6-K
ABB LTD (ABLZF)
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 April 2023
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
⬜
No
☒
If “Yes” is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82-
This Form 6-K consists of the following:
1.
Press release issued by ABB Ltd dated April
25, 2023 titled “Q1 2023 results”.
2.
Q1 2023 Financial Information.
3.
Press release issued by ABB Ltd dated
April 25, 2023 titled “ABB plans
to delist ADRs from NYSE”.
4.
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.
2
—
ZURICH, SWITZERLAND, APRIL
25, 2023
Q1 2023 results
Strong start to the year
●
Orders $9,450 million
,
+1%; comparable
1
+9%
●
Revenues $7,859 million
,
+13%; comparable
+22%
●
Income from operations
$1,198 million; margin
15.2%
●
Operational EBITA
1
$1,277 million;
margin
1
16.3%
●
Basic EPS $0.56;
+78%
2
●
Cash flow from operating
activities
4
$282 million
Ad hoc Announcement pursuant to Art.
53 Listing Rules of SIX Swiss Exchange
—
Q1 2023
First three months
Press Release
—
“ABB had a strong start to the year, with a positive development in most measures,
including cash flow. This gives us the confidence to raise our 2023 guidance.”
Björn Rosengren
, CEO
KEY FIGURES
CHANGE
($ millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Comparable
1
Orders
9,450
9,373
1%
9%
Revenues
7,859
6,965
13%
22%
Gross Profit
2,716
2,281
19%
as % of revenues
34.6%
32.7%
+1.9 pts
Income from operations
1,198
857
40%
Operational EBITA
1
1,277
997
28%
33%
3
as % of operational revenues
1
16.3%
14.3%
+2 pts
Income from continuing operations, net of tax
1,065
643
66%
Net income attributable to ABB
1,036
604
72%
Basic earnings per share ($)
0.56
0.31
78%
2
Cash flow from operating activities
4
282
(573)
n.a.
1
For a reconciliation of non-GAAP measures, see “supplemental
reconciliations and definitions” in the attached
Q1 2023 Financial Information.
2
EPS growth rates are computed using unrounded amounts.
3
Constant currency (not adjusted for portfolio
changes).
4
Amount represents total for both continuing and
discontinued operations.
ABB
INTERIM
REPORT
I
Q1
2023
2
Customer activity was
strong in the first quarter
.
Despite a very
high comparable from
last year,
we increased order intake
by
1% (9% comparable)
,
with a positive development
in three out
of four business
areas. While Robotics & Discrete
Automation
improved orders sequentially,
it declined from last year’s high
level which benefited
from pre-buys in a period
of significant
component shortages.
Particularly strong momentum
was noted
in Process Automation
with orders reaching the
highest level in
recent history.
A positive underlying momentum
was noted also
in all three regions.
Just like in the previous
quarter, we
did not
face significant
supply chain constraints,
hence we converted backlog
into
customer deliveries.
Revenue growth was strong
at 13%
(22%
comparable), with double
-digit comparable increases
in all
business areas. The
impacts from robust development
in both
pricing and volumes
more than offset the notable
adverse
impact from changes
in exchange rates.
Despite strong
revenue growth we
built order backlog, with
book-to-bill at
120%.
I was pleased about
the operational execution
of the increased
revenues.
We improved the
Operational EBITA by
28%
to
$1,277 million and
the margin was up by 200
basis points to
16.3%. This is the strongest
first quarter result in many
years.
On top of the strong operational
performance, net income was
additionally supported
by net positive tax
impacts of
approximately $200
million linked to a favorable
resolution of
certain prior year tax
matters, mainly related to
the divestment
of the Power Grids
business.
It was good to see
our cash flow improve from
last year by $855
million, in line with
our expectations. Cash
flow from operating
activities of $282
million was strong for a first
quarter,
and set
us off to a robust
start for what I expect
will be a good cash
delivery this year.
I feel confident that our
balance sheet will be
strong enough to support
both organic and acquired
growth, a
rising, sustainable dividend
per share over time and
utilizing
share buybacks as
a means to return excess
cash to our
shareholders. In early
April, we launched our new
share
buyback program of up
to $1 billion, which will run
until March
2024.
In February,
we published our first integrated
report, including
our 2022 sustainability
report showing solid progress
toward our
2030 goals. One highlight
to mention is that we
reduced our
own greenhouse
gas emissions by 43%, a
total reduction of
65% from the 2019
baseline.
Furthermore, we defined
a new emissions reduction
target for
our supply chain, covering
suppliers that account for
70% of our
procurement spend.
We have continued our
work to strengthen
ABB’s circularity approach
by defining clear key performance
indicators for every
stage of the product life
cycle, from design
to end-of-life. The largest positive
environmental impact
we can
make is through providing
our customers with resource
-efficient
products and the demand
for clean energy and
efficiency is
broad and long-term.
After having been listed
on the New York
Stock Exchange
(NYSE) since 2001,
we have decided to delist
and plan to
eventually deregister
with the SEC.
The main reason being
that
the access to international
equity markets has increased
since
our listing,
through digital trading on
multiple platforms.
Consequently,
we no longer see the
need to be listed on as
many as three equity
capital markets. We
plan to delist our
American Depositary
Receipts (ADRs) on or
around May 23,
2023, and as from the
time of delisting, the ABB ADRs
will
instead be converted
to a sponsored Level
I program. This still
gives US investors
the ability to invest in
ABB through ADRs.
The ABB shares
will remain listed on the
SIX Swiss Exchange
and the Swedish
Nasdaq exchange due to the
company’s
heritage. The delisting
and planned deregistration
in the US
would be yet another
step towards further simplification
and
efficiency at ABB.
I want to emphasize
that we remain as committed
to the US-
market, which represent
ed 24% of our revenues
in 2022. The
United States is critical
to ABB’s success, and
approximately
85%
of ABB’s sales
in the US are from products
produced
locally.
To
support future success,
we are currently investing
approximately $170
million in our US facilities
to meet
increasing demand
for clean energy and automation.
Björn Rosengren
CEO
In the
second quarter of 2023
, we anticipate double-digit
comparable revenue
growth to support an improvement
in the
Operational EBITA
margin,
year-on-year.
In full-year 2023
, despite current market uncertainty,
we
anticipate comparable
revenue
growth to be at least
10%
and
we expect to improve
Operational EBITA
margin,
year-on-year.
CEO summary
Outlook
ABB
INTERIM
REPORT
I
Q1
2023
3
In the first quarter,
a robust customer activity
resulted in an
order intake of $9,450
million, representing an
increase of 1%
(9% comparable) from
last year’s high level. The strongest
order momentum was
noted in the late-cyclical
process
industry-related business
segments.
Order intake improved
in three out of four business
areas.
Process Automation
increased orders by 25%
(55%
comparable) supported
by a strong general demand
pattern
as well as by timing of
larger project orders, and
additionally
by the impact from
the de-booking of approximately
$190 million in last
year’s period. Electrification
orders were
up by 1% (5% comparable)
despite weakness in the
residential construction
market. Motion improved
by 3% (8%
comparable). In Robotics
& Discrete Automation
customers
returned to a seemingly
more normal order pattern,
recovering from the
previous quarter,
although some
hampering effect
from customers outside
of the automotive
segment adjusting
inventory levels was noted.
In total, orders
declined by 23%
(20% comparable)
from the high comparable
last year.
The automotive segment
improved on EV-related
investments, while
softening demand was noted
in the
robotics consumer
related segments.
In transport & infrastructure,
there was a positive development
in
marine & ports and
renewables. In buildings
there was weakness
in all three regions
in residential-related demand,
while
commercial construction
was solid.
Demand in the process
-related business was strong
across the
board, with particular strength
in oil & gas, and it held
up well also
for refining, water & wastewater,
power generation and
pulp &
paper.
Customer activity was
high in all three regions.
Orders in Europe
increased by 1% (10%
comparable), with growth
rates reflecting
the de-booking last year
.
The underlying business increased
slightly,
despite weakness in Germany.
Asia, Middle East and
Africa declined by 2%
(up 11%
comparable), although
China
declined by 12%
(3% comparable).
The Covid-related
implications in China
eased quickly,
and demand came off
to a
strong start early in
the quarter with the additional
timing related
support from ordering
ahead of the New Year
celebrations in
China,
after which
customer activity slowed
somewhat from the
record-high comparable
last year.
The Americas improved
by 3%
(5% comparable), weighed
down by the United States
which
declined by 4% (3% comparable)
from the challenging
comparable in last
year’s period.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q1 2023
Q1 2022
US$
Comparable
Europe
3,582
3,534
1%
10%
The Americas
2,985
2,897
3%
5%
Asia, Middle East
and Africa
2,883
2,942
-2%
11%
ABB Group
9,450
9,373
1%
9%
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
9%
22%
FX
-5%
-6%
Portfolio changes
-3%
-3%
Total
1%
13%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q1 2023
Q1 2022
US$
Comparable
Europe
2,872
2,518
14%
24%
The Americas
2,653
2,169
22%
25%
Asia, Middle East
and Africa
2,334
2,278
2%
16%
ABB Group
7,859
6,965
13%
22%
ABB
INTERIM
REPORT
I
Q1
2023
4
Gross profit
Gross profit increased
strongly by 19% (25% constant
currency) to
$2,716 million, supported
by a significant
gross margin
improvement of
190 basis points to 34.6%.
Gross margin improved
in all business areas,
with three showing significant
increases.
Income from operations
Income from operations
amounted to $1,198 million,
representing a
strong increase of 40
%
(46%
constant currency),
year-on-year.
Compared with last
year, earnings
were mainly supported
by the
improved operational
performance, with some
additional tailwind
from lower expenses
related to both acquisition
-
and divestments
and non-operational
items.
Operational EBITA
The year-on-year improvement
was driven by strong operational
execution of the significantly
higher volumes as
well as benefits
from successful price
management
with only a slight adverse
impact from raw materials
and freight costs. Price
clearly more than
offset higher
labor costs. Selling, general
and administrative
expenses declined
in relation to revenues to 17.0%,
from 17.8%
last year.
The operational improvements
more than offset the
adverse impact from
changes in exchange
rates, resulting in an
Operational EBITA
of $1,277
million, an increase of 28% (33%
constant currency)
year-on-year.
Operational EBITA in
Corporate
and Other amounted
to -$111
million, out of which -$28
million
related to the E-mobility
business, which is reported as
part of
Group Corporate and
Other as from this quarter.
Net finance expenses
Net finance expense
was $21 million,
somewhat lower than
expected due to
a reduction in certain income
tax-related risks.
Income tax
Income tax expense
was $119
million with an effective
tax rate of
10.1%, including approximately
17% net benefit on the favorable
resolution of a prior
year tax matter relating to
the divestment of the
Power Grids business.
Net income and earnings
per share
Net income attributable
to ABB was $1,036 million and
increased by
72%, driven primarily by
improved operational performance
and the
benefit of the resolution
of the prior year tax matter
booked in the
quarter.
This resulted in basic earnings
per share of $0.56, up
from
$0.31
last year.
Operational EBITA
($ millions)
Q1 2023
Q1 2022
Corporate and Other
E-mobility
(28)
(2)
Corporate costs, intersegment
eliminations and other
1
(83)
(32)
Total
(111)
(34)
1
Majority of which relates to underlying corporate
Earnings
ABB
INTERIM
REPORT
I
Q1
2023
5
Net working capital
Net working capital
amounted to $4,164 million,
increasing
year-on-year from $3,461
million and sequentially
from
$3,216 million.
The sequential increase
was mainly driven
by higher receivables
triggered by high revenue
growth and
higher inventories on
the back of continued
strong order
intake.
That said, inventory volumes
began to decline
toward the end of the
quarter.
Net working capital as a
percentage of revenues
1
was 13.9% up from 11.1%.
Capital expenditures
Purchases of property,
plant and equipment
and intangible
assets amounted to
$151 million.
Net debt
Net debt
1
amounted to $3,826 million
at the end of the quarter
and increased from
$2,772 million year-on-year,
and
sequentially from $2,779
million. The sequential
increase was
mainly driven by
the initial dividend payment
s, partially offset
by positive free cash
flow during the period
as well as the
shares issued in our subsidiary
ABB E-mobility to third
parties
in private placements
of $341 million.
Cash flows
Cash flow from operating
activities was $282
million and
increased year-on-year
from -$573 million. The
improvement
was driven by positive
cash generation across
all business
areas on the back of higher
earnings and a lower build-up
of net
working capital,
year-on-year. It
should also be noted that
last
year’s cash flow included
a negative cash flow
of approximately
$170 million for income
taxes related to business
separations.
Share buyback program
ABB has completed
its share buyback program that
was
launched in April 2022.
Through this buyback program,
ABB
repurchased a total
of 67,459,000 shares –
equivalent to 3.29%
of its issued share
capital at launch of the buyback
program –
for a total amount of approximately
$2 billion. This included
the
remaining $1.2 billion
of the $7.8 billion of cash
proceeds from
the Power Grids divestment.
A new share buyback program
of
up to $1 billion was
launched on April 3, 2023.
($ millions,
unless otherwise indicated)
Mar. 31
2023
Mar. 31
2022
Dec. 31
2022
Short term debt and current
maturities of long-term debt
3,433
3,114
2,535
Long-term debt
5,230
6,171
5,143
Total debt
8,663
9,285
7,678
Cash & equivalents
3,438
5,216
4,156
Restricted cash - current
19
30
18
Marketable securities and
short-term investments
1,380
967
725
Restricted cash - non-current
–
300
–
Cash and marketable securities
4,837
6,513
4,899
Net debt (cash)*
3,826
2,772
2,779
Net debt (cash)* to EBITDA ratio
0.9
0.4
0.7
Net debt (cash)* to Equity ratio
0.30
0.20
0.21
*
At Mar. 31, 2023, Mar. 31, 2022 and Dec. 31, 2022, net debt(cash) excludes net
pension
(assets)/liabilities of $(301) million $(13) million and $(114) million, respectively.
