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 October 2022
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether
the registrant files or will file
annual reports under cover of Form
20-F or Form 40-F.
Form 20-F
☒
Form 40-F
⬜
Indicate by check mark if the registrant
is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule
101(b)(1):
⬜
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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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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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If “Yes” is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82-
This Form 6-K consists of the following:
1.
Press release issued by ABB Ltd dated October
20, 2022 titled “Q3 2022 results”.
2.
Q3 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
—
“In the third quarter, we delivered a high order growth,
a strong top-line development and a
historically high margin. We have not seen any material changes in the underlying customer
activity. It
looks like we are likely to achieve our 2023 margin target one year early. We are now
starting to see the real benefits of the ABB Way operating model.”
Björn Rosengren
, CEO
—
ZURICH, SWITZERLAND, OCTOBER 20,
2022
Q3 2022 results
Strong order growth,
high revenues and
historically high Operational
EBITA
margin
●
Orders $8.2 billion,
+4%; comparable
1
+16%
●
Revenues $7.4 billion
,
+5%; comparable +18%
●
Income from operations
$708 million; margin 9.6%
●
Operational EBITA
1
$1,231 million;
margin
1
16.6%
●
Basic EPS $0.19;
-41%
2
●
Cash flow from operating
activities $791 million
Ad hoc Announcement pursuant to Art.
53 Listing Rules of SIX Swiss Exchange
—
Q3 2022
First nine months
Press Release
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
1
9M 2022
9M 2021
US$
Comparable
1
Orders
8,188
7,866
4%
16%
26,368
23,611
12%
22%
Revenues
7,406
7,028
5%
18%
21,622
21,378
1%
10%
Gross Profit
2,481
2,294
8%
7,052
7,070
0%
as % of revenues
33.5%
32.6%
+0.9 pts
32.6%
33.1%
-0.5 pts
Income from operations
708
852
-17%
2,152
2,743
-22%
Operational EBITA
1
1,231
1,062
16%
27%
3
3,364
3,134
7%
15%
3
as % of operational revenues
1
16.6%
15.1%
+1.5 pts
15.5%
14.6%
+0.9 pts
Income from continuing operations, net of tax
420
687
-39%
1,469
2,027
-28%
Net income attributable to ABB
360
652
-45%
1,343
1,906
-30%
Basic earnings per share ($)
0.19
0.33
-41%
2
0.70
0.95
-26%
2
Cash flow from operating activities
4
791
1,104
-28%
600
2,310
-74%
Cash flow from operating activities in continuing
operations
793
1,119
-29%
614
2,305
-73%
1
For a reconciliation of non-GAAP measures, see “supplemental
reconciliations and definitions” in the attached
Q3 2022 Financial Information.
2
EPS growth rates are computed using unrounded amounts.
3
Constant currency (not adjusted for portfolio
changes).
4
Amount represents total for both continuing and
discontinued operations.
ABB
INTERIM
REPORT
I
Q3
2022
2
There were several
positive takeaways from the
third
quarter 2022. Strong
order growth of 4% (16%
comparable),
resulted in a book
-to-bill ratio of above
one for the seventh
consecutive quarter
.
Revenues
were supported by the
sequential easing of
component supply constraints
facilitating customer deliveries
but also by a significantly
lower level of interruptions
from Covid-related lockdowns
in
China.
I was pleased to see
the Operational EBITA
increase by
16%
year-on-year and the high
Operational EBITA
margin
of 16.6%, with improvements
noted in all business areas.
An excellent achievement,
driven by higher volumes
and
operational improvements
including good pricing execution
which offset cost
inflation related to raw materials,
freight
and labor.
Importantly,
this signals that our new way
of
working, with higher accountability,
transparency and
speed, is really starting
to take hold. I am proud
that we are
likely to achieve
our target of Operational EBITA
margin of
at least 15% already
in 2022, one year ahead of
plan.
It was good to see
cash flow from operating
activities of
$791
million, a higher level than
in the previous quarter,
and
I anticipate an additional
step up in the fourth
quarter.
Orders increased in
all regions, led by a very strong
development in the
Americas. In total, Europe
improved
strongly although some
normalization of inventory
levels
was noted in Germany
for parts of our customer base.
Asia,
Middle East and
Africa improved despite softness
noted in
China.
Customer activity was
at a high level in the quarter
with
overall stable to positive
development in most
segments
outside of discrete
industries.
In the latter we noted
some
customers normalizing
order patterns in anticipation
of
shorter delivery lead-times
as supply constraints ease.
Overall, demand
increased for both the short
-cycle flow
business and the systems
-driven offerings.
Changes in
exchange rates weighed
on total orders in all business
areas,
however the underlying
customer activity improved.
In total,
our order backlog remained
at a high level of
$19.4 billion.
Income from operations
amounted to $708 million
and
declined by 17%
(7% constant currency)
year-on-year.
This
includes the non-operational
provision of approximatel
y
In the
fourth quarter of 2022
, we anticipate a low double-
digit comparable revenue
growth, impacted by the
high level
of revenues recorded
last year.
We expect the typical
pattern of a sequentially
lower Operational EBITA
margin.
$325 million related
to the remaining matters for
the legacy
Kusile project,
with a similar cash flow
impact expected in
subsequent quarters.
We are now resolving this
matter,
related to a project
awarded in 2015. The new
ABB Way
operating model
is guided by our code of conduct
and is
part of our regular and
transparent business
reviews.
I am pleased about
the multiple portfolio management
activities in the quarter.
Importantly,
Motion signed two
acquisitions – in
the NEMA motors and Traction
divisions –
which will further cement
their leading market position
s. I
also want to highlight
our investment into an
accelerated
strategic collaboration
between Process Automation
and
Canada’s Hydrogen
Optimized launched in 2020
.
Together
we are advancing the
deployment of economic
large-scale
green hydrogen production
systems to decarbonize
hard-to-
abate industries.
We also announced
the early divestment of
the remaining
19.9% of the Hitachi
Energy joint venture to Hitachi
as they
exercised the call opti
on that was agreed in
- We do
not foresee any significant
gain or loss as a result of
the
sale and anticipate
net positive cash inflows
of
approximately $1.4
billion upon closing, expected
in the
fourth quarter 2022.
This will further strengthen
our balance
sheet and give us additional
flexibility in our capital
allocation decisions.
With regards to E-mobility,
we remain
committed to our plans
to list the division, although
we no
longer expect it to happen
this year due to the current
volatility in capital markets.
Finally, just
after the close of the
third quarter we
distributed Accelleron to shareholders
as a
dividend in kind.
I was delighted to mark
the first day of
trading of Accelleron
by joining the management
team in
ringing the bell on the
Swiss stock exchange.
I wish the
team great success
as a separately listed company
.
Björn Rosengren
CEO
In full-year
2022,
we are likely to achiev
e
early the 2023
target of an Operational
EBITA margin of
at least 15%,
supported by increased
efficiency as we fully incorporate
the decentralized operating
model and performance
culture
in all our divisions and
strong top-line execution.
CEO summary
Outlook
ABB
INTERIM
REPORT
I
Q3
2022
3
The impact from changes
in exchange rates weighed
on total
order growth. However
,
the underlying customer demand
was
strong, resulting in
order growth of 4% (16%
comparable), year-
on-year.
Customer activity was robust
for both the short-cycle
flow business and the
systems business.
The strongest
contribution to order
growth was seen in Electrification
and
Motion.
Process
Automation was hampered by
a high
comparable and
timing of order placements.
Robotics &
Discrete Automation saw
protracted lead times
in customers’
decision making and
normalizing order patterns
in anticipation
of shorter delivery lead-times
due to easing of component
constraints. Total
order intake for ABB amounted
to
$8,188 million, with
improvement in most divisions.
The positive development
was strong in the segment
of food &
beverage while normalizing
order patterns slowed
robotics
demand in general
industries and automotive
.
In transport and infrastructure,
the order development was
strong in renewables.
The buildings segment was
positively
impacted by both the
non-residential and residential
areas,
although some softness
in residential building in
China was
noted.
The timing of customers
placing orders impacted
growth
in the marine segment
,
although the pipeline
remains strong.
In the process-related
business,
gas-related demand improved.
Power generation and
pulp & paper were broadly
stable.
Early
signs of headwind were
noted in metals.
Customer activity was
strong across regions. Order
intake in the
Americas increased by
16% (25% comparable)
driven by the
US. Orders in Europe
increased
by 1% (20% comparable),
supported by all the
largest markets in the region.
Asia, Middle
East and Africa reported
a decline of 4% (up 4%
comparable),
including a decline
of 8% (2% comparable)
in China. However,
worth noting is that
excluding the impact
from large orders
received last year the
region increased at a
double-digit pace,
on a comparable basis
.
Revenues improved by
5% (18% comparable) with
improvements in virtually
all divisions. Price execution
was
robust. In addition to a
generally high flow business
demand,
volumes were supported
by the sequential easing
of supply
chain constraints fac
ilitating deliveries from
the order backlog,
not least due to better
access to semi-conductors.
Additional
support was derived
from lower business disruption
s
from
Covid-related lockdowns in
China compared with the previous
quarter.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2022
Q3 2021
US$
Comparable
Europe
2,682
2,663
1%
20%
The Americas
2,980
2,580
16%
25%
Asia, Middle East
and Africa
2,526
2,623
-4%
4%
ABB Group
8,188
7,866
4%
16%
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
16%
18%
FX
-9%
-10%
Portfolio changes
-3%
-3%
Total
4%
5%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2022
Q3 2021
US$
Comparable
Europe
2,494
2,525
-1%
18%
The Americas
2,452
2,161
13%
23%
Asia, Middle East
and Africa
2,460
2,342
5%
13%
ABB Group
7,406
7,028
5%
18%
ABB
INTERIM
REPORT
I
Q3
2022
4
Gross profit
Gross profit increased
by 8% (19% constant curren
cy) to $2,481
million, supported by
a gross margin improvement
of 90 basis
points to 33.5%. Increas
es were noted in all business
areas except
for a slight decline
in Robotics & Discrete Automation.
Income from operations
Income from operations
amounted to $708 million,
declining by
17% (7% constant
currency).
The main trigger was a
non-
operational provision
of approximately $325
million in connection
with the remaining
matters related to the
legacy Kusile project, with
a similar cash flow
impact expected in subsequent
quarters.
Additional pressures stemmed
from adverse changes in exchange
rates and slightly higher
acquisition-
and divestment-related
expenses.
Operational EBITA
Operational EBITA
of $1,231 million
was 16%
higher (27%
constant
currency) year-on-year,
as contribution from operational
performance more
than offset the adverse
impact from mainly
changes in exchange
rates and portfolio changes.
The Operational
EBITA margin increased
by 150 basis points to
16.6%. Results were
supported by the positive
impacts from
operational leverage on
significantly higher volumes,
strong pricing
execution as well as selling,
general & administrative
expenses
(SG&A) being reduced
in relation to revenues.
This more than
offset the adverse
impact from cost inflation
on materials, freight
and labor.
Operational EBITA
in Corporate and
Other declined by
$15 million to -$52
million.
Net finance expenses
Net finance expenses
was $28 million compared
with the low level
of $6 million a year
ago.
Income tax
Income tax expense
was $294 million with an
effective tax rate of
41.2%, including approximately
15%
adverse impact due
mainly to
the non-deductibility of
the charges related to the
Kusile legacy
project as well as taxes
in connection with portfolio
management
activities.
Net income and earnings
per share
Net income attributable
to ABB was $360 million and
decreased by
45%
from last year,
with the decline primarily
related to the booked
non-operational provision
which weighed on
Income from operations.
This resulted in a basic
earnings per share of $0.
19,
a decline from
$0.33 last year.
Earnings
ABB
INTERIM
REPORT
I
Q3
2022
5
Net working capital
Net working capital
amounted to $3,407 millio
n, increasing
year-on-year from $2,920
million but declining sequentially
from $3,663 million.
The sequential decrease
was mainly
driven by changes
in exchange rates.
Net working capital as
a percentage of revenues
1
was 11.7%.
Capital expenditures
Purchases of property,
plant and equipment and
intangible
assets amounted to
$165 million.
Net debt
Net debt
1
amounted to $4,117
million at the end of the
quarter,
and increased from $1,898
million, year-on-year.
Sequentially,
it declined slightly from
$4,235 million, mainly
due to lower carrying
debt values as a result of
changes in
exchange rates.
Cash flows
Cash flow from operating
activities in continuing operations
was $793
million and declined year
-on-year from
$1,119
million. The year-on-year change
was the results of
improved operational
performance which however
was
more than offset by
higher build-up of net working
capital
mainly related to a
higher build-up of inventories
and lower
collections of receivables.
In addition, the current
quarter
was adversely impacted
by the cash outflow from
the earlier
announced exit of a
non-core business.
ABB expects the
fourth quarter to be
the strongest cash flow
period in 2022.
Share buyback program
ABB launched a new
share buyback program
of up to $3 billion
on April 1. As part of
this program, ABB completed
in the third
quarter,
the return
to its shareholders of
the remaining $1.2
billion out of the
$7.8 billion of cash proceeds
from the Power
Grids divestment. During
the third quarter,
15,784,000 shares
were repurchased
on the second trading line
for approximately
$436 million. The total
number of ABB Ltd’s
issued shares is
1,964,745,075,
after the cancellation of
88,403,189 shares in
June, as approved
at ABB's 2022 AGM.
($ millions,
unless otherwise indicated)
Sep. 30
2022
Sep. 30
2021
Dec. 31
2021
Short term debt and current
maturities of long-term debt
3,068
2,414
1,384
Long-term debt
4,530
4,270
4,177
Total debt
7,598
6,684
5,561
Cash & equivalents
2,365
3,709
4,159
Restricted cash - current
323
31
30
Marketable securities and
short-term investments
793
746
1,170
Restricted cash - non-current
–
300
300
Cash and marketable securities
3,481
4,786
5,659
Net debt (cash)*
4,117
1,898
(98)
Net debt (cash)* to EBITDA ratio
0.6
0.5
(0.01)
Net debt (cash)* to Equity ratio
0.34
0.13
(0.01)
*
At Sep. 30, 2022, Sep. 30, 2021 and Dec. 31, 2021,
net debt(cash) excludes net pension
(assets)/liabilities of $(114) million, $530 million and $45 million, respectively.
Balance sheet & Cash flow
ABB
INTERIM
REPORT
I
Q3
2022
6
Orders and revenues
Although changes in exchange
rates had an adverse effect
on
the total, the absolute
order intake reached
one of the highest
levels
in recent history,
amounting to $3,902
million. This
corresponds to a year
-on-year increase of 11%
(20%
comparable), supported
by both the flow- and systems
-driven
business. The strong
demand and a sequential
easing of
supply chain constraints
supported revenues,
yet order
backlog reached another
all-time-high level
of $6.8 billion.
●
Customer activity was
strong in most segments
in the
Americas and Europe,
while softness was noted
in China.
●
Orders in Asia, Middle
East and Africa were up
by 5% (13%
comparable) hampered
by China which dropped by
9% (4%
comparable). Changes
in exchange rates weighed
on total
orders
in Europe which declined by
8% (up 10%
comparable). This
reflects high activity across
major
countries except
for a decline in Germany
where a
normalization of
distributors’ inventory levels
was noted and
seemingly completed
by quarter end. The Americas
improved sharply by 33%
(34% comparable), reflecting
a
steep order increase
of 38% in the US (39%
comparable).
●
Despite the adverse
impact from changes in exchange
rates, revenue growth
reached 12% (22% comparable).
This was driven by
a good contribution from increased
volumes on a generally
strong market and execution
of the
order backlog, but also
by another quarter of very
strong
price execution. The sequential
improvement in access
to
semi-conductors supported
customer deliveries in
Distribution Solutions
and now all divisions
contributed to
growth. Revenues
amounted to $3,584 million,
representing
the highest quarterly
level in recent years.
Profit
Record high quarterly
Operational EBITA
of $647 million
was up 27% year
-on-year and Operational
EBITA margin
reached the high level
of 18.0%. All of the large
divisions
improved both earnings
and margin year-on-year.
●
A very robust price
management was the main
driver to
the earnings improvement
and more than offset
the
adverse impact from
cost inflation in raw materials,
freight
and labor.
●
Impact from higher
volumes in customer deliveries
contributed significantly
to increased
earnings.
●
Settlement of an
insurance claim supported
the margin by
50 basis points in the
quarter.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
20%
22%
FX
-9%
-10%
Portfolio changes
0%
0%
Total
11%
12%
—
Electrification
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
3,902
3,519
11%
20%
12,336
10,743
15%
22%
Order backlog
6,805
5,246
30%
41%
6,805
5,246
30%
41%
Revenues
3,584
3,196
12%
22%
10,442
9,742
7%
14%
Operational EBITA
647
511
27%
1,756
1,614
9%
as % of operational revenues
18.0%
15.9%
+2.1 pts
16.8%
16.5%
+0.3 pts
Cash flow from operating activities
651
636
2%
1,083
1,466
-26%
No. of employees (FTE equiv.)
52,100
51,100
2%
ABB
INTERIM
REPORT
I
Q3
2022
7
Orders and revenues
Orders increased by 3%
(24% comparable)
and this was yet
another strong period
with orders at the $2
billion level. The
high market activity
offset headwinds from
changes in
exchange rates and
the lack of contribution from
the divested
Mechanical Power
Transmission (Dodge)
division.
Furthermore,
support was gained
from a higher level of large
orders, driven
by approximately $170
million related to sustainable
transport
by enhancing Europe’s
railway network.
●
Strong double-digit
order growth was reported
in virtually
all divisions with a steady
profile to the underlying
business activity throughout
the quarter.
●
Demand increased
in all regions, with the strongest
development in Europe
which improved by 23%
(46% comparable),
supported by the large rail
order
received. As a headline
number, the
Americas declined
by 11%
(up 17% comparable), with
the drop related to
portfolio changes. In
Asia, Middle East and Africa
the
overall growth declined
by 1% (up 8% comparable)
as
changes in exchange
rates offset the positive
impact
from a robust market
activity level. China specifically
increased by 4% (11%
comparable).
●
Revenues increased
by 2% (23% comparable)
to $1,702
million with support
from strong demand, solid
price
management and the
sequential improvement
in
customer deliveries
in China due to less Covid-related
business disruptions.
Profit
Both earnings and
profitability improved
year-on-year with
Operational EBITA
amounting to $30
5
million and
Operational EBITA
margin at 17.8%.
●
Higher volumes
improved operational performance
and
offset negative
mix stemming from robust
deliveries of
electrical motors.
●
Strong pricing execution
offset the increased
costs
related to commodities
,
freight and labor.
●
The reported margin
improved by 40 basis points
as
improved operational
performance more
than
compensated for the
adverse impact of 60
basis points
due to the divestment
of Dodge, year-on-year.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
24%
23%
FX
-9%
-9%
Portfolio changes
-12%
-12%
Total
3%
2%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
1,966
1,909
3%
24%
6,247
5,773
8%
27%
Order backlog
4,613
3,717
24%
42%
4,613
3,717
24%
42%
Revenues
1,702
1,673
2%
23%
4,900
5,190
-6%
11%
Operational EBITA
305
291
5%
845
905
-7%
as % of operational revenues
17.8%
17.4%
+0.4 pts
17.2%
17.4%
-0.2 pts
Cash flow from operating activities
268
399
-33%
507
946
-46%
No. of employees (FTE equiv.)
20,700
21,300
-3%
ABB
INTERIM
REPORT
I
Q3
2022
8
Orders and revenues
Total
order intake amounted
to $1,568 million and declined
by
6% (up 3% comparable)
year-on-year,
as adverse changes in
exchange rates more
than offset a positive
underlying trend in
customer activity in
most divisions. A book-to-bill
ratio of
108%
was achieved.
●
The timing of customers
placing orders somewhat
hampered order
intake, particularly noticeable
in Energy
Industries and Marine
& Ports. The general
order pipeline
remains strong.
●
Demand was particularly
strong in the segments
of mining
and refining, with positive
developments
also noted in areas
of marine and gas. In the
power generation,
pulp & paper
and ports segments,
the customer activity remained
stable,
while some initial signs
of headwinds
were noted in metals
due to the high energy
prices. Service orders increased
by
1% (12% comparable).
●
Orders in the Americas
increased by 6% (9% comparable).
Changes in exchange
rates weighed on Europe
which declined
by 8% (up 8% comparable)
and Asia, Middle East and
Africa
which reported a sharp
drop of 12% (4% comparable
), with the
latter also challenged
by a high comparable
from last year’s
order level in China.
●
Revenues declined
by 3% (up 6% comparable)
and amounted
to $1,458 million
with a positive development
in customer
deliveries in all divisions.
While the supply constraints
on semi-
conductors eased somewhat
sequentially,
some hampering
effect is still expected
in the fourth quarter.
Profit
Operational EBITA
amounted to $225
million and Operational
EBITA margin
improved by 160
basis points year-on-year to
15.3% with contribution
from all divisions.
●
The impact from increased
volumes with improved
gross
margin in the order
backlog was the main driver
for margin
improvement.
●
This marks the last
quarter when reporting
includes the
Turbocharging division
(Accelleron), which was
separately
listed on the Swiss
stock exchange in early
October.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
3%
6%
FX
-9%
-9%
Portfolio changes
0%
0%
Total
-6%
-3%
—
Process Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
1,568
1,670
-6%
3%
5,079
4,881
4%
11%
Order backlog
6,006
6,021
0%
11%
6,006
6,021
0%
11%
Revenues
1,458
1,507
-3%
6%
4,493
4,454
1%
8%
Operational EBITA
225
207
9%
645
554
16%
as % of operational revenues
15.3%
13.7%
+1.6 pts
14.2%
12.4%
+1.8 pts
Cash flow from operating activities
217
231
-6%
470
692
-32%
No. of employees (FTE equiv.)
22,400
22,000
2%
ABB
INTERIM
REPORT
I
Q3
2022
9
Orders and revenues
While market demand
was at a high
level in the quarter,
we saw
customers normalizing
order patterns on the back
of anticipated
shorter delivery lead-times
as supply chain constraints
ease.
There were some signs
of protracted lead times
in customers’
order decisions,
although the opportunity pipeline
remains
robust. Total
orders decreased by
4% (up 7% comparable)
and
amounted to $901
million,
hampered by changes in
exchange
rates.
On a book-to-bill ratio of
109% the order backlog
remained sequentially
stable at $2.7 billion.
●
Order momentum was
particularly strong in the
machine
builder segment on an
easy comparable from last
year,
but
electronics also improved
.
This more than offset
declines in
automotive and general
industry,
where customers
normalized order patter
ns after a very strong first
half of the
year.
●
In total, orders increased
in the Americas by 11%
(11%
comparable), while
changes in exchange rates
weighed on
the total in Europe
to a decline of 1% (up 17%
comparable).
Asia, Middle East and
Africa dropped by 13%
(7%
comparable) with China
declining by 9% (4% comparable
).
●
Changes in exchange
rates weighed on reported
revenues,
however,
access to semi-conductors
improved compared with
recent quarters supporting
customer deliveries in both
divisions. Additional
support from positive price
execution
contributed to quarterly
revenue growth of 2% (13%
comparable) resulting
in revenues of $828 million.
●
The new Robotics
manufacturing site in
Shanghai was fully
operational with local
production volumes transferred
in the
quarter.
Profit
Despite the headwind
from changes in exchange
rates,
Operational EBITA
increased by 18%
.
The Operational
EBITA margin
returned to a double-digit
level after three
single-digit quarters, reach
ing 12.8%, with support
from
both divisions.
●
Impact from a positive
volume growth improved
cost
absorption in production,
year-on-year.
●
Solid price execution
more than offset adverse
impacts
from inflation in freight,
input and labor costs.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
7%
13%
FX
-12%
-11%
Portfolio changes
1%
0%
Total
-4%
2%
—
Robotics & Discrete Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
901
935
-4%
7%
3,318
2,744
21%
29%
Order backlog
2,659
1,619
64%
87%
2,659
1,619
64%
87%
Revenues
828
813
2%
13%
2,290
2,498
-8%
-2%
Operational EBITA
106
90
18%
215
291
-26%
as % of operational revenues
12.8%
11.1%
+1.7 pts
9.4%
11.7%
-2.3 pts
Cash flow from operating activities
82
56
46%
109
245
-56%
No. of employees (FTE equiv.)
10,700
10,700
1%
ABB
INTERIM
REPORT
I
Q3
2022
10
Quarterly highlights
●
ABB E-mobility announce
d
the continued expansion
of its
global and US manufacturing
footprint with new
manufacturing operations
in Columbia, South Carolina.
The multi-million-dollar investment
is planned to increase
production of electric
vehicle chargers, including
Buy
America Act compliant
ones, and create over 100
jobs.
The new facility will
be capable of producing up
to 10,000
chargers per year,
ranging from 20kW to 180kW
in
power, which
are ideally suited for public
charging, school
buses, and fleets.
●
The European Union’s
2022 F-gas proposal
outlines
important new regulations
designed to phase out the
use of
Sulfur Hexafluoride
(SF6) – an established
but
environmentally harmful
insulating gas which is 25,200
times more potent than
CO
2
. This has been made
possible
with the development
of SF6 alternatives paving
the way for
this level of regulation,
including pioneering products
within
ABB’s ecoGIS™ range.
Following the EU’s latest
F-gas
proposal, ABB created
a free-of-charge, downloadable
whitepaper – ‘Migrate
to a more certain future’
– to support
engineers in making this
key transition.
●
ABB and Canada’s
Hydrogen Optimized
Inc. (HOI) signed an
agreement to expand
the companies’ existing
strategic
relationship. This includes
an investment by ABB into
Key DH
Technologies
Inc. (KEY), the parent
company of HOI, as they
seek to accelerate
the fast-emerging green
hydrogen
production segment
with unique large-scale
architecture.
●
ABB has achieved
carbon neutral operations
at its factory
in Porvoo, Finland,
reducing CO
2
emissions by 636
tons in
its first year under
the mission to Zero program.
This saving
is equivalent to driving
112 times the
length of the equator
or warming an electric
sauna every day for 373
years. By
combining digital solutions,
electrification, and renewable
technologies the
Porvoo factory has taken an
important
step towards a more
sustainable value chain
.
●
General Counsel and
Company Secretary,
Andrea
Antonelli, has been
appointed as the Executive
Committee sponsor
for Abilities. At ABB, the Abilities
dimension encompasses
differences that include
long-
term physical, mental,
intellectual, or sensory impairments
which in interaction
with various barriers may
hinder the
individuals’ full and
effective participation in
society on an
equal basis with others.
Story of the quarter
ABB announced a new
emissions target for its supply
chain.
The company aims
to work with its main tier
-one suppliers
to achieve a 50 percent
reduction in their CO
2
emissions by
- The target
is aimed at suppliers covering
70 percent
of ABB’s annual
procurement expenditure.
The new target
is expected to make an
important contribution to
ABB’s goal
of enabling a low-carbon
society because, in
many cases,
its suppliers have a
bigger footprint than the
company.
Q3 outcome
●
43% reduction of CO
₂
emissions in own operations year
-on-year
due to increased use of renewable
energy and energy efficient
projects on sites.
●
5% year-on-year decrease in
LTIFR.
●
2.4%-points increase in number of women
in senior
management versus the prior
year showing steady progress
towards our target.
—
Sustainability
Q3 2022
Q3 2021
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
kt scope 1 and 2
1
55
96
-43%
319
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.13
0.14
-5%
0.15
Share of females in senior management
positions, %
17.4
15.0
+2.4 pts
16.9
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 CO2e to reflect the application
of green energy certificates retrospectively.
ABB
INTERIM
REPORT
I
Q3
2022
11
During Q3 2022
●
On July 20, ABB announced
that it would spin off
Accelleron and list
the company on SIX Swiss Exchange.
●
On July 21, ABB announced
that it had decided to exit the
Russian market.
●
On August 11,
ABB announced that
it had signed an
agreement to purchase
Siemens’ low voltage NEMA
motor business.
The business employs around
600 people and generated
revenues of approximately
$63 million in 2021.
The transaction is expected
to close
in the second quarter
2023.
●
On September 7,
ABB announced that shareholders
approved the proposed
spin-off of its Accelleron
turbocharging division
at the Extraordinary General
Shareholders Meeting.
●
On September 19,
ABB announced that
it will acquire the
PowerTech
Converter (PTC) business,
a leading supplier
of auxiliary power converter
solutions for light rail vehicles
and metros. With around
280 employees, the business
generated revenues
of approximately €60 million
in 2021.
The deal is expected
to close in the fourth quarter
2022.
●
On September 30,
ABB announced that
it has reached an
agreement to divest
to Hitachi, Ltd. (Hitachi)
its remaining
19.9% equity stake in the
Hitachi Energy joint venture.
Hitachi has exercised
its call option. ABB expects
net
positive cash inflows
of approximately $1.4
billion upon
closing of the sale.
The transaction is subject
to
regulatory approvals and
closing is expected to
happen in
the fourth quarter 2022.
●
On September 30,
ABB announced that
it is progressing
discussions with relevant
authorities regarding
the
remaining matters
related to the legacy Kusile
project in
South Africa awarded
in 2015. Consequently,
ABB made
a non-operational
provision of approximately
$325 million
in Income from operations
in the third quarter 2022
results, with a similar
cash flow impact expected
in
subsequent quarters.
After the third quarter
●
On October 3, ABB announce
d
that Accelleron Industries
AG (formerly ABB Turbocharging),
has been admitted to
trading on SIX Swiss Exchange
in Zurich under the
ticker
symbol “ACLN”, marking
the completion of Accelleron’s
spin-off from ABB.
After Q3 2022
In the first nine months
of 2022, demand for
ABB’s offering
increased strongly
year-on-year, supported
by most
customer segments
and across all regions.
Orders
amounted to $26,368
million and improved by 12%
(22% comparable).
Revenues amounted
to $21,622 million up
by 1%
(10%
comparable),
year-on-year. Customer
deliveries were
impacted by component
constraints, but shortages
progressively eased
throughout the year.
As a result, the
book-to-bill ratio amounted
to 1.22
in the first nine months of
2022.
Income from operations
amounted to $2,152
million down
from $2,743 million
in the year-earlier period. Results
included
a business charge
amounting to $195 million
triggered by the exit
of the legacy full-train retrofit
business
in non-core operations
as well as a provision of
approximately $325
million provision related
to the legacy
Kusile project in
South Africa awarded in 2015
.
Operational EBITA
improved by 7%
year-on-year to
$3,364 million and
the Operational EBITA
margin increased
by 90 basis points to
15.5%. 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
$133 million to -$97
million, partly due to higher
real estate
gains and a better non-core
result.
The net finance expenses
amounted to $57 million,
down
from $71 million
in the same period last year,
while non-
operational pension
credits were down $28
million year-
over-year to $102 million
.
Income tax expense
was $728 million with a
tax rate of
33.1%, including approximately
9% adverse impact primarily
related to adverse impact
from non-deductible non-
operational charges.
Net income attributable
to ABB was $1,343 million
and
decreased by -30%.
Basic earnings per share
was $0.70 and
decreased by -26%. 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
.
Significant events
First nine months 2022
ABB
INTERIM
REPORT
I
Q3
2022
12
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.
2
Last twelve months ending October 31, 2021.
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
Includes restructuring-related expenses of $195 million
from the exit of the full train retrofit business
as well as $57 million respectively from the exit of the
Russian market in Q2 2022.
3
Costs relating to the announced exits and the
potential E-mobility listing.
4
Excluding impact of acquisitions or divestments or
any significant non-operational items.
($ in millions, unless otherwise stated)
FY 2022
Q4 2022
Net finance expenses
~(100)
~(40)
unchanged
Non-operational pension
(cost) / credit
~90
~(10)
from ~120
Effective tax rate
~25%
4
~25%
4
unchanged
Capital Expenditures
~(700)
~(200)
from ~(750)
($ in millions, unless otherwise stated)
FY 2022
1
Q4 2022
Corporate and Other Operational costs
~(170)
~(75)
from ~(200)
Non-operating items
Acquisition-related amortization
~(230)
~(55)
unchanged
Restructuring and restructuring related
~(100)+(252)
2
~(50)
unchanged
Separation costs
3
~(180)
~(30)
unchanged
ABB Way transformation
~(150)
~(50)
unchanged
Additional 2022 guidance
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2021
Motion
Mechanical Power Transmission
1-Nov
645
2
1,500
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Electrification
Numocity (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
EBITDA, $ in million
1,024
1,324
1,072
3,191
6,611
1,067
794
906
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
14.90
n.a.
n.a.
n.a.
Net debt/Equity
0.09
0.16
0.13
(0.01)
(0.01)
0.20
0.34
0.34
Net debt/ EBITDA 12M rolling
0.4
0.7
0.5
(0.01)
(0.01)
0.4
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%
Earnings per share, basic, $
0.25
0.37
0.33
1.34
2.27
0.31
0.20
0.19
Earnings per share, diluted, $
0.25
0.37
0.32
1.33
2.25
0.31
0.20
0.19
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.82
n.a.
n.a.
n.a.
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
Share price at the end of period, $
1
28.99
32.33
31.73
36.31
36.31
30.76
25.43
24.41
Number of employees (FTE equivalents)
105,330
106,370
106,080
104,420
104,420
104,720
106,380
106,830
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
Data prior to October 3, 2022, has been adjusted for
the Accelleron spin-off (Source: FactSet).
Acquisitions and divestments, last twelve months
ABB
INTERIM
REPORT
I
Q3
2022
13
For additional information please contact:
Media Relations
Phone: +41 43 317
71 11
Email:
media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317
71 11
Email:
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse
44
8050 Zurich
Switzerland
Financial calendar
2023
February 2
Q4 2022 results
March 23
Annual General Meeting
April 25
Q1 2023 results
July 20
Q2 2023 results
October 18
Q3 2023 results
This press release
includes forward-looking information
and
statements as well
as other statements concerning
the
outlook for our business,
including those in the sections
of
this release titled “CEO summary,”
“Outlook,” “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
The Q3 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.
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.
To
pre-register for the conference
call or to join the
webcast, please
refer to the ABB website:
www.abb.com/investorrelations.
The recorded session
will be available after
the event on
ABB’s website.
Important notice about forward-looking information
Q3 results presentation on October 20, 2022
ABB
(ABBN: SIX Swiss
Ex) is a leading global
technology company
that energizes the transformation
of society and industry to
achieve a more productive,
sustainable future. By connecting
software to its electrification,
robotics, automation and
motion
portfolio, ABB pushes
the boundaries of technology
to drive performance
to new levels. With a history
of excellence stretching
back
more than 130 years,
ABB’s success is
driven by about 105,000 talented
employees in over 100 countries.
1
Q3 2022
FINANCIAL
INFORMATION
October 20, 2022
Q3 2022
Financial information
2
Q3 2022
FINANCIAL
INFORMATION
—
Financial
Information
Contents
03
─ 07
Key Figures
08 ─
34
Consolidated
Financial
Information
(unaudited)
35 ─
47
Supplemental
Reconciliations
and Definitions
3
Q3 2022
FINANCIAL
INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
(1)
Orders
8,188
7,866
4%
16%
Order backlog (end September)
19,393
16,012
21%
35%
Revenues
7,406
7,028
5%
18%
Gross Profit
2,481
2,294
8%
as % of revenues
33.5%
32.6%
+0.9 pts
Income from operations
708
852
-17%
Operational EBITA
(1)
1,231
1,062
16%
27%
(2)
as % of operational revenues
(1)
16.6%
15.1%
+1.5 pts
Income from continuing operations, net of tax
420
687
-39%
Net income attributable to ABB
360
652
-45%
Basic earnings per share ($)
0.19
0.33
-41%
(3)
Cash flow from operating activities
(4)
791
1,104
-28%
Cash flow from operating activities in continuing operations
793
1,119
-29%
CHANGE
($ in millions, unless otherwise indicated)
9M 2022
9M 2021
US$
Comparable
(1)
Orders
26,368
23,611
12%
22%
Revenues
21,622
21,378
1%
10%
Gross Profit
7,052
7,070
0%
as % of revenues
32.6%
33.1%
-0.5 pts
Income from operations
2,152
2,743
-22%
Operational EBITA
(1)
3,364
3,134
7%
15%
(2)
as % of operational revenues
(1)
15.5%
14.6%
+0.9 pts
Income from continuing operations, net of tax
1,469
2,027
-28%
Net income attributable to ABB
1,343
1,906
-30%
Basic earnings per share ($)
0.70
0.95
-26%
(3)
Cash flow from operating activities
(4)
600
2,310
-74%
Cash flow from operating activities in continuing operations
614
2,305
n.a.
(1)
For a reconciliation of non-GAAP measures see “
Supplemental Reconciliations and Definitions
” on page 35.
(2)
Constant currency (not adjusted for portfolio changes).
(3)
EPS growth rates are computed using unrounded amounts.
(4)
Cash flow from operating activities includes both continuing and discontinued operations.
4
Q3 2022
FINANCIAL
INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Local
Comparable
Orders
ABB Group
8,188
7,866
4%
13%
16%
Electrification
3,902
3,519
11%
20%
20%
Motion
1,966
1,909
3%
12%
24%
Process Automation
1,568
1,670
-6%
3%
3%
Robotics & Discrete Automation
901
935
-4%
8%
7%
Corporate and Other
(incl. intersegment eliminations)
(149)
(167)
Order backlog (end September)
ABB Group
19,393
16,012
21%
34%
35%
Electrification
6,805
5,246
30%
41%
41%
Motion
4,613
3,717
24%
39%
42%
Process Automation
6,006
6,021
0%
11%
11%
Robotics & Discrete Automation
2,659
1,619
64%
87%
87%
Corporate and Other
(incl. intersegment eliminations)
(690)
(591)
Revenues
ABB Group
7,406
7,028
5%
15%
18%
Electrification
3,584
3,196
12%
22%
22%
Motion
1,702
1,673
2%
11%
23%
Process Automation
1,458
1,507
-3%
6%
6%
Robotics & Discrete Automation
828
813
2%
13%
13%
Corporate and Other
(incl. intersegment eliminations)
(166)
(161)
Income from operations
ABB Group
708
852
Electrification
631
434
Motion
291
244
Process Automation
154
183
Robotics & Discrete Automation
81
68
Corporate and Other
(incl. intersegment eliminations)
(449)
(77)
Income from operations %
ABB Group
9.6%
12.1%
Electrification
17.6%
13.6%
Motion
17.1%
14.6%
Process Automation
10.6%
12.1%
Robotics & Discrete Automation
9.8%
8.4%
Operational EBITA
ABB Group
1,231
1,062
16%
27%
Electrification
647
511
27%
41%
Motion
305
291
5%
15%
Process Automation
225
207
9%
20%
Robotics & Discrete Automation
106
90
18%
36%
Corporate and Other
(incl. intersegment eliminations)
(52)
(37)
Operational EBITA %
ABB Group
16.6%
15.1%
Electrification
18.0%
15.9%
Motion
17.8%
17.4%
Process Automation
15.3%
13.7%
Robotics & Discrete Automation
12.8%
11.1%
Cash flow from operating activities
ABB Group
791
1,104
Electrification
651
636
Motion
268
399
Process Automation
217
231
Robotics & Discrete Automation
82
56
Corporate and Other
(incl. intersegment eliminations)
(425)
(203)
Discontinued operations
(2)
(15)
5
Q3 2022
FINANCIAL
INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
9M 2022
9M 2021
US$
Local
Comparable
Orders
ABB Group
26,368
23,611
12%
19%
22%
Electrification
12,336
10,743
15%
22%
22%
Motion
6,247
5,773
8%
15%
27%
Process Automation
5,079
4,881
4%
11%
11%
Robotics & Discrete Automation
3,318
2,744
21%
30%
29%
Corporate and Other
(incl. intersegment eliminations)
(612)
(530)
Order backlog (end September)
ABB Group
19,393
16,012
21%
34%
35%
Electrification
6,805
5,246
30%
41%
41%
Motion
4,613
3,717
24%
39%
42%
Process Automation
6,006
6,021
0%
11%
11%
Robotics & Discrete Automation
2,659
1,619
64%
87%
87%
Corporate and Other
(incl. intersegment eliminations)
(690)
(591)
Revenues
ABB Group
21,622
21,378
1%
7%
10%
Electrification
10,442
9,742
7%
14%
14%
Motion
4,900
5,190
-6%
1%
11%
Process Automation
4,493
4,454
1%
8%
8%
Robotics & Discrete Automation
2,290
2,498
-8%
-1%
-2%
Corporate and Other
(incl. intersegment eliminations)
(503)
(506)
Income from operations
ABB Group
2,152
2,743
Electrification
1,602
1,423
Motion
776
812
Process Automation
480
520
Robotics & Discrete Automation
146
224
Corporate and Other
(incl. intersegment eliminations)
(852)
(236)
Income from operations %
ABB Group
10.0%
12.8%
Electrification
15.3%
14.6%
Motion
15.8%
15.6%
Process Automation
10.7%
11.7%
Robotics & Discrete Automation
6.4%
9.0%
Operational EBITA
ABB Group
3,364
3,134
7%
15%
Electrification
1,756
1,614
9%
18%
Motion
845
905
-7%
-1%
Process Automation
645
554
16%
26%
Robotics & Discrete Automation
215
291
-26%
-17%
Corporate and Other
(incl. intersegment eliminations)
(97)
(230)
Operational EBITA %
ABB Group
15.5%
14.6%
Electrification
16.8%
16.5%
Motion
17.2%
17.4%
Process Automation
14.2%
12.4%
Robotics & Discrete Automation
9.4%
11.7%
Cash flow from operating activities
ABB Group
600
2,310
Electrification
1,083
1,466
Motion
507
946
Process Automation
470
692
Robotics & Discrete Automation
109
245
Corporate and Other
(incl. intersegment eliminations)
(1,555)
(1,044)
Discontinued operations
(14)
5
6
Q3 2022
FINANCIAL
INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Revenues
7,406
7,028
3,584
3,196
1,702
1,673
1,458
1,507
828
813
Foreign exchange/commodity timing
differences in total revenues
23
23
3
11
9
4
14
9
(1)
(1)
Operational revenues
7,429
7,051
3,587
3,207
1,711
1,677
1,472
1,516
827
812
Income from operations
708
852
631
434
291
244
154
183
81
68
Acquisition-related amortization
55
62
28
30
8
10
1
1
19
21
Restructuring, related and
implementation costs
(1)
20
28
8
11
3
13
1
2
6
1
Changes in obligations related to
divested businesses
–
10
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
1
(14)
1
(14)
–
–
–
–
–
–
Gains and losses from sale of businesses
–
–
(1)
–
1
–
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
62
44
3
18
4
12
53
13
1
1
Other income/expense relating to the
Power Grids joint venture
30
15
–
–
–
–
–
–
–
–
Certain other non-operational items
350
17
(16)
2
–
–
–
1
1
–
Foreign exchange/commodity timing
differences in income from operations
5
48
(7)
30
(2)
12
16
7
(2)
(1)
Operational EBITA
1,231
1,062
647
511
305
291
225
207
106
90
Operational EBITA margin (%)
16.6%
15.1%
18.0%
15.9%
17.8%
17.4%
15.3%
13.7%
12.8%
11.1%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
Revenues
21,622
21,378
10,442
9,742
4,900
5,190
4,493
4,454
2,290
2,498
Foreign exchange/commodity timing
differences in total revenues
90
43
15
23
8
12
45
10
5
(2)
Operational revenues
21,712
21,421
10,457
9,765
4,908
5,202
4,538
4,464
2,295
2,496
Income from operations
2,152
2,743
1,602
1,423
776
812
480
520
146
224
Acquisition-related amortization
174
191
89
88
23
36
3
3
59
62
Restructuring, related and
implementation costs
(1)
300
81
18
32
11
18
6
15
9
6
Changes in obligations related to
divested businesses
(17)
16
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
–
(6)
2
(6)
–
–
–
–
(2)
–
Gains and losses from sale of businesses
4
(9)
(1)
4
5
(1)
–
(13)
–
–
Acquisition- and divestment-related
expenses and integration costs
171
74
32
36
12
19
122
17
4
1
Other income/expense relating to the
Power Grids joint venture
67
34
–
–
–
–
–
–
–
–
Certain other non-operational items
413
(58)
(24)
(13)
–
1
–
3
2
–
Foreign exchange/commodity timing
differences in income from operations
100
68
38
50
18
20
34
9
(3)
(2)
Operational EBITA
3,364
3,134
1,756
1,614
845
905
645
554
215
291
Operational EBITA margin (%)
15.5%
14.6%
16.8%
16.5%
17.2%
17.4%
14.2%
12.4%
9.4%
11.7%
(1)
Includes impairment of certain assets.
7
Q3 2022
FINANCIAL
INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Depreciation
129
142
64
70
25
30
17
21
16
15
Amortization
69
78
35
37
8
11
2
3
19
22
including total acquisition-related amortization of:
55
62
28
30
8
10
1
1
19
21
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
Depreciation
401
434
198
202
78
94
51
59
46
43
Amortization
214
243
107
113
26
40
8
9
60
64
including total acquisition-related amortization of:
174
191
89
88
23
36
3
3
59
62
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q3 22
Q3 21
US$
Local
parable
Q3 22
Q3 21
US$
Local
parable
Europe
2,682
2,663
1%
20%
20%
2,494
2,525
-1%
18%
18%
The Americas
2,980
2,580
16%
17%
25%
2,452
2,161
13%
14%
23%
of which United States
2,294
1,934
19%
19%
29%
1,796
1,610
12%
12%
22%
Asia, Middle East and Africa
2,526
2,623
-4%
4%
4%
2,460
2,342
5%
13%
13%
of which China
1,165
1,260
-8%
-2%
-2%
1,300
1,209
7%
14%
14%
ABB Group
8,188
7,866
4%
13%
16%
7,406
7,028
5%
15%
18%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
9M 22
9M 21
US$
Local
parable
9M 22
9M 21
US$
Local
parable
Europe
9,174
8,719
5%
19%
19%
7,520
7,773
-3%
10%
10%
The Americas
8,927
7,300
22%
23%
32%
7,018
6,488
8%
8%
17%
of which United States
6,753
5,459
24%
24%
35%
5,124
4,818
6%
6%
17%
Asia, Middle East and Africa
8,267
7,592
9%
14%
14%
7,084
7,117
0%
4%
4%
of which China
4,112
3,781
9%
11%
11%
3,563
3,699
-4%
-1%
-1%
ABB Group
26,368
23,611
12%
19%
22%
21,622
21,378
1%
7%
10%
8
Q3 2022
FINANCIAL
INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Nine months ended
Three months ended
($ in millions, except per share data in $)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Sales of products
17,946
17,644
6,184
5,770
Sales of services and other
3,676
3,734
1,222
1,258
Total revenues
21,622
21,378
7,406
7,028
Cost of sales of products
(12,439)
(12,089)
(4,217)
(3,981)
Cost of services and other
(2,131)
(2,219)
(708)
(753)
Total cost of sales
(14,570)
(14,308)
(4,925)
(4,734)
Gross profit
7,052
7,070
2,481
2,294
Selling, general and administrative expenses
(3,833)
(3,808)
(1,277)
(1,231)
Non-order related research and development expenses
(844)
(897)
(272)
(296)
Other income (expense), net
(223)
378
(224)
85
Income from operations
2,152
2,743
708
852
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Non-operational pension (cost) credit
102
130
34
42
Income from continuing operations before taxes
2,197
2,802
714
888
Income tax expense
(728)
(775)
(294)
(201)
Income from continuing operations, net of
tax
1,469
2,027
420
687
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,433
1,982
404
678
Net income attributable to noncontrolling interests
(90)
(76)
(44)
(26)
Net income attributable to ABB
1,343
1,906
360
652
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,379
1,951
376
661
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,343
1,906
360
652
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.97
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.95
0.19
0.33
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.96
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.94
0.19
0.32
Weighted-average number of shares outstanding
(in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,909
2,011
1,882
2,001
Diluted earnings per share attributable to ABB shareholders
1,920
2,028
1,889
2,019
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9
Q3 2022
FINANCIAL
INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Total comprehensive income, net of
tax
778
1,722
70
516
Total comprehensive income
attributable to noncontrolling interests, net of tax
(61)
(81)
(35)
(26)
Total comprehensive income attributable
to ABB shareholders, net of tax
717
1,641
35
490
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10
Q3 2022
FINANCIAL
INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Sep. 30, 2022
Dec. 31, 2021
Cash and equivalents
2,365
4,159
Restricted cash
323
30
Marketable securities and short-term investments
793
1,170
Receivables, net
6,695
6,551
Contract assets
955
990
Inventories, net
5,849
4,880
Prepaid expenses
261
206
Other current assets
519
573
Current assets held for sale and in discontinued operations
102
136
Total current assets
17,862
18,695
Restricted cash, non-current
–
300
Property, plant and equipment, net
3,735
4,045
Operating lease right-of-use assets
857
895
Investments in equity-accounted companies
1,557
1,670
Prepaid pension and other employee benefits
901
892
Intangible assets, net
1,386
1,561
Goodwill
10,285
10,482
Deferred taxes
1,353
1,177
Other non-current assets
497
543
Total assets
38,433
40,260
Accounts payable, trade
4,769
4,921
Contract liabilities
2,115
1,894
Short-term debt and current maturities of long-term debt
3,068
1,384
Current operating leases
215
230
Provisions for warranties
962
1,005
Other provisions
1,478
1,386
Other current liabilities
4,201
4,367
Current liabilities held for sale and in discontinued operations
286
381
Total current liabilities
17,094
15,568
Long-term debt
4,530
4,177
Non-current operating leases
666
689
Pension and other employee benefits
871
1,025
Deferred taxes
766
685
Other non-current liabilities
2,246
2,116
Non-current liabilities held for sale and in discontinued operations
17
43
Total liabilities
26,190
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 September
30, 2022, and December 31, 2021, respectively)
171
178
Additional paid-in capital
9
22
Retained earnings
19,127
22,477
Accumulated other comprehensive loss
(4,715)
(4,088)
Treasury stock, at cost
(90 million and 95 million shares at September 30, 2022, and December
31, 2021, respectively)
(2,770)
(3,010)
Total ABB stockholders’ equity
11,822
15,579
Noncontrolling interests
336
378
Total stockholders’ equity
12,158
15,957
Total liabilities and stockholders’
equity
38,433
40,260
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11
Q3 2022
FINANCIAL
INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Operating activities:
Net income
1,433
1,982
404
678
Loss from discontinued operations, net of tax
36
45
16
9
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
615
677
198
220
Changes in fair values of investments
(39)
(114)
(24)
(1)
Pension and other employee benefits
(107)
(159)
(24)
(65)
Deferred taxes
(183)
82
(35)
(27)
Loss from equity-accounted companies
100
83
38
26
Net loss (gain) from derivatives and foreign exchange
44
99
(33)
55
Net loss (gain) from sale of property,
plant and equipment
(64)
(22)
(9)
(7)
Other
65
61
(2)
32
Changes in operating assets and liabilities:
Trade receivables, net
(657)
(182)
(36)
232
Contract assets and liabilities
353
(73)
101
74
Inventories, net
(1,667)
(692)
(584)
(399)
Accounts payable, trade
390
361
177
52
Accrued liabilities
52
336
307
283
Provisions, net
312
(79)
186
(19)
Income taxes payable and receivable
19
(92)
71
(36)
Other assets and liabilities, net
(88)
(8)
42
12
Net cash provided by operating activities – continuing
operations
614
2,305
793
1,119
Net cash provided by (used in) operating activities – discontinued
operations
(14)
5
(2)
(15)
Net cash provided by operating activities
600
2,310
791
1,104
Investing activities:
Purchases of investments
(271)
(414)
(15)
(67)
Purchases of property, plant and
equipment and intangible assets
(503)
(459)
(165)
(166)
Acquisition of businesses (net of cash acquired)
and increases in cost-
and equity-accounted companies
(226)
(227)
(47)
(199)
Proceeds from sales of investments
654
1,639
148
318
Proceeds from maturity of investments
–
80
–
–
Proceeds from sales of property,
plant and equipment
85
36
19
13
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost-
and equity-accounted companies
(8)
93
5
46
Net cash from settlement of foreign currency derivatives
(154)
(75)
(210)
(3)
Other investing activities
1
(25)
9
(11)
Net cash provided by (used in) investing activities – continuing
operations
(422)
648
(256)
(69)
Net cash provided by (used in) investing activities – discontinued
operations
(91)
(83)
–
(13)
Net cash provided by (used in) investing activities
(513)
565
(256)
(82)
Financing activities:
Net changes in debt with original maturities of 90 days or less
1,475
213
284
(61)
Increase in debt
3,554
1,378
373
374
Repayment of debt
(2,025)
(763)
(542)
(13)
Delivery of shares
389
786
19
20
Purchase of treasury stock
(3,251)
(2,441)
(590)
(470)
Dividends paid
(1,698)
(1,726)
–
–
Dividends paid to noncontrolling shareholders
(83)
(91)
(7)
1
Other financing activities
(58)
(17)
(5)
(23)
Net cash used in financing activities – continuing
operations
(1,697)
(2,661)
(468)
(172)
Net cash provided by financing activities – discontinued
operations
–
–
–
–
Net cash used in financing activities
(1,697)
(2,661)
(468)
(172)
Effects of exchange rate changes on cash and equivalents
and restricted cash
(191)
(75)
(115)
(41)
Net change in cash and equivalents and restricted cash
(1,801)
139
(48)
809
Cash and equivalents and restricted cash, beginning of period
4,489
3,901
2,736
3,231
Cash and equivalents and restricted cash, end of period
2,688
4,040
2,688
4,040
Supplementary disclosure of cash flow information:
Interest paid
47
75
11
17
Income taxes paid
907
793
269
250
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12
Q3 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
Comprehensive income:
Net income
1,906
1,906
76
1,982
Foreign currency translation
adjustments, net of tax of $2
(366)
(366)
5
(361)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(3)
(10)
(10)
(10)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $10
114
114
114
Change in derivative instruments
and hedges, net of tax of $0
(3)
(3)
(3)
Total comprehensive income
1,641
81
1,722
Changes in noncontrolling interests
(37)
(20)
(57)
55
(2)
Dividends to
noncontrolling shareholders
–
(92)
(92)
Dividends to shareholders
(1,730)
(1,730)
(1,730)
Cancellation of treasury shares
(10)
(17)
(3,130)
3,157
–
–
Share-based payment arrangements
48
48
48
Purchase of treasury stock
(2,430)
(2,430)
(2,430)
Delivery of shares
(68)
(136)
990
786
786
Other
6
6
6
Balance at September 30, 2021
178
16
19,837
(4,266)
(1,814)
13,951
358
14,309
Balance at January 1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Comprehensive income:
Net income
1,343
1,343
93
1,436
Foreign currency translation
adjustments, net of tax of $1
(774)
(774)
(32)
(806)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(6)
(24)
(24)
(24)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $57
172
172
172
Change in derivative instruments
and hedges, net of tax of $3
–
–
–
Total comprehensive income
717
61
778
Changes in noncontrolling interests
(3)
(3)
(22)
(25)
Dividends to
noncontrolling shareholders
–
(81)
(81)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
33
33
33
Purchase of treasury stock
(3,201)
(3,201)
(3,201)
Delivery of shares
(46)
(130)
565
389
389
Other
7
7
7
Balance at September 30, 2022
171
9
19,127
(4,715)
(2,770)
11,822
336
12,158
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
13
Q3 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 leading global technology
company, connecting software
to its electrification, robotics,
automation and motion portfolio to drive performance to new
levels.
The Company’s Consolidated Financial Information is
prepared in accordance with United States of America generally
accepted accounting principles (U.S.
GAAP) for interim financial reporting. As such, the Consolidated
Financial Information does not include all the
information and notes required under U.S. GAAP
for
annual consolidated financial statements. Therefore, such financial
information should be read in conjunction with the audited
consolidated financial statements in
the Company’s Annual Report for the year ended December
31, 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:
●
growth rates, discount rates and other assumptions used to determine
impairment of long-lived assets and
in testing goodwill for impairment,
●
estimates to determine valuation allowances for deferred tax assets
and amounts recorded for unrecognized tax benefits,
●
assumptions used in determining inventory obsolescence and net
realizable value,
●
estimates and assumptions used in determining the initial fair value
of retained noncontrolling interest and certain obligations
in connection with
divestments,
●
estimates and assumptions used in determining the fair
values of assets and liabilities assumed in business
combinations,
●
estimates of loss contingencies associated with litigation or
threatened litigation and other claims and inquiries,
environmental damages, product
warranties, self-insurance reserves, regulatory and other proceedings,
●
estimates used to record expected costs for employee sever
ance in connection with restructuring programs,
●
estimates related to credit losses expected to occur over
the remaining life of financial assets such as trade and other
receivables, loans and other
instruments,
●
assumptions used in the calculation of pension and postretirement
benefits and the fair value of pension plan assets, and
●
assumptions and projections, principally related to future material,
labor and project-related overhead costs, used in determining the
percentage-of-
completion on projects, as well as the amount of variable consideration
the Company expects to be entitled to.
The actual results and outcomes may differ from the Company’s
estimates and assumptions.
A portion of the Company’s activities (primarily long-term
construction activities) has an operating cycle that
exceeds one year. For classification of
current assets
and liabilities related to such activities, the Company elected to
use the duration of the individual contracts
as its operating cycle. Accordingly,
there are accounts
receivable, contract assets, inventories and provisions related to
these contracts which will not be realized within one
year that have been classified as current.
Basis of presentation
In the opinion of management, the unaudited Consolidated Financial
Information contains all necessary
adjustments to present fairly the financial position, results
of operations and cash flows for the reported periods. Management considers
all such adjustments to be of a normal recurring nature. The
Consolidated Financial
Information is presented in United States dollars ($)
unless otherwise stated. Due to rounding, numbers presented
in the Consolidated Financial Information may
not add to the totals provided.
14
Q3 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 prospe
ctively.
This update does not have a significant impact on the Company’s
consolidated financial statements.
Applicable for future periods
Facilitation of the effects of reference rate reform on financial
reporting
In March 2020, an accounting standard update was issued
which provides temporary optional expedients and exceptions
to the current guidance on contract
modifications and hedge accounting to ease the financial reporting
burdens
related to the expected market transition from the London
Interbank Offered Rate
(LIBOR) and other interbank offered rates to alternative reference
rates. This update,
along with clarifications outlined in a subsequent
update issued in January
2021, can be adopted and applied no later than December 31,
2022, with early adoption permitted. The Company does
not expect this update to have a significant
impact on its consolidated financial statements.
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.
─
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
is deemed to have been
both divested and reacquired at its fair value on July 1, 2020 (see
Note 4).
At the date of 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. From the date of the disposal
through September 30, 2022, $455 million of these
liabilities had been paid and are reported as
reductions in the cash consideration received, of which $91
million and $17 million was paid during the nine and
three months ended September 30, 2022,
respectively. In the nine and three months
ended September 30, 2021, total cash payments made
in connection with these liabilities amounted to $83 million
and
$13 million, respectively. At September
30, 2022,
the remaining amount recorded was $55 million.
During the second quarter of 2022, the Company completed the
legal title transfer of the remaining entities of
Power Grids business to Hitachi Energy,
resulting in
the release of $12 million held in escrow and included in Current
Restricted Cash at December 31, 2021.
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
nine and three months ended September 30, 2022, the Company
has recognized within its continuing operations, general
and administrative expenses incurred to
perform the TSA, offset by $11
5
million and $39 million, respectively,
in TSA-related income for such services
that is reported in Other income (expense). In the
nine and three months ended September 30, 2021,
Other income (expense) included $127 million
and $39 million, respectively,
of TSA-related income for such
services.
Discontinued operations
As a result of the sale of the Power Grids business, substantially
all assets and liabilities related to Power Grids have
been sold. As this divestment represented
a
strategic shift that would have a major effect on the Company’s
operations and financial results, the
results of this business were presented as discontinued
operations and the assets and liabilities were presented as held
for sale and in discontinued operations. After the
date of sale, certain business contracts in the
Power Grids business continue to be executed by subsidiaries
of the Company for the benefit/risk of Hitachi Energy
.
Assets and liabilities relating to, as well as
the
net financial results of, these contracts will continue to be
included in discontinued operations until they have been completed
or otherwise transferred to Hitachi
Energy.
15
Q3 2022
FINANCIAL
INFORMATION
Amounts recorded in discontinued operations were as follows:
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Expenses
(25)
(13)
(14)
(4)
Change to net gain recognized on sale of the Power Grids business
(11)
(32)
(2)
(5)
Loss from discontinued operations, net of
tax
(36)
(45)
(16)
(9)
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)
Sep. 30, 2022
(1)
Dec. 31, 2021
(1)
Receivables, net
92
131
Other current assets
10
5
Current assets held for sale and in discontinued
operations
102
136
Accounts payable, trade
49
71
Other liabilities
237
310
Current liabilities held for sale and in discontinued
operations
286
381
Other non-current liabilities
17
43
Non-current liabilities held for sale and in discontinued
operations
17
43
(1)
At September 30, 2022, and December 31, 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:
Nine months ended September 30,
Three months ended September 30,
($ in millions, except number of acquired businesses)
2022
2021
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
150
216
12
190
Aggregate excess of purchase price
over fair value of net assets acquired
(2)
205
159
14
148
Number of acquired businesses
3
2
2
1
(1)
Excluding changes in cost- and equity-accounted companies.
(2)
Recorded as goodwill.
In the table
above, the “Purchase price for acquisitions” and “Aggregate
excess of purchase price over fair value of net assets
acquired” amounts for the nine
months ended September 30, 2022, relate primarily to the acquisition
of InCharge Energy, Inc. (In-Charge)
and in the nine months ended September 30, 2021,
relate primarily to the acquisition of ASTI Mobile Robotics
Group (ASTI).
Acquisitions of controlling interests have been accounted for under the
acquisition method and have been included in
the Company’s Consolidated Financial
Statements since the date of acquisition.
While the Company uses its best estimates and assumptions
as part of the purchase price allocation process
to value assets acquired and liabilities assumed
at
the acquisition date, the purchase price allocation for acquisitions
is preliminary for up to 12 months after the acquisition
date and is subject to refinement as more
detailed analyses are completed and additional information about
the fair values of the assets and liabilities becomes available.
16
Q3 2022
FINANCIAL
INFORMATION
On January 26, 2022, the Company increased its ownership in
In-Charge to a 60 percent controlling interest through a stock
purchase agreement. 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)
in the nine months ended
September 30, 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 $190 million (net of cash
acquired of $7 million). The acquisition expands the Company’s
robotics and automation offering in its Robotics and Discrete
Automation operating segment.
Investments in equity-accounted companies
In connection with the divestment of its Power Grids business
to Hitachi (see Note 3), the Company retained a 19.
9
percent interest in the business and 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. The
Company has concluded that based on its
continuing involvement with the Power Grids business, including
membership in its governing board of directors, it has significant influence
over Hitachi Energy.
As
a result, the investment (including the value of the option)
is accounted for using the equity method.
Hitachi also holds a call option which would require the Company
to sell the remaining 19.9 percent interest
in Hitachi Energy at a price consistent with what was
paid by Hitachi to acquire the initial 80.1 percent or at fair value,
if higher. In September 2022, the
Company and Hitachi agreed to sell the Company’s
remaining
investment in Hitachi Energy and settle certain outstanding contractual
obligations relating to the initial sale of the business,
including certain indemnification
guarantees (see Note #NCCC). The Company expects
to receive approximately $1.5 billion of net proceeds in connection with
the sale of the remaining
investment in Hitachi Energy. The sale
is planned to be completed in the fourth quarter of 2022.
At the date of the divestment of the Power Grids business,
the fair value of Hitachi Energy exceeded the book
value of the underlying net assets.
At September 30,
2022, and December 31, 2021,
the reported value of the investment in Hitachi
Energy includes $1,375 million and $1,474 million, respectively,
for the Company’s
19.9 percent share of this basis difference. The Company
amortizes its share of these differences
over the estimated remaining
useful lives of the underlying
assets that gave rise to this difference, recording the amortizati
on, net of related deferred tax benefit, as a reduction of
income from equity-accounted companies.
As of September 30, 2022,
the Company determined that no impairment of
its equity-accounted investments existed.
The carrying value of the Company’s investments in equity-accounted
companies and respective percentage of ownership
is as follows:
Ownership as of
Carrying value at
($ in millions, except ownership share in %)
September 30, 2022
September 30, 2022
December 31, 2021
Hitachi Energy Ltd
19.9%
1,491
1,609
Others
66
61
Total
1,557
1,670
In the nine and three months ended September 30, 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:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Income (loss) from equity-accounted companies, net of taxes
(34)
11
(24)
7
Basis difference amortization (net of deferred income tax benefit)
(66)
(94)
(14)
(33)
Loss from equity-accounted companies
(100)
(83)
(38)
(26)
Subsequent events
On September 7, 2022, the shareholders approved the spinoff
of the Company’s Turbocharging Division
into an independent, publicly traded company,
Accelleron
Industries AG, which was completed through the distribution of common
stock to the stockholders of
ABB on October 3, 2022.
17
Q3 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:
September 30, 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
1,760
1,760
1,760
Time deposits
947
947
928
19
Equity securities
340
4
344
344
3,047
4
–
3,051
2,688
363
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
270
1
(17)
254
254
European government obligations
13
13
13
Other government obligations
107
107
107
Corporate
64
(8)
56
56
454
1
(25)
430
–
430
Total
3,501
5
(25)
3,481
2,688
793
Of which:
Restricted cash, current
323
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
Q3 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)
September 30, 2022
December 31, 2021
September 30, 2021
Foreign exchange contracts
15,501
11,276
9,401
Embedded foreign exchange derivatives
864
815
881
Cross-currency interest rate swaps
781
906
926
Interest rate contracts
2,598
3,541
3,102
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
September 30, 2022
December 31, 2021
September 30, 2021
Copper swaps
metric tonnes
36,264
36,017
34,615
Silver swaps
ounces
2,787,909
2,842,533
2,593,338
Aluminum swaps
metric tonnes
6,925
7,125
6,700
Equity derivatives
At September 30, 2022, December 31, 2021, and September 30,
2021, the Company held 8 million,
9 million and 11
million cash-settled call options indexed to
ABB Ltd shares (conversion ratio 5:1) with a total fair value of $11
million,
$29 million and $25 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange
contracts to manage the foreign exchange risk
of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to
hedge its WAR liabilities. The Company applies cash
flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their
fair value is recorded in “Accumulated other comprehensive
loss” and subsequently reclassified into
earnings in the same line item and in the same period as
the underlying hedged transaction affects
earnings. For the nine and three months ended
September 30,
2022 and 2021, there were no significant
amounts recorded for cash flow hedge accounting
activities.
Fair value hedges
To reduce its interest
rate exposure arising primarily from its debt issuance activities,
the Company uses interest rate swaps and
cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges,
the changes in the fair value of these instruments,
as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded
as offsetting gains and losses in “Interest
and other finance expense”.
19
Q3 2022
FINANCIAL
INFORMATION
The effect of derivative instruments, designated and qualifying
as fair value hedges, on the Consolidated Income
Statements was as follows:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(83)
(40)
(28)
(13)
Hedged item
85
41
29
13
Cross-currency interest rate swaps
Designated as fair value hedges
(125)
(27)
(31)
(2)
Hedged item
119
25
29
1
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
Nine months ended September 30,
Three months ended September 30,
($ in millions)
Location
2022
2021
2022
2021
Foreign exchange contracts
Total revenues
(201)
(49)
(82)
(39)
Total cost of sales
57
(24)
23
–
SG&A expenses
(1)
35
6
12
7
Non-order related research
and development
2
(2)
1
(1)
Interest and other finance expense
(139)
(121)
(85)
(2)
Embedded foreign exchange
Total revenues
12
(14)
7
(1)
contracts
Total cost of sales
(12)
(3)
(10)
(1)
Commodity contracts
Total cost of sales
(72)
47
(21)
(16)
Other
Interest and other finance expense
4
–
1
(1)
Total
(314)
(160)
(154)
(54)
(1)
SG&A expenses represent
“Selling, general and
administrative expenses”.
The fair values of derivatives included in the Consolidated Balance
Sheets were as follows:
September 30, 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
1
–
5
5
Interest rate contracts
1
–
7
48
Cross-currency interest rate swaps
–
–
–
349
Cash-settled call options
11
–
–
–
Total
13
–
12
402
Derivatives not designated as hedging instruments:
Foreign exchange contracts
161
26
199
21
Commodity contracts
3
–
45
–
Interest rate contracts
5
–
5
–
Embedded foreign exchange derivatives
27
4
15
11
Total
196
30
264
32
Total fair value
209
30
276
434
20
Q3 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 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 September 30, 2022, and December 31,
2021, have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements
allow net settlements under certain conditions.
At September 30, 2022, and December 31,
2021, information related to these offsetting arrangements was
as follows:
($ in millions)
September 30, 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
208
(143)
–
–
65
Total
208
(143)
–
–
65
($ in millions)
September 30, 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
684
(143)
–
–
541
Total
684
(143)
–
–
541
($ 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
Q3 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 valuation models
may be both
observable and unobservable. In these cases, the fair value measurement
is classified as Level 2 unless the unobservable portion
of the adjustment or
the unobservable input to the valuation model is significant,
in which case the fair value measurement would be
classified as Level 3. Assets and
liabilities valued or disclosed using Level 2 inputs include investments
in certain funds, certain debt securities that are not actively
traded, interest rate
swaps, cross-currency interest rate swaps, commodity
swaps, cash-settled call options, forward foreign exchange
contracts, foreign exchange swaps and
forward rate agreements, time deposits, as well as financing receivables
and debt.
Level 3:
Valuation inputs are based on
the Company’s assumptions of relevant market
data (unobservable input).
Whenever quoted prices involve bid-ask spreads, the Company
ordinarily determines fair
values based on mid-market quotes. However,
for the purpose of
determining the fair value of cash-settled call options serving
as hedges of the Company’s management incentive
plan, bid prices are used.
When determining fair values based on quoted prices
in an active market, the Company considers if the
level of transaction activity for the financial instrument
has
significantly decreased or would not be considered orderly.
In such cases, the resulting changes in valuation
techniques would be disclosed. If the market is
considered disorderly or if quoted prices are not available, the Company
is required to use another valuation technique, such
as an income approach.
Recurring fair value measures
The fair values of financial assets and liabilities measured at
fair value on a recurring basis were as follows:
September 30, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
344
344
Debt securities—U.S. government obligations
254
254
Debt securities—European government obligations
13
13
Debt securities—Other government obligations
107
107
Debt securities—Corporate
56
56
Derivative assets—current in “Other current assets”
209
209
Derivative assets—non-current in “Other non-current assets”
30
30
Total
267
746
–
1,013
Liabilities
Derivative liabilities—current in “Other current liabilities”
276
276
Derivative liabilities—non-current in “Other non-current liabilities”
434
434
Total
–
710
–
710
22
Q3 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”
and “Other non-current assets”:
If quoted market prices in active markets for identical
assets are available, these are considered Level 1 inputs; however,
when markets are not active, these inputs
are considered Level 2. If such quoted
market prices are not available, fair value is determined using
market prices for similar assets or present value techniques,
applying an appropriate risk-
free interest rate adjusted for non-performance risk. The inputs
used in present value techniques are observable and fall
into the Level 2 category.
●
Derivatives
: The fair values of derivative instruments are determined using
quoted prices of identical instruments from an
active market, if available
(Level 1 inputs). If quoted prices are not available, price quotes
for similar instruments, appropriately adjusted, or present
value techniques, based on
available market data, or option pricing models are used. Cash
-settled call options hedging the Company’s WAR
liability are valued based on bid prices
of the equivalent listed warrant. The fair values obtained using price
quotes for similar instruments or valuation techniques
represent a Level 2 input
unless significant unobservable inputs are used.
Non-recurring fair value measures
The Company elects to record private equity investments without readily
determinable fair values at cost, less impairment, adjusted
by observable price changes.
The Company reassesses at each reporting period whether these
investments continue to qualify for this treatment. During the
nine months ended September 30,
2022 and 2021,
the Company recognized, in Other income (expense), net
fair value gains of $56 million and $106 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 gains of $26 million and
$3 million were recognized in the three months ended September
30, 2022 and 2021, respectively.
The fair values were determined using level 2 inputs. The
carrying values of investments,
carried at fair value on a non-recurring basis, at
September 30, 2022, and December 31, 2021, totaled $90 million
and $169 million,
respectively.
Apart from the transactions above, there were no additional significant
non-recurring fair value measurements during the
nine months ended September 30, 2022
and 2021.
Disclosure about financial instruments carried on a cost
basis
The fair values of financial instruments carried on a cost
basis were as follows:
September 30, 2022
($ 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
1,437
1,437
1,437
Time deposits
928
928
928
Restricted cash
323
323
323
Marketable securities and short-term investments
(excluding securities):
Time deposits
19
19
19
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
3,038
987
2,051
3,038
Long-term debt (excluding finance lease obligations)
4,367
4,179
32
4,211
23
Q3 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)
September 30, 2022
December 31, 2021
September 30, 2021
Contract assets
955
990
1,139
Contract liabilities
2,115
1,894
1,940
Contract assets primarily relate to the Company’s right to receive
consideration for work completed but for which no invoice
has been issued at the reporting date.
Contract assets are transferred to receivables when rights
to receive payment become unconditional.
Contract liabilities primarily relate to up-front advances received on
orders from customers as well as amounts invoiced
to customers in excess of revenues
recognized, primarily for long-term projects. Contract
liabilities are reduced as work is performed and as revenues
are recognized. In addition to the amounts
presented as Contract liabilities in the table above, $63 million
are non-current and are included in Other non-curren
t
liabilities in the Balance Sheet.
The significant changes in the Contract assets and Contract liabilities
balances were as follows:
Nine months ended September 30,
2022
2021
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities
balance at Jan 1, 2022/2021
(923)
(939)
Additions to Contract liabilities - excluding amounts recognized as
revenue during the period
1,320
1,032
Receivables recognized that were included in the Contract
asset balance at Jan 1, 2022/2021
(501)
(502)
At September 30, 2022, the Company had unsatisfied performance
obligations totaling $19,393 million and, of this amount,
the Company expects to fulfill
approximately 34 percent of the obligations in 2022, approximately
50 percent of the obligations in 2023 and the
balance thereafter.
24
Q3 2022
FINANCIAL
INFORMATION
─
Note 9
Debt
The Company’s total debt at September 30, 2022,
and December 31, 2021, amounted to $7,598 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)
September 30, 2022
December 31, 2021
Short-term debt
2,071
78
Current maturities of long-term debt
997
1,306
Total
3,068
1,384
Short-term debt primarily represented issued commercial paper and
short-term bank borrowings from various banks.
At September 30, 2022,
$1,883 million was
outstanding under the $2 billion Euro-commercial paper program
and $109 million was outstanding under the $2 billion commercial
paper program in the United
States. At December 31, 2021, no amount was outstanding under
either of these programs.
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 September 30, 2022,
and December 31, 2021, amounted to $4,530 million and
$4,177 million, respectively.
Outstanding bonds (including maturities within the next 12 months)
were as follows:
September 30, 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
$
677
EUR
700
$
800
0% CHF Bonds, due 2023
CHF
275
$
280
0.625% EUR Instruments, due 2024
EUR
700
$
660
Floating Rate EUR Instruments, due 2024
EUR
500
$
490
0.75% EUR Instruments, due 2024
EUR
750
$
705
EUR
750
$
860
0.3% CHF Bonds, due 2024
CHF
280
$
285
CHF
280
$
306
0.75% CHF Bonds, due 2027
CHF
425
$
433
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
173
CHF
170
$
186
0% EUR Notes, due 2030
EUR
800
$
620
EUR
800
$
862
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
589
Total
$
5,294
$
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 floating
rate obligations.
Subsequent events
On October 5, 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).
25
Q3 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.
The Company continues to cooperate with the U.S.
authorities as requested. At this time, it is not
possible for the Company to make an informed judgment about
the outcome of this matter.
Based on findings during an internal investigation, the Company
self-reported to the SEC and the DoJ, in the United
States, to the Special Investigating Unit (SIU)
and the National Prosecuting Authority (NPA)
in South Africa as well as to various authorities in other countries
potential suspect payments and other compliance
concerns in connection with some of the Company’s dealings
with Eskom and related persons. Many of those parties
have expressed an interest in, or
commenced an investigation into, these matters and the Company is
cooperating fully with them. The Company paid $104
million to Eskom in December 2020 as
part of a full and final settlement with Eskom and the Special Investigating
Unit relating to improper payments and other compliance
issues associated with the
Controls and Instrumentation Contract, and its Variation
Orders for Units 1 and 2 at Kusile. The Company
continues to cooperate fully with the authorities in
their
review of the Kusile project and discussions are progressing with
them regarding a final settlement. Based on these
discussions, the Company made a provision of
approximately $325 million which was recorded in Other income (expense),
net,
in the three months ended September 30, 2022. The provision
is not expected to
be tax deductible. In addition, based on these discussions,
the Company does not expect that it will be required to recor
d
any material additional provisions related
to the resolution of these matters.
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 September 30, 2022, and December 31, 2021, the Company
had aggregate liabilities of $413 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)
September 30, 2022
December 31, 2021
Performance guarantees
3,700
4,540
Financial guarantees
54
52
Indemnification guarantees
(1)
136
136
Total
(2)
3,890
4,728
(1)
Prior to September 2022 agreement (See Note 4), 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 September 30,
2022, and December 31, 2021,
amounted to $148 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 in 2017, the
Company has entered into various performance
guarantees with
other parties with respect to certain liabilities
of the divested business. At September 30, 2022, and December
31, 2021, the maximum potential
payable under these guarantees amounts to $773 million
and $911 million, respectively,
and these guarantees have various original maturities ranging
from five to
ten years.
The Company retained obligations for financial, performance
and indemnification guarantees related to the Power Grids
business sold on July 1, 2020 (see Note 3
for details). The performance and financial guarantees have been
indemnified by Hitachi, at the same proportion of its ownership
in Hitachi Energy Ltd
(80.1 percent). These guarantees, which have various maturities
up to 2035, primarily consist of bank guarantees, standby
letters of credit, business performance
guarantees and other trade-related guarantees, the majority of which
have original maturity dates ranging from one to ten
years. The maximum amount payable
under the guarantees at September 30, 2022, and December
31, 2021, is approximately $2.6 billion and $3.2
billion, respectively, and the
carrying amounts of
liabilities (recorded in discontinued operations) at both September
30, 2022, and December 31, 2021, amounted to $136
million, relating to the indemnification
guarantees.
26
Q3 2022
FINANCIAL
INFORMATION
Commercial commitments
In addition, in the normal course of bidding for and executing certain
projects, the Company has entered into standby
letters of credit, bid/performance bonds
and
surety bonds (collectively “performance bonds”) with various
financial institutions. Customers can draw on such
performance bonds in the event that the Company
does not fulfill its contractual obligations. The Company would
then have an obligation to reimburse the financial institution
for amounts paid under the performance
bonds. At both September 30, 2022, and December 31, 2021,
the total outstanding performance bonds aggregated to
$2.8 billion and $3.6 billion, respectively,
of
each of these amounts, $0.1 billion relates
to discontinued operations. There have been no significant
amounts reimbursed to financial institutions under these
types of arrangements in the nine and three months ended
September 30, 2022 and 2021.
Product and order-related contingencies
The Company calculates its provision for product warranties
based on historical claims experience and specific review
of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance,
was as follows:
($ in millions)
2022
2021
Balance at January 1,
1,005
1,035
Claims paid in cash or in kind
(122)
(176)
Net increase in provision for changes in estimates, warranties
issued and warranties expired
173
190
Exchange rate differences
(94)
(35)
Balance at September 30,
962
1,014
─
Note 11
Employee benefits
The Company operates defined benefit pension plans, defined contribution
pension plans, and termination indemnity plans,
in accordance with local regulations
and practices. These plans cover a large portion of the Company’s
employees and provide benefits to employees
in the event of death, disability,
retirement, or
termination of employment. Certain of these plans are multi-employer
plans. The Company also operates other postretirement benefit plans
including
postretirement health care benefits, and other employee-related
benefits for active employees including long-service
award plans. The measurement date used for
the Company’s employee benefit plans is December
- The funding policies of the Company’s plans
are consistent with the local government and tax
requirements.
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
Nine months ended September 30,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
40
45
26
31
–
–
Operational pension cost
40
45
26
31
–
–
Non-operational pension cost (credit):
Interest cost
2
(3)
61
52
1
1
Expected return on plan assets
(87)
(88)
(113)
(133)
–
–
Amortization of prior service cost (credit)
(5)
(6)
(2)
(2)
(1)
(1)
Amortization of net actuarial loss
–
–
44
53
(2)
(2)
Curtailments, settlements and special termination benefits
–
–
–
(1)
–
–
Non-operational pension cost (credit)
(90)
(97)
(10)
(31)
(2)
(2)
Net periodic benefit cost (credit)
(50)
(52)
16
–
(2)
(2)
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
13
15
9
9
–
–
Operational pension cost
13
15
9
9
–
–
Non-operational pension cost (credit):
Interest cost
1
(1)
18
15
–
–
Expected return on plan assets
(29)
(30)
(36)
(42)
–
–
Amortization of prior service cost (credit)
(1)
(1)
(1)
(1)
–
–
Amortization of net actuarial loss
–
–
14
18
–
(1)
Curtailments, settlements and special termination benefits
–
–
–
1
–
–
Non-operational pension cost (credit)
(29)
(32)
(5)
(9)
–
(1)
Net periodic benefit cost (credit)
(16)
(17)
4
–
–
(1)
The components of net periodic benefit cost other than the service
cost component are included in the line “Non-operational
pension (cost) credit” in the income
statement.
27
Q3 2022
FINANCIAL
INFORMATION
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Nine months ended September 30,
2022
2021
2022
2021
2022
2021
Total contributions
to defined benefit pension and
other postretirement benefit plans
33
46
24
42
5
8
Of which, discretionary contributions to defined benefit
pension plans
–
–
–
11
–
–
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2022
2021
2022
2021
2022
2021
Total contributions
to defined benefit pension and
other postretirement benefit plans
2
15
5
29
1
5
Of which, discretionary contributions to defined benefit
pension plans
–
–
–
20
–
–
The Company expects to make contributions totaling approximately
$86 million and $6 million to its defined pension plans
and other postretirement benefit plans,
respectively, for the full year 2022.
─
Note 12
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 September 30,
2022, 50 million shares, resulting in an increase in Treasury
stock of $1,452 million. At the 2023
AGM, the
Company intends to request shareholder approval to cancel the shares
purchased through this new program as well as those
shares purchased under the
program launched in April 2021 that were not proposed for cancellation
at the 2022 AGM.
In addition to the share buyback programs, the Company
purchased 20 million of its own shares on the open market
in the nine months ended September 30,
2022, mainly for use in connection with its employee share
plans, resulting in an increase in Treasury
stock of $660 million.
In the nine months ended September 30, 2022, the Company
delivered, out of treasury stock, 16 million shares in connection
with its Management Incentive Plan.
28
Q3 2022
FINANCIAL
INFORMATION
─
Note 13
Earnings per share
Basic earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during
the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares
outstanding during the period, assuming that all potentially
dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding
written call options, and outstanding options and
shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Nine months ended September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,379
1,951
376
661
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,343
1,906
360
652
Weighted-average number of shares outstanding
(in millions)
1,909
2,011
1,882
2,001
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.97
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.95
0.19
0.33
Diluted earnings per share
Nine months ended September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,379
1,951
376
661
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,343
1,906
360
652
Weighted-average number of shares outstanding (in millions)
1,909
2,011
1,882
2,001
Effect of dilutive securities:
Call options and shares
11
17
7
18
Adjusted weighted-average number of shares outstanding
(in millions)
1,920
2,028
1,889
2,019
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.96
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.94
0.19
0.32
29
Q3 2022
FINANCIAL
INFORMATION
─
Note 14
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive
loss” (OCI) attributable to ABB, by component, net
of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ 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
(361)
(10)
64
6
(301)
Amounts reclassified from OCI
–
–
50
(9)
41
Total other comprehensive (loss)
income
(361)
(10)
114
(3)
(260)
Less:
Amounts attributable to
noncontrolling interests
5
–
–
–
5
Balance at September 30, 2021
(1)
(2,825)
7
(1,442)
(6)
(4,266)
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2022
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(811)
(25)
148
(15)
(703)
Amounts reclassified from OCI
5
1
24
15
45
Total other comprehensive (loss)
income
(806)
(24)
172
–
(658)
Less:
Amounts attributable to
noncontrolling interests
(32)
–
–
–
(32)
Balance at September 30, 2022
(1)
(3,767)
(22)
(917)
(8)
(4,715)
(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:
Nine months ended
Three months ended
($ in millions)
Location of (gains) losses
September 30,
September 30,
Details about OCI components
reclassified from OCI
2022
2021
2022
2021
Foreign currency translation adjustments:
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
5
–
–
–
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(1)
(8)
(9)
(2)
(2)
Amortization of net actuarial loss
Non-operational pension (cost) credit
(1)
42
51
14
17
Net gain (loss) from settlements and curtailments
Non-operational pension (cost) credit
(1)
–
(1)
–
1
Total before tax
34
41
12
16
Tax
Income tax expense
(10)
9
(3)
(3)
Amounts reclassified from OCI
24
50
9
13
The amounts in respect of Unrealized gains (losses)
on available-for-sale securities and Derivative instruments
and hedges were not significant for the nine and
three months ended September 30, 2022 and 2021.
30
Q3 2022
FINANCIAL
INFORMATION
─
Note 15
Restructuring and related expenses
Other restructuring-related activities
In the nine and three months ended September 30, 2022 and
2021, the Company executed various other restructuring-related
activities and incurred the following
expenses:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Employee severance costs
64
44
21
11
Estimated contract settlement, loss order and other costs
205
15
3
3
Inventory and long-lived asset impairments
5
17
–
15
Total
274
76
24
29
Expenses associated with these activities are recorded in the following
line items in the Consolidated Income Statements:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Total cost of sales
13
36
5
12
Selling, general and administrative expenses
39
10
11
5
Non-order related research and development expenses
2
–
–
–
Other income (expense), net
220
30
8
12
Total
274
76
24
29
During
the second
quarter
of 2022,
the Company
completed
a plan
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 September
30, 2022,
and December
31, 2021,
$194 million
and $212
million,
respectively,
were recorded
for other
restructuring
-related
liabilities
and
were included
primarily
in Other
provisions.
─
Note 16
Operating segment data
The Chief Operating Decision Maker (CODM) is the Chief
Executive Officer. The CODM
allocates resources to and assesses the performance of
each operating
segment using the information outlined below. The
Company is organized into the following segments, based
on products and services: Electrification, Motion,
Process Automation, and Robotics & Discrete Automation. The remaining
operations of the Company are included in Corporate
and Other.
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 Electrification 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
Q3 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, Turbocharging,
and Measurement & Analytics.
●
Robotics & Discrete Automation:
delivers its products, solutions and services
through two operating Divisions: Robotics and Machine Automation.
Robotics includes industrial robots, 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 receiva
bles/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 nine and three months
ended September 30, 2022 and 2021, as well as total
assets
at September 30, 2022, and December 31, 2021.
Nine months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,291
1,430
1,726
1,070
3
7,520
The Americas
3,929
1,574
1,135
377
3
7,018
of which: United States
2,870
1,307
681
267
–
5,124
Asia, Middle East and Africa
3,066
1,564
1,607
838
9
7,084
of which: China
1,530
888
498
646
1
3,563
10,286
4,568
4,468
2,285
15
21,622
Product type
Products
9,006
3,931
1,045
1,337
9
15,328
Systems
639
–
1,375
598
6
2,618
Services and other
641
637
2,048
350
–
3,676
10,286
4,568
4,468
2,285
15
21,622
Third-party revenues
10,286
4,568
4,468
2,285
15
21,622
Intersegment revenues
156
332
25
5
(518)
–
Total revenues
(1)
10,442
4,900
4,493
2,290
(503)
21,622
32
Q3 2022
FINANCIAL
INFORMATION
Nine months ended September 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,357
1,483
1,716
1,201
16
7,773
The Americas
3,312
1,832
1,010
331
3
6,488
of which: United States
2,465
1,540
577
236
–
4,818
Asia, Middle East and Africa
2,905
1,554
1,694
957
7
7,117
of which: China
1,577
861
547
714
–
3,699
9,574
4,869
4,420
2,489
26
21,378
Product type
Products
8,106
4,202
1,097
1,639
15
15,059
Systems
824
–
1,258
492
11
2,585
Services and other
644
667
2,065
358
–
3,734
9,574
4,869
4,420
2,489
26
21,378
Third-party revenues
9,574
4,869
4,420
2,489
26
21,378
Intersegment revenues
(1)
168
321
34
9
(532)
–
Total revenues
(2)
9,742
5,190
4,454
2,498
(506)
21,378
Three months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,063
477
595
358
1
2,494
The Americas
1,398
545
368
139
2
2,452
of which: United States
1,021
454
221
101
–
1,796
Asia, Middle East and Africa
1,073
569
488
329
1
2,460
of which: China
523
323
189
264
1
1,300
3,534
1,591
1,451
826
4
7,406
Product type
Products
3,086
1,379
364
479
3
5,311
Systems
232
–
414
226
1
873
Services and other
216
212
673
121
–
1,222
3,534
1,591
1,451
826
4
7,406
Third-party revenues
3,534
1,591
1,451
826
4
7,406
Intersegment revenues
50
111
7
2
(170)
–
Total revenues
3,584
1,702
1,458
828
(166)
7,406
Three months ended September 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,091
463
574
387
10
2,525
The Americas
1,091
609
352
107
2
2,161
of which: United States
810
511
214
75
–
1,610
Asia, Middle East and Africa
955
507
569
315
(4)
2,342
of which: China
524
284
171
231
–
1,210
3,137
1,579
1,495
809
8
7,028
Product type
Products
2,549
1,357
408
581
5
4,900
Systems
374
–
387
106
3
870
Services and other
214
222
700
122
–
1,258
3,137
1,579
1,495
809
8
7,028
Third-party revenues
3,137
1,579
1,495
809
8
7,028
Intersegment revenues
59
94
12
4
(169)
–
Total revenues
3,196
1,673
1,507
813
(161)
7,028
(1)
Due to rounding, numbers presented may not add to the totals provided.
33
Q3 2022
FINANCIAL
INFORMATION
Nine months ended
Three months ended
September 30,
September 30,
($ in millions)
2022
2021
2022
2021
Operational EBITA:
Electrification
1,756
1,614
647
511
Motion
845
905
305
291
Process Automation
645
554
225
207
Robotics & Discrete Automation
215
291
106
90
Corporate and Other
‒
Non-core and divested businesses
8
(39)
(10)
(10)
‒ Corporate costs and Other Intersegment elimination
(105)
(191)
(42)
(27)
Total
3,364
3,134
1,231
1,062
Acquisition-related amortization
(174)
(191)
(55)
(62)
Restructuring, related and implementation costs
(1)
(300)
(81)
(20)
(28)
Changes in obligations related to divested businesses
17
(16)
–
(10)
Changes in pre-acquisition estimates
–
6
(1)
14
Gains and losses from sale of businesses
(4)
9
–
–
Acquisition- and divestment-related expenses and integration
costs
(171)
(74)
(62)
(44)
Other income/expense relating to the Power Grids joint venture
(67)
(34)
(30)
(15)
Foreign exchange/commodity timing differences in
income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
(107)
(106)
(7)
(49)
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(48)
5
(13)
(4)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
55
33
15
5
Certain other non-operational items:
Regulatory, compliance and legal costs
(333)
(3)
(329)
(1)
Business transformation costs
(2)
(114)
(59)
(48)
(20)
Favorable resolution of an uncertain purchase price adjustment
–
5
–
5
Certain other fair value changes, including asset impairments
58
118
24
4
Other non-operational items
(24)
(3)
3
(5)
Income from operations
2,152
2,743
708
852
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Non-operational pension (cost) credit
102
130
34
42
Income from continuing operations before taxes
2,197
2,802
714
888
(1)
Includes impairment of certain assets.
(2)
Amount includes ABB Way process transformation costs of $98 million and $52 million for nine months ended September 30, 2022 and 2021, respectively, and $34 million and
$19 million for the three months ended September 30, 2022 and 2021, respectively.
Total assets
(1)
($ in millions)
September 30, 2022
December 31, 2021
Electrification
13,635
12,831
Motion
6,249
5,936
Process Automation
5,088
5,009
Robotics & Discrete Automation
4,626
4,860
Corporate and Other
(2)
8,835
11,624
Consolidated
38,433
40,260
(1)
Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2)
At September 30, 2022, and December 31, 2021, respectively, Corporate and Other includes $102 million and $136 million of assets in the Power Grids business which is reported as
discontinued operations (see Note 3). In addition, at September 30, 2022, and December 31, 2021, Corporate and Other includes $1,491 million and $1,609 million, respectively,
related to the equity investment in Hitachi Energy Ltd (see Note 4).
34
Q3 2022
FINANCIAL
INFORMATION
35
Q3 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
nine and
three months
ended
September
30, 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 $50 million.
The following tables provide reconciliations of reported growth rates
of certain key figures to their respective comparable growth
rate.
Comparable growth rate reconciliation by Business Area
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
11%
9%
0%
20%
12%
10%
0%
22%
Motion
3%
9%
12%
24%
2%
9%
12%
23%
Process Automation
-6%
9%
0%
3%
-3%
9%
0%
6%
Robotics & Discrete Automation
-4%
12%
-1%
7%
2%
11%
0%
13%
ABB Group
4%
9%
3%
16%
5%
10%
3%
18%
9M 2022 compared to 9M 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
15%
7%
0%
22%
7%
7%
0%
14%
Motion
8%
7%
12%
27%
-6%
7%
10%
11%
Process Automation
4%
7%
0%
11%
1%
7%
0%
8%
Robotics & Discrete Automation
21%
9%
-1%
29%
-8%
7%
-1%
-2%
ABB Group
12%
7%
3%
22%
1%
6%
3%
10%
36
Q3 2022
FINANCIAL
INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group
- Quarter
Q3 2022 compared to Q3 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%
19%
0%
20%
-1%
19%
0%
18%
The Americas
16%
1%
8%
25%
13%
1%
9%
23%
of which: United States
19%
0%
10%
29%
12%
0%
10%
22%
Asia, Middle East and Africa
-4%
8%
0%
4%
5%
8%
0%
13%
of which: China
-8%
6%
0%
-2%
7%
7%
0%
14%
ABB Group
4%
9%
3%
16%
5%
10%
3%
18%
Regional comparable growth rate reconciliation by Business
Area - Quarter
Q3 2022 compared to Q3 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
-8%
18%
0%
10%
-3%
19%
0%
16%
The Americas
33%
1%
0%
34%
28%
1%
0%
29%
of which: United States
38%
1%
0%
39%
26%
0%
0%
26%
Asia, Middle East and Africa
5%
8%
0%
13%
12%
8%
0%
20%
of which: China
-9%
5%
0%
-4%
0%
6%
0%
6%
Electrification
11%
9%
0%
20%
12%
10%
0%
22%
Q3 2022 compared to Q3 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
23%
22%
1%
46%
1%
20%
0%
21%
The Americas
-11%
1%
27%
17%
-9%
1%
30%
22%
of which: United States
-9%
0%
31%
22%
-9%
0%
33%
24%
Asia, Middle East and Africa
-1%
8%
1%
8%
15%
8%
2%
25%
of which: China
4%
6%
1%
11%
16%
8%
1%
25%
Motion
3%
9%
12%
24%
2%
9%
12%
23%
Q3 2022 compared to Q3 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
-8%
16%
0%
8%
3%
18%
0%
21%
The Americas
6%
3%
0%
9%
3%
3%
0%
6%
of which: United States
9%
1%
0%
10%
3%
0%
0%
3%
Asia, Middle East and Africa
-12%
8%
0%
-4%
-14%
6%
0%
-8%
of which: China
-16%
5%
0%
-11%
11%
7%
0%
18%
Process Automation
-6%
9%
0%
3%
-3%
9%
0%
6%
Q3 2022 compared to Q3 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%
19%
-1%
17%
-7%
17%
-1%
9%
The Americas
11%
0%
0%
11%
30%
1%
0%
31%
of which: United States
15%
1%
0%
16%
34%
0%
0%
34%
Asia, Middle East and Africa
-13%
6%
0%
-7%
4%
7%
0%
11%
of which: China
-9%
5%
0%
-4%
14%
7%
0%
21%
Robotics & Discrete Automation
-4%
12%
-1%
7%
2%
11%
0%
13%
37
Q3 2022
FINANCIAL
INFORMATION
Regional comparable growth rate reconciliation for ABB Group
– Year to date
9M 2022 compared to 9M 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
5%
14%
0%
19%
-3%
13%
0%
10%
The Americas
22%
1%
9%
32%
8%
0%
9%
17%
of which: United States
24%
0%
11%
35%
6%
1%
10%
17%
Asia, Middle East and Africa
9%
5%
0%
14%
0%
4%
0%
4%
of which: China
9%
2%
0%
11%
-4%
3%
0%
-1%
ABB Group
12%
7%
3%
22%
1%
6%
3%
10%
Regional comparable growth rate reconciliation by Business
Area – Year to date
9M 2022 compared to 9M 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%
15%
0%
19%
-2%
14%
0%
12%
The Americas
34%
1%
0%
35%
19%
0%
0%
19%
of which: United States
39%
1%
0%
40%
16%
0%
0%
16%
Asia, Middle East and Africa
4%
5%
0%
9%
5%
5%
0%
10%
of which: China
-2%
2%
0%
0%
-3%
3%
0%
0%
Electrification
15%
7%
0%
22%
7%
7%
0%
14%
9M 2022 compared to 9M 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
14%
16%
1%
31%
-3%
15%
0%
12%
The Americas
-3%
1%
33%
31%
-13%
0%
29%
16%
of which: United States
-1%
0%
37%
36%
-14%
0%
32%
18%
Asia, Middle East and Africa
14%
5%
1%
20%
0%
5%
1%
6%
of which: China
11%
2%
1%
14%
2%
3%
1%
6%
Motion
8%
7%
12%
27%
-6%
7%
10%
11%
9M 2022 compared to 9M 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%
11%
0%
1%
0%
13%
0%
13%
The Americas
25%
3%
0%
28%
12%
2%
0%
14%
of which: United States
22%
0%
0%
22%
18%
0%
0%
18%
Asia, Middle East and Africa
5%
6%
0%
11%
-5%
5%
0%
0%
of which: China
6%
2%
0%
8%
-9%
3%
0%
-6%
Process Automation
4%
7%
0%
11%
1%
7%
0%
8%
9M 2022 compared to 9M 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
16%
15%
-2%
29%
-11%
12%
-1%
0%
The Americas
26%
1%
0%
27%
14%
0%
0%
14%
of which: United States
28%
0%
0%
28%
13%
0%
0%
13%
Asia, Middle East and Africa
26%
4%
0%
30%
-13%
4%
0%
-9%
of which: China
39%
2%
0%
41%
-10%
3%
0%
-7%
Robotics & Discrete Automation
21%
9%
-1%
29%
-8%
7%
-1%
-2%
38
Q3 2022
FINANCIAL
INFORMATION
Order backlog growth rate reconciliation
September 30, 2022 compared to September 30, 2021
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
30%
11%
0%
41%
Motion
24%
18%
0%
42%
Process Automation
0%
11%
0%
11%
Robotics & Discrete Automation
64%
23%
0%
87%
ABB Group
21%
13%
1%
35%
Other growth rate reconciliations
Q3 2022 compared to Q3 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
1%
9%
0%
10%
2%
9%
0%
11%
Motion
8%
12%
0%
20%
-5%
11%
0%
6%
Process Automation
1%
11%
0%
12%
-4%
10%
0%
6%
Robotics & Discrete Automation
-2%
13%
0%
11%
-2%
12%
0%
10%
ABB Group
2%
11%
0%
13%
-3%
10%
0%
7%
9M 2022 compared to 9M 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
7%
7%
0%
14%
0%
6%
0%
6%
Motion
9%
9%
0%
18%
-4%
7%
0%
3%
Process Automation
4%
8%
0%
12%
-1%
8%
0%
7%
Robotics & Discrete Automation
4%
9%
0%
13%
-3%
9%
0%
6%
ABB Group
5%
8%
0%
13%
-2%
8%
0%
6%
39
Q3 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
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Operational EBITA
3,364
3,134
1,231
1,062
Acquisition-related amortization
(174)
(191)
(55)
(62)
Restructuring, related and implementation costs
(1)
(300)
(81)
(20)
(28)
Changes in obligations related to divested businesses
17
(16)
–
(10)
Changes in pre-acquisition estimates
–
6
(1)
14
Gains and losses from sale of businesses
(4)
9
–
–
Acquisition- and divestment-related expenses and integration
costs
(171)
(74)
(62)
(44)
Other income/expense relating to the Power Grids joint venture
(67)
(34)
(30)
(15)
Certain other non-operational items
(413)
58
(350)
(17)
Foreign exchange/commodity timing differences in
income from operations
(100)
(68)
(5)
(48)
Income from operations
2,152
2,743
708
852
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Non-operational pension (cost) credit
102
130
34
42
Income from continuing operations before taxes
2,197
2,802
714
888
Income tax expense
(728)
(775)
(294)
(201)
Income from continuing operations, net of
tax
1,469
2,027
420
687
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,433
1,982
404
678
(1)
Includes impairment of certain assets.
40
Q3 2022
FINANCIAL
INFORMATION
Reconciliation of Operational EBITA
margin by business
Three months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,584
1,702
1,458
828
(166)
7,406
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
12
14
14
3
2
45
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
–
9
–
–
12
Unrealized foreign exchange movements
on receivables (and related assets)
(12)
(5)
(9)
(4)
(4)
(34)
Operational revenues
3,587
1,711
1,472
827
(168)
7,429
Income (loss) from operations
631
291
154
81
(449)
708
Acquisition-related amortization
28
8
1
19
(1)
55
Restructuring, related and
implementation costs
8
3
1
6
2
20
Changes in pre-acquisition estimates
1
–
–
–
–
1
Gains and losses from sale of businesses
(1)
1
–
–
–
–
Acquisition- and divestment-related expenses
and integration costs
3
4
53
1
1
62
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
30
30
Certain other non-operational items
(16)
–
–
1
365
350
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
–
–
9
(1)
(1)
7
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
–
7
1
2
13
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(10)
(2)
–
(2)
(1)
(15)
Operational EBITA
647
305
225
106
(52)
1,231
Operational EBITA margin (%)
18.0%
17.8%
15.3%
12.8%
n.a.
16.6%
In the three months ended September 30, 2022, Certain other
non-operational items in the table above includes the following:
Three months ended September 30, 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
–
–
–
–
329
329
Certain other fair values changes,
including asset impairments
(26)
–
–
–
2
(24)
Business transformation costs
(1)
13
–
–
–
35
48
Other non-operational items
(3)
–
–
1
(1)
(3)
Total
(16)
–
–
1
365
350
(1)
Amounts
include ABB Way process transformation costs of $34 million for the three months ended September 30, 2022.
41
Q3 2022
FINANCIAL
INFORMATION
Three months ended September 30, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,196
1,673
1,507
813
(161)
7,028
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
15
4
5
–
(1)
23
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
1
5
–
(1)
8
Unrealized foreign exchange movements
on receivables (and related assets)
(7)
(1)
(1)
(1)
2
(8)
Operational revenues
3,207
1,677
1,516
812
(161)
7,051
Income (loss) from operations
434
244
183
68
(77)
852
Acquisition-related amortization
30
10
1
21
–
62
Restructuring, related and
implementation costs
11
13
2
1
1
28
Changes in obligations related to
divested businesses
–
–
–
–
10
10
Changes in pre-acquisition estimates
(14)
–
–
–
–
(14)
Acquisition- and divestment-related expenses
and integration costs
18
12
13
1
–
44
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
15
15
Certain other non-operational items
2
–
1
–
14
17
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
34
14
5
–
(4)
49
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
(1)
2
–
2
4
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(5)
(1)
–
(1)
2
(5)
Operational EBITA
511
291
207
90
(37)
1,062
Operational EBITA margin (%)
15.9%
17.4%
13.7%
11.1%
n.a.
15.1%
In the three months ended September 30, 2021, Certain other
non-operational items in the table above includes the following:
Three months ended September 30, 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
–
–
–
–
1
1
Certain other fair values changes,
including asset impairments
3
–
–
–
(7)
(4)
Business transformation costs
(1)
3
–
–
–
17
20
Favorable resolution of an uncertain
purchase price adjustment
(5)
–
–
–
–
(5)
Other non-operational items
1
–
1
–
3
5
Total
2
–
1
–
14
17
(1)
Amounts
include ABB Way process transformation costs of $19 million for the three months ended September 30, 2021.
42
Q3 2022
FINANCIAL
INFORMATION
Nine months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
10,442
4,900
4,493
2,290
(503)
21,622
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
36
17
50
14
5
122
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
13
2
11
–
27
53
Unrealized foreign exchange movements
on receivables (and related assets)
(34)
(11)
(16)
(9)
(15)
(85)
Operational revenues
10,457
4,908
4,538
2,295
(486)
21,712
Income (loss) from operations
1,602
776
480
146
(852)
2,152
Acquisition-related amortization
89
23
3
59
–
174
Restructuring, related and
implementation costs
(1)
18
11
6
9
256
300
Changes in obligations related to
divested businesses
–
–
–
–
(17)
(17)
Changes in pre-acquisition estimates
2
–
–
(2)
–
–
Gains and losses from sale of businesses
(1)
5
–
–
–
4
Acquisition- and divestment-related expenses
and integration costs
32
12
122
4
1
171
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
67
67
Certain other non-operational items
(24)
–
–
2
435
413
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
54
22
27
3
1
107
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
11
1
11
–
25
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(27)
(5)
(4)
(6)
(13)
(55)
Operational EBITA
1,756
845
645
215
(97)
3,364
Operational EBITA margin (%)
16.8%
17.2%
14.2%
9.4%
n.a.
15.5%
(1)
Includes impairment of certain assets.
In the nine months ended September 30, 2022, Certain other
non-operational items in the table above includes the following:
Nine months ended September 30, 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
–
–
–
–
333
333
Certain other fair values changes,
including asset impairments
(57)
–
–
–
(1)
(58)
Business transformation costs
(1)
15
–
–
–
99
114
Other non-operational items
18
–
–
2
4
24
Total
(24)
–
–
2
435
413
(1)
Amounts
include ABB Way process transformation costs of $98 million for the nine months ended September 30, 2022.
43
Q3 2022
FINANCIAL
INFORMATION
Nine months ended September 30, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
9,742
5,190
4,454
2,498
(506)
21,378
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
37
17
19
5
3
81
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
1
(2)
(1)
(2)
(2)
Unrealized foreign exchange movements
on receivables (and related assets)
(16)
(6)
(7)
(6)
(1)
(36)
Operational revenues
9,765
5,202
4,464
2,496
(506)
21,421
Income (loss) from operations
1,423
812
520
224
(236)
2,743
Acquisition-related amortization
88
36
3
62
2
191
Restructuring, related and
implementation costs
32
18
15
6
10
81
Changes in obligations related to
divested businesses
–
–
–
–
16
16
Changes in pre-acquisition estimates
(6)
–
–
–
–
(6)
Gains and losses from sale of businesses
4
(1)
(13)
–
1
(9)
Acquisition- and divestment-related expenses
and integration costs
36
19
17
1
1
74
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
34
34
Certain other non-operational items
(13)
1
3
–
(49)
(58)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
63
26
17
1
(1)
106
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
–
(1)
(1)
(3)
(5)
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(13)
(6)
(7)
(2)
(5)
(33)
Operational EBITA
1,614
905
554
291
(230)
3,134
Operational EBITA margin (%)
16.5%
17.4%
12.4%
11.7%
n.a.
14.6%
In the nine months ended September 30, 2021, Certain other
non-operational items in the table above includes the following:
Nine months ended September 30, 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
(16)
–
–
–
(102)
(118)
Business transformation costs
7
–
–
–
52
59
Favorable resolution of an uncertain
purchase price adjustment
(5)
–
–
–
–
(5)
Other non-operational items
1
1
3
–
(2)
3
Total
(13)
1
3
–
(49)
(58)
(1)
Amounts
include ABB Way process transformation costs of $52 million for the nine months ended September 30, 2021.
44
Q3 2022
FINANCIAL
INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total
debt less Cash and marketable securities.
Total debt
Total debt is the sum
of Short-term debt and current maturities of long-term
debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents,
Restricted cash (current and non-current)
and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
September 30, 2022
December 31, 2021
Short-term debt and current maturities of long-term debt
3,068
1,384
Long-term debt
4,530
4,177
Total debt (gross debt)
7,598
5,561
Cash and equivalents
2,365
4,159
Restricted cash - current
323
30
Marketable securities and short-term investments
793
1,170
Restricted cash - non-current
–
300
Cash and marketable securities
3,481
5,659
Net debt (cash)
4,117
(98)
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)
September 30, 2022
December 31, 2021
Total stockholders'
equity
12,158
15,957
Net debt (cash) (as defined above)
4,117
(98)
Net debt (cash) / Equity ratio
0.34
-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)
September 30, 2022
September 30, 2021
Income from operations for the three months ended:
September 30, 2022 / 2021
708
852
June 30, 2022 / 2021
587
1,094
March 31, 2022 / 2021
857
797
December 31, 2021 / 2020
2,975
578
Depreciation and Amortization for the three months
ended:
September 30, 2022 / 2021
198
220
June 30, 2022 / 2021
207
230
March 31, 2022 / 2021
210
227
December 31, 2021 / 2020
216
229
EBITDA
5,958
4,227
Net debt (as defined above)
4,117
1,898
Net debt / EBITDA
0.7
0.5
45
Q3 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
($ in millions, unless otherwise indicated)
September 30, 2022
September 30, 2021
Net working capital:
Receivables, net
6,695
6,728
Contract assets
955
1,139
Inventories, net
5,849
4,864
Prepaid expenses
261
217
Accounts payable, trade
(4,769)
(4,642)
Contract liabilities
(1)
(2,178)
(1,940)
Other current liabilities
(2)
(3,406)
(3,514)
Net working capital in assets and liabilities held for sale
–
68
Net working capital
3,407
2,920
Total revenues for the three months
ended:
September 30, 2022 / 2021
7,406
7,028
June 30, 2022 / 2021
7,251
7,449
March 31, 2022 / 2021
6,965
6,901
December 31, 2021 / 2020
7,567
7,182
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(55)
40
Adjusted revenues for the trailing twelve months
29,134
28,600
Net working capital as a percentage of revenues (%)
11.7%
10.2%
(1)
Amount includes certain amounts relating to contract liabilities that are presented in other non-current liabilities.
(2)
Amounts exclude $795 million and $719 million at September 30, 2022 and 2021, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities,
(c) pension and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain restructuring-related activities and (f) liabilities related to the
divestment of the Power Grids business.
46
Q3 2022
FINANCIAL
INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash
flow divided by Adjusted net income attributable to
ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income
attributable to ABB adjusted for: (i) impairment of
goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of both the Mechanical
Power Transmission Division (Dodge) and Power
Grids business, the latter being included in
discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities
adjusted for: (i) purchases of property,
plant and equipment and intangible assets,
and (ii)
proceeds from sales of property,
plant and equipment.
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow
recorded by ABB in the twelve months preceding the
relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income
recorded by ABB (as adjusted) in the twelve months
preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
September 30, 2022
December 31, 2021
Net cash provided by operating activities – continuing
operations
1,647
3,338
Adjusted for the effects of continuing operations:
Purchases of property, plant and
equipment and intangible assets
(864)
(820)
Proceeds from sale of property, plant and
equipment
142
93
Free cash flow from continuing operations
925
2,611
Net cash used in operating activities – discontinued operations
(27)
(8)
Free cash flow
898
2,603
Adjusted net income attributable to ABB
(1)
1,832
2,416
Free cash flow conversion to net income
49%
108%
(1)
Adjusted net income attributable to ABB for the year ended December 31, 2021, 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 $65 million.
Reconciliation of the trailing twelve months to
September 30, 2022
Continuing operations
Discontinued operations
($ in millions)
Net cash
provided by
continuing
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Net cash
provided by
(used in)
discontinued
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Adjusted net
income
attributable
to ABB
(1)
Q4 2021
1,033
(361)
57
(13)
–
–
478
Q1 2022
(564)
(187)
35
(9)
–
–
609
Q2 2022
385
(151)
31
(3)
–
–
383
Q3 2022
793
(165)
19
(2)
–
–
362
Total for the trailing
twelve months to
September 30, 2022
1,647
(864)
142
(27)
–
–
1,832
(1)
Adjusted net income attributable to ABB for Q4 of 2021 as well as Q1,
Q2 and Q3 of 2022, is adjusted to exclude reductions
to the gain on the sale of Power Grids of $33 million,
$5 million,
$4 million and $2 million, respectively.
In addition, Q4 2021 is also adjusted to exclude the gain on the sale of Dodge of $2,195 million.
47
Q3 2022
FINANCIAL
INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income
less Interest and other finance expense.
Reconciliation
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Net finance expenses
(57)
(71)
(28)
(6)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total
revenues.
Reconciliation
Nine months ended September 30,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
12,336
10,442
1.18
10,743
9,742
1.10
Motion
6,247
4,900
1.27
5,773
5,190
1.11
Process Automation
5,079
4,493
1.13
4,881
4,454
1.10
Robotics & Discrete Automation
3,318
2,290
1.45
2,744
2,498
1.10
Corporate and Other
(incl. intersegment eliminations)
(612)
(503)
n.a.
(530)
(506)
n.a.
ABB Group
26,368
21,622
1.22
23,611
21,378
1.10
Three months ended September 30,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,902
3,584
1.09
3,519
3,196
1.10
Motion
1,966
1,702
1.16
1,909
1,673
1.14
Process Automation
1,568
1,458
1.08
1,670
1,507
1.11
Robotics & Discrete Automation
901
828
1.09
935
813
1.15
Corporate and Other
(incl. intersegment eliminations)
(149)
(166)
n.a.
(167)
(161)
n.a.
ABB Group
8,188
7,406
1.11
7,866
7,028
1.12
48
Q3 2022
FINANCIAL
INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box
8131
8050
Zurich
Switzerland
Tel:
+41 (0)43
317 71
11
www.abb.com
July 1 — September 30, 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
Theodor Swedjemark
August 29, 2022
Option
148,750
CHF
1.81
Carolina Granat
September 01, 2022
Share
4,000
CHF
26.61
Key:
* Received instruments were delivered
as part of the ABB Ltd Director’s or
Executive Committee Member’s
compensation as compensation
for foregone
benefits
** In addition, Theodor Swedjemark’s
spouse, who has a separate
senior role in the Company,
received 102,000 options from
the Company on August 29, 2022
at the price of CHF 1.81 each.
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: October 20, 2022.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: October 20, 2022.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance