6-K - ABLZF - Equibles

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 February 2022

Commission File Number 001-16429

ABB Ltd

(Translation of registrant’s

name into English)

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.

Form 20-F

☒

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.

Yes

⬜

☒

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:

Press release issued by ABB Ltd dated February 3, 2022 titled “Q4 2021 results”.

Q4 2021 Financial Information.

Press release issued by ABB Ltd dated February 2, 2022 titled “ABB appoints Andrea

Antonelli as General

Counsel

and Company Secretary”.

Announcements regarding transactions in ABB Ltd’s

Securities made by the directors or the members of the

Executive Committee.

The information provided

by Item 2 above is hereby incorporated by reference into the Registration

Statements on Form F-3 of

ABB Ltd and ABB Finance (USA) Inc. (File Nos. 333-223907

and 333-223907-01) and registration statements on Form S-8

(File Nos. 333-190180, 333-181583, 333-179472, 333-171971

and 333-129271) each of which was previously filed with the

Securities and Exchange Commission.

—

ZURICH, SWITZERLAND, FEBRUARY 3, 2022

Q4 2021 results

Strong demand, increased earnings and margin

support a robust cash flow

Q4 2021

●

Orders $8.3 billion, +18%; comparable

+21%

●

Revenues $7.6 billion, +5%; comparable +8%

●

Income from operations $2,975 million; margin 39.3%

●

Operational EBITA

$988 million; margin

13.1%

●

Basic EPS $1.34; up from $-0.04 year on year

●

Cash flow from operating activities was $1,020 million and

from operating activities in continuing operations it was

$1,033 million

FY 2021

●

Orders $31.9 billion, +20%; comparable

+17%

●

Revenues $28.9 billion, +11%; comparable +8%

●

Income from operations $5,718 million; margin 19.8%

●

Operational EBITA

$4,122 million; margin

14.2%

●

Basic EPS $2.27; -7%

●

Cash flow from operating activities was $3,330 million and

from operating activities in continuing operations it was

$3,338 million

●

Dividend proposal of CHF 0.82 per share, up from CHF 0.80

last year

—

“2021 was a good year with strong demand, improved profitability, consolidation of our

portfolio and strong cash flow. We

look towards 2022 with confidence.”

Björn Rosengren

, CEO

Ad hoc Announcement pursuant to Art. 53 Listing

Rules of SIX Swiss Exchange

—

Q4 2021

Full year

Press Release

KEY FIGURES

CHANGE

($ millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Comparable

FY 2021

FY 2020

US$

Comparable

Orders

8,257

7,003

18%

21%

31,868

26,512

20%

17%

Revenues

7,567

7,182

28,945

26,134

11%

Gross Profit

2,397

2,147

12%

9,467

7,878

20%

as % of revenues

31.7%

29.9%

+1.8 pts

32.7%

30.1%

+2.6 pts

Income from operations

2,975

578

415%

5,718

1,593

259%

Operational EBITA

988

825

20%

22%

4,122

2,899

42%

37%

as % of operational revenues

13.1%

11.5%

+1.6 pts

14.2%

11.1%

+3.1 pts

Income (loss) from continuing operations, net of

tax

2,703

127

n.a.

4,730

345

n.a.

Net income attributable to ABB

2,640

(79)

n.a.

4,546

5,146

-12%

Basic earnings per share ($)

1.34

(0.04)

n.a.

2.27

2.44

-7%

Cash flow from operating activities

1,020

1,182

-14%

3,330

1,693

97%

Cash flow from operating activities in continuing

operations

1,033

1,225

-16%

3,338

1,875

78%

For a reconciliation of non-GAAP measures, see

“supplemental reconciliations and definitions”

in the attached Q4 2021 Financial Information.

EPS growth rates are computed using unrounded

amounts.

Constant currency (not adjusted for portfolio changes).

Amount represents total for both continuing and

discontinued operations.

ABB

INTERIM

REPORT

Q4 2021

In the fourth quarter,

demand increased significantly and

orders grew by 18% year-on-year (21% comparable) with

underlying strength shown across all business areas,

regions and most customer segments. Revenue growth of

5% (8% comparable) was stronger than expected, due

primarily to higher project deliveries towards the end of the

period and despite supply chain disruptions in parts of our

business. We expect supply chain constraints to prevail

near-term. Importantly, we did not experience any unusual

order cancellations, which adds comfort to the high level of

order backlog of $16.6 billion, up 16% year-on-year (21%

comparable).

Operational EBITA increased by 20% year-on-year, and

despite adverse impacts from supply chain imbalances and

some cost inflation we achieved a 160bps improvement of

the Operational EBITA margin to 13.1%. This improvement

includes last year’s adverse margin impact of 80bps due to

the charges triggered by the Kusile project in South Africa

as well as non-core items.

At $1.0 billion we maintained a strong cash generation in

the fourth quarter, and I am pleased with us closing 2021

with a total cash flow from operating activities in continuing

operations of $3.3 billion, representing an annual

improvement of $1.5 billion.

We successfully closed the divestment of the Mechanical

Power Transmission (Dodge) division on November 1. This

triggered a book gain of $2.2 billion reported in income from

operations. This marks the completion of the announced first

step to focus the business portfolio on our leading position in

electrification and automation. As part of these actions, we

have appointed a new Head of the Turbocharging division

and while a spin-off looks more likely, we will make a final

decision towards the end of the first quarter. Meanwhile,

efforts to separately list the E-mobility business are moving

ahead and we aim to complete this during the second quarter

2022.

On the back of added confidence for our future growth and

profitability, we lifted our long-term targets at our Capital

Markets Day in December. Our leading position in resource

efficiency through electrification and automation, new ways

of working through the decentralized operating model,

improved performance management system and

acceleration of ESG drivers are expected to drive our

through-the-cycle revenue growth

to 4-7%, in constant currency. This is the total of 3-5%

organic growth and 1-2% acquired growth. We also

sharpened our Operational EBITA margin target to be at

least 15% as from 2023, in any given year.

We firmed up our ambition to drive industry leadership in

circularity. By 2030, the goal is to have 80% of ABB products

and solutions covered by our common approach for circular

customer solutions and circularity in our own operations.

To support our growth ambitions and leading offering, we

invested in start-up company BrainBox AI which pioneers

the use of artificial intelligence to reduce energy costs and

carbon emissions from Heating, Ventilation and Air

Conditioning (HVAC) systems in commercial buildings.

Additionally, we entered into a strategic partnership with

start-up Sevensense, to enhance our new autonomous

mobile robotics (AMR) offering with artificial intelligence and

3D vision mapping technology.

After the close of the quarter, the E-mobility division took

action to strengthen its position on the US market as it

increased its stake to a controlling 60% in InCharge Energy.

InCharge Energy tailors end-to-end EV charging

infrastructure solutions, including the procurement,

installation, operation, and maintenance of charging

systems, and provides cloud-based software services to

optimize energy management.

Considering improving performance, strong cash flow and

robust balance sheet, the Board of Directors proposes an

ordinary dividend of CHF 0.82 per share. Up from CHF 0.80

in the previous year and in line with the long-term ambition

of a rising sustainable dividend per share over time, while

still prioritizing a continued solid balance sheet to support

our growth ambitions. We plan to continue our share

buybacks for full year of 2022, also in excess of the PG

capital return program.

Björn Rosengren

CEO

In the

first quarter of 2022

, ABB anticipates the underlying

market activity to remain overall stable compared with the prior

quarter. Revenues in the first quarter tend to be sequentially

seasonally softer in absolute terms. ABB anticipates the

Operational EBITA margin to remain broadly stable or to be

slightly up, compared with the prior quarter.

In full year 2022

, we expect a steady margin improvement

towards the 2023 target of at least 15%, supported by

increased efficiency as we fully incorporate the decentralized

operating model and performance culture in all our divisions.

Furthermore, we expect support from an anticipated positive

market momentum and our strong order backlog.

CEO summary

Outlook

ABB

INTERIM

REPORT

Q4 2021

In the fourth quarter,

demand was strong across the board and

orders improved by 18% (21% comparable) year-on-year,

growing from an already relatively high level and despite a

lower contribution from large orders received in the current

quarter. Total

order intake amounted to the high level of

$8,257 million, supported by both the short-cycle as well as the

process-related businesses and a 14% (16% comparable)

improvement in the service business. All business areas

reported strong double-digit order growth, except for Process

Automation, which faced a high comparable in last year’s

quarter and reported a flat development.

All customer segments improved year-on-year. Orders grew

strongly in the machine building and food & beverage

segments, as well as in general industries overall. The

automotive segment increased due to broadly accelerating

investments in the EV segment.

In transport and infrastructure, there was a very strong order

development across the renewables and e-mobility business.

The buildings segment improved in both the residential and

non-residential segments. The marine segment recovered,

including a positive development in the cruise segment with

customers initiating service spend in anticipation of upcoming

cruising activities.

The process-related business improved across most of the

customer segments.

From a geographical perspective, demand was strong in all

three regions. In Europe and Americas orders increased by

26% (31% comparable) and 32% (38% comparable)

respectively. While order intake in China increased by 17%

(14% comparable), the region of Asia Middle East and Africa

declined by 1% (2% comparable) from last year, when certain

large project orders were received.

Revenues increased by 5% (8% comparable) with contribution

from positive volumes in a generally strong demand

environment and execution of the order backlog. Additionally,

there was support from a positive pricing development, but also

due to stronger than expected project deliveries late in the

period. The impact from imbalances in the supply chain

adversely affected the revenues as component shortages and

strained logistics triggered protracted lead times for some

customer deliveries. Sequentially,

these challenges remained

broadly stable. The strong order intake and certain limitations

on deliveries resulted in a book-to-bill ratio of 1.09 and an order

backlog of $16.6 billion, up by 16% year-on-year (21%

comparable).

Orders and revenues

Orders by region

($ in millions,

unless otherwise

indicated)

CHANGE

Q4 2021

Q4 2020

US$

Comparable

Europe

3,138

2,497

26%

31%

The Americas

2,640

2,002

32%

38%

Asia, Middle East

and Africa

2,479

2,504

-1%

-2%

ABB Group

8,257

7,003

18%

21%

Growth

Change year-on-year

Orders

Revenues

Comparable

21%

-2%

Portfolio changes

-1%

Total

18%

Revenues by region

($ in millions,

unless otherwise

indicated)

CHANGE

Q4 2021

Q4 2020

US$

Comparable

Europe

2,756

2,710

The Americas

2,198

2,045

12%

Asia, Middle East

and Africa

2,613

2,427

ABB Group

7,567

7,182

ABB

INTERIM

REPORT

Q4 2021

Gross profit

Gross margin increased to 31.7%, up 180bps year-on-year, driven

by Process Automation and lower project charges.

Gross profit

improved by 12% to $2,397 million.

Income from operations

Income from operations amounted to $2,975 million, improving by

close to $2.4 billion, mainly due to the positive impact from the

$2.2 billion book gain related to the completion of the divestment of

the Mechanical Power Transmission division, in the Motion

business area. The improvement was also driven by strong

operational performance and approximately $140 million less

restructuring costs, partially offset by separation costs of

$36 million.

Operational EBITA

Operational EBITA of $988 million was 20% higher (22% constant

currency) year-on-year, with the increased profit in Process

Automation as the main driver. The Operational EBITA margin

improved by 160bps to 13.1%, including last year’s adverse margin

impact of 80bps due to the specific items impacting comparability

triggered by the Kusile project in South Africa as well as non-core

items. The operational improvement was due to the combined

positive impact from higher volumes, positive price development

and increased efficiency, which more than offset adverse effects

from primarily cost inflation related to raw materials and freight.

Both Process Automation as well as Robotics and Discrete

Automation improved profitability, while Electrification and Motion

declined,

with the latter primarily due to the divestment of

Mechanical Power Transmission.

Selling, general and administrative (SG&A) expenses increased by

7% (9% in constant currency), while the ratio in relation to revenues

remained relatively stable at 17.9%, compared with 17.7% last

year. Corporate and Other Operational EBITA improved by

$36 million, to -$108 million.

Net finance expenses

declined to $26 million from $199 million,

primarily reflecting the absence of losses on extinguishment of debt

and slightly lower underlying debt compared with last year.

Income tax

Income tax expense was $282 million with an effective tax rate of

9.4%. The low rate reflects the approximate $210 million of income

tax expense related to the $2.2 billion book gain due to the

divestment of the Mechanical Power Transmission business. In

addition, we benefited from favorable resolution of prior year tax

matters and together these reduced the reported tax rate by

approximately 9 percentage points. For the full year 2021, the tax

rate was 18.3%, reduced by approximately 8 percentage points by

the impact from the divestment and certain tax benefits in the third

and fourth quarter.

Net income and earnings per share

Net income attributable to ABB was $2,640 million and increased

significantly from last year due to the book gain related to the

divestment of Mechanical Power Transmission as well as increased

earnings in continuing operations.

Consequently,

basic earnings per

share was $1.34 and increased from last year’s loss of $0.04, when

early repayment of bonds and non-operational pension costs had an

adverse impact.

Earnings

ABB

INTERIM

REPORT

Q4 2021

Net working capital

Net working capital amounted to $2,303 million, declining

both year-on-year from $2,718 million and sequentially from

$2,920 million. The sequential decline was driven primarily

by payables as inventories and receivables remained

largely stable. Net working capital as a percentage of

revenues

was 8.1%.

Capital expenditures

Purchases of property, plant and equipment and intangible

assets amounted to $361 million, higher than anticipated due

mainly to the opportunity to acquire a formerly leased property

in China.

Net debt

A net cash

position of $98 million was achieved at the end of

the quarter, compared with last year’s net debt of

$112 million. Sequentially,

net debt was reduced from

$1,898 million,

including the contribution from completing the

divestment of Mechanical Power Transmission.

Cash flows

Cash flow from operating activities in continuing operations

was $1,033 million and declined year-on-year from

$1,225 million. The quarterly year-on-year decline was

related to a lower reduction of trade net working capital.

Cash flow was impacted by approximately $300 million cash

tax related to the Mechanical Power Transmission

divestment, compared with approximately $200 million in

the prior year quarter due to the Kusile settlement and

pension plan transfers.

Share buyback program

A follow-up share buyback program of up to $4.3 billion was

launched in early April. This follow-up program is part of the

plan to return $7.8 billion of cash proceeds from the Power

Grids divestment to shareholders. Under the initial program a

total of 128,620,589 shares were repurchased for an amount of

approximately $3.5 billion. Since the launch of the follow-up

program on April 9 and through the end of 2021, a total of

58,627,600 shares were repurchased for the total of

approximately $2.0 billion,

including 32,785,000 shares in the

fourth quarter. Shares were repurchased on the second trading

line. The total number of ABB Ltd’s issued shares is

2,053,148,264.

($ millions,

unless otherwise indicated)

Dec. 31

2021

Dec. 31

2020

Short term debt and current

maturities of long-term debt

1,384

1,293

Long-term debt

4,177

4,828

Total debt

5,561

6,121

Cash & equivalents

4,159

3,278

Restricted cash - current

323

Marketable securities and

short-term investments

1,170

2,108

Restricted cash - non-current

300

Cash and marketable securities

5,659

6,009

Net debt (cash)*

(98)

112

Net debt (cash)* to EBITDA ratio

(0.01)

0.04

Net debt (cash)* to Equity ratio

(0.01)

0.01

net debt excludes net pension liabilities $871

million

Balance sheet & Cash flow

ABB

INTERIM

REPORT

Q4 2021

Orders and revenues

Order intake of $3,638 million increased by 18% year-on-year

(20% comparable) and represents one of the strongest

quarters on record, supported by an overall positive

development in all customer segments. Supply chain

constraints hampered revenues. Consequently, Electrification

enters 2022 with a record-high order backlog of $5.5 billion to

execute, while supply chain challenges are expected to

persist near term.

●

Strong comparable order growth was driven by a positive

development in all divisions. E-mobility and Power

Conversion were particularly strong, albeit relatively small in

absolute terms.

●

All segments improved. Momentum was stronger in

buildings, food & beverage, infrastructure, renewables and

e-mobility. The pace of improvement was more moderate in

oil & gas and utilities.

●

Order growth was very strong in both Americas at 41%

(40% comparable) and Europe at 15% (19% comparable).

Asia, Middle East and Africa remained stable, including a

decline of 3% (6% comparable) in China on high

comparables.

●

Revenues improved by 3% (4% comparable), mainly due to

strong pricing execution as volumes were hampered by

supply chain disruptions including component shortages

and a tight labor market. All regions noted stable to positive

growth, with the strongest comparable contribution from

Americas and Europe while Asia, Middle East and Africa

remained stable.

Profit

The impact from higher revenues was offset primarily by

higher raw material and freight costs, and while gross

margin remained stable, the Operational EBITA declined by

3% (1% constant currency) to $507 million, from a high

comparable.

Operational EBITA margin declined by 80bps

to 14.8% in the fourth quarter, which tends to be seasonally

soft.

●

The component shortages mostly impacted the largest

division, Distribution Solutions, due to its large systems

sales. This, and the impact from higher costs for primarily

raw materials,

freight and higher sales costs, weighed on

business area earnings and margins year-on-year and

more than offset impacts from increased efficiency,

positive pricing and higher profits in the smaller divisions.

—

Electrification

Growth

Change year-on-year

Orders

Revenues

Comparable

20%

-2%

-1%

Portfolio changes

Total

18%

CHANGE

($ millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Comparable

FY 2021

FY 2020

US$

Comparable

Orders

3,638

3,074

18%

20%

14,381

11,884

21%

18%

Order backlog

5,458

4,358

25%

29%

5,458

4,358

25%

29%

Revenues

3,445

3,356

13,187

11,924

11%

Operational EBITA

507

522

-3%

2,121

1,681

26%

as % of operational revenues

14.8%

15.6%

-0.8 pts

16.1%

14.1%

+2 pts

Cash flow from operating activities

715

882

-19%

2,181

1,757

24%

No. of employees (FTE equiv.)

50,800

50,500

ABB

INTERIM

REPORT

Q4 2021

Orders and revenues

Demand was strong across the board, which supported the

double-digit growth in both the short- and long-cycle

businesses as well as in the service business.

●

Despite the divestment of the Mechanical Power

Transmission division, order intake amounted to

$1,843 million, representing a reported growth of 19%,

with market strength further visible in the remaining

divisions (29% comparable).

●

All divisions reported strong double-digit order growth,

supported by a positive development in all customer

segments for electrical motors and drives. Orders were

supported by a higher level of project orders coming

through, year-on-year.

●

All regions improved, although the very strong order

growth in Europe and the Americas outpaced the high

single-digit improvement in Asia, Middle East and Africa,

which included a slight order growth in China.

●

The focused efforts to ease the impact from component

shortages by re-designing products and onboarding

additional sourcing options are increasingly paying off in

some areas, compared with the previous quarter.

Consequently, most divisions increased revenues which

amounted to $1,735 million, up 2% (9% comparable),

year-on-year.

Profit

Despite the divestment of the Mechanical Power

Transmission division early in the quarter, the Operational

EBITA remained largely stable year-on-year at $278 million.

●

The Operational EBITA margin declined by 70bps year-

on-year, out of which approximately 50bps was related to

the divestment of the Mechanical Power Transmission.

Additional slight margin pressure was primarily due to

increased raw material and freight costs as well as

divisional mix, which offset the positive impacts from

higher revenues and efficiency measures.

The divestment of the Mechanical Power Transmission

division for $2.9 billion in cash was completed,

triggering a

non-operational pre-tax book gain of $2.2 billion in income

from operations.

Growth

Change year-on-year

Orders

Revenues

Comparable

29%

-2%

-1%

Portfolio changes

-8%

-6%

Total

19%

—

Motion

CHANGE

($ millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Comparable

FY 2021

FY 2020

US$

Comparable

Orders

1,843

1,552

19%

29%

7,616

6,574

16%

14%

Order backlog

3,749

3,320

13%

20%

3,749

3,320

13%

20%

Revenues

1,735

1,705

6,925

6,409

Operational EBITA

278

285

-2%

1,183

1,075

10%

as % of operational revenues

16.1%

16.8%

-0.7 pts

17.1%

16.8%

+0.3 pts

Cash flow from operating activities

416

424

-2%

1,362

1,283

No. of employees (FTE equiv.)

20,100

20,900

-4%

ABB

INTERIM

REPORT

Q4 2021

Orders and revenues

Order intake for the quarter of $1,898 million remained

stable at last year’s record-high level, despite significantly

less contribution from large orders received. Consequently,

while growth was very strong in base orders, total order

growth remained largely flat at -1% (0% comparable). Order

backlog increased slightly sequentially to $6.1 billion.

●

Demand was strong across almost all customer segments

with power generation remaining stable. Orders in the

service business increased by 19% (21% comparable),

including a significant improvement related to the cruise

business.

●

Excluding the impact from large orders

, order intake

increased by at least 20% in all regions. Large orders

received in the year-earlier period resulted in declining

total orders in Asia, Middle East and Africa.

Revenues increased by 17% (19% comparable) with

support from all divisions on successful execution of the

order backlog and a generally strong demand environment

in the relatively more short-cycle business like

Measurement and Analytics.

Profit

All divisions improved both earnings and margin compared

with the corresponding quarter last year, which included the

already communicated items impacting comparability of

approximately $43 million. In total, the business area’s

Operational EBITA increased by 140%, to $247 million, and

the Operational EBITA margin improved to 13.7% from

6.8%.

●

The earnings and margin increase were driven by higher

volumes and efficiency measures.

●

Impacts from component shortages were limited in the

period, although may increase near-term.

As part of the process to exit the Turbocharging business, a

new divisional President has been appointed, as Daniel

Bischofberger rejoins ABB.

Growth

Change year-on-year

Orders

Revenues

Comparable

19%

-1%

-2%

Portfolio changes

Total

-1%

17%

—

Process Automation

Large orders, defined as orders >$15 million

CHANGE

($ millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Comparable

FY 2021

FY 2020

US$

Comparable

Orders

1,898

1,918

-1%

6,779

6,144

10%

Order backlog

6,079

5,805

10%

6,079

5,805

10%

Revenues

1,805

1,545

17%

19%

6,259

5,792

Operational EBITA

247

103

140%

801

451

78%

as % of operational revenues

13.7%

6.8%

+6.9 pts

12.8%

7.8%

+5 pts

Cash flow from operating activities

370

196

89%

1,062

454

134%

No. of employees (FTE equiv.)

22,000

22,200

-1%

ABB

INTERIM

REPORT

Q4 2021

Orders and revenues

Due to the broad-based strength in all customer segments

order intake amounted to $1,100 million, representing a

significant increase of 57% (59% comparable), albeit from a low

comparable in the year-earlier period. Order backlog increased

to the high level of $1.9 billion, as the pace of converting strong

orders into revenues was protracted due to component

shortages, which are expected to remain also in the coming

quarter.

●

Both divisions reported double-digit order growth, with

Machine Automation outpacing Robotics on a lower

comparable.

●

The automotive segment benefited from investments in EV

capacity, with the strongest increase noted in China. The

conscious effort to grow in the general industry segment is

paying off as steep order growth resulted in the strongest

contribution in absolute terms, supporting future profitability

as the backlog is executed. Demand from machine builders

was stellar, despite extended delivery times.

●

All regions increased orders at a high rate of at least 40%

year-on-year.

●

Despite the strong order intake, revenues remained broadly

stable year-on-year at $799 million, as component shortages

slowed the pace of customer deliveries in both divisions.

Supply constraints primarily relate to semiconductor

shortages and logistics.

Profit

Both profit and profitability increased year-on-year, despite

the lack of revenue growth. Operational EBITA improved by

8% with a margin increase of 80bps.

●

In total, the positive impacts from increased efficiency and

favorable mix due to a lower share of systems sales

compared with the year-earlier period, more than offset

the adverse impacts from increased freight and input

costs.

●

The positive earnings and profitability development in

Robotics more than offset the decline in Machine

Automation where the impacts from supply chain

disruptions were relatively higher.

Growth

Change year-on-year

Orders

Revenues

Comparable

59%

-1%

-3%

-2%

Portfolio changes

Total

57%

—

Robotics & Discrete Automation

CHANGE

($ millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Comparable

FY 2021

FY 2020

US$

Comparable

Orders

1,100

699

57%

59%

3,844

2,868

34%

29%

Order backlog

1,919

1,403

37%

43%

1,919

1,403

37%

43%

Revenues

799

801

-1%

3,297

2,907

13%

Operational EBITA

355

237

50%

as % of operational revenues

8.1%

7.3%

+0.8 pts

10.8%

8.2%

+2.6 pts

Cash flow from operating activities

129

134

-4%

374

378

-1%

No. of employees (FTE equiv.)

10,600

10,300

ABB

INTERIM

REPORT

Q4 2021

Quarterly highlights

●

At the Capital Markets Day in December, ABB unveiled

its circularity framework covering every stage of the

product lifecycle to preserve resources. It includes four

stages: circular design and sourcing, resource efficient

operations, optimized use phase and responsible end of

life. The goal is to have 80% of ABB products, solutions

and services covered by the circularity framework by

2030, with the company’s progress measured against a

set of KPIs.

●

Safety performance was good for the year with ABB

having zero fatalities in 2021, the first time since 2011,

and underlines the company’s efforts to continuously

advance its world-class safety practices, an integral part

of its sustainability ambitions.

●

ABB Robotics signed an agreement to collaborate with

California-based Zume, a global provider of innovative,

compostable packaging. ABB will supply robotic cells that

will enable Zume’s production of sustainable packaging

on a global scale, helping to reduce reliance on single-

use plastics.

●

As part of its Diversity and Inclusion Strategy 2030 and in

line with national legislation, ABB carried out an equal

pay analysis for its Swiss entities with at least 100

employees. More details will be available in the

Compensation Report to be published near the end of

February.

●

In October, ABB’s Electrification sites in Ede (The

Netherlands) and Porvoo (Finland) joined Beijing (China)

and Lüdenscheid (Germany) as official sites that have

achieved carbon neutral operations, a key element of the

company’s 2030 Mission to Zero journey.

Story of the quarter

As part of the 26th UN Climate Change Conference of the

Parties (COP26) in Glasgow, UK, ABB announced the ABB

Formula E Climate Initiatives focused around three pillars:

Innovating technologies; Social progress, diversity and

inclusion; and Championing Change. Under these pillars,

activities will be undertaken in connection with ABB Formula

E races in city centers around the world. ABB will build on

its existing partnership with FIA Girls on Track to empower

women and promote gender equality in an innovative,

engaging, and positive manner. It will also support energy

transition through education, awareness, training and

volunteering by organizing events in schools and

communities. Global & local engagement will also be driven

by targeted public affairs programs within race locations.

Q4 outcome

●

29% reduction of CO

₂

emissions in own operations as

green electricity contracts increasingly implemented

●

12% year-on-year decline in LTIFR due to increased

safety measures in production and more employees

working from home

●

3%-points increase in number of women in senior

management supported by various initiatives across the

company

—

Sustainability

Q4 2021

Q4 2020

CHANGE

12M ROLLING

CO2e own operations emissions,

kt scope 1 and 2

-29%

Lost Time Injury Frequency Rate (LTIFR),

frequency / 200,000 working hours

0.142

0.162

-12%

0.143

Share of females in senior management

positions, %

16.3

13.5

+2.8 pts

14.9

From energy use, previous quarter

ABB

INTERIM

REPORT

Q4 2021

During Q4 2021

●

On December 7, ABB hosted its Capital Markets Day and

lifted the revenue growth target to 4-7% through the

economic cycle, in constant currency, which is the total of 3-

5% organic growth and 1-2% acquired growth. ABB also

sharpened the operational EBITA margin target to be at least

15% as from 2023, in any given year. These changes take

into account the immediate adverse margin impacts due to

the exit of the Mechanical Power Transmission division and

the planned exit of the Turbocharging division. The Group

had previously targeted 3-5% for revenue growth through the

cycle and an operational EBITA margin in the upper half of a

13-16% range as from 2023.

Additionally, in 2022, ABB will introduce a circularity

framework covering every stage of the product lifecycle in

order to preserve resources. These include: design and

sourcing; production and packaging; optimizing the use

phase (efficiency and lifetime); and the end-of-life phase

(take back and recycling). The goal is to have 80% of ABB

products, solutions and services covered by the circularity

framework by 2030, with the company’s progress measured

against a set of KPIs. Already today, several initiatives are in

place. For example, close to 40% of ABB’s 400 sites across

the world are sending zero waste to landfills.

●

On November 1, ABB completed the divestment of its

Mechanical Power Transmission division (Dodge) for

$2.9 billion in cash. The deal triggered a non-operational pre-

tax book gain of approximately $2.2 billion reported in income

from operations.

After Q4 2021

●

On January 27, ABB announced that it had increased its

shareholdings to approximately 60% in start-up company

InCharge Energy to strengthen its E-mobility division in

the North American market and expand its software and

digital services offering. InCharge Energy tailors end-to-

end EV charging infrastructure solutions, including the

procurement, installation, operation, and maintenance of

charging systems, and provides cloud-based software

services for the optimization of energy management.

●

On February 2, ABB announced that Andrea Antonelli

had been appointed General Counsel and Member of the

Executive Committee, as of March 1, 2022. He will

succeed Maria Varsellona, who will, as previously

announced, leave the company to become Chief Legal

Officer of Unilever. Furthermore, Andrea will become

ABB’s Company Secretary on March 24, 2022, following

the Annual General Meeting.

After Q4 2021

In 2021, demand for ABB’s products increased strongly from

the low level in the previous year period when the adverse

business impact of the COVID-19 pandemic was significant.

Orders amounted to $31,868 million and improved by 20%

(17% comparable) and revenues amounted to

$28,945 million, up by 11%

(8% comparable), with a book-to-

bill ratio of 1.10. The recovery was initially driven by the short-

cycle business, and the process-related business

predominantly picked up later in the period.

Demand

increased in both the product and the service business.

Additionally, exchange rates had a positive impact on order

intake and revenues.

Income from operations amounted to $5,718 million, up

significantly from last year driven by stronger Operational

EBITA as well as the book gain of $2.2 billion related to the

divestment of the Mechanical Power Transmission business.

Results include restructuring activities that are progressing

according to plan with restructuring and restructuring-related

expenses of $160 million. Operational EBITA improved by 42%

year-on-year to $4,122 million and the Operational EBITA

margin increased by 310bps to 14.2%. The improved

performance was driven by increased revenues in combination

with an improved gross margin and lower specific items which

impact comparability. While revenues increased by 11%, the

expenses related to selling, general and administrative (SG&A)

increased by a more limited 5%, driven by higher sales

expenses. The ratio in relation to revenues declined to 17.8%,

from 18.7% in the year-earlier period. R&D expenses increased

by 8%. Corporate and Other Operational EBITA improved by

$207 million to -$338 million.

Net finance expenses amounted to -$97 million. For the full year

2021, the tax rate was 18.3%, reduced by approximately

8 percentage points by the impact from the divestment and

certain tax benefits in the third and fourth quarter. Net income

attributable to ABB was $4,546 million and decreased from last

year’s level which includes the book gain related to the

divestment of Power Grids and was larger than the book gain

related to this year’s divestment of Mechanical Power

Transmission.

Basic earnings per share was $2.27. Cash flow

from operating activities in continuing operations amounted to

$3,338 million, up from $1,875 million in the year-earlier period.