Balance sheet & Cash flow
ABB
INTERIM
REPORT
I
Q1
2023
6
Orders and revenues
Despite a very challenging
comparable from last
year, order
intake increased by
1% (5% comparable) to
$4,141 million, the
highest quarterly level in
several years.
Strong orders added
further to the order backlog,
with book-
to-bill at 115%.
●
Demand improved
in all customer segments
except for
residential construction,
which declined year-on-year
in all
three regions. Weakness
in residential construction
impacted primarily the
Smart Buildings division,
and to
some extent also Installation
Products, while the other
divisions generally
improved order intake at
a double-digit
pace.
●
Orders increased by
4% (15% comparable)
in Asia, Middle
East and Africa,
as the decline in China of
11%
(4%
comparable) was more
than offset by a strong
development
elsewhere in the
region. Europe improved by
1% (5%
comparable), as a solid
development in a majority
of the
markets more than
offset a low single-digit
decline in
Germany.
The Americas declined
slightly by 1% (1%
comparable), weighed
down by a 6% drop in the
United
States.
●
Revenues increased
by 11%
(16% comparable)
to the
highest level in many
years, with strong developments
in
both pricing and
volume, supported by solid
market
demand and execution
of the order backlog.
●
This was the first quarter
when the E-mobility business
was
not reported as part
of the business area. In
preparation of
the planned separate
listing and new governance
structure,
E-mobility is now reported
in Corporate and Other.
Profit
Both earnings and
margin reached their
highest levels in recent
history.
Operational EBITA amounted
to $677
million, up 32% year-
on-year, and
the Operational EBITA
margin reached 19.0%,
representing a 310
basis points improvement.
●
The impacts from operational
leverage on increased volumes
and strong pricing activities,
in combination with lower
costs
related to raw materials
and freight,
more than offset a slight
negative divisional
and geographical mix
in revenues,
as well as
the adverse impacts
from changes in exchange
rates.
●
Margins improved in all
divisions except in Smart
Buildings
where
profitability was slightly
hampered due to the
weakness in
residential construction
demand.
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
5%
16%
FX
-4%
-5%
Portfolio changes
0%
0%
Total
1%
11%
—
Electrification
CHANGE
($ millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Comparable
Orders
4,141
4,112
1%
5%
Order backlog
7,101
5,946
19%
24%
Revenues
3,590
3,236
11%
16%
Operational EBITA
677
512
32%
as % of operational revenues
19.0%
15.9%
+3.1 pts
Cash flow from operating activities
395
87
354%
No. of employees (FTE equiv.)
51,130
49,650
ABB
INTERIM
REPORT
I
Q1
2023
7
Orders and revenues
Order intake of $2,262
million reached the highest
level in
several years,
up by 3% (8% comparable)
from last year’s
high comparable. Notably,
the order intake increased
also
when separating out
the impact of larger project
orders. Book-
to-bill was 11
7%, expanding the
order backlog to
$5,102 million.
●
Positive development
s
for the energy efficiency
-related
drives business,
the e-mobility Traction
division and the
Service division supported
the strong overall order
growth,
while the low voltage
motor divisions declined
from last
year’s very high levels.
●
In total, customer activity
improved in all segments,
except
for weakness in
the HVAC business
due to softer
construction demand.
●
Order intake increased
in Europe by 6% (11%
comparable),
despite a double-digit decline
in Germany.
Asia, Middle East
and Africa was up by
2% (11%
comparable), as a slight
decline in China
was more than offset by
good momentum
elsewhere in the
region. The Americas was
stable (1%
comparable), including
a slight increase of 2% (2%
comparable) in the
United States.
●
Strong revenue growth
of 23%
(29% comparable)
supported by execution
of the order backlog resulted
in
the highest revenues
since the formation of
the Motion
business area. Significant
support from both increased
volumes and robust
price development.
Profit
Operational EBITA
of $366 million
and Operational EBITA
margin of 18.9% reached
their highest levels in
several
years.
●
Positive
earnings and margin impact
from earlier
implemented price
actions were the main driver
s
to the
year-on-year improvement.
●
Efficient execution
of increased volumes, supported
by
deliveries from the
order backlog,
contributed
significantly.
●
The margin was somewhat
supported by a positive
divisional mix as the drives
and service businesses
represented a slightly
larger proportion
of revenues, year-
on-year.
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
8%
29%
FX
-5%
-7%
Portfolio changes
0%
1%
Total
3%
23%
—
Motion
CHANGE
($ millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Comparable
Orders
2,262
2,202
3%
8%
Order backlog
5,102
4,317
18%
22%
Revenues
1,940
1,572
23%
29%
Operational EBITA
366
274
34%
as % of operational revenues
18.9%
17.4%
+1.5 pts
Cash flow from operating activities
149
(2)
n.a.
No. of employees (FTE equiv.)
21,000
20,330
ABB
INTERIM
REPORT
I
Q1
2023
8
Orders and revenues
Driven by a strong
underlying customer activity
across the
segments,
as well as by supportive
timing of some project
orders, the orders
increased by 25%
(55% comparable)
to
$2,113
million - the highest quarterly
level in recent history.
The
order backlog increased
to $6,893 million.
●
All divisions reported
order growth of more
than 15%
(+20%
comparable) year
-on-year. Momentum
was particularly strong
in the Energy Industries
division, including high
activity
related to new energy
sources such as hydrogen,
which
admittedly still is a
small part of the total but
growing at a high
pace.
●
Europe improved by 44
%
(88%
comparable), with growth
rates positively impacted
by the order de-booking
of
approximately $190
million in last year’s period.
Asia, Middle
East and Africa was up
by 5% (34%
comparable), with
strong
contribution from China
at 16% (52% comparable).
The
Americas was up by
29% (47%
comparable), including an
overall decline in the
United States of 9% (up 6%
comparable).
●
Total
revenue growth was hampered
primarily by the absence
of
the Turbocharging
division (Accelleron)
which was spun-off in
- That aside, a strong
customer activity and deliveries
from
the order backlog resulted
in revenues of $1,436
million, down in
total by 5% (up 15% comparable),
year-on-year.
Profit
Strong operational
performance resulted
in an Operational EBITA
margin of 14.2%, up by
120 basis points year-on
-year,
more than
offsetting the adverse
margin impact of 140
basis points related to
the exit of the high-margin
Accelleron business.
●
Significant gross
margin improvement was
the main contributor
to the strong operational
performance.
●
Operational EBITA
margin increased in
all divisions except for
a slight decline in Marine
& Ports, which was somewhat
impacted by an adverse
mix due to lower share
of revenues
stemming from the
arctic marine propulsion business.
●
All divisions were well
into double-digit margin
territory.
Particularly strong
year-on-year improvement was
noted in
Measurement & Analytics
which benefited from
a positive mix
in deliveries.
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
55%
15%
FX
-7%
-5%
Portfolio changes
-23%
-15%
Total
25%
-5%
—
Process Automation
CHANGE
($ millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Comparable
Orders
2,113
1,692
25%
55%
Order backlog
6,893
6,190
11%
21%
Revenues
1,436
1,506
-5%
15%
Operational EBITA
205
196
5%
as % of operational revenues
14.2%
13.0%
+1.2 pts
Cash flow from operating activities
112
60
87%
No. of employees (FTE equiv.)
20,500
21,920
ABB
INTERIM
REPORT
I
Q1
2023
9
Orders and revenues
Order intake amounted
to $1,001 million, declining
by 23%
(20% comparable)
from the high order level
last year, which
benefitted from pre-buys
in a period of a strained supply
chain. While orders
increased from the fourth
quarter,
somewhat of a hampering
effect from customers
outside of
the automotive segment
adjusting inventory
levels was
noted,
particularly in China.
●
Orders declined
at a double-digit rate in both divisions
and all regions.
In total, book-to-bill was 107%
and order
backlog increased to
$2,782 million.
●
Orders were positively
impacted by favorable
development in the
automotive segment.
This was
however offset
by declines across other
segments and
primarily for machine
builders, from last year’s
very high
level.
●
With no material supply
chain constraints, execution
of
the order backlog supported
the strong revenue growth
of
28% (35% comparable).
Both divisions benefitted from
strong double-digit
comparable growth, with
contribution
from both higher volumes
and solid pricing actions.
Profit
Operational EBITA
close to tripled
year-on-year and
amounted to $140
million, supported by
higher production
output and favorable business
mix, which triggered
an
820 basis point margin
improvement to 14.9%.
●
Significantly higher
volumes in production improved
cost
absorption and were
the main driver in the strong
earnings increase.
●
Strong contribution
from earlier implemented
price
actions.
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
-20%
35%
FX
-3%
-7%
Portfolio changes
0%
0%
Total
-23%
28%
—
Robotics & Discrete Automation
CHANGE
($ millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Comparable
Orders
1,001
1,308
-23%
-20%
Order backlog
2,782
2,495
12%
16%
Revenues
937
730
28%
35%
Operational EBITA
140
49
186%
as % of operational revenues
14.9%
6.7%
+8.2 pts
Cash flow from operating activities
130
(29)
n.a.
No. of employees (FTE equiv.)
10,850
10,690
ABB
INTERIM
REPORT
I
Q1
2023
10
Quarterly highlights
●
ABB’s production
site in Xiamen – which
covers 425,000
m
2
and employs over 3,000
people – has reduced its
CO
2
equivalent (CO
2
e) emissions by 13,400
tons as part of
ABB’s global Mission
to Zero program. This year,
Xiamen
will be opening its doors
to customers and other
manufacturers in
China to showcase how its smart
digital
technology has been
applied to decarbonize
and reduce
scope 2 emissions
and help them achieve
similar results.
●
ABB launched its new
film series: Unstoppable.
This series
aims to promote diversity
and profiles
three remarkable
female leaders in the
mining, pulp & paper,
and metals
industries. Unstoppable
highlights the inspiring stories
of
three women who have
broken down barriers and
made
significant contributions
to their respective industries.
Through this series,
ABB aims to raise awareness
of the
importance of diversity
and inclusion; and encourage
more
women to pursue careers
in STEM fields.
●
On March 8, 2022,
CEO – Björn Rosengren
signed ABB’s
commitment to UN’s
Women Empowerment’s
Principles
(WEPs). The UN WEPs are
a powerful vehicle for
corporate delivery on
the gender equality dimension
of
the 2030 agenda and
the UN Sustainable
Development
Goals. Following the
commitment, in March
2023, the
WEPs were witnessed
in action through organization-
wide participation in
numerous activities and
events –
such as panel discussions
with leadership on the
commitment, mastering
the Open Job Market
and global
engagement in the
social media campaign
#ABBsolutelyUnited,
to name a few.
●
Tarkett’s
vinyl flooring factory in
Ronneby, Sweden,
is using
ABB data insights and
service expertise to save
800
megawatt-hours (MWh)
of energy per year
from their motor-
driven systems.
With the data gathered
through the ABB
Ability™ Digital Powertrain
Energy Appraisal solution,
ABB
identified that upgrading
10 motors to IE5 SynRM
technology would boost
efficiency from 80%
to 95%. With
the current energy
prices, the payback period
would be only
18 months or less.
●
ABB has been recognized
for its global leadership
in
corporate sustainabil
ity as the company has been
named
on CDP’s this years’
Supplier Engagement Leaderboard,
being among the top 8%
of the assessed companies
for
supplier engagement
on climate change, based
on ABB’s
2022 CDP disclosure
.
Story of the quarter
●
Research shows that
businesses around the
world
remain concerned about
the impacts of energy security
and prices, which could
be a catalyst for a range of
environmental, social
and economic ripple effects.
According to ABB Electrification’s
Energy Insights survey
of 2,300 leaders
from small and large businesses
across
a range of sectors,
92%
of respondents feel that
the
continuing instability of
energy is threatening their
profitability and competitiveness.
Energy costs and
insecurity are having
a significant impact on
the workforce
with decreased investment
in employees. Business
leaders are also
concerned about potential
impacts of
meeting their sustainability
targets.
Q1 outcome
●
48% reduction of CO
₂
e emissions in own operations
mainly
driven by shifting to green electricity
in our operations.
●
13% decrease in LTIFR
due to a decrease in incidents
in
absolute numbers.
●
2.1%-points increase in share of women
in senior management,
demonstrating progress towards
our target.
—
Sustainability
Q1 2023
Q1 2022
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
Ktons scope 1 and 2
1
50
96
-48%
221
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
2
0.15
0.18
-13%
0.14
Share of females in senior management
positions, %
19.0
16.9
+2.1 pts
17.6
1
CO
₂
equivalent emissions from site, energy use, SF
₆
and fleet, previous quarter
2
Current quarter Includes all incidents reported until April
5, 2023
ABB
INTERIM
REPORT
I
Q1
2023
11
During Q1 2023
●
On January 20, ABB announced
it had reached an agreement
to sell its Power
Conversion division to AcBel
Polytech Inc. for
$505 million in cash.
The transaction is subject
to regulatory
approvals and is expected
to be completed in the second
half
of 2023. Upon closing,
ABB expects to record a
small non-
operational book
gain in Income from operations
on the sale.
●
On February 1, ABB anno
unced its E-mobility business
had
signed an agreement
with four minority investors to
raise an
additional CHF325 million
in funds in exchange
for
approximately a
12%
shareholding in the company.
The
transaction represents
the final part of ABB E-mobility’s
pre-
IPO funding tranche
through newly issued shares
.
Through
the private placement,
a total of approximately
CHF525 million has
been raised for approximately
a 20%
shareholding in ABB’s
E-mobility business
,
which will be
used
to continue the execution
of its growth strategy,
driven
by both organic and
M&A investments in hardware
and
software.
