"As expected, the second quarter has been heavily impacted by
COVID-19. At the same time, we were very focused on cost mitigation
efforts which provided some resilience. Operational margins for the
Group turned out better than we had anticipated, with Motion doing
particularly well," said Björn Rosengren, CEO of ABB. "A lot of
uncertainty remains and we still see some challenging quarters
ahead. At the same time, our way forward is clear. We will continue
to roll out our new operating model, review our business portfolio
and start our share buyback program."
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 6,054 7,401 -18% -14% 13,400 15,014 -11% -7%
Revenues 6,154 7,171 -14% -10% 12,370 14,018 -12% -8%
Income from
operations 571 123 +364% 944 713 +32%
Operational
EBITA(1) 651 825 -21% -20%(4) 1,287 1,591 -19% -18%(4)
as % of
operational -1.0
revenues 10.6 11.5 -0.9 pts 10.4 11.4 pts
Income from
continuing
operations,
net of tax 395 (54) n.a. 721 361 +100%
Net income
attributable
to ABB 319 64 +398% 695 599 +16%
Basic EPS ($) 0.15 0.03 +398%(3) 0.33 0.28 +16%(3)
Operational
EPS ($)(1) 0.22 0.34 -35%(3) -33%(3) 0.52 0.64 -19%(3) -18%(3)
Cash flow from
operating
activities(5) 680 0 n.a. 103 (256) n.a.
On December 17, 2018, ABB announced an agreed sale of its Power Grids
business. Consequently, the results of the Power Grids business are presented
as discontinued operations.
Q2 2020 Group results
Summary
Trading conditions during the second quarter were challenging,
influenced by the escalating COVID-19 pandemic. Alongside the sharp
drop in short-cycle demand that lowered product volumes, system
installation and service activities faced extensive mobility
restrictions. Reflecting this, orders and revenues for the second
quarter period were severely dampened across the Group when
compared to the prior year period. Motion's result fared better,
aided by a strong rebound in China and strong backlog execution.
Despite intensified cost mitigation, operational margins contracted
in Electrification, Industrial Automation and Robotics &
Discrete Automation compared to the prior year period, while Motion
improved its margin year-on-year.
Orders
Orders were 18 percent lower (14 percent comparable) in the
quarter compared to the prior year period. Foreign exchange
translation effects had a net negative impact of 2 percent and
portfolio changes a net negative impact of 2 percent. The order
backlog was 1 percent lower (up 5 percent comparable) at the end of
the quarter.
Regional overview
-- Orders from Europe were 18 percent lower (14 percent
comparable). Most countries had materially lower orders, driven
mainly by lockdowns. Orders were 4 percent lower in Germany (2
percent comparable), 4 percent lower in the UK (up 1 percent
comparable) and 3 percent lower in Switzerland (4 percent
comparable). Orders fell materially in Italy, which was 13 percent
lower (9 percent comparable), and in Finland, Norway, Spain and the
Netherlands declined even more steeply. Orders from Sweden advanced
9 percent (11 percent comparable).
-- Orders from the Americas were 26 percent lower (23 percent
comparable), with nearly all countries reporting lower order
levels. In the US, orders declined by 25 percent (23 percent
comparable).
-- In Asia, Middle East and Africa (AMEA), orders were 11
percent lower (5 percent comparable), with a notable drop in India
of 40 percent (33 percent comparable). In China, demand improved
sequentially; orders were 3 percent lower (up 3 percent comparable)
on a year-on-year basis in the second quarter.
End-market overview
-- In discrete industries, orders were disrupted in most
end-markets, with orders from automotive and automotive
sector-related industries as well as machine builders severely
impacted. 3C activities were challenged, although they trended more
favorably toward quarter end.
-- Process industry activities fell sharply in the quarter.
Service activities were severely constrained by lockdowns, as well
as customers reducing operational expenditure. In addition,
multiple capital expenditure projects have been deferred as
customers adapt to a softer demand outlook.
-- In transport & infrastructure, investments in rail,
e-mobility, water & wastewater and data centers continued. As
well, orders were resilient in electrical distribution utilities.
However, marine and renewables activities declined steeply.
-- Buildings were challenged, with construction activity
constrained by lockdowns.
Revenues
Revenues were 14 percent lower (10 percent comparable)
year-on-year. Foreign exchange translation effects had a net
negative impact of 2 percent and portfolio changes a net negative
impact of 2 percent. The book-to-bill ratio for the quarter was
0.98x(1) , compared to 1.03x in the prior year period.
Income from operations and operational EBITA
Income from operations of $571 million increased 364 percent.
Compared to the prior year, the result benefited mainly from the
absence of the charge booked in 2019 in relation to the sale of the
solar inverters business. The year-on-year increase was also aided
by a net $86 million gain related to timing differences on
commodities and foreign exchange, and lower expenses related to
restructuring and integration efforts.
Operational EBITA(1) of $651 million was 21 percent lower (20
percent in local currencies). The operational EBITA margin(1) of
10.6 percent was 90 basis points lower year-on-year. Margins were
higher in Motion while all other businesses reported lower margins
compared to the prior year period, mainly reflecting lower volumes,
despite intensified cost mitigation efforts. Corporate & Other
costs, including $19 million stranded costs, improved when compared
to the prior year period.
Net income and basic earnings per share
Net income from continuing operations was $395 million,
significantly higher mainly due to the aforementioned absence of
the solar inverters charge. The Group's effective tax rate was 24.8
percent. Discontinued operations reported $49 million in losses,
reflecting a material non-operational pension charge as well as
subdued operational performance mainly due to COVID-19
disruption.
Group net income attributable to ABB was $319 million and basic
EPS $0.15, 398 percent higher for both on a year-on-year basis.
Operational EPS of $0.22(1) was 35 percent(3) lower compared to the
prior year period.
Cash flow from operating activities
Cash flow from operating activities was $680 million, versus $0
million in the second quarter of 2019. Despite the reduction in
business activities, cash flow from operating activities from
continuing operations improved materially, while the amount from
discontinued operations was $32 million.
Cash flow from operating activities from continuing operations
was supported mainly by timing differences on employee incentive
payments, which were distributed in the first quarter this year as
opposed to the second quarter last year. As well, cash flow
benefited from timing of tax payments and favorable net working
capital movement. Net working capital as a percent of revenues
ended the quarter at 12.6 percent.
Q2 2020 business area results
All commentary by business area relates to second quarter
results on a year-on-year basis.
Electrification (EL)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 2,737 3,339 -18% -12% 5,858 6,702 -13% -7%
Order backlog 4,465 4,553 -2% +6% 4,465 4,553 -2% +6%
Revenues 2,764 3,272 -16% -10% 5,537 6,329 -13% -9%
Operational
EBITA(1) 348 440 -21% 666 817 -18%
as % of
operational -0.9 -0.9
revenues 12.6% 13.5% pts 12.0% 12.9% pts
-- Orders were impacted by a fall in short-cycle demand including in the
buildings market, and a material decline in the oil and gas and
renewables markets. Select markets including electric distribution
utilities, rail, e-mobility and data centers offered relative
resilience. All regions declined, with demand from the Americas
materially impacted by COVID-19.
-- Revenues declined due to weak short-cycle business as well as
constrained project activities, mainly in Distribution Solutions.
-- Margin contraction was essentially driven by lower volumes. This was
partly mitigated by supportive cost savings initiatives and resilient
pricing, as well as the ongoing turnaround of GEIS and Installation
Products, both of which remain firmly on track.
Industrial Automation (IA)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 1,305 1,622 -20% -17% 3,062 3,288 -7% -4%
Order backlog 5,210 5,240 -1% +3% 5,210 5,240 -1% +3%
Revenues 1,382 1,580 -13% -9% 2,844 3,098 -8% -5%
Operational
EBITA(1) 115 190 -39% 259 395 -34%
as % of
operational -3.7 -3.7
revenues 8.4% 12.1% pts 9.1% 12.8% pts
-- Orders reflect a sharp downturn across energy and process industries as
well as a fall-off in marine, even while the business area benefited
from select large order wins. Orders were lower in all regions, with a
severe drop in the Americas.
-- Revenues were impacted by a substantial drop in book-and-bill
activities, particularly mobility constrained services.
-- Aside from lower volumes, margins were held back by under-absorption and
negative mix, mainly from lower service activities.
Motion (MO)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 1,586 1,762 -10% -7% 3,487 3,562 -2% 0%
Order backlog 3,384 3,050 +11% +13% 3,384 3,050 +11% +13%
Revenues 1,583 1,641 -4% -1% 3,093 3,246 -5% -3%
Operational
EBITA(1) 279 275 +1% 509 538 -5%
as % of
operational +1.0 -0.1
revenues 17.7% 16.7% pts 16.5% 16.6% pts
-- A broad-based short-cycle downturn weighed on orders, even while orders
remained healthy in the rail and chemicals sectors. Orders across the
Americas fell steeply, substantially mitigated by a strong rebound in
China.
-- Resilient revenue development mainly reflects strong backlog execution.
-- Margin expansion was driven by strong cost actions and favorable mix.
Robotics & Discrete Automation (RA)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 638 883 -28% -25% 1,449 1,850 -22% -19%
Order backlog 1,478 1,586 -7% -4% 1,478 1,586 -7% -4%
Revenues 629 845 -26% -23% 1,300 1,696 -23% -21%
Operational
EBITA(1) 43 105 -59% 102 200 -49%
as % of
operational -5.5 -4.0
revenues 6.8% 12.3% pts 7.8% 11.8% pts
-- Against a tough comparison base for large orders, RA's order result
moved sharply lower, as expected. Activity levels declined materially
across key end-markets, including automotive, general industry and
machine builders. Orders fell sharply in Europe and the Americas, while
demand from the AMEA region remained weak.
-- Revenues were severely impacted by lower systems business and service
activities, as well as lower product volumes.
-- Margin contraction reflects steep volume decline, which outweighed
supportive cost actions.
Corporate and Other
KEY FIGURES CHANGE CHANGE
($ millions, unless
otherwise indicated) Q2 2020 Q2 2019 US$ H1 2020 H1 2019 US$
Orders (212) (205) (7) (456) (388) (68)
Revenues (204) (167) (37) (404) (351) (53)
Income from operations (153) (285) +132 (326) (515) +189
Operational EBITA(1) (134) (185) +51 (249) (359) +110
-- Corporate and Other operational EBITA improved to -$134 million.
Compared to a year ago this reflects lower stranded and lower ongoing
corporate costs.
-- In the second quarter of 2020, stranded costs of $19 million were
recognized, impacting operational EBITA margin by 30 basis points.
Corporate and Other orders and revenues primarily represent intersegment
eliminations.
Capital structure optimization
ABB divested 80.1 percent of its Power Grids business to Hitachi
on July 1, 2020, as planned, delivering on an important milestone
in the company's transformation agenda as announced in December
2018.
ABB is committed to returning to shareholders net cash proceeds
from the Power Grids divestment of $7.6-7.8 billion. ABB will
initially launch a share buyback program of 10 percent(6) of the
company's share capital to begin imminently. This represents about
180 million shares in addition to those already held in
treasury.
Also, as part of the overall capital structure optimization
program, ABB has now repaid fully the EUR2 billion short-term
revolving credit facility put in place to strengthen liquidity in
the face of COVID-19. The Group plans to implement further
deleveraging actions, including a review of certain defined benefit
pension structures, as well as repayment of a EUR1 billion bond
that matures in October 2020. ABB aims to maintain its single A
credit rating.
"ABB's capital structure optimization during the coming years
will focus on shareholder returns, by executing on its share
buyback program, as planned, as well as by improving the company's
risk profile and finance costs through an efficient deleveraging
strategy. In these challenging times, ABB has a resilient financial
framework and strong balance sheet, " said Timo Ihamuotila, CFO of
ABB.
Transformation progress
ABB's CEO presented his First Perspectives to investors on June
10, 2020, outlining ABB's way forward on creating value for
shareholders, customers and employees. Following a new ABB Way of
working, the Group intends to accelerate its transition to a fully
decentralized operating model. This comprises four business areas
-- Electrification, Industrial Automation, Motion and Robotics
& Discrete Automation -- with 18 divisions, governed by a lean
corporate. Going forward, the 18 divisions will have full
accountability for their P&L and operational balance sheet.
ABB's management team will prioritize improvement of the Group's
financial performance, with a clear profitability focus for
underperforming divisions, as well as active portfolio management.
A new, division level, scorecard system using standardized KPIs to
measure performance and drive continuous improvement will be
introduced in the third quarter of 2020. ABB is on track for faster
delivery of $500 million per annum net savings initiated through
the ABB-OS simplification program.
ABB plans to host a Capital Markets Day in November 2020 that
will provide more detail on the portfolio's evolution and business
area and divisional strategies, while also setting out ABB's 2030
sustainability targets.
Short-term outlook
The global economy is expected to contract in 2020 after a rapid
deterioration in outlook driven by the COVID-19 pandemic. Despite
unprecedented stimuli by governments and central banks around the
world and a recovery in economic activity in China in the second
quarter, macro-indicators continue to point to a deep global
recession with uncertainty around the pace of recovery. Many
countries continue to face ongoing or new restrictions, with
anticipated long-term economic consequences.
The impact of COVID-19 continues to weigh on the short-term
outlook across many end-markets, and particularly in oil and gas,
conventional power generation, automotive, marine and buildings.
Some end markets such as electrical distribution, transport, data
centers and food and beverage continue to show relative
resilience.
Potential easing of COVID-19 impacts remain subject to
considerable uncertainties. Against this background, ABB expects
some improvement in year-on-year order decline already in the third
quarter. Revenues are expected to remain strongly impacted on a
year-on-year basis, at best recovering somewhat in the fourth
quarter.
As ABB continues to adapt its operations and cost base to
safeguard profitability, it expects its operational margin to
steady on a sequential basis. The company anticipates resilient
cash delivery for the full year.
More information
The Q2 2020 results press release and presentation slides are
available on the ABB News Center at www.abb.com/news and on the
Investor Relations homepage at www.abb.com/investorrelations. A
conference call and webcast for analysts and investors is scheduled
to begin today at 10:00 a.m. CEST (9:00 a.m. BST). To pre-register
for the conference call or to join the webcast, please refer to the
ABB website: www.abb.com/investorrelations. The recorded session
will be available after the event on ABB's website.
ABB (ABBN: SIX Swiss Ex) is a leading global technology company
that energizes the transformation of society and industry to
achieve a more productive, sustainable future. By connecting
software to its electrification, robotics, automation and motion
portfolio, ABB pushes the boundaries of technology to drive
performance to new levels. With a history of excellence stretching
back more than 130 years, ABB's success is driven by about 110,000
talented employees in over 100 countries.
INVESTOR CALAR
Q3 2020 results October 23, 2020
Capital Markets Day November 2020
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 "Capital structure optimization", "Transformation progress"
and "Short-term outlook". 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. These expectations, estimates and
projections are generally identifiable by statements containing
words such as "anticipates", "expects," "believes, " "estimates,"
"plans", "targets" 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.
Zurich, July 22, 2020
Björn Rosengren, CEO
__________
(1) For a reconciliation of non-GAAP measures, see "supplemental
reconciliations and definitions" in the attached Q2 2020 Financial
Information.
(2) The result benefited mainly from the absence of the charge booked in 2019
in relation to the sale of the solar inverters business.
(3) EPS growth rates are computed using unrounded amounts. Comparable
operational earnings per share is in constant currency (2019 exchange
rates not adjusted for changes in the business portfolio).
(4) Constant currency (not adjusted for portfolio changes).
(5) Amount represents total for both continuing and discontinued operations.
(6) Maximum 10 percent of the company's issued share capital, including
treasury shares.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20200721005994/en/
CONTACT: ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Media Relations
Phone: +41 43 317 71 11
E-mail: media.relations@ch.abb.com
or
Investor Relations
Phone: +41 43 317 71 11
E-mail: investor.relations@ch.abb.com
SOURCE: ABB
Copyright Business Wire 2020
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