Significant events

Full year 2021

ABB

INTERIM

REPORT

Q4 2021

Note: comparable growth calculation includes

acquisitions and divestments with revenues of greater

than $50 million.

Represents the estimated annual revenues for the

period prior to the announcement of the

respective acquisition/divestment.

Divestments

Company/unit

Closing date

Revenues, $ million

No. of employees

2021

Motion

Mechanical Power Transmission

1-Nov

645

1,500

Acquisitions

Company/unit

Closing date

Revenues, $ million

No. of employees

2021

Electrification

Enervalis (majority stake)

26-Apr

Robotics & Discrete Automation

ASTI Mobile Robotics Group

2-Aug

300

($ in millions, unless otherwise stated)

FY 2022

Q1 2022

Net finance expenses

~(100)

~(25)

Non-operational pension

(cost) / credit

~140

~35

Effective tax rate

~25%

~20%

Capital Expenditures

~(750)

~(140)

($ in millions, unless otherwise stated)

FY 2022

Q1 2022

Corporate and Other Operational costs

~(330)

~(80)

Non-operating items

Restructuring and restructuring related

~(150)

~(40)

Separation costs

~(180)

~(70)

ABB Way transformation

~(150)

~(30)

PPA-related amortization

~(230)

~(60)

Certain other income and expenses

related to PG divestment

~(20)

~(15)

Additional 2022 guidance

Additional figures

ABB Group

Q1 2020

Q2 2020

Q3 2020

Q4 2020

FY 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

FY 2021

EBITDA, $ in million

600

799

302

807

2,508

1,024

1,324

1,072

3,191

6,611

Return on Capital Employed, %

n.a.

10.3%

n.a.

14.90

Net debt/Equity

0.52

0.61

(0.05)

0.01

0.09

0.16

0.13

(0.01)

Net debt/ EBITDA 12M rolling

2.3

2.5

(0.4)

0.04

0.4

0.7

0.5

(0.01)

Net working capital, % of 12M rolling

revenues

12.3%

12.6%

12.5%

10.5%

10.8%

11.6%

10.2%

8.1%

Earnings per share, basic, $

0.18

0.15

2.14

(0.04)

2.44

0.25

0.37

0.33

1.34

2.27

Earnings per share, diluted, $

0.18

0.15

2.14

(0.04)

2.43

0.25

0.37

0.32

1.33

2.25

Dividend per share, CHF

n.a.

0.80

n.a.

0.82*

Share price at the end of period, CHF

17.01

21.33

23.45

24.71

28.56

31.39

34.90

Share price at the end of period, $

17.26

22.56

25.45

27.96

30.47

33.99

33.36

38.17

Number of employees (FTE

equivalents)

143,320

142,310

106,420

105,520

105,330

106,370

106,080

104,420

No. of shares outstanding at end of

period (in millions)

2,134

2,135

2,092

2,031

2,024

2,006

1,993

1,958

Dividend proposal subject to shareholder approval

at the 2022 AGM

Excludes 2 main exposures estimated to a total

of ~$300 million, that are ongoing in the

non-core business. Exact exit timing is difficult to

assess due to legal proceedings etc. however ABB

currently

expects $150-$200 million to come through in non-operating

items during 2022.

Costs relating to the announced exits and the potential

E-mobility listing.

Excluding share of net income from JV.

Acquisitions and divestments, last twelve months

ABB

INTERIM

REPORT

Q4 2021

For additional information please contact:

Media Relations

Phone: +41 43 317 71 11

Email:

[email protected]

Investor Relations

Phone: +41 43 317 71 11

Email:

[email protected]

ABB Ltd

Affolternstrasse 44

8050 Zurich

Switzerland

Financial calendar

202

February 10

ABB E

mobility

CMD, virtual

March 24

Annual General Meeting

March 30

Propose date to receive dividend for shares on CHSIX

April 1

Proposed date to receive dividend for shares on SENasdaq

April 21

Q1 2022 results

Mid-May

Proposed timing to receive dividend for shares on USNYSE

May 17

BB Motion CMD in Helsinki

May 18

ABB Process Automation CMD in Helsinki

July 21

Q2 2022 results

October 20

Q3 2022 results

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 “CEO summary”, “Outlook”, “Share

buyback program”, “Sustainability” and “Significant events”.

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 “goals”,

“anticipates,” “expects”, “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. Some 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.

The Q4 2021 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. CET.

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.

Q4 results presentation on February 3, 2022

Important notice about forward-looking information

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 105,000 talented employees in over 100 countries.

2021

FINANCIAL

INFORMATION

February 3, 2022

Q4 2021

Financial information

2021

FINANCIAL

INFORMATION

—

Financial

Information

Contents

─ 07

Key Figures

08 ─

Consolidated

Financial

Information

(unaudited)

38 ─

Supplemental

Reconciliations

and Definitions

2021

FINANCIAL

INFORMATION

—

Key Figures

CHANGE

($ in millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Comparable

(1)

Orders

8,257

7,003

18%

21%

Order backlog (end December)

16,607

14,303

16%

21%

Revenues

7,567

7,182

Gross Profit

2,397

2,147

12%

as % of revenues

31.7%

29.9%

+1.8 pts

Income from operations

2,975

578

415%

Operational EBITA

(1)

988

825

20%

22%

(2)

as % of operational revenues

(1)

13.1%

11.5%

+1.6 pts

Income from continuing operations, net of tax

2,703

127

n.a.

Net income (loss) attributable to ABB

2,640

(79)

n.a.

Basic earnings per share ($)

1.34

(0.04)

n.a.

(3)

Cash flow from operating activities

(4)

1,020

1,182

-14%

Cash flow from operating activities in continuing operations

1,033

1,225

-16%

CHANGE

($ in millions, unless otherwise indicated)

FY 2021

FY 2020

US$

Comparable

(1)

Orders

31,868

26,512

20%

17%

Revenues

28,945

26,134

11%

Gross Profit

9,467

7,878

20%

as % of revenues

32.7%

30.1%

+2.6 pts

Income from operations

5,718

1,593

259%

Operational EBITA

(1)

4,122

2,899

42%

37%

(2)

as % of operational revenues

(1)

14.2%

11.1%

+3.1 pts

Income from continuing operations, net of tax

4,730

345

n.a.

Net income attributable to ABB

4,546

5,146

-12%

Basic earnings per share ($)

2.27

2.44

-7%

(3)

Cash flow from operating activities

(4)

3,330

1,693

97%

Cash flow from operating activities in continuing operations

3,338

1,875

78%

(1)

For a reconciliation of non-GAAP measures see “

Supplemental Reconciliations and Definitions

” on page 38.

(2)

Constant currency (not adjusted for portfolio changes).

(3)

EPS growth rates are computed using unrounded amounts.

(4)

Cash flow from operating activities includes both continuing and discontinued operations.

2021

FINANCIAL

INFORMATION

CHANGE

($ in millions, unless otherwise indicated)

Q4 2021

Q4 2020

US$

Local

Comparable

Orders

ABB Group

8,257

7,003

18%

20%

21%

Electrification

3,638

3,074

18%

20%

Motion

1,843

1,552

19%

21%

29%

Process Automation

1,898

1,918

-1%

Robotics & Discrete Automation

1,100

699

57%

60%

59%

Corporate and Other

(incl. intersegment eliminations)

(222)

(240)

Order backlog (end December)

ABB Group

16,607

14,303

16%

21%

Electrification

5,458

4,358

25%

29%

Motion

3,749

3,320

13%

19%

20%

Process Automation

6,079

5,805

10%

Robotics & Discrete Automation

1,919

1,403

37%

43%

Corporate and Other

(incl. intersegment eliminations)

(598)

(583)

Revenues

ABB Group

7,567

7,182

Electrification

3,445

3,356

Motion

1,735

1,705

Process Automation

1,805

1,545

17%

19%

Robotics & Discrete Automation

799

801

-1%

Corporate and Other

(incl. intersegment eliminations)

(217)

(225)

Income from operations

ABB Group

2,975

578

Electrification

418

444

Motion

2,464

258

Process Automation

193

Robotics & Discrete Automation

Corporate and Other

(incl. intersegment eliminations)

(145)

(175)

Income from operations %

ABB Group

39.3%

8.0%

Electrification

12.1%

13.2%

Motion

142.0%

15.1%

Process Automation

10.7%

1.8%

Robotics & Discrete Automation

5.6%

2.9%

Operational EBITA

ABB Group

988

825

20%

22%

Electrification

507

522

-3%

-1%

Motion

278

285

-2%

-1%

Process Automation

247

103

140%

146%

Robotics & Discrete Automation

10%

Corporate and Other

(incl. intersegment eliminations)

(108)

(144)

Operational EBITA %

ABB Group

13.1%

11.5%

Electrification

14.8%

15.6%

Motion

16.1%

16.8%

Process Automation

13.7%

6.8%

Robotics & Discrete Automation

8.1%

7.3%

Cash flow from operating activities

(1)

ABB Group

1,020

1,182

Electrification

715

882

Motion

416

424

Process Automation

370

196

Robotics & Discrete Automation

129

134

Corporate and Other

(incl. intersegment eliminations)

(597)

(411)

Discontinued operations

(13)

(43)

(1)

Commencing Q1 2021, depreciation relating to certain real estate assets, previously reported in Corporate and Other, has been reallocated to the individual

operating segments utilizing these assets. Comparatives have been restated.

2021

FINANCIAL

INFORMATION

CHANGE

($ in millions, unless otherwise indicated)

FY 2021

FY 2020

US$

Local

Comparable

Orders

ABB Group

31,868

26,512

20%

17%

Electrification

14,381

11,884

21%

18%

Motion

7,616

6,574

16%

13%

14%

Process Automation

6,779

6,144

10%

Robotics & Discrete Automation

3,844

2,868

34%

29%

Corporate and Other

(incl. intersegment eliminations)

(752)

(958)

Order backlog (end December)

ABB Group

16,607

14,303

16%

21%

Electrification

5,458

4,358

25%

29%

Motion

3,749

3,320

13%

19%

20%

Process Automation

6,079

5,805

10%

Robotics & Discrete Automation

1,919

1,403

37%

43%

Corporate and Other

(incl. intersegment eliminations)

(598)

(583)

Revenues

ABB Group

28,945

26,134

11%

Electrification

13,187

11,924

11%

Motion

6,925

6,409

Process Automation

6,259

5,792

Robotics & Discrete Automation

3,297

2,907

13%

Corporate and Other

(incl. intersegment eliminations)

(723)

(898)

Income from operations

ABB Group

5,718

1,593

Electrification

1,841

1,335

Motion

3,276

989

Process Automation

713

344

Robotics & Discrete Automation

269

(163)

Corporate and Other

(incl. intersegment eliminations)

(381)

(912)

Income from operations %

ABB Group

19.8%

6.1%

Electrification

14.0%

11.2%

Motion

47.3%

15.4%

Process Automation

11.4%

5.9%

Robotics & Discrete Automation

8.2%

-5.6%

Operational EBITA

ABB Group

4,122

2,899

42%

37%

Electrification

2,121

1,681

26%

21%

Motion

1,183

1,075

10%

Process Automation

801

451

78%

70%

Robotics & Discrete Automation

355

237

50%

43%

Corporate and Other

(1)

(incl. intersegment eliminations)

(338)

(545)

Operational EBITA %

ABB Group

14.2%

11.1%

Electrification

16.1%

14.1%

Motion

17.1%

16.8%

Process Automation

12.8%

7.8%

Robotics & Discrete Automation

10.8%

8.2%

Cash flow from operating activities

(2)

ABB Group

3,330

1,693

Electrification

2,181

1,757

Motion

1,362

1,283

Process Automation

1,062

454

Robotics & Discrete Automation

374

378

Corporate and Other

(incl. intersegment eliminations)

(1,641)

(1,997)

Discontinued operations

(8)

(182)

(1)

Corporate and Other includes Stranded corporate costs of $40 million for the year ended December 31, 2020.

(2)

Commencing Q1 2021, depreciation relating to certain real estate assets, previously reported in Corporate and Other, has been reallocated to the individual

operating segments utilizing these assets. Comparatives have been restated.

2021

FINANCIAL

INFORMATION

Operational EBITA

Process

Robotics & Discrete

ABB

Electrification

Motion

Automation

($ in millions, unless otherwise indicated)

Q4 21

Q4 20

Q4 21

Q4 20

Q4 21

Q4 20

Q4 21

Q4 20

Q4 21

Q4 20

Revenues

7,567

7,182

3,445

3,356

1,735

1,705

1,805

1,545

799

801

Foreign exchange/commodity timing

differences in total revenues

(44)

(37)

(22)

(15)

(10)

(4)

(5)

(23)

(5)

Operational revenues

7,523

7,145

3,423

3,341

1,725

1,701

1,800

1,522

794

804

Income from operations

2,975

578

418

444

2,464

258

193

Acquisition-related amortization

Restructuring, related and

implementation costs

220

Changes in obligations related to

divested businesses

(7)

–

Gains and losses from sale of businesses

(2,184)

(2)

(2,195)

–

Acquisition- and divestment-related

expenses and integration costs

–

Other income/expense relating to the

Power Grids joint venture

–

Certain other non-operational items

(43)

(22)

–

(2)

–

Foreign exchange/commodity timing

differences in income from operations

(32)

(44)

(25)

(20)

(9)

(14)

(15)

(3)

Operational EBITA

988

825

507

522

278

285

247

103

Operational EBITA margin

(%)

13.1%

11.5%

14.8%

15.6%

16.1%

16.8%

13.7%

6.8%

8.1%

7.3%

Process

Robotics & Discrete

ABB

Electrification

Motion

Automation

($ in millions, unless otherwise indicated)

FY 21

FY 20

FY 21

FY 20

FY 21

FY 20

FY 21

FY 20

FY 21

FY 20

Revenues

28,945

26,134

13,187

11,924

6,925

6,409

6,259

5,792

3,297

2,907

Foreign exchange/commodity timing

differences in total revenues

(1)

(41)

(13)

(7)

(30)

(7)

–

Operational revenues

28,944

26,093

13,188

11,911

6,927

6,402

6,264

5,762

3,290

2,907

Income (loss) from operations

5,718

1,593

1,841

1,335

3,276

989

713

344

269

(163)

Acquisition-related amortization

250

263

117

115

Restructuring, related and

implementation costs

160

410

145

125

Changes in obligations related to

divested businesses

218

–

Changes in pre-acquisition estimates

(6)

–

Gains and losses from sale of businesses

(2,193)

(2,196)

–

(13)

–

Fair value adjustment on assets and

liabilities held for sale

–

Acquisition- and divestment-related

expenses and integration costs

132

–

Other income/expense relating to the

Power Grids joint venture

–

Certain other non-operational items

(18)

335

(5)

(27)

–

295

Foreign exchange/commodity timing

differences in income from operations

(60)

(21)

(27)

(25)

(5)

Operational EBITA

4,122

2,899

2,121

1,681

1,183

1,075

801

451

355

237

Operational EBITA margin

(%)

14.2%

11.1%

16.1%

14.1%

17.1%

16.8%

12.8%

7.8%

10.8%

8.2%

2021

FINANCIAL

INFORMATION

Depreciation and Amortization

Process

Robotics & Discrete

ABB

Electrification

Motion

Automation

($ in millions)

Q4 21

Q4 20

Q4 21

Q4 20

Q4 21

Q4 20

Q4 21

Q4 20

Q4 21

Q4 20

Depreciation

(1)

141

147

Amortization

including total acquisition-related amortization of:

Process

Robotics & Discrete

ABB

Electrification

Motion

Automation

($ in millions)

FY 21

FY 20

FY 21

FY 20

FY 21

FY 20

FY 21

FY 20

FY 21

FY 20

Depreciation

(1)

575

586

276

274

123

127

Amortization

318

329

149

138

including total acquisition-related amortization of:

250

263

117

115

(1)

Commencing Q1 2021, depreciation related to certain real estate assets, previously reported in Corporate and Other, has been reallocated to the individual operating segments

utilizing these assets. Comparatives have been restated.

Orders received and revenues by region

($ in millions, unless otherwise indicated)

Orders received

CHANGE

Revenues

CHANGE

Com-

Q4 21

Q4 20

US$

Local

parable

Q4 21

Q4 20

US$

Local

parable

Europe

3,138

2,497

26%

31%

2,756

2,710

The Americas

2,640

2,002

32%

38%

2,198

2,045

12%

of which United States

1,995

1,450

38%

46%

1,579

1,497

11%

Asia, Middle East and Africa

2,479

2,504

-1%

-2%

2,613

2,427

of which China

1,255

1,071

17%

14%

1,233

1,231

-3%

-2%

ABB Group

8,257

7,003

18%

20%

21%

7,567

7,182

($ in millions, unless otherwise indicated)

Orders received

CHANGE

Revenues

CHANGE

Com-

FY 21

FY 20

US$

Local

parable

FY 21

FY 20

US$

Local

parable

Europe

11,857

9,559

24%

20%

10,529

9,708

The Americas

9,940

7,938

25%

24%

25%

8,686

7,936

10%

of which United States

7,453

5,962

25%

27%

6,397

6,019

Asia, Middle East and Africa

10,071

8,893

13%

9,730

8,382

16%

12%

of which China

5,036

4,107

23%

15%

4,932

4,091

21%

13%

14%

Intersegment orders/revenues

(1)

–

122

–

108

ABB Group

31,868

26,512

20%

17%

28,945

26,134

11%

(1)

Intersegment orders/revenues during the six months ended June 30, 2020, include sales to the Power Grids business which is presented as discontinued operations and thus these

sales are not eliminated from Total orders/revenues.

2021

FINANCIAL

INFORMATION

—

Consolidated Financial Information

ABB Ltd Consolidated Income Statements (unaudited)

Year ended

Three months ended

($ in millions, except per share data in $)

Dec. 31, 2021

Dec. 31, 2020

Dec. 31, 2021

Dec. 31, 2020

Sales of products

23,745

21,214

6,101

5,823

Sales of services and other

5,200

4,920

1,466

1,359

Total revenues

28,945

26,134

7,567

7,182

Cost of sales of products

(16,364)

(15,229)

(4,275)

(4,182)

Cost of services and other

(3,114)

(3,027)

(895)

(853)

Total cost of sales

(19,478)

(18,256)

(5,170)

(5,035)

Gross profit

9,467

7,878

2,397

2,147

Selling, general and administrative expenses

(5,162)

(4,895)

(1,354)

(1,271)

Non-order related research and development expenses

(1,219)

(1,127)

(322)

(336)

Impairment of goodwill

–

(311)

–

Other income (expense), net

2,632

2,254

Income from operations

5,718

1,593

2,975

578

Interest and dividend income

Interest and other finance expense

(148)

(240)

(40)

(49)

Losses from extinguishment of debt

–

(162)

–

(162)

Non-operational pension (cost) credit

166

(401)

(129)

Income from continuing operations before taxes

5,787

841

2,985

250

Income tax expense

(1,057)

(496)

(282)

(123)

Income from continuing operations, net of tax

4,730

345

2,703

127

Income (loss) from discontinued operations, net of tax

(80)

4,860

(35)

(183)

Net income (loss)

4,650

5,205

2,668

(56)

Net income attributable to noncontrolling interests

(104)

(59)

(28)

(23)

Net income (loss) attributable to ABB

4,546

5,146

2,640

(79)

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

4,625

294

2,674

104

Income (loss) from discontinued operations, net of tax

(79)

4,852

(34)

(183)

Net income (loss)

4,546

5,146

2,640

(79)

Basic earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.31

0.14

1.35

0.05

Income (loss) from discontinued operations, net of tax

(0.04)

2.30

(0.02)

(0.09)

Net income (loss)

2.27

2.44

1.34

(0.04)

Diluted earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.29

0.14

1.34

0.05

Income (loss) from discontinued operations, net of tax

(0.04)

2.29

(0.02)

(0.09)

Net income (loss)

2.25

2.43

1.33

(0.04)

Weighted-average number of shares outstanding

(in millions) used to compute:

Basic earnings per share attributable to ABB shareholders

2,001

2,111

1,974

2,059

Diluted earnings per share attributable to ABB shareholders

2,019

2,119

1,991

2,071

Due to rounding, numbers presented may not add to the totals provided.

See Notes to the Consolidated Financial Information

2021

FINANCIAL

INFORMATION

—

ABB Ltd Condensed Consolidated Statements of Comprehensive

Income (unaudited)

Year ended

Three months ended

($ in millions)

Dec. 31, 2021

Dec. 31, 2020

Dec. 31, 2021

Dec. 31, 2020

Total comprehensive income,

net of tax

4,567

6,820

2,845

576

Total comprehensive

income attributable to noncontrolling interests, net

of tax

(108)

(86)

(27)

(28)

Total comprehensive income

attributable to ABB shareholders, net of tax

4,459

6,734

2,818

548

Due to rounding, numbers presented may not add to the totals provided.

See Notes to the Consolidated Financial Information

2021

FINANCIAL

INFORMATION

—

ABB Ltd Consolidated Balance Sheets (unaudited)

($ in millions)

Dec. 31, 2021

Dec. 31, 2020

Cash and equivalents

4,159

3,278

Restricted cash

323

Marketable securities and short-term investments

1,170

2,108

Receivables, net

6,551

6,820

Contract assets

990

985

Inventories, net

4,880

4,469

Prepaid expenses

206

201

Other current assets

573

760

Current assets held for sale and in discontinued operations

136

282

Total current assets

18,695

19,226

Restricted cash, non-current

300

Property, plant and equipment,

net

4,045

4,174

Operating lease right-of-use assets

895

969

Investments in equity-accounted companies

1,670

1,784

Prepaid pension and other employee benefits

892

360

Intangible assets, net

1,561

2,078

Goodwill

10,482

10,850

Deferred taxes

1,177

843

Other non-current assets

543

504

Total assets

40,260

41,088

Accounts payable, trade

4,921

4,571

Contract liabilities

1,894

1,903

Short-term debt and current maturities of long-term

debt

1,384

1,293

Current operating leases

230

270

Provisions for warranties

1,005

1,035

Other provisions

1,386

1,519

Other current liabilities

4,367

4,181

Current liabilities held for sale and in discontinued operations

381

644

Total current liabilities

15,568

15,416

Long-term debt

4,177

4,828

Non-current operating leases

689

731

Pension and other employee benefits

1,025

1,231

Deferred taxes

685

661

Other non-current liabilities

2,116

2,025

Non-current liabilities held for sale and in discontinued operations

197

Total liabilities

24,303

25,089

Commitments and contingencies

Stockholders’ equity:

Common stock, CHF 0.12 par value

(2,053 million and 2,168 million shares issued at December

31, 2021 and 2020, respectively)

178

188

Additional paid-in capital

Retained earnings

22,477

22,946

Accumulated other comprehensive loss

(4,088)

(4,002)

Treasury stock, at cost

(95 million and 137 million shares at December 31, 2021

and 2020, respectively)

(3,010)

(3,530)

Total ABB stockholders’ equity

15,579

15,685

Noncontrolling interests

378

314

Total stockholders’ equity

15,957

15,999

Total liabilities and stockholders’

equity

40,260

41,088

Due to rounding, numbers presented may not add to the totals provided.

See Notes to the Consolidated Financial Information

2021

FINANCIAL

INFORMATION

—

ABB Ltd Consolidated Statements of Cash Flows (unaudited)

Year ended

Three months ended

($ in millions)

Dec. 31, 2021

Dec. 31, 2020

Dec. 31, 2021

Dec. 31, 2020

Operating activities:

Net income (loss)

4,650

5,205

2,668

(56)

Loss (income) from discontinued operations, net of tax

(4,860)

183

Adjustments to reconcile net income (loss) to

net cash provided by operating activities:

Depreciation and amortization

893

915

216

229

Impairment of goodwill

–

311

–

Changes in fair values of investments

(123)

(99)

(9)

(13)

Pension and other employee benefits

(216)

(57)

Deferred taxes

(289)

(280)

(371)

(121)

Losses from extinguishment of debt

–

162

–

162

Loss (income) from equity-accounted companies

100

Net loss (gain) from derivatives and foreign exchange

(2)

(50)

(31)

Net loss (gain) from sale of property,

plant and equipment

(38)

(37)

(16)

(13)

Net loss (gain) from sale of businesses

(2,193)

(2,184)

(2)

Fair value adjustment on assets and liabilities held for sale

–

Other

117

(12)

Changes in operating assets and liabilities:

Trade receivables, net

(142)

(100)

(63)

Contract assets and liabilities

186

102

145

Inventories, net

(771)

196

(79)

397

Accounts payable, trade

659

(13)

298

Accrued liabilities

454

(92)

118

(34)

Provisions, net

(48)

243

147

Income taxes payable and receivable

117

(76)

209

Other assets and liabilities, net

118

Net cash provided by operating activities – continuing

operations

3,338

1,875

1,033

1,225

Net cash used in operating activities – discontinued

operations

(8)

(182)

(13)

(43)

Net cash provided by operating activities

3,330

1,693

1,020

1,182

Investing activities:

Purchases of investments

(1,528)

(5,933)

(1,114)

Purchases of property, plant and

equipment and intangible assets

(820)

(694)

(361)

(262)

Acquisition of businesses (net of cash acquired)

and increases in cost- and equity-accounted companies

(241)

(121)

(14)

(22)

Proceeds from sales of investments

2,272

4,341

633

3,053

Proceeds from maturity of investments

Proceeds from sales of property,

plant and equipment

114

Proceeds from sales of businesses (net of transaction costs

and cash disposed) and cost- and equity-accounted companies

2,958

(136)

2,865

(3)

Net cash from settlement of foreign currency derivatives

(121)

138

(46)

Other investing activities

(23)

(3)

Net cash provided by (used in) investing activities –

continuing operations

2,671

(2,272)

2,023

2,912

Net cash provided by (used in) investing activities –

discontinued operations

(364)

9,032

(281)

(59)

Net cash provided by investing activities

2,307

6,760

1,742

2,853

Financing activities:

Net changes in debt with original maturities of 90 days or less

(83)

(587)

(296)

(62)

Increase in debt

1,400

343

(17)

Repayment of debt

(1,538)

(3,459)

(775)

(2,796)

Delivery of shares

826

412

Purchase of treasury stock

(3,708)

(3,048)

(1,267)

(1,778)

Dividends paid

(1,726)

(1,736)

–

Dividends paid to noncontrolling shareholders

(98)

(82)

(7)

–

Other financing activities

(41)

(49)

(24)

Net cash used in financing activities – continuing

operations

(4,968)

(8,206)

(2,307)

(4,606)

Net cash provided by financing activities – discontinued

operations

–

Net cash used in financing activities

(4,968)

(8,175)

(2,307)

(4,606)

Effects of exchange rate changes on cash and equivalents

and restricted cash

(81)

(6)

134

Net change in cash and equivalents and restricted cash

588

357

449

(437)

Cash and equivalents and restricted cash, beginning

of period

3,901

3,544

4,040

4,338

Cash and equivalents and restricted cash, end of period

4,489

3,901

4,489

3,901

Supplementary disclosure of cash flow information:

Interest paid

132

189

Income taxes paid

1,292

905

499

216

Due to rounding, numbers presented may not add to the totals provided.

See Notes to the Consolidated Financial Information

2021

FINANCIAL

INFORMATION

—

ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

($ in millions)

Common

stock

Additional

paid-in

capital

Retained

earnings

Accumulated

other

comprehensive

loss

Treasury

stock

Total ABB

stockholders’

equity

Non-

controlling

interests

Total

stockholders’

equity

Balance at January 1, 2020

188

19,640

(5,590)

(785)

13,526

454

13,980

Adoption of accounting

standard update

(82)

(9)

(91)

Comprehensive income:

Net income

5,146

5,205

Foreign currency translation

adjustments, net of tax of $2

990

1,017

Effect of change in fair value of

available-for-sale securities,

net of tax of $3

Unrecognized income (expense)

related to pensions and other

postretirement plans,

net of tax of $161

589

Change in derivative instruments

and hedges, net of tax of $(2)

Total comprehensive income

6,734

6,820

Changes in noncontrolling interests

(16)

Change in noncontrolling interests

in connection with divestments

–

(138)

Dividends to

noncontrolling shareholders

–

(98)

Dividends to shareholders

(1,758)

Share-based payment arrangements

Purchase of treasury stock

(3,181)

Delivery of shares

(24)

436

412

Other

(3)

Balance at December 31, 2020

188

22,946

(4,002)

(3,530)

15,685

314

15,999

Balance at January 1, 2021

188

22,946

(4,002)

(3,530)

15,685

314

15,999

Comprehensive income:

Net income

4,546

104

4,650

Foreign currency translation

adjustments, net of tax of $0

(534)

(530)

Effect of change in fair value of

available-for-sale securities,

net of tax of $(4)

(15)

Unrecognized income (expense)

related to pensions and other

postretirement plans,

net of tax of $22

467

Change in derivative instruments

and hedges, net of tax of $(1)

(5)

Total comprehensive income

4,459

108

4,567

Changes in noncontrolling interests

(37)

(20)

(57)

(2)

Dividends to

noncontrolling shareholders

–

(98)

Dividends to shareholders

(1,730)

Cancellation of treasury shares

(10)

(17)

(3,130)

3,157

–

Share-based payment arrangements

Purchase of treasury stock

(3,682)

Delivery of shares

(84)

(136)

1,046

826

Other

Balance at December 31, 2021

178

22,477

(4,088)

(3,010)

15,579

378

15,957

Due to rounding, numbers presented may not add to the totals provided.

See Notes to the Consolidated Financial Information

2021

FINANCIAL

INFORMATION

—

Notes to the Consolidated Financial Information (unaudited)

─

Note 1

The Company and basis of presentation

ABB Ltd and its subsidiaries (collectively,

the Company) together form a leading global technology

company, connecting software

to its electrification, robotics,

automation and motion portfolio to drive performance to new levels.

The Company’s Consolidated Financial Information is

prepared in accordance with United States of America

generally accepted accounting principles (U.S.

GAAP) for interim financial reporting. As such, the Consolidated

Financial Information does not include all the information

and notes required under U.S. GAAP for

annual consolidated financial statements. Therefore, such

financial information should be read in conjunction with the

audited consolidated financial statements in

the Company’s Annual Report for the year ended December

31, 2020.

The preparation of financial information in conformity with

U.S. GAAP requires management to make assumptions

and estimates that directly affect the amounts

reported in the Consolidated Financial Information. These

accounting assumptions and estimates include:

●

growth rates, discount rates and other assumptions used

to determine impairment of long-lived assets and in

testing goodwill for impairment,

●

estimates to determine valuation allowances for deferred tax

assets and amounts recorded for unrecognized tax

benefits,

●

assumptions used in determining inventory obsolescence

and net realizable value,

●

estimates and assumptions used in determining the initial

fair value of retained noncontrolling interest and certain obligations

in connection with

divestments,

●

estimates and assumptions used in determining the fair

values of assets and liabilities assumed in business combinations,

●

assumptions used in the determination of corporate costs

directly attributable to discontinued operations,

●

estimates of loss contingencies associated with litigation

or threatened litigation and other claims and inquiries,

environmental damages, product

warranties, self-insurance reserves, regulatory and other proceedings,

●

estimates used to record expected costs for employee severance

in connection with restructuring programs,

●

estimates related to credit losses expected to occur over the

remaining life of financial assets such as trade and other

receivables, loans and other

instruments,

●

assumptions used in the calculation of pension and postretirement

benefits and the fair value of pension plan assets,

and

●

assumptions and projections, principally related to future material,

labor and project-related overhead costs, used in

determining the percentage-of-

completion on projects, as well as the amount of variable consideration

the Company expects to be entitled to.

The actual results and outcomes may differ from

the Company’s estimates and assumptions.

A portion of the Company’s activities (primarily long-term

construction activities) has an operating cycle that

exceeds one year. For classification

of current assets

and liabilities related to such activities, the Company elected

to use the duration of the individual contracts as its

operating cycle. Accordingly, there

are accounts

receivable, contract assets, inventories and provisions related

to these contracts which will not be realized within

one year that have been classified as current.

Basis of presentation

In the opinion of management, the unaudited Consolidated

Financial Information contains all necessary adjustments

to present fairly the financial position, results

of operations and cash flows for the reported periods.

Management considers all such adjustments to be

of a normal recurring nature. The Consolidated Financial

Information is presented in United States dollars ($) unless

otherwise stated. Due to rounding, numbers presented in

the Consolidated Financial Information may

not add to the totals provided.

Certain amounts reported in the Interim Consolidated

Financial Information for prior periods have been reclassified

to conform to the current year’s presentation.

These changes

primarily relate to the reallocation of certain real estate assets,

previously reported within Corporate and Other,

into the operating segments which

utilize the assets.

Adjustment related to prior periods

In the three months ended December 31, 2020, the Company

corrected certain liabilities which were

extinguished as part of the finalization of the purchase

price of

GEIS. The price agreement was reached in 2019 but the

impact on these liabilities was not originally identified

at that time by the Company. As

a result, a gain of

$28 million was recorded in the Interim Consolidated

Income Statements for the three months ended December

31, 2020. As this gain results from the favorable

resolution of a purchase price uncertainty with respect

to the acquisition of GEIS, this amount has been excluded

from the measure of segment performance,

Operational EBITA (see Note

18) for the Electrification operating segment. The

Company evaluated the impact of the correction on

both a quantitative and

qualitative basis under the guidance of ASC 250, Accounting

Changes and Error Corrections, and determined

that there were no material impacts on the trend

net income, cash flows or liquidity for previously issued

annual financial statements.

2021

FINANCIAL

INFORMATION

─

Note 2

Recent accounting pronouncements

Applicable for current periods

Simplifying the accounting for income taxes

In January 2021, the Company adopted a new accounting standard

update,

which enhances and simplifies various aspects of

the income tax accounting guidance

related to intraperiod tax allocations, ownership changes in

investments and certain aspects of interim period tax

accounting. Depending on the amendment,

the

adoption was applied on either a retrospective, modified retrospective,

or prospective basis. This update does not have a

significant impact on the Company’s

consolidated financial statements.

Applicable for future periods

Facilitation of the effects of reference rate reform

on financial reporting

In March 2020, an accounting standard update was issued

which provides temporary optional expedients and exceptions

to the current guidance on contract

modifications and hedge accounting to ease the financial

reporting burdens related to the expected market

transition from the London Interbank Offered Rate

(LIBOR) and other interbank offered rates to alternative

reference rates. This update, along with clarifications

outlined in a subsequent update issued in January

2021, can be adopted and applied no later than December

31, 2022, with early adoption permitted. The Company

does not expect this update to have a significant

impact on its consolidated financial statements.

Business Combinations — Accounting for contract assets

and contract liabilities from contracts with customers

In October 2021, an accounting standard update was issued

which provides guidance on the accounting for revenue

contracts acquired in a business combination.

The update requires contract assets and liabilities acquired in

a business combination to be recognized and measured

at the date of acquisition in accordance with

the principles for recognizing revenues from contracts with

customers. This update is effective prospectively

for the Company for annual and interim

reporting

periods beginning January 1, 2023, with early adoption

permitted in any interim period. The Company will adopt

this update prospectively as of January 1, 2022.

The Company does not expect this update to have a significant

impact on its consolidated financial statements.

Disclosures about government assistance

In November 2021, an accounting standard update was issued

which requires entities to disclose certain types of government

assistance. Under the update, the

Company is required to annually disclose (i) the type of

the assistance received, including any significant terms

and conditions, (ii) its related accounting policy,

and (iii) the effect such transactions have on its

financial statements. The update is effective

either prospectively for all in-scope transactions at the

date of

adoption or retrospectively, for

annual periods beginning January 1, 2022, with early

adoption permitted. The Company will adopt this update

prospectively as of

January 1, 2022. This update does not have a significant

impact on the Company’s consolidated financial

statements.

─

Note 3

Discontinued operations and assets held for sale

Divestment of the Power Grids business

On July 1, 2020, the Company completed the sale of 80.1

percent of its Power Grids business to Hitachi Ltd (Hitachi)

The transaction was executed through the

sale of 80.1 percent of the shares of Hitachi Energy Ltd, formerly

Hitachi ABB Power Grids Ltd (“Hitachi Energy”). Cash

consideration received at the closing date

was $9,241 million net of cash disposed.

Further, for accounting purposes,

the 19.9 percent ownership interest retained by the Company

was deemed to have

been both divested and reacquired at its fair value

on July 1, 2020. The Company also obtained a put

option, exercisable with three-months’ notice commencing

April 2023 (to be effective from July 2023), allowing

the Company to require Hitachi to purchase the remaining

interest for fair value, subject to a minimum floor

price equivalent to a 10 percent discount compared to

the price paid for the initial 80.1 percent. The combined

fair value of the retained investment and the related

put option, which was initially estimated at $1,808 million

on July 1, 2020, and subsequently remeasured to $1,779

million in the three months ended

December 31, 2020, was recorded as an equity-method

investment and also accounted for as part of the proceeds

for the sale of the entire Power Grids business

(see Note 4).

In connection with the divestment, the Company recorded liabilities

in discontinued operations for estimated future costs

and other cash payments of $487 million

for various contractual items relating to the sale of the business,

including required future cost reimbursements

payable to Hitachi Energy,

costs to be incurred by

the Company for the direct benefit of Hitachi Energy and

an amount due to Hitachi Ltd in connection with

the expected purchase price finalization of the closing

debt and working capital balances. In October 2021,

the Company and Hitachi concluded an agreement

to settle the various amounts owing by the Company.

The

net difference between the agreed amounts and the

amounts initially estimated by the Company was recorded

in the three months ended December 31, 2021,

discontinued operations as an adjustment to “Net gain

recognized on sale of the Power Grids business” in the table

below. During the year and three

months

ended December 31, 2021, total cash payments (including

the amounts paid under the settlement agreement) of $364

million and $281 million, respectively,

were

made in connection with these liabilities. In both the year

and three months ended December 31, 2020, total

cash payments made in connection with these

liabilities amounted to $33 million. At December 31, 2021,

the remaining amount recorded was $150 million.

As a result of the Power Grids sale, the Company

recognized an initial net gain of $5,320 million, net

of transaction costs, for the sale of the entire Power

Grids

business, in Income from discontinued operations, net

of tax, in the year ended December 31, 2020. Certain

amounts included in the net gain were estimated or

otherwise subject to change and in the three months

ended December 31, 2020, adjustments to decrease

the net gain by $179 million were recorded. Included

the calculation of the net gain was a cumulative translation

loss relating to the Power Grids business of $420 million

which was reclassified from Accumulated other

comprehensive loss (see Note 16). In the year and

three months ended December 31, 2021, the Company

has recorded further adjustments to the net gain,

including the impacts of the agreed settlement amount

referred to above, reducing the gain by $65 million and

$33 million, respectively.

Certain remaining minor

obligations relating to the divestment continue to be subject

to uncertainty and will be adjusted in future periods but these

adjustments are not expected to have a

material impact on the consolidated financial statements.

In the year ended December 31, 2020,

the Company recorded $262 million,

in Income tax expense within discontinued operations

in connection with the

reorganization of the legal entity structure of the Power Grids

business required to facilitate the sale.

2021

FINANCIAL

INFORMATION

Certain entities of the Power Grids business for which the

legal process or other regulatory delays resulted

in the Company not yet having transferred legal

titles to

Hitachi were accounted for as being sold since control

of the business as well as all risks and rewards of

the business were fully transferred to Hitachi Energy.

December 31, 2021, substantially all of these delayed entities

have been legally transferred to Hitachi. The proceeds

for these entities are included in the cash

proceeds described above and certain funds were placed in

escrow pending completion of the transfer process.

At December 31, 2021 and 2020, current

restricted cash includes $12 million and $302 million, respectively,

relating to these proceeds.

In connection with the divestment, the Company has recognized

liabilities in discontinued operations for certain indemnities

(see Note 11 for additional

information)

and has also recorded an initial liability of $258 million

representing the fair value of the right granted to Hitachi

Energy for the use of the ABB brand for up to

8 years.

Upon closing of the sale, the Company entered into various

transition services agreements (TSAs). Pursuant to

these TSAs, the Company and Hitachi Energy

provide to each other, on an interim, transitional

basis, various services. The services provided by the Company

primarily include finance, information technology,

human resources and certain other administrative services.

Under the current terms, the TSAs will continue

for up to 3 years, and can only be extended

on an

exceptional basis for business-critical services for an additional period

which is reasonably necessary to avoid a material adverse

impact on the business. In the

year and three months ended December 31, 2021, the Company

has recognized within its continuing operations, general

and administrative expenses incurred to

perform the TSA, offset by $173 million and $46 million,

respectively, in TSA-related income

for such services that is reported in Other income (expense).

In the

year and three months ended December 31, 2020, Other

income (expense) included $91 million and $49 million,

respectively, of TSA

-related income for such

services.

Discontinued operations

As a result of the sale of the Power Grids business,

substantially all Power Grids-related assets and liabilities

have been sold. As this divestment represented a

strategic shift that would have a major effect on the Company’s

operations and financial results, the results of operations

for this business have been presented as

discontinued operations and the assets and liabilities are presented

as held for sale and in discontinued operations for

all periods presented. Certain of the

business contracts in the Power Grids business continue to

be executed by subsidiaries of the Company for the

benefit/risk of Hitachi Energy. Assets

and liabilities

relating to, as well as the net financial results of, these

contracts will continue to be included in discontinued

operations until they have been completed or

otherwise transferred to Hitachi Energy.

Prior to the divestment, interest expense that was

not directly attributable to or related to the Company’s

continuing business or discontinued business was

allocated to discontinued operations based on the ratio

of net assets to be sold less debt that was required to

be paid as a result of the planned disposal

transaction to the sum of total net assets of the Company

plus consolidated debt. General corporate overhead was

not allocated to discontinued operations.

Operating results of the discontinued operations, are summarized

as follows:

Year ended

Three months ended

($ in millions)

Dec. 31, 2021

Dec. 31, 2020

Dec. 31, 2021

Dec. 31, 2020

Total revenues

–

4,008

–

Total cost of sales

–

(3,058)

–

Gross profit

–

950

–

Expenses

(18)

(808)

(5)

(6)

Change to net gain recognized on sale of the Power Grids

business

(65)

5,141

(33)

(179)

Income (loss) from operations

(83)

5,282

(38)

(185)

Net interest income (expense) and other finance expense

(5)

–

Non-operational pension (cost) credit

–

(94)

–

Income (loss) from discontinued operations before taxes

(81)

5,182

(36)

(185)

Income tax

(322)

Income (loss) from discontinued operations, net of tax

(80)

4,860

(35)

(183)

Of the total Income (loss) from discontinued operations

before taxes in the table above, $(80) million and

$5,170 million in the year ended December 31,

2021

and

2020, respectively, and $(35)

million and $(185) million in the three months ended

December 31, 2021 and 2020, respectively,

are attributable to the Company,

while the remainder is attributable to noncontrolling interests.

Until the date of the divestment, Income (loss) from

discontinued operations before taxes excluded

stranded costs which were previously able to be

allocated to

the Power Grids operating segment.

As a result, for the year ended December 31,

2020, $40 million of allocated overhead and other management

costs, which

were previously included in the measure of segment profit

for the Power Grids operating segment are reported

as part of Corporate and Other.

In the table above,

Net interest income (expense) and other finance expense in

the year ended December 31, 2020, included

$20 million of interest expense which was recorded

an allocated basis in accordance with the Company’s

accounting policy election until the divestment date. In

addition, as required by U.S. GAAP,

subsequent to

December 17, 2018, (the date of the original agreement to

sell the Power Grids business) the Company has not record

ed depreciation or amortization on the

property, plant and equipment,

and intangible assets reported as discontinued operations.

Included in the reported Total

revenues of the Company for the year ended December

31, 2020, are revenues for sales from the Company’s

operating segments to

the Power Grids business of $108 million, which represent

intercompany transactions that, prior to Power Grids

being classified as a discontinued operation, were

eliminated in the Company’s consolidated financial

statements (see Note 18). Subsequent to the divestment,

sales to Hitachi Energy are reported as third-party

revenues.

In addition,

the Company also has retained obligations (primarily

for environmental and taxes) related to other businesses

disposed or otherwise exited that

qualified as discontinued operations. Changes to these retained

obligations are also included in Income (loss) from discontinued

operations, net of tax, above.

2021

FINANCIAL

INFORMATION

The major components of assets and liabilities held for

sale and in discontinued operations in the Company’s

Consolidated Balance Sheets are summarized

follows:

($ in millions)

Dec. 31, 2021

(1)

Dec. 31, 2020

(1)

Receivables, net

131

280

Inventories, net

–

Other current assets

Current assets held for sale and in discontinued operations

136

282

Accounts payable, trade

188

Other liabilities

310

456

Current liabilities held for sale and in discontinued

operations

381

644

Other non-current liabilities

197

Non-current liabilities held for sale and in discontinued

operations

197

(1)

At December 31, 2021 and 2020, the balances reported as held for sale and in discontinued operations pertain to Power Grids activities and other obligations which will remain with

the Company until such time as the obligation is settled or the activities are fully wound down.

─

Note 4

Acquisitions, divestments and equity-accounted companies

Acquisition of controlling interests

Acquisitions of controlling interests were as follows:

Year ended December 31,

Three months ended December 31,

($ in millions, except number of acquired businesses)

2021

2020

2021

2020

Purchase price for acquisitions (net of cash acquired)

(1)

212

(3)

Aggregate excess of purchase price

over fair value of net assets acquired

(2)

161

Number of acquired businesses

–

(1)

Excluding changes in cost- and equity-accounted companies

(2)

Recorded as goodwill (see Note 9). For all periods presented, amounts include adjustments arising during the measurement period of acquisitions.

In the table above, the “Purchase price for acquisitions”

and “Aggregate excess of purchase price over fair value

of net assets acquired” amounts for the year

ended December 31, 2021, relate primarily to the acquisition

of ASTI Mobile Robotics Group (ASTI).

Acquisitions of controlling interests have been accounted for

under the acquisition method and have been included

in the Company’s Consolidated Financial

Statements since the date of acquisition.

While the Company uses its best estimates and assumptions

as part of the purchase price allocation process to value

assets acquired and liabilities assumed at

the acquisition date, the purchase price allocation for acquisitions

is preliminary for up to 12 months after the acquisition

date and is subject to refinement as more

detailed analyses are completed and additional information

about the fair values of the assets and liabilities becomes

available.

On August 2, 2021, the Company acquired the shares

of ASTI.

ASTI is headquartered in Burgos, Spain,

and is a global autonomous mobile robot (AMR)

manufacturer.

The resulting cash outflows for the Company amounted

to $186 million (net of cash acquired of $7 million). The

acquisition expands the Company’s

robotics and automation offering in its Robotics

and Discrete Automation operating segment.

There were no significant business acquisitions for the year

and three months ended December 31, 2020.

Investments in equity-accounted companies

In connection with the divestment of its Power Grids business

to Hitachi (see Note 3), the Company retained a

19.9 percent interest in the business. For

accounting purposes, the 19.9 percent interest is deemed

to have been both divested and reacquired, with

a fair value at the transaction date of $1,661 million

The fair value was based on a discounted cash flow model

considering the expected results of the future business

operations of Hitachi Energy and using relevant

market inputs including a risk-adjusted weighted-average cost

of capital. The Company also obtained a right to require

Hitachi to purchase this investment (see

Note 3) with a floor price equivalent to a 10 percent

discount compared to the price paid by Hitachi for

the initial 80.1 percent. This option was valued at

$118 million using a standard

option pricing model with inputs considering the nature

of the investment and the expected period until option

exercise. As this option

is not separable from the investment the value has been

combined with the value of the underlying investment

and is accounted for together.

Hitachi also holds a call option which would require the Company

to sell the remaining 19.9 percent interest in Hitachi

Energy at a price consistent with what was

paid by Hitachi to acquire the initial 80.1 percent

or at fair value, if higher. The

option is exercisable with three-months’ notice from April 2023,

to be effective from

July 2023.

The Company has concluded that based on its continuing involvement

with the Power Grids business, including membership

in its governing board of directors, it

has significant influence over Hitachi Energy.

As a result, the investment (including the value of

the option) is accounted for using the equity method.

2021

FINANCIAL

INFORMATION

The difference between the initial carrying value of

the Company's investment in Hitachi Energy at fair value

and its proportionate share of the underlying net

assets, created basis differences

of $8,570 million ($1,705 million for the Company’s

19.9 percent ownership),

which are allocated as follows:

Allocated

Weighted-average

($ in millions)

Amount

useful life

Inventories

169

5 months

Order backlog

727

2 years

Property, plant and equipment

(1)

1,016

Intangible assets

(2)

1,731

9 years

Other contractual rights

251

2 years

Other assets

Deferred tax liabilities

(942)

Goodwill

6,026

Less: Amount attributed to noncontrolling interest

(451)

Basis difference

8,570

(1)

Property, plant and equipment includes assets subject to amortization having an initial fair value difference of $686 million and a weighted-average useful life of 14 years.

(2)

Intangible assets include brand license agreement, technology and customer relationships.

For assets subject to depreciation or amortization, the Company

amortizes these basis differences

over the estimated remaining useful lives of the assets

that

gave rise to this difference,

recording the amortization,

net of related deferred tax benefit, as a reduction

of income from equity accounted companies.

Certain

other assets are recorded as an expense as the benefits

from the assets are realized. As of December 31, 2021,

the Company determined that no impairment of

its equity-accounted investments existed.

The carrying value of the Company’s investments

in equity-accounted companies and respective

percentage of ownership is as follows:

Ownership as of

Carrying value at

($ in millions, except ownership share in %)

December 31, 2021

December 31, 2020

Hitachi Energy Ltd

19.9%

1,609

1,710

Others

Total

1,670

1,784

In the year and three months ended December 31, 2021

and 2020, the Company recorded its share of the

earnings of investees accounted for under the equity

method of accounting in Other income (expense), net, as follows:

Year ended December 31,

Three months ended December 31,

($ in millions)

2021

2020

2021

2020

Income from equity-accounted companies, net of taxes

Basis difference amortization (net of deferred income

tax benefit)

(138)

(95)

(44)

(43)

Loss from equity-accounted companies

(100)

(66)

(17)

(26)

Business divestments

In the year and three months ended December 31, 2021,

the Company received proceeds (net of transactions costs

and cash disposed) of $2,958 million and

$2,865 million, respectively, relating

to divestments of consolidated businesses and recorded

gains of $2,193 million and $2,184 million, respectively

in “Other

income (expense), net” on the sales of such businesses. These

are primarily due to the divestment of the Company’s

Mechanical Power Transmission Division

(Dodge) to RBC Bearings Inc. Certain amounts included in

the net gain for the sale of the Dodge business

are estimated or otherwise subject to change in value

and, as a result, the Company may record additional

adjustments to the gain in future periods which are

not expected to have a material impact on the

consolidated financial statements. In the years ended December

31, 2021 and 2020, “Income from continuing operations

before taxes”, included net income of

$115 million and $96 million,

respectively, from the Dodge

business which, prior to its sale was part of the Company’s

Motion operating segment. In the three

months ended December 31, 2021 and 2020, “Income

from continuing operations before taxes”, included net income

of $9 million and $25 million, respectively,

related to this business.

In 2020, the Company completed the sale of its Power Grids

business (see Note 3 for details) and its solar inverters

business.

Divestment of the solar inverters business

In February 2020, the Company completed the sale

of its solar inverters business for no consideration. Under

the agreement, which was reached in July 2019, the

Company was required to transfer $143 million of cash

to the buyer on the closing date. In addition, payments

totaling EUR 132 million ($145 million) are required

to be transferred to the buyer from 2020 through 2025.

In the year ended December 31, 2019, the Company

recorded a loss of $421 million,

representing the

excess of the carrying value, which includes a loss of

$99 million arising from the cumulative translation adjustment

over the estimated fair value of this business.

During the year ended December 31, 2020, a loss of

$33 million was included in “Other income (expense),

net” for changes in fair value of this business of which

$14 million was recorded in the three months. The loss

in 2020 includes the $99 million reclassification from

other comprehensive income of the currency

translation adjustment related to the business.

The fair value was based on the estimated current market

values using Level 3 inputs, considering the agreed-upon

sale terms with the buyer. The

solar inverters

business, which includes the solar inverters business acquired

as part of the Power-One acquisition in 2013, was

part of the Company’s Electrification segment.

As this divestment does not qualify as a discontinued operation,

the results of operations for this business prior to its

disposal are included in the Company’s

continuing operations for all periods presented.

Including the above loss of $33 million,

in the year ended December 31, 2020, Income from

continuing operations before taxes includes net losses

of $63 million

from the solar inverters business prior to its sale.

2021

FINANCIAL

INFORMATION

─

Note 5

Cash and equivalents, marketable securities and short-term investments

Cash and equivalents, marketable securities and short

-term investments consisted of the following:

December 31, 2021

Cash and

Marketable

Gross

equivalents

securities

unrealized

and restricted

and short-term

($ in millions)

Cost basis

gains

losses

Fair value

cash

investments

Changes in fair value

recorded in net income

Cash

2,752

Time deposits

2,037

1,737

300

Equity securities

569

587

5,358

–

5,376

4,489

887

Changes in fair value recorded

in other comprehensive income

Debt securities available-for-sale:

U.S. government obligations

203

(1)

209

Corporate

(1)

277

(2)

283

–

283

Total

5,635

(2)

5,659

4,489

1,170

Of which:

Restricted cash, current

Restricted cash, non-current

300

December 31, 2020

Cash and

Marketable

Gross

equivalents

securities

unrealized

and restricted

and short-term

($ in millions)

Cost basis

gains

losses

Fair value

cash

investments

Changes in fair value

recorded in net income

Cash

2,388

Time deposits

1,513

Equity securities

1,704

1,716

5,605

–

5,617

3,901

1,716

Changes in fair value recorded

in other comprehensive income

Debt securities available-for-sale:

U.S. government obligations

274

293

European government obligations

Corporate

367

–

392

–

392

Total

5,972

–

6,009

3,901

2,108

Of which:

Restricted cash, current

323

Restricted cash, non-current

300

2021

FINANCIAL

INFORMATION

─

Note 6

Derivative financial instruments

The Company is exposed to certain currency,

commodity, interest rate

and equity risks arising from its global operating, financing

and investing activities. The

Company uses derivative instruments to reduce and manage

the economic impact of these exposures.

Currency risk

Due to the global nature of the Company’s operations,

many of its subsidiaries are exposed to currency risk

in their operating activities from entering into

transactions in currencies other than their functional currency.

To manage

such currency risks, the Company’s policies

require its subsidiaries to hedge their

foreign currency exposures from binding sales and purchase

contracts denominated in foreign currencies. For forecasted

foreign currency denominated sales of

standard products and the related foreign currency denominated

purchases, the Company’s policy is to hedge

up to a maximum of 100 percent of the forecasted

foreign currency denominated exposures, depending on

the length of the forecasted exposures. Forecasted

exposures greater than 12 months are not hedged.

Forward foreign exchange contracts are the main instrument

used to protect the Company against the volatility

of future cash flows (caused by changes in

exchange rates) of contracted and forecasted sales and purchases

denominated in foreign currencies. In addition, within

its treasury operations, the Company

primarily uses foreign exchange swaps and forward foreign

exchange contracts to manage the currency and timing

mismatches arising in its liquidity management

activities.

Commodity risk

Various commodity products

are used in the Company’s manufacturing activities.

Consequently it is exposed to volatility in future cash flows

arising from changes

in commodity prices. To

manage the price risk of commodities, the Company’s

policies require that its subsidiaries hedge the commodity

price risk exposures from

binding contracts, as well as at least 50 percent (up to

a maximum of 100 percent) of the forecasted commodity

exposure over the next 12 months or longer (up to

a maximum of 18 months). Primarily swap contracts are

used to manage the associated price risks of commodities.

Interest rate risk

The Company has issued bonds at fixed rates. Interest

rate swaps and cross-currency interest rate swaps

are used to manage the interest rate and foreign

currency risk associated with certain debt and generally

such swaps are designated as fair value hedges. In addition,

from time to time, the Company uses

instruments such as interest rate swaps, interest rate futures,

bond futures or forward rate agreements to manage interest

rate risk arising from the Company’s

balance sheet structure but does not designate such instruments

as hedges.

Equity risk

The Company is exposed to fluctuations in the fair

value of its warrant appreciation rights (WARs)

issued under its management

incentive plan. A WAR gives its

holder the right to receive cash equal to the market price

of an equivalent listed warrant on the date of exercise.

To eliminate

such risk, the Company has

purchased cash-settled call options, indexed to the shares

of the Company, which entitle

the Company to receive amounts equivalent to its obligations

under the

outstanding WARs.

Volume of derivative activity

In general, while the Company’s primary objective

in its use of derivatives is to minimize exposures arising

from its business, certain derivatives are designated

and qualify for hedge accounting treatment while others either

are not designated or do not qualify for hedge accounting.

Foreign exchange and interest rate derivatives

The gross notional amounts of outstanding foreign exchange

and interest rate derivatives (whether designated as hedges

or not) were as follows:

Type of derivative

Total notional amounts at

($ in millions)

December 31, 2021

December 31, 2020

Foreign exchange contracts

11,276

12,610

Embedded foreign exchange derivatives

815

1,134

Cross-currency interest rate swaps

906

–

Interest rate contracts

3,541

3,227

Derivative commodity contracts

The Company uses derivatives to hedge its direct

or indirect exposure to the movement in the prices of commodities

which are primarily copper, silver

and

aluminum. The following table shows the notional amounts

of outstanding derivatives (whether designated as hedges

or not), on a net basis, to reflect the

Company’s requirements for these commodities:

Type of derivative

Unit

Total notional amounts at

December 31, 2021

December 31, 2020

Copper swaps

metric tonnes

36,017

39,390

Silver swaps

ounces

2,842,533

1,966,677

Aluminum swaps

metric tonnes

7,125

8,112

Equity derivatives

At December 31, 2021 and 2020, the Company held 9 million

and 22 million cash-settled call options indexed to ABB

Ltd shares (conversion ratio 5:1) with a total

fair value of $29 million and $21 million, respectively.

Cash flow hedges

As noted above, the Company mainly uses forward foreign

exchange contracts to manage the foreign exchange

risk of its operations, commodity swaps to

manage its commodity risks and cash-settled call options

to hedge its WAR liabilities. The Company

applies cash flow hedge accounting in only limited cases.

these cases, the effective portion of the changes in

their fair value is recorded in “Accumulated other comprehensive

loss” and subsequently reclassified into

earnings in the same line item and in the same period

as the underlying hedged transaction affects

earnings. For the year and three months

ended December 31,

2021 and 2020, there were no significant amounts recorded

for cash flow hedge accounting activities.

Fair value hedges

To reduce its interest

rate exposure arising primarily from its debt issuance

activities, the Company uses interest rate swaps and cross-currency

interest rate

swaps. Where such instruments are designated as fair value

hedges, the changes in the fair value of these instruments,

as well as the changes in the fair value of

the risk component of the underlying debt being hedged,

are recorded as offsetting gains and losses in

“Interest and other finance expense”.

2021

FINANCIAL

INFORMATION

The effect of derivative instruments, designated and

qualifying as fair value hedges, on the Consolidated

Income Statements was as follows:

Year ended December 31,

Three months ended December 31,

($ in millions)

2021

2020

2021

2020

Gains (losses) recognized in Interest and other finance

expense:

Interest rate contracts

Designated as fair value hedges

(55)

(15)

(10)

Hedged item

(11)

Cross-currency interest rate swaps

Designated as fair value hedges

(37)

–

(10)

–

Hedged item

–

Derivatives not designated in hedge relationships

Derivative instruments that are not designated as hedges

or do not qualify as either cash flow or fair value

hedges are economic hedges used for risk management

purposes. Gains and losses from changes in the fair

values of such derivatives are recognized in the same line

in the income statement as the economically

hedged transaction.

Furthermore, under certain circumstances, the Company is

required to split and account separately for foreign

currency derivatives that are embedded within

certain binding sales or purchase contracts denominated in

a currency other than the functional currency of the subsidiary

and the counterparty.

The gains (losses) recognized in the Consolidated Income Statements

on derivatives not designated in hedging relationships were

as follows:

Type of derivative not

Gains (losses) recognized in income

designated as a hedge

Year ended December 31,

Three months ended December 31,

($ in millions)

Location

2021

2020

2021

2020

Foreign exchange contracts

Total revenues

131

Total cost of sales

(53)

–

(29)

(53)

SG&A expenses

(1)

(11)

(9)

Non-order related research

and development

(2)

–

(1)

Interest and other finance expense

(173)

207

(52)

100

Embedded foreign exchange

Total revenues

(7)

(34)

(30)

contracts

Total cost of sales

(2)

(1)

Commodity contracts

Total cost of sales

Other

Interest and other finance expense

–

Total

(145)

310

183

(1)

SG&A expenses represent

“Selling, general and

administrative expenses”.

The fair values of derivatives included in the Consolidat

ed Balance Sheets were as follows:

December 31, 2021

Derivative assets

Derivative liabilities

Current in

Non-current in

Current in

Non-current in

“Other current

“Other non-current

“Other current

“Other non-current

($ in millions)

assets”

liabilities”

Derivatives designated as hedging instruments:

Foreign exchange contracts

–

Interest rate contracts

–

Cross-currency interest rate swaps

–

109

Cash-settled call options

–

Total

114

Derivatives not designated as hedging instruments:

Foreign exchange contracts

108

107

Commodity contracts

–

Interest rate contracts

–

Embedded foreign exchange derivatives

Total

138

130

Total fair value

176

133

131

2021

FINANCIAL

INFORMATION

December 31, 2020

Derivative assets

Derivative liabilities

Current in

Non-current in

Current in

Non-current in

“Other current

“Other non-current

“Other current

“Other non-current

($ in millions)

assets”

liabilities”

Derivatives designated as hedging instruments:

Foreign exchange contracts

–

Interest rate contracts

–

Cash-settled call options

–

Total

Derivatives not designated as hedging instruments:

Foreign exchange contracts

221

106

Commodity contracts

–

Interest rate contracts

–

Embedded foreign exchange derivatives

Total

292

143

Total fair value

308

114

145

Close-out netting agreements provide for the termination,

valuation and net settlement of some or all outstanding

transactions between two counterparties on the

occurrence of one or more pre-defined trigger events.

Although the Company is party to close-out netting agreements

with most derivative counterparties, the fair values in the

tables above and in the Consolidated

Balance Sheets at December 31, 2021 and 2020, have

been presented on a gross basis.

The Company’s netting agreements and other similar

arrangements allow net settlements under certain conditions.

At December 31, 2021 and 2020, information

related to these offsetting arrangements was as follows:

($ in millions)

December 31, 2021

Gross amount

Derivative liabilities

Cash

Non-cash

Type of agreement or

of recognized

eligible for set-off

collateral

Net asset

similar arrangement

assets

in case of default

received

exposure

Derivatives

200

(104)

–

Total

200

(104)

–

($ in millions)

December 31, 2021

Gross amount

Derivative liabilities

Cash

Non-cash

Type of agreement or

of recognized

eligible for set-off

collateral

Net liability

similar arrangement

liabilities

in case of default

pledged

exposure

Derivatives

238

(104)

–

134

Total

238

(104)

–

134

($ in millions)

December 31, 2020

Gross amount

Derivative liabilities

Cash

Non-cash

Type of agreement or

of recognized

eligible for set-off

collateral

Net asset

similar arrangement

assets

in case of default

received

exposure

Derivatives

410

(106)

–

304

Total

410

(106)

–

304

($ in millions)

December 31, 2020

Gross amount

Derivative liabilities

Cash

Non-cash

Type of agreement or

of recognized

eligible for set-off

collateral

Net liability

similar arrangement

liabilities

in case of default

pledged

exposure

Derivatives

147

(106)

–

Total

147

(106)

–

─

Note 7

Fair values

The Company uses fair value measurement principles

to record certain financial assets and liabilities on a

recurring basis and, when necessary,

to record certain

non-financial assets at fair value on a non-recurring

basis, as well as to determine fair value disclosures for

certain financial instruments carried at amortized

cost

in the financial statements. Financial assets and liabilities

recorded at fair value on a recurring basis include foreign

currency, commodity and interest

rate

derivatives, as well as cash-settled call options and available

-for-sale securities. Non-financial assets recorded at

fair value on a non-recurring basis include

long-lived assets that are reduced to their estimated fair

value due to impairments.

2021

FINANCIAL

INFORMATION

Fair value is the price that would be received when

selling an asset or paid to transfer a liability in an orderly

transaction between market participants at the

measurement date. In determining fair value, the Company

uses various valuation techniques including the market approach

(using observable market data for

identical or similar assets and liabilities), the income approach

(discounted cash flow models) and the cost approach

(using costs a market participant would incur

to develop a comparable asset). Inputs used to determine

the fair value of assets and liabilities are defined

by a three-level hierarchy,

depending on the nature of

those inputs. The Company has categorized its financial

assets and liabilities and non-financial assets measured

at fair value within this hierarchy based on

whether the inputs to the valuation technique are observable

or unobservable. An observable input is based on market

data obtained from independent sources,

while an unobservable input reflects the Company’s assumptions

about market data.

The levels of the fair value hierarchy are as follows:

Level 1:

Valuation inputs consist of

quoted prices in an active market for identical assets

or liabilities (observable quoted prices). Assets and

liabilities valued

using Level 1 inputs include exchange

‑

traded equity securities, listed derivatives which are

actively traded such as commodity futures, interest rate

futures and certain actively traded debt securities.

Level 2:

Valuation inputs consist of

observable inputs (other than Level 1 inputs) such

as actively quoted prices for similar assets, quoted

prices in inactive

markets and inputs other than quoted prices such as interest

rate yield curves, credit spreads, or inputs derived from

other observable data by

interpolation, correlation, regression or other means. The

adjustments applied to quoted prices or the inputs

used in valuation models may be both

observable and unobservable. In these cases, the fair

value measurement is classified as Level 2 unless the

unobservable portion of the adjustment or

the unobservable input to the valuation model is significant, in

which case the fair value measurement would be classified

as Level 3. Assets and

liabilities valued or disclosed using Level 2 inputs include investments

in certain funds, certain debt securities that are not

actively traded, interest rate

swaps, cross-currency interest rate swaps, commodity swaps,

cash-settled call options, forward foreign exchange contracts,

foreign exchange swaps and

forward rate agreements, time deposits, as well as financing

receivables and debt.

Level 3:

Valuation inputs are based

on the Company’s assumptions of relevant market

data (unobservable input).

Whenever quoted prices involve bid-ask spreads, the Company

ordinarily determines fair values based on mid-market

quotes. However, for the purpose of

determining the fair value of cash-settled call options serving

as hedges of the Company’s management

incentive plan, bid prices are used.

When determining fair values based on quoted prices

in an active market, the Company considers if the level

of transaction activity for the financial instrument

has

significantly decreased or would not be considered orderly.

In such cases, the resulting changes in valuation

techniques would be disclosed. If the market is

considered disorderly or if quoted prices are not available,

the Company is required to use another valuation

technique, such as an income approach.

Recurring fair value measures

The fair values of financial assets and liabilities measured

at fair value on a recurring basis were as follows:

December 31, 2021

($ in millions)

Level 1

Level 2

Level 3

Total fair value

Assets

Securities in “Marketable securities and short-term investments”:

Equity securities

587

Debt securities—U.S. government obligations

209

Debt securities—Corporate

Derivative assets—current in “Other current assets”

176

Derivative assets—non-current in “Other non-current assets”

Total

209

878

–

1,087

Liabilities

Derivative liabilities—current in “Other current liabilities”

133

Derivative liabilities—non-current in “Other non-current

liabilities”

131

Total

–

264

–

264

December 31, 2020

($ in millions)

Level 1

Level 2

Level 3

Total fair value

Assets

Securities in “Marketable securities and short-term investments”:

Equity securities

1,716

Debt securities—U.S. government obligations

293

Debt securities—European government obligations

Debt securities—Corporate

Derivative assets—current in “Other current assets”

308

Derivative assets—non-current in “Other non-current assets”

114

Total

317

2,213

–

2,530

Liabilities

Derivative liabilities—current in “Other current liabilities”

145

Derivative liabilities—non-current in “Other non-current

liabilities”

Total

–

191

–

191

2021

FINANCIAL

INFORMATION

The Company uses the following methods and assumptions

in estimating fair values of financial assets and liabilities

measured at fair value on a recurring basis:

●

Securities in “Marketable securities and short-term investments

”

and “Other non-current assets”:

If quoted market prices in active markets for identical

assets are available, these are considered Level 1 inputs;

however, when markets are not

active, these inputs are considered Level 2.

If such quoted

market prices are not available, fair value is determined

using market prices for similar assets or present value

techniques, applying an appropriate risk-

free interest rate adjusted for non-performance risk. The

inputs used in present value techniques are observable

and fall into the Level 2 category.

●

Derivatives

: The fair values of derivative instruments are determined

using quoted prices of identical instruments from

an active market, if available

(Level 1 inputs). If quoted prices are not available,

price quotes for similar instruments, appropriately adjusted,

or present value techniques, based on

available market data, or option pricing models are used. Cash

-settled call options hedging the Company’s WAR

liability are valued based on bid prices

of the equivalent listed warrant. The fair values obtained

using price quotes for similar instruments or valuation techniques

represent a Level 2 input

unless significant unobservable inputs are used.

Non-recurring fair value measures

The Company elects to record private equity investments without

readily determinable fair values at cost, less impairment,

adjusted by observable price changes.

The Company reassesses at each reporting period whether

these investments continue to qualify for this treatment.

In the year ended December 31, 2021 and

2020, the Company recognized, in Other income (expense),

net fair value gains of $108 million and $73 million, respectively,

related to certain of its private equity

investments based on observable market price changes for

an identical or similar investment of the same issuer,

of which a net gain of $2 million and a net gain

$1 million was recognized in the three months ended December

31, 2021 and 2020, respectively.

The fair values were determined using level 2 inputs.

The

carrying values of these investments at December 31, 2021

and 2020, totaled $169 million and $105 million, respectively

Based on valuations at July 1, 2020, the Company recorded

goodwill impairment charges of $311

million in the third quarter of 2020. The fair value

measurements

used in the analyses were calculated using the income approach

(discounted cash flow method). The discounted cash

flow models were calculated using

unobservable inputs, which classified the fair value measurement

as Level 3 (see Note 9 for additional information including

further detailed information related to

these charges and significant unobservable inputs)

During the year ended December 31, 2020, the Company

recorded a $33 million fair value adjustment for the

solar inverters business which met the criteria to be

classified as held for sale in June 2019 and was sold in

February 2020 (see Note 4 for details).

Apart from the transactions above, there were no additional

significant non-recurring fair value measurements during

the year and three months ended

December 31, 2021 and 2020.

Disclosure about financial instruments carried on a

cost basis

The fair values of financial instruments carried on a cost

basis were as follows:

December 31, 2021

($ in millions)

Carrying value

Level 1

Level 2

Level 3

Total fair value

Assets

Cash and equivalents (excluding securities with original

maturities up to 3 months):

Cash

2,422

Time deposits

1,737

Restricted cash

Marketable securities and short-term investments

(excluding securities):

Time deposits

300

Restricted cash, non-current

300

Liabilities

Short-term debt and current maturities of long-term

debt

(excluding finance lease obligations)

1,357

1,288

1,357

Long-term debt (excluding finance lease obligations)

4,043

4,234

4,292

December 31, 2020

($ in millions)

Carrying value

Level 1

Level 2

Level 3

Total fair value

Assets

Cash and equivalents (excluding securities with original

maturities up to 3 months):

Cash

1,765

Time

deposits

1,513

Restricted cash

323

Restricted cash, non-current

300

Liabilities

Short-term debt and current maturities of long-term

debt

(excluding finance lease obligations)

1,266

497

769

1,266

Long-term debt (excluding finance lease obligations)

4,668

4,909

4,998

2021

FINANCIAL

INFORMATION

The Company uses the following methods and assumptions

in estimating fair values of financial instruments carried

on a cost basis:

●

Cash and equivalents (excluding securities with original maturities

up to 3 months), Restricted cash, current and non-current,

and Marketable securities

and short-term investments (excluding securities):

The carrying amounts approximate the fair values as

the items are short-term in nature or,

for cash

held in banks, are equal to the deposit amount.

●

Short-term debt and current maturities of long-term debt

(excluding finance lease obligations):

Short-term debt includes commercial paper,

bank

borrowings and overdrafts. The carrying amounts of short-term

debt and current maturities of long-term debt, excluding

finance lease obligations,

approximate their fair values.

●

Long-term debt (excluding finance lease obligations):

Fair values of bonds are determined using quoted market

prices (Level 1 inputs), if available. For

bonds without available quoted market prices and other

long-term debt, the fair values are determined using

a discounted cash flow methodology

based upon borrowing rates of similar debt instruments and

reflecting appropriate adjustments for non-performance

risk (Level 2 inputs).

─

Note 8

Contract assets and liabilities

The following table provides information about Contract

assets and Contract liabilities:

($ in millions)

December 31, 2021

December 31, 2020

December 31, 2019

Contract assets

990

985

1,025

Contract liabilities

1,894

1,903

1,719

Contract assets primarily relate to the Company’s right

to receive consideration for work completed but for which

no invoice has been issued at the reporting date.

Contract assets are transferred to receivables when rights

to receive payment become unconditional.

Contract liabilities primarily relate to up-front advances received

on orders from customers as well as amounts invoiced

to customers in excess of revenues

recognized, primarily for long-term projects. Contract liabilities

are reduced as work is performed and as revenues

are recognized.

The significant changes in the Contract assets and

Contract liabilities balances were as follows:

Year ended December 31,

2021

2020

Contract

($ in millions)

assets

liabilities

assets

liabilities

Revenue recognized, which was included in the Contract

liabilities balance at Jan 1, 2021/2020

(1,086)

(1,011)

Additions to Contract liabilities - excluding amounts recognized

as revenue during the period

1,136

1,129

Receivables recognized that were included in the Contract

asset balance at Jan 1, 2021/2020

(566)

(680)

At December 31, 2021, the Company had unsatisfied

performance obligations totaling $16,607 million and, of

this amount, the Company expects to fulfill

approximately 75 percent of the obligations in 2022, approximately

14 percent

of the obligations in 2023 and the balance thereafter.

─

Note 9

Goodwill

Goodwill is reviewed for impairment annually as of

October 1, or more frequently if events or circumstances

indicate that the carrying value may not be

recoverable.

Goodwill is evaluated for impairment at the reporting unit level,

which for the Company is determined to be one

level below its operating segments.

When evaluating goodwill for impairment, the Company

uses either a qualitative or quantitative assessment

method for each reporting unit. The qualitative

assessment involves determining, based on an evaluation

of qualitative factors, if it is more likely than

not that the fair value of a reporting unit is less than

its

carrying value. If, based on this qualitative assessment,

it is determined to be more likely than not that

the reporting unit’s fair value is less than its

carrying value, a

quantitative impairment test (described below) is performed,

otherwise no further analysis is required. If the Company

elects not to perform the qualitative

assessment for a reporting unit, then a quantitative impairment

test is performed.

When performing a quantitative impairment test, the

Company calculates the fair value of a reporting unit

using an income approach

based on the present value of

future cash flows, applying a discount rate that represents

the reporting unit’s weighted-average cost

of capital, and compares it to the reporting unit’s

carrying

value. If the carrying value of the net assets of a reportin

unit exceeds the fair value of the reporting unit then the

Company records an impairment charge equal

to the difference, provided that the loss recognized

does not exceed the total amount of goodwill allocated to

that reporting unit.

2021

FINANCIAL

INFORMATION

The changes in “Goodwill” were as follows:

Robotics &

Process

Discrete

Corporate

($ in millions)

Electrification

Motion

Automation

and Other

Total

Balance at January 1, 2020

4,372

2,436

1,615

2,381

10,825

Goodwill acquired during the year

–

Impairment of Goodwill

–

(290)

(21)

(311)

Exchange rate differences and other

116

–

244

Balance at December 31, 2020

(1)

4,527

2,456

1,639

2,228

–

10,850

Goodwill acquired during the year

–

150

–

161

Goodwill allocated to disposals

–

(338)

(7)

–

(345)

Exchange rate differences and other

(66)

(1)

(19)

(98)

–

(184)

Balance at December 31, 2021

(1)

4,472

2,117

1,613

2,280

–

10,482

(1)

At December 31, 2021 and 2020, gross goodwill amounted to $10,760 million and $11,152 million, respectively, and accumulated impairment charges, relating to the Robotics &

Discrete Automation segment, amounted to $278 million and $302 million, respectively.

The Company adopted a new operating model on July 1,

2020, which resulted in a change to the identification

of the goodwill reporting units. Previously,

the

reporting units were the same as the operating segments for

Electrification, Motion and Robotics & Discrete Automation,

while for the Process Automation

operating segment the reporting units were determined to

be at the Division level, which is one level below

the operating segment. The new operating model

provides the Divisions with full ownership and accountability

for their respective strategies, performance and resources

and based on these changes, the Company

concluded that the reporting units would change and be

the respective Divisions within each operating segment.

This change resulted only in an allocation of

goodwill within the operating segments and thus there is

no change to segment level goodwill in the table

above.

As a result of the new allocation of goodwill, an interim

quantitative impairment test was conducted both before

and after the

changes which were effective July 1,

In the “before” test, it was concluded that the fair

value of the Company’s reporting units exceeded

the carrying value under the historical reporting unit

structure.

The impairment test was performed for the new reporting

units and the fair value of each was determined

using a discounted cash flow fair value estimate based

on objective information available at the measurement date. The

significant assumptions used to develop the estimates

of fair value for each reporting unit

included management’s best estimates of the expected

future results and discount rates specific to the reporting

unit. The fair value estimates were based on

assumptions that the Company believed to be reasonable,

but which are inherently uncertain and thus, actual

results may differ from those estimates. The fair

values for each of the individual reporting units and their

associated goodwill were determined using Level

3 measurements.

The 2020 interim quantitative impairment test indicated that

the estimated fair values of the reporting units were substantially

in excess of their carrying value for all

reporting units except for the Machine Automation reporting

unit within the Robotics & Discrete Automation operating

segment. The contraction of the global

economy in 2020, particularly in end-customer industries

related to this reporting unit and considerable uncertainty

around the continued pace of macroeconomic

recovery generally led to a reduction in the fair values of the

reporting units, thus affecting this reporting unit. Also,

at the division level, this reporting unit does not

benefit from shared cash flows generated within an entire

operating segment. In addition, the book value

of the Machine Automation Division includes a significant

amount of intangible assets recognized in past acquisitions,

resulting in a proportionately higher book value than the

other reporting unit within the Robotics &

Discrete Automation Business Area. With the fair value

of the reporting unit lower due to the economic conditions,

the existing book value of the intangible assets

combined with the newly allocated reporting unit goodwill led

to the carrying value of the Machine Automation reporting

unit exceeding its fair value. During 2020, a

goodwill impairment charge of $290 million was recorded

to reduce the carrying value of this reporting unit to its implied

fair value. The remaining goodwill for the

Machine Automation reporting unit was $554 million as

of December 31, 2020.

During 2021, certain reporting units were split into separate

reporting units. For each change, an interim quantitative

impairment test was conducted before and

after the change and in all cases, it was concluded

that the fair value of the relevant reporting units

exceeded the carrying value by a significant amount.

At October 1, 2021 and 2020, respectively,

the Company performed qualitative assessments and

determined that it was not more likely than not that the fair

value

for each of these reporting units was below the carrying

value. As a result, the Company concluded that it was

not necessary to perform the quantitative

impairment test.

─

Note 10

Debt

The Company’s total debt at December 31, 2021

and 2020, amounted to $5,561 million and $6,121 million,

respectively.

Short-term debt and current maturities of long-term

debt

The Company’s “Short-term debt and current maturities

of long-term debt” consisted of the following:

($ in millions)

December 31, 2021

December 31, 2020

Short-term debt

153

Current maturities of long-term debt

1,306

1,140

Total

1,384

1,293

Short-term debt primarily represented issued commercial

paper and short-term bank borrowings from various banks.

At December 31, 2021 no amount was

outstanding under the $2 billion commercial paper program

in the United States,

while $32 million was outstanding at December 31, 2020.

On June 15, 2021, the Company repaid at maturity

its USD 650 million 4.0% Notes.

On October 11, 2021, the Company

repaid at maturity its CHF 350 million 2.25 % Bonds,

equivalent to $378 million on date of repayment.

2021

FINANCIAL

INFORMATION

Long-term debt

The Company’s long-term debt at December

31, 2021 and 2020, amounted to $4,177 million and $4,828

million, respectively.

Outstanding bonds (including maturities within the next

12 months) were as follows:

December 31, 2021

December 31, 2020

(in millions)

Nominal outstanding

Carrying value

(1)

Nominal outstanding

Carrying value

(1)

Bonds:

4.0% USD Notes, due 2021

USD

650

649

2.25% CHF Bonds, due 2021

CHF

350

403

2.875% USD Notes, due 2022

USD

1,250

1,258

USD

1,250

1,280

0.625% EUR Instruments, due 2023

EUR

700

800

EUR

700

875

0.75% EUR Instruments, due 2024

EUR

750

860

EUR

750

946

0.3% CHF Notes, due 2024

CHF

280

306

CHF

280

317

3.8% USD Notes, due 2028

(2)

USD

383

381

USD

383

381

1.0% CHF Notes, due 2029

CHF

170

186

CHF

170

192

0% EUR Notes, due 2030

EUR

800

862

–

4.375% USD Notes, due 2042

(2)

USD

609

589

USD

609

589

Total

5,242

5,632

(1)

USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting, where appropriate.

(2)

Prior to completing a cash tender offer in November 2020, the original principal amount outstanding, on each of the 3.8% USD Notes, due 2028, and the 4.375% USD Notes, due

2042, was USD750 million.

In January 2021, the Company issued zero interest Notes

having a principal amount of EUR 800 million and

due in 2030. The Company recorded net proceeds

(after underwriting fees) of EUR 791 million (equivalent

to $960 million on the date of issuance). In line with

the Company’s policy of reducing its currency and

interest rate exposures, cross-currency interest rate swap

have been used to modify the characteristics of the

EUR 800 million Notes, due 2030. After considering

the impact of these cross-currency interest rate swaps,

the EUR Notes, due 2030, effectively became a

floating rate U.S. dollar obligation.

─

Note 11

Commitments and contingencies

Contingencies—Regulatory,

Compliance and Legal

Regulatory

As a result of an internal investigation, the Company self

-reported to the Securities and Exchange Commission

(SEC) and the Department of Justice (DoJ) in the

United States as well as to the Serious Fraud Office

(SFO) in the United Kingdom concerning certain

of its past dealings with Unaoil and its subsidiaries, including

alleged improper payments made by these entities to third parties.

In May 2020, the SFO closed its investigation, which

it originally announced in February 2017,

as the case did not meet the relevant test for prosecution

The Company continues to cooperate with the U.S.

authorities as requested. At this time, it is not

possible for the Company to make an informed judgment

about the outcome of this matter.

Based on findings during an internal investigation, the

Company self-reported to the SEC and the DoJ, in the

United States, to the Special Investigating Unit

(SIU)

and the National Prosecuting Authority (NPA)

in South Africa as well as to various authorities

in other countries potential suspect payments and

other compliance

concerns in connection with some of the Company’s

dealings with Eskom and related persons. Many of those

parties have expressed an interest in, or

commenced an investigation into, these matters and the Company

is cooperating fully with them. The Company paid

$104 million to Eskom in December 2020 as

part of a full and final settlement with Eskom and the Special

Investigating Unit relating to improper payments and

other compliance issues associated with the

Controls and Instrumentation Contract, and its Variation

Orders for Units 1 and 2 at Kusile. The Company

continues to cooperate fully with the authorities in their

review of the Kusile project and is in discussions with them

regarding a coordinated resolution.

Although the Company believes that there could

be an unfavorable

outcome in one or more of these ongoing reviews,

at this time it is not possible for the Company to make

an informed judgment about the possible financial

impact.

General

The Company is aware of proceedings, or the threat of

proceedings, against it and others in respect of private

claims by customers and other third parties

with

regard to certain actual or alleged anticompetitive

practices. Also, the Company is subject to other claims

and legal proceedings, as well as investigations carried

out by various law enforcement authorities. With respect

to the above-mentioned claims, regulatory matters, and

any related proceedings, the Company will bear

the related costs, including costs necessary to resolve them.

Liabilities recognized

At December 31, 2021 and 2020, the Company had

aggregate liabilities of $104 million and $100 million, respectively,

included in “Other provisions” and “Other

non

‑

current liabilities”, for the above regulatory,

compliance and legal contingencies, and none of

the individual liabilities recognized was significant. As

it is not

possible to make an informed judgment on, or reasonably

predict, the outcome of certain matters and as it is

not possible, based on information currently available

to management, to estimate the maximum potential liability

on other matters, there could be adverse outcomes beyond

the amounts accrued.

2021

FINANCIAL

INFORMATION

Guarantees

General

The following table provides quantitative data regarding the

Company’s third-party guarantees. The maximum

potential payments represent a “worst-case

scenario”, and do not reflect management’s expected

outcomes.

Maximum potential payments

($ in millions)

December 31, 2021

December 31, 2020

Performance guarantees

4,540

6,726

Financial guarantees

339

Indemnification guarantees

(1)

136

177

Total

(2)

4,728

7,242

(1)

Certain indemnifications provided to Hitachi in connection with the divestment of Power Grids are without limit.

(2)

Maximum potential payments include amounts in both continuing and discontinued operations.

The carrying amount of liabilities recorded in the Consolidated

Balance Sheets reflects the Company’s best

estimate of future payments, which it may incur

as part

of fulfilling its guarantee obligations. In respect of the above

guarantees, the carrying amounts of liabilities at December

31, 2021 and 2020, amounted to

$156 million and $135 million, respectively,

the majority of which is included in discontinued operations.

The Company is party to various guarantees providing financial

or performance assurances to certain third parties. These guarantees,

which have various

maturities up to 2035, mainly consist of performance guarantees

whereby (i) the Company guarantees the performance

of a third party’s product or service

according to the terms of a contract and (ii) as member

of a consortium/joint-venture that includes third parties,

the Company guarantees not only its own

performance but also the work of third parties. Such guarantees

may include guarantees that a project will be completed

within a specified time. If the third party

does not fulfill the obligation, the Company will compensate

the guaranteed party in cash or in kind. The original maturity

dates for the majority of these

performance guarantees range from one to ten years.

In conjunction with the divestment of the high-voltage cable

and cables accessories businesses, the Company has

entered into various performance guarantees

with other parties with respect to certain liabilities of the divested

business. At December 31, 2021 and 2020, the

maximum potential payable under these

guarantees amounts to $911 million

and $994 million, respectively,

and these guarantees have various original maturities ranging

from five to ten years.

The Company retained obligations for financial, performance

and indemnification guarantees related to the Power

Grids business sold on July 1, 2020 (see Note 3

for details). The performance and financial guarantees have

been indemnified by Hitachi, at the same proportion

of its ownership in Hitachi Energy Ltd

(80.1 percent). These guarantees, which have various maturities

up to 2035, primarily consist of bank guarantees, standby

letters of credit, business performance

guarantees and other trade-related guarantees, the majority

of which have original maturity dates ranging from

one to ten years. The maximum amount payable

under the guarantees at December 31, 2021 and 2020, are

approximately $3.2 billion and $5.5 billion, respectively,

and the carrying amounts of liabilities

(recorded in discontinued operations) at December 31, 2021

and 2020, amounted to $136 million and $135 million,

respectively.

Commercial commitments

In addition, in the normal course of bidding for and executing

certain projects, the Company has entered into

standby letters of credit, bid/performance bonds and

surety bonds (collectively “performance bonds”) with various

financial institutions. Customers can draw on such performance

bonds in the event that the Company

does not fulfill its contractual obligations. The Company would

then have an obligation to reimburse the financial

institution for amounts paid under the performance

bonds. At December 31, 2021 and 2020, the total outstanding

performance bonds aggregated to $3.6 billion and

$4.3 billion, respectively,

of which $0.1 billion and

$0.3 billion,

respectively, relate to discontinued

operations. There have been no significant amounts

reimbursed to financial institutions under these types

arrangements in the year and three months ended December

31, 2021 and 2020.

Product and order-related contingencies

The Company calculates its provision for product warranties

based on historical claims experience and specific review

of certain contracts. The reconciliation of the

“Provisions for warranties”, including guarantees of product performance,

was as follows:

($ in millions)

2021

2020

Balance at January 1,

1,035

816

Net change in warranties due to acquisitions, divestments

and liabilities held for sale

Claims paid in cash or in kind

(222)

(209)

Net increase in provision for changes in estimates, warranties

issued and warranties expired

226

369

Exchange rate differences

(35)

Balance at December 31,

1,005

1,035

During 2020, the Company recorded changes in a

previously estimated amount for a product warranty relating

to a divested business, increasing the related

liability by $143 million during the year ended December

31, 2020.

The corresponding increase was included in Cost

of sales of products and as these costs relate

to a divested business,

they have been excluded from the Company’s

primary measure of segment performance, Operational

EBITA (see Note 18). The

warranty

liability has been recorded based on the information currently

available and is subject to change in the future.

2021

FINANCIAL

INFORMATION

─

Note 12

Income taxes

The effective tax rate of 18.3 percent in 2021 was

lower than the effective tax rate of 59.0 percent

in 2020, primarily because 2020 includes impacts

non-deductible goodwill impairment (see Note 9), the

non-deductibility of the non-operational pension costs

due to certain settlements in 2020 (see Note 13)

well as the impact of no tax benefit being recorded for

the charge recorded in connection with changes

in estimated warranty provisions relating to a divested

business (see Note 11). The effective

rate in 2020 was also higher as no tax benefit was recorded

for amounts recorded on losses on extinguishment

of debt. In

addition, the rate in 2020 reflects a net benefit from

a favorable resolution of an uncertain tax position

during the first quarter as well as increases to the

valuation

allowance in certain countries. The effective tax

rate In 2021 was lower as a substantial portion of the gain

on sale of businesses

was not subject to tax.

─

Note 13

Employee benefits

The Company operates defined benefit pension plans,

defined contribution pension plans, and termination indemnity

plans, in accordance with local regulations

and practices. These plans cover a large portion of the

Company’s employees and provide benefits to

employees in the event of death, disability,

retirement, or

termination of employment. Certain of these plans are multi-employer

plans. The Company also operates other postretirement

benefit plans including

postretirement health care benefits, and other employee

-related benefits for active employees including long-service

award plans. The measurement date used for

the Company’s employee benefit plans is December

The funding policies of the Company’s plans

are consistent with the local government and tax

requirements.

The following tables include amounts relating to defined

benefit pension plans and other postretirement benefits

for both continuing and discontinued operations.

During the year and three months ended December 31,

2020, the Company took steps to transfer certain defined

benefit pension risks in three international

countries to external financial institutions and thus settle these

obligations for accounting purposes. In connection

with these transactions the Company made

net

payments of $36 million in the three months ended December

31, 2020, and incurred non-operational pension costs

of $141 million which are included in

curtailments, settlements and special termination benefits in the

table below. During the year ended December

31, 2020, the Company made net payments

$309 million and incurred non-operational pension costs

of $520 million for similar settlements of pension

obligations. The Company also made cash payments

$143 million and recorded non-operational pension charges

of $101 million in 2020 for the Settlement of pension

obligations in discontinued operations.

Net periodic benefit cost of the Company’s defined

benefit pension and other postretirement benefit plans consisted

of the following:

($ in millions)

Defined pension benefits

Other postretirement

Switzerland

International

benefits

Year ended December 31,

2021

2020

2021

2020

2021

2020

Operational pension cost:

Service cost

Operational pension cost

Non-operational pension cost (credit):

Interest cost

(5)

111

Expected return on plan assets

(116)

(123)

(178)

(253)

–

Amortization of prior service cost (credit)

(9)

(11)

(2)

(3)

(2)

Amortization of net actuarial loss

–

109

(2)

(3)

Curtailments, settlements and special termination benefits

(1)

644

–

Non-operational pension cost (credit)

(129)

(115)

(34)

613

(3)

(2)

Net periodic benefit cost (credit)

(68)

(41)

705

(2)

(1)

($ in millions)

Defined pension benefits

Other postretirement

Switzerland

International

benefits

Three months ended December 31,

2021

2020

2021

2020

2021

2020

Operational pension cost:

Service cost

Operational pension cost

Non-operational pension cost (credit):

Interest cost

(2)

Expected return on plan assets

(28)

(30)

(45)

(57)

–

Amortization of prior service cost (credit)

(3)

(1)

–

(2)

–

Amortization of net actuarial loss

–

(1)

Curtailments, settlements and special termination benefits

157

–

Non-operational pension cost (credit)

(32)

(21)

(3)

151

(1)

–

Net periodic benefit cost (credit)

(16)

(7)

177

–

2021

FINANCIAL

INFORMATION

The components of net periodic benefit cost other than

the service cost component are included in the line “Non-operational

pension (cost) credit” in the income

statement. Net periodic benefit cost includes $121 million for

the year ended December 31, 2020 related to discontinued

operations.

Employer contributions were as follows:

($ in millions)

Defined pension benefits

Other postretirement

Switzerland

International

benefits

Year ended December 31,

2021

2020

2021

2020

2021

2020

Total contributions

to defined benefit pension and

Other postretirement

Switzerland

International

benefits

Three months ended December 31,

2021

2020

2021

2020

2021

2020

Total contributions

to defined benefit pension and