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 February 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.
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is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule
101(b)(7):
⬜
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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
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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
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is also thereby furnishing
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pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
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⬜
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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 February
2, 2023 titled “Q4 2022 results”.
2.
Q4 2022 Financial Information.
3.
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, FEBRUARY 2,
2023
Q4 2022 results
Strong performance
improvements in Q4
and
long-term margin target
achieved early
Q4 2022
●
Orders $7.6 billion,
-8%; comparable
1
+2%
●
Revenues $7.8 billion,
+3%; comparable +16%
●
Income from operations
$1,185 million; margin 15.1%
●
Operational EBITA
1
$1,146 million;
margin
1
14.8%
●
Basic EPS $0.61
●
Cash flow from operating
activities was $687
million and from
operating activities
in continuing operations
it was
$720 million, including
adverse impact of approximately
$315
million due to earlier announced
settlements for Kusile
project.
FY 2022
●
Orders $34.0 billion,
+7%; comparable
1
+16%
●
Revenues $29.4 billion,
+2%; comparable +12%
●
Income from operations
$3,337 million; margin 11.3%
●
Operational EBITA
1
$4,510 million;
margin
1
15.3%
●
Basic EPS $1.30
●
Cash flow from operating
activities was $1,287
million and
from operating activities
in continuing operations
it was
$1,334 million
—
“2022 was another successful year for ABB,
including a further streamlining of our business
portfolio and achieving our margin target earlier than expected.
We have made ABB more
resilient. In 2023, regardless of current market uncertainty, we want to show that we can
continuously deliver an Operational EBITA margin of
at least 15%.”
Björn Rosengren
, CEO
Ad hoc Announcement pursuant to Art.
53 Listing Rules of SIX Swiss Exchange
—
Q4 2022
Full year
Press Release
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
1
FY 2022
FY 2021
US$
Comparable
1
Orders
7,620
8,257
-8%
2%
33,988
31,868
7%
16%
Revenues
7,824
7,567
3%
16%
29,446
28,945
2%
12%
Gross Profit
2,658
2,397
11%
9,710
9,467
3%
as % of revenues
34.0%
31.7%
+2.3 pts
33.0%
32.7%
+0.3 pts
Income from operations
1,185
2,975
-60%
3,337
5,718
-42%
Operational EBITA
1
1,146
988
16%
28%
3
4,510
4,122
9%
18%
3
as % of operational revenues
1
14.8%
13.1%
+1.7 pts
15.3%
14.2%
+1.1 pts
Income from continuing operations, net of tax
1,168
2,703
-57%
2,637
4,730
-44%
Net income attributable to ABB
1,132
2,640
-57%
2,475
4,546
-46%
Basic earnings per share ($)
0.61
1.34
-55%
2
1.30
2.27
-43%
2
Cash flow from operating activities
4
687
1,020
-33%
1,287
3,330
-61%
Cash flow from operating activities in continuing
operations
720
1,033
-30%
1,334
3,338
-60%
1
For a reconciliation of non-GAAP measures, see “supplemental
reconciliations and definitions” in the attached
Q4 2022 Financial Information.
2
EPS growth rates are computed using unrounded amounts.
2021 numbers include the impact related to the
divestment of Mechanical Power Transmission.
3
Constant currency (not adjusted for portfolio
changes).
4
Amount represents total for both continuing and discontinued
operations.
ABB
INTERIM
REPORT
I
Q4
2022
2
In the fourth quarter
of 2022, we improved comparable
orders
and revenues, we increased
our Operational EBITA
by 16%,
raised our Operational
EBITA margin by
170 basis points and
lifted ROCE to 16.5%
for 2022,
to within our target range.
All in
all, this was a good
achievement in my view.
Customer activity improved
slightly or remained stable
in most
customer segments, except
for declines related to residential
construction and discrete
manufacturing.
The market outlook for
discrete manufacturing
remains solid, although
the fourth
quarter was adversely
impacted by customers
normalizing order
patterns following a
period of pre-ordering triggered
by the long
delivery lead times
in a strained value chain.
This weighed on
order intake in Robotics
& Discrete Automation,
while the other
three business areas
remained stable or
increased
comparable
orders. Revenues were
strong and increased by 3%
(16%
comparable). The Americas
region was the growth engine
for
orders, while Europe
reversed and Asia,
Middle East and Africa
remained overall largely
stable despite a decline
in China. The
escalating Covid-related
situation in China somewhat
slowed
down local business activity
towards the end of the period.
Our
priority is to keep our
people safe.
Our strong price execution
combined with increased volumes
supported the higher
gross margin and drove the
improvement
of 170 basis points
in the Operational EBITA
margin to 14.8%,
the strongest fourth
quarter margin in several years.
This
resulted in 2022
being a record year for
ABB,
in recent history,
with an Operational
EBITA margin
of 15.3%. We achieved
good
price management,
executed well on increased
volumes with
some additional support
from unusually low corporate
costs. I
am pleased how the divisions
managed challenges
like supply
chain constraints, a
tight labor market, Covid
-related lock downs
in China and a high
inflationary environment.
Cash flow of $687
million in the quarter
is the one area which
did not quite meet our
expectations as the depletion
of net
working capital was
slower than anticipated.
This will be an
important focus area
for us near term as
we deliver against our
high order backlog.
As earlier announced, the
finalization of the
Kusile-related issues
weighed on cash flow by
approximately
$315
million, while the closing of
the divestment of Power Grids
generated a net
cash contribution in investing
activities of $1.4
billion.
We remain committed
to our plans to separately
list our E-mobility
business,
subject to constructive
market conditions.
Meanwhile,
we have closed by
the end of January the pre
-IPO private
placement of approx
imately CHF525 million
for newly issued
shares to new minority
investors representing
approximately 20%
ownership of the
E-mobility business. The
proceeds will be used
to capture E-mobility’s
growth
potential through organic
and M&A investments
in hardware and
software.
Just after the close
of the fourth quarter,
we progressed with the
final part of our announced
divisional exits by signing
an
agreement to divest
the Power Conversion division
in the
Electrification business
area. From here on,
we will continue to
review our business portfolio
on a product group
level within our
current divisions.
One example is our decision
to initiate the exit
of the emergency lighting
business within the
Smart Buildings
division in the Electrification
business area during 2023.
By partnering with
the Swedish mining and
smelting company
Boliden to build a strategic
co-operation to use low
carbon
footprint copper in our
electromagnetic stirring
(EMS) equipment
and high-efficiency
electric motors, we took
another step towards
our 2030 target of having
a circular approach in
at least 80
percent of our products
and solutions. The aim is to
reduce
greenhouse gas
(GHG) emissions while driving
the transition to a
more circular economy.
Looking into 2023,
we currently do not ant
icipate a major set-back
in demand, although
the high inflationary environment
adds
uncertainty.
Comparable order growth,
at least in the first half of
the year, should
be somewhat hampered by
last year’s very high
order level coupled
with a normalization of customers’
order
pattern after a period of
pre-ordering in times of
a strained value
chain. I expect comparable
revenue growth to be above
5%,
supported by backlog
execution. Cash flow
should benefit from us
working down the net working
capital, and we should also
have
less adverse items
impacting comparability.
I view 2023 as a
good opportunity for
ABB to prove that we can
continuously
deliver an annual
Operational EBITA margin
of at least 15%.
Considering improving
performance, robust cash
flow and a solid
balance sheet, the
Board of Directors proposes
an ordinary
dividend of CHF0.84 per
share. Up from CHF0.82 in
the previous
year and in line with
the long-term ambition
of a rising sustainable
dividend per share
over time, while still prioritizing
a solid balance
sheet to support our
growth ambitions. We
plan to continue with
share buybacks for
full year of 2023.
Björn Rosengren
CEO
In the
first quarter of 2023
, we anticipate double-digit
comparable revenue
growth to support some improvement
in
the Operational EBITA
margin, year-on-year.
In full-year
2023, despite current market
uncertainty,
we
anticipate comparable
revenue growth to be
above 5% and we
expect to again achieve
our long-term target of
Operational
EBITA margin
of at least 15%.
CEO summary
Outlook
ABB
INTERIM
REPORT
I
Q4
2022
3
In the fourth quarter
,
order intake declined
by 8% (up 2%
comparable) year
-on-year to $7,620 million
with a favorable
development in most
of the process-related
segments, while
certain parts of the
short-cycle business declined
as customers
normalize order patterns.
When looking through
the adverse impact from
changes in
exchange rate, orders
remained stable or increased
in three out
of four business
areas. Robotics & Discrete
Automation
declined due to a normalization
of customers’ order patterns
following a period of pre
-buying due to a strained supply
chain
which extended delivery
lead times. This was predominantly
related to the machine
builder segment, while robotics
demand
remained broadly stable
year-on-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 residential
-related demand, while
commercial
construction was robust.
Demand in the process
-related business was robust
in refining,
and held up well also
for oil & gas, water
& wastewater,
power
generation and pulp
& paper.
Slightly softer momentum
was noted in metals,
where
customers seemingly
are concerned about
elevated energy
prices.
The strongest order
momentum was reported
in the Americas
on an increase of 10%
(15% comparable), supported
by a
strong development
in the US in all business areas.
Orders in
Europe decreased
by 17% (5% comparable),
including a
double-digit decline noted
in the large German
market. Asia,
Middle East and
Africa reported a decline of
15% (2%
comparable), including
a decline of 22% (12% comparable)
in
China. Some softening
of demand in China was
noted towards
the end of the quarter,
coinciding with the local
intensifying of
the Covid situation.
A strong momentum in
deliveries, including a good
release from
the order backlog, resulted
in revenues increasing by
3% (16%
comparable) to $7,824
million. Impacts from strong
increases in
both volume and price
more than offset adverse
effects from
changes in exchange
rates and portfolio changes,
with
contribution from all
business areas. So far,
the ABB operations
in China have maintained
production at close to
normal level
without any major impact
from the intensified
Covid-related
situation.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q4 2022
Q4 2021
US$
Comparable
Europe
2,604
3,138
-17%
-5%
The Americas
2,898
2,640
10%
15%
Asia, Middle East
and Africa
2,118
2,479
-15%
-2%
ABB Group
7,620
8,257
-8%
2%
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
2%
16%
FX
-8%
-10%
Portfolio changes
-2%
-3%
Total
-8%
3%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q4 2022
Q4 2021
US$
Comparable
Europe
2,766
2,756
0%
16%
The Americas
2,554
2,198
16%
22%
Asia, Middle East
and Africa
2,504
2,613
-4%
10%
ABB Group
7,824
7,567
3%
16%
ABB
INTERIM
REPORT
I
Q4
2022
4
Gross profit
Gross profit increased
strongly by 11
%
(22%
constant currency) to
$2,658 million, supported
by a significant gross
margin
improvement of
230 basis points to 34.0
%. Gross margin improved
materially in all business
areas.
Income from operations
Income from operations
amounted to $1,185 million,
declining by
60% (56% constant
currency). Compared with
last year, earnings
were significantly supported
by the improved operational
performance, with some
additional tailwind from
a net positive
impact related to the non
-core business. This was however
more
than offset by the
impact of streamlining the
business portfolio, as
last year’s period included
the $2.2 billion book gain
related to the
completion of the divestment
of the Mechanical Power
Transmission
division.
Operational EBITA
Significant contribution
from successful price
management and
good operational execution
of increased volumes
were key drivers
to the improvement
in Operational EBITA.
The strong price
execution more than offset
inflationary impacts in commodities,
freight and labor.
Selling, general and administrative
expenses
declined in relation
to revenues. The operational
improvements
more than offset
the adverse impact from changes
in exchange
rates, resulting in an
Operational EBITA of
$1,146 million, an
increase of 16% (28%
local currency) year-on-year.
Operational
EBITA in Corporate
and Other improved by
$36 million
to -$72 million.
Net finance expenses
Net finance expense
was $1 million compared
with $26 million a
year ago. The primary
driver for the unusually
low quarterly amount
was a reversal of interest
charges related to
income tax risks.
Income tax
Income tax expense
was $29 million with an effective
tax rate of
2.4%, including approximately
20% impact from a release
of
valuation allowances
on deferred tax assets
due mainly to an
improved business
performance in the US, as
well as
approximately 3% impact
from a favorable resolution
of certain prior
year tax matters.
Net income and earnings
per share
Net income attributable
to ABB was $1,132 million
and decreased by
57%, as the last year period
included the book gain
on the
divestment of the
Mechanical Power Transmission
division. This
resulted in basic earnings
per share of $0.61,
a decline from $1.34
last year.
Earnings
ABB
INTERIM
REPORT
I
Q4
2022
5
Net working capital
Net working capital
amounted to $3,216 million,
increasing
year-on-year from $2,303
million but declining sequentially
from $3,407 million. The sequential
decrease reflects the
total impact from higher
trade payables and other current
liabilities offset
by the increase in receivables
triggered by
high revenue growth and
higher inventories.
That said,
inventory volumes
declined sequentially,
however changes
in exchange rates inflated
the total.
Net working capital as a
percentage of revenues
1
was 11.1%.
Capital expenditures
Purchases of property,
plant and equipment and
intangible
assets amounted to
$259 million.
Net debt
Net debt
1
amounted to $2,779 million
at the end of the
quarter,
and increased from a net
cash position of $98 million,
year-on-year.
Sequentially,
it declined from $4,117
million,
mainly due to the $1.4
billion net proceeds received
from the
sale of our remaining
19.9% equity stake in
the Hitachi
Energy joint venture
in December.
Cash flows
Cash flow from operating
activities was $687
million and
declined year-on-year
from $1,020 million. An
improvement in
underlying operational
performance was more
than offset by a
lower reduction in net
working capital, mainly
due to the
increase in trade receivables
and a less favorable
timing of
payments of trade payables,
despite stronger inventory
management. In addition,
the current quarter
was adversely
impacted by the
cash outflow from the earlier
announced Kusile
settlement
of approximately $315 million,
while the prior year
included approximately
$300 million cash paid for
income taxes
related to the sale of
the Mechanical Power Transmission
business.
Share buyback program
ABB launched a new
share buyback program
of up to $3 billion
on April 1, 2022.
As of December 31, 2022,
we have returned
approximately $0.5
billion (approximately 18
million shares) in
excess of the planned
return of the Power Grids
proceeds,
which were fully
returned during the third
quarter.
During the
fourth quarter,
10,320,000 shares were
repurchased on the
second trading line
for approximately $300
million. The total
number of ABB Ltd’s
issued shares is 1,964,745,075
,
after the
cancellation of 88,403,189
shares in June, as approved
at
ABB's 2022 AGM.
($ millions,
unless otherwise indicated)
Dec. 31
2022
Dec. 31
2021
Short term debt and current
maturities of long-term debt
2,535
1,384
Long-term debt
5,143
4,177
Total debt
7,678
5,561
Cash & equivalents
4,156
4,159
Restricted cash - current
18
30
Marketable securities and
short-term investments
725
1,170
Restricted cash - non-current
–
300
Cash and marketable securities
4,899
5,659
Net debt (cash)*
2,779
(98)
Net debt (cash)* to EBITDA ratio
0.67
(0.01)
Net debt (cash)* to Equity ratio
0.21
(0.01)
*
At Dec. 31, 2022 and Dec. 31, 2021, net debt(cash)
excludes net pension (assets)/liabilities of
$(114) million and $45 million, respectively.
Balance sheet & Cash flow
ABB
INTERIM
REPORT
I
Q4
2022
6
Orders and revenues
Demand was stable
or improved in most customer
segments
year-on-year,
except for in residential
building.
Order intake
amounted to $3,565
million and including the adverse
impact
from changes in exchange
rates it declined by 2%
(up 6%
comparable).
●
Customer activity in
the Americas was very
strong driven by
the US order increase
of 25%, year-on-year.
Order intake in
Europe and Asia,
Middle East and Africa declined
by 17%
and 14% respectively,
but the comparable drop
of 4% in both
regions was materially
softer. As the
quarter progressed,
business activity
in China was increasingly
hampered by the
intensifying Covid-related
situation.
●
A smooth supply chain
supported order backlog deliveries,
a
solid current demand
in the flow-business and
strong price
execution all contributed
to the high revenue growth
of 6%
(16% comparable)
to $3,663 million. The positive
development was broad
across the divisions.
●
Division Smart Building
s
has decided to exit
its emergency
lighting business as
the strategic fit with energy
distribution
and home & building automation
is limited. This business
generates revenues
of approximately $160 million,
and the
divestment process
will be initiated in the coming
months.
●
Just after the close
of the fourth quarter,
an agreement was
signed to divest the
Power Conversion division
for $505 million in
cash. The deal is expected
to close in the second half
of 2023.
●
As from the first
quarter 2023 and in preparation
of a planned
separate listing, the
E-mobility division will no
longer be reported
as part of Electrification,
but as a sub-segment
in Corporate and
other.
Profit
By leveraging on high
comparable growth, the
Operational EBITA
increased by 13%,
significantly offsetting
the adverse impacts from
changes in exchange
rates. Operational EBITA
margin improved by
90 basis points to 15.7%,
despite a slightly negative
divisional and
geographical mix in
revenues.
●
Benefits from a strong
price execution were
a key driver to the
earnings improvement
and more than offset
year-on-year cost
increases related to
raw materials, freight and
labor.
●
Strong execution of
increased volumes improved
cost absorption
in production overall.
●
The higher volumes
and pricing more than offset
a somewhat
adverse divisional mix
triggered by higher system
-related
deliveries as Distribution
Solutions executed the order
backlog,
as well as some
margin pressure related to
lower volumes in
parts of the high
margin residential building busin
ess.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
6%
16%
FX
-8%
-10%
Portfolio changes
0%
0%
Total
-2%
6%
—
Electrification
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
3,565
3,638
-2%
6%
15,901
14,381
11%
17%
Order backlog
6,933
5,458
27%
33%
6,933
5,458
27%
33%
Revenues
3,663
3,445
6%
16%
14,105
13,187
7%
14%
Operational EBITA
572
507
13%
2,328
2,121
10%
as % of operational revenues
15.7%
14.8%
+0.9 pts
16.5%
16.1%
+0.4 pts
Cash flow from operating activities
804
715
12%
1,887
2,181
-13%
No. of employees (FTE equiv.)
52,300
50,800
3%
ABB
INTERIM
REPORT
I
Q4
2022
7
Orders and revenues
Order intake amounted
to $1,649 million and declined
by 11%
(0% comparable). The
development was hampered
by fewer
project orders received
,
although the product business
improved at a mid-single
digit rate.
●
Orders in Europe declined
by 26% (15% comparable)
from a high comparable
last year when a large Traction
order was booked.
The Americas declined
by 7% (up 5%
comparable) supported
primarily by the drives business,
which more than offset
a somewhat weaker momentum
in
the US motor business.
Asia, Middle East and Africa
had
the strongest momentum
at 5% (16% comparable)
including China at a
low single-digit growth rate.
Momentum in China
was somewhat impacted by
the
intensified Covid-related
situation.
●
Solid execution of the
order backlog contributed
to the
strong volume growth
in revenues which in total
improved
by 6% (20% comparable).
Comparable growth was
the
strongest in the syste
ms-related business.
Profit
Strong operational
execution of increased volume
s
and
pricing triggered a 130
basis point improvement
in the
Operational EBITA
margin to 17.4%. Business
performance
strongly outweighed
the adverse changes in exchange
rates, resulting in earnings
increase of 14% (26% in
local
currency).
●
Strong pricing contributed
materially to comparable
growth, and more than
offset the adverse impacts
from
cost inflation in commodities
and labor.
●
An improved supply
chain facilitated volumes
being
released from the order
backlog which triggered
improved
cost absorption in production,
year-on-year.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
0%
20%
FX
-8%
-11%
Portfolio changes
-3%
-3%
Total
-11%
6%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
1,649
1,843
-11%
0%
7,896
7,616
4%
20%
Order backlog
4,726
3,749
26%
34%
4,726
3,749
26%
34%
Revenues
1,845
1,735
6%
20%
6,745
6,925
-3%
14%
Operational EBITA
318
278
14%
1,163
1,183
-2%
as % of operational revenues
17.4%
16.1%
+1.3 pts
17.3%
17.1%
+0.2 pts
Cash flow from operating activities
346
416
-17%
853
1,362
-37%
No. of employees (FTE equiv.)
21,100
20,100
5%
ABB
INTERIM
REPORT
I
Q4
2022
8
Orders and revenues
Robust customer activity
supported a solid order
momentum in
all divisions on a comparable
basis, although this
was more
than offset by changes
in exchange rates and business
portfolio
which resulted in a
total order decline
of 8% (up 11%
comparable).
●
Customer activity was
particularly strong in marine
& ports,
mining and refining
and renewables, but held up
well also for
oil & gas, pulp & paper,
water & wastewater and power
generation. Slightly
softer momentum was
noted in metals,
where customers seemingly
are concerned about
elevated
energy prices. Service
orders decreased by
21% (up 4
comparable) with the
total order decline weighed
down
primarily by portfolio changes
on the back of the spin
-off of
Accelleron.
●
The growth engine
for orders was the Americas
which
improved by 11%
(22%
comparable). Europe declined
by 9%
(up 15%
comparable).
Asia, Middle East and
Africa dropped
by 21% (2% comparable),
impacted by a high comparable
due to a larger order
booked last year.
In China, only a slight
slow-down in business
activity due to the escalating
Covid-
related situation was noted
towards the end of the quarter.
●
There was a good flow
of customer deliveries in virtually
all
divisions, although
revenue growth declined
in total by 14%
(up 6% comparable) hampered
by the very high base level
in
last year’s quarter,
changes in exchange rates
as well as the
absence of the exited
Accelleron business
in the fourth
quarter 2022.
Profit
Through improved
operational performance
in virtually all
divisions the business
area managed to almost
fully offset the
adverse margin impact
stemming from the exit
of the high-
margin Accelleron
business,
resulting in an Operational
EBITA
margin of 13.2%.
●
Gross margin improvement
was the main contributor
to strong
operational performance
supported by growth
in the digital
businesses and better
project execution.
●
The now exited Accelleron
business supported last
year’s
margin by 160 basis points.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
11%
5%
FX
-8%
-8%
Portfolio changes
-11%
-11%
Total
-8%
-14%
—
Process Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
1,746
1,898
-8%
11%
6,825
6,779
1%
11%
Order backlog
6,229
6,079
2%
16%
6,229
6,079
2%
16%
Revenues
1,551
1,805
-14%
6%
6,044
6,259
-3%
7%
Operational EBITA
203
247
-18%
848
801
6%
as % of operational revenues
13.2%
13.7%
-0.5 pts
14.0%
12.8%
+1.2 pts
Cash flow from operating activities
205
370
-45%
675
1,062
-36%
No. of employees (FTE equiv.)
20,100
22,000
-8%
ABB
INTERIM
REPORT
I
Q4
2022
9
Orders and revenues
Following a period
of elevated order levels
when customers
pre-ordered in response
to a strained supply chain,
growth in
the fourth quarter was
impacted by a normalization
of order
patterns in anticipation
of shorter delivery lead
times. Order
intake
declined by 27% (19% comparable).
●
The order decline from
a very high comparable
last year was
significant in the
Machine Automation division,
while Robotics
reported a virtually
stable development for
comparable
orders.
●
There were positive
developments
in the automotive and
electronics segments.
The adverse impact from
the order
normalization pattern
was predominantly noted in
the
machine builder
segment but also to some
extent in general
industry and areas
of food and beverage, pharmaceuticals
as
well as consumer packaged
goods.
●
Order intake declined
in all regions at a double-digit
rate,
hampered by the broad
adverse development in
Machine
Automation.
●
Improved access to
components supported
a release of
volumes from the order
backlog resulting in the
high revenue
growth of 12% (23% comparable),
with strong contribution
from both divisions.
The order backlog of $2.7
billion
facilitates near-term revenue
generation.
Profit
Operational EBITA
doubled year
-on-year and amounted
to
$125 million, supported
by higher production output
which
triggered a 590 basis
point margin improvement
to 14.0%.
●
Significantly higher
volumes in production improved
cost
absorption and were
the main driver in the strong
earnings increase.
●
Contribution from strong
price development
more than
offset cost inflation
in commodities and labor.
●
Earnings benefitted
from a slight positive product
mix
impact stemming from higher
share of revenues from
the
high margin product
business.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
-19%
23%
FX
-8%
-11%
Portfolio changes
0%
0%
Total
-27%
12%
—
Robotics & Discrete Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
798
1,100
-27%
-19%
4,116
3,844
7%
15%
Order backlog
2,679
1,919
40%
48%
2,679
1,919
40%
48%
Revenues
891
799
12%
23%
3,181
3,297
-4%
4%
Operational EBITA
125
64
95%
340
355
-4%
as % of operational revenues
14.0%
8.1%
+5.9 pts
10.7%
10.8%
-0.1 pts
Cash flow from operating activities
105
129
-19%
214
374
-43%
No. of employees (FTE equiv.)
10,700
10,600
0%
ABB
INTERIM
REPORT
I
Q4
2022
10
Quarterly highlights
●
ABB is working with Boliden,
the Swedish mining and
smelting company,
to build a strategic co-operation
to use
low carbon footprint
copper in its electromagnetic
stirring
(EMS) equipment and
high-efficiency electric
motors. The
aim is to reduce
greenhouse gas (GHG) emissions
while
driving the transition
to a more circular economy
.
●
ABB has been selected
to deliver the shaft generator
system with permanent
magnet technology for the
first
dedicated CO
2
-storage vessels
ever to be built. Due for
delivery in 2024,
the two vessels will support
the Northern
Lights carbon capture
and storage (CCS) project
by
transporting greenhouse
gas from industrial emitters to
an
onshore terminal in
Øygarden, Norway.
From there, the
CO
2
will be delivered
by pipeline to dedicated
reservoirs
2,600 meters under
the seabed in the North
Sea for
permanent storage.
●
ABB launched in
December its new Abilities campaign
internally,
with a focus on supporting
employees with
physical, mental or
cognitive and emotional
challenges so
that they have equal access
to resources that can empower
them in their professional
and personal lives.
●
Every year,
the Society of Women
Engineers (SWE)
organizes the world’s
largest conference for
women in
engineering and
technology.
The conference took place
in
Houston, Texas,
at the end of October
and brought
together over 16,000
attendees from around
the world.
ABB is proud to be
a part of SWE’s Corporate
Partnership
Council, which annually
sponsors over 120 employees
with
global SWE memberships,
and subsequently supports
SWE’s mission
towards gender parity in
the workplace, a
goal that aligns closely
with ABB’s own strategy
for diversity
& inclusion.
Story of the quarter
●
The Energy Efficiency
Movement, which counts
ABB as a
member, published
the “Industrial energy efficiency
playbook” including 10
actions that a business
can take to
improve its energy
efficiency,
reduce energy costs and
lower emissions. Industry
is the world’s largest
consumer
of electricity,
natural gas and coal,
according to the IEA,
accounting for 42%
of total electricity demand.
This
energy consumption carries
high costs in the current
inflationary environment.
The Movement’s
recommendations range
from carrying out energy
audits
to right-sizing industrial
machines that are often
too big
for the job at hand,
which wastes energy.
Moving data
from on-site servers and
into the cloud could help
save
around 90%
of the energy consumed
by IT systems.
Speeding up the
transition from fossil fuels,
by electrifying
industrial fleets switching
gas boilers to heat pumps
or
using well-maintained
heat exchangers will also
offer
efficiencies.
Q4 outcome
●
54% reduction of CO
₂
e emissions in own operations
mainly by
shifting to green electricity and
a reduction of sulfur hexafluoride
gas (SF6) emissions in our operations
.
●
29% year-on-year decrease
in LTIFR due
to a decrease in
incidents in absolute numbers.
●
1.5%-points increase in share of women
in senior management,
demonstrating progress towards
our target.
—
Sustainability
Q4 2022
Q4 2021
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
kt scope 1 and 2
1
44
95
-54%
268
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.10
0.14
-29%
0.14
Share of females in senior management
positions, %
17.8
16.3
+1.5 pts
17.2
1
CO
₂
equivalent emissions from site, energy use, SF6
and fleet, previous quarter
2
Q2 2022 emission data was restated from 88.8 to
72.6 Ktons of CO
₂
e to reflect the application
of green energy certificates retrospectively.
ABB
INTERIM
REPORT
I
Q4
2022
11
During Q4 2022
●
On December 28, ABB announced
it had completed the
previously announced
divestment to Hitachi, Ltd.
(Hitachi) of
its remaining 19.9
%
equity stake in the Hitachi
Energy joint
venture that was
formed from ABB’s Power
Grids business in
2020, with Hitachi holding
a stake of 80.1%. Through
the
divestment, ABB has
realized a net positive
cash inflow of
approximately $1.4
billion in the fourth quarter
2022.
●
On December
2, ABB announced that
it had reached a full
and final settlement
with the National Director
of Public
Prosecution in South
Africa, the U.S. Department
of
Justice, the U.S. Securities
and Exchange Commission,
and the Office of
the Attorney General of
Switzerland
related to the legacy
Kusile project in South Africa,
awarded
in 2015. The settlements
total approximately $32
5
million
primarily accounted
for in ABB’s third quarter
2022 financial
results and include
the expected exposure to
the German
case.
●
On October 3, ABB announce
d
that Accelleron Industries
AG (formerly ABB Turbocharging)
had
started trading on
SIX Swiss Exchange
in Zurich, marking the
completion of
Accelleron’s spin
-off from ABB.
After Q4 2022
●
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 announced
its E-mobility business
had
signed an agreement
with four minority investors to
raise an
additional CHF325 million
in funds in exchange
for
approximately 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
20% shareholding in
ABB’s E-
mobility,
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 February 2, ABB announced
the nomination of Denise C.
Johnson, group president
of Caterpillar Inc, as a new
member
for election at the company’s
upcoming Annual General
Meeting (AGM) on March
23, 2023. At the same time,
current
member Satish Pai
will step down from the
Board.
In 2022, demand for
ABB’s offering increased
strongly year-
on-year, supported
by most customer segments
and across
all regions. Orders
amounted to $33,988
million and improved
by 7% (16% comparable).
Revenues amounted
to $29,446 million up
by 2% (12%
comparable), year-on-year.
Customer deliveries were
impacted by component
constraints in the first half,
but
shortages progressively
eased throughout the
year. As a
result, the book-to-bill ratio
amounted to 1.15 in 2022.
Income from operations
amounted to $3,337 million
down
from $5,718 million
in the year-earlier period. Results
in 2022
included a charge triggered
by the exit of the legacy
full-train
retrofit business
in non-core operations as
well as a provision
related to the legacy
Kusile project in South Africa
awarded in
- Results in 2021
included a book gain
of $2.2 billion
related to the divestment
of the Mechanical Power
Transmission
business.
Operational EBITA
improved by 9%
year-on-year to
$4,510 million and
the Operational EBITA
margin increased
by
110
basis points to 15.3%, achieving
the margin target of at
least 15% already one
year earlier than expected.
Performance
was driven by the positive
impacts from strong pricing
execution
and higher volumes,
which more than offset
cost inflation in raw
materials, freight and
labor. Additionally,
Corporate and Other
Operational EBITA
improved by $169
million to -$169 million,
partly due to higher
real estate gains and a better
non-core
result.
The net finance expenses
declined $39 million to $58
million,
roughly offsetting
the decline in non-operational
pension credits
of $51 million to $115
million compared to the
same period last
year.
Income tax expense
was $757 million with a
tax rate of
22.3%, including approximately
3% net adverse impact
primarily related
to adverse impacts from non-deductible
non-operational charges
as well as a positive impact
related
to a release of a valuation
allowance on deferred tax
assets
due to the
improved business performance
mainly related
to the US.
Net income attributable
to ABB was $2,475 million
and
decreased by 46%.
Basic earnings per share
was $1.30
and decreased by 43%.
Both measures were adversely
impacted by the
charges triggered by the exit
of the legacy
full-train retrofit business
in non-core operations
as well as
the provision related
to the legacy Kusile project and
include
a book gain related
to the divestment of the
Mechanical
Power Transmission
business in 2021.
Significant events
Full year 2022
ABB
INTERIM
REPORT
I
Q4
2022
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.
1
Excludes one project estimated to a total of ~$100
million, that is ongoing in the non-core business. Exact
exit timing is difficult to assess due to legal proceedings
etc.
2
Excludes Operational EBITA from E-mobility business.
3
Includes restructuring and restructuring-related as
well as separation costs.
4
Excluding impact of acquisitions or divestments or
any significant non-operational items.
($ in millions, unless otherwise stated)
FY 2023
Net finance expenses
~(150)
Effective tax rate
~25%
4
Capital Expenditures
~(800)
($ in millions, unless otherwise stated)
FY 2023
1
Q1 2023
Corporate and Other Operational EBITA
~(300)
2
~(75)
2
Non-operating items
Acquisition-related amortization
~(220)
~(55)
Restructuring and related
3
~(150)
~(40)
ABB Way transformation
~(180)
~(40)
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
Electrification
InCharge Energy, Inc (majority stake)
26-Jan
~16
40
Additional figures
ABB Group
Q1 2021
Q2 2021
Q3 2021
Q4 2021
FY 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
EBITDA, $ in million
1,024
1,324
1,072
3,191
6,611
1,067
794
906
1,384
4,151
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
14.90
n.a.
n.a.
n.a.
n.a.
16.50
Net debt/Equity
0.09
0.16
0.13
(0.01)
(0.01)
0.20
0.34
0.34
0.21
0.21
Net debt/ EBITDA 12M rolling
0.4
0.7
0.5
(0.01)
(0.01)
0.4
0.7
0.7
0.7
0.7
Net working capital, % of 12M rolling
revenues
10.8%
11.6%
10.2%
8.1%
8.1%
12.1%
12.8%
11.7%
11.1%
11.1%
Earnings per share, basic, $
0.25
0.37
0.33
1.34
2.27
0.31
0.20
0.19
0.61
1.30
Earnings per share, diluted, $
0.25
0.37
0.32
1.33
2.25
0.31
0.20
0.19
0.60
1.30
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.82
n.a.
n.a.
n.a.
n.a.
0.84
*
Share price at the end of period, CHF
1
27.56
30.30
30.30
33.68
33.68
29.12
24.57
24.90
28.06
28.06
Share price at the end of period, $
1
28.99
32.33
31.73
36.31
36.31
30.76
25.43
24.41
30.46
30.46
Number of employees (FTE equivalents)
105,330
106,370
106,080
104,420
104,420
104,720
106,380
106,830
105,130
105,130
No. of shares outstanding at end of period
(in millions)
2,024
2,006
1,993
1,958
1,958
1,929
1,892
1,875
1,865
1,865
1
Data prior to October 3, 2022, has been adjusted for
the Accelleron spin-off (Source: FactSet).
*
Dividend proposal subject to shareholder approval at the
2023 AGM
Acquisitions and divestments, last twelve months
ABB
INTERIM
REPORT
I
Q4
2022
13
For additional information please contact:
Media Relations
Phone: +41 43 317
71 11
Email: media.relations@c
h.abb.com
Investor Relations
Phone: +41 43 317
71 11
Email: [email protected]
ABB Ltd
Affolternstrasse
44
8050 Zurich
Switzerland
Financial calendar
2023
March 23
Annual General Meeting
April 25
Q1 2023 results
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,” “Robotics and
Discrete
Automation” 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 Q4 2022
results press release
and presentation slides
are available on the
ABB News Center at
www.abb.com/news
and on the Investor
Relations
homepage at www.abb.com/investorrelations.