●
On March 23, at
ABB’s Annual General
Meeting, Denise C.
Johnson was elected
as a new member to
the Board while
Satish Pai did not stand
for re-election.
●
On March 31, ABB announced
its E-mobility business
is taking
additional strategic
steps to further increase
customer focus by
driving growth in the
three customer-centric business
lines of
public, transit & fleet and
home & work. Supporting
this strategy
evolution, changes
in the company’s
leadership were
announced and Michael
Halbherr, with
his strong background
in software and high-tech
industries, will take on
the role of
Executive
Chairman and interim-CEO.
After Q1 2023
●
On April 3, ABB launch
ed its previously announced
new share
buyback program of up
to $1 billion. The maximum number
of
shares that may be
repurchased under this
new program on
any given trading day
is 762,196.
●
On April 25,
ABB announced it plans to
delist its American
Depositary Receipts (ADRs)
from the New York
Stock
Exchange (NYSE), and
ultimately to seek to deregister
its
ADRs and the underlying
shares under the US Securities
Act of
1934 (the Exchange
Act). In connection with
the delisting of its
ADRs from the NYSE, ABB
intends to convert
its current
sponsored Level
II ADR program into a sponsored
Level I ADR
program, which would
give US investors a continued
investment option,
in addition to the ordinary
ABB share. The
company’s shares
will remain listed on the
SIX Swiss
Exchange (SIX) and
the Swedish Nasdaq exchange
due to the
company’s heritage.
Significant events
ABB
INTERIM
REPORT
I
Q1
2023
12
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Hitachi Energy JV (Power Grids, 19.9% stake)
28-Dec
Note: comparable growth calculation includes acquisitions
and divestments with revenues of greater than $50
million.
1
Represents the estimated revenues for the last fiscal
year prior to the announcement of the respective
acquisition/divestment unless otherwise stated.
ABB Group
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
Q1 2023
EBITDA, $ in million
1,067
794
906
1,384
4,151
1,389
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
16.50
n.a.
Net debt/Equity
0.20
0.34
0.34
0.21
0.21
0.30
Net debt/ EBITDA 12M rolling
0.4
0.7
0.7
0.7
0.7
0.9
Net working capital, % of 12M rolling revenues
12.1%
12.8%
11.7%
11.1%
11.1%
13.9%
Earnings per share, basic, $
0.31
0.20
0.19
0.61
1.30
0.56
Earnings per share, diluted, $
0.31
0.20
0.19
0.60
1.30
0.55
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.84
n.a.
Share price at the end of period, CHF
1
29.12
24.57
24.90
28.06
28.06
31.37
Share price at the end of period, $
1
30.76
25.43
24.41
30.46
30.46
34.30
Number of employees (FTE equivalents)
104,720
106,380
106,830
105,130
105,130
106,170
No. of shares outstanding at end of period (in millions)
1,929
1,892
1,875
1,865
1,865
1,862
1
Data prior to October 3, 2022, has been adjusted for
the Accelleron spin-off (Source: FactSet).
1
Excludes one project estimated to a total of ~$100
million, that is ongoing in the non-core business. Exact
exit timing is difficult to assess due to legal proceedings
etc.
2
Excludes Operational EBITA from E-mobility business.
3
Includes restructuring and restructuring-related as
well as separation costs.
4
Includes net positive tax impact of $206 million linked
to a favorable resolution of certain prior year tax matters
in Q1 2023 but excludes the impact of acquisitions
or divestments or any
significant non-operational items.
($ in millions, unless otherwise stated)
FY 2023
Net finance expenses
~(150)
unchanged
Effective tax rate
~21%
4
from ~25%
Capital Expenditures
~(800)
unchanged
($ in millions, unless otherwise stated)
FY 2023
1
Q2 2023
Corporate and Other Operational EBITA
2
~(300)
~(75)
unchanged
Non-operating items
Acquisition-related amortization
~(220)
~(55)
unchanged
Restructuring and related
3
~(150)
~(40)
unchanged
ABB Way transformation
~(180)
~(40)
unchanged
Additional 2023 guidance
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Motion
PowerTech Converter
business
1-Dec
~60
300
Electrification
ASKI Industrie Elektronik GmbH
3-Oct
~2
16
Electrification
Numocity Technologies
Private Ltd. (majority stake)
22-Jul
<1
20
Additional figures
Acquisitions and divestments, last twelve months
ABB
INTERIM
REPORT
I
Q1
2023
13
For additional information please contact:
Media Relations
Phone: +41 43 317
71 11
Email:
media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317
71 11
Email:
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse
44
8050 Zurich
Switzerland
Financial calendar
2023
July 20
Q2 2023 results
October 18
Q3 2023 results
November 30
Capital Markets
Day in Frosinone, Italy
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,” “Earnings,”
“Balance sheet & cash
flow,” “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
“anticipates,” “expects,”
“estimates,” “plans,” “targets
,”
“likely” 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 Q1 2023
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.
Important notice about forward-looking information
Q1 results presentation on April 25, 2023
ABB
(ABBN: SIX Swiss
Ex) is a technology leader
in electrification and automation,
enabling a more sustainable
and resource-
efficient future.
The company’s solutions
connect engineering know
-how and software
to optimize how things
are manufactured,
moved, powered and
operated. Building on
more than 130 years of
excellence, ABB’s ~105,000
employees are committed
to
driving innovations
that accelerate industrial
transformation.
1
Q1 2023
FINANCIAL
INFORMATION
April 25, 2023
Q1 2023
Financial information
2
Q1 2023
FINANCIAL
INFORMATION
—
Financial
Information
Contents
03
─ 05
Key Figures
06 ─
28
Consolidated
Financial
Information
(unaudited)
29 ─
38
Supplemental
Reconciliations
and Definitions
3
Q1 2023
FINANCIAL
INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Comparable
(1)
Orders
9,450
9,373
1%
9%
Order backlog (end March)
21,607
18,901
14%
21%
Revenues
7,859
6,965
13%
22%
Gross Profit
2,716
2,281
19%
as % of revenues
34.6%
32.7%
+1.9 pts
Income from operations
1,198
857
40%
Operational EBITA
(1)
1,277
997
28%
33%
(2)
as % of operational revenues
(1)
16.3%
14.3%
+2 pts
Income from continuing operations, net of tax
1,065
643
66%
Net income attributable to ABB
1,036
604
72%
Basic earnings per share ($)
0.56
0.31
78%
(3)
Cash flow from operating activities
(4)
282
(573)
n.a.
Cash flow from operating activities in continuing operations
283
(564)
n.a.
(1)
For a reconciliation of non-GAAP measures see “
Supplemental Reconciliations and Definitions
” on page 29.
(2)
Constant currency (not adjusted for portfolio changes).
(3)
EPS growth rates are computed using unrounded amounts.
(4)
Cash flow from operating activities includes both continuing and discontinued operations.
4
Q1 2023
FINANCIAL
INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q1 2023
Q1 2022
US$
Local
Comparable
Orders
ABB Group
9,450
9,373
1%
6%
9%
Electrification
4,141
4,112
1%
5%
5%
Motion
2,262
2,202
3%
8%
8%
Process Automation
2,113
1,692
25%
32%
55%
Robotics & Discrete Automation
1,001
1,308
-23%
-20%
-20%
Corporate and Other
196
305
Intersegment eliminations
(263)
(246)
Order backlog (end March)
ABB Group
21,607
18,901
14%
19%
21%
Electrification
7,101
5,946
19%
24%
24%
Motion
5,102
4,317
18%
22%
22%
Process Automation
6,893
6,190
11%
18%
21%
Robotics & Discrete Automation
2,782
2,495
12%
16%
16%
Corporate and Other
(incl. intersegment eliminations)
(271)
(47)
Revenues
ABB Group
7,859
6,965
13%
19%
22%
Electrification
3,590
3,236
11%
16%
16%
Motion
1,940
1,572
23%
30%
29%
Process Automation
1,436
1,506
-5%
1%
15%
Robotics & Discrete Automation
937
730
28%
35%
35%
Corporate and Other
169
114
Intersegment eliminations
(213)
(193)
Income from operations
ABB Group
1,198
857
Electrification
655
481
Motion
353
254
Process Automation
200
151
Robotics & Discrete Automation
115
22
Corporate and Other
(incl. intersegment eliminations)
(125)
(51)
Income from operations %
ABB Group
15.2%
12.3%
Electrification
18.2%
14.9%
Motion
18.2%
16.2%
Process Automation
13.9%
10.0%
Robotics & Discrete Automation
12.3%
3.0%
Operational EBITA
ABB Group
1,277
997
28%
33%
Electrification
677
512
32%
38%
Motion
366
274
34%
40%
Process Automation
205
196
5%
11%
Robotics & Discrete Automation
140
49
186%
212%
Corporate and Other
(1)
(incl. intersegment eliminations)
(111)
(34)
Operational EBITA %
ABB Group
16.3%
14.3%
Electrification
19.0%
15.9%
Motion
18.9%
17.4%
Process Automation
14.2%
13.0%
Robotics & Discrete Automation
14.9%
6.7%
Cash flow from operating activities
ABB Group
282
(573)
Electrification
395
87
Motion
149
(2)
Process Automation
112
60
Robotics & Discrete Automation
130
(29)
Corporate and Other
(incl. intersegment eliminations)
(503)
(680)
Discontinued operations
(1)
(9)
(1)
Corporate and Other at Q1 2023 and Q1 2022 includes losses of $28 million and $2 million, respectively, relating to E-mobility.
5
Q1 2023
FINANCIAL
INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q1 23
Q1 22
Q1 23
Q1 22
Q1 23
Q1 22
Q1 23
Q1 22
Q1 23
Q1 22
Revenues
7,859
6,965
3,590
3,236
1,940
1,572
1,436
1,506
937
730
Foreign exchange/commodity timing
differences in total revenues
(16)
(3)
(22)
(10)
–
3
10
(1)
1
5
Operational revenues
7,843
6,962
3,568
3,226
1,940
1,575
1,446
1,505
938
735
Income from operations
1,198
857
655
480
353
254
200
151
115
22
Acquisition-related amortization
54
60
22
28
8
8
1
1
20
21
Restructuring, related and
implementation costs
(1)
28
16
8
2
1
8
2
5
–
1
Changes in obligations related to
divested businesses
3
(14)
–
–
–
–
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
19
59
7
18
4
5
3
33
2
1
Certain other non-operational items
(1)
34
3
3
2
–
–
–
2
–
Foreign exchange/commodity timing
differences in income from operations
(24)
(15)
(18)
(19)
(2)
(1)
(1)
6
1
4
Operational EBITA
1,277
997
677
512
366
274
205
196
140
49
Operational EBITA margin (%)
16.3%
14.3%
19.0%
15.9%
18.9%
17.4%
14.2%
13.0%
14.9%
6.7%
(1)
Includes impairment of certain assets.
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q1 23
Q1 22
Q1 23
Q1 22
Q1 23
Q1 22
Q1 23
Q1 22
Q1 23
Q1 22
Depreciation
125
136
62
64
26
27
11
18
14
15
Amortization
66
74
27
34
10
9
2
3
20
21
including total acquisition-related amortization of:
54
60
22
28
8
8
1
1
20
21
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q1 23
Q1 22
US$
Local
parable
Q1 23
Q1 22
US$
Local
parable
Europe
3,582
3,534
1%
7%
10%
2,872
2,518
14%
20%
24%
The Americas
2,985
2,897
3%
3%
5%
2,653
2,169
22%
23%
25%
of which United States
2,130
2,225
-4%
-4%
-3%
1,984
1,582
25%
26%
28%
Asia, Middle East and Africa
2,883
2,942
-2%
7%
11%
2,334
2,278
2%
12%
16%
of which China
1,355
1,537
-12%
-5%
-3%
1,155
1,100
5%
13%
16%
ABB Group
9,450
9,373
1%
6%
9%
7,859
6,965
13%
19%
22%
6
Q1 2023
FINANCIAL
INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Three months ended
($ in millions, except per share data in $)
Mar. 31, 2023
Mar. 31, 2022
Sales of products
6,644
5,749
Sales of services and other
1,215
1,216
Total revenues
7,859
6,965
Cost of sales of products
(4,418)
(3,968)
Cost of services and other
(725)
(716)
Total cost of sales
(5,143)
(4,684)
Gross profit
2,716
2,281
Selling, general and administrative expenses
(1,339)
(1,239)
Non-order related research and development expenses
(304)
(277)
Other income (expense), net
125
92
Income from operations
1,198
857
Interest and dividend income
40
13
Interest and other finance expense
(61)
(22)
Non-operational pension (cost) credit
7
36
Income from continuing operations before taxes
1,184
884
Income tax expense
(119)
(241)
Income from continuing operations, net of
tax
1,065
643
Loss from discontinued operations, net of tax
(5)
(11)
Net income
1,060
632
Net income attributable to noncontrolling interests and redeemable noncontrolling
interests
(24)
(28)
Net income attributable to ABB
1,036
604
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,041
615
Loss from discontinued operations, net of tax
(5)
(11)
Net income
1,036
604
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.56
0.32
Loss from discontinued operations, net of tax
–
(0.01)
Net income
0.56
0.31
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.56
0.31
Loss from discontinued operations, net of tax
–
(0.01)
Net income
0.55
0.31
Weighted-average number of shares outstanding
(in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,861
1,936
Diluted earnings per share attributable to ABB shareholders
1,874
1,953
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Interim Consolidated Financial Information
7
Q1 2023
FINANCIAL
INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Three months ended
($ in millions)
Mar. 31, 2023
Mar. 31, 2022
Total comprehensive income, net of
tax
1,153
577
Total comprehensive income
attributable to noncontrolling interests and redeemable
noncontrolling interests, net of tax
(30)
(23)
Total comprehensive income attributable
to ABB shareholders, net of tax
1,123
554
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Interim Consolidated Financial Information
8
Q1 2023
FINANCIAL
INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Mar. 31, 2023
Dec. 31, 2022
Cash and equivalents
3,438
4,156
Restricted cash
19
18
Marketable securities and short-term investments
1,380
725
Receivables, net
7,174
6,858
Contract assets
1,009
954
Inventories, net
6,269
6,028
Prepaid expenses
304
230
Other current assets
484
505
Current assets held for sale and in discontinued operations
615
96
Total current assets
20,692
19,570
Property, plant and equipment, net
3,888
3,911
Operating lease right-of-use assets
870
841
Investments in equity-accounted companies
153
130
Prepaid pension and other employee benefits
935
916
Intangible assets, net
1,285
1,406
Goodwill
10,381
10,511
Deferred taxes
1,381
1,396
Other non-current assets
454
467
Total assets
40,039
39,148
Accounts payable, trade
4,945
4,904
Contract liabilities
2,339
2,216
Short-term debt and current maturities of long-term debt
3,433
2,535
Current operating leases
228
220
Provisions for warranties
1,060
1,028
Dividends payable to shareholders
411
–
Other provisions
1,196
1,171
Other current liabilities
4,112
4,323
Current liabilities held for sale and in discontinued operations
225
132
Total current liabilities
17,949
16,529
Long-term debt
5,230
5,143
Non-current operating leases
666
651
Pension and other employee benefits
716
719
Deferred taxes
731
729
Other non-current liabilities
1,807
2,085
Non-current liabilities held for sale and in discontinued operations
20
20
Total liabilities
27,119
25,876
Commitments and contingencies
Redeemable noncontrolling interest
89
85
Stockholders’ equity:
Common stock, CHF 0.12 par value
(1,965 million shares issued at March 31, 2023, and December
31, 2022)
171
171
Additional paid-in capital
279
141
Retained earnings
19,411
20,082
Accumulated other comprehensive loss
(4,469)
(4,556)
Treasury stock, at cost
(103 million and 100 million shares at March 31, 2023,
and December 31, 2022, respectively)
(3,165)
(3,061)
Total ABB stockholders’ equity
12,227
12,777
Noncontrolling interests
604
410
Total stockholders’ equity
12,831
13,187
Total liabilities and stockholders’
equity
40,039
39,148
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9
Q1 2023
FINANCIAL
INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Three months ended
($ in millions)
Mar. 31, 2023
Mar. 31, 2022
Operating activities:
Net income
1,060
632
Loss from discontinued operations, net of tax
5
11
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization
191
210
Changes in fair values of investments
(13)
(24)
Pension and other employee benefits
1
(46)
Deferred taxes
25
(116)
Loss from equity-accounted companies
7
48
Net gain from derivatives and foreign exchange
(37)
(28)
Net gain from sale of property,
plant and equipment
(26)
(32)
Other
27
36
Changes in operating assets and liabilities:
Trade receivables, net
(366)
(317)
Contract assets and liabilities
10
107
Inventories, net
(264)
(542)
Accounts payable, trade
27
7
Accrued liabilities
(324)
(390)
Provisions, net
40
(53)
Income taxes payable and receivable
(115)
14
Other assets and liabilities, net
35
(81)
Net cash provided by (used in) operating activities – continuing
operations
283
(564)
Net cash used in operating activities – discontinued operations
(1)
(9)
Net cash provided by (used in) operating activities
282
(573)
Investing activities:
Purchases of investments
(660)
(128)
Purchases of property, plant and
equipment and intangible assets
(151)
(187)
Acquisition of businesses (net of cash acquired) and increases
in cost-
and equity-accounted companies
(19)
(145)
Proceeds from sales of investments
20
305
Proceeds from sales of property,
plant and equipment
31
35
Net cash from settlement of foreign currency derivatives
36
66
Other investing activities
7
10
Net cash used in investing activities – continuing operations
(736)
(44)
Net cash used in investing activities – discontinued
operations
(5)
(21)
Net cash used in investing activities
(741)
(65)
Financing activities:
Net changes in debt with original maturities of 90 days or less
(714)
1,305
Increase in debt
1,633
2,542
Repayment of debt
(36)
(41)
Delivery of shares
95
370
Purchase of treasury stock
(274)
(1,561)
Dividends paid
(1,294)
(889)
Dividends paid to noncontrolling shareholders
(3)
(1)
Proceeds from issuance of subsidiary shares
341
–
Other financing activities
12
(34)
Net cash provided by (used in) financing activities – continuing
operations
(240)
1,691
Net cash provided by financing activities – discontinued
operations
–
–
Net cash provided by (used in) financing activities
(240)
1,691
Effects of exchange rate changes on cash and equivalents
and restricted cash
(5)
4
Adjustment for the net change in cash and equivalents and restricted
cash in Assets held for sale
(13)
–
Net change in cash and equivalents and restricted cash
(717)
1,057
Cash and equivalents and restricted cash, beginning of period
4,174
4,489
Cash and equivalents and restricted cash, end of period
3,457
5,546
Supplementary disclosure of cash flow information:
Interest paid
48
9
Income taxes paid
207
340
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10
Q1 2023
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, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Net income
604
604
28
632
Foreign currency translation
adjustments, net of tax of $0
(70)
(70)
(5)
(75)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(3)
(12)
(12)
(12)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $10
28
28
28
Change in derivative instruments
and hedges, net of tax of $2
4
4
4
Changes in noncontrolling interests
(10)
(10)
(7)
(17)
Dividends to
noncontrolling shareholders
–
(3)
(3)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Share-based payment arrangements
12
12
12
Purchase of treasury stock
(1,561)
(1,561)
(1,561)
Delivery of shares
(26)
(104)
500
370
370
Other
2
2
2
Balance at March 31, 2022
178
–
21,278
(4,138)
(4,071)
13,247
391
13,638
Balance at January 1, 2023
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
Net income
(1)
1,036
1,036
25
1,061
Foreign currency translation
adjustments, net of tax of $(1)
79
79
6
85
Effect of change in fair value of
available-for-sale securities,
net of tax of $1
5
5
5
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $1
–
–
–
Change in derivative instruments
and hedges, net of tax of $0
3
3
3
Issuance of subsidiary shares
170
170
168
338
Other changes in
noncontrolling interests
–
(1)
(1)
Dividends to
noncontrolling shareholders
–
(5)
(5)
Dividends to shareholders
(1,706)
(1,706)
(1,706)
Share-based payment arrangements
22
22
1
23
Purchase of treasury stock
(253)
(253)
(253)
Delivery of shares
(53)
148
95
95
Other
(2)
(2)
(2)
Balance at March 31, 2023
171
279
19,411
(4,469)
(3,165)
12,227
604
12,831
(1)
Amounts attributable to noncontrolling interests for the three months ended March 31, 2023, exclude net losses of $1 million related to redeemable noncontrolling interests, which are
reported in the mezzanine equity section on the Consolidated Balance Sheets. See Note 4 for details.
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11
Q1 2023
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 technology
leader in electrification and automation, enabling a more sustainable
and
resource-efficient future. The Company’s solutions connect
engineering know-how and software to optimize how things
are manufactured, moved, powered and
operated.
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, 2022.
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:
●
estimates to determine valuation allowances for deferred tax assets
and amounts recorded for unrecognized tax benefits,
●
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,
●
estimates used to record expected costs for employee severance
in connection with restructuring programs,
●
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,
●
assumptions and projections, principally related to future material,
labor and project-related overhead costs, used in determining the
percentage-of-
completion on projects where revenue is recognized over time,
as well as the amount of variable consideration the
Company expects to be entitled to,
●
assumptions used in the calculation of pension and postretirement
benefits and the fair value of pension plan assets,
●
assumptions used in determining inventory obsolescence and net
realizable value,
●
growth rates, discount rates and other assumptions used to determine
impairment of long-lived assets and in testing goodwill
for impairment,
●
estimates and assumptions used in determining the fair
values of assets and liabilities assumed in business
combinations, and
●
estimates and assumptions used in determining the initial fair
value of retained noncontrolling interests
and certain obligations in connection with
divestments.
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 Consolidated Financial Information for
prior periods have been reclassified to conform to the
current year’s presentation. These
changes relate primarily to the reorganization of the Company’s
operating segments (see Note 16 for details).
12
Q1 2023
FINANCIAL
INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Disclosure about supplier finance program obligations
In January 2023, the Company adopted an accounting standard
update which requires entities to disclose information related
to supplier finance programs. Under
the update, the Company is required to disclose annually
(i) the key terms of the program, (ii) the amount of the supplier
finance obligations outstanding and where
those obligations are presented in the balance sheet at the reporting
date, and (iii) a rollforward of the supplier finance obligation
program within the reporting
period. The Company adopted this update retrospectively for all
in-scope transactions, with the exception of the rollforward
disclosures, which will be adopted
prospectively for annual periods beginning January 1, 2024.
Apart from the additional disclosure requirements, this
update does not have a significant impact on
the Company’s consolidated financial statements.
The total outstanding supplier finance obligation included in “Accounts
payable, trade” in the Consolidated Balance Sheets
at March 31, 2023 and December 31,
2022, amounted to $460 million and $477 million, respectively.
The Company’s payment terms related to suppliers’
finance programs are not impacted by the
suppliers’ decisions to sell amounts under the arrangements
and are typically consistent with local market practices.
Facilitation of the effects of reference rate reform on financial
reporting
In January 2023, the Company adopted an accounting standard
update 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. The Company is applying this standard
update as relevant contract and hedge
accounting relationship modifications are made during the course
of the transition period ending December 31, 2024. 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
In 2020, the Company completed the divestment of its
Power Grids business to Hitachi Ltd (Hitachi).
Upon closing of the sale, the Company entered into various
transition services agreements (TSAs),
some of which continue to have services performed. Pursuant
to these TSAs, the Company and Hitachi Energy provide
to
each other, on a transitional basis, various
services. The services provided by the Company
primarily include finance, information technology,
human resources
and certain other administrative services. The TSAs were to
be performed for up to 3 years with the possibility
to agree on extensions on an exceptional basis
for
business-critical services which are reasonably necessary to avoid a material
adverse impact on the business. The TSA for
information technology services was
extended until mid-2025. In the three months ended March
31, 2023 and 2022, the Company has recognized within
its continuing operations, general and
administrative expenses incurred to perform the TSAs,
offset by $37 million and $38 million, respectively,
in TSA-related income for such services that is reported
in Other income (expense), net.
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 are presented
as
discontinued operations and the assets and liabilities are presented
as held for sale and in discontinued operations.
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. The remaining business
activities of the Power Grids business being executed
by the Company is not significant.
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 at the time of their
disposal. Changes to these retained obligations are also included
in Loss from discontinued operations, net
of tax.
At March 31, 2023, the balances reported as held for sale and
in discontinued operations pertaining to the activities of the Power Grids business
and other
obligations will remain with the Company until such time as
the obligations
are settled or the activities are fully wound down
.
These balances amounted to
$90 million of current assets, $122 million of current liabilities
and $20 million of non-current liabilities.
Planned business divestments classified as held for sale
The Company classifies its long-lived assets or disposal groups
to be sold as held for sale in the period in which all of
the held for sale criteria are met. The
Company initially measures a long-lived asset or disposal group
that is classified as held for sale at the lower of its carrying
value or fair value less any costs
to
sell. Any resulting loss is recognized in the period in whi
ch the held for sale criteria are met,
while gains are not recognized on the sale of a
long-lived asset or
disposal group until the date of sale. The Company assesses
the fair value of a long-lived asset or disposal group less any costs
to sell at each reporting period
and until the asset or disposal group is no longer classified
as held for sale.
In January 2023, the Company entered into an agreement to
divest its Power Conversion Division to AcBel Polytech
Inc. for cash proceeds of $505 million.
The
Power Conversion Division is part of the Company’s
Electrification operating segment
and the divestment,
subject to regulatory approvals, is expected to be
completed in the second half of 2023.
13
Q1 2023
FINANCIAL
INFORMATION
As this planned divestment does not qualify as a discontinued operation,
the results of operations for this business are included
in the Company’s continuing
operations for all periods presented. The assets and liabilities of
this business are shown as assets and liabilities held for
sale in the Company’s Consolidated
Balance Sheet at March 31, 2023.
The carrying amounts of the major classes
of assets and liabilities held for sale relating to this planned divestment
are as
follows:
($ in millions)
March 31, 2023
Assets
Receivables, net
92
Inventories, net
106
Property, plant and equipment, net
42
Other intangible assets, net
73
Goodwill
175
Other assets
37
Current assets held for sale
525
Liabilities
Accounts payable, trade
44
Other liabilities
59
Current liabilities held for sale
103
In the three months ended March 31, 2023 and 2022,
Income from continuing operations before taxes includes
income of $17 million and $1 million, respectively,
from the Power Conversion Division.
─
Note 4
Acquisitions and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Three months ended March 31,
($ in millions, except number of acquired businesses)
2023
2022
Purchase price for acquisitions (net of cash acquired)
(1)
1
138
Aggregate excess of purchase price over fair value of net assets
acquired
(2)
4
191
Number of acquired businesses
–
1
(1)
Excluding changes in cost- and equity-accounted companies.
(2)
Recorded as goodwill.
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 three
months ended March 31, 2022,
relate primarily to the acquisition of InCharge Energy,
Inc. (In-Charge).
Acquisitions of controlling interests have been accounted for under the
acquisition method and have been included in the Comp
any’s consolidated financial
statements since the date of acquisition.
On January 26, 2022, the Company increased its ownership in
In-Charge to a 60 percent controlling interest through
a stock purchase agreement. In-Charge
is
headquartered in Santa Monica, USA, and is a provider of
turn-key commercial electric vehicle charging hardware and
software solutions. The resulting cash
outflows for the Company amounted to $134
million (net of cash acquired of $4 million). The acquisition
expands the market presence of the E-mobility
Division of
its Electrification operating segment,
particularly in the North American market. In connection
with the acquisition, the Company’s pre-existing
13.2 percent
ownership of In-Charge was revalued to fair value and a gain
of $32 million was recorded in “Other income
(expense),
net” in the three months ended March 31,
- The Company entered into an agreement with the remaining
noncontrolling shareholders allowing either party to put or
call the remaining 40 percent of the
shares until 2027. The amount for which either party can exercise
their option is dependent on a formula based on revenues and
thus, the amount is subject to
change. As a result of this agreement, the noncontrolling interest
is classified as Redeemable noncontrolling interest
(i.e. mezzanine equity) in the Consolidated
Balance Sheets and was initially recognized at fair value.
While the Company uses its best estimates and assumptions
as part of the purchase price allocation process
to value assets acquired and liabilities assumed
at
the acquisition date, the purchase price allocation for acquisitions
is preliminary for up to 12 months after the acquisition
date and is subject to refinement as more
detailed analyses are completed and additional information about
the fair values of the assets and liabilities becomes available.
Investments in equity-accounted companies
In connection with the divestment of its Power Grids business
to Hitachi in 2020 (see Note 3), the Company
initially retained a 19.9
percent interest in the business
until December 2022, when the retained investment was sold to Hitachi.
During the Company’s period of ownership
of the retained 19.9 percent interest, based on
its continuing involvement with the Power Grids business, including
the membership in its governing board of directors,
the Company concluded that it had
significant influence over Hitachi Energy.
As a result, the investment was accounted for using the
equity method through to the date of its sale.
In the three months ended March 31, 2023 and 2022,
the Company recorded its share of the earnings of
investees accounted for under the equity method of
accounting in Other income (expense), net, as follows:
Three months ended March 31,
($ in millions)
2023
2022
Loss from equity-accounted companies, net of taxes
(7)
(11)
Basis difference amortization (net of deferred income tax benefit)
–
(37)
Loss from equity-accounted companies
(7)
(48)
14
Q1 2023
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:
March 31, 2023
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
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
1,319
1,319
1,319
Time deposits
2,424
2,424
2,138
286
Equity securities
696
18
714
714
4,439
18
–
4,457
3,457
1,000
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
270
2
(11)
261
261
Other government obligations
58
58
58
Corporate
67
(6)
61
61
395
2
(17)
380
–
380
Total
4,834
20
(17)
4,837
3,457
1,380
Of which:
Restricted cash, current
19
December 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
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
1,715
1,715
1,715
Time deposits
2,459
2,459
2,459
Equity securities
345
10
355
355
4,519
10
–
4,529
4,174
355
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
269
1
(15)
255
255
Other government obligations
58
58
58
Corporate
64
(7)
57
57
391
1
(22)
370
–
370
Total
4,910
11
(22)
4,899
4,174
725
Of which:
Restricted cash, current
18
15
Q1 2023
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)
March 31, 2023
December 31, 2022
March 31, 2022
Foreign exchange contracts
13,273
13,509
13,255
Embedded foreign exchange derivatives
1,104
933
863
Cross-currency interest rate swaps
870
855
888
Interest rate contracts
2,963
2,830
4,421
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
March 31, 2023
December 31, 2022
March 31, 2022
Copper swaps
metric tonnes
27,920
29,281
39,223
Silver swaps
ounces
2,392,353
2,012,213
2,634,550
Aluminum swaps
metric tonnes
6,750
6,825
6,950
Equity derivatives
At March 31, 2023, December 31, 2022, and March 31,
2022, the Company held 5 million, 8 million and 9 million cash
-settled call options indexed to ABB Ltd
shares (conversion ratio 5:1) with a total fair value of $14
million, $15 million and $20 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange
contracts to manage the foreign exchange risk
of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to
hedge its WAR liabilities. The Company applies cash
flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their
fair value is recorded in “Accumulated other comprehensive
loss” and subsequently reclassified into
earnings in the same line item and in the same period as
the underlying hedged transaction affects
earnings. For the three months ended March 31, 2023 and
2022, there were no significant amounts recorded for cash
flow hedge accounting activities.
Fair value hedges
To reduce its interest
rate exposure arising primarily from its debt issuance activities,
the Company uses interest rate swaps
and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges,
the changes in the fair value of these instruments,
as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded
as offsetting gains and losses in “Interest
and other finance expense”.
16
Q1 2023
FINANCIAL
INFORMATION
The effect of derivative instruments, designated and qualifying
as fair value hedges, on the Consolidated Income
Statements was as follows:
Three months ended March 31,
($ in millions)
2023
2022
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
10
(29)
Hedged item
(10)
29
Cross-currency interest rate swaps
Designated as fair value hedges
(11)
(45)
Hedged item
2
44
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
Three months ended March 31,
($ in millions)
Location
2023
2022
Foreign exchange contracts
Total revenues
11
4
Total cost of sales
(1)
(6)
SG&A expenses
(1)
6
8
Non-order related research and development
–
1
Interest and other finance expense
42
22
Embedded foreign exchange contracts
Total revenues
7
(2)
Total cost of sales
(1)
1
Commodity contracts
Total cost of sales
11
35
Other
Interest and other finance expense
–
1
Total
75
64
(1)
SG&A expenses represent
“Selling, general and
administrative expenses”.
The fair values of derivatives included in the Consolidated Balance
Sheets were as follows:
March 31, 2023
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”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
4
2
Interest rate contracts
–
–
25
28
Cross-currency interest rate swaps
–
–
–
281
Cash-settled call options
14
–
–
–
Total
14
–
29
311
Derivatives not designated as hedging instruments:
Foreign exchange contracts
149
23
56
11
Commodity contracts
17
–
6
–
Interest rate contracts
7
–
4
–
Embedded foreign exchange derivatives
14
7
24
5
Total
187
30
90
16
Total fair value
201
30
119
327
17
Q1 2023
FINANCIAL
INFORMATION
December 31, 2022
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”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
4
4
Interest rate contracts
–
–
5
57
Cross-currency interest rate swaps
–
–
–
288
Cash-settled call options
15
–
–
–
Total
15
–
9
349
Derivatives not designated as hedging instruments:
Foreign exchange contracts
140
21
80
5
Commodity contracts
13
–
12
–
Interest rate contracts
5
–
3
–
Embedded foreign exchange derivatives
11
6
17
13
Total
169
27
112
18
Total fair value
184
27
121
367
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 March 31, 2023, and December 31, 2022,
have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements
allow net settlements under certain conditions.
At March 31, 2023, and December 31, 2022,
information related to these offsetting arrangements was
as follows:
($ in millions)
March 31, 2023
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
210
(91)
–
–
119
Total
210
(91)
–
–
119
($ in millions)
March 31, 2023
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
417
(91)
–
–
326
Total
417
(91)
–
–
326
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
194
(96)
–
–
98
Total
194
(96)
–
–
98
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
458
(96)
–
–
362
Total
458
(96)
–
–
362
18
Q1 2023
FINANCIAL
INFORMATION
─
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.
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 valuati
on 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:
March 31, 2023
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
714
714
Debt securities—U.S. government obligations
261
261
Debt securities—Other government obligations
58
58
Debt securities—Corporate
61
61
Derivative assets—current in “Other current assets”
201
201
Derivative assets—non-current in “Other non-current assets”
30
30
Total
261
1,064
–
1,325
Liabilities
Derivative liabilities—current in “Other current liabilities”
119
119
Derivative liabilities—non-current in “Other non-current liabilities”
327
327
Total
–
446
–
446
19
Q1 2023
FINANCIAL
INFORMATION
December 31, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
355
355
Debt securities—U.S. government obligations
255
255
Debt securities—European government obligations
58
58
Debt securities—Corporate
57
57
Derivative assets—current in “Other current assets”
184
184
Derivative assets—non-current in “Other non-current assets”
27
27
Total
255
681
–
936
Liabilities
Derivative liabilities—current in “Other current liabilities”
121
121
Derivative liabilities—non-current in “Other non-current liabilities”
367
367
Total
–
488
–
488
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”:
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
There were no significant non-recurring fair value measurements
during the three months ended March 31, 2023 and
2022.
Disclosure about financial instruments carried on a cost
basis
The fair values of financial instruments carried on a cost
basis were as follows:
March 31, 2023
($ 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
1,300
1,300
1,300
Time deposits
2,138
2,138
2,138
Restricted cash
19
19
19
Marketable securities and short-term investments
(excluding securities):
Time deposits
286
286
286
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
3,406
2,365
1,041
3,406
Long-term debt (excluding finance lease obligations)
5,093
5,014
20
5,034
December 31, 2022
($ 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
1,697
1,697
1,697
Time deposits
2,459
2,459
2,459
Restricted cash
18
18
18
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
2,500
1,068
1,432
2,500
Long-term debt (excluding finance lease obligations)
4,976
4,813
30
4,843
20
Q1 2023
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, 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)
March 31, 2023
December 31, 2022
March 31, 2022
Contract assets
1,009
954
1,072
Contract liabilities
2,339
2,216
2,080
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. Management expects
that the majority of the amounts will be
collected within one year of the respective balance sheet date.
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 predominantly on 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:
Three months ended March 31,
2023
2022
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities
balance at Jan 1, 2023/2022
(651)
(518)
Additions to Contract liabilities - excluding amounts recognized as
revenue during the period
707
701
Receivables recognized that were included in the Contract
assets balance at Jan 1, 2023/2022
(325)
(318)
The Company considers its order backlog to represent its
unsatisfied performance obligations. At March 31, 2023, the Company
had unsatisfied performance
obligations totaling $21,607 million and, of this amount, the Company
expects to fulfill approximately 66 percent of the obligations in
2023, approximately
23 percent of the obligations in 2024 and the balance thereafter.
21
Q1 2023
FINANCIAL
INFORMATION
─
Note 9
Debt
The Company’s total debt at March 31, 2023, and December
31, 2022, amounted to $8,663 million and $7,678 million,
respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of
long-term debt” consisted of the following:
($ in millions)
March 31, 2023
December 31, 2022
Short-term debt
1,047
1,448
Current maturities of long-term debt
2,386
1,087
Total
3,433
2,535
Short-term debt primarily represented issued commercial paper and
short-term bank borrowings from various banks.
At March 31, 2023,
and December 31, 2022,
$946 million and $1,383 million, respectively,
was outstanding under the $2 billion Euro-commercial
paper program. At March 31, 2023,
$34 million was
outstanding under the $2 billion commercial paper program in
the United States, whereas at December 31, 2022,
no amount was outstanding under this program.
Long-term debt
The Company’s long-term debt at March 31, 2023, and
December 31, 2022, amounted to $5,230 million and $5,143
million, respectively.
Outstanding bonds (including maturities within the next 12 months)
were as follows:
March 31, 2023
December 31, 2022
(in millions)
Nominal outstanding
Carrying value
(1)
Nominal outstanding
Carrying value
(1)
Bonds:
0.625% EUR Instruments, due 2023
EUR
700
$
759
EUR
700
$
742
0% CHF Bonds, due 2023
CHF
275
$
300
CHF
275
$
298
0.625% EUR Instruments, due 2024
EUR
700
$
737
EUR
700
$
720
Floating Rate EUR Instruments, due 2024
EUR
500
$
545
EUR
500
$
536
0.75% EUR Instruments, due 2024
EUR
750
$
787
EUR
750
$
769
0.3% CHF Bonds, due 2024
CHF
280
$
305
CHF
280
$
303
2.1% CHF Bonds, due 2025
CHF
150
$
163
CHF
150
$
162
3.25% EUR Instruments, due 2027
EUR
500
$
540
0.75% CHF Bonds, due 2027
CHF
425
$
462
CHF
425
$
460
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
185
CHF
170
$
184
0% EUR Instruments, due 2030
EUR
800
$
691
EUR
800
$
677
2.375% CHF Bonds, due 2030
CHF
150
$
163
CHF
150
$
162
3.375% EUR Instruments, due 2031
EUR
750
$
802
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
590
Total
$
7,410
$
5,984
(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 USD 750 million.
In January 2023, the Company issued the following EUR Instruments:
(i) EUR 500 million of 3.25 percent Instruments,
due 2027, and (ii) EUR 750 million of
3.375 percent Instruments, due 2031, both paying interest
annually in arrears. The aggregate net proceeds
of these EUR Instruments, after discount and
fees,
amounted to EUR 1,235 million (equivalent to approximately
$1,338 million on date of issuance).
22
Q1 2023
FINANCIAL
INFORMATION
─
Note 10
Commitments and contingencies
Contingencies—Regulatory, Compliance
and Legal
Regulatory
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
made a provision of approximately $325 million which
was recorded in Other income (expense), net, during the third
quarter of 2022. In December 2022, the Company settled with
the SEC and DOJ as well as the
authorities in South Africa and Switzerland. The matter is still pending
with the authorities in Germany,
but the Company does not believe that it will need to
record
any additional provisions for this matter.
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 March 31, 2023, and December 31, 2022, the Company had
aggregate liabilities of $97 million and $86
million, respectively, included
in “Other provisions” and
“Other non
‑
current liabilities”, for the above regulatory,
compliance and legal contingencies, and none of the individual
liabilities recognized was significant. As it is
not possible to make an informed judgment on, or reasonably predict,
the outcome of certain matters and as it is not possible,
based on information currently
available to management, to estimate the maximum potential
liability on other matters, there could be adverse outcomes beyond
the amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s
third-party guarantees. The maximum potential payments
represent a “worst-case
scenario”, and do not reflect management’s expected
outcomes.
Maximum potential payments
($ in millions)
March 31, 2023
December 31, 2022
Performance guarantees
3,778
4,300
Financial guarantees
94
96
Total
(1)
3,872
4,396
(1)
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 March
31, 2023, and December 31, 2022, were not
significant.
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 March 31, 2023, and December 31,
2022, the maximum potential payable under
these guarantees amounts to $855 million and $843 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 sale of the
Power Grids business (see Note 3 for
details). The performance and financial guarantees have been
indemnified by Hitachi Ltd. 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 these guarantees at March 31, 2023, and
December 31, 2022, is
approximately $2.5 billion and $3.0 billion, 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 both March 31, 2023, and December 31, 2022, the
total outstanding performance bonds aggregated to
$2.9 billion. There have been no significant
amounts reimbursed to financial institutions under these types
of arrangements in the three months ended March
31, 2023 and 2022.
Product and order-related contingencies
The Company calculates its provision for product warranties
based on historical claims experience and specific review
of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance,
was as follows:
($ in millions)
2023
2022
Balance at January 1,
1,028
1,005
Claims paid in cash or in kind
(40)
(36)
Net increase in provision for changes in estimates, warranties
issued and warranties expired
65
38
Exchange rate differences
7
(8)
Balance at March 31,
1,060
999
23
Q1 2023
FINANCIAL
INFORMATION
─
Note 11
Income taxes
In calculating income tax expense, the Company uses an estimate
of the annual effective tax rate based upon the
facts and circumstances known at each
interim
period. On a quarterly basis, the actual effective tax
rate is adjusted, as appropriate, based upon changed facts
and circumstances, if any, as
compared to those
forecasted at the beginning of the year and each interim period
thereafter.
The effective tax rate of 10.1 percent in the three months
ended March 31, 2023, was lower than the effective tax
rate of 27.3 percent in the three months ended
March 31, 2022, primarily due to a net benefit realized on a favorable
resolution of an uncertain tax position in the three months
ended March 31, 2023.
In
February 2023, on completion of a tax audit, the Company
obtained resolution of the uncertain tax position for which
an amount was recorded within Other non-
current liabilities as of December 31, 2022. In the three months
ended March 31, 2023, the Company released the provision
of $206
million, due to the resolution
of this matter,
which resulted in an increase of $0.11
in earnings per share (basic and diluted).
─
Note 12
Employee benefits
The Company operates defined benefit pension plans, defined contribution
pension plans, and termination indemnity
plans, in accordance with local regulations
and practices. At March 31, 2023, the Company’s most significant
defined benefit pension plans are in Switzerland as well as
in Germany, the United Kingdom,
and the United States. These plans cover a large portion of the
Company’s employees and provide benefits to employees
in the event of death, disability,
retirement, or termination of employment. Certain of these
plans are multi-employer plans. The Company also operates
other postretirement benefit plans including
postretirement health care benefits and other employee-related
benefits for active employees including long-service
award plans. The measurement date used
for
the Company’s employee benefit plans is December
- The funding policies of the Company’s plans
are consistent with the local government and tax
requirements.
Net periodic benefit cost of the Company’s defined benefit
pension and other postretirement benefit plans consisted of
the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended March 31,
2023
2022
2023
2022
2023
2022
Operational pension cost:
Service cost
9
14
8
9
–
–
Operational pension cost
9
14
8
9
–
–
Non-operational pension cost (credit):
Interest cost
12
1
40
22
1
–
Expected return on plan assets
(33)
(30)
(39)
(41)
–
–
Amortization of prior service cost (credit)
–
(2)
–
–
–
(1)
Amortization of net actuarial loss
–
–
13
15
(1)
–
Non-operational pension cost (credit)
(21)
(31)
14
(4)
–
(1)
Net periodic benefit cost (credit)
(12)
(17)
22
5
–
(1)
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.
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended March 31,
2023
2022
2023
2022
2023
2022
Total contributions
to defined benefit pension and
other postretirement benefit plans
2
16
11
10
2
3
The Company expects to make contributions totaling approximately
$67 million and $5 million to its defined pension plans
and other postretirement benefit plans,
respectively, for the full year 2023.
24
Q1 2023
FINANCIAL
INFORMATION
─
Note 13
Stockholder's
equity
At the Annual General Meeting of Shareholders (AGM) on March
23, 2023, shareholders approved the proposal of the
Board of Directors to distribute 0.84
Swiss
francs per share to shareholders. The declared dividend amounted
to $1,706 million, with the Company disburs
ing a portion in March and the remaining amounts
in April.
In March 2023, the Company completed the share buyback
program that was launched in April 2022. This program was executed
on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased
a total of 67 million shares for approximately
$2.0 billion, of which 8 million shares were
purchased in the first quarter of 2023 (resulting in an
increase in Treasury stock of $253 million
).
Also in March 2023, the Company announced a new share buyback
program of up to $1 billion. This program, which was
launched in April 2023, is being executed
on a second trading line on the SIX Swiss Exchange and is planned
to run until the Company’s 2024 AGM.
During the first quarter of 2023, the Company delivered, out
of treasury stock, approximately 5 million shares
in connection with its Management Incentive Plan.
In February 2023, the Company obtained funding through
a private placement of shares in its ABB E-Mobility subsidiary,
ABB E-mobility Holding Ltd
(ABB E-Mobility),
receiving gross proceeds of 325 million Swiss francs
(approximately $351 million) and reducing the Company’s
ownership in ABB E-Mobility from
92 percent to 81 percent. This resulted in an increase
in Additional paid-in capital of $170
million.
─
Note 14
Earnings per share
Basic earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during
the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares
outstanding during the period, assuming that all potentially
dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding
written call options, and outstanding options and
shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Three months ended March 31,
($ in millions, except per share data in $)
2023
2022
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,041
615
Loss from discontinued operations, net of tax
(5)
(11)
Net income
1,036
604
Weighted-average number of shares outstanding
(in millions)
1,861
1,936
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.56
0.32
Loss from discontinued operations, net of tax
–
(0.01)
Net income
0.56
0.31
Diluted earnings per share
Three months ended March 31,
($ in millions, except per share data in $)
2023
2022
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,041
615
Loss from discontinued operations, net of tax
(5)
(11)
Net income
1,036
604
Weighted-average number of shares outstanding (in millions)
1,861
1,936
Effect of dilutive securities:
Call options and shares
13
17
Adjusted weighted-average number of shares outstanding
(in millions)
1,874
1,953
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.56
0.31
Loss from discontinued operations, net of tax
–
(0.01)
Net income
0.55
0.31
25
Q1 2023
FINANCIAL
INFORMATION
─
Note 15
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive
loss” (OCI) attributable to ABB, by component, net
of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2022
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(80)
(12)
20
(4)
(76)
Amounts reclassified from OCI
5
–
8
8
21
Total other comprehensive (loss)
income
(75)
(12)
28
4
(55)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(5)
–
–
–
(5)
Balance at March 31, 2022
(3,063)
(10)
(1,061)
(4)
(4,138)
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2023
(3,691)
(19)
(838)
(8)
(4,556)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
85
4
(8)
2
83
Amounts reclassified from OCI
–
1
8
1
10
Total other comprehensive (loss)
income
85
5
–
3
93
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
6
–
–
–
6
Balance at March 31, 2023
(3,612)
(14)
(838)
(5)
(4,469)
The amounts reclassified out of OCI for the three months
ended March 31, 2023 and 2022, were not significant.
─
Note 16
Operating segment data
The Chief Operating Decision Maker (CODM) is the Chief
Executive Officer. The CODM
allocates resources to and assesses the performance of
each operating
segment using the information outlined below. The
Company is organized into the following segments, based
on products and services: Electrification, Motion,
Process Automation and Robotics & Discrete Automation. The remaining
operations of the Company are included in
Corporate and Other.
Effective January 1, 2023, the E-mobility Division
is no longer managed within the Electrification segment
and has become a separate operating segment. This
new segment does not currently meet any of the size thresholds
to be considered a reportable segment and as such is presented
within Corporate and Other.
The
segment information for the three months ended March 31,
2023 and 2022, and at December 31, 2022,
has been recast to reflect this change.
A description of the types of products and services
provided by each reportable segment is as follows:
●
Electrification:
manufactures and sells electrical products and solutions
which are designed to provide safe, smart and
sustainable electrical flow from
the substation to the socket. The portfolio of increasingly digital and connected
solutions includes renewable power solutions, modular substation
packages, distribution automation products, switchboard and panelboards,
switchgear, UPS solutions, circuit breakers,
measuring and sensing devices,
control products, wiring accessories, enclosures and cabling
systems and intelligent home and building solutions,
designed to integrate and automate
lighting, heating, ventilation, security and data communication
networks.
The products and services are delivered through six
operating Divisions:
Distribution Solutions, Smart Power, Smart
Buildings, Installation Products,
Power Conversion and Service.
●
Motion:
designs, manufactures, and sells drives, motors, generators
and traction converters that are driving the low-carbon future
for industries, cities,
infrastructure and transportation. These products, digital technology
and related services enable industrial customers to increase
energy efficiency,
improve safety and reliability, and achieve
precise control of their processes. Building on over 130
years of cumulative experience in electric
powertrains, Motion combines domain expertise and technology
to deliver the optimum solution for a wide range of applications
in all industrial
segments. In addition, Motion, along with its partners,
has a leading global service presence. These products and services
are delivered through seven
operating Divisions: Large Motors and Generators, IEC LV
Motors, NEMA Motors, Drive Products, System Drives,
Service and Traction.
26
Q1 2023
FINANCIAL
INFORMATION
●
Process Automation:
offers a broad range of industry-specific,
integrated automation, electrification and digital solutions,
as well as lifecycle services for
the process,
hybrid and marine industries. The product portfolio includes
control technologies, industrial software, advanced
analytics, sensing and
measurement technology, and marine
propulsion systems. In addition,
Process Automation offers a comprehensive range
of services,
from repair to
advanced digital capabilities such as remote monitoring, preventive
maintenance, asset performance management, emission
monitoring and
cybersecurity.
The products, systems and services are currently delivered through four operating
Divisions: Energy Industries, Process Industries,
Marine & Ports and Measurement & Analytics as well as,
prior to its spin-off in October 2022, the Turbocharging
Division (Accelleron).
●
Robotics & Discrete Automation:
delivers its products, solutions and services
through two operating Divisions: Robotics and Machine Automation.
Robotics includes industrial robots, autonomous mobile robotics, software,
robotic solutions, field services, spare parts, and
digital services. Machine
Automation specializes in solutions based on its programmable
logic controllers (PLC), industrial PCs (IPC), servo
motion, transport systems and
machine vision.
Both Divisions offer engineering and simulation software
as well as a comprehensive range of digital solutions.
Corporate and Other:
includes headquarter costs,
the Company’s corporate real estate activities, Corporate Treasury
Operations, the E-mobility operating
segment, historical operating activities of certain divested businesses
,
and other non-core operating activities.
The primary measure of profitability on which the operating segments
are evaluated is Operational EBITA, which
represents income from operations excluding:
●
amortization expense on intangibles arising upon acquisition (acquisition
-related amortization),
●
restructuring, related and implementation costs,
●
changes in the amount recorded for obligations related to divested
businesses occurring after the divestment date (changes
in obligations related to
divested businesses),
●
gains and losses from sale of businesses (including fair value adjustment
on assets and liabilities held for sale),
●
acquisition- and divestment-related expenses and integration costs,
●
certain other non-operational items, as well as
●
foreign exchange/commodity timing differences in income
from operations consisting of: (a) unrealized gains
and losses on derivatives (foreign
exchange, commodities, embedded derivatives), (b) realized
gains and losses on derivatives where the underlying hedged
transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/payables
(and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory,
compliance and legal costs, other income/expense relating
to the Power Grids joint
venture, certain asset write downs/impairments and certain
other fair value changes, changes in estimates relating to opening
balance sheets of acquired
businesses (changes in pre-acquisition estimates), as well as
other items which are determined by management on
a case-by-case basis.
The CODM primarily reviews the results of each segment on
a basis that is before the elimination of profits
made on inventory sales between segments. Segment
results below are presented before these eliminations, with a total deduction
for intersegment profits to arrive at the Company’s
consolidated Operational EBITA.
Intersegment sales and transfers are accounted for as if the sales
and transfers were to third parties, at current market prices.
The following tables present disaggregated segment revenues from
contracts with customers, Operational EBITA,
and the reconciliations of consolidated
Operational EBITA to Income from continuing
operations before taxes for the three months ended March
31, 2023 and 2022, as well as total assets at March 31
,
2023, and December 31, 2022.
Three months ended March 31, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,162
638
519
474
79
2,872
The Americas
1,407
632
421
136
57
2,653
of which: United States
1,043
533
264
91
53
1,984
Asia, Middle East and Africa
957
549
489
324
15
2,334
of which: China
457
281
162
248
7
1,155
3,526
1,819
1,429
934
151
7,859
Product type
Products
3,306
1,583
827
791
137
6,644
Services and other
220
236
602
143
14
1,215
3,526
1,819
1,429
934
151
7,859
Third-party revenues
3,526
1,819
1,429
934
151
7,859
Intersegment revenues
64
121
7
3
(195)
–
Total revenues
(1)
3,590
1,940
1,436
937
(44)
7,859
27
Q1 2023
FINANCIAL
INFORMATION
Three months ended March 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,062
466
585
354
51
2,518
The Americas
1,164
492
368
108
37
2,169
of which: United States
849
407
221
72
33
1,582
Asia, Middle East and Africa
951
499
546
267
15
2,278
of which: China
457
287
150
197
9
1,100
3,177
1,457
1,499
729
103
6,965
Product type
Products
2,981
1,248
813
612
95
5,749
Services and other
196
209
686
117
8
1,216
3,177
1,457
1,499
729
103
6,965
Third-party revenues
3,177
1,457
1,499
729
103
6,965
Intersegment revenues
59
115
7
1
(182)
–
Total revenues
(1)
3,236
1,572
1,506
730
(79)
6,965
(1)
Due to rounding, numbers presented may not add to the totals provided.
Three months ended
March 31,
($ in millions)
2023
2022
Operational EBITA:
Electrification
677
512
Motion
366
274
Process Automation
205
196
Robotics & Discrete Automation
140
49
Corporate and Other
‒
E-mobility
(28)
(2)
‒ Corporate costs, intersegment eliminations and other
(83)
(32)
Total
1,277
997
Acquisition-related amortization
(54)
(60)
Restructuring, related and implementation costs
(1)
(28)
(16)
Changes in obligations related to divested businesses
(3)
14
Acquisition- and divestment-related expenses and integration
costs
(19)
(59)
Foreign exchange/commodity timing differences in
income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
22
18
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(5)
(2)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
7
(1)
Certain other non-operational items:
Other income/expense relating to the Power Grids joint venture
13
(35)
Regulatory, compliance and legal costs
–
1
Business transformation costs
(2)
(34)
(26)
Changes in pre-acquisition estimates
–
(1)
Certain other fair value changes, including asset impairments
(1)
34
Other non-operational items
23
(7)
Income from operations
1,198
857
Interest and dividend income
40
13
Interest and other finance expense
(61)
(22)
Non-operational pension (cost) credit
7
36
Income from continuing operations before taxes
1,184
884
(1)
Includes impairment of certain assets.
(2)
Amount includes ABB Way process transformation costs of $30 million and $25 million for three months ended March 31, 2023 and 2022, respectively.
Total assets
(1)
($ in millions)
March 31, 2023
December 31, 2022
Electrification
13,001
12,993
Motion
6,832
6,565
Process Automation
4,672
4,598
Robotics & Discrete Automation
4,960
4,901
Corporate and Other
(2)
10,574
10,091
Consolidated
40,039
39,148
(1)
Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2)
At March 31, 2023, and December 31, 2022,
respectively, Corporate and Other includes $90 million and $96 million of assets in the Power Grids business which is reported as
discontinued operations (see Note 3). In addition, at March 31, 2023, Corporate and Other includes
assets held for sale of $525 million (see Note 3).
28
Q1 2023
FINANCIAL
INFORMATION
29
Q1 2023
FINANCIAL
INFORMATION
—
Supplemental Reconciliations
and Definitions
The following
reconciliations
and definitions
include
measures
which ABB
uses to
supplement
its Consolidated
Financial
Information
(unaudited)
which is
prepared
in accordance
with
United
States
generally
accepted
accounting
principles
(U.S.
GAAP).
Certain
of these
financial
measures
are, or
may be,
considered
non-GAAP
financial
measures
as defined
in the
rules of
the U.S.
Securities
and Exchange
Commission
(SEC).
While
ABB’s
management
believes
that the
non-GAAP
financial
measures
herein
are useful
in evaluating
ABB’s
operating
results,
this information
should
be considered
as supplemental
in nature
and not
as a substitute
for the
related
financial
information
prepared
in accordance
with U.S.
GAAP.
Therefore
these
measures
should
not be
viewed
in isolation
but considered
together
with
the Consolidated
Financial
Information
(unaudited)
prepared
in accordance
with
U.S. GAAP
as of and
for the
three
months
ended
March 31,
2023.
Comparable growth rates
Growth rates for certain key figures may be presented and discussed
on a “comparable” basis. The comparable growth rate measures growth
on a constant
currency basis. Since we are a global company,
the comparability of our operating results reported
in U.S. dollars is affected by foreign currency
exchange rate
fluctuations. We calculate the impacts from foreign currency
fluctuations by translating the current-year periods’ reported key
figures into U.S. dollar amounts using
the exchange rates in effect for the comparable periods
in the previous year.
Comparable growth rates are also adjusted for changes
in our business portfolio. Adjustments to our business
portfolio occur due to acquisitions, divestments,
or
by exiting specific business activities or customer markets. The adjustment
for portfolio changes is calculated as follows: where
the results of any business
acquired or divested have not been consolidated and reported for the
entire duration of both the current and comparable
periods, the reported key figures of such
business are adjusted to exclude the relevant key figures
of any corresponding quarters which are not comparable when
computing the comparable growth rate.
Certain portfolio
changes which do not qualify as divestments under
U.S. GAAP have been treated in a similar manner to
divestments. Changes in our portfolio
where we have exited certain business activities or customer markets
are adjusted as if the relevant business
was divested in the period when the decision to
cease business activities was taken. We do not adjust
for portfolio changes where the relevant business
has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth rates
of certain key figures to their respective comparable growth
rate.
Comparable growth rate reconciliation by Business Area
Q1 2023 compared to Q1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
4%
0%
5%
11%
5%
0%
16%
Motion
3%
5%
0%
8%
23%
7%
-1%
29%
Process Automation
25%
7%
23%
55%
-5%
5%
15%
15%
Robotics & Discrete Automation
-23%
3%
0%
-20%
28%
7%
0%
35%
ABB Group
1%
5%
3%
9%
13%
6%
3%
22%
30
Q1 2023
FINANCIAL
INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group
- Quarter
Q1 2023 compared to Q1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
1%
6%
3%
10%
14%
7%
3%
24%
The Americas
3%
0%
2%
5%
22%
1%
2%
25%
of which: United States
-4%
-1%
2%
-3%
25%
1%
2%
28%
Asia, Middle East and Africa
-2%
9%
4%
11%
2%
10%
4%
16%
of which: China
-12%
6%
3%
-3%
5%
8%
3%
16%
ABB Group
1%
5%
3%
9%
13%
6%
3%
22%
Regional comparable growth rate reconciliation by Business
Area - Quarter
Q1 2023 compared to Q1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
1%
4%
0%
5%
9%
5%
0%
14%
The Americas
-1%
0%
0%
-1%
21%
0%
0%
21%
of which: United States
-6%
0%
0%
-6%
23%
0%
0%
23%
Asia, Middle East and Africa
4%
11%
0%
15%
1%
11%
0%
12%
of which: China
-11%
7%
0%
-4%
0%
8%
0%
8%
Electrification
1%
4%
0%
5%
11%
5%
0%
16%
Q1 2023 compared to Q1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
6%
6%
-1%
11%
30%
7%
-1%
36%
The Americas
0%
1%
0%
1%
29%
0%
0%
29%
of which: United States
2%
0%
0%
2%
32%
0%
-1%
31%
Asia, Middle East and Africa
2%
9%
0%
11%
12%
10%
0%
22%
of which: China
-8%
7%
0%
-1%
3%
8%
0%
11%
Motion
3%
5%
0%
8%
23%
7%
-1%
29%
Q1 2023 compared to Q1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
44%
12%
32%
88%
-11%
5%
15%
9%
The Americas
29%
1%
17%
47%
14%
1%
15%
30%
of which: United States
-9%
0%
15%
6%
20%
0%
19%
39%
Asia, Middle East and Africa
5%
8%
21%
34%
-10%
6%
15%
11%
of which: China
16%
9%
27%
52%
8%
7%
22%
37%
Process Automation
25%
7%
23%
55%
-5%
6%
14%
15%
Q1 2023 compared to Q1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-21%
4%
0%
-17%
34%
7%
0%
41%
The Americas
-17%
-1%
0%
-18%
27%
0%
0%
27%
of which: United States
-23%
0%
0%
-23%
26%
0%
0%
26%
Asia, Middle East and Africa
-29%
6%
0%
-23%
22%
10%
0%
32%
of which: China
-31%
5%
0%
-26%
25%
11%
0%
36%
Robotics & Discrete Automation
-23%
3%
0%
-20%
28%
7%
0%
35%
31
Q1 2023
FINANCIAL
INFORMATION
Order backlog growth rate reconciliation
March 31, 2023 compared to March 31, 2022
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
19%
5%
0%
24%
Motion
18%
4%
0%
22%
Process Automation
11%
6%
4%
21%
Robotics & Discrete Automation
12%
4%
0%
16%
ABB Group
14%
6%
1%
21%
Other growth rate reconciliations
Q1 2023 compared to Q1 2022
Service orders growth rate
Services revenues growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
5%
5%
0%
10%
12%
5%
0%
17%
Motion
6%
6%
0%
12%
13%
7%
0%
20%
Process Automation
-16%
4%
23%
11%
-12%
4%
25%
17%
Robotics & Discrete Automation
10%
5%
0%
15%
22%
6%
0%
28%
ABB Group
-6%
5%
13%
12%
0%
5%
14%
19%
32
Q1 2023
FINANCIAL
INFORMATION
Operational EBITA as
% of operational revenues (Operational EBITA margin)
Definition
Operational EBITA margin
Operational EBITA margin is Operational
EBITA as a percentage of
operational revenues.
Operational EBITA
Operational earnings before interest, taxes and acquisition-related
amortization (Operational EBITA)
represents Income from operations excluding:
●
acquisition-related amortization (as defined below),
●
restructuring, related and implementation costs,
●
changes in the amount recorded for obligations related to divested
businesses occurring after the divestment date (changes
in obligations related to
divested businesses),
●
gains and losses from sale of businesses (including fair value adjustment
on assets and liabilities held for sale),
●
acquisition- and divestment-related expenses and integration costs,
●
certain other non-operational items, as well as
●
foreign exchange/commodity timing differences in income
from operations consisting of: (a) unrealized gains
and losses on derivatives (foreign
exchange, commodities, embedded derivatives), (b) realized
gains and losses on derivatives where the underlying hedged
transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/payables
(and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory,
compliance and legal costs, other income/expense relating
to the Power Grids joint
venture, certain asset
write downs/impairments and certain other fair
value changes, changes in estimates relating to opening balance
sheets of acquired
businesses (changes in pre-acquisition estimates), as well as
other items which are determined by management on
a case-by-case basis.
Operational EBITA is our measure of
segment profit but is also used by management to evaluate
the profitability of the Company
as a whole.
Acquisition-related amortization
Amortization expense on intangibles arising upon acquisitions.
Restructuring, related and implementation costs
Restructuring, related and implementation costs consists
of restructuring and other related expenses, as well as internal and external
costs relating to the
implementation of group-wide restructuring programs.
Operational revenues
The Company presents operational revenues solely for the purpose
of allowing the computation of Operational EBITA
margin. Operational revenues are Total
revenues adjusted for foreign exchange/commodity timing differences
in total revenues of: (i) unrealized gains and losses
on derivatives, (ii) realized gains and
losses on derivatives where the underlying hedged transaction
has not yet been realized, and (iii) unrealized foreign
exchange movements on receivables (and
related assets). Operational revenues are not intended to be an
alternative measure to Total
revenues, which represent our revenues measured
in accordance
with U.S. GAAP.
Reconciliation
The following tables provide reconciliations of consolidated Operational
EBITA to Net Income and Operational
EBITA Margin by business.
Reconciliation of consolidated Operational EBITA
to Net Income
Three months ended March 31,
($ in millions)
2023
2022
Operational EBITA
1,277
997
Acquisition-related amortization
(54)
(60)
Restructuring, related and implementation costs
(1)
(28)
(16)
Changes in obligations related to divested businesses
(3)
14
Acquisition- and divestment-related expenses and integration
costs
(19)
(59)
Certain other non-operational items
1
(34)
Foreign exchange/commodity timing differences in
income from operations
24
15
Income from operations
1,198
857
Interest and dividend income
40
13
Interest and other finance expense
(61)
(22)
Non-operational pension (cost) credit
7
36
Income from continuing operations before taxes
1,184
884
Income tax expense
(119)
(241)
Income from continuing operations, net of
tax
1,065
643
Loss from discontinued operations, net of tax
(5)
(11)
Net income
1,060
632
(1)
Includes impairment of certain assets.
33
Q1 2023
FINANCIAL
INFORMATION
Reconciliation of Operational EBITA
margin by business
Three months ended March 31, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,590
1,940
1,436
937
(44)
7,859
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(14)
4
13
2
(4)
1
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(1)
–
1
–
2
2
Unrealized foreign exchange movements
on receivables (and related assets)
(7)
(4)
(4)
(1)
(3)
(19)
Operational revenues
3,568
1,940
1,446
938
(49)
7,843
Income (loss) from operations
655
353
200
115
(125)
1,198
Acquisition-related amortization
22
8
1
20
3
54
Restructuring, related and
implementation costs
8
1
2
–
17
28
Changes in obligations related to
divested businesses
–
–
–
–
3
3
Acquisition- and divestment-related expenses
and integration costs
7
4
3
2
3
19
Certain other non-operational items
3
2
–
2
(8)
(1)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(15)
–
(2)
2
(7)
(22)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
–
2
–
3
5
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(3)
(2)
(1)
(1)
–
(7)
Operational EBITA
677
366
205
140
(111)
1,277
Operational EBITA margin (%)
19.0%
18.9%
14.2%
14.9%
n.a.
16.3%
In the three months ended March 31, 2023, certain other non-operational
items in the table above includes the following:
Three months ended March 31, 2023
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
(13)
(13)
Certain other fair values changes,
including asset impairments
1
1
–
1
(2)
1
Business transformation costs
(1)
4
–
–
1
29
34
Other non-operational items
(2)
1
–
–
(22)
(23)
Total
3
2
–
2
(8)
(1)
(1)
Amounts
include ABB Way process transformation costs of $30 million for the three months ended March 31, 2023.
34
Q1 2023
FINANCIAL
INFORMATION
Three months ended March 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,236
1,572
1,506
730
(79)
6,965
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(11)
4
(1)
2
(2)
(8)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
1
(3)
–
4
3
Unrealized foreign exchange movements
on receivables (and related assets)
–
(2)
3
3
(2)
2
Operational revenues
3,226
1,575
1,505
735
(79)
6,962
Income (loss) from operations
480
254
151
22
(50)
857
Acquisition-related amortization
28
8
1
21
2
60
Restructuring, related and
implementation costs
2
8
5
1
–
16
Changes in obligations related to
divested businesses
–
–
–
–
(14)
(14)
Acquisition- and divestment-related expenses
and integration costs
18
5
33
1
2
59
Certain other non-operational items
3
–
–
–
31
34
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(21)
(1)
6
3
(5)
(18)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
–
(3)
–
3
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
–
–
3
1
(3)
1
Operational EBITA
512
274
196
49
(34)
997
Operational EBITA margin (%)
15.9%
17.4%
13.0%
6.7%
n.a.
14.3%
In the three months ended March 31, 2022, certain other non-operational
items in the table above includes the following:
Three months ended March 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
(1)
(1)
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
35
35
Certain other fair values changes,
including asset impairments
–
–
–
–
(34)
(34)
Business transformation costs
(1)
1
–
–
–
25
26
Changes in pre-acquisition estimates
1
–
–
–
–
1
Other non-operational items
1
–
–
–
6
7
Total
3
–
–
–
31
34
(1)
Amounts
include ABB Way process transformation costs of $25 million for the three months ended March 31, 2022.
35
Q1 2023
FINANCIAL
INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total
debt less Cash and marketable securities.
Total debt
Total debt is the sum
of Short-term debt and current maturities of long-term
debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents,
Restricted cash (current and non-current)
and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
March 31, 2023
December 31, 2022
Short-term debt and current maturities of long-term debt
3,433
2,535
Long-term debt
5,230
5,143
Total debt
8,663
7,678
Cash and equivalents
3,438
4,156
Restricted cash - current
19
18
Marketable securities and short-term investments
1,380
725
Cash and marketable securities
4,837
4,899
Net debt
3,826
2,779
Net debt/Equity ratio
Definition
Net debt/Equity ratio
Net debt/Equity ratio is defined as Net debt divided by Equity.
Equity
Equity is defined as Total
stockholders’ equity.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2023
December 31, 2022
Total stockholders'
equity
12,831
13,187
Net debt (as defined above)
3,826
2,779
Net debt / Equity ratio
0.30
0.21
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA ratio is defined as Net debt divided by
EBITDA.
EBITDA
EBITDA is defined as Income from operations for the trailing
twelve months preceding the balance sheet date before depreciati
on and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2023
March 31, 2022
Income from operations for the three months ended:
June 30, 2022 / 2021
587
1,094
September 30, 2022 / 2021
708
852
December 31, 2022 / 2021
1,185
2,975
March 31, 2023 / 2022
1,198
857
Depreciation and Amortization for the three months
ended:
June 30, 2022 / 2021
207
230
September 30, 2022 / 2021
198
220
December 31, 2022 / 2021
199
216
March 31, 2023 / 2022
191
210
EBITDA
4,473
6,654
Net debt (as defined above)
3,826
2,772
Net debt / EBITDA
0.9
0.4
36
Q1 2023
FINANCIAL
INFORMATION
Net working capital as a percentage of revenues
Definition
Net working capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated
as Net working capital divided by Adjusted revenues for the
trailing twelve months.
Net working capital
Net working capital is the sum of (i) receivables, net, (ii) contract
assets, (iii) inventories, net, and (iv) prepaid expenses; less
(v) accounts payable, trade, (vi)
contract liabilities (including non-current amounts)
and (vii) other current liabilities (excluding primarily:
(a) income taxes payable, (b) current derivative liabilities,
(c)
pension and other employee benefits, (d) payables under the share
buyback program, (e) liabilities related to certain other restructuring
-related activities and
(f) liabilities related to the divestment of the Power Grids business
); and including the amounts related to these accounts which have been
presented as either
assets or liabilities held for sale but excluding any amounts included
in discontinued operations.
Adjusted revenues for the trailing twelve months
Adjusted revenues for the trailing twelve months includes total revenues
recorded by ABB in the twelve months preceding the relevant
balance sheet date adjusted
to eliminate revenues of divested businesses and the estimated
impact of annualizing revenues of certain acquisitions
which were completed in the same trailing
twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2023
March 31, 2022
Net working capital:
Receivables, net
7,174
6,851
Contract assets
1,009
1,072
Inventories, net
6,269
5,372
Prepaid expenses
304
289
Accounts payable, trade
(4,945)
(4,830)
Contract liabilities
(2,339)
(2,080)
Other current liabilities
(1)
(3,444)
(3,213)
Net working capital in assets and liabilities held for sale
136
–
Net working capital
4,164
3,461
Total revenues for the three months
ended:
June 30, 2022 / 2021
7,251
7,449
September 30, 2022 / 2021
7,406
7,028
December 31, 2022 / 2021
7,824
7,567
March 31, 2023 / 2022
7,859
6,965
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(340)
(363)
Adjusted revenues for the trailing twelve months
30,000
28,646
Net working capital as a percentage of revenues (%)
13.9%
12.1%
(1)
Amounts exclude $668 million and $901 million at March 31, 2023 and 2022, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities, (c) pension
and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain restructuring-related activities and (f) liabilities related to the divestment of
the Power Grids business.
37
Q1 2023
FINANCIAL
INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash
flow divided by Adjusted net income attributable to
ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income
attributable to ABB adjusted for: (i) impairment of
goodwill, (ii) losses from extinguishment
of
debt, and (iii) gains arising on the sale of both the Hitachi
Energy Joint Venture and Power
Grids business, the latter being included in discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities
adjusted for: (i) purchases of property,
plant and equipment and intangible assets,
and (ii)
proceeds from sales of property,
plant and equipment.
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow
recorded by ABB in the twelve months preceding the
relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income
recorded by ABB (as adjusted) in the twelve months
preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
March 31, 2023
December 31, 2022
Net cash provided by operating activities – continuing
operations
2,181
1,334
Adjusted for the effects of continuing operations:
Purchases of property, plant and
equipment and intangible assets
(726)
(762)
Proceeds from sale of property, plant and
equipment
123
127
Free cash flow from continuing operations
1,578
699
Net cash used in operating activities – discontinued operations
(39)
(47)
Free cash flow
1,539
652
Adjusted net income attributable to ABB
(1)
2,869
2,442
Free cash flow conversion to net income
54%
27%
(1)
Adjusted net income attributable to ABB for the year ended December 31, 2022, is adjusted to exclude the gain on the sale of Hitachi Energy Joint Venture of $43 million and
reductions to the gain on the sale of Power Grids of $10 million.
Reconciliation of the trailing twelve months to
March 31, 2023
Continuing operations
Discontinued
operations
($ in millions)
Net cash provided by
continuing operating
activities
Purchases of
property, plant and
equipment and
intangible assets
Proceeds
from sale of property,
plant and equipment
Net cash provided
by (used in)
discontinued
operating activities
Adjusted net income
attributable to ABB
(1)
Q2 2022
385
(151)
31
(3)
383
Q3 2022
793
(165)
19
(2)
362
Q4 2022
720
(259)
42
(33)
1,088
Q1 2023
283
(151)
31
(1)
1,036
Total for the trailing twelve
months to March 31, 2023
2,181
(726)
123
(39)
2,869
(1)
Adjusted net income attributable to ABB for Q2, Q3 and Q4 of 2022, is adjusted to exclude reductions to the gain on the sale of Power Grids of $4 million, $2 million and $(1) million,
respectively.
In addition, Q4 2022 is also adjusted to exclude the gain on the sale of Hitachi Energy Joint Venture of $43 million.
38
Q1 2023
FINANCIAL
INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income
less Interest and other finance expense.
Reconciliation
Three months ended March 31,
($ in millions)
2023
2022
Interest and dividend income
40
13
Interest and other finance expense
(61)
(22)
Net finance expenses
(21)
(9)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total
revenues.
Reconciliation
Three months ended March 31,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
4,141
3,590
1.15
4,112
3,236
1.27
Motion
2,262
1,940
1.17
2,202
1,572
1.40
Process Automation
2,113
1,436
1.47
1,692
1,506
1.12
Robotics & Discrete Automation
1,001
937
1.07
1,308
730
1.79
Corporate and Other
(incl. intersegment eliminations)
(67)
(44)
n.a.
59
(79)
n.a.
ABB Group
9,450
7,859
1.20
9,373
6,965
1.35
39
Q1 2023
FINANCIAL
INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box
8131
8050
Zurich
Switzerland
Tel:
+41 (0)43
317 71
11
www.abb.com
—
ZURICH, SWITZERLAND, APRIL
25,
2023
ABB plans to delist ADRs from NYSE
ABB is planning to delist its
American Depositary
Receipts (ADRs) from the
New York Stock Exchange
(NYSE),
and ultimately to seek to deregister
its ADRs and
the underlying shares
under the US Securities
Exchange Act
of 1934 (the Exchange
Act). In connection with the delisting
of its ADRs from the
NYSE, ABB
intends to convert
its current sponsored Level II
ADR program into a sponsored
Level I ADR program,
which would give US
investors a continued investment
option, in addition to the
ordinary ABB share.
The company’s shares
will
remain listed on the SIX Swiss
Exchange (SIX) and the Nasdaq
Stockholm due to the company’s
heritage.
ABB was listed on the NYSE in
April 2001. Investor access
to international equity markets
has significantly
changed in recent times with digital
trading on multiple platforms
providing many new possibilities
to investors.
Consequently, the need to be
listed on as many as three
equity capital markets has decreased.
Trading of ABB shares
is currently conducted predominantly
on the SIX and via electronic
trading platforms.
ABB expects that reducing the
number of listings will support
internal simplification and efficiency
while the
company remains fully committed
to an open and frequent
dialog with US investors, as well
as maintaining the
highest standards of corporate
governance and transparent
financial reporting.
ABB plans to file the required
Form 25 with the SEC on or
around May 12, 2023.
The last day of trading of
ABB’s ADRs on
the NYSE is expected to be
on or around May 22, 2023,
and the delisting is expected
to
become effective on or around
May 23, 2023.
Once the delisting is effective,
ABB’s ADRs will
no longer be traded
on the NYSE but will instead be traded
on
the US over-the-counter (OTC)
market. In connection
with the delisting,
ABB will establish a Level I
ADR
program to allow investors to continue
to hold their
ABB shares in the form
of ADRs. Once the
12-month US
Average Daily Trading Volume
(ADTV) in
ABB ADRs has
fallen to less than 5 percent
ADTV worldwide,
ABB
intends to apply for deregistration
with the SEC and for termination
of its equity reporting obligations
under the
Exchange Act.
Timo Ihamuotila, Chief Financial
Officer of
ABB. “Over the last years, capital
market access has moved
strongly
towards trading on digital platforms.
Furthermore,
ABB has a strong balance
sheet and good capital markets
access to facilitate both organic
and inorganic growth,
while also returning cash to
shareholders.
As a result,
we believe three separate stock market
listings are no longer necessary
for us. The delisting and deregistration
in the US would be yet another
step towards further simplification
and efficiency at
ABB. I would also like to
emphasize that we remain fully
committed to serve the
US market with our leading, sustainable
and resource-
efficient solutions for electrification
and automation.”
The US is ABB’s
largest market representing
nearly a quarter of
Group revenues and since 2010,
ABB has
invested a combined $14 billion
in the US with acquisitions,
plant expansions, operational
improvements, state-
of-the-art equipment,
products, and people. With approx.
20,000 employees in more than
40 manufacturing
and distribution facilities,
ABB is investing, growing, and
serving across
America through industries
that create
jobs, encourage innovation, and
achieve a more productive,
sustainable future.
1/2
ABB
is a technology leader in electrification
and automation,
enabling a more sustainable and
resource-
efficient future. The
company’s solutions connect engineering
know-how and software to
optimize how things
are manufactured, moved,
powered and operated.
Building on more than 130
years of excellence,
ABB’s
~105,000 employees are
committed to driving innovations
that accelerate industrial transformation.
www.abb.com
—
For more information please
contact:
Media Relations
Phone: +41 43 317 71 11
Email: media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317 71 11
Email: investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Important notice about
forward-looking information
This press release includes forward-looking
information and statements
which are based on current
expectations, estimates and projections
about the factors that
may affect our future performance,
including 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 “intends”,
“expects”, “plans”, 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 or anticipated transactions.
Some important factors
that could cause such differences
include, among
others, business risks associated
with the COVID-19 pandemic,
the volatile global economic environment
and
political conditions including
the conflict in Ukraine, 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 foregoing list of factors is not
exclusive and
undue reliance should not be
placed upon any forward-looking
statements, including projections,
which speak
only as of the date made.
ABB PLANS TO DELIST ADRS FROM NYSE
2/2
January 1 — March 31, 2023
ABB Ltd announces that the following
members of the Executive Committee
or Board of Directors of ABB
have purchased,
sold or been granted ABB’s registered shares, call options
and warrant appreciation rights (“WARs”), in the following amounts:
Name
Date
Type of Instrument
Received*
Purchased
Sold
Price / Instrument
Björn Rosengren
February 01, 2023
Share
12,742
CHF
31.39
Tarak Mehta
February 03, 2023
Share
60,000
CHF
31.97
Peter Terwiesch
February 03, 2023
Share
42,940
CHF
31.38
Key:
* Received instruments were delivered
as part of the ABB Ltd Director’s or
Executive Committee Member’s
compensation or as compensation
for foregone
benefits
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant
has duly caused this report to be signed
on
its behalf by the undersigned, thereunto
duly authorized.
ABB LTD
Date: April 25, 2023.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: April 25, 2023.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance