By
focusing on growing segments and bringing together maintenance, operation and control,
ABB will drive penetration of strongholds and create differentiation for
customers.
Power Grids
Power
Grids will be the partner of choice for stronger, smarter and greener grids.
Following
a comprehensive strategic portfolio review, the Board and Executive Committee
of ABB have concluded that the transformation of Power Grids under ABB
ownership will unlock maximum shareholder value compared to other ownership
options such as sale, IPO, spin-off or joint venture.
Key
factors in the decision-making process included market attractiveness, the
existing and future product offerings, business model opportunities and best
ownership, as well as all alternative value creation options for ABB
shareholders. This review included independent analyses from McKinsey and
independent financial advice from Goldman Sachs and Credit Suisse.
The
division, which is #1 globally, will take advantage of the Energy and Fourth
Industrial Revolutions. These are creating significant demand for Power Grids’
products, systems, software and services, and support the portfolio shift
towards digitalization.
To
realize the full potential of the division and continue the ongoing
transformation, “Power Up,” a massive program covering key aspects of the
business, was introduced today. It will drive growth and enhance earnings
accretion by focusing on core operational strengths and high growth segments as
well as digitally enabled services and software.
A
key element of the division’s ongoing transformation is the de-risking of the business
model and tapping of growth opportunities through two strategic partnerships
announced today – with Fluor for large electrical substations, and Aibel for
offshore wind connections. Both partnerships combine ABB’s market leadership in
power technologies with the respective partner’s expertise – Fluor’s in
managing large engineering, procurement and construction (EPC) projects, and
Aibel’s in offshore wind projects.
Another
key element is ABB’s pruning of niche non-core businesses such as the recently
announced sale of ABB’s cable business to NKT cables while preserving access to
technology through a strategic partnership.
As
a consequence of the transformation, ABB is raising the operational EBITA
margin target corridor for the division from 8-12% to 10-14%, effective 2018.
“In our strategic portfolio
review we have listened carefully to all stakeholders and all expressed views.
After a very thorough and detailed process, supported by leading advisors, we
have concluded that the continued transformation of Power Grids under ABB’s
ownership creates the highest value for our shareholders and customers.
Building on the transformation success and momentum to date, the Power Grids
division is ideally positioned within ABB to drive long-term, profitable growth
during the Energy and Fourth Industrial Revolutions and is an integral part of
our offering,” Spiesshofer said.
Quantum leap in digital with
ABB Ability
TM
ABB is a hidden digital
champion today. It is ideally positioned to win in the digital space with new
and existing end-to-end digital solutions that build on the intelligent cloud
and close the loop with connected devices. ABB will use its profound knowledge
of its customers’ domains to plan, build and operate a unique digital offering
which will deliver true operational differentiation for customers.
The newly launched ABB Ability
offering combines ABB’s portfolio of digital solutions and services across all
customer segments, cementing the group’s leading position in the Fourth
Industrial Revolution and support the competiveness of ABB’s four
entrepreneurial divisions.
ABB today announced a
far-reaching strategic partnership with Microsoft, the world’s largest software
company, to develop next-generation digital solutions on an integrated cloud
platform. Customers will benefit from the unique combination of ABB’s deep
domain knowledge and extensive portfolio of industrial solutions and
Microsoft’s Azure intelligent cloud as well as B2B engineering competence.
Together, the partners will drive digital transformation in customer segments
across ABB’s businesses such as robotics, marine and e-mobility.
“This partnership will provide
unique benefits to our customers in utilities, industry, transport &
infrastructure, building on the combined strength of Microsoft and ABB,” said
Spiesshofer. “Building on ABB’s installed base of more than 70 million
connected devices and more than 70,000 installed control systems, the next step
is to develop one of the world’s largest industrial cloud platforms.”
ABB’s digital transformation
will be led by Guido Jouret, a pioneer in the Internet of Things, who began his
role as Chief Digital Officer, reporting directly to the CEO, on October 1,
2016.
Strengthening the global ABB
brand
ABB will adopt a single
corporate brand, consolidating all its brands around the world under one
umbrella. ABB’s portfolio of companies will be unified, showcasing the full
breadth and depth of the company’s global offering under one master brand. This
transition is expected to take up to two years.
The unified brand plays a key
part in realizing the value potential of ABB’s digital offering, as it
increases customer loyalty, price premiums and purchase probability. One master
brand allows ABB to better present its strategy to relevant stakeholders,
emphasizes the Group’s customer-first, digital-first thinking and makes it
easier to interact with existing and future customers.
The brand will feature design
elements intended to clearly articulate ABB’s vision, direction and unique
market position to customers, shareholders, employees and all other
stakeholders. ABB’s heritage as a pioneering technology leader and the three
focus areas of its Next Level strategy are reflected in its new brand promise:
“Let’s write the future. Together.”
TM
Accelerating
momentum in operational excellence
ABB continues to build on its
existing momentum and is further accelerating its operational excellence.
The company’s white-collar
productivity savings program has outperformed expectations since its launch
last year. As a result, ABB has increased the program’s cost reduction target
by 30% to $1.3 billion. ABB will achieve these additional savings within the
initially announced timeframe and with unchanged restructuring and
implementation costs. ABB is continuing its regular cost-savings programs,
leveraging operational excellence and world-class supply chain management to
achieve savings equivalent to 3-5% of cost of sales each year.
ABB reaffirms the target of its
1,000-day working capital program to free up approximately $2 billion by the
end of 2017. The program is well on track and focuses on improving inventory
management by optimizing the entire value chain, from product design to
manufacturing, and by optimizing other net working capital measures.
The Group reaffirms its
2015-2020 financial targets as laid out below.
ABB
Next Level – 2015-2020 targets
2
Revenue
growth
3
|
3-6%
|
Operational
EBITA %
4
|
11-16%
|
Operational
EPS growth CAGR
5
|
10-15%
|
Free
cash flow conversion to net income
|
>90%
|
Cash
return on investment %
6
|
Mid-teens
|
Operational
EBITA % – 2015-2020 divisional targets
Electrification
Products
|
15-19%
|
Robotics
and Motion
|
14-19%
|
Industrial
Automation
|
11-15%
|
Power
Grids
|
10-14%*
|
*The margin target
for Power Grids will be in effect as of Jan. 1, 2018.
2
For definitions refer to “Supplemental Financial Information” under “Capital
Markets Day 2016” – “More information” on our website at
www.abb.com/investorrelations
3
Average annual revenue growth on a comparable basis, over six years, base year
2014.
4
Target is on a full-year basis
5
CAGR = Compound Annual Growth Rate. Base year is 2014 and target assumes
constant exchange rates.
6
Temporary reduction possible in the event of large acquisitions.
Capital
allocation
ABB
today announced its plans for a new share buyback program of up to $3 billion
from 2017 through 2019. This reflects the company’s confidence and the
continued strength of ABB’s cash generation and financial position. On
September 30, 2016, ABB announced the completion of its recent share buyback
program in which it returned $3.5bn to its shareholders. Over the last three
years, ABB has returned $8.7bn to shareholders in the form of dividends and
share buybacks.
Active
portfolio management remains a key aspect of ABB’s operating pattern as
demonstrated in the recent portfolio pruning and bolt on acquisitions as well
as the announced cable business divestiture and business model changes in Power
Grids.
ABB’s
capital allocation priorities remain unchanged: 1) funding organic growth,
R&D and capital expenditures at attractive cash returns; 2) paying a
steadily rising, sustainable dividend; 3) investing in value-creating
acquisitions; and 4) returning additional cash to shareholders.
About
ABB
ABB
(ABBN: SIX Swiss Ex) is a pioneering technology leader in
electrification products, robotics and motion, industrial automation and power
grids serving customers in utilities, industry and transport &
infrastructure globally. For more than four decades, ABB is writing the future
of industrial digitalization. With more than 70 million devices connected
through its installed base of more than 70,000 control systems across all
customer segments, ABB is ideally positioned to benefit from the Energy and
Fourth Industrial Revolution. With a heritage of more than 130 years, ABB operates
in more than 100 countries with about 135,000 employees.
www.abb.com
Important notice about forward-looking
information
This press release includes
forward-looking information and statements as well as other statements
concerning the outlook for our business, including those in the sections of
this release titled “Accelerating momentum in operational excellence”, “ABB
Next Level – 2015-2020 targets”, “Operational EBITA % - 2015-2020 divisional
targets” and “Capital allocation”. These statements are based on current
expectations, estimates and projections about the factors that may affect our
future performance, including global economic conditions, the economic
conditions of the regions and industries that are major markets for ABB Ltd.
These expectations, estimates and projections are generally identifiable by
statements containing words such as “expects,” “believes,” “estimates,”
“targets,” “plans,” “is likely”, “intends” or similar expressions. However, there
are many risks and uncertainties, many of which are beyond our control, that
could cause our actual results to differ materially from the forward-looking
information and statements made in this press release and which could affect
our ability to achieve any or all of our stated targets. The important factors
that could cause such differences include, among others, business risks
associated with the volatile global economic environment and political
conditions, costs associated with compliance activities, market acceptance of
new products and services, changes in governmental regulations and currency
exchange rates and such other factors as may be discussed from time to time in
ABB Ltd’s filings with the U.S. Securities and Exchange Commission, including its
Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations
reflected in any such forward-looking statement are based upon reasonable
assumptions, it can give no assurance that those expectations will be achieved.
For more information please
contact:
|
Media Relations
Saswato Das,
Antonio Ligi, Domenico
Truncellito, Sandra Wiesner
Tel: +41 43
317 65 68
media.relations@ch.abb.com
|
Investor Relations
Tel. +41 43 317 71 11
investor.relations@ch.abb.com
|
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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ABB LTD
|
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Date: October 4, 2016.
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By:
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/s/ Alanna Abrahamson - Haka
|
|
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Name:
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Alanna Abrahamson - Haka
|
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Title:
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Group Senior Vice President
and
Head of Investor Relations
|
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By:
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Name:
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Richard A. Brown
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Title:
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Group Senior Vice President
and
Chief Counsel Corporate & Finance
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