A conference call and
webcast for analysts
and investors is
scheduled to begin
today at 10:00 a.m. CET.
To
pre-register for the conference
call or to join the
webcast, please
refer to the ABB website:
www.abb.com/investorrelations.
The recorded session
will be available after
the event on
ABB’s website.
Q4 results presentation on February 2, 2023
Important notice about forward-looking information
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
Q4 2022
FINANCIAL
INFORMATION
February 2, 2023
Q4 2022
Financial information
2
Q4 2022
FINANCIAL
INFORMATION
—
Financial
Information
Contents
03
─ 07
Key Figures
08 ─
34
Consolidated
Financial
Information
(unaudited)
35 ─
50
Supplemental
Reconciliations
and Definitions
3
Q4 2022
FINANCIAL
INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
(1)
Orders
7,620
8,257
-8%
2%
Order backlog (end December)
19,867
16,607
20%
29%
Revenues
7,824
7,567
3%
16%
Gross Profit
2,658
2,397
11%
as % of revenues
34.0%
31.7%
+2.3 pts
Income from operations
1,185
2,975
-60%
Operational EBITA
(1)
1,146
988
16%
28%
(2)
as % of operational revenues
(1)
14.8%
13.1%
+1.7 pts
Income from continuing operations, net of tax
1,168
2,703
-57%
Net income attributable to ABB
1,132
2,640
-57%
Basic earnings per share ($)
0.61
1.34
-55%
(3)
Cash flow from operating activities
(4)
687
1,020
-33%
Cash flow from operating activities in continuing operations
720
1,033
-30%
CHANGE
($ in millions, unless otherwise indicated)
FY 2022
FY 2021
US$
Comparable
(1)
Orders
33,988
31,868
7%
16%
Revenues
29,446
28,945
2%
12%
Gross Profit
9,710
9,467
3%
as % of revenues
33.0%
32.7%
+0.3 pts
Income from operations
3,337
5,718
-42%
Operational EBITA
(1)
4,510
4,122
9%
18%
(2)
as % of operational revenues
(1)
15.3%
14.2%
+1.1 pts
Income from continuing operations, net of tax
2,637
4,730
-44%
Net income attributable to ABB
2,475
4,546
-46%
Basic earnings per share ($)
1.30
2.27
-43%
(3)
Cash flow from operating activities
(4)
1,287
3,330
-61%
Cash flow from operating activities in continuing operations
1,334
3,338
-60%
(1)
For a reconciliation of non-GAAP measures see “
Supplemental Reconciliations and Definitions
” on page 35.
(2)
Constant currency (not adjusted for portfolio changes).
(3)
EPS growth rates are computed using unrounded amounts.
(4)
Cash flow from operating activities includes both continuing and discontinued operations.
4
Q4 2022
FINANCIAL
INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Local
Comparable
Orders
ABB Group
7,620
8,257
-8%
0%
2%
Electrification
3,565
3,638
-2%
6%
6%
Motion
1,649
1,843
-11%
-3%
0%
Process Automation
1,746
1,898
-8%
0%
11%
Robotics & Discrete Automation
798
1,100
-27%
-19%
-19%
Corporate and Other
(incl. intersegment eliminations)
(138)
(222)
Order backlog (end December)
ABB Group
19,867
16,607
20%
26%
29%
Electrification
6,933
5,458
27%
33%
33%
Motion
4,726
3,749
26%
33%
34%
Process Automation
6,229
6,079
2%
8%
16%
Robotics & Discrete Automation
2,679
1,919
40%
49%
48%
Corporate and Other
(incl. intersegment eliminations)
(700)
(598)
Revenues
ABB Group
7,824
7,567
3%
13%
16%
Electrification
3,663
3,445
6%
16%
16%
Motion
1,845
1,735
6%
17%
20%
Process Automation
1,551
1,805
-14%
-6%
6%
Robotics & Discrete Automation
891
799
12%
23%
23%
Corporate and Other
(incl. intersegment eliminations)
(126)
(217)
Income from operations
ABB Group
1,185
2,975
Electrification
557
418
Motion
316
2,464
Process Automation
183
193
Robotics & Discrete Automation
101
45
Corporate and Other
(incl. intersegment eliminations)
28
(145)
Income from operations %
ABB Group
15.1%
39.3%
Electrification
15.2%
12.1%
Motion
17.1%
142.0%
Process Automation
11.8%
10.7%
Robotics & Discrete Automation
11.3%
5.6%
Operational EBITA
ABB Group
1,146
988
16%
28%
Electrification
572
507
13%
26%
Motion
318
278
14%
26%
Process Automation
203
247
-18%
-8%
Robotics & Discrete Automation
125
64
95%
117%
Corporate and Other
(incl. intersegment eliminations)
(72)
(108)
Operational EBITA %
ABB Group
14.8%
13.1%
Electrification
15.7%
14.8%
Motion
17.4%
16.1%
Process Automation
13.2%
13.7%
Robotics & Discrete Automation
14.0%
8.1%
Cash flow from operating activities
ABB Group
687
1,020
Electrification
804
715
Motion
346
416
Process Automation
205
370
Robotics & Discrete Automation
105
129
Corporate and Other
(incl. intersegment eliminations)
(740)
(597)
Discontinued operations
(33)
(13)
5
Q4 2022
FINANCIAL
INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
FY 2022
FY 2021
US$
Local
Comparable
Orders
ABB Group
33,988
31,868
7%
13%
16%
Electrification
15,901
14,381
11%
17%
17%
Motion
7,896
7,616
4%
11%
20%
Process Automation
6,825
6,779
1%
8%
11%
Robotics & Discrete Automation
4,116
3,844
7%
16%
15%
Corporate and Other
(incl. intersegment eliminations)
(750)
(752)
Order backlog (end December)
ABB Group
19,867
16,607
20%
26%
29%
Electrification
6,933
5,458
27%
33%
33%
Motion
4,726
3,749
26%
33%
34%
Process Automation
6,229
6,079
2%
8%
16%
Robotics & Discrete Automation
2,679
1,919
40%
49%
48%
Corporate and Other
(incl. intersegment eliminations)
(700)
(598)
Revenues
ABB Group
29,446
28,945
2%
9%
12%
Electrification
14,105
13,187
7%
14%
14%
Motion
6,745
6,925
-3%
5%
14%
Process Automation
6,044
6,259
-3%
4%
7%
Robotics & Discrete Automation
3,181
3,297
-4%
5%
4%
Corporate and Other
(incl. intersegment eliminations)
(629)
(723)
Income from operations
ABB Group
3,337
5,718
Electrification
2,159
1,841
Motion
1,092
3,276
Process Automation
663
713
Robotics & Discrete Automation
247
269
Corporate and Other
(incl. intersegment eliminations)
(824)
(381)
Income from operations %
ABB Group
11.3%
19.8%
Electrification
15.3%
14.0%
Motion
16.2%
47.3%
Process Automation
11.0%
11.4%
Robotics & Discrete Automation
7.8%
8.2%
Operational EBITA
ABB Group
4,510
4,122
9%
18%
Electrification
2,328
2,121
10%
20%
Motion
1,163
1,183
-2%
6%
Process Automation
848
801
6%
15%
Robotics & Discrete Automation
340
355
-4%
8%
Corporate and Other
(incl. intersegment eliminations)
(169)
(338)
Operational EBITA %
ABB Group
15.3%
14.2%
Electrification
16.5%
16.1%
Motion
17.3%
17.1%
Process Automation
14.0%
12.8%
Robotics & Discrete Automation
10.7%
10.8%
Cash flow from operating activities
ABB Group
1,287
3,330
Electrification
1,887
2,181
Motion
853
1,362
Process Automation
675
1,062
Robotics & Discrete Automation
214
374
Corporate and Other
(incl. intersegment eliminations)
(2,295)
(1,641)
Discontinued operations
(47)
(8)
6
Q4 2022
FINANCIAL
INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Revenues
7,824
7,567
3,663
3,445
1,845
1,735
1,551
1,805
891
799
Foreign exchange/commodity timing
differences in total revenues
(62)
(44)
(29)
(22)
(22)
(10)
(12)
(5)
1
(5)
Operational revenues
7,762
7,523
3,634
3,423
1,823
1,725
1,539
1,800
892
794
Income from operations
1,185
2,975
557
418
316
2,464
183
193
101
45
Acquisition-related amortization
55
59
27
29
8
7
1
2
19
21
Restructuring, related and
implementation costs
(1)
47
79
10
34
5
4
23
33
2
1
Changes in obligations related to
divested businesses
(71)
(7)
1
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
10
–
9
–
–
–
–
–
1
–
Gains and losses from sale of businesses
3
(2,184)
–
9
3
(2,195)
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
24
58
8
34
3
7
12
18
2
–
Other income/expense relating to the
Power Grids joint venture
(10)
–
–
–
–
–
–
–
–
–
Certain other non-operational items
(28)
40
–
8
–
–
–
(2)
(9)
–
Foreign exchange/commodity timing
differences in income from operations
(69)
(32)
(40)
(25)
(17)
(9)
(16)
3
9
(3)
Operational EBITA
1,146
988
572
507
318
278
203
247
125
64
Operational EBITA margin (%)
14.8%
13.1%
15.7%
14.8%
17.4%
16.1%
13.2%
13.7%
14.0%
8.1%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
Revenues
29,446
28,945
14,105
13,187
6,745
6,925
6,044
6,259
3,181
3,297
Foreign exchange/commodity timing
differences in total revenues
28
(1)
(14)
1
(14)
2
33
5
6
(7)
Operational revenues
29,474
28,944
14,091
13,188
6,731
6,927
6,077
6,264
3,187
3,290
Income from operations
3,337
5,718
2,159
1,841
1,092
3,276
663
713
247
269
Acquisition-related amortization
229
250
116
117
31
43
4
5
78
83
Restructuring, related and
implementation costs
(1)
347
160
28
66
16
22
29
48
11
7
Changes in obligations related to
divested businesses
(88)
9
1
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
10
(6)
11
(6)
–
–
–
–
(1)
–
Gains and losses from sale of businesses
7
(2,193)
(1)
13
8
(2,196)
–
(13)
–
–
Acquisition- and divestment-related
expenses and integration costs
195
132
40
70
15
26
134
35
6
1
Other income/expense relating to the
Power Grids joint venture
57
34
–
–
–
–
–
–
–
–
Certain other non-operational items
385
(18)
(24)
(5)
–
1
–
1
(7)
–
Foreign exchange/commodity timing
differences in income from operations
31
36
(2)
25
1
11
18
12
6
(5)
Operational EBITA
4,510
4,122
2,328
2,121
1,163
1,183
848
801
340
355
Operational EBITA margin (%)
15.3%
14.2%
16.5%
16.1%
17.3%
17.1%
14.0%
12.8%
10.7%
10.8%
(1)
Includes impairment of certain assets.
7
Q4 2022
FINANCIAL
INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Depreciation
130
141
67
74
27
29
13
13
16
16
Amortization
69
75
34
36
10
9
3
2
19
21
including total acquisition-related amortization of:
55
59
27
29
8
7
1
2
19
21
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
Depreciation
531
575
265
276
105
123
64
72
62
59
Amortization
283
318
141
149
36
49
11
11
79
85
including total acquisition-related amortization of:
229
250
116
117
31
43
4
5
78
83
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q4 22
Q4 21
US$
Local
parable
Q4 22
Q4 21
US$
Local
parable
Europe
2,604
3,138
-17%
-5%
-5%
2,766
2,756
0%
15%
16%
The Americas
2,898
2,640
10%
11%
15%
2,554
2,198
16%
17%
22%
of which United States
2,167
1,995
9%
9%
13%
1,898
1,579
20%
20%
26%
Asia, Middle East and Africa
2,118
2,479
-15%
-5%
-2%
2,504
2,613
-4%
7%
10%
of which China
976
1,255
-22%
-13%
-12%
1,133
1,234
-8%
2%
5%
ABB Group
7,620
8,257
-8%
0%
2%
7,824
7,567
3%
13%
16%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
FY 22
FY 21
US$
Local
parable
FY 22
FY 21
US$
Local
parable
Europe
11,778
11,857
-1%
13%
13%
10,286
10,529
-2%
12%
12%
The Americas
11,825
9,940
19%
20%
28%
9,572
8,686
10%
11%
19%
of which United States
8,920
7,453
20%
20%
29%
7,021
6,397
10%
10%
19%
Asia, Middle East and Africa
10,385
10,071
3%
9%
10%
9,588
9,730
-1%
5%
6%
of which China
5,087
5,036
1%
5%
5%
4,696
4,932
-5%
0%
0%
ABB Group
33,988
31,868
7%
13%
16%
29,446
28,945
2%
9%
12%
8
Q4 2022
FINANCIAL
INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Year ended
Three months ended
($ in millions, except per share data in $)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Sales of products
24,471
23,745
6,525
6,101
Sales of services and other
4,975
5,200
1,299
1,466
Total revenues
29,446
28,945
7,824
7,567
Cost of sales of products
(16,804)
(16,364)
(4,365)
(4,275)
Cost of services and other
(2,932)
(3,114)
(801)
(895)
Total cost of sales
(19,736)
(19,478)
(5,166)
(5,170)
Gross profit
9,710
9,467
2,658
2,397
Selling, general and administrative expenses
(5,132)
(5,162)
(1,299)
(1,354)
Non-order related research and development expenses
(1,166)
(1,219)
(322)
(322)
Other income (expense), net
(75)
2,632
148
2,254
Income from operations
3,337
5,718
1,185
2,975
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Non-operational pension (cost) credit
115
166
13
36
Income from continuing operations before taxes
3,394
5,787
1,197
2,985
Income tax expense
(757)
(1,057)
(29)
(282)
Income from continuing operations, net of
tax
2,637
4,730
1,168
2,703
Loss from discontinued operations, net of tax
(43)
(80)
(7)
(35)
Net income
2,594
4,650
1,161
2,668
Net income attributable to noncontrolling interests and
redeemable noncontrolling interests
(119)
(104)
(29)
(28)
Net income attributable to ABB
2,475
4,546
1,132
2,640
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,517
4,625
1,138
2,674
Loss from discontinued operations, net of tax
(42)
(79)
(6)
(34)
Net income
2,475
4,546
1,132
2,640
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.33
2.31
0.61
1.35
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.27
0.61
1.34
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.32
2.29
0.60
1.34
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.25
0.60
1.33
Weighted-average number of shares outstanding
(in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,899
2,001
1,870
1,974
Diluted earnings per share attributable to ABB shareholders
1,910
2,019
1,881
1,991
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9
Q4 2022
FINANCIAL
INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Year ended
Three months ended
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Total comprehensive income, net of
tax
2,189
4,567
1,414
2,845
Total comprehensive income
attributable to noncontrolling interests and
redeemable noncontrolling interests, net of tax
(87)
(108)
(29)
(27)
Total comprehensive income attributable
to ABB shareholders, net of tax
2,102
4,459
1,385
2,818
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10
Q4 2022
FINANCIAL
INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Cash and equivalents
4,156
4,159
Restricted cash
18
30
Marketable securities and short-term investments
725
1,170
Receivables, net
6,858
6,551
Contract assets
954
990
Inventories, net
6,028
4,880
Prepaid expenses
230
206
Other current assets
505
573
Current assets held for sale and in discontinued operations
96
136
Total current assets
19,570
18,695
Restricted cash, non-current
–
300
Property, plant and equipment, net
3,911
4,045
Operating lease right-of-use assets
841
895
Investments in equity-accounted companies
130
1,670
Prepaid pension and other employee benefits
916
892
Intangible assets, net
1,406
1,561
Goodwill
10,511
10,482
Deferred taxes
1,396
1,177
Other non-current assets
467
543
Total assets
39,148
40,260
Accounts payable, trade
4,904
4,921
Contract liabilities
2,216
1,894
Short-term debt and current maturities of long-term debt
2,535
1,384
Current operating leases
220
230
Provisions for warranties
1,028
1,005
Other provisions
1,171
1,386
Other current liabilities
4,323
4,367
Current liabilities held for sale and in discontinued operations
132
381
Total current liabilities
16,529
15,568
Long-term debt
5,143
4,177
Non-current operating leases
651
689
Pension and other employee benefits
719
1,025
Deferred taxes
729
685
Other non-current liabilities
2,085
2,116
Non-current liabilities held for sale and in discontinued operations
20
43
Total liabilities
25,876
24,303
Commitments and contingencies
Redeemable noncontrolling interest
85
–
Stockholders’ equity:
Common stock, CHF 0.12 par value
(1,965 million and 2,053 million shares issued at December 31,
2022 and 2021, respectively)
171
178
Additional paid-in capital
141
22
Retained earnings
20,082
22,477
Accumulated other comprehensive loss
(4,556)
(4,088)
Treasury stock, at cost
(100 million and 95 million shares at December 31, 2022
and 2021, respectively)
(3,061)
(3,010)
Total ABB stockholders’ equity
12,777
15,579
Noncontrolling interests
410
378
Total stockholders’ equity
13,187
15,957
Total liabilities and stockholders’
equity
39,148
40,260
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11
Q4 2022
FINANCIAL
INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Year ended
Three months ended
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Operating activities:
Net income
2,594
4,650
1,161
2,668
Loss from discontinued operations, net of tax
43
80
7
35
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
814
893
199
216
Changes in fair values of investments
(33)
(123)
6
(9)
Pension and other employee benefits
(125)
(216)
(18)
(57)
Deferred taxes
(348)
(289)
(165)
(371)
Loss from equity-accounted companies
102
100
2
17
Net loss (gain) from derivatives and foreign exchange
(23)
49
(67)
(50)
Net loss (gain) from sale of property,
plant and equipment
(84)
(38)
(20)
(16)
Net loss (gain) from sale of businesses
7
(2,193)
3
(2,184)
Other
70
117
9
47
Changes in operating assets and liabilities:
Trade receivables, net
(831)
(142)
(174)
40
Contract assets and liabilities
416
29
63
102
Inventories, net
(1,599)
(771)
68
(79)
Accounts payable, trade
395
659
5
298
Accrued liabilities
136
454
84
118
Provisions, net
(70)
(48)
(382)
31
Income taxes payable and receivable
(94)
117
(113)
209
Other assets and liabilities, net
(36)
10
52
18
Net cash provided by operating activities – continuing
operations
1,334
3,338
720
1,033
Net cash used in operating activities – discontinued operations
(47)
(8)
(33)
(13)
Net cash provided by operating activities
1,287
3,330
687
1,020
Investing activities:
Purchases of investments
(321)
(1,528)
(50)
(1,114)
Purchases of property, plant and
equipment and intangible assets
(762)
(820)
(259)
(361)
Acquisition of businesses (net of cash acquired)
and increases in cost-
and equity-accounted companies
(288)
(241)
(62)
(14)
Proceeds from sales of investments
697
2,272
43
633
Proceeds from maturity of investments
73
81
73
1
Proceeds from sales of property,
plant and equipment
127
93
42
57
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost-
and equity-accounted companies
1,541
2,958
1,549
2,865
Net cash from settlement of foreign currency derivatives
(166)
(121)
(12)
(46)
Changes in loans receivable, net
320
(19)
309
6
Other investing activities
(14)
(4)
(4)
(4)
Net cash provided by investing activities – continuing
operations
1,207
2,671
1,629
2,023
Net cash used in investing activities – discontinued
operations
(226)
(364)
(135)
(281)
Net cash provided by investing activities
981
2,307
1,494
1,742
Financing activities:
Net changes in debt with original maturities of 90 days or less
1,366
(83)
(109)
(296)
Increase in debt
3,849
1,400
295
22
Repayment of debt
(2,703)
(1,538)
(678)
(775)
Delivery of shares
394
826
5
40
Purchase of treasury stock
(3,553)
(3,708)
(302)
(1,267)
Dividends paid
(1,698)
(1,726)
–
–
Cash associated with the spin-off of the Turbocharging
Division
(172)
–
(172)
–
Dividends paid to noncontrolling shareholders
(99)
(98)
(16)
(7)
Proceeds from issuance of subsidiary shares
216
–
216
–
Other financing activities
6
(41)
64
(24)
Net cash used in financing activities – continuing
operations
(2,394)
(4,968)
(697)
(2,307)
Net cash provided by financing activities – discontinued
operations
–
–
–
–
Net cash used in financing activities
(2,394)
(4,968)
(697)
(2,307)
Effects of exchange rate changes on cash and equivalents
and restricted cash
(189)
(81)
2
(6)
Net change in cash and equivalents and restricted cash
(315)
588
1,486
449
Cash and equivalents and restricted cash, beginning of period
4,489
3,901
2,688
4,040
Cash and equivalents and restricted cash, end of period
4,174
4,489
4,174
4,489
Supplementary disclosure of cash flow information:
Interest paid
90
132
43
57
Income taxes paid
1,188
1,292
281
499
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12
Q4 2022
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, 2021
188
83
22,946
(4,002)
(3,530)
15,685
314
15,999
Net income
4,546
4,546
104
4,650
Foreign currency translation
adjustments, net of tax of $0
(534)
(534)
4
(530)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(4)
(15)
(15)
(15)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $22
467
467
467
Change in derivative instruments
and hedges, net of tax of $(1)
(5)
(5)
(5)
Changes in noncontrolling interests
(37)
(20)
(57)
55
(2)
Dividends to
noncontrolling shareholders
–
(98)
(98)
Dividends to shareholders
(1,730)
(1,730)
(1,730)
Cancellation of treasury shares
(10)
(17)
(3,130)
3,157
–
–
Share-based payment arrangements
60
60
60
Purchase of treasury stock
(3,682)
(3,682)
(3,682)
Delivery of shares
(84)
(136)
1,046
826
826
Other
16
16
16
Balance at December 31, 2021
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Balance at January 1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Net income
(1)
2,475
2,475
124
2,599
Foreign currency translation
adjustments, net of tax of $0
(608)
(608)
(31)
(639)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(5)
(21)
(21)
(21)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $86
256
256
(1)
255
Change in derivative instruments
and hedges, net of tax of $2
–
–
–
Issuance of subsidiary shares
120
120
86
206
Other changes in
noncontrolling interests
10
10
(34)
(24)
Dividends to
noncontrolling shareholders
–
(100)
(100)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Spin-off of the Turbocharging Division
(177)
(95)
(272)
(12)
(284)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
42
42
42
Purchase of treasury stock
(3,502)
(3,502)
(3,502)
Delivery of shares
(51)
(130)
575
394
394
Other
2
2
2
Balance at December 31, 2022
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
(1)
Amounts attributable to noncontrolling interests for the year ended December 31, 2022, exclude net losses of $5 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
13
Q4 2022
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, 2021.
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.
14
Q4 2022
FINANCIAL
INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Business Combinations — Accounting for contract
assets and contract liabilities from contracts with customers
In January 2022, the Company early adopted a new accounting
standard update, which provides guidance on the accounting for
revenue contracts acquired in a
business combination. The update requires contract assets
and liabilities acquired in a business combination to be recognized
and measured at the date of
acquisition in accordance with the principles for recognizing revenues
from contracts with customers.
The Company has applied this accounting standard update
prospectively starting with acquisitions closing after January
1, 2022.
Disclosures about government assistance
In January 2022, the Company adopted a new accounting standard
update,
which requires entities to disclose certain types of government
assistance. Under the
update, the Company is required to annually disclose (i) the
type of the assistance received, including any significant
terms and conditions, (ii) its related
accounting policy, and (iii) the effect
such transactions have on its financial statements. The Company
has applied this accounting standard update
prospectively.
This update does not have a significant impact on the Company’s
consolidated financial statements.
Applicable for future periods
Facilitation of the effects of reference rate reform on financial
reporting
In March 2020, an accounting standard update was issued which provides
temporary optional expedients and exceptions to the current
guidance on contract
modifications and hedge accounting to ease the financial reporting burdens
related to the expected market transition from the London
Interbank Offered Rate
(LIBOR) and other interbank offered rates to alternative reference
rates. This update, along with clarifications outlined
in subsequent updates issued during
January 2021 and December 2022, can be adopted and applied
no later than December 31, 2024, with early
adoption permitted. The Company expects to adopt
this update during the second half of 2023 and does
not expect this update to have a significant impact on its consolidated
financial statements.
Disclosure about supplier finance program obligations
In September 2022, an accounting standard update was issued which
requires entities to disclose information related to supplier
finance programs. Under the
update, the Company is required to annually disclose (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. This update is effective for the Company
retrospectively for all in-scope transactions for annual periods
beginning January 1, 2023, with the exception
of
the rollforward disclosures,
which are effective prospectively for annual periods
beginning January 1, 2024, with early adoption permitted. The Company
does not
expect this update to have a significant impact on its consolidated financial
statements.
The total outstanding supplier finance obligation included
in “Accounts
payable, trade” in the Consolidated Balance Sheet at December 31,
2022, amounted to $477 million.
─
Note 3
Discontinued operations and assets held for sale
Divestment of the Power Grids business
On July 1, 2020, the Company completed the sale of 80.1 percent
of its Power Grids business to Hitachi Ltd (Hitachi).
The transaction was executed through the
sale of 80.1 percent of the shares of Hitachi Energy Ltd, formerly
Hitachi ABB Power Grids Ltd (“Hitachi Energy”).
Cash consideration received at the closing date
was $9,241 million net of cash disposed.
Further, for accounting purposes,
the 19.9 percent ownership interest retained by the Company
was deemed to have
been both divested and reacquired at its fair value on July
1, 2020.
The Company also obtained a put option, exercisable
with three-months’ notice commencing in
April 2023. The combined fair value of the retained investment
and the related put option amounted to $1,779 million
and was recorded as both an equity-method
investment and as part of the proceeds for the sale of the
entire Power Grids business (see Note 4).
In connection with the divestment, the Company recorded
liabilities in discontinued operations for estimated future costs and other cash
payments of $487 million
for various contractual items relating to the sale of the business
,
including required future cost reimbursements payable
to Hitachi Energy, costs
to be incurred by
the Company for the direct benefit of Hitachi Energy and
an amount due to Hitachi Ltd in connection with the expected purchase
price finalization of the closing
debt and working capital balances. In October 2021, the Company
and Hitachi concluded an agreement to settle the various amounts
owing by the Company.
The
net difference between the agreed amounts and the amounts
initially estimated by the Company was recorded
in 2021 in discontinued operations as an
adjustment to “Change to net gain recognized on sale
of the Power Grids business” in the table below.
During the year and three months ended December
31,
2022, total cash payments of $102 million (excluding payments
related to the guarantees, see Note 10), and $11
million, respectively, were made
in connection
with these liabilities. During the year and three months ended
December 31, 2021, total cash payments (including the amounts
paid under the settlement
agreement) of $364 million and $281 million, respectively,
were made in connection with these liabilities.
At December 31, 2022, the remaining amount recorded
was $53 million.
Upon closing of the sale, the Company entered into various
transition services agreements (TSAs). Pursuant to these
TSAs, the Company and Hitachi Energy
provide to each other, on an interim, transitional
basis, various services. The services
provided by the Company primarily include finance, information technology,
human resources and certain other administrative services.
Under the current terms, the TSAs will continue for up
to 3 years, and can only be extended on an
exceptional basis for business-critical services for an additional period which
is reasonably necessary to avoid a material adverse
impact on the business. In the
year and three months ended December 31, 2022, the Company
has recognized within its continuing operations, general
and administrative expenses incurred to
perform the TSAs, offset by $162 million and $47
million, respectively, in TSA-related
income for such services that is reported in Other income
(expense), net.
In
the year and three months ended December 31, 2021,
Other income (expense) included $173 million
and $46 million, respectively, of
TSA-related income for such
services.
Discontinued operations
As a result of the sale of the Power Grids business, substantially
all Power Grids-related assets and liabilities have
been sold. As this divestment represented
a
strategic shift that would have a major effect on the Company’s
operations and financial results, the
results of operations for this business have been
presented as
discontinued operations and the assets and liabilities are presented
as held for sale and in discontinued operations
for all periods presented. Certain of the
business contracts in the Power Grids business continue to
be executed by subsidiaries of the Company for the benefit/risk
of Hitachi Energy. Assets
and liabilities
relating
to, as well as the net financial results of, these contracts
will continue to be included in discontinued operations until they
have been completed or
otherwise transferred to Hitachi Energy.
15
Q4 2022
FINANCIAL
INFORMATION
Amounts recorded in discontinued operations were as follows:
Year ended
Three months ended
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Expenses
(38)
(18)
(13)
(5)
Change to net gain recognized on sale of the Power Grids business
(10)
(65)
1
(33)
Loss from operations
(48)
(83)
(12)
(38)
Net interest income and other finance expense
–
2
–
2
Loss from discontinued operations before taxes
(48)
(81)
(12)
(36)
Income tax
5
1
5
1
Loss from discontinued operations, net of
tax
(43)
(80)
(7)
(35)
Of the total Loss from discontinued operations before taxes
in the table above, $(47) million and $(80) million
in the year ended December 31, 2022 and 2021,
respectively, and $(11
)
million and $(35) million in the three months
ended December 31, 2022 and 2021, respectively,
are attributable to the Company, while
the
remainder is attributable to noncontrolling interests.
In addition,
the Company also has retained obligations (primarily for environmental
and taxes) related to other businesses
disposed or otherwise exited that
qualified as discontinued operations. Changes to these retained obligations
are also included in Loss from discontinued operations,
net of tax, above.
The major components of assets and liabilities held for sale and
in discontinued operations in the Company’s Consolidated
Balance Sheets are summarized as
follows:
($ in millions)
Dec. 31, 2022
(1)
Dec. 31, 2021
(1)
Receivables, net
92
131
Other current assets
4
5
Current assets held for sale and in discontinued
operations
96
136
Accounts payable, trade
44
71
Other liabilities
88
310
Current liabilities held for sale and in discontinued
operations
132
381
Other non-current liabilities
20
43
Non-current liabilities held for sale and in discontinued
operations
20
43
(1)
At December 31, 2022 and 2021,
the balances reported as held for sale and in discontinued operations pertain to Power Grids activities and other obligations which will remain with
the Company until such time as the obligation is settled or the activities are fully wound down.
─
Note 4
Acquisitions and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Year ended December 31,
Three months ended December 31,
($ in millions, except number of acquired businesses)
2022
2021
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
195
212
46
(3)
Aggregate excess of purchase price
over fair value of net assets acquired
(2)
229
161
24
2
Number of acquired businesses
5
2
2
-
(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 year
ended December 31, 2022, relate primarily to the acquisition of InCharge
Energy, Inc. (In-Charge)
and in the year ended December 31, 2021, relate primarily
to
the acquisition of ASTI Mobile Robotics Group (ASTI).
Acquisitions of controlling interests have been accounted for
under the acquisition method and have been included in
the Company’s consolidated financial
statements since the date of acquisition.
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 year ended December 31, 2022.
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.
On August 2, 2021, the Company acquired the shares
of ASTI. ASTI is headquartered in Burgos, Spain, and
is a global autonomous mobile robot (AMR)
manufacturer. The resulting cash outflows
for the Company amounted to $186 million (net of cash
acquired). The acquisition expands the Company’s
robotics and
automation offering in its Robotics & Discrete Automation
operating segment.
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.
16
Q4 2022
FINANCIAL
INFORMATION
Business divestments and spin-offs
On September 7, 2022, the shareholders approved the spin-off
of the Company’s Turbocharging Division
into an independent, publicly traded company,
Accelleron
Industries AG (Accelleron), which was completed through the
distribution of common stock of Accelleron to the stockholders
of ABB on October 3, 2022. As a
result of the spin-off of this Division, the Company distributed
net assets of $272 million, net of amounts
attributable to noncontrolling interests of $12 million,
which
was reflected as a reduction in Retained earnings. In addition,
total accumulated comprehensive income of $95
million, including the cumulative translation
adjustment, was reclassified to Retained earnings. Cash and cash
equivalents distributed with Accelleron was $172 million.
The results of operations of the Turbocharging Division,
are included in the continuing operations of the Process
Automation operating segment for all periods
presented through to the spin-off date. In the year
and three months ended December 31, 2022,
“Income continuing operations before taxes”,
included income of
$134 million and $1 million, respectively,
from this Division. In the year and three months ended
December 31, 2021, “Income continuing operations
before taxes”,
included income of $186 million and $53 million, respectively,
from this Division. In anticipation of the spin-off,
the Company granted to a subsidiary of
Accelleron
access to funds in the form of a short-term intercompany
loan.
At the spin-off date, this loan,
having a principal amount of 300 million Swiss
francs ($306 million at
the date of spin-off), was due to ABB and subsequently
collected in October 2022.
In the year and three months ended December 31, 2021,
the Company received proceeds (net of transactions
costs and cash disposed) of $2,958 million and
$2,865 million, respectively, relating to
divestments of consolidated businesses and recorded gains of
$2,193 million and $2,184 million, respectively
in “Other
income (expense), net” on the sales of such businesses.
These are primarily due to the divestment of the Company’s
Mechanical Power Transmission Division
(Dodge) to RBC Bearings Inc. Certain amounts included in
the net gain for the sale of the Dodge business
are estimated or otherwise subject to change in value
and, as a result, the Company may record additional adjustments
to the gain in future periods which are not expected to have
a material impact on the
consolidated financial statements. In the year and three months
ended December 31, 2021, “Income from continuing operations
before taxes”, included net income
of $115 million and $9 million, respectively,
from the Dodge business which, prior to its sale was
part of the Company’s Motion operating segment.
Investments in equity-accounted companies
In connection with the divestment of its Power Grids business
to Hitachi in 2020 (see Note 3), the Company
retained a 19.9 percent interest in the business.
For
accounting purposes the 19.9 percent interest was deemed to
have been both divested and reacquired, with a fair
value at the transaction date of $1,661 million.
The fair value was based on a discounted cash flow model
considering the expected results of the future business operations
of Hitachi Energy and using relevant
market inputs including a risk-adjusted weighted-average cost
of capital.
The Company also obtained an option, exercisable with three-months’
notice commencing April 2023, granting it
the right to require Hitachi to purchase this
investment at fair value, subject to a minimum floor price equivalent
to a 10 percent discount compared to the price paid for
the initial 80.1 percent. This option was
initially valued at $118 million using
a standard option pricing model with inputs considering the
nature of the investment and the expected period until
option
exercise. As this option is not separable from the investment the
value has been combined with the value of the underlying investment
and is accounted for
together. Hitachi also
received a call option requiring the Company
to sell the remaining 19.9 percent interest in Hitachi
Energy at any time at a price consistent
with what was paid by Hitachi to acquire the initial 80.1 percent
or at fair value, if higher.
In September 2022, the Company and Hitachi agreed terms to sell
the Company’s remaining investment in Hitachi
Energy to Hitachi and simultaneously settle
certain outstanding contractual obligations relating to the initial sale
of the Power Grids business, including certain
indemnification guarantees (see Note 10).
The
sale of the remaining investment was completed in December 2022,
resulting in net cash proceeds of $1,552
million and a gain of $43 million which was recorded
in “Other income (expense), net”.
In July 2020, the Company concluded that based on its continuing
involvement with the Power Grids business, including
the membership in its governing board of
directors, it had significant influence over Hitachi Energy.
As a result, the investment (including the value
of the option) was accounted for using the equity method
through the date of its sale in December 2022.
The carrying value of the Company’s investments in equity-accounted
companies and respective percentage of ownership
is as follows:
Ownership as of
Carrying value at
($ in millions, except ownership share in %)
December 31, 2021
December 31, 2022
December 31, 2021
Hitachi Energy Ltd
19.9%
–
1,609
Others
130
61
Total
130
1,670
In the year and three months ended December 31, 2022
and 2021,
the Company recorded its share of the earnings
of investees accounted for under the equity
method of accounting in Other income (expense), net, as follows:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Income (loss) from equity-accounted companies, net of taxes
(22)
38
12
27
Basis difference amortization (net of deferred income tax benefit)
(80)
(138)
(14)
(44)
Loss from equity-accounted companies
(102)
(100)
(2)
(17)
Subsequent event
On January 19, 2023, the Company reached an agreement to sell
its Power Conversion Division to AcBel Polytech Inc.
for $505 million in cash. The transaction is
subject to regulatory approvals and is expected to be completed
in the second half of 2023.
17
Q4 2022
FINANCIAL
INFORMATION
─
Note 5
Cash and equivalents, marketable securities and short-term investments
Cash and equivalents, marketable securities and short-term
investments consisted of the following:
December 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ 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
December 31, 2021
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
2,752
2,752
2,752
Time deposits
2,037
2,037
1,737
300
Equity securities
569
18
587
587
5,358
18
–
5,376
4,489
887
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
203
7
(1)
209
209
Corporate
74
1
(1)
74
74
277
8
(2)
283
–
283
Total
5,635
26
(2)
5,659
4,489
1,170
Of which:
Restricted cash, current
30
Restricted cash, non-current
300
18
Q4 2022
FINANCIAL
INFORMATION
─
Note 6
Derivative financial instruments
The Company is exposed to certain currency,
commodity, interest rate and equity
risks arising from its global operating, financing and
investing activities. The
Company uses derivative instruments to reduce and manage the
economic impact of these exposures.
Currency risk
Due to the global nature of the Company’s operations, many
of its subsidiaries are exposed to currency risk
in their operating activities from entering into
transactions in currencies other than their functional currency.
To manage such
currency risks, the Company’s policies require its
subsidiaries to hedge their
foreign currency exposures from binding sales and purchase
contracts denominated in foreign currencies. For forecasted foreign currency
denominated sales of
standard products and the related foreign currency denominated purchases,
the Company’s policy is to hedge up to a maximum of
100 percent of the forecasted
foreign currency denominated exposures, depending on the
length of the forecasted exposures. Forecasted
exposures greater than 12 months are not hedged.
Forward foreign exchange contracts are the main instrument
used to protect the Company against the volatility of future
cash flows (caused by changes in
exchange rates) of contracted and forecasted sales and purchases
denominated in foreign currencies. In addition, within
its treasury operations, the Company
primarily uses foreign exchange swaps and forward foreign exchange
contracts to manage the currency and timing mismatches
arising in its liquidity management
activities.
Commodity risk
Various commodity products
are used in the Company’s manufacturing activities.
Consequently it is exposed to volatility in future cash flows
arising from changes
in commodity prices. To
manage the price risk of commodities, the Company’s
policies require that its subsidiaries hedge the commodity
price risk exposures from
binding contracts, as well as at least 50 percent (up to a maximum
of 100 percent) of the forecasted commodity exposure over
the next 12 months or longer (up to
a maximum of 18 months). Primarily swap contracts are used to
manage the associated price risks of commodities.
Interest rate risk
The Company has issued bonds at fixed rates. Interest rate swaps
and cross-currency interest rate swaps are used to manage
the interest rate and foreign
currency risk associated with certain debt and generally such
swaps are designated as fair value hedges. In addition, from time
to time, the Company uses
instruments such as interest rate swaps, interest rate futures, bond
futures or forward rate agreements to manage interest
rate risk arising from the Company’s
balance sheet structure but does not designate such instruments
as hedges.
Equity risk
The Company is exposed to fluctuations in the fair value of
its warrant appreciation rights (WARs)
issued under its management
incentive plan. A WAR gives its
holder the right to receive cash equal to the market price of
an equivalent listed warrant on the date of exercise.
To eliminate
such risk, the Company has
purchased cash-settled call options, indexed to the shares of the
Company, which entitle the Company
to receive amounts equivalent to its obligations
under the
outstanding WARs.
Volume of derivative activity
In general, while the Company’s primary objective in
its use of derivatives is to minimize exposures arising from
its business, certain derivatives are designated
and qualify for hedge accounting treatment while others either are
not designated or do not qualify for hedge accounting.
Foreign exchange and interest rate derivatives
The gross notional amounts of outstanding foreign exchange and
interest rate derivatives (whether designated as
hedges or not) were as follows:
Type of derivative
Total notional amounts
at
($ in millions)
December 31, 2022
December 31, 2021
Foreign exchange contracts
13,509
11,276
Embedded foreign exchange derivatives
933
815
Cross-currency interest rate swaps
855
906
Interest rate contracts
2,830
3,541
Derivative commodity contracts
The Company uses derivatives to hedge its direct or indirect exposure
to the movement in the prices of commodities which are
primarily copper, silver and
aluminum. The following table shows the notional amounts of outstanding
derivatives (whether designated as hedges or not), on
a net basis, to reflect the
Company’s requirements for these commodities:
Type of derivative
Unit
Total notional amounts
at
December 31, 2022
December 31, 2021
Copper swaps
metric tonnes
29,281
36,017
Silver swaps
ounces
2,012,213
2,842,533
Aluminum swaps
metric tonnes
6,825
7,125
Equity derivatives
At December 31, 2022 and 2021, the Company held 8 million
and 9 million cash-settled call options indexed to
ABB Ltd shares (conversion ratio 5:1) with a total
fair value of $15 million and $29 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange
contracts to manage the foreign exchange risk
of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to
hedge its WAR liabilities. The Company applies cash
flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their
fair value is recorded in “Accumulated other comprehensive
loss” and subsequently reclassified into
earnings in the same line item and in the same period as
the underlying hedged transaction affects
earnings. For the year and three months ended December
31,
2022 and 2021, there were no significant amounts recorded for cash
flow hedge accounting activities.
Fair value hedges
To reduce its interest
rate exposure arising primarily from its debt issuance activities,
the Company uses interest rate swaps
and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges,
the changes in the fair value of these instruments,
as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded
as offsetting gains and losses in “Interest
and other finance expense”.
19
Q4 2022
FINANCIAL
INFORMATION
The effect of derivative instruments, designated and qualifying
as fair value hedges, on the Consolidated Income
Statements was as follows:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(91)
(55)
(8)
(15)
Hedged item
93
56
8
15
Cross-currency interest rate swaps
Designated as fair value hedges
(134)
(37)
(9)
(10)
Hedged item
135
34
16
9
Derivatives not designated in hedge relationships
Derivative instruments that are not designated as hedges or do not
qualify as either cash flow or fair value hedges
are economic hedges used for risk management
purposes. Gains and losses from changes in the fair values
of such derivatives are recognized in the same line
in the income statement as the economically
hedged transaction.
Furthermore, under certain circumstances, the Company
is required to split and account separately for foreign currency
derivatives that are embedded within
certain binding sales or purchase contracts denominated
in a currency other than the functional currency of the subsidiary
and the counterparty.
The gains (losses) recognized in the Consolidated Income Statements
on derivatives not designated in hedging relationships
were as follows:
Type of derivative not
Gains (losses) recognized in income
designated as a hedge
Year ended December 31,
Three months ended December 31,
($ in millions)
Location
2022
2021
2022
2021
Foreign exchange contracts
Total revenues
(56)
3
145
52
Total cost of sales
21
(53)
(36)
(29)
SG&A expenses
(1)
27
11
(8)
5
Non-order related research
and development
–
(2)
(2)
–
Interest and other finance expense
(128)
(173)
11
(52)
Embedded foreign exchange
Total revenues
(3)
(7)
(15)
7
contracts
Total cost of sales
(11)
(2)
1
1
Commodity contracts
Total cost of sales
(47)
78
25
31
Other
Interest and other finance expense
4
–
–
–
Total
(193)
(145)
121
15
(1)
SG&A expenses represent
“Selling, general and
administrative expenses”.
The fair values of derivatives included in the Consolidated Balance
Sheets were as follows:
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
20
Q4 2022
FINANCIAL
INFORMATION
December 31, 2021
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
3
5
Interest rate contracts
9
20
–
–
Cross-currency interest rate swaps
–
–
–
109
Cash-settled call options
29
–
–
–
Total
38
20
3
114
Derivatives not designated as hedging instruments:
Foreign exchange contracts
108
14
107
7
Commodity contracts
19
–
5
–
Interest rate contracts
1
–
2
–
Embedded foreign exchange derivatives
10
7
16
10
Total
138
21
130
17
Total fair value
176
41
133
131
Close-out netting agreements provide for the termination, valuation
and net settlement of some or all outstanding transactions
between two counterparties on the
occurrence of one or more pre-defined trigger events.
Although the Company is party to close-out netting agreements
with most derivative counterparties, the fair values in the
tables above and in the Consolidated
Balance Sheets at December 31, 2022 and 2021, have been presented
on a gross basis.
The Company’s netting agreements and other similar
arrangements allow net settlements under certain conditions.
At December 31, 2022 and 2021, information
related to these offsetting arrangements was as follows:
($ 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
($ in millions)
December 31, 2021
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
200
(104)
–
–
96
Total
200
(104)
–
–
96
($ in millions)
December 31, 2021
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
238
(104)
–
–
134
Total
238
(104)
–
–
134
21
Q4 2022
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:
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—Other 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
22
Q4 2022
FINANCIAL
INFORMATION
December 31, 2021
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
587
587
Debt securities—U.S. government obligations
209
209
Debt securities—Corporate
74
74
Derivative assets—current in “Other current assets”
176
176
Derivative assets—non-current in “Other non-current assets”
41
41
Total
209
878
–
1,087
Liabilities
Derivative liabilities—current in “Other current liabilities”
133
133
Derivative liabilities—non-current in “Other non-current liabilities”
131
131
Total
–
264
–
264
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
The Company elects to record private equity investments without readily
determinable fair values at cost, less impairment, adjusted
for observable price changes.
The Company reassesses at each reporting period whether these
investments continue to qualify for this treatment. Durin
g
the year ended December 31, 2022
and 2021,
the Company recognized, in “Other income (expense),
net”, net fair value gains of $52 million and
$108 million, respectively,
related to certain of its
private equity investments based on observable market price changes
for an identical or similar investment of the same
issuer of which net loss of $4 million and
net gain of $2 million were recognized in the three months
ended December 31, 2022 and 2021, respectively.
The fair values were determined using Level
2
inputs. The carrying values of these investments, carried
at fair value on a non-recurring basis, at December
31, 2022 and 2021,
totaled $106 million and
$169 million, respectively.
Apart from the transactions above, there were no additional significant
non-recurring fair value measurements during the
year ended December 31, 2022 and
2021.
Disclosure about financial instruments carried on a cost
basis
The fair values of financial instruments carried on a cost
basis were as follows:
December 31, 2022
($ 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
23
Q4 2022
FINANCIAL
INFORMATION
December 31, 2021
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
2,422
2,422
2,422
Time deposits
1,737
1,737
1,737
Restricted cash
30
30
30
Marketable securities and short-term investments
(excluding securities):
Time deposits
300
300
300
Restricted cash, non-current
300
300
300
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
1,357
1,288
69
1,357
Long-term debt (excluding finance lease obligations)
4,043
4,234
58
4,292
The Company uses the following methods and assumptions in
estimating fair values of financial instruments carried
on a cost basis:
●
Cash and equivalents (excluding securities with original maturities
up to 3 months), Restricted cash, current
and non-current, and Marketable securities
and short-term investments (excluding securities):
The carrying amounts approximate the fair values as the
items are short-term in nature or, for cash
held in banks, are equal to the deposit amount.
●
Short-term debt and current maturities of long-term debt (excluding
finance lease obligations):
Short-term debt includes commercial paper,
bank
borrowings and overdrafts. The carrying amounts of short-term debt
and current maturities of long-term debt, excluding finance
lease obligations,
approximate their fair values.
●
Long-term debt (excluding finance lease obligations):
Fair values of bonds are determined using quoted market
prices (Level 1 inputs), if available. For
bonds without available quoted market prices and other long-term
debt, the fair values are determined using a discounted cash
flow methodology
based upon borrowing rates of similar debt instruments and reflecting
appropriate adjustments for non-performance risk
(Level 2 inputs).
─
Note 8
Contract assets and liabilities
The following table provides information about Contract assets
and Contract liabilities:
($ in millions)
December 31, 2022
December 31, 2021
December 31, 2020
Contract assets
954
990
985
Contract liabilities
2,216
1,894
1,903
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
.
In addition to the amounts
presented as Contract liabilities in the table above, $59 million
are non-current and are included in Other non-current liabilities
in the Balance Sheet.
The significant changes in the Contract assets and Contract liabi
lities balances were as follows:
Year ended December 31,
2022
2021
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities
balance at Jan 1, 2022/2021
(1,043)
(1,086)
Additions to Contract liabilities - excluding amounts recognized as
revenue during the period
1,481
1,136
Receivables recognized that were included in the Contract
assets balance at Jan 1, 2022/2021
(591)
(566)
The Company considers its order backlog to represent its
unsatisfied performance obligations. At December 31, 2022,
the Company had unsatisfied performance
obligations totaling $19,867 million and, of this amount, the Company
expects to fulfill approximately 77 percent of the obligations
in 2023, approximately
13 percent of the obligations in 2024 and the balance thereafter.
24
Q4 2022
FINANCIAL
INFORMATION
─
Note 9
Debt
The Company’s total debt at December 31, 2022 and
2021, amounted to $7,678 million and $5,561 million,
respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of
long-term debt” consisted of the following:
($ in millions)
December 31, 2022
December 31, 2021
Short-term debt
1,448
78
Current maturities of long-term debt
1,087
1,306
Total
2,535
1,384
Short-term debt primarily represented issued commercial paper and
short-term bank borrowings from various banks.
At December 31, 2022, $1,383 million was
outstanding under the $2 billion Euro-commercial paper program.
At December 31, 2021, no amount was outstanding
under this program.
On May 9, 2022, the Company repaid on maturity its USD
1,250 million 2.875% Notes.
Long-term debt
The Company’s long-term debt at December
31, 2022 and 2021, amounted to $5,143 million and $4,177
million, respectively.
Outstanding bonds (including maturities within the next 12 months)
were as follows:
December 31, 2022
December 31, 2021
(in millions)
Nominal outstanding
Carrying value
(1)
Nominal outstanding
Carrying value
(1)
Bonds:
2.875% USD Notes, due 2022
USD
1,250
$
1,258
0.625% EUR Instruments, due 2023
EUR
700
$
742
EUR
700
$
800
0% CHF Bonds, due 2023
CHF
275
$
298
–
0.625% EUR Instruments, due 2024
EUR
700
$
720
–
Floating Rate EUR Instruments, due 2024
EUR
500
$
536
–
0.75% EUR Instruments, due 2024
EUR
750
$
769
EUR
750
$
860
0.3% CHF Bonds, due 2024
CHF
280
$
303
CHF
280
$
306
2.1% CHF Bonds, due 2025
CHF
150
$
162
–
0.75% CHF Bonds, due 2027
CHF
425
$
460
–
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
184
CHF
170
$
186
0% EUR Notes, due 2030
EUR
800
$
677
EUR
800
$
862
2.375% CHF Bonds, due 2030
CHF
150
$
162
–
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
589
Total
$
5,984
$
5,242
(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 March 2022, the Company issued the following CHF bonds
:
(i) CHF 275 million of zero interest bonds, due 2023, and (ii) CHF
425 million of bonds, due 2027
with a coupon of 0.75 percent payable annually in arrears.
The aggregate net proceeds of these CHF bond issues,
after discount and fees, amounted to CHF
699 million (equivalent to approximately $751 million on the date
of issuance).
Also in March 2022, the Company issued the following EUR Instruments,
both due in 2024, (i) EUR 700 million, paying interest
annually in arrears at a fixed rate of
0.625 percent per annum, and (ii) EUR 500 million floating
rate notes,
paying interest quarterly in arrears at a variable rate of
70 basis points above the 3-month
EURIBOR. In relation to these EUR Instruments, the Company
recorded net proceeds (after the respective discount
and premium, as well as fees) of
EUR 1,203 million (equivalent to $1,335 million on the date
of issuance). Interest rate swaps have been used
to modify the characteristics of the EUR 700 million
Instruments, due 2024. After considering the impact of these interest
rate swaps, these Instruments effectively become floati
ng rate obligations.
In October 2022, the Company issued the following CHF bonds: (i)
CHF 150 million of 2.1
percent bonds, due 2025, and (ii) CHF
150 million of 2.375 percent
bonds, due 2030 with interest payable annually in arrears. The aggregate
net proceeds of these CHF bond issues,
after discount and fees, amounted to
CHF 299 million (equivalent to approximately $304 million on
date of issuance).
Subsequent events
On January 16, 2023, the Company issued the following EUR
Instruments: (i) EUR 500 million of 3.25 percent notes,
due 2027, and (ii) EUR 750 million of
3.375 percent notes,
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).
As of February 1, 2023, the Company has repaid substantially
all amounts previously outstanding at December 31, 2022,
under the $2 billion Euro-commercial
paper program.
25
Q4 2022
FINANCIAL
INFORMATION
─
Note 10
Commitments and contingencies
Contingencies—Regulatory, Compliance
and Legal
Regulatory
As a result of an internal investigation, the Company self-reported
to the Securities and Exchange Commission
(SEC) and the Department of Justice (DoJ) in the
United States as well as to the Serious Fraud Office (SFO)
in the United Kingdom concerning certain of its past dealings
with Unaoil and its subsidiaries, including
alleged improper payments made by these entities to third parties.
In May 2020, the SFO closed its investigation, which
it originally announced in February 2017,
as the case did not meet the relevant test for prosecution
and in December 2022 this matter was closed without action
by the DOJ as part of the Kusile settlement.
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 December 31, 2022 and 2021, the Company had aggregate
liabilities of $86 million and $104 million, respectively,
included in “Other provisions” and “Other
non
‑
current liabilities”, for the above regulatory,
compliance and legal contingencies, and none of the
individual liabilities recognized was significant. As it
is not
possible to make an informed judgment on, or reasonably predict, the
outcome of certain matters and as it is not possible,
based on information currently available
to management, to estimate the maximum potential liability on other
matters, there could be adverse outcomes beyond
the amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s
third-party guarantees. The maximum potential payments
represent a “worst-case
scenario”, and do not reflect management’s expected
outcomes.
Maximum potential payments
($ in millions)
December 31, 2022
December 31, 2021
Performance guarantees
4,300
4,540
Financial guarantees
96
52
Indemnification guarantees
(1)
–
136
Total
(2)
4,396
4,728
(1)
Certain indemnifications provided to Hitachi in connection with the divestment of Power Grids were without limit.
(2)
Maximum potential payments include amounts in both continuing and discontinued operations.
The carrying amount of liabilities recorded in the Consolidated
Balance Sheets reflects the Company’s best estimate of
future payments, which it may incur as part
of fulfilling its guarantee obligations. In respect of the above guarantees,
the carrying amounts of liabilities at December 31,
2022 and 2021, amounted to $1 million
and $156 million, respectively, the
majority of which is included in discontinued operations.
The Company is party to various guarantees providing financial
or performance assurances to certain third parties. These guarantees,
which have various
maturities up to 2035, mainly consist of performance guarantees
whereby (i) the Company guarantees
the performance of a third party’s product or service
according to the terms of a contract and (ii) as member
of a consortium/joint-venture that includes third parties, the
Company guarantees not only its own
performance but also the work of third parties. Such guarantees
may include guarantees that a project will be
completed within a specified time. If the third party
does not fulfill the obligation, the Company will compensate the
guaranteed party in cash or in kind. The original
maturity dates for the majority of these
performance guarantees range from one to ten years.
In conjunction with the divestment of the high-voltage cable
and cables accessories businesses, the Company has
entered into various performance guarantees
with other parties with respect to certain liabilities of the
divested business. At December 31, 2022 and 2021, the
maximum potential payable under these
guarantees amounts to $843 million and $911
million, respectively, and
these guarantees have various 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 at the same proportion of
its ownership in Hitachi Energy Ltd, (increasing
from 80.1 percent at December 31, 2021, to 100 percent at December
31, 2022). 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 December 31, 2022 and 2021,
is approximately $3.0 billion and
$3.2 billion, respectively. On completing
the sale of the Company’s remaining 19.9
percent interest in Hitachi Energy to Hitachi,
the Company also settled certain
existing indemnification guarantees that were due to be settled concurrent
with such transaction. As a result, in the year and
three months ended December 31,
2022, the Company recorded $136 million of cash outflows for
the settlement of these liabilities (recorded in discontinued
operations).
Commercial commitments
In addition, in the normal course of bidding for and executing certain
projects, the Company has entered into standby
letters of credit, bid/performance bonds
and
surety bonds (collectively “performance bonds”) with various
financial institutions. Customers can draw on such
performance bonds in the event that the Company
does not fulfill its contractual obligations. The Company would
then have an obligation to reimburse the financial institution
for amounts paid under the performance
bonds. At December 31, 2022 and 2021, the total outstanding performance
bonds aggregated to $2.9 billion and $3.6 billion, respectively
,
of each of these
amounts $0.1 billion relates
to discontinued operations. There have been
no significant amounts reimbursed to financial institutions under
these types of
arrangements in the year and three months ended December 31,
2022 and 2021.
26
Q4 2022
FINANCIAL
INFORMATION
Product and order-related contingencies
The Company calculates its provision for product warranties
based on historical claims experience and specific review
of certain contracts. The reconciliation
of the
“Provisions for warranties”, including guarantees of product performance,
was as follows:
($ in millions)
2022
2021
Balance at January 1,
1,005
1,035
Net change in warranties due to acquisitions, divestments, spin
-offs and liabilities held for sale
(24)
1
Claims paid in cash or in kind
(157)
(222)
Net increase in provision for changes in estimates, warranties
issued and warranties expired
252
226
Exchange rate differences
(48)
(35)
Balance at December 31,
1,028
1,005
Provisions for contractual penalties
During the three months ended December 31, 2022, the Company
reversed a provision of $61 million it had previously
recorded relating to one of its divested
businesses based on a settlement proposal issued by the ruling court
.
As the provision related to a customer contractual obligation,
the adjustment was reported
as an increase in Sales of products and resulted in an increase
in earnings per share (basic and diluted) of $0.03 for both the
year and three months ended
December 31, 2022.
In addition, as this amount relates
to a divested business, it has been excluded from the Company’s
primary measure of segment
performance, Operational EBITA (See
Note 17).
─
Note 11
Income taxes
The effective tax rate of 22.3 percent in year ended December
31, 2022, was higher than the effective tax
rate of 18.3 percent in the same period in 2021, primarily
because 2021 includes a non-taxable gain in connection with
the sale of the Dodge business while 2022 included
impacts of changes in valuation allowances
primarily a positive impact from a reversal of a valuation allowance
in the Americas for $208 million (recorded in the fourth
quarter) offset partially by the negative
impact of non-deductible regulatory penalties in connection with the
Kusile project.
─
Note 12
Employee benefits
The Company operates defined benefit pension plans, defined contribution
pension plans, and termination indemnity plans,
in accordance with local regulations
and practices. At December
31, 2022, the Company’s most significant
defined benefit pension plans are in Switzerland as well as
in Germany, the United
Kingdom, and the United States. These plans cover a large portion
of the Company’s employees and
provide benefits to employees in the event of death,
disability, retirement, or termination of
employment. Certain of these plans are multi-employer
plans. The Company also operates other postretirement benefit
plans including postretirement health care benefits and other
employee-related benefits for active employees including
long-service award plans. The
measurement date used for the Company’s employee benefit
plans is December 31. The funding policies of the Company’s
plans are consistent with the local
government and tax requirements.
Net periodic benefit cost of the Company’s defined benefit
pension and other postretirement benefit plans consisted of
the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Year ended December 31,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
50
61
38
47
–
1
Operational pension cost
50
61
38
47
–
1
Non-operational pension cost (credit):
Interest cost
13
(5)
87
72
1
2
Expected return on plan assets
(116)
(116)
(153)
(178)
–
–
Amortization of prior service cost (credit)
(9)
(9)
(2)
(2)
(2)
(3)
Amortization of net actuarial loss
–
–
58
67
(3)
(2)
Curtailments, settlements and special termination benefits
4
1
7
7
–
–
Non-operational pension cost (credit)
(108)
(129)
(3)
(34)
(4)
(3)
Net periodic benefit cost (credit)
(58)
(68)
35
13
(4)
(2)
27
Q4 2022
FINANCIAL
INFORMATION
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended December 31,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
10
16
12
16
–
1
Operational pension cost
10
16
12
16
–
1
Non-operational pension cost (credit):
Interest cost
11
(2)
26
20
–
1
Expected return on plan assets
(29)
(28)
(40)
(45)
–
–
Amortization of prior service cost (credit)
(4)
(3)
–
–
(1)
(2)
Amortization of net actuarial loss
–
–
14
14
(1)
–
Curtailments, settlements and special termination benefits
4
1
7
8
–
–
Non-operational pension cost (credit)
(18)
(32)
7
(3)
(2)
(1)
Net periodic benefit cost (credit)
(8)
(16)
19
13
(2)
–
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
Year ended December 31,
2022
2021
2022
2021
2022
2021
Total contributions
to defined benefit pension and
other postretirement benefit plans
37
63
58
124
7
9
Of which, discretionary contributions to defined benefit
pension plans
–
–
18
61
–
–
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended December 31,
2022
2021
2022
2021
2022
2021
Total contributions
to defined benefit pension and
other postretirement benefit plans
4
17
34
82
2
1
Of which, discretionary contributions to defined benefit
pension plans
–
–
18
50
–
–
During the year and three months ended December 31, 202
2, total contributions included non-cash contributions of
marketable debt securities having a fair value
at the contribution date of $12 million.
These non-cash contributions were made
to certain of the Company’s pension plans in Germany
during the three months
ended December 31, 2022. During the year and three months ended
December 31, 2021, total contributions
included non-cash contributions of marketable debt
securities having a fair value at the contribution date of $53 million.
These non-cash contributions were made to certain of the
Company’s pension plans in
Germany and the United Kingdom during the three months ended December
31, 2021.
─
Note 13
Stockholder's
equity
At the Annual General Meeting of Shareholders (AGM) on March
24, 2022, shareholders approved the proposal of the
Board of Directors to distribute 0.82
Swiss
francs per share to shareholders. The declared dividend amounted
to $1,700 million, with the Company disburs
ing a portion in March and the remaining amounts
in April.
In March 2022, the Company completed the share buyback
program that was launched in April 2021. This program was executed
on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased
a total of 90 million shares for approximately
$3.1 billion, of which 31 million shares were
purchased in the first quarter of 2022 (resulting in an
increase in Treasury stock of $1,089 million).
At the 2022 AGM, shareholders approved the cancellation
of
88 million shares which had been purchased under the share buyback
programs launched in July 2020 and April 2021.
The cancellation was completed in the
second quarter of 2022, resulting
in a decrease in Treasury stock
of $2,876 million and a corresponding total decrease in Capital stock,
Additional paid-in capital
and Retained Earnings.
Also in March 2022, the Company announced a new share buyback
program of up to $3 billion. This program, which was
launched in April 2022, is being executed
on a second trading line on the SIX Swiss Exchange and is planned
to run until the Company’s 2023 AGM. Through
this program, the Company purchased, from
the program’s launch in April 2022 to December 31,
2022, 60 million shares, resulting in an increase in Treasury
stock of $1,753 million.
In addition to the share buyback programs, the Company
purchased 20 million of its own shares on the open market
in 2022, mainly for use in connection with
its
employee share plans, resulting in an increase in Treasury
stock of $660 million.
In 2022, the Company delivered, out of treasury stock,
16 million shares in connection with its Management Incentive Plan.
In November 2022, the Company received gross proceeds
of 203 million Swiss francs ($216 million) through
a private placement of shares in its ABB E-Mobility
subsidiary, ABB E-mobility Holding Ltd
(ABB E-Mobility),
reducing the Company's
beneficial ownership in the subsidiary from 100 percent to 92 percent. This
resulted in an increase in Additional paid-in capital of $120 million.
Subsequent event
In January 2023, the Company signed an agreement to increase
the amount of funding raised through the private placement
of shares in ABB E-mobility,
increasing the total funding by an additional 325 million Swiss
francs. The transaction is scheduled to be closed in the beginning
of February 2023 and, after
completion of this transaction, the Company will have a beneficial
ownership in ABB E-Mobility of 81 percent.
28
Q4 2022
FINANCIAL
INFORMATION
─
Note 14
Earnings per share
Basic earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during
the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number
of shares outstanding during the period, assuming that
all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding
written call options, and outstanding options and
shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Year ended December 31,
Three months ended December 31,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,517
4,625
1,138
2,674
Loss from discontinued operations, net of tax
(42)
(79)
(6)
(34)
Net income
2,475
4,546
1,132
2,640
Weighted-average number of shares outstanding
(in millions)
1,899
2,001
1,870
1,974
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.33
2.31
0.61
1.35
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.27
0.61
1.34
Diluted earnings per share
Year ended December 31,
Three months ended December 31,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,517
4,625
1,138
2,674
Loss from discontinued operations, net of tax
(42)
(79)
(6)
(34)
Net income
2,475
4,546
1,132
2,640
Weighted-average number of shares outstanding (in millions)
1,899
2,001
1,870
1,974
Effect of dilutive securities:
Call options and shares
11
18
11
17
Adjusted weighted-average number of shares outstanding
(in millions)
1,910
2,019
1,881
1,991
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.32
2.29
0.60
1.34
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.25
0.60
1.33
29
Q4 2022
FINANCIAL
INFORMATION
─
Note 15
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive
loss” (OCI) attributable to ABB, by component, net
of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2021
(2,460)
17
(1,556)
(3)
(4,002)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(521)
(10)
411
8
(112)
Amounts reclassified from OCI
(9)
(5)
56
(13)
29
Total other comprehensive (loss)
income
(530)
(15)
467
(5)
(83)
Less:
Amounts attributable to
noncontrolling interests
4
–
–
–
4
Balance at December 31, 2021
(1)
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(685)
(23)
226
(12)
(494)
Amounts reclassified from OCI
46
2
29
12
89
Total other comprehensive (loss)
income
(639)
(21)
255
–
(405)
Spin-off of the Turbocharging Division
(93)
–
(5)
–
(98)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(34)
–
(1)
–
(35)
Balance at December 31, 2022
(3,691)
(19)
(838)
(8)
(4,556)
(1)
Due to rounding, numbers presented may not add to the totals provided.
The following table reflects amounts reclassified out of OCI
in respect of Pension and other postretirement plan adjustments:
Year ended
Three months ended
($ in millions)
Location of (gains) losses
December 31,
December 31,
Details about OCI components
reclassified from OCI
2022
2021
2022
2021
Foreign currency translation adjustments:
Changes attributable to divestments
Other income (expense), net
41
(9)
41
(9)
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
5
–
–
–
Amounts reclassified from OCI
46
(9)
41
(9)
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(1)
(13)
(14)
(5)
(5)
Amortization of net actuarial loss
Non-operational pension (cost) credit
(1)
55
65
13
14
Net gain (loss) from settlements and curtailments
Non-operational pension (cost) credit
(1)
11
7
11
8
Changes attributable to divestments
Other income (expense), net
(8)
(8)
(8)
(8)
Total before tax
45
50
11
9
Tax
Income tax expense
(16)
4
(6)
(5)
Changes attributable to divestments
Other income (expense), net
–
2
–
2
Amounts reclassified from OCI
29
56
5
6
The amounts in respect of Unrealized gains (losses)
on available-for-sale securities and Derivative instruments
and hedges were not significant for the year and
three months ended December 31, 2022 and 2021.
30
Q4 2022
FINANCIAL
INFORMATION
─
Note 16
Restructuring and related expenses
Other restructuring-related activities
In the year and three months ended December 31, 2022
and 2021, the Company executed various other restructuring
-related activities and incurred the following
expenses:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Employee severance costs
81
101
17
57
Estimated contract settlement, loss order and other costs
209
31
4
16
Inventory and long-lived asset impairments
7
24
2
7
Total
297
156
23
80
Expenses associated with these activities are recorded in the following
line items in the Consolidated Income Statements:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Total cost of sales
24
71
11
35
Selling, general and administrative expenses
40
21
1
11
Non-order related research and development expenses
2
2
–
2
Other income (expense), net
231
62
11
32
Total
297
156
23
80
During
the second
quarter
of 2022,
the Company
completed
a plan
(initiated
in 2021)
to fully
exit its
full train
retrofit
business
by transferring
the remaining
contracts
to a third
party.
The Company
recorded
$195 million
of restructuring
expenses
in connection
with this
business
exit primarily
for contract
settlement
costs.
Prior to
exiting
this business,
the business
was reported
as part
of the
Company’s
non-core
business
activities
within
Corporate
and
Other.
At December
31, 2022
and 2021,
$198 million
and $212
million,
respectively,
was recorded
for other
restructuring
-related
liabilities
and is
included
primarily
in Other
provisions.
─
Note 17
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.
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 electric vehicle
charging infrastructure, 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 seven operating Divisions: Distribution Solutions,
Smart Power, Smart Buildings, E-Mobility,
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, the Business Area combines domain expertise and
technology to deliver the optimum solution for a wide range
of applications in all
industrial segments. In addition, the Business Area, 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,
as well as, prior to its sale in November 2021, the Mechanical
Power Transmission Division.
31
Q4 2022
FINANCIAL
INFORMATION
●
Process Automation:
develops and sells a broad range of industry-specific,
integrated automation, electrification and digital systems
and solutions, as
well as digital solutions, lifecycle services, advanced industrial analytics
and artificial intelligence applications and suites for the
process, marine and
hybrid industries. Products and solutions include control technologies,
advanced process control software and manufacturing execution
systems,
sensing, measurement and analytical instrumentation, marine
propulsion systems and turbochargers. In addition, the
Business Area offers a
comprehensive range of services ranging from repair to advanced services
such as remote monitoring, preventive maintenance,
asset performance
management, emission monitoring and cybersecurity
services. The products, systems and services
are delivered through five 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, 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),
●
changes in estimates relating to opening balance sheets of acquired
businesses (changes in pre-acquisition estimates),
●
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,
●
other income/expense relating to the Power Grids joint venture,
●
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, certain asset write downs/impairments
and certain other fair
value changes, 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 year and three months
ended December 31, 2022 and 2021, as well as
total assets
at December 31, 2022 and 2021.
Year ended December 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
4,449
2,031
2,248
1,494
63
10,285
The Americas
5,332
2,148
1,566
524
3
9,573
of which: United States
3,918
1,787
943
373
2
7,023
Asia, Middle East and Africa
4,123
2,101
2,199
1,155
10
9,588
of which: China
1,984
1,147
666
897
2
4,696
13,904
6,280
6,013
3,173
76
29,446
Product type
Products
12,179
5,380
1,337
1,863
7
20,766
Systems
830
–
1,974
832
69
3,705
Services and other
895
900
2,702
478
–
4,975
13,904
6,280
6,013
3,173
76
29,446
Third-party revenues
13,904
6,280
6,013
3,173
76
29,446
Intersegment revenues
201
465
31
8
(705)
–
Total revenues
(1)
14,105
6,745
6,044
3,181
(629)
29,446
32
Q4 2022
FINANCIAL
INFORMATION
Year ended December 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
4,517
2,015
2,416
1,578
3
10,529
The Americas
4,465
2,346
1,431
439
5
8,686
of which: United States
3,304
1,952
833
308
–
6,397
Asia, Middle East and Africa
3,975
2,111
2,367
1,270
7
9,730
of which: China
2,087
1,156
740
949
–
4,932
12,957
6,472
6,214
3,287
15
28,945
Product type
Products
10,706
5,555
1,496
2,159
4
19,920
Systems
1,367
–
1,802
645
11
3,825
Services and other
884
917
2,916
483
–
5,200
12,957
6,472
6,214
3,287
15
28,945
Third-party revenues
12,957
6,472
6,214
3,287
15
28,945
Intersegment revenues
230
453
45
10
(738)
–
Total revenues
(1)
13,187
6,925
6,259
3,297
(723)
28,945
Three months ended December 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,158
601
522
424
60
2,765
The Americas
1,403
574
431
147
–
2,555
of which: United States
1,048
480
262
106
2
1,898
Asia, Middle East and Africa
1,057
537
592
317
1
2,504
of which: China
454
259
168
251
1
1,133
3,618
1,712
1,545
888
61
7,824
Product type
Products
3,146
1,449
292
526
(2)
5,411
Systems
218
–
599
234
63
1,114
Services and other
254
263
654
128
–
1,299
3,618
1,712
1,545
888
61
7,824
Third-party revenues
3,618
1,712
1,545
888
61
7,824
Intersegment revenues
45
133
6
3
(187)
–
Total revenues
(1)
3,663
1,845
1,551
891
(126)
7,824
Three months ended December 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,160
532
700
377
(13)
2,756
The Americas
1,153
514
421
108
2
2,198
of which: United States
839
412
256
72
–
1,579
Asia, Middle East and Africa
1,070
557
673
313
–
2,613
of which: China
510
295
193
235
–
1,233
3,383
1,603
1,794
798
(11)
7,567
Product type
Products
2,600
1,353
399
520
(11)
4,861
Systems
543
–
544
153
–
1,240
Services and other
240
250
851
125
–
1,466
3,383
1,603
1,794
798
(11)
7,567
Third-party revenues
3,383
1,603
1,794
798
(11)
7,567
Intersegment revenues
62
132
11
1
(206)
–
Total revenues
(1)
3,445
1,735
1,805
799
(217)
7,567
(1)
Due to rounding, numbers presented may not add to the totals provided.
33
Q4 2022
FINANCIAL
INFORMATION
Year ended
Three months ended
December 31,
December 31,
($ in millions)
2022
2021
2022
2021
Operational EBITA:
Electrification
2,328
2,121
572
507
Motion
1,163
1,183
318
278
Process Automation
848
801
203
247
Robotics & Discrete Automation
340
355
125
64
Corporate and Other
‒
Non-core and divested businesses
5
(39)
(3)
–
‒ Corporate costs and Other Intersegment elimination
(174)
(299)
(69)
(108)
Total
4,510
4,122
1,146
988
Acquisition-related amortization
(229)
(250)
(55)
(59)
Restructuring, related and implementation costs
(1)
(347)
(160)
(47)
(79)
Changes in obligations related to divested businesses
88
(9)
71
7
Changes in pre-acquisition estimates
(10)
6
(10)
–
Gains and losses from sale of businesses
(7)
2,193
(3)
2,184
Acquisition- and divestment-related expenses and integration
costs
(195)
(132)
(24)
(58)
Other income/expense relating to the Power Grids joint venture
(57)
(34)
10
–
Foreign exchange/commodity timing differences in
income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
32
(54)
139
52
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(48)
(2)
–
(7)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
(15)
20
(70)
(13)
Certain other non-operational items:
Regulatory, compliance and legal costs
(317)
–
16
3
Business transformation costs
(2)
(152)
(92)
(38)
(33)
Favorable resolution of an uncertain purchase price adjustment
15
6
15
1
Gains and losses from sale of investments in
equity-accounted companies
43
–
43
–
Certain other fair value changes, including asset impairments
45
119
(13)
1
Other non-operational items
(19)
(15)
5
(12)
Income from operations
3,337
5,718
1,185
2,975
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Non-operational pension (cost) credit
115
166
13
36
Income from continuing operations before taxes
3,394
5,787
1,197
2,985
(1)
Includes impairment of certain assets.
(2)
Amount includes ABB Way process transformation costs of $131 million and $80 million for year ended December 31, 2022 and 2021, respectively, and $33 million and $28 million for
the three months ended December 31, 2022 and 2021, respectively.
Total assets
(1)
($ in millions)
December 31, 2022
December 31, 2021
Electrification
13,992
12,831
Motion
6,565
5,936
Process Automation
4,598
5,009
Robotics & Discrete Automation
4,901
4,860
Corporate and Other
(2)
9,092
11,624
Consolidated
39,148
40,260
(1)
Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2)
At December 31, 2022 and 2021, respectively, Corporate and Other includes $96 million and $136 million of assets in the Power Grids business which is reported as discontinued
operations (see Note 3). In addition, at December 31, 2021, Corporate and Other included
$1,609 million, related to the equity investment in Hitachi Energy Ltd, which was
subsequently sold in December 2022 (see Note 4).
2023 Realignment of segments
Commencing in January 2023, the E-mobility Division is no
longer managed within the Electrification Business Area
and has become an independent Division and
a separate operating segment. The Division does not currently meet
any of the size thresholds to be considered a reportable
segment and will be presented within
Corporate and Other.
34
Q4 2022
FINANCIAL
INFORMATION
35
Q4 2022
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
year and
three
months
ended
December
31, 2022.
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 $50 million.
The following tables provide reconciliations of reported growth rates
of certain key figures to their respective comparable growth
rate.
Comparable growth rate reconciliation by Business Area
Q4 2022 compared to Q4 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
-2%
8%
0%
6%
6%
10%
0%
16%
Motion
-11%
8%
3%
0%
6%
11%
3%
20%
Process Automation
-8%
8%
11%
11%
-14%
8%
11%
5%
Robotics & Discrete Automation
-27%
8%
0%
-19%
12%
11%
0%
23%
ABB Group
-8%
8%
2%
2%
3%
10%
3%
16%
FY 2022 compared to FY 2021
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
11%
6%
0%
17%
7%
7%
0%
14%
Motion
4%
7%
9%
20%
-3%
8%
9%
14%
Process Automation
1%
7%
3%
11%
-3%
7%
3%
7%
Robotics & Discrete Automation
7%
9%
-1%
15%
-4%
9%
-1%
4%
ABB Group
7%
6%
3%
16%
2%
7%
3%
12%
36
Q4 2022
FINANCIAL
INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group
- Quarter
Q4 2022 compared to Q4 2021
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
-17%
12%
0%
-5%
0%
15%
1%
16%
The Americas
10%
1%
4%
15%
16%
1%
5%
22%
of which: United States
9%
0%
4%
13%
20%
0%
6%
26%
Asia, Middle East and Africa
-15%
10%
3%
-2%
-4%
11%
3%
10%
of which: China
-22%
9%
1%
-12%
-8%
10%
3%
5%
ABB Group
-8%
8%
2%
2%
3%
10%
3%
16%
Regional comparable growth rate reconciliation by Business
Area - Quarter
Q4 2022 compared to Q4 2021
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
-17%
13%
0%
-4%
-1%
16%
0%
15%
The Americas
20%
0%
0%
20%
21%
1%
0%
22%
of which: United States
25%
0%
0%
25%
25%
0%
0%
25%
Asia, Middle East and Africa
-14%
10%
0%
-4%
-2%
12%
0%
10%
of which: China
-15%
10%
0%
-5%
-12%
10%
0%
-2%
Electrification
-2%
8%
0%
6%
6%
10%
0%
16%
Q4 2022 compared to Q4 2021
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
-26%
11%
0%
-15%
9%
17%
0%
26%
The Americas
-7%
2%
10%
5%
12%
1%
12%
25%
of which: United States
-9%
1%
10%
2%
16%
1%
13%
30%
Asia, Middle East and Africa
5%
11%
0%
16%
-2%
12%
0%
10%
of which: China
-8%
11%
0%
3%
-9%
10%
0%
1%
Motion
-11%
8%
3%
0%
6%
11%
3%
20%
Q4 2022 compared to Q4 2021
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
-9%
12%
12%
15%
-25%
10%
11%
-4%
The Americas
11%
2%
9%
22%
2%
2%
12%
16%
of which: United States
0%
1%
7%
8%
2%
1%
13%
16%
Asia, Middle East and Africa
-21%
9%
10%
-2%
-12%
8%
13%
9%
of which: China
-42%
7%
5%
-30%
-13%
9%
17%
13%
Process Automation
-8%
8%
11%
11%
-14%
8%
11%
5%
Q4 2022 compared to Q4 2021
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
-28%
10%
0%
-18%
13%
16%
0%
29%
The Americas
-13%
1%
0%
-12%
36%
-1%
0%
35%
of which: United States
-34%
0%
0%
-34%
49%
0%
0%
49%
Asia, Middle East and Africa
-33%
8%
0%
-25%
2%
11%
0%
13%
of which: China
-35%
8%
0%
-27%
7%
13%
0%
20%
Robotics & Discrete Automation
-27%
8%
0%
-19%
12%
11%
0%
23%
37
Q4 2022
FINANCIAL
INFORMATION
Regional comparable growth rate reconciliation for ABB Group
– Year to date
FY 2022 compared to FY 2021
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%
14%
0%
13%
-2%
14%
0%
12%
The Americas
19%
1%
8%
28%
10%
1%
8%
19%
of which: United States
20%
0%
9%
29%
10%
0%
9%
19%
Asia, Middle East and Africa
3%
6%
1%
10%
-1%
6%
1%
6%
of which: China
1%
3%
1%
5%
-5%
4%
1%
0%
ABB Group
7%
6%
3%
16%
2%
7%
3%
12%
Regional comparable growth rate reconciliation by Business
Area – Year to date
FY 2022 compared to FY 2021
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%
14%
0%
13%
-2%
15%
0%
13%
The Americas
30%
1%
0%
31%
19%
1%
0%
20%
of which: United States
36%
0%
0%
36%
19%
0%
0%
19%
Asia, Middle East and Africa
0%
6%
0%
6%
3%
7%
0%
10%
of which: China
-5%
4%
0%
-1%
-5%
4%
0%
-1%
Electrification
11%
6%
0%
17%
7%
7%
0%
14%
FY 2022 compared to FY 2021
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
4%
14%
0%
18%
1%
15%
0%
16%
The Americas
-4%
2%
25%
23%
-8%
1%
26%
19%
of which: United States
-3%
0%
29%
26%
-8%
1%
28%
21%
Asia, Middle East and Africa
12%
6%
1%
19%
0%
6%
1%
7%
of which: China
7%
4%
1%
12%
-1%
5%
0%
4%
Motion
4%
7%
9%
20%
-3%
8%
9%
14%
FY 2022 compared to FY 2021
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
-10%
12%
3%
5%
-7%
12%
3%
8%
The Americas
21%
2%
3%
26%
9%
2%
3%
14%
of which: United States
15%
0%
3%
18%
13%
1%
4%
18%
Asia, Middle East and Africa
-2%
7%
3%
8%
-7%
6%
3%
2%
of which: China
-9%
4%
2%
-3%
-10%
5%
3%
-2%
Process Automation
1%
7%
3%
11%
-3%
7%
3%
7%
FY 2022 compared to FY 2021
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
3%
13%
-1%
15%
-5%
13%
-1%
7%
The Americas
15%
0%
0%
15%
19%
0%
0%
19%
of which: United States
9%
0%
0%
9%
21%
0%
0%
21%
Asia, Middle East and Africa
10%
5%
0%
15%
-9%
5%
0%
-4%
of which: China
18%
4%
0%
22%
-5%
4%
0%
-1%
Robotics & Discrete Automation
7%
9%
-1%
15%
-4%
9%
-1%
4%
38
Q4 2022
FINANCIAL
INFORMATION
Order backlog growth rate reconciliation
December 31, 2022 compared to December 31, 2021
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
27%
6%
0%
33%
Motion
26%
8%
0%
34%
Process Automation
2%
6%
8%
16%
Robotics & Discrete Automation
40%
9%
-1%
48%
ABB Group
20%
6%
3%
29%
Other growth rate reconciliations
Q4 2022 compared to Q4 2021
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
6%
7%
0%
13%
5%
10%
0%
15%
Motion
-2%
10%
0%
8%
5%
11%
0%
16%
Process Automation
-21%
7%
18%
4%
-23%
6%
18%
1%
Robotics & Discrete Automation
4%
10%
0%
14%
4%
10%
0%
14%
ABB Group
-11%
7%
11%
7%
-11%
8%
11%
8%
FY 2022 compared to FY 2021
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
6%
8%
0%
14%
1%
8%
0%
9%
Motion
7%
8%
0%
15%
-2%
9%
0%
7%
Process Automation
-2%
7%
5%
10%
-7%
6%
6%
5%
Robotics & Discrete Automation
4%
9%
0%
13%
-1%
9%
0%
8%
ABB Group
1%
8%
3%
12%
-4%
7%
3%
6%
39
Q4 2022
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),
●
changes in estimates relating to opening balance sheets of acquired
businesses (changes in pre-acquisition estimates),
●
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,
●
other income/expense relating to the Power Grids joint venture,
●
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, certain asset write downs
/impairments and certain other fair
value changes, 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.
Other income/expense relating to the Power Grids joint
venture
Other income/expense relating to the Power Grids joint venture
consists of amounts recorded in Income from continuing
operations before taxes relating to the
divested Power Grids business including the income/loss under the
equity method for the investment in Hitachi Energy
Ltd. (Hitachi Energy), amortization of
deferred brand income as well as changes in value of other
obligations relating to the divestment.
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
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Operational EBITA
4,510
4,122
1,146
988
Acquisition-related amortization
(229)
(250)
(55)
(59)
Restructuring, related and implementation costs
(1)
(347)
(160)
(47)
(79)
Changes in obligations related to divested businesses
88
(9)
71
7
Changes in pre-acquisition estimates
(10)
6
(10)
–
Gains and losses from sale of businesses
(7)
2,193
(3)
2,184
Acquisition- and divestment-related expenses and integration
costs
(195)
(132)
(24)
(58)
Other income/expense relating to the Power Grids joint venture
(57)
(34)
10
–
Certain other non-operational items
(385)
18
28
(40)
Foreign exchange/commodity timing differences in
income from operations
(31)
(36)
69
32
Income from operations
3,337
5,718
1,185
2,975
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Non-operational pension (cost) credit
115
166
13
36
Income from continuing operations before taxes
3,394
5,787
1,197
2,985
Income tax expense
(757)
(1,057)
(29)
(282)
Income from continuing operations, net of
tax
2,637
4,730
1,168
2,703
Loss from discontinued operations, net of tax
(43)
(80)
(7)
(35)
Net income
2,594
4,650
1,161
2,668
(1)
Includes impairment of certain assets.
40
Q4 2022
FINANCIAL
INFORMATION
Reconciliation of Operational EBITA
margin by business
Three months ended December 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,663
1,845
1,551
891
(126)
7,824
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(74)
(35)
(25)
(10)
(5)
(149)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
(2)
(1)
1
3
2
Unrealized foreign exchange movements
on receivables (and related assets)
44
15
14
10
2
85
Operational revenues
3,634
1,823
1,539
892
(126)
7,762
Income (loss) from operations
557
316
183
101
28
1,185
Acquisition-related amortization
27
8
1
19
–
55
Restructuring, related and
implementation costs
10
5
23
2
7
47
Changes in obligations related to
divested businesses
1
–
–
–
(72)
(71)
Changes in pre-acquisition estimates
9
–
–
1
–
10
Gains and losses from sale of businesses
–
3
–
–
–
3
Acquisition- and divestment-related expenses
and integration costs
8
3
12
2
(1)
24
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
(10)
(10)
Certain other non-operational items
–
–
–
(9)
(19)
(28)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(86)
(27)
(21)
1
(6)
(139)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
(1)
(2)
1
–
–
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
44
11
7
7
1
70
Operational EBITA
572
318
203
125
(72)
1,146
Operational EBITA margin (%)
15.7%
17.4%
13.2%
14.0%
n.a.
14.8%
In the three months ended December 31, 2022, certain other non
-operational items in the table above includes the following:
Three months ended December 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
–
–
–
–
(16)
(16)
Certain other fair values changes,
including asset impairments
–
–
–
8
5
13
Business transformation costs
(1)
5
–
–
–
33
38
Favorable resolution of an uncertain
purchase price adjustment
–
–
–
(15)
–
(15)
Gains and losses from sale of investments
in equity-accounted companies
–
–
–
–
(43)
(43)
Other non-operational items
(5)
–
–
(2)
2
(5)
Total
–
–
–
(9)
(19)
(28)
(1)
Amounts
include ABB Way process transformation costs of $33 million for the three months ended December 31, 2022.
41
Q4 2022
FINANCIAL
INFORMATION
Three months ended December 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,445
1,735
1,805
799
(217)
7,567
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(20)
(13)
(10)
(4)
(7)
(54)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
4
(1)
2
6
Unrealized foreign exchange movements
on receivables (and related assets)
(3)
3
1
–
3
4
Operational revenues
3,423
1,725
1,800
794
(219)
7,523
Income (loss) from operations
418
2,464
193
45
(145)
2,975
Acquisition-related amortization
29
7
2
21
–
59
Restructuring, related and
implementation costs
34
4
33
1
7
79
Changes in obligations related to
divested businesses
–
–
–
–
(7)
(7)
Gains and losses from sale of businesses
9
(2,195)
–
–
2
(2,184)
Acquisition- and divestment-related expenses
and integration costs
34
7
18
–
(1)
58
Certain other non-operational items
8
–
(2)
–
34
40
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(30)
(12)
(2)
(3)
(5)
(52)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
5
–
1
7
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
4
3
–
–
6
13
Operational EBITA
507
278
247
64
(108)
988
Operational EBITA margin (%)
14.8%
16.1%
13.7%
8.1%
n.a.
13.1%
In the three months ended December 31, 2021, certain other non
-operational items in the table above includes the following:
Three months ended December 31, 2021
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
–
–
–
–
(3)
(3)
Certain other fair values changes,
including asset impairments
1
–
–
–
(2)
(1)
Business transformation costs
(1)
10
–
–
–
23
33
Favorable resolution of an uncertain
purchase price adjustment
–
–
(1)
–
–
(1)
Other non-operational items
(3)
–
(1)
–
16
12
Total
8
–
(2)
–
34
40
(1)
Amounts
include ABB Way process transformation costs of $28 million for the three months ended December 31, 2021.
42
Q4 2022
FINANCIAL
INFORMATION
Year ended December 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
14,105
6,745
6,044
3,181
(629)
29,446
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(38)
(18)
25
4
–
(27)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
14
–
10
1
30
55
Unrealized foreign exchange movements
on receivables (and related assets)
10
4
(2)
1
(13)
–
Operational revenues
14,091
6,731
6,077
3,187
(612)
29,474
Income (loss) from operations
2,159
1,092
663
247
(824)
3,337
Acquisition-related amortization
116
31
4
78
–
229
Restructuring, related and
implementation costs
(1)
28
16
29
11
263
347
Changes in obligations related to
divested businesses
1
–
–
–
(89)
(88)
Changes in pre-acquisition estimates
11
–
–
(1)
–
10
Gains and losses from sale of businesses
(1)
8
–
–
–
7
Acquisition- and divestment-related expenses
and integration costs
40
15
134
6
–
195
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
57
57
Certain other non-operational items
(24)
–
–
(7)
416
385
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(32)
(5)
6
4
(5)
(32)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
13
–
9
1
25
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
17
6
3
1
(12)
15
Operational EBITA
2,328
1,163
848
340
(169)
4,510
Operational EBITA margin (%)
16.5%
17.3%
14.0%
10.7%
n.a.
15.3%
(1)
Includes impairment of certain assets.
In the year ended December 31, 2022, certain other non-operational
items in the table above includes the following:
Year ended December 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
–
–
–
–
317
317
Certain other fair values changes,
including asset impairments
(57)
–
–
8
4
(45)
Business transformation costs
(1)
20
–
–
–
132
152
Favorable resolution of an uncertain
purchase price adjustment
–
–
–
(15)
–
(15)
Gains and losses from sale of investments
in equity-accounted companies
–
–
–
–
(43)
(43)
Other non-operational items
13
–
–
–
6
19
Total
(24)
–
–
(7)
416
385
(1)
Amounts
include ABB Way process transformation costs of $131 million for the year ended December 31, 2022.
43
Q4 2022
FINANCIAL
INFORMATION
Year ended December 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
13,187
6,925
6,259
3,297
(723)
28,945
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
17
4
9
1
(4)
27
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
1
2
(2)
–
4
Unrealized foreign exchange movements
on receivables (and related assets)
(19)
(3)
(6)
(6)
2
(32)
Operational revenues
13,188
6,927
6,264
3,290
(725)
28,944
Income (loss) from operations
1,841
3,276
713
269
(381)
5,718
Acquisition-related amortization
117
43
5
83
2
250
Restructuring, related and
implementation costs
66
22
48
7
17
160
Changes in obligations related to
divested businesses
–
–
–
–
9
9
Changes in pre-acquisition estimates
(6)
–
–
–
–
(6)
Gains and losses from sale of businesses
13
(2,196)
(13)
–
3
(2,193)
Acquisition- and divestment-related expenses
and integration costs
70
26
35
1
–
132
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
34
34
Certain other non-operational items
(5)
1
1
–
(15)
(18)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
33
14
15
(2)
(6)
54
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
4
(1)
(2)
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(9)
(3)
(7)
(2)
1
(20)
Operational EBITA
2,121
1,183
801
355
(338)
4,122
Operational EBITA margin (%)
16.1%
17.1%
12.8%
10.8%
n.a.
14.2%
In the year ended December 31, 2021, certain other non-operational
items in the table above includes the following:
Year ended December 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Certain other fair values changes,
including asset impairments
(15)
–
–
–
(104)
(119)
Business transformation costs
17
–
–
–
75
92
Favorable resolution of an uncertain
purchase price adjustment
(5)
–
(1)
–
–
(6)
Other non-operational items
(2)
1
2
–
14
15
Total
(5)
1
1
–
(15)
(18)
(1)
Amounts
include ABB Way process transformation costs of $80 million for the year ended December 31, 2021.
44
Q4 2022
FINANCIAL
INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total
debt less Cash and marketable securities.
Total debt
Total debt is the sum
of Short-term debt and current maturities of long-term
debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents,
Restricted cash (current and non-current)
and Marketable securities and short-term
investments.
Reconciliation
December 31,
($ in millions)
2022
2021
2020
Short-term debt and current maturities of long-term debt
2,535
1,384
1,293
Long-term debt
5,143
4,177
4,828
Total debt
7,678
5,561
6,121
Cash and equivalents
4,156
4,159
3,278
Restricted cash - current
18
30
323
Marketable securities and short-term investments
725
1,170
2108
Restricted cash - non-current
–
300
300
Cash and marketable securities
4,899
5,659
6,009
Net debt (cash)
2,779
(98)
112
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)
December 31, 2022
December 31, 2021
Total stockholders'
equity
13,187
15,957
Net debt (cash) (as defined above)
2,779
(98)
Net debt (cash) / Equity ratio
0.21
-0.01
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)
December 31, 2022
December 31, 2021
Income from operations
3,337
5,718
Depreciation and Amortization
814
893
EBITDA
4,151
6,611
Net debt (cash) (as defined above)
2,779
(98)
Net debt (cash) / EBITDA
0.67
-0.01
45
Q4 2022
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
December 31,
($ in millions, unless otherwise indicated)
2022
2021
2020
Net working capital:
Receivables, net
6,858
6,551
6,820
Contract assets
954
990
985
Inventories, net
6,028
4,880
4,469
Prepaid expenses
230
206
201
Accounts payable, trade
(4,904)
(4,921)
(4,571)
Contract liabilities
(1)
(2,275)
(1,894)
(1,903)
Other current liabilities
(2)
(3,675)
(3,509)
(3,283)
Net working capital
3,216
2,303
2,718
Total revenues for the
twelve months ended
29,446
28,945
26,134
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(513)
(517)
(167)
Adjusted revenues for the trailing twelve months
28,933
28,428
25,967
Net working capital as a percentage of revenues (%)
11.1%
8.1%
10.5%
(1)
Amount includes certain amounts relating to contract liabilities that are presented in other non-current liabilities.
(2)
Amounts exclude $648 million, $858 million and $898 million at December 31, 2022, 2021 and 2020, respectively, related primarily to (a) income taxes payable, (b) current derivative
liabilities, (c) pension and other employee benefits, (d) payables under the share buyback program and (e) liabilities related to the divestment of the Power Grids business.
46
Q4 2022
FINANCIAL
INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as
free cash flow divided by Adjusted net income attributable
to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income
attributable to ABB adjusted for: (i) impairment of
goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of the equity-accounted
investment in Hitachi Energy Ltd., the Mechanical Power Transmission
Division (Dodge) and the
Power Grids business, the latter being included in discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities
adjusted for: (i) purchases of property,
plant and equipment and intangible assets
and (ii)
proceeds from sales of property,
plant and equipment.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
December 31, 2022
December 31, 2021
Net cash provided by operating activities – continuing
operations
1,334
3,338
Adjusted for the effects of continuing operations:
Purchases of property, plant and
equipment and intangible assets
(762)
(820)
Proceeds from sale of property, plant and
equipment
127
93
Free cash flow from continuing operations
699
2,611
Net cash used in operating activities – discontinued operations
(47)
(8)
Free cash flow
652
2,603
Adjusted net income attributable to ABB
(1)
2,442
2,416
Free cash flow conversion to net income
27%
108%
(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. For the year ended December 31, 2021, Adjusted net income attributable to ABB is adjusted to exclude the gain on
the sale of Dodge of $2,195
million and reductions to the gain on the sale of Power Grids of $65 million.
47
Q4 2022
FINANCIAL
INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income
less Interest and other finance expense.
Reconciliation
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Net finance expenses
(58)
(97)
(1)
(26)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total
revenues.
Reconciliation
Year ended December 31,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
15,901
14,105
1.13
14,381
13,187
1.09
Motion
7,896
6,745
1.17
7,616
6,925
1.10
Process Automation
6,825
6,044
1.13
6,779
6,259
1.08
Robotics & Discrete Automation
4,116
3,181
1.29
3,844
3,297
1.17
Corporate and Other
(incl. intersegment eliminations)
(750)
(629)
n.a.
(752)
(723)
n.a.
ABB Group
33,988
29,446
1.15
31,868
28,945
1.10
Three months ended December 31,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,565
3,663
0.97
3,638
3,445
1.06
Motion
1,649
1,845
0.89
1,843
1,735
1.06
Process Automation
1,746
1,551
1.13
1,898
1,805
1.05
Robotics & Discrete Automation
798
891
0.90
1,100
799
1.38
Corporate and Other
(incl. intersegment eliminations)
(138)
(126)
n.a.
(222)
(217)
n.a.
ABB Group
7,620
7,824
0.97
8,257
7,567
1.09
48
Q4 2022
FINANCIAL
INFORMATION
Return on Capital employed (ROCE)
Definition
Return on Capital employed (ROCE)
Return on Capital employed is calculated as Operational EBITA
after tax, divided by the average of the period’s
opening and closing Capital employed,
adjusted to
reflect impacts from the timing of significant acquisitions/divestments
occurring during the period.
Capital employed
Capital employed is calculated as the sum of Adjusted total fixed
assets and Net working capital (as defined above).
Adjusted total fixed assets
Adjusted total fixed assets is the sum of (i) property,
plant and equipment, net, (ii) goodwill, (iii) other
intangible assets, net, (iv) investments in equity-accounted
companies,
and (v) operating lease right-of-use assets,
less (vi) deferred tax liabilities recognized in certain
acquisitions.
Notional tax on Operational EBITA
The Notional tax on Operational EBITA
is computed using the adjusted group effective tax
rate multiplied by Operational EBITA.
Adjusted Group effective tax rate
The Adjusted Group effective tax rate is computed by
dividing an adjusted income tax expense by an
adjusted pre-tax income. Certain amounts recorded
in
income before taxes and the related income tax expense (primarily
due to gains and losses from sale of businesses
and in 2022, regulatory penalties in connection
with the Kusile project)
are removed from the reported amounts when computing
these adjusted amounts. Certain other amounts recorded in
income tax expense
are also excluded from the computation to determine the Adjusted
Group effective tax rate.
Reconciliation
December 31,
($ in millions, unless otherwise indicated)
2022
2021
2020
Adjusted total fixed assets:
Property, plant and equipment, net
3,911
4,045
4,174
Goodwill
10,511
10,482
10,850
Other intangible assets, net
1,406
1,561
2,078
Investments in equity-accounted companies
130
1,670
1,784
Operating lease right-of-use assets
841
895
969
Total fixed assets
16,799
18,653
19,855
Less: Deferred taxes recognized in certain acquisitions
(1)
(358)
(417)
(597)
Adjusted total fixed assets
16,441
18,236
19,258
Net working capital - (as defined above)
3,216
2,303
2,718
Capital employed
19,657
20,539
21,976
Average Capital employed:
Capital employed at the end of the previous year
20,539
21,976
20,141
(2)
Capital employed at the end of the current year
19,657
20,539
21,976
20,098
21,258
21,059
Adjusted for timing of acquisitions/divestments
948
224
–
Average Capital employed
21,046
21,482
21,059
Operational EBITA for the year ended
4,510
4,122
2,899
Notional tax on Operational EBITA
(1,037)
(929)
(731)
Operational EBITA after tax
3,473
3,193
2,168
Return on Capital employed (ROCE)
16.5%
14.9%
10.3%
(1)
Amount relates to GEIS acquired in 2018, B&R acquired in 2017, Power-One acquired in 2013, Thomas & Betts acquired in 2012 and Baldor acquired in 2011.
(2)
Adjusted to include $1,196 million of operating lease right-of-use assets, recorded on adoption of the new lease accounting standard on January 1, 2019.
49
Q4 2022
FINANCIAL
INFORMATION
2023 Realignment of segments - Electrification Business Area excluding E-Mobility
Commencing in January 2023, the E-mobility Division is no
longer managed within the Electrification Business Area
and has become an independent Division and
a separate operating segment. The Division does not currently meet
any of the size thresholds to be considered a reportable
segment and will be presented within
Corporate and Other. The tables below present
Operational EBITA and Operational
EBITA margin for 2022 and 2021,
restated to reflect the new structure.
Year ended
December 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
13,619
6,745
6,044
3,181
(143)
29,446
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(37)
(18)
25
4
(1)
(27)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
11
–
10
1
33
55
Unrealized foreign exchange movements
on receivables (and related assets)
6
4
(2)
1
(9)
–
Operational revenues
13,599
6,731
6,077
3,187
(120)
29,474
Income (loss) from operations
2,140
1,092
663
247
(805)
3,337
Acquisition-related amortization
104
31
4
78
12
229
Restructuring, related and
implementation costs
(1)
28
16
29
11
263
347
Changes in obligations related to
divested businesses
1
–
–
–
(89)
(88)
Changes in pre-acquisition estimates
11
–
–
(1)
–
10
Gains and losses from sale of businesses
(1)
8
–
–
–
7
Acquisition- and divestment-related expenses
and integration costs
36
15
134
6
4
195
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
57
57
Certain other non-operational items
30
–
–
(7)
362
385
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(30)
(5)
6
4
(7)
(32)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
10
–
9
1
28
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
14
6
3
1
(9)
15
Operational EBITA
2,343
1,163
848
340
(184)
4,510
Operational EBITA margin (%)
17.2%
17.3%
14.0%
10.7%
n.a.
15.3%
(1)
Includes impairment of certain assets.
50
Q4 2022
FINANCIAL
INFORMATION
Year ended December 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
12,894
6,925
6,259
3,297
(430)
28,945
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
15
4
9
1
(2)
27
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
1
2
(2)
–
4
Unrealized foreign exchange movements
on receivables (and related assets)
(18)
(3)
(6)
(6)
1
(32)
Operational revenues
12,894
6,927
6,264
3,290
(431)
28,944
Income (loss) from operations
1,827
3,276
713
269
(367)
5,718
Acquisition-related amortization
115
43
5
83
4
250
Restructuring, related and
implementation costs
66
22
48
7
17
160
Changes in obligations related to
divested businesses
–
–
–
–
9
9
Changes in pre-acquisition estimates
(6)
–
–
–
–
(6)
Gains and losses from sale of businesses
13
(2,196)
(13)
–
3
(2,193)
Acquisition- and divestment-related expenses
and integration costs
69
26
35
1
1
132
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
34
34
Certain other non-operational items
13
1
1
–
(33)
(18)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
30
14
15
(2)
(3)
54
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
4
(1)
(2)
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(8)
(3)
(7)
(2)
–
(20)
Operational EBITA
2,120
1,183
801
355
(337)
4,122
Operational EBITA margin (%)
16.4%
17.1%
12.8%
10.8%
n.a.
14.2%
51
Q4 2022
FINANCIAL
INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box
8131
8050
Zurich
Switzerland
Tel:
+41 (0)43
317 71
11
www.abb.com
October 1 — December 31, 2022
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
Description
Received *
Purchased
Sold
Price
Gunnar Brock
November 01, 2022
Share
2,388
CHF
26.43
David Constable
November 01, 2022
Share
2,316
CHF
26.43
Frederico Curado
November 01, 2022
Share
4,799
CHF
26.43
Lars Förberg
November 01, 2022
Share
5,736
CHF
26.43
Jennifer Xin-Zhe Li
November 01, 2022
Share
2,338
CHF
26.43
Geraldine Matchett
November 01, 2022
Share
3,121
CHF
26.43
David Meline
November 01, 2022
Share
2,895
CHF
26.43
Satish Pai
November 01, 2022
Share
4,523
CHF
26.43
Peter Voser
November 01, 2022
Share
21,565
CHF
26.43
Jacob Wallenberg
November 01, 2022
Share
3,257
CHF
26.43
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: February 2, 2023.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: February 2, 2023.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance