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 2023
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
Affolternstrasse 44, CH-8050, Zurich,
Switzerland
(Address of principal executive
office)
Indicate by check mark
whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-
F.
Form 20-F
☒
Form 40-F
⬜
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if the registrant is submitting the Form 6-K in paper
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⬜
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submitted solely to provide an
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is submitting the Form 6-K in paper
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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
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and, if discussing a material event,
has already been the subject
of a Form 6-K submission or other Commission filing
on EDGAR.
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whether the registrant by furnishing the information contained
in this Form is also thereby furnishing
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Act of 1934.
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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
18, 2023 titled “Q3
2023 results”.
2.
Q3 2023 Financial Information.
The information provided by Item
2 above is hereby incorporated
by reference into the Registration
Statements on Form F-3 of
ABB Ltd and ABB Finance (USA) Inc.
(File Nos. 333-223907 and 333-223907-01)
and registration statements on
Form S-8
(File Nos. 333-190180, 333-181583, 333-179472,
333-171971 and 333-129271) each
of which was previously filed with the
Securities and Exchange Commission.
2
—
ZURICH, SWITZERLAND, OCTOBER
18,
2023
Q3 2023 results
Positive book-to-bill,
high margin and strong
cash flow
delivery
●
Orders $8,052 million,
-2%; comparable
1
+2%
●
Revenues $7,968 million,
+8%; comparable
1
+11%
●
Income from operations
$1,259 million;
margin 15.8%
●
Operational EBITA
1
$1,392 million;
margin
1
17.4%
●
Basic EPS $0.48;
+149%
2
●
Cash flow from operating
activities
4
$1,351 million; +71%
Ad hoc Announcement pursuant to Art. 53
Listing Rules of SIX Swiss Exchange
—
Q3 2023
First nine months
Press Release
—
“Q3 2023 was a strong
quarter for ABB including
a positive book-to-bill
ratio, Operational EBITA
margin again above
17% and a strong cash flow
delivery putting
us in a good position to
achieve an annual free cash
flow of about $3
billion.”
Björn Rosengren
, CEO
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
1
9M 2023
9M 2022
US$
Comparable
1
Orders
8,052
8,188
-2%
2%
26,169
26,368
-1%
4%
Revenues
7,968
7,406
8%
11%
23,990
21,622
11%
16%
Gross Profit
2,762
2,481
11%
8,366
7,052
19%
as % of revenues
34.7%
33.5%
+1.2 pts
34.9%
32.6%
+2.3 pts
Income from operations
1,259
708
78%
3,755
2,152
74%
Operational EBITA
1
1,392
1,231
13%
11%
3
4,094
3,364
22%
22%
3
as % of operational
revenues
1
17.4%
16.6%
+0.8 pts
17.0%
15.5%
+1.5 pts
Income from continuing
operations, net of
tax
905
420
115%
2,902
1,469
98%
Net income attributable
to ABB
882
360
145%
2,824
1,343
110%
Basic earnings
per share ($)
0.48
0.19
149%
2
1.52
0.70
116%
2
Cash flow from
operating activities
4
1,351
791
71%
2,393
600
299%
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and
definitions” in the attached Q3 2023 Financial
Information.
2
EPS growth rates are computed using unrounded amounts.
3
Constant currency (not adjusted for portfolio changes).
4
Amount represents total for both continuing and discontinued
operations.
ABB INTERIM
REPORT
I
Q3
2023
2
The third quarter developed
largely as planned,
and I am
pleased about the comparable
order growth of 2%
supporting a
book-to-bill ratio of 1.01.
This means we delivered
on our
quarterly expectation of
book-to-bill in positive
territory, despite
a double-digit comparable
increase in revenues.
We had yet
another quarter with
strong operational
performance across
the
business areas, and
this time coupled with
a very strong cash
flow generation,
setting
us up to achieve
free cash flow of about
$3 billion in 2023.
In total, Operational
EBITA increased by 13% and we
achieved
an Operational EBITA margin of
17.4%, an improvement
of 80
basis points from the
corresponding period
last year.
This was
supported by a strong
price contribution
which outweighed
the
impacts from inflation in labor
costs, with additional
support
from efficient execution
of higher volumes
in production. It was
good to see that our
focus on cash conversion
yielded results
with Cash flow from operating
activities at $1.4
billion, an
increase of $560 million
from last year supported
mainly by
higher earnings
and better Net working
capital management.
As in recent quarters,
the order development
was strong in
the
project-
and systems-related
businesses that is often
linked to
our various medium voltage
offerings. This more
than offset the
impact from a decline in
parts of the short-cycle
businesses.
In
total, most customer segments
remained overall
stable or
improved, with declines
mainly noted in
the discrete automation
and construction segments.
Order growth was
strongest in
business area Process
Automation,
supported by a
strong
underlying market and
the added contribution
from a large order
amounting to approximately
$285 million.
In contrast, order
intake in Robotics & Discrete
Automation was hampered
by
customers normalizing
order patterns in a period
of shortening
delivery lead times, with
added pressure
from inventory
adjustments among
robotics-related distribution
channels in
China.
From a geographical
perspective, the Americas
region was the
growth engine for orders,
driven by double-digit
comparable
growth in the United
States and supported
by the timing of
large
orders booked. Also,
Asia, Middle East
and Africa improved
on
a comparable basis where
India noted yet another
quarter with
strong year-on-year development.
In contrast, orders in China
declined at a low single-digit
comparable growth rate
particularly hampered
by weakness in robotics
and construction
demand.
Outside of these segments
and towards the
end of the
quarter we noted some
indications of the
underlying Chinese
market stabilizing,
although uncertainty
is admittedly
high.
Europe declined
to the tune of a low double-digit
rate, and while
the underlying market
softened,
the rate of decline
was
accentuated by a high
comparable last year
due to timing of
larger orders booked.
Sustainability is embedded
in everything we do,
and I was
pleased to see this
being recognized
by MSCI and the upgrade
of ABB to the highest
ESG rating of AAA,
meaning we score
in
the top 10%
of the peer universe.
During the quarter, Process Automation
expanded its
partnership with Northvolt,
providing electrification
and
automation technologies
to power the world’s largest
battery
recycling facility, Revolt Ett.
The recycling site will
process
125,000 tons of end-of-life
batteries and battery
production
waste each year – making
it the largest plant
of its kind in
the
world.
We recently took additional
steps to support our
customers on
their journey towards
more sustainable
and flexible production
with Robotics & Discrete
Automation expanding
its robot family
with four models in 22
variants and energy
savings of up
to 20
percent. We have also
announced our plans
to invest $280
million in our Robotics
business in Sweden.
The site will serve
as a European hub, and
further strengthen
our capabilities in
serving our customers in
Europe with locally manufactured
products in a growing
market. This is to
replace the existing
old
robotics facilities at the
site, and the new
Campus is planned
to
open in late 2026.
To
mark the completion
of all divisional
portfolio divestments
announced at the end of
2020, we successfully
closed the
divestment of the Power
Conversion division.
Going forward we
will continuously
review the product groups
within all divisions
to optimize the portfolio
as part of the ABB
Way operating
model.
Björn Rosengren
CEO
In the
fourth quarter of 2023
, we anticipate low-
to mid single
digit comparable revenue
growth.
Additionally, we expect the
historical pattern to repeat
with
the Operational EBITA
margin in
Q4 to be sequentially
lower from Q3, and
to be around 16%.
In full-year 2023
, we anticipate comparable
revenue growth
to
be in the low teens
range and we expect
Operational EBITA
margin to be in the range
of 16.5%
- 17.0%.
Outlook
CEO summary
ABB INTERIM
REPORT
I
Q3
2023
3
Strong demand for the
project-
and systems-related
businesses,
often linked to the
medium voltage
offerings,
more than offset a decline
in parts of the short-cycle
businesses hampered
by inventory adjustments
among
channel partners and
normalizing order
patterns. In total,
orders
declined by 2% (up comparable
2%) year-on-year to
8,052 million. Comparable
order growth was driven
by the
higher contribution
from large orders, including
the one in the
Process Automation business
area for $285
million, which
will be executed over
a multi-year period.
Timing of booking significant
orders supported
the Americas
growth of 9% (comparable
13%).
Orders in Asia, Middle
East
and Africa declined by 5%
(up comparable 4%) as
the
decline in China
of 10% (comparable 3%) was
more than
offset by strength elsewhere
in the region, including
strong
growth in India. The sharp
order decline
of 11% (comparable
13%) in Europe was
the result of softer markets
including the
impact from customers
normalizing inventory
levels, but also
impacted by last year’s
high comparable
supported by timing
of customers placing large
orders.
Demand in the automotive
segment improved,
supported
by EV-related investments, while
the general industry
and
consumer-related robotics
segments declined.
In transport
& infrastructure, there were
positive developments
in
marine,
ports and renewables.
The machine builder
segment declined as
customers
normalized order patterns
in the face of
shortening delivery
lead times.
In buildings,
there was weakness
in all three regions
in
residential-related
demand. In the commercial
construction
segment the United States
stood out with a
continued
robust momentum and
outperformed a
broadly stable
Europe and declining
China.
Demand in the process-related
businesses was
strong
across the board, with particular
strength in the oil
& gas
segment, and it held up
well also for refining,
petrochemicals and the energy-related
low carbon
segments.
Revenues increased
by 8% (11% comparable) to
$7,968 million and
benefitted primarily from
increased
volumes through execution
of the order backlog,
combined
with a strong price contribution.
These benefits
more than
offset a slight adverse impact
from portfolio changes.
Revenues increased
in all business areas,
supported by
comparable growth in
most divisions as
the order backlog
was executed.
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2023
Q3 2022
US$
Comparable
Europe
2,810
2,494
13%
10%
The Americas
2,775
2,452
13%
16%
Asia, Middle East
and Africa
2,383
2,460
-3%
6%
ABB Group
7,968
7,406
8%
11%
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2023
Q3 2022
US$
Comparable
Europe
2,391
2,682
-11%
-13%
The Americas
3,258
2,980
9%
13%
Asia, Middle East
and Africa
2,403
2,526
-5%
4%
ABB Group
8,052
8,188
-2%
2%
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
2%
11%
FX
0%
1%
Portfolio changes
-4%
-4%
Total
-2%
8%
Orders and revenues
ABB INTERIM
REPORT
I
Q3
2023
4
Gross profit
Gross profit increased
strongly by 11% (9% constant
currency) to
$2,762 million, reflecting
a strong gross margin
improvement of
120 basis points to 34.7%.
Gross margin improved
in three out of
four business areas,
with only Process
Automation declining
mainly
due to the absence
of the exited high
margin Turbocharging
division (Accelleron).
Income from operations
Income from operations
amounted to
$1,259 million and
increased
by 78% year-on-year.
The improvement
was driven by operational
performance and contribution
from gains of $71
million from selling
businesses, including
the divestment of the
Power Conversion
division,
but also by last year’s
period being burdened
by the
recording of a provision
of $325 million
relating to the legacy
Kusile
project.
Margin on Income
from operations reached
15.8%, up by
620 basis points year-on-year.
Operational EBITA
Operational EBITA improved by 13%
year-on-year to $1,392
million
and the margin was up
by 80 basis points
to 17.4%. Key drivers
to
the higher earnings
were the impacts
from robust price activities
and operational
leverage on higher
volumes, which more
than
offset adverse impacts
from inflation in labor
costs and from
divestments. Selling, general
and administrative expenses
declined
in relation to revenues
to 16.7%, from 17.2%
last year, mostly due
to the absence of
costs related to the spin-off
of the Accelleron
business in last year’s
period.
Operational EBITA in Corporate
and
Other amounted to -$109
million, of which
-$39 million related
to
the E-mobility business
where operational
performance was
hampered by the ongoing
reorganization to ensure
a more focused
portfolio, and some
inventory-related provisions.
Net finance expenses
Net finance expense was
$36 million and
increased slightly from
last year’s $28
million.
Income tax
Income tax expense was
$326 million with
an effective tax rate of
26.5%.
Net income and earnings
per share
Net income attributable
to ABB was $882
million
and more than
doubled from last year
driven by improved
operational performance
and lower non-operational
items.
This resulted in basic
earnings per
share of $0.48, up
from $0.19 last year.
Operational EBITA
($ millions)
Q3 2023
Q3 2022
Corporate and Other
E-mobility
(39)
(4)
Corporate costs, intersegment
eliminations and other
1
(70)
(52)
Total
(109)
(56)
1
Majority of which relates to underlying corporate
Earnings
ABB INTERIM
REPORT
I
Q3
2023
5
Net working capital
Net working capital amounted
to $4,041 million,
increasing
year-on-year from $3,407
million driven mainly
by the
increase in inventories
and receivables. Net
working capital
decreased sequentially
from $4,585 million
driven mainly by
strong trade net working
capital management
and an
increase in accrued
expenses
related to the timing
of
payments of accruals.
Net working capital
as a percentage
of revenues
1
was 12.8%, down sequentially
from 14.7%.
Capital expenditures
Purchases of property, plant and equipment
and intangible
assets amounted to $175
million.
Net debt
Net debt
1
amounted to $2,872
million at the end
of the quarter
and decreased from $4,117 million
year-on-year,
and
declined sequentially
from $4,165 million.
The sequential
net
decrease was driven by
the strong operational
cash flow in
the quarter, and further supported
by the proceeds
from the
sale of the Power Conversion
business.
Cash flows
Cash flow from operating
activities was $1,351
million,
representing a steep year-on-year
increase from $791
million.
This was driven by strong
improvements in all
business areas
on the back of higher
earnings and a reduction
of net working
capital this quarter versus
a build-up of net
working capital in
the prior year mainly
related to inventories.
Share buyback program
A share buyback program
of up to $1 billion
was launched on
April 3, 2023. During
the third quarter, 5,244,809
shares were
repurchased on the second
trading line for approximately
$200
million. ABB’s total number
of issued shares,
including shares
held in treasury, amounts to 1,882,002,575.
($ millions,
unless otherwise
indicated)
Sep. 30
2023
Sep. 30
2022
Dec. 31
2022
Short term debt and
current
maturities of long
-term debt
2,951
3,068
2,535
Long-term debt
4,899
4,530
5,143
Total debt
7,850
7,598
7,678
Cash & equivalents
3,869
2,365
4,156
Restricted cash
- current
18
323
18
Marketable securities
and
short-term investments
1,091
793
725
Restricted cash
- non-current
–
–
–
Cash and marketable
securities
4,978
3,481
4,899
Net debt (cash)*
2,872
4,117
2,779
Net debt (cash)*
to EBITDA ratio
0.5
0.7
0.7
Net debt (cash)*
to Equity ratio
0.21
0.34
0.21
*
At Sep. 30, 2023, Sep. 30, 2022 and Dec. 31, 2022,
net debt(cash) excludes net pension
(assets)/liabilities of $(414) million $(114) million and $(276) million,
respectively.
Balance sheet & Cash flow
ABB INTERIM
REPORT
I
Q3
2023
6
Orders and revenues
Demand linked to the
medium-voltage offerings
noted
strong year-on-year development
and more than offset
market softness in parts
of the short-cycle
business which
was hampered by distributors
normalizing inventory
levels in
the face of shortening
delivery lead times.
Total orders
amounted to $3,693
million and declined
2% (up
comparable 1%) impacted
by the divestment
of the Power
Conversion division
early in the quarter.
●
Demand was particularly
strong in the datacenters
and
chemical, oil & gas segments
with a solid development
noted in rail and green
energy-linked areas
like solar.
However, weakness was noted
in construction with
the
residential segment down
in all three regions
while in
commercial construction
the United States
stood out with
a continued robust
momentum and outperformed
a
broadly stable Europe
and declining
China.
●
In Asia, Middle East and
Africa orders decreased
by 5%
(up comparable 2%)
including a slight
comparable
improvement in China,
where signs of
sequential
stabilization emerged
towards the latter part
of the quarter
outside of the construction
segment.
The Americas
declined by 2% (up comparable
4%) with United States
down by 2% (up comparable
6%). Europe was stable
(down comparable
3%), including a 6% decline
in
Germany where weakness
in the residential
construction
market weighed on the
Smart Buildings
division.
●
Revenues amounted
to $3,561 million
and weakness in
the buildings segment
weighed on growth
in Smart
Buildings and Installation
Products, while the remaining
divisions contributed
to revenue growth
of 3%
(comparable 6%) with a
strong contribution
from price as
the key driver.
Profit
Operational EBITA increased by 15%
year-on-year and
amounted to $748 million,
supported by strong
operational
performance which more
than offset the absent
earnings
from portfolio changes.
The Operational EBITA margin
remained sequentially
strong at 20.8%, representing
an
improvement of 210 basis
points year-on-year.
●
Benefits
from a strong price execution
was the main
driver to the earnings
improvement, with
some additional
support from operational
leverage on slightly
higher
volumes.
●
The positive impact
from lower commodity
costs year-on-
year, was virtually offset by inflation
linked to labor.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
3,693
3,772
-2%
1%
11,794
11,797
0%
3%
Order backlog
6,994
6,317
11%
16%
6,994
6,317
11%
16%
Revenues
3,561
3,471
3%
6%
10,886
10,121
8%
11%
Operational EBITA
748
651
15%
2,212
1,768
25%
as % of operational
revenues
20.8%
18.7%
+2.1 pts
20.3%
17.4%
+2.9 pts
Cash flow from
operating activities
1,051
715
47%
2,143
1,258
70%
No. of employees (FTE equiv.)
50,500
50,500
0%
Growth
Q3
Q3
Change year-on
-year
Orders
Revenues
Comparable
1%
6%
FX
0%
1%
Portfolio changes
-3%
-4%
Total
-2%
3%
—
Electrification
ABB INTERIM
REPORT
I
Q3
2023
7
Orders and revenues
Total orders declined due to a high level
of larger bookings
in
last year’s period. Looking
beyond this impact,
it was a more
stable development
with a strong order
momentum reported
for
the long-cycle businesses,
while weakness was
noted in parts
of the short-cycle businesses.
Order intake amounted
to
$1,886 million, representing
a decrease of 4% (7%
comparable).
●
Demand improved in
the process-related
segments of
chemicals, oil & gas, pulp
& paper and mining,
however
declined in the more
short-cycle segments including
HVAC
linked to weakness in construction,
food & beverage and
electronics.
●
Order intake increased
by 10% (comparable
15%) in Asia,
Middle East and Africa,
supported by a double-digit
comparable growth in
China. Europe declined
sharply by
22%
(comparable 28%) mainly
due to the Traction-related
high order level last
year. The Americas increased
by 3%
(down comparable
3%) as the acquired
contribution was
more than offset by softness
in demand for the
low voltage
motors.
●
Execution of the order backlog
resulted in high revenues
of
$1,947
million, representing
an increase of 14%
(comparable
11%) year-on-year. Higher volumes
and earlier implemented
pricing activities both
contributed strongly
to comparable
growth.
Profit
All divisions contributed
to the strong 28%
year-on-year
improvement in Operational
EBITA to $390
million, driving the
Operational EBITA margin up by
200 basis points
to 19.8%.
●
Results were mainly supported
by the benefits from
a strong
price execution which
more than offset cost
inflation related
to
labor and raw materials.
●
Higher volume output
supported the
fixed cost absorption
in
production.
●
Strongest profitability improvements
were reported in
the motor
divisions, with Large Motors
& Generators as
the outperformer.
●
Divisional mix was slightly
positive due to strong
deliveries from
the drives and service-related
businesses.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
-7%
11%
FX
1%
1%
Portfolio changes
2%
2%
Total
-4%
14%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
1,886
1,966
-4%
-7%
6,285
6,247
1%
1%
Order backlog
5,108
4,613
11%
5%
5,108
4,613
11%
5%
Revenues
1,947
1,702
14%
11%
5,868
4,900
20%
20%
Operational EBITA
390
305
28%
1,157
845
37%
as % of operational
revenues
19.8%
17.8%
+2 pts
19.7%
17.2%
+2.5 pts
Cash flow from
operating activities
466
268
74%
935
507
84%
No. of employees (FTE equiv.)
22,100
20,700
7%
ABB INTERIM
REPORT
I
Q3
2023
8
Orders and revenues
On a broad robust underlying
activity across the
customer
segments,
with the added
contribution of large
orders, order
intake reached $1,883 million
and increased
by 20%
(comparable 38%) year-on-year.
●
Order intake included
the booking of an order
at a value
of $285 million with fulfillment
due over a
multi-year
period.
●
The Energy Industries division
benefited from
strong
demand in the traditional
oil & gas segment,
but also
seeing high activity levels
in low carbon-related
areas
such as hydrogen,
LNG and carbon capture.
One
example of how Energy
Industries builds
further on its
value creation offer enabling
the clean energy transition,
is that it was contracted
to support the Danish
company
H2 Energy Esbjerg
ApS with electrical engineering
at its
hydrogen production
and distribution hub.
The plant will
convert renewable
electricity from offshore
wind into
about 90,000 tons of green
hydrogen per
year – the
equivalent of 1.9
million barrels of oil, supporting
the
decarbonization
of heavy industry and
road
transportation.
●
All divisions contributed
with a double-digit
growth in
revenues, which amounted
to $1,554 million, up
by 7%
(comparable 23%) year-on-year,
supported mainly by
volumes but also by a
positive price development.
Total
revenue growth was hampered
mainly by the absence
of
the Accelleron business
which
was spun-off in early
October 2022, meaning
this is the last quarter
of structural
impact.
Profit
The Operational EBITA was largely
stable year-on-year
at
$226
million, the result of a
strong revenue execution
which
offset the absence of earnings
related to the exited
Accelleron business.
The Operational EBITA margin
amounted to 14.6%,
representing a
decline of 70 basis
points as operational
improvements did
not quite offset the
adverse impact of 190
basis points due
to the portfolio
change.
●
Operational EBITA margin remained
stable or increased
in all divisions except
for a decline in Marine
& Ports,
which was somewhat impacted
by an adverse
mix due to
lower share of revenues
stemming from the arctic
marine
propulsion business.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
1,883
1,568
20%
38%
5,665
5,079
12%
31%
Order backlog
7,135
6,006
19%
20%
7,135
6,006
19%
20%
Revenues
1,554
1,458
7%
23%
4,543
4,493
1%
19%
Operational EBITA
226
225
0%
670
645
4%
as % of operational
revenues
14.6%
15.3%
-0.7 pts
14.7%
14.2%
+0.5 pts
Cash flow from
operating activities
258
217
19%
558
470
19%
No. of employees (FTE equiv.)
20,900
22,400
-6%
Growth
Q3
Q3
Change year-on
-year
Orders
Revenues
Comparable
38%
23%
FX
2%
1%
Portfolio changes
-20%
-17%
Total
20%
7%
—
Process Automation
ABB INTERIM
REPORT
I
Q3
2023
9
Orders and revenues
With both divisions in
negative growth, total
orders declined
by 26% (comparable
27%), weighed
down by normalizing
order patterns and weakening
of the Chinese robotics
market.
Although it is difficult
to exactly assess, we
expect these
pressures to persist also
in the next couple
of quarters.
●
In Machine Automation
order intake was impacted
by
customers normalizing
order patterns to align
with
shortening delivery
lead times,
and awaiting deliveries
from
the Machine Automation
order backlog which
extends into
the second half of 2024.
●
In the Robotics division, orders
declined at a mid-single
digit rate.
This was driven by
a sequential softening
of the
underlying Chinese
market, with some additional
pressure
from local inventory reductions
among channel
partners
outside of the automotive
segment. Outside of
China
demand was more resilient
with growth in
the United States
and the decline in
Europe limited to a mid-single
digit rate.
●
From a geographical
perspective, orders in
the Americas
declined by 10%
(12%
comparable). The decline
in Europe
was 35% (comparable
38%) triggered
by machine
automation-related customers
normalizing order
patterns. In
Asia, Middle East and
Africa orders
declined by 20%
(comparable 17%), hampered
by China being
down by 32%
(comparable 28%) weighed
down mainly by robotics-related
channel partners adjusting
inventories.
●
Revenues increased
in both divisions as
the order backlog
was executed and amounted
to $929 million,
an
improvement of 12% (comparable
9%), supported
by
positive impacts from
both price and volumes.
Profit
Steep improvement of 29%
in Operational
EBITA to
$137 million was supported
by both divisions, and
Operational
EBITA margin was up by 190 basis
points and reached
14.7%.
●
Higher gross margin was
the key contributor
to the strong
earnings improvement,
mainly supported by positive
impacts
from earlier implemented
price increases
and improved
operational execution,
which more than offset
the impacts
from higher labor costs as
well as increased spend
in
Research & Development.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
665
901
-26%
-27%
2,516
3,318
-24%
-22%
Order backlog
2,363
2,659
-11%
-14%
2,363
2,659
-11%
-14%
Revenues
929
828
12%
9%
2,788
2,290
22%
23%
Operational EBITA
137
106
29%
418
215
94%
as % of operational
revenues
14.7%
12.8%
+1.9 pts
15.0%
9.4%
+5.6 pts
Cash flow from
operating activities
92
82
12%
266
109
144%
No. of employees (FTE equiv.)
11,000
10,700
3%
Growth
Q3
Q3
Change year-on
-year
Orders
Revenues
Comparable
-27%
9%
FX
1%
3%
Portfolio changes
0%
0%
Total
-26%
12%
—
Robotics & Discrete Automation
ABB INTERIM
REPORT
I
Q3
2023
10
Quarterly highlights
●
ABB was upgraded
from AA to AAA in
the MSCI ESG
rating. ESG ratings from
MSCI ESG Research
are
designed to measure
a company’s resilience
to financially
material environmental,
societal and governance
(ESG)
risks.
Achieving the highest
possible rating
of AAA, ABB
ranks in the top ten
percent of industry
peers.
●
As part of its commitment
to increase the circularity
of its
low-voltage solutions,
ABB expanded
its portfolio of
electrification products
that are made of sustainable
plastics in the Nordics,
Germany and Spain.
ABB’s Smart
Buildings division
is progressively substituting
about
1,000 tonnes per year
of conventional
fossil-based
plastics with sustainable
alternatives including
mechanically recycled
or bio-based plastics.
●
ABB’s Motion business area
and WindESCo have
signed
a strategic partnership,
where ABB has
acquired a
minority stake in the
company. US-based WindESCo
is
the leading analytics
software provider for
improving the
performance and reliability
of wind turbines. Leveraging
WindESCo’ solutions,
the investment will strengthen
ABB’s position as a key
enabler of a low
carbon society
and its position in the
renewable power
generation sector.
●
ABB will deliver complete
power, propulsion
and
automation systems
for two newbuild
short-sea container
ships of global logistics
company Samskip
Group. The
vessels will be among
the world’s first of their
kind to use
hydrogen as a fuel.
Both vessels will be
operating between
Oslo Fjord and Rotterdam,
a distance of approximately
700
nautical miles.
●
ABB has expanded
its large robot range
with four new
models and 22 variants
offering more choice,
increased
coverage and greater
performance.
The next generation
models offer customers superior
performance and
up to
20% energy savings thanks
to their lighter robot
design and
use of regenerative braking.
●
In August and September
2023, ABB organized
a range of
courses and trainings
for its employees
to better
understand the differences
between generations,
how to
challenge biases,
and benefit from intergenerational
collaboration. The events
were part of the company’s
commitment to the generations
dimension of its
D&I
strategy that is focused
on ensuring that
all generations are
welcomed and skills
and strengths are utilized
and bridged
across.
Q3 outcome
●
34% reduction year-on-year of CO
₂
e emissions in own
operations mainly driven by shifting
to green electricity in
our operations.
●
9% increase year-on-year in LTIFR
due to a slight
increase in incidents in absolute numbers
.
●
3%-points increase year-on-year in share
of women in
senior management,
demonstrating steady progress
towards our target.
—
Sustainability
Q3 2023
Q3 2022
CHANGE
12M ROLLING
CO
₂
e own operations
emissions,
Ktons scope 1 and 2
1
36
55
-34%
182
Lost Time Injury
Frequency
Rate (LTIFR),
frequency / 200,000
working hours
2
0.15
0.14
9%
0.13
Share of females
in senior management
positions, %
20.4
17.4
+3 pts
19.4
1
CO
₂
equivalent emissions from site, energy use,
SF
₆
and fleet, previous quarter
2
Current quarter Includes all incidents reported until October
5, 2023
ABB INTERIM
REPORT
I
Q3
2023
11
During Q3 2023
●
On July 3, ABB announced
the closing of
the divestment
of the Power Conversion
division at around $530
million.
As a result, ABB recorded
a non-operational
book gain of
$53 million in Income
from operations in
the third quarter
of 2023. Net cash impact
was approximately
$500
million. With this transaction,
ABB has completed all
divisional portfolio
divestments announced
at the end of
2020.
The demand for ABB’s offering
was robust in the
first nine
months of 2023.
Weakness in the short-cycle
businesses
from last year's high level
was offset by strong
momentum in
the project-
and systems businesses.
Orders remained stable
or increased in three out
of four business
areas, with a
decline noted only
in Robotics & Discrete
Automation, for a
combined total decrease
of 1% (up 4% comparable)
at
$26,169 million.
Revenues were supported
by strong
execution of the order backlog
and amounted
to
$23,990 million, up by 11% (16% comparable),
overall
implying a book-to-bill
of 1.09.
Income from operations
amounted to
$3,755 million, up from
$2,152 million year-on-year.
This increase can be
attributed
mostly to an improved
operational performance.
In addition,
the result in the first
three quarters last
year was hampered
by
charges of approximately
$195 million due
to the exit of a
legacy project in non-core
business as well
as a provision of
$325 million related
to the legacy Kusile
project.
Operational EBITA increased by 22%
year-on-year to
$4,094 million,
up from $3,364 million
in last year’s period
and the Operational
EBITA margin improved by 150 basis
points to 17.0%. The increase
was driven by higher
margins
across all business areas.
Main drivers of
the margin
expansion were operating
leverage on higher
volumes from
backlog execution
as well as the impacts
from earlier
implemented price increases,
which more
than offset
inflation in labor and
input cost. Corporate and
Other
Operational EBITA amounted to
-$363 million.
Thereof, an
amount of -$134 million
can be attributed to
the E-mobility
business, which was negatively
affected by the ongoing
reorganization to ensure
a more focused
portfolio, and
some inventory-related
provisions.
Net finance expenses increased
by $25 million
to
$82 million, whereas
non-operational
pension credits
decreased by $79 million
to $23 million in comparison
to
last year’s period,
reflecting the impact
of higher interest
rates. Income tax expense
was $794 million
reflecting a tax
rate of 21.5%. This includes
a net benefit realized
on a
favorable resolution
of a prior year tax matter
relating to the
Power Grids business
in the current year, as well
as the
impact of non-deductible
regulatory penalties
related to the
Kusile project in the prior
year.
Net income attributable
to ABB was $2,824
million, up from
$1,343
million year-on-year. Basic earnings
per share was
$1.52, representing an
increase of 116% compared
with the
first nine months last year.
Significant events
First nine months 2023
ABB INTERIM
REPORT
I
Q3
2023
12
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2023
Electrification
Power Conversion
division
3-Jul
~440
1,500
Electrification
Industrial Plugs
& Sockets business
3-Jul
~12
2
Process Automation
UK technical engineering
consultancy
business
1-May
~20
160
2022
Hitachi Energy JV (Power
Grids, 19.9%
stake)
28-Dec
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2023
Electrification
Eve Systems
1-Jun
~20
50
Motion
Siemens low voltage
NEMA Motors
2-May
~60
600
2022
Motion
PowerTech
Converter business
1-Dec
~60
300
Note: comparable growth calculation includes acquisitions and
divestments with revenues of greater than $50 million.
1
Represents the estimated revenues for the last
fiscal year prior to the announcement of the
respective acquisition/divestment unless otherwise stated.
ABB Group
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
Q1 2023
Q2 2023
Q3 2023
EBITDA, $ in million
1,067
794
906
1,384
4,151
1,389
1,494
1,453
Return on Capital
Employed, %
n.a.
n.a.
n.a.
n.a.
16.50
n.a.
n.a.
n.a.
Net debt/Equity
0.20
0.34
0.34
0.21
0.21
0.30
0.31
0.21
Net debt/ EBITDA 12M
rolling
0.4
0.7
0.7
0.7
0.7
0.9
0.8
0.5
Net working capital,
% of 12M rolling
revenues
12.1%
12.8%
11.7%
11.1%
11.1%
13.9%
14.7%
12.8%
Earnings per share,
basic, $
0.31
0.20
0.19
0.61
1.30
0.56
0.49
0.48
Earnings per share,
diluted, $
0.31
0.20
0.19
0.60
1.30
0.55
0.48
0.47
Dividend per share,
CHF
n.a.
n.a.
n.a.
n.a.
0.84
n.a.
n.a.
n.a.
Share price at the end
of period, CHF
1
29.12
24.57
24.90
28.06
28.06
31.37
35.18
32.80
Share price at the
end of period, $
1
30.76
25.43
24.41
30.46
30.46
34.30
39.32
35.86
Number of employees
(FTE equivalents)
104,720
106,380
106,830
105,130
105,130
106,170
108,320
107,430
No. of shares outstanding
at end of period (in
millions)
1,929
1,892
1,875
1,865
1,865
1,862
1,860
1,849
1
Data prior to October 3, 2022, has been adjusted
for the Accelleron spin-off (Source: FactSet).
Additional figures
Additional 2023 guidance
($ in millions,
unless otherwise
stated)
FY 2023
Net finance expenses
~(100)
from ~(130)
Effective tax
rate
~21%
4
unchanged
Capital Expenditures
~(800)
unchanged
($ in millions, unless
otherwise stated)
FY 2023
1
Q4 2023
Corporate and Other
Operational EBITA
2
~(300)
~(75)
unchanged
Non-operating items
Acquisition-related amortization
~(220)
~(55)
unchanged
Restructuring and related
3
~(180)
~(40)
from ~(150)
ABB Way transformation
~(180)
~(55)
unchanged
1
Excludes one project estimated to a total of ~$100 million,
that is ongoing in the non-core business. Exact exit timing
is difficult to assess due to legal proceedings etc.
2
Excludes Operational EBITA from E-mobility business.
3
Includes restructuring and restructuring-related as well as separation
and integration costs.
4
Includes net positive tax impact of $206 million linked
to a favorable resolution of certain prior year tax
matters in Q1 2023 but excludes the impact
of acquisitions or divestments or any
significant non-operational items.
Acquisitions and divestments, last twelve months
ABB INTERIM
REPORT
I
Q3
2023
13
For additional information please contact:
Media Relations
Phone: +41 43 317 71 11
Email:
media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317 71 11
Email:
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Financial calendar
2023
November 30
Capital Markets Day in
Frosinone, Italy
2024
February 1
Q4 and FY 2023 results
March 21
Annual General Meeting,
Zurich
April 18
Q1 2024 results
July 18
Q2 2024 results
October 17
Q3 2024 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,” and
“Sustainability”. 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,”
“guidance,”
“likely” or similar
expressions. However,
there
are many risks and uncertainties,
many of which
are beyond
our control, that could
cause our actual results
to differ
materially from the
forward-looking information
and
statements
made in this press release
and which could
affect our ability
to achieve any or all
of our stated targets.
Some important
factors that could cause
such differences
include, among
others, business risks associated
with the volatile global
economic environment
and political conditions,
costs
associated with compliance
activities, market
acceptance of
new products and services,
changes in governmental
regulations and
currency exchange rates
and such other
factors as may be discussed
from time to time in
ABB Ltd’s
filings with the U.S. Securities
and Exchange
Commission,
including its Annual
Reports on Form 20-F. Although ABB
Ltd believes that its expectations
reflected in any
such
forward looking statement
are based upon
reasonable
assumptions, it can give
no assurance that
those
expectations will be
achieved.
The Q3 2023
results press release
and presentation
slides
are available on
the ABB News Center
at
www.abb.com/news and on
the Investor Relations
homepage at www.abb.com/investorrelations.
A conference call and
webcast for analysts
and investors is
scheduled to begin
at 10:00 a.m. CET.
To
pre-register for the conference
call or to join the
webcast, please refer
to the ABB website:
www.abb.com/investorrelations.
The recorded session will
be available after
the event on
ABB’s website.
Important notice about forward-looking information
Q3 results presentation on October 18, 2023
ABB
(ABBN: SIX Swiss Ex)
is a technology leader
in electrification
and automation,
enabling a more
sustainable and
resource-
efficient future. The company’s
solutions connect
engineering
know-how and software
to optimize how
things are manufactured,
moved, powered and
operated. Building
on more than 130
years of excellence,
ABB’s ~105,000 employees
are committed to driving
innovations
that accelerate industrial
transformation.
1
Q3 2023 FINANCIAL INFORMATION
October 18,
2023
Q3 2023
Financial information
2
Q3 2023 FINANCIAL INFORMATION
—
Financial
Information
Contents
03
─ 07
Key Figures
08 ─
33
Consolidated
Financial
Information
(unaudited)
34 ─
46
Supplemental Reconciliations
and Definitions
3
Q3 2023 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
(1)
Orders
8,052
8,188
-2%
2%
Order backlog (end
September)
21,445
19,393
11%
11%
Revenues
7,968
7,406
8%
11%
Gross Profit
2,762
2,481
11%
as % of revenues
34.7%
33.5%
+1.2 pts
Income from operations
1,259
708
78%
Operational EBITA
(1)
1,392
1,231
13%
11%
(2)
as % of operational
revenues
(1)
17.4%
16.6%
+0.8 pts
Income from continuing
operations, net of
tax
905
420
115%
Net income attributable
to ABB
882
360
145%
Basic earnings
per share ($)
0.48
0.19
149%
(3)
Cash flow from
operating activities
(4)
1,351
791
71%
Cash flow from
operating activities
in continuing operations
1,361
793
72%
CHANGE
($ in millions, unless otherwise indicated)
9M 2023
9M 2022
US$
Comparable
(1)
Orders
26,169
26,368
-1%
4%
Revenues
23,990
21,622
11%
16%
Gross Profit
8,366
7,052
19%
as % of revenues
34.9%
32.6%
+2.3 pts
Income from operations
3,755
2,152
74%
Operational EBITA
(1)
4,094
3,364
22%
22%
(2)
as % of operational
revenues
(1)
17.0%
15.5%
+1.5 pts
Income from continuing
operations, net of
tax
2,902
1,469
98%
Net income attributable
to ABB
2,824
1,343
110%
Basic earnings
per share ($)
1.52
0.70
116%
(3)
Cash flow from
operating activities
(4)
2,393
600
299%
Cash flow from
operating activities
in continuing operations
2,404
614
n.a.
(1)
For a reconciliation of non-GAAP
measures see “
Supplemental Reconciliations
and Definitions
” on page 34.
(2)
Constant currency (not adjusted
for portfolio changes).
(3)
EPS growth rates are computed
using unrounded amounts.
(4)
Cash flow from operating activit
ies includes both continuing
and discontinued operations.
4
Q3 2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Local
Comparable
Orders
ABB Group
8,052
8,188
-2%
-2%
2%
Electrification
3,693
3,772
-2%
-2%
1%
Motion
1,886
1,966
-4%
-5%
-7%
Process Automation
1,883
1,568
20%
18%
38%
Robotics & Discrete
Automation
665
901
-26%
-27%
-27%
Corporate and Other
135
147
Intersegment eliminations
(210)
(166)
Order backlog
(end September)
ABB Group
21,445
19,393
11%
8%
11%
Electrification
6,994
6,317
11%
9%
16%
Motion
5,108
4,613
11%
6%
5%
Process Automation
7,135
6,006
19%
16%
20%
Robotics & Discrete
Automation
2,363
2,659
-11%
-14%
-14%
Corporate and Other
(incl. intersegment eliminations)
(155)
(202)
Revenues
ABB Group
7,968
7,406
8%
7%
11%
Electrification
3,561
3,471
3%
2%
6%
Motion
1,947
1,702
14%
13%
11%
Process Automation
1,554
1,458
7%
6%
23%
Robotics & Discrete
Automation
929
828
12%
9%
9%
Corporate and Other
194
141
Intersegment eliminations
(217)
(194)
Income from operations
ABB Group
1,259
708
Electrification
762
616
Motion
365
291
Process Automation
218
154
Robotics & Discrete
Automation
113
81
Corporate and Other
(incl. intersegment eliminations)
(199)
(434)
Income from operations
%
ABB Group
15.8%
9.6%
Electrification
21.4%
17.7%
Motion
18.7%
17.1%
Process Automation
14.0%
10.6%
Robotics & Discrete
Automation
12.2%
9.8%
Operational EBITA
ABB Group
1,392
1,231
13%
11%
Electrification
748
651
15%
14%
Motion
390
305
28%
25%
Process Automation
226
225
0%
0%
Robotics & Discrete
Automation
137
106
29%
27%
Corporate and Other
(1)
(incl. intersegment eliminations)
(109)
(56)
Operational EBITA
%
ABB Group
17.4%
16.6%
Electrification
20.8%
18.7%
Motion
19.8%
17.8%
Process Automation
14.6%
15.3%
Robotics & Discrete
Automation
14.7%
12.8%
Cash flow from operating
activities
ABB Group
1,351
791
Electrification
1,051
715
Motion
466
268
Process Automation
258
217
Robotics & Discrete
Automation
92
82
Corporate and Other
(incl. intersegment eliminations)
(506)
(489)
Discontinued
operations
(10)
(2)
(1)
Corporate and Other at Q3
2023 and Q3
2022 includes losses of $39
million and $4 million,
respectively, relating to E-mobility.
5
Q3 2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
9M 2023
9M 2022
US$
Local
Comparable
Orders
ABB Group
26,169
26,368
-1%
1%
4%
Electrification
11,794
11,797
0%
2%
3%
Motion
6,285
6,247
1%
2%
1%
Process Automation
5,665
5,079
12%
14%
31%
Robotics & Discrete
Automation
2,516
3,318
-24%
-22%
-22%
Corporate and Other
595
530
Intersegment eliminations
(686)
(603)
Order backlog
(end September)
ABB Group
21,445
19,393
11%
8%
11%
Electrification
6,994
6,317
11%
9%
16%
Motion
5,108
4,613
11%
6%
5%
Process Automation
7,135
6,006
19%
16%
20%
Robotics & Discrete
Automation
2,363
2,659
-11%
-14%
-14%
Corporate and Other
(incl. intersegment eliminations)
(155)
(202)
Revenues
ABB Group
23,990
21,622
11%
13%
16%
Electrification
10,886
10,121
8%
10%
11%
Motion
5,868
4,900
20%
22%
20%
Process Automation
4,543
4,493
1%
3%
19%
Robotics & Discrete
Automation
2,788
2,290
22%
23%
23%
Corporate and Other
540
395
Intersegment eliminations
(635)
(577)
Income from operations
ABB Group
3,755
2,152
Electrification
2,130
1,571
Motion
1,098
776
Process Automation
688
480
Robotics & Discrete
Automation
347
146
Corporate and Other
(incl. intersegment eliminations)
(508)
(821)
Income from operations
%
ABB Group
15.7%
10.0%
Electrification
19.6%
15.5%
Motion
18.7%
15.8%
Process Automation
15.1%
10.7%
Robotics & Discrete
Automation
12.4%
6.4%
Operational EBITA
ABB Group
4,094
3,364
22%
22%
Electrification
2,212
1,768
25%
27%
Motion
1,157
845
37%
38%
Process Automation
670
645
4%
6%
Robotics & Discrete
Automation
418
215
94%
98%
Corporate and Other
(1)
(incl. intersegment eliminations)
(363)
(109)
Operational EBITA
%
ABB Group
17.0%
15.5%
Electrification
20.3%
17.4%
Motion
19.7%
17.2%
Process Automation
14.7%
14.2%
Robotics & Discrete
Automation
15.0%
9.4%
Cash flow from operating
activities
ABB Group
2,393
600
Electrification
2,143
1,258
Motion
935
507
Process Automation
558
470
Robotics & Discrete
Automation
266
109
Corporate and Other
(incl. intersegment eliminations)
(1,498)
(1,730)
Discontinued
operations
(11)
(14)
(1)
Corporate and Other at 9M
2023 and 9M
2022 includes losses of $134
million and $12
million, respectively, relating to E-mobility.
6
Q3 2023 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless
otherwise indicated)
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Revenues
7,968
7,406
3,561
3,471
1,947
1,702
1,554
1,458
929
828
Foreign exchange/commodity
timing
differences
in total revenues
51
23
32
3
23
9
(7)
14
2
(1)
Operational revenues
8,019
7,429
3,593
3,474
1,970
1,711
1,547
1,472
931
827
Income from operations
1,259
708
762
616
365
291
218
154
113
81
Acquisition-related amortization
55
55
22
24
9
8
1
1
20
19
Restructuring, related
and
implementation costs
(1)
51
20
14
8
3
3
3
1
–
6
Changes in obligations
related to
divested businesses
–
–
–
–
–
–
–
–
–
–
Gains and losses
from sale of businesses
(71)
–
(71)
(1)
–
1
–
–
–
–
Acquisition-
and divestment
-related
expenses and
integration costs
10
62
4
3
3
4
(4)
53
3
1
Certain other non-operational
items
49
381
2
7
1
–
–
–
1
1
Foreign exchange/commodity
timing
differences
in income from operations
39
5
15
(6)
9
(2)
8
16
–
(2)
Operational EBITA
1,392
1,231
748
651
390
305
226
225
137
106
Operational EBITA
margin (%)
17.4%
16.6%
20.8%
18.7%
19.8%
17.8%
14.6%
15.3%
14.7%
12.8%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless
otherwise indicated)
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
Revenues
23,990
21,622
10,886
10,121
5,868
4,900
4,543
4,493
2,788
2,290
Foreign exchange/commodity
timing
differences
in total revenues
25
90
12
11
12
8
3
45
2
5
Operational revenues
24,015
21,712
10,898
10,132
5,880
4,908
4,546
4,538
2,790
2,295
Income from operations
3,755
2,152
2,130
1,571
1,098
776
688
480
347
146
Acquisition-related amortization
164
174
66
80
26
23
4
3
59
59
Restructuring, related
and
implementation costs
(1)
92
300
26
18
5
11
7
6
–
9
Changes in obligations
related to
divested businesses
(5)
(17)
1
–
–
–
–
–
–
–
Gains and losses
from sale of businesses
(97)
4
(71)
(1)
–
5
(26)
–
–
–
Acquisition-
and divestment
-related
expenses and
integration costs
55
171
23
31
15
12
(3)
122
7
4
Certain other non-operational
items
89
480
11
30
4
–
–
–
4
–
Foreign exchange/commodity
timing
differences
in income from operations
41
100
26
39
9
18
–
34
1
(3)
Operational EBITA
4,094
3,364
2,212
1,768
1,157
845
670
645
418
215
Operational EBITA
margin (%)
17.0%
15.5%
20.3%
17.4%
19.7%
17.2%
14.7%
14.2%
15.0%
9.4%
(1)
Includes impairment of certain
assets.
7
Q3 2023 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Depreciation
130
129
64
62
27
25
12
17
14
16
Amortization
64
69
27
30
11
8
2
2
21
19
including total acquisition-related
amortization of:
55
55
22
24
9
8
1
1
20
19
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
Depreciation
384
401
190
191
80
78
35
51
43
46
Amortization
197
214
81
98
31
26
7
8
61
60
including total acquisition-related
amortization of:
164
174
66
80
26
23
4
3
59
59
Orders received and
revenues by
region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q3 23
Q3 22
US$
Local
parable
Q3 23
Q3 22
US$
Local
parable
Europe
2,391
2,682
-11%
-16%
-13%
2,810
2,494
13%
6%
10%
The Americas
3,258
2,980
9%
8%
13%
2,775
2,452
13%
12%
16%
of which United
States
2,479
2,294
8%
7%
13%
2,067
1,796
15%
15%
19%
Asia, Middle East
and Africa
2,403
2,526
-5%
0%
4%
2,383
2,460
-3%
2%
6%
of which China
1,044
1,166
-10%
-5%
-3%
1,075
1,300
-17%
-13%
-10%
ABB Group
8,052
8,188
-2%
-2%
2%
7,968
7,406
8%
7%
11%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
9M 23
9M 22
US$
Local
parable
9M 23
9M 22
US$
Local
parable
Europe
8,904
9,174
-3%
-3%
0%
8,617
7,520
15%
14%
17%
The Americas
9,452
8,927
6%
5%
8%
8,243
7,018
17%
17%
20%
of which United
States
6,928
6,753
3%
2%
5%
6,143
5,124
20%
20%
23%
Asia, Middle East
and Africa
7,813
8,267
-5%
1%
5%
7,130
7,084
1%
7%
12%
of which China
3,593
4,114
-13%
-7%
-5%
3,404
3,563
-4%
1%
4%
ABB Group
26,169
26,368
-1%
1%
4%
23,990
21,622
11%
13%
16%
8
Q3 2023 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, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Sales of products
20,210
17,946
6,680
6,184
Sales of services
and other
3,780
3,676
1,288
1,222
Total revenues
23,990
21,622
7,968
7,406
Cost of sales
of products
(13,393)
(12,439)
(4,447)
(4,217)
Cost of services
and other
(2,231)
(2,131)
(759)
(708)
Total cost of
sales
(15,624)
(14,570)
(5,206)
(4,925)
Gross profit
8,366
7,052
2,762
2,481
Selling, general and administrative
expenses
(4,058)
(3,833)
(1,331)
(1,277)
Non-order related research
and development
expenses
(951)
(844)
(314)
(272)
Other income (expense),
net
398
(223)
142
(224)
Income from operations
3,755
2,152
1,259
708
Interest and dividend
income
115
50
37
17
Interest and other
finance expense
(197)
(107)
(73)
(45)
Non-operational pension
(cost) credit
23
102
8
34
Income from continuing
operations before
taxes
3,696
2,197
1,231
714
Income tax expense
(794)
(728)
(326)
(294)
Income from continuing
operations, net
of tax
2,902
1,469
905
420
Loss from discontinued
operations, net of
tax
(16)
(36)
(7)
(16)
Net income
2,886
1,433
898
404
Net income attributable
to noncontrolling
interests and
redeemable noncontrolling
interests
(62)
(90)
(16)
(44)
Net income attributable
to ABB
2,824
1,343
882
360
Amounts attributable
to ABB shareholders:
Income from continuing
operations, net of
tax
2,840
1,379
889
376
Loss from discontinued
operations, net of
tax
(16)
(36)
(7)
(16)
Net income
2,824
1,343
882
360
Basic earnings per share
attributable to
ABB shareholders:
Income from continuing
operations, net of
tax
1.53
0.72
0.48
0.20
Loss from discontinued
operations, net of
tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.52
0.70
0.48
0.19
Diluted earnings
per share attributable
to ABB shareholders:
Income from continuing
operations, net of
tax
1.52
0.72
0.48
0.20
Loss from discontinued
operations, net of
tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.51
0.70
0.47
0.19
Weighted-average
number of shares
outstanding
(in millions)
used to compute:
Basic earnings
per share attributable
to ABB shareholders
1,859
1,909
1,854
1,882
Diluted earnings per share
attributable to
ABB shareholders
1,871
1,920
1,865
1,889
Due to rounding, numbers
presented may not add
to the totals provided.
See Notes to the Consolidated
Financial Information
9
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated
Statements of Comprehensive
Income (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Total comprehensive
income, net of
tax
2,729
775
815
67
Total comprehensive
income attributable
to noncontrolling
interests and
redeemable noncontrolling
interests, net of
tax
(54)
(58)
(11)
(32)
Total comprehensive
income attributable
to ABB shareholders,
net of tax
2,675
717
804
35
Due to rounding, numbers
presented may not add
to the totals provided.
See Notes to the Consolidated
Financial Information
10
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated
Balance Sheets (unaudited)
($ in millions)
Sep. 30, 2023
Dec. 31, 2022
Cash and equivalents
3,869
4,156
Restricted cash
18
18
Marketable securities
and short-term investments
1,091
725
Receivables,
net
7,586
6,858
Contract assets
1,073
954
Inventories, net
6,332
6,028
Prepaid expenses
280
230
Other current assets
527
505
Current assets held
for sale and in
discontinued
operations
60
96
Total current
assets
20,836
19,570
Property, plant
and equipment, net
3,891
3,911
Operating lease right
-of-use assets
850
841
Investments in equity
-accounted companies
186
130
Prepaid pension
and other employee
benefits
969
916
Intangible assets,
net
1,181
1,406
Goodwill
10,356
10,511
Deferred taxes
1,366
1,396
Other non-current assets
464
467
Total assets
40,099
39,148
Accounts payable,
trade
4,777
4,904
Contract liabilities
2,610
2,216
Short-term debt and
current maturities
of long-term debt
2,951
2,535
Current operating
leases
234
220
Provisions for warranties
1,108
1,028
Other provisions
1,114
1,171
Other current liabilities
4,597
4,323
Current liabilities held
for sale and
in discontinued
operations
79
132
Total current
liabilities
17,470
16,529
Long-term debt
4,899
5,143
Non-current operating
leases
643
651
Pension and
other employee
benefits
642
719
Deferred taxes
675
729
Other non-current liabilities
1,908
2,085
Non-current liabilities
held for sale and
in discontinued
operations
19
20
Total liabilities
26,256
25,876
Commitments and contingencies
Redeemable
noncontrolling interest
89
85
Stockholders’ equity:
Common stock, CHF
0.12 par value
(1,882 million and 1,965
million shares issued
at September
30, 2023, and December
31, 2022, respectively)
163
171
Additional paid-in capital
19
141
Retained earnings
18,840
20,082
Accumulated
other comprehensive
loss
(4,705)
(4,556)
Treasury stock, at
cost
(33 million and 100
million shares at
September 30, 2023,
and December
31, 2022, respectively)
(1,111)
(3,061)
Total ABB stockholders’ equity
13,206
12,777
Noncontrolling interests
548
410
Total stockholders’
equity
13,754
13,187
Total liabilities
and stockholders’
equity
40,099
39,148
Due to rounding, numbers
presented may not add
to the totals provided.
See Notes to the Consolidated
Financial Information
11
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated
Statements of Cash
Flows (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Operating activities:
Net income
2,886
1,433
898
404
Loss from discontinued
operations, net of
tax
16
36
7
16
Adjustments to reconcile
net income (loss)
to
net cash provided
by operating activities:
Depreciation and
amortization
581
615
194
198
Changes in fair
values of investments
(28)
(39)
(4)
(24)
Pension and
other employee benefits
(67)
(107)
(55)
(24)
Deferred taxes
(42)
(183)
(79)
(35)
Loss from equity
-accounted companies
11
100
4
38
Net loss (gain) from
derivatives
and foreign exchange
(44)
44
10
(33)
Net gain from sale of
property,
plant and equipment
(39)
(64)
(6)
(9)
Net loss (gain) from
sale of businesses
(97)
4
(71)
–
Other
115
61
23
(2)
Changes in operating
assets and
liabilities:
Trade receivables,
net
(819)
(657)
(152)
(36)
Contract assets and
liabilities
243
353
164
101
Inventories, net
(438)
(1,667)
12
(584)
Accounts payable,
trade
(37)
390
(35)
177
Accrued liabilities
140
52
342
307
Provisions, net
106
312
50
186
Income taxes payable
and receivable
(9)
19
77
71
Other assets and
liabilities, net
(74)
(88)
(18)
42
Net cash provided
by operating activities
– continuing
operations
2,404
614
1,361
793
Net cash used
in operating activities
– discontinued
operations
(11)
(14)
(10)
(2)
Net cash provided
by operating activities
2,393
600
1,351
791
Investing activities:
Purchases
of investments
(1,103)
(271)
(343)
(15)
Purchases
of property, plant
and equipment
and intangible assets
(506)
(503)
(175)
(165)
Acquisition of businesses
(net of cash acquired)
and increases
in cost- and equity-accounted
companies
(160)
(226)
(25)
(47)
Proceeds from
sales of investments
598
654
422
148
Proceeds from
maturity of investments
138
–
–
–
Proceeds from
sales of property,
plant and equipment
67
85
10
19
Proceeds from
sales of businesses
(net of transaction costs
and cash disposed)
and cost- and
equity-accounted
companies
552
(8)
509
5
Net cash from settlement
of foreign currency
derivatives
(76)
(154)
(58)
(210)
Changes in loans
receivable, net
8
11
7
2
Other investing activities
9
(10)
–
7
Net cash provided
by (used in)
investing activities
– continuing
operations
(473)
(422)
347
(256)
Net cash provided
by (used in)
investing activities
– discontinued
operations
(22)
(91)
(1)
–
Net cash provided
by (used in)
investing activities
(495)
(513)
346
(256)
Financing activities:
Net changes
in debt with original
maturities of 90
days or less
(997)
1,475
(962)
284
Increase in debt
2,584
3,554
936
373
Repayment of
debt
(1,437)
(2,025)
(309)
(542)
Delivery of shares
118
389
22
19
Purchase of
treasury stock
(909)
(3,251)
(433)
(590)
Dividends paid
(1,713)
(1,698)
–
–
Dividends paid
to noncontrolling shareholders
(89)
(83)
(6)
(7)
Proceeds from
issuance of subsidiary
shares
328
–
–
–
Other financing
activities
4
(58)
4
(5)
Net cash used
in financing activities
– continuing
operations
(2,111)
(1,697)
(748)
(468)
Net cash provided
by financing
activities –
discontinued operations
–
–
–
–
Net cash used
in financing activities
(2,111)
(1,697)
(748)
(468)
Effects of
exchange rate changes
on cash and equivalents
and restricted cash
(74)
(191)
(32)
(115)
Adjustment for the net
change in cash
and equivalents
and restricted cash
in Assets held for
sale
–
–
28
–
Net change in cash
and equivalents
and restricted
cash
(287)
(1,801)
945
(48)
Cash and equivalents
and restricted cash,
beginning of
period
4,174
4,489
2,942
2,736
Cash and equivalents
and restricted
cash, end of
period
3,887
2,688
3,887
2,688
Supplementary disclosure
of cash flow
information:
Interest paid
151
47
43
11
Income taxes paid
865
907
338
269
Due to rounding, numbers
presented may not add
to the totals provided.
See Notes to the Consolidated
Financial Information
12
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated
Statements of Changes
in Stockholders’
Equity (unaudited)
($ in millions)
Common
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total ABB
stockholders’
equity
Non-
controlling
interests
Total
stockholders’
equity
Balance at January
1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Net income
(1)
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
–
–
–
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
Balance at January
1, 2023
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
Net income
(1)
2,824
2,824
65
2,889
Foreign currency
translation
adjustments, net of
tax of $0
(177)
(177)
(8)
(185)
Effect of change
in fair value of
available-for-sale securities,
net of tax of $1
6
6
6
Unrecognized income
(expense)
related to pensions
and other
postretirement plans,
net of tax of $8
19
19
19
Change in derivative
instruments
and hedges, net of tax of $0
3
3
3
Issuance of subsidiary
shares
170
170
168
338
Other changes
in
noncontrolling interests
(7)
(7)
5
(2)
Dividends to
noncontrolling shareholders
–
(93)
(93)
Dividends to shareholders
(1,706)
(1,706)
(1,706)
Cancellation of
treasury shares
(7)
(201)
(2,359)
2,567
–
–
Share-based payment
arrangements
82
82
1
83
Purchase of
treasury stock
(898)
(898)
(898)
Delivery of shares
(163)
281
118
118
Other
(4)
(4)
(4)
Balance at September
30, 2023
163
19
18,840
(4,705)
(1,111)
13,206
548
13,754
(1)
Amounts attributable to noncontrolling
interests for the nine months
ended September
30, 2023 and 2022,
exclude net losses of $3 million
and $3 million, respectively, related to
redeemable noncontrolling
interests, which
are reported in the mezzanine
equity section on the Consolidated
Balance Sheets. See
Note 4 for details.
Due to rounding, numbers
presented may not add
to the totals provided.
See Notes to the Consolidated
Financial Information
13
Q3 2023 FINANCIAL INFORMATION
—
Notes to the Consolidated
Financial Information (unaudited)
─
Note 1
The Company and basis
of presentation
ABB Ltd and its subsidiaries
(collectively,
the Company)
together form a
technology
leader in electrification
and automation,
enabling a more
sustainable and
resource-efficient
future. The Company’s
solutions connect
engineering know
-how and software
to optimize how
things are manufactured,
moved, powered
and
operated.
The Company’s
Consolidated
Financial Information
is prepared in accordance
with United States
of America generally
accepted accounting
principles (U.S.
GAAP) for interim
financial reporting.
As such, the Consolidated
Financial Information
does not include
all the information
and notes
required under U.S.
GAAP for
annual consolidated
financial statements. Therefore,
such financial
information should
be read in conjunction
with the audited
consolidated
financial statements
in
the Company’s
Annual Report for
the year ended
December 31, 2022.
The preparation of
financial information
in conformity with
U.S. GAAP requires
management
to make assumptions
and estimates that
directly affect
the amounts
reported in the Consolidated
Financial Information.
These accounting
assumptions
and estimates include:
●
estimates to determine
valuation allowances
for deferred tax
assets and
amounts recorded
for unrecognized
tax benefits,
●
estimates related
to credit losses
expected to occur
over the remaining
life of financial
assets such
as trade and other rece
ivables, loans and
other
instruments,
●
estimates used
to record expected
costs for employee
severance
in connection with restructuring
programs,
●
estimates of loss
contingencies
associated with litigation
or threatened litigation
and other claims
and inquiries, environmental
damages, product
warranties, self-insurance
reserves, regulatory
and other proceedings,
●
assumptions
and projections, principally
related to future material,
labor and project-related
overhead costs,
used in determining
the percentage
-of-
completion on projects
where revenue
is recognized over
time,
as well as the amount
of variable consideration
the Company expects
to be entitled to,
●
assumptions
used in the calculation
of pension
and postretirement benefits
and the fair value
of pension
plan assets,
●
assumptions
used in determining
inventory obsolescence
and net realizable value,
●
growth rates, discount
rates and other
assumptions
used to determine
impairment of long
-lived assets and
in testing goodwill for
impairment,
●
estimates and assumptions
used in determining the fair
values of assets
and liabilities assumed
in business combinations,
and
●
estimates and ass
umptions used
in determining the initial
fair value of
retained noncontrolling
interests
and certain obligations
in connection with
divestments.
The actual results and
outcomes may
differ from the
Company’s
estimates and assumptions.
A portion of the Company’s
activities (primarily
long-term construction
activities) has an
operating cycle
that exceeds
one year. For classification
of current assets
and liabilities related
to such activities,
the Company elected
to use the duration
of the individual contracts
as its operating
cycle. Accordingly,
there are accounts
receivable, contract
assets, inventories
and provisions
related to these
contracts which
will not be realized
within one year
that have been
classified as
current.
Basis of presentation
In the opinion of management,
the unaudited Consolidated
Financial Information
contains all necessary
adjustments to present
fairly the financial
position, results
of operations
and cash flows
for the reported periods.
Management
considers
all such adjustments
to be of a normal
recurring nature. The
Consolidated
Financial
Information is presented
in United States
dollars ($) unless
otherwise stated.
Due to rounding,
numbers presented
in the Consolidated
Financial Information
may
not add to the totals
provided.
Certain amounts
reported in the Consolidated
Financial Information
for prior periods have
been reclassified
to conform to the
current year’s presentation.
These
changes
relate primarily to the reorganization
of the Company’s
operating segments
(see Note 17 for
details).
14
Q3 2023 FINANCIAL INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current
periods
Disclosure about supplier
finance program
obligations
In January 202
3, the Company adopted
an accounting
standard update
which requires entities to
disclose information
related to supplier finance
programs. Under
the update, the Company
is required to
disclose annually
(i) the key terms of
the program, (ii) the
amount of
the supplier finance
obligations outstanding
and where
those obligations
are presented in
the balance sheet
at the reporting date,
and (iii) a
rollforward of the supplier
finance obligation
program within
the reporting
period. The Company
adopted this update
retrospectively
for all in-scope
transactions, with
the exception of
the rollforward disclosures,
which will be adopted
prospectively
for annual periods
beginning January
1, 2024. Apart from the additional
disclosure requirements,
this update does
not have a significant
impact on
the Company’s
consolidated
financial statements.
The total outstanding
supplier finance
obligation included
in “Accounts payable,
trade” in the Consolidated
Balance Sheets
at September 30,
2023 and
December 31, 2022,
amounted to $448
million and $477
million,
respectively.
The Company’s
payment terms
related to suppliers’
finance programs
are not
impacted by the suppliers’
decisions to sell
amounts under
the arrangements
and are typically
consistent with
local market practices.
Facilitation of the effects
of reference
rate reform on
financial reporting
In January 202
3, the Company adopted
an accounting
standard update
which provides
temporary optional expedients
and exceptions
to the current guidance
on
contract modifications
and hedge
accounting to ease
the financial reporting
burdens related
to the expected
market transition
from the London
Interbank Offered
Rate (LIBOR) and other
interbank offered
rates to alternative
reference rates.
The Company
is applying this standard
update as
relevant contract and
hedge
accounting
relationship modifications
are made during
the course of
the transition period
ending December
31, 2024. This
update does
not have a significant
impact on the Company’s
consolidated
financial statements.
─
Note 3
Discontinued operations
and assets held for
sale
Divestment of the
Power Grids business
In 2020, the Company
completed the divestment
of its Power Grids
business to Hitachi
Ltd (Hitachi)
.
Upon closing
of the sale, the Company
entered into various
transition services agreements
(TSAs),
some of which
continue to have
services performed
.
Pursuant to these
TSAs, the
Company and
Hitachi Energy provide
to
each other, on
a transitional basis,
various services.
The services
provided by the
Company primarily
include finance,
information technology,
human resources
and certain other administrative
services. The
TSAs were
to be performed for
up to 3 years
with the possibility
to agree on extensions
on an exceptional
basis for
business-critical services
which are reasonably
necessary
to avoid a material adverse
impact on the business.
The TSA for
information technology
services was
extended until mid-2025.
In the nine and
three months ended
September 30,
2023, the Company
has recognized
within its continuing
operations, general
and
administrative expenses
incurred to perform
the TSAs, offset
by $114
million and $38 million
in TSA-related
income for such
services that is reported
in Other
income (expense),
net.
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 TSAs, offset
by $115
million and $39 million
in TSA-related
income for such
services that is reported
in Other
income (expense),
net.
Discontinued op
erations
As a result of the sale
of the Power
Grids business,
substantially all
Power Grids-related
assets and
liabilities have been
sold. As this divestment
represented a
strategic shift that
would have
a major effect
on the Company’s
operations and
financial results, the
results of operations
for this business
are presented as
discontinued
operations and
the assets and
liabilities are presented
as held for sale
and in discontinued
operations.
Certain of the business
contracts in the
Power
Grids business
continue to be executed
by subsidiaries
of the Company
for the benefit/risk of Hitachi
Energy.
Assets and
liabilities relating to,
as well as the net
financial results
of,
these contracts
will continue to
be included in discontinued
operations until
they have been
completed or otherwise
transferred to Hitachi
Energy.
The remaining busin
ess activities of
the Power Grids
business being
executed by the Company
are not significant.
In addition, the Company
also has retained
obligations
(primarily for environmental
and taxes)
related to other
businesses disposed
or otherwise exited that
qualified as discontinued
operations at the time
of their disposal
.
Changes to these
retained obligations
are also included
in Loss from discontinued
operations, net
of tax.
At September 30,
2023, the balances
reported as held for
sale and
in discontinued
operations pertaining
to the activities
of the Power Grids
business
and other
obligations will remain
with the Company
until such time as
the obligations
are settled or
the activities are
fully wound down
.
These balanc
es amounted
to
$60 million of current
assets, $79 million
of current liabilities
and $19 million
of non-current
liabilities.
15
Q3 2023 FINANCIAL INFORMATION
─
Note 4
Acquisitions and equity
-accounted companies
Acquisition of controlling
interests
Acquisitions of
controlling interests
were as follows:
Nine months ended
September 30,
Three months ended September 30,
($ in millions, except
number of acquired
businesses)
2023
2022
2023
2022
Purchase price
for acquisitions
(net of cash acquired)
(1)
115
150
1
12
Aggregate excess
of purchase price
over
fair value of net
assets acquired
(2)
55
205
1
14
Number of acquired
businesses
3
3
1
2
(1)
Excluding changes in cost-
and equity-accounted companies.
(2)
Recorded as goodwill.
In the table above,
the “Purchase
price for acquisitions”
and “Aggregate excess
of purchase
price over fair value
of net assets
acquired” amounts
in the nine
months ended
September 30, 2022
,
relate primarily
to the acquisition
of InCharge Energy,
Inc. (In-Charge).
Acquisitions of
controlling interests
have been
accounted for under
the acquisition method
and have been
included in the
Company’s consolidated
financial
statements since
the date of acquisi
tion.
On January 26,
2022, the Company
increased its ownership
in In-Charge to a 60
percent controlling
interest through a
stock purchase
agreement. In-Charge is
headquartered
in Santa Monica, USA,
and is a provider
of turn-key commercial
electric vehicle
charging hardware
and software
solutions. The resulting
cash
outflows for the
Company amounted
to $134
million (net of cash
acquired of $4
million). The acquisition
expands
the market presence
of the E-mobility operating
segment, particularly
in the North American
market. In connection
with the acquisition,
the Company’s
pre-existing 13.2
percent ownership
of In-Charge was
revalued to fair value
and a gain of
$32 million was
recorded in “Other
income (expense)
,
net” in the 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.
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.
Business divestments
In the nine and three
months ended
September 30, 2023,
the Company received
proceeds (net of
transaction costs
and cash disposed)
of $552 million and
$509 million,
respectively,
relating to divestments
of consolidated
businesses and
recorded gains
of $97 million and
$71 million, respectively,
in “Other income
(expense), net” on
the sale of such
businesses. These
are primarily due the
divestment of the
Company’s
Power Conversion
Division to AcBel
Polytech Inc.,
which
prior to its sale was
part of the Company’s
Electrification operating
segment. Certain
amounts
included in the net gain
for the sale of
Power Conversion
Division
are estimated or otherwise
subject to change
in value and, as a
result, the Company
may record additional
adjustments
to the gain in future
periods which are
not
expected to have
a material impact on the
consolidated
financial statements.
Investments in equity
-accounted companies
In connection with the
divestment
of its Power Grids
business to Hitachi
in 2020 (see Note 3),
the Company
initially retained
a 19.9 percent interest
in the business
until December 2022,
when the retained
investment
was sold to Hitachi.
During the
Company’s
period of ownership
of the retained 19.9
percent interest,
based on
its continuing involvement
with the Power
Grids business,
including the membership
in its governing
board of directors,
the Company concluded
that it had
significant influence
over Hitachi Energy.
As a result, the
investment was
accounted
for using the equity
method through
to the date of its sale.
In the nine and three
months ended
September 30, 2023
and 2022, the
Company recorded
its share of
the earnings of
investees accounted
for under the equity
method of accounting
in Other income (expense),
net, as follows:
Nine months ended
September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Loss from equity
-accounted companies,
net of taxes
(11)
(34)
(4)
(24)
Basis difference
amortization (net of
deferred income
tax benefit)
–
(66)
–
(14)
Loss from equity
-accounted companies
(11)
(100)
(4)
(38)
16
Q3 2023 FINANCIAL INFORMATION
─
Note 5
Cash and equivalents
,
marketable securities
and short-term investments
Cash and equivalents,
marketable securities
and short-term
investments consisted
of the following:
September 30, 2023
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair
value
recorded in net income
Cash
1,425
1,425
1,425
Time deposits
2,709
2,709
2,462
247
Equity securities
620
24
644
644
4,754
24
–
4,778
3,887
891
Changes in fair
value recorded
in other comprehensive
income
Debt securities available
-for-sale:
U.S. government obligations
200
1
(13)
188
188
European government
obligations
12
12
12
212
1
(13)
200
–
200
Total
4,966
25
(13)
4,978
3,887
1,091
Of which:
Restricted cash, current
18
December 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair
value
recorded in net income
Cash
1,715
1,715
1,715
Time deposits
2,459
2,459
2,459
Equity securities
345
10
355
355
4,519
10
–
4,529
4,174
355
Changes in fair
value recorded
in other comprehensive
income
Debt securities available
-for-sale:
U.S. government obligations
269
1
(15)
255
255
Other government obligations
58
58
58
Corporate
64
(7)
57
57
391
1
(22)
370
–
370
Total
4,910
11
(22)
4,899
4,174
725
Of which:
Restricted cash, current
18
17
Q3 2023 FINANCIAL INFORMATION
─
Note 6
Derivative financial instruments
The Company
is exposed to certain currency,
commodity,
interest rate and equity
risks arising from
its global operating,
financing
and investing activities.
The
Company uses
derivative instruments
to reduce and
manage the economic
impact of these
exposures.
Currency risk
Due to the global nature
of the Company’s
operations, many
of its subsidiaries
are exposed
to currency risk
in their operating
activities from entering
into
transactions in currencies
other than their
functional currency.
To manage
such currency
risks, the Company’s
policies require
its subsidiaries
to hedge their
foreign currency
exposures from
binding sales
and purchase
contracts denominated
in foreign currencies.
For forecasted
foreign currency
denominated
sales of
standard products
and the related foreign
currency denominated
purchases,
the Company’s
policy is to hedge
up to a maximum
of 100 percent
of the forecasted
foreign currency
denominated
exposures, depending
on the length of the
forecasted
exposures. Forecasted
exposures greater than
12 months are not
hedged.
Forward foreign exchange
contracts are the main
instrument used
to protect the
Company against
the volatility of future
cash flows
(caused by changes
in
exchange rates) of
contracted and
forecasted
sales and purchases
denominated
in foreign currencies.
In addition, within
its treasury operations,
the Company
primarily uses foreign
exchange swaps
and forward foreign
exchange
contracts to manage the
currency and
timing mismatches
arising in its liquidity
management
activities.
Commodity risk
Various commodity
products are used
in the Company’s
manufacturing
activities. Consequently
it is exposed
to volatility in future
cash flows
arising from changes
in commodity prices.
To manage
the price risk of
commodities,
the Company’s
policies require
that its subsidiaries
hedge the commodity
price risk exposures
from
binding contracts,
as well as at least
50 percent (up
to a maximum of
100 percent) of
the forecasted
commodity exposure
over the next 12
months or longer
(up to
a maximum of 18
months). Primarily
swap contracts
are used to manage
the associated
price risks of
commodities.
Interest rate risk
The Company
has issued bonds
at fixed rates. Interest
rate swaps and
cross-currency interest
rate swaps
are used to manage
the interest rate and
foreign
currency risk associated
with certain debt and
generally such
swaps are designated
as fair value hedges.
In addition, from time
to time, the Company
uses
instruments such
as interest rate swaps,
interest rate futures,
bond futures
or forward rate agreements
to manage
interest rate risk arising
from the Company’s
balance sheet
structure but does not
designate such
instruments as hedges.
Equity risk
The Company
is exposed to fluctuations
in the fair value
of its warrant appreciation
rights (WARs)
issued under
its managemen
t
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, 2023
December 31, 2022
September 30, 2022
Foreign exchange
contracts
13,090
13,509
15,501
Embedded
foreign exchange
derivatives
1,291
933
864
Cross-currency interest
rate swaps
849
855
781
Interest rate contracts
1,751
2,830
2,598
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, steel 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 derivat
ive
Unit
Total notional amounts at
September 30, 2023
December 31, 2022
September 30, 2022
Copper swaps
metric tonnes
32,223
29,281
36,264
Silver swaps
ounces
1,702,359
2,012,213
2,787,909
Steel swaps
metric tonnes
11,476
–
–
Aluminum swaps
metric tonnes
5,800
6,825
6,925
Equity derivatives
At September 30,
2023, December
31, 2022, and September
30, 2022, the
Company held
3 million, 8 million
and 8 million
cash-settled call options
indexed to ABB
Ltd shares (conversion
ratio 5:1) with a
total fair value of
$9 million, $15 million
and $11
million, respectively.
Cash flow hedges
As noted above,
the Company mainly
uses forward
foreign exchange
contracts to manage
the foreign exchange
risk of its operations,
commodity swaps
to
manage its commodity
risks and cash
-settled call options
to hedge its WAR
liabilities. The
Company applies
cash flow hedge
accounting in only limited
cases. In
these cases,
the effective portion
of the changes
in their fair value is
recorded in “Accumulated
other comprehensive
loss” and subsequently
reclassified into
earnings in the same
line item and
in the same period
as the underlying
hedged transaction
affects
earnings. For the nine
and three months
ended September
30,
2023 and 2022,
there were no significant
amounts recorded
for cash flow
hedge accounting
activities.
Fair value hedges
To reduce
its interest rate exposure
arising primarily from
its debt issuance
activities, the Company
uses interest
rate swaps
and cross-currency
interest rate
swaps. Where such
instruments are designated
as fair value hedges,
the changes
in the fair value of these
instruments, as
well as the changes
in the fair value of
the risk component
of the underlying
debt being hedged,
are recorded
as offsetting gains
and losses
in “Interest and other
finance expense”.
18
Q3 2023 FINANCIAL INFORMATION
The effect of
derivative instruments, designated
and qualifying
as fair value hedges,
on the Consolidated
Income Statements
was as follows:
Nine months ended
September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Gains (losses)
recognized in Interest
and other finance
expense:
Interest rate contracts
Designated as
fair value hedges
30
(83)
12
(28)
Hedged item
(31)
85
(13)
29
Cross-currency interest
rate swaps
Designated as
fair value hedges
(13)
(125)
(3)
(31)
Hedged item
2
119
2
29
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
2023
2022
2023
2022
Foreign exchange
contracts
Total revenues
(13)
(201)
(18)
(82)
Total cost
of sales
(20)
57
(8)
23
SG&A expenses
(1)
24
35
10
12
Non-order related research
(4)
and development
2
(3)
1
Interest and other
finance expense
(16)
(139)
46
(85)
Embedded
foreign exchange
Total revenues
39
12
(6)
7
contracts
Total cost
of sales
–
(12)
1
(10)
Commodity contracts
Total cost
of sales
(7)
(72)
8
(21)
Other
Interest and other
finance expense
1
4
–
1
Total
4
(314)
30
(154)
(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, 2023
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated
as hedging
instruments:
Foreign exchange
contracts
–
–
4
1
Interest rate contracts
–
–
32
–
Cross-currency interest
rate swaps
–
–
–
304
Cash-settled call options
9
–
–
–
Total
9
–
36
305
Derivatives not designated
as hedging instruments:
Foreign exchange
contracts
179
17
91
16
Commodity contracts
3
–
8
–
Interest rate contracts
1
–
4
–
Other equity contracts
9
–
–
–
Embedded
foreign exchange
derivatives
26
10
22
4
Total
218
27
125
20
Total fair
value
227
27
161
325
19
Q3 2023 FINANCIAL INFORMATION
December 31, 2022
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated
as hedging
instruments:
Foreign exchange
contracts
–
–
4
4
Interest rate contracts
–
–
5
57
Cross-currency interest
rate swaps
–
–
–
288
Cash-settled call options
15
–
–
–
Total
15
–
9
349
Derivatives not designated
as hedging instruments:
Foreign exchange
contracts
140
21
80
5
Commodity contracts
13
–
12
–
Interest rate contracts
5
–
3
–
Embedded
foreign exchange
derivatives
11
6
17
13
Total
169
27
112
18
Total fair
value
184
27
121
367
Close-out netting agreements
provide for
the termination, valuation
and net settlement
of some or all
outstanding transactions
between two counterparties
on the
occurrence of
one or more pre-defined
trigger events.
Although the Company
is party to close-out netting
agreements with
most derivative
counterparties,
the fair values in the
tables above
and in the Consolidated
Balance Sheets at September 30, 2023, and December 31, 2022, have
been presented on a gross basis.
The Company’s
netting agreements
and other similar
arrangements allow
net settlements
under certain conditions.
At September
30, 2023, and December
31,
2022, information
related to these offsett
ing arrangements
was as follows:
($ in millions)
September 30, 2023
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement
or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
218
(70)
–
–
148
Total
218
(70)
–
–
148
($ in millions)
September 30, 2023
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement
or
of recognized
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
460
(70)
–
–
390
Total
460
(70)
–
–
390
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement
or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
194
(96)
–
–
98
Total
194
(96)
–
–
98
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement
or
of recognized
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
458
(96)
–
–
362
Total
458
(96)
–
–
362
20
Q3 2023 FINANCIAL INFORMATION
─
Note 7
Fair values
The Company
uses fair value measurement
principles to record
certain financial
assets and
liabilities on a recurring
basis and,
when necessary,
to record certain
non-financial assets
at fair value on a non
-recurring basis, as
well as to determine
fair value disclosures
for certain financial
instruments carried
at amortized cost
in the financial statements.
Financial assets
and liabilities
recorded at fair value
on a recurring basis
include foreign
currency,
commodity and
interest rate
derivatives, as well
as cash-settled call options
and available-for-sale
securities.
Non-financial
assets recorded
at fair value on
a non-recurring basis
include
long-lived assets that
are reduced
to their estimated
fair value due to
impairments.
Fair value is the price
that would be received
when selling an asset
or paid to transfer
a liability in an orderly
transaction
between market participants
at the
measurement date.
In determining
fair value, the Company
uses various
valuation techniques
including the market approach
(using observable
market data for
identical or similar assets
and liabilities),
the income approach
(discounted cash
flow models) and
the cost approach
(using costs
a market participant
would incur
to develop a comparable
asset). Inputs used
to determine
the fair value of
assets and
liabilities are defined
by a three-level
hierarchy, depending
on the nature of
those inputs. The
Company has
categorized its finan
cial assets and
liabilities and non
-financial assets
measured at fair value
within this hierarchy
based on
whether the inputs
to the valuation
technique are observable
or unobservable.
An observable
input is based on
market data obtained
from independent
sources,
while an unobservable
input reflects the Company’s
assumptions
about market data.
The levels of
the fair value hierarchy
are as follows:
Level 1:
Valuation
inputs consist of
quoted prices in an
active market for
identical assets
or liabilities (observable
quoted prices). Assets
and liabilities
valued
using Level 1 inputs
include exchange
‑
traded equity securities,
listed derivatives
which are actively
traded such
as commodity futures,
interest rate
futures and certain
actively
traded debt securities
.
Level 2:
Valuation
inputs consist of
observable inputs
(other than Level
1 inputs) such
as actively quoted
prices for similar assets,
quoted prices in inactive
markets and inputs
other than quoted
prices such as
interest rate yield
curves, credit spreads,
or inputs derived
from other observable
data by
interpolation, correlation,
regression or other
means. The adjustments
applied to quoted
prices or the inputs
used in valuati
on models may
be both
observable and
unobservable. In these
cases, the fair value
measurement is classified
as Level 2 unless
the unobservable
portion of the adjustment
or
the unobservable
input to the valuation
model is significant,
in which case the
fair value measurement
would be classified
as Level 3. Assets
and
liabilities valued or disclosed
using Level 2 inputs
include investments
in certain funds,
certain debt securities
that are not actively
traded, interest
rate
swaps, cross-currency
interest rate swaps,
commodity swaps,
cash-settled call
options, forward
foreign exchange
contracts, foreign exchange
swaps and
forward rate agreements,
time deposits, as
well as financing
receivables and
debt.
Level 3:
Valuation
inputs are based
on the Company’s
assumptions
of relevant market
data (unobservable
input).
Whenever quoted
prices involve bid-ask
spreads, the
Company ordinarily
determines fair
values based
on mid-market
quotes. However,
for the purpose
of
determining the fair
value of cash
-settled call options serving
as hedges
of the Company’s
management
incentive plan, bid prices
are used.
When determining fair
values based
on quoted prices
in an active market,
the Company considers
if the level of transaction
activity for the financial
instrument has
significantly decreased
or would not be considered
orderly. In such
cases, the resulting
changes
in valuation techniques
would
be disclosed.
If the market is
considered disorderly
or if quoted prices are
not available, the
Company is
required to use another
valuation technique,
such as
an income approach.
Recurring fair
value measures
The fair values
of financial assets
and liabilities measured
at fair value on a
recurring basis
were as follows:
September 30, 2023
($ in millions)
Level 1
Level 2
Level 3
Total fair
value
Assets
Securities in “Marketable
securities and
short-term investments”:
Equity securities
–
644
–
644
Debt securities—U.S. government
obligations
188
–
–
188
Debt securities—European
government obligations
12
–
–
12
Derivative assets
—current in “Other current
assets”
–
227
–
227
Derivative assets
—non-current in “Other
non-current assets”
–
27
–
27
Total
200
898
–
1,098
Liabilities
Derivative liabilities
—current in “Other
current liabilities”
–
161
–
161
Derivative liabilities
—non-current in
“Other non-current
liabilities”
–
325
–
325
Total
–
486
–
486
21
Q3 2023 FINANCIAL INFORMATION
December 31, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair
value
Assets
Securities in “Marketable
securities and
short-term investments”:
Equity securities
–
355
–
355
Debt securities—U.S. government
obligations
255
–
–
255
Debt securities—European
government obligations
–
58
–
58
Debt securities—Corporate
–
57
–
57
Derivative assets
—current in “Other current
assets”
–
184
–
184
Derivative assets
—non-current in “Other
non-current assets”
–
27
–
27
Total
255
681
–
936
Liabilities
Derivative liabilities
—current in “Other
current liabilities”
–
121
–
121
Derivative liabilities
—non-current in
“Other non-current
liabilities”
–
367
–
367
Total
–
488
–
488
The Company
uses the following
methods and
assumptions in estimating
fair values
of financial
assets and
liabilities measured
at fair value on a recurring
basis:
●
Securities in “Marketable
securities and
short-term investments”:
If quoted market
prices in active
markets for identical
assets are available,
these are
considered Level
1 inputs; however,
when markets are not
active, these
inputs are considered
Level 2. If
such quoted
market prices are
not available,
fair value is determined
using market prices
for similar assets
or present value
techniques, applying
an appropriate
risk-free interest
rate adjusted for
non-performance
risk. The inputs used
in present value techniques
are observable
and fall into the
Level 2 category.
●
Derivatives
: The fair values of
derivative instruments
are determined
using quoted
prices of identical
instruments from
an active market,
if available
(Level 1 inputs). If quoted
prices are not available,
price quotes for similar
instruments, appropriately
adjusted, or present
value techniques,
based on
available market data,
or option pricing
models are used.
Cash-settled call
options hedging
the Company’s
WAR liability
are valued based
on bid prices
of the equivalent
listed warrant. The fair
values obtained
using price quotes
for similar instruments
or valuation techniques
represent a Level
2 input
unless significant
unobservable inputs
are used.
Non-recurring fair
value measures
There were no significant
non-recurring fair value
measurements
during the nine
and three months
ended September
30, 2023 and
2022.
Disclosure about
financial instruments
carried on a
cost basis
The fair values
of financial instruments
carried on a cost
basis were
as follows:
September 30, 2023
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair
value
Assets
Cash and equivalents
(excluding securities with
original
maturities up to 3
months):
Cash
1,407
1,407
–
–
1,407
Time deposits
2,462
–
2,462
–
2,462
Restricted cash
18
18
–
–
18
Marketable securities
and short-term investments
(excluding securities):
Time deposits
247
–
247
–
247
Liabilities
Short-term debt and
current maturities
of long-term debt
(excluding finance
lease obligations)
2,923
2,380
543
–
2,923
Long-term debt
(excluding finance
lease obligations)
4,768
4,618
13
–
4,631
December 31, 2022
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair
value
Assets
Cash and equivalents
(excluding securities with
original
maturities up to 3
months):
Cash
1,697
1,697
–
–
1,697
Time deposits
2,459
–
2,459
–
2,459
Restricted cash
18
18
–
–
18
Liabilities
Short-term debt and
current maturities
of long-term debt
(excluding finance
lease obligations)
2,500
1,068
1,432
–
2,500
Long-term debt
(excluding finance
lease obligations)
4,976
4,813
30
–
4,843
22
Q3 2023 FINANCIAL INFORMATION
The Company
uses the following
methods and
assumptions in estimating
fair values
of financial
instruments carried on
a cost basis:
●
Cash and equivalents
(excluding securities with
original maturities
up to 3 months),
Restricted cash, and
Marketable securities
and short-term
investments (excluding
securities):
The carrying amounts
approximate
the fair values as
the items are short
-term in nature
or, for cash
held in banks,
are equal to the deposit
amount.
●
Short-term debt and
current maturities
of long-term debt
(excluding finance
lease obligations):
Short-term debt
includes commercial
paper,
bank
borrowings and
overdrafts. The
carrying amounts
of short-term
debt and current
maturities of long
-term debt, excluding
finance lease
obligations,
approximate their
fair values.
●
Long-term debt
(excluding finance
lease obligations):
Fair values of bonds
are determined using
quoted market
prices (Level
1 inputs), if available.
For
bonds without available
quoted market prices
and other long-term
debt, the fair values
are determined
using a discounted
cash flow methodology
based upon
borrowing rates of similar
debt instruments
and reflecting appropriate
adjustments for
non-performance
risk (Level 2 inputs).
─
Note 8
Contract assets and liabilities
The following table
provides information
about Contract
assets and
Contract liabilities:
($ in millions)
September 30, 2023
December 31, 2022
September 30, 2022
Contract assets
1,073
954
955
Contract liabilities
2,610
2,216
2,115
Contract assets primarily
relate to the Company’s
right to receive consideration
for work completed
but for which no
invoice has been
issued at the reporting date.
Contract assets are
transferred
to receivables when
rights to receive
payment become
unconditional. Management
expects that the majority
of the amounts
will be
collected within one
year of the
respective balance
sheet date.
Contract liabilities
primarily relate
to up-front advances
received on orders
from customers
as well as amounts
invoiced to customers
in excess
of revenues
recognized predominantly
on long-term projects.
Contract
liabilities are reduced
as work is performed
and as revenues
are recognized.
The significant
changes in the Contract
assets and
Contract liabilities
balances were
as follows:
Nine months ended
September 30,
2023
2022
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized,
which was included
in the Contract liabilities
balance at Jan
1, 2023/2022
(1,230)
(923)
Additions to Contract
liabilities - excluding
amounts recognized
as revenue during
the period
1,602
1,320
Receivables
recognized that were
included in the Contract
assets balance
at Jan 1, 2023/2022
(553)
(501)
The Company
considers its order backlog
to represent its unsatisfied
performance
obligations. At
September 30, 2023,
the Company had
unsatisfied
performance
obligations totaling $21,445
million and, of
this amount, the Company
expects to fulfill
approximately
30% percent of
the obligations
in 2023, approximately
49%
percent of the obligations
in 2024
and the balance
thereafter.
23
Q3 2023 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s
total debt at September
30, 2023, and
December 31, 2022,
amounted to $7,850
million and
$7,678 million,
respectively.
Short-term debt and
current maturities
of long-term debt
The Company’s
“Short-term debt and cu
rrent maturities
of long-term debt”
consisted of
the following:
($ in millions)
September 30, 2023
December 31, 2022
Short-term debt
568
1,448
Current maturities of
long-term debt
2,383
1,087
Total
2,951
2,535
Short-term debt primarily
represented issued
commercial paper and
short-term bank borrowings
from various banks.
At September 30,
2023,
and December
31,
2022, $486 million and
$1,383 million,
respectively,
was outstanding
under the $2
billion Euro-commercial
paper program.
No amount was outstanding
under the
$2 billion commercial
paper program
in the United States
at September
30, 2023, or at
December 31, 2022
.
In September 2023,
the Company repaid
at maturity its
CHF 275 million 0%
Bonds, equivalent
to $302 million
on date of
repayment.
In May 2023, the
Company
repaid at maturity
its EUR 700 million
0.625% Instruments,
equivalent to
$772 million on
date of repayment.
Long-term debt
The Company’s
long-term debt at September
30, 2023, and
December 31, 2022,
amounted
to $4,899 million and
$5,143 million,
respectively.
Outstanding bonds
(including maturities within
the next 12 months)
were as follows:
September 30, 2023
December 31, 2022
(in millions)
Nominal outstanding
Carrying value
(1)
Nominal outstanding
Carrying value
(1)
Bonds:
0.625% EUR Instruments,
due 2023
EUR
700
$
742
0% CHF Bonds, due 2023
CHF
275
$
298
0.625% EUR Instruments,
due 2024
EUR
700
$
729
EUR
700
$
720
Floating Rate EUR
Instruments, due
2024
EUR
500
$
531
EUR
500
$
536
0.75% EUR Instruments,
due 2024
EUR
750
$
777
EUR
750
$
769
0.3% CHF Bonds, due
2024
CHF
280
$
307
CHF
280
$
303
2.1% CHF Bonds, due
2025
CHF
150
$
164
CHF
150
$
162
1.965% CHF Bonds, due 2026
CHF
325
$
356
3.25% EUR Instruments,
due 2027
EUR
500
$
527
0.75% CHF Bonds,
due 2027
CHF
425
$
466
CHF
425
$
460
3.8% USD Notes, due 2028
(2)
USD
383
$
382
USD
383
$
381
1.9775% CHF Bonds, due 2028
CHF
150
$
165
1.0% CHF Bonds, due
2029
CHF
170
$
186
CHF
170
$
184
0% EUR Instruments,
due 2030
EUR
800
$
670
EUR
800
$
677
2.375% CHF Bonds, due 2030
CHF
150
$
164
CHF
150
$
162
3.375% EUR Instruments,
due 2031
EUR
750
$
783
2.1125% CHF Bonds, due 2033
CHF
275
$
301
4.375% USD Notes, due
2042
(2)
USD
609
$
590
USD
609
$
590
Total
$
7,098
$
5,984
(1)
USD carrying values include
unamortized debt
issuance costs, bond
discounts or premiums,
as well as adjustments
for fair value hedge accounting,
where appropriate.
(2)
Prior to completing a cash
tender offer in November
2020,
the original principal
amount outstanding,
on each of the 3.8%
USD Notes,
due 2028,
and the 4.375% USD
Notes,
due
2042, was USD 750
million.
In January 2023,
the Company issued
the following EUR Instruments:
(i) EUR 500 million
of 3.25 percent
Instruments,
due 2027, and
(ii) EUR 750 million
of
3.375 percent Instruments
,
due 2031, both
paying interest
annually in arrears.
The aggregate
net proceeds
of these EUR Instruments,
after discount and
fees,
amounted to EUR
1,235 million
(equivalent to approximately
$1,338 million on
date of issuance).
In September 2023,
the Company issued
the following CHF
Bonds: (i) CHF
325 million of
1.965 percent Bond
s, due 2026, (ii) CHF
150 million of
1.9775 percent
Bonds, due 2028
,
and (iii) CHF 275 million
of 2.1125
percent Bonds, due
2033,
all paying interest
annually in arrears.
The aggregate
net proceeds
of these CHF
Bonds, after fees,
amounted to CHF
748 million (equivalent
to approximately
$825 million on
date of issuance).
24
Q3 2023 FINANCIAL INFORMATION
─
Note 10
Commitments and
contingencies
Contingencies—Regulatory,
Compliance
and Legal
Regulatory
Based on findings
during an internal investigation,
the Company self
-reported to the SEC and
the DoJ, in the United
States, to the Special
Investigating Unit
(SIU)
and the National Prosecuting
Authority (NPA)
in South Africa as
well as to various
authorities in other
countries potential
suspect payments
and other compliance
concerns in connection
with some of the Company’s
dealings with Eskom and
related persons. Many
of those parties
have expressed
an interest in, or
commenced
an investigation into, these
matters and the Company
is cooperating fully
with them. The
Company paid
$104
million to Eskom in December
2020 as
part of a full and final
settlement with
Eskom and the
Special Investigating
Unit relating to
improper payments
and other compliance
issues associated
with the
Controls and Instrumentation
Contract, and its
Variation
Orders for Units
1 and 2 at Kusile.
The Company
made a provision
of approximately
$325 million which
was recorded in Other
income (expense),
net, during
the third quarter of
- In December
2022, the Company
settled with the
SEC and DOJ as
well as the
authorities in South
Africa and Switzerland.
The matter
is still pending with
the authorities
in Germany,
but the Company
does
not believe that it will need
to record
any additional provisions
for this matter.
General
The Company
is aware of proceedings,
or the threat of proceedings,
against it and others
in respect of
private claims by
customers and
other third parties
with
regard to certain actual
or alleged anticompetitive
practices. Also,
the Company is subject
to other claims
and legal proceedings,
as well as investigations
carried
out by various law enforcement
authorities. With
respect to the above
-mentioned claims,
regulatory matters,
and any
related proceedings,
the Company will
bear
the related costs,
including costs
necessary
to resolve them.
Liabilities recognized
At September 30,
2023, and December
31, 2022, the
Company had
aggregate liabilities
of $94 million
and $86 million,
respectively,
included in “Other provisions”
and “Other non
‑
current liabilities”,
for the above
regulatory,
compliance and
legal contingencies,
and none of
the individual liabilities
recognized was significant.
As
it is not possible to
make an informed
judgment on, or reasonably
predict, the outcome
of certain matters
and as it
is not possible,
based on information
currently
available to manage
ment, to estimate
the maximum potential
liability on other matters,
there could be adverse
outcomes beyond
the amounts accrue
d.
Guarantees
General
The following table
provides quantitative
data regarding
the Company’s
third-party guarantees
.
The maximum
potential payments
represent a “worst
-case
scenario”, and do
not reflect management’s
expected outcomes.
Maximum potential
payments
($ in millions)
September 30, 2023
December 31, 2022
Performance
guarantees
3,358
4,300
Financial guarantees
92
96
Total
(1)
3,450
4,396
(1)
Maximum potential payments
include amounts in both
continuing and discontinued
operations.
The carrying amount
of liabilities
recorded in the Consolidated
Balance Sheets
reflects the Company’s
best estimate of
future payments,
which it may incur
as part
of fulfilling its guarantee
obligations. In
respect of the above
guarantees, the carrying
amounts of liabilities
at September
30, 2023, and December
31, 2022, were
not significant
.
The Company
is party to various
guarantees providing
financial or performance
assurances
to certain third parties. These
guarantees,
which have various
maturities up to 2032,
mainly consist of
performance
guarantees whereby
(i) the Company
guarantees the
performance
of a third party’s product
or service
according to the terms
of a contract and
(ii) as member
of a consortium/joint
-venture that includes
third parties,
the Company
guarantees not
only its own
performance
but also the work of
third parties. Such
guarantees may
include guarantees
that a project will be
completed
within a specified
time. If the third party
does not fulfill the
obligation, the Company
will compensate
the guaranteed
party in cash
or in kind. The
original maturity
dates for the majority
of these
performance
guarantees range
from one to ten years
.
In conjunction with
the divestment of
the high-voltage
cable and cables
accessories businesses,
the Company has
entered into various
performance
guarantees
with other parties
with respect to certain
liabilities of
the divested business.
At September 30,
2023, and December
31, 2022, the
maximum potential
payable under
these guarantees
amounts to $830
million and $843 million,
respectively,
and these guarantees
have various
original maturities
ranging from five
to ten years.
The Company
retained obligations
for financial, performance
and indemnification
guarantees related
to the sale of
the Power Grids business
(see Note 3 for
details). The performance
and financial
guarantees have
been indemnified
by Hitachi Ltd. These
guarantees, which
have various
maturities up to 2032, primarily
consist of bank
guarantees, standby
letters of credit,
business performance
guarantees and
other trade-related guarantees,
the majority of which
have original
maturity dates ranging
from one to
ten years. The maximum
amount payable
under these guarantees
at September 30,
2023, and December
31, 2022, is
approximately $2.2
billion and $3.0
billion, respectively
.
Commercial commitments
In addition, in the normal
course of bidding
for and executing
certain projects, the
Company has
entered into
standby letters of
credit, bid/performance
bonds and
surety bonds
(collectively “performance
bonds”) with various
financial institutions.
Customers
can draw on such
performance
bonds in the
event that the Company
does not fulfill its contractual
obligations. The
Company would
then have an
obligation to
reimburse the financial
institution for
amounts paid under
the performance
bonds. At September
30, 2023, and
December 31, 2022,
respectively,
the total outstandin
g
performance
bonds aggregated
to $3.0 billion and
$2.9 billion.
There
have been
no significant amounts
reimbursed to financial
institutions
under these types
of arrangements
in the nine and
three months ended
September 30, 2023
and 2022.
25
Q3 2023 FINANCIAL INFORMATION
Product and order
-related contingencies
The Company
calculates its provision
for product warranties
based on historical
claims experience
and specific
review of certain contracts.
The reconciliation
of the
“Provisions for warranties
”, including guarantees
of product performance,
was as follows:
($ in millions)
2023
2022
Balance at January
1,
1,028
1,005
Claims paid in cash
or in kind
(132)
(122)
Net increase in provision
for changes
in estimates, warranties
issued and
warranties expired
228
173
Exchange rate differences
(16)
(94)
Balance at September
30,
1,108
962
─
Note 11
Income taxes
In calculating income
tax expense,
the Company uses
an estimate of the annual
effective
tax rate based upon
the facts and circumstances
known at each interim
period. On a quarterly
basis, the actual
effective
tax rate is adjusted,
as appropriate,
based upon
changed
facts and circumstances,
if any, as
compared to those
forecasted
at the beginning of
the year and each
interim period thereafter.
The effective
tax rate of 21.5 percent
in the
nine months ended
September
30, 2023, was
lower than the effective
tax rate of 33.1
percent in the nine
months
ended September
30, 2022, primarily due
to a net benefit
realized on a favorable
resolution of an
uncertain tax position
in the nine months
ended September
30,
2023, as well as the
impact of non-deductible
regulatory penalties
in connection with
the Kusile project
in the nine months
ended September
30, 2022.
In February 2023,
on completion of
a tax audit, the
Company obtained
resolution of the uncertain
tax position for which
an amount was
recorded within
Other non-
current liabilities as
of December
31, 2022. In the nine
months ended
September 30,
2023, the Company
released the
provision of $206
million, due to the
resolution of this matter
,
which resulted
in an increase of
$0.11 in earnings
per share (basic
and diluted) for
the nine months
ended September
30, 2023.
─
Note 12
Employee benefits
The Company
operates defined
benefit pension
plans, defined
contribution pension
plans, and termination
indemnity plans,
in accordance
with local regulations
and practices. At September
30, 2023, the Company’s
most significant
defined benefit
pension plans
are in Switzerland
as well as in Germany,
the United
Kingdom, and the
United States. These
plans cover a large
portion of the
Company’s
employees
and provide benefits
to employees in the
event of death,
disability,
retirement, or termination
of employment.
Certain of these
plans are multi-employer
plans. The Company
also operates
other postretirement
benefit
plans including
postretirement health
care benefits
and other employee
-related benefits
for active employees
including long-service
award plans. The
measurement date
used for the Company’s
employee benefit
plans is December
- The funding
policies of the Company’s
plans are consistent
with the local
government and
tax requirements.
Net periodic benefit
cost of the Company’s
defined benefit
pension and
other postretirement benefit
plans consisted
of the following:
($ in millions)
Defined pension
benefits
Other postretirement
Switzerland
International
benefits
Nine months ended
September 30,
2023
2022
2023
2022
2023
2022
Operational pension
cost:
Service cost
29
40
21
26
–
–
Operational pension
cost
29
40
21
26
–
–
Non-operational pension
cost (credit):
Interest cost
35
2
122
61
1
1
Expected return on
plan assets
(94)
(87)
(116)
(113)
–
–
Amortization of prior service
cost (credit)
(6)
(5)
(2)
(2)
(1)
(1)
Amortization of net actuarial
loss
–
–
39
44
(3)
(2)
Curtailments, settlements
and special termination
benefits
–
–
18
–
(16)
–
Non-operational pension
cost (credit)
(65)
(90)
61
(10)
(19)
(2)
Net periodic benefit
cost (credit)
(36)
(50)
82
16
(19)
(2)
($ in millions)
Defined pension
benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2023
2022
2023
2022
2023
2022
Operational pension
cost:
Service cost
10
13
7
9
–
–
Operational pension
cost
10
13
7
9
–
–
Non-operational pension
cost (credit):
Interest cost
11
1
40
18
–
–
Expected return on
plan assets
(31)
(29)
(42)
(36)
–
–
Amortization of prior service
cost (credit)
(2)
(1)
(1)
(1)
–
–
Amortization of net actuarial
loss
–
–
16
14
(1)
–
Curtailments, settlements
and special termination
benefits
–
–
18
–
(16)
–
Non-operational pension
cost (credit)
(22)
(29)
31
(5)
(17)
–
Net periodic benefit
cost (credit)
(12)
(16)
38
4
(17)
–
26
Q3 2023 FINANCIAL INFORMATION
The components
of net periodic benefit
cost other than
the service cost component
are included in
the line “Non-operational
pension cost
(credit)” in the income
statement.
Employer contributions
were as follows:
($ in millions)
Defined pension
benefits
Other postretirement
Switzerland
International
benefits
Nine months ended
September 30,
2023
2022
2023
2022
2023
2022
Total con
tributions to defined
benefit pension
and
other postretirement benefit
plans
8
33
85
24
29
5
Of which, discretionary
contributions
to defined benefit
pension plans
–
–
56
–
25
–
($ in millions)
Defined pension
benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2023
2022
2023
2022
2023
2022
Total con
tributions to defined
benefit pension
and
other postretirement benefit
plans
3
2
64
5
25
1
Of which, discretionary
contributions
to defined benefit
pension plans
–
–
56
–
25
–
The Company
expects to make contributions
totaling approximately
$91 million and
$31 million
to its defined
pension plans and
other postretirement
benefit plans,
respectively,
for the full year 2023.
─
Note 13
Stockholder's equity
At the Annual General
Meeting of Shareholders
(AGM) on March
23, 2023, shareholders
approved the
proposal of the
Board of Directors to
distribute 0.84 Swiss
francs per share
to shareholders. The
declared dividend
amounted to $1,706
million,
with the Company
disbursing a portion
in March and
the remaining amounts
in April.
In March 2023, the
Company completed
the share buyback
program that was
launched in April
- This program
was executed
on a second trading
line on the
SIX Swiss Exchange.
Through this program,
the Company purchased
a total of 67 million
shares for approximately
$2.0 billion, of
which 8 million shares
were
purchased
in the first quarter of
2023
(resulting in an increase
in Treasury
stock of $253
million).
Also in March 2023,
the Company announced
a new share buyback
program of up to $1
billion. This program,
which was
launched in April 202
3, is being executed
on a second
trading line on the SIX Swiss
Exchange
and is planned
to run until the Company’s
2024 AGM. Through
this program,
the Company purchased,
from
the program’s
launch in April 2023
to September 30,
2023, 11
million shares,
resulting in an increase
in Treasury
stock of $411
million.
In the second quarter
of 2023, the Company
cancelled 83
million shares which
had
been purchased
under its share buyback
program. This resulted
in a decrease
in Treasury stock of
$2,567
million and a corresponding
total decrease in Capital
stock, Additional
paid-in capital and
Retained earnings
.
In addition to the share
buyback programs,
the Company purchased
6 million of its own shares
on the open
market in the
nine months
ended September
30, 2023,
mainly for use in connection
with its employee
share plans,
resulting in an increase
in Treasury stock
of $234
million.
In the nine months ended
September 30,
2023, the Company
delivered, out of
treasury stock, approximately
6 million shares
in connection with its
Management
Incentive Plan.
In February 2023,
the Company obtained
funding through
a private placement
of shares in its ABB
E-Mobility subsidiary,
ABB E-mobility
Holding Ltd
(ABB E-Mobility),
receiving gross
proceeds of
325 million Swiss francs
(approximately $351
million) and
reducing the Company’s
ownership in ABB
E-Mobility from
92 percent to 81 percent.
This
resulted in an increase
in Additional paid
-in capital of $17
0
million.
27
Q3 2023 FINANCIAL INFORMATION
─
Note 14
Earnings per share
Basic earnings
per share is calculated
by dividing income
by the weighted
-average number
of shares outstanding
during the period.
Diluted earnings
per share is
calculated by
dividing income by
the weighted-average
number of shares
outstanding during
the period, assuming
that all potentially
dilutive securities
were
exercised, if dilutive. Potentially
dilutive securities
comprise outstanding
written call options,
and outstanding
options and shares
granted subject
to certain
conditions under
the Company’s
share-based payment
arrangements.
Basic earnings per share
Nine months ended
September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2023
2022
2023
2022
Amounts attributable
to ABB shareholders:
Income from continuing
operations, net of
tax
2,840
1,379
889
376
Loss from discontinued
operations, net of
tax
(16)
(36)
(7)
(16)
Net income
2,824
1,343
882
360
Weighted-average
number of shares
outstanding
(in millions)
1,859
1,909
1,854
1,882
Basic earnings
per share attributable
to ABB shareholders:
Income from continuing
operations, net of
tax
1.53
0.72
0.48
0.20
Loss from discontinued
operations, net of
tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.52
0.70
0.48
0.19
Diluted earnings
per share
Nine months ended
September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2023
2022
2023
2022
Amounts attributable
to ABB shareholders:
Income from continuing
operations, net of
tax
2,840
1,379
889
376
Loss from discontinued
operations, net of
tax
(16)
(36)
(7)
(16)
Net income
2,824
1,343
882
360
Weighted-average
number of shares
outstanding (in millions)
1,859
1,909
1,854
1,882
Effect of dilutive
securities:
Call options and shares
12
11
11
7
Adjusted weighted-average
number of
shares outstanding
(in millions)
1,871
1,920
1,865
1,889
Diluted earnings per share
attributable to
ABB shareholders:
Income from continuing
operations, net of
tax
1.52
0.72
0.48
0.20
Loss from discontinued
operations, net of
tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.51
0.70
0.47
0.19
28
Q3 2023 FINANCIAL INFORMATION
─
Note 15
Reclassifications out of
accumulated other comprehensive
loss
The following table
shows changes
in “Accumulated other
comprehensive
loss” (OCI) attributable
to ABB, by component,
net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January
1, 2022
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive
(loss) income:
Other comprehensive
(loss) income
before reclassifications
(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
and
redeemable noncontrolling
interests
(32)
–
–
–
(32)
Balance at September
30, 2022
(1)
(3,767)
(22)
(917)
(8)
(4,715)
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January
1, 2023
(3,691)
(19)
(838)
(8)
(4,556)
Other comprehensive
(loss) income:
Other comprehensive
(loss) income
before reclassifications
(194)
–
(9)
(5)
(208)
Amounts reclassified
from OCI
9
6
28
8
51
Total other
comprehensive
(loss) income
(185)
6
19
3
(157)
Less:
Amounts attributable
to
noncontrolling interests
and
redeemable noncontrolling
interests
(8)
–
–
–
(8)
Balance at September
30, 2023
(3,868)
(13)
(819)
(5)
(4,705)
(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 Foreign currency
translation adjustments
and 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
2023
2022
2023
2022
Foreign currency
translation adjustments:
Changes attributable
to divestments
Other income (expense),
net
9
–
9
–
Net loss on complete
or substantially
complete
liquidations of foreign
subsidiaries
Other income (expense),
net
–
5
–
–
Amounts reclassified
from OCI
9
5
9
–
Pension and
other postretirement plan
adjustments:
Amortization of prior service
cost (credit)
Non-operational pension
(cost) credit
(9)
(8)
(3)
(2)
Amortization of net actuarial
loss
Non-operational pension
(cost) credit
36
42
15
14
Net gain (loss) from
settlements and
curtailments
Non-operational pension
(cost) credit
2
–
2
–
Total before
tax
29
34
14
12
Tax
Income tax expense
(1)
(10)
6
(3)
Amounts reclassified
from OCI
28
24
20
9
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, 2023
and 2022.
29
Q3 2023 FINANCIAL INFORMATION
─
Note 16
Restructuring and related
expenses
Other restructuring-related
activities
In the nine and three
months ended
September 30, 2023
and 2022, 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)
2023
2022
2023
2022
Employee severance
costs
38
64
12
21
Estimated contract settlement,
loss order and
other costs
4
205
2
3
Inventory and long
-lived asset impairments
18
5
18
–
Total
60
274
32
24
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)
2023
2022
2023
2022
Total cost
of sales
19
13
9
5
Selling, general and administrative
expenses
14
39
1
11
Non-order related research
and development
expenses
–
2
–
–
Other income (expense),
net
27
220
22
8
Total
60
274
32
24
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,
2023, and December
31, 2022, $179
million and $198
million, respectively,
was recorded
for other restructuring
-related liabilities
and is included
primarily in Other provisions.
─
Note 17
Operating segment data
The Chief Operating
Decision Maker
(CODM) is the Chief
Executive Officer.
The CODM allocates
resources to and
assesses
the performance of
each operating
segment using
the information outlined
below. The
Company is organized
into the following
segments, based
on products and
services: Electrification,
Motion,
Process Automation
and Robotics
& Discrete Automation.
The remaining
operations
of the Company
are included in Corporate
and
Other.
Effective January
1, 2023, the E-mobility Division
is no longer managed
within the Electrification
segment and
has become
a separate operating
segment. This
new segment
does not currently meet
any of the size
thresholds to be considered
a reportable segment
and as such
is presented within Corporate
and Other.
The
segment information
for the nine and
three months
ended September
30, 2023 and
2022, and at December
31, 2022,
has been recast
to reflect this change.
A description of the
types of products
and services
provided by each
reportable segment
is as follows:
●
Electrification:
manufactures
and sells electrical products
and solutions which
are designed to provide
safe, smart and
sustainable electrical
flow from
the substation to the socket.
The portfolio of
increasingly digital
and connected
solutions includes
renewable power
solutions, modular substation
packages, distribution
automation products,
switchboard
and panelboards,
switchgear, UPS
solutions, circuit
breakers, measuring
and sensing
devices,
control products, wiring
accessories,
enclosures
and cabling systems
and intelligent home and
building solutions,
designed to integrate
and automate
lighting, heating, ventilation,
security and
data communication
networks.
The products
and services
are delivered through
six operating Divisions:
Distribution Solutions,
Smart Power,
Smart Buildings,
Installation Products
and Service, as
well as, prior
to its sale in July
2023, the Power Conversion
Division.
●
Motion:
designs, manufactures,
and sells drives,
motors, generators
and traction converters
that are driving
the low-carbon
future for industries,
cities,
infrastructure and
transportation. These
products, digital
technology
and related services
enable industrial customers
to increase
energy efficiency,
improve safety
and reliability,
and achieve
precise control of
their processes.
Building on over 130
years of cumulative
experience
in electric
powertrains, Motion
combines domain
expertise and technology
to deliver the optimum
solution for
a wide range
of applications in all
industrial
segments. In addition,
Motion,
along with its
partners, has
a leading global service
presence. These
products and
services are delivered
through seven
operating Divisions:
Large Motors
and Generators,
IEC LV
Motors, NEMA
Motors, Drive Products,
System Drives,
Service
and Traction.
30
Q3 2023 FINANCIAL INFORMATION
●
Process Automation:
offers a broad
range of industry
-specific, integrated
automation, electrification
and digital solutions,
as well as lifecycle
services for
the process,
hybrid and marine
industries. The product
portfolio includes
control technologies,
industrial software,
advanced
analytics, sensing
and
measurement technology,
and marine propulsion
systems. In addition
,
Process
Automation offers
a comprehensive
range of services,
from repair to
advanced digital capabilities
such as remote
monitoring, preventive
maintenance, asset
performance
management, emission
monitoring and
cybersecurity.
The products, systems
and services
are currently delivered
through four operating
Divisions: Energy
Industries, Process
Industries,
Marine & Ports and
Measurement &
Analytics as
well as, prior to
its spin-off
in October 2022, the Turbocharging
Division (Accelleron).
●
Robotics & Discrete
Automation:
delivers its products
,
solutions and
services through
two operating
Divisions: Robotics
and Machine
Automation.
Robotics includes
industrial robots, autonomous
mobile robotics,
software, robotic
solutions, field services,
spare parts, and
digital services.
Machine
Automation specializes
in solutions based
on its programmable
logic controllers
(PLC), industrial PCs
(IPC), servo motion,
transport systems
and
machine vision
.
Both Divisions offer
engineering and
simulation software
as well as a comprehensive
range of digital solutions.
Corporate and Other:
includes headquarter
costs,
the Company’s
corporate real estate
activities, Corporate
Treasury
Operations, the E-mobility
operating
segment, historical operating
activities of certain
divested businesses
,
and other non-core operati
ng activities.
The primary measure
of profitability
on which the
operating segments
are evaluated
is Operational EBITA,
which represents
income from operations
excluding:
●
amortization expense
on intangibles arising
upon acquisition
(acquisition-related
amortization),
●
restructuring, related
and implementation
costs,
●
changes
in the amount recorded
for obligations related
to divested businesses
occurring after the divestment
date (changes
in obligations related
to
divested businesses),
●
gains and losses
from sale of businesses
(including fair value
adjustment on assets
and liabilities
held for sale,
if any),
●
acquisition-
and divestment
-related expenses
and integration costs,
●
certain other non-operational
items, as well as
●
foreign exchange/commodity
timing differences
in income from operations
consisting of:
(a) unrealized gains
and losses
on derivatives (foreign
exchange, commodities,
embedded
derivatives), (b)
realized gains and
losses on derivatives
where the underlying
hedged transaction
has not yet been
realized, and (c) unrealized
foreign exchange
movements on
receivables/payables
(and related assets/liabilities).
Certain other non-operational
items generally
includes certain regulatory,
compliance and
legal costs, other
income/expense
relating to the Power Grids
joint
venture, certain asset
write downs/impairments
and certain other
fair value changes,
changes
in estimates relating to opening
balance sheets
of acquired
businesses (changes
in pre-acquisition estimates),
as well as other
items which are determined
by management
on a case-by-case
basis.
The CODM primarily
reviews the results
of each segment
on a basis that is before
the elimination
of profits made
on inventory
sales between
segments. Segment
results below are presented
before these
eliminations, with a
total deduction
for intersegment profits
to arrive at the Company’s
consolidated
Operational EBITA.
Intersegment sales
and transfers
are accounted
for as if the sales
and transfers
were to third parties,
at current market
prices.
The following tables
present disaggregated
segment revenues
from contracts with customers
,
Operational EBITA,
and the reconciliations
of consolidated
Operational EBITA
to Income from
continuing operations
before taxes
for the nine and three
months ended
September 30, 2023
and 2022, as
well as total assets
at September 30, 2023, and December 31, 2022.
Nine months ended
September 30,
2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,411
1,858
1,663
1,456
229
8,617
The Americas
4,393
1,924
1,279
431
216
8,243
of which: United States
3,292
1,602
798
269
182
6,143
Asia, Middle East
and Africa
2,912
1,699
1,580
886
53
7,130
of which: China
1,356
866
502
657
23
3,404
10,716
5,481
4,522
2,773
498
23,990
Product type
Products
10,050
4,695
2,667
2,353
445
20,210
Services and
other
666
786
1,855
420
53
3,780
10,716
5,481
4,522
2,773
498
23,990
Third-party revenues
10,716
5,481
4,522
2,773
498
23,990
Intersegment revenues
170
387
21
15
(593)
–
Total revenues
(1)
10,886
5,868
4,543
2,788
(95)
23,990
31
Q3 2023 FINANCIAL INFORMATION
Nine months ended
September 30,
2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,125
1,430
1,726
1,070
169
7,520
The Americas
3,799
1,574
1,135
377
133
7,018
of which: United States
2,777
1,307
681
267
92
5,124
Asia, Middle East
and Africa
3,020
1,564
1,607
838
55
7,084
of which: China
1,506
888
498
646
25
3,563
9,944
4,568
4,468
2,285
357
21,622
Product type
Products
9,328
3,931
2,420
1,935
332
17,946
Services and
other
616
637
2,048
350
25
3,676
9,944
4,568
4,468
2,285
357
21,622
Third-party revenues
9,944
4,568
4,468
2,285
357
21,622
Intersegment revenues
177
332
25
5
(539)
–
Total revenues
(1)
10,121
4,900
4,493
2,290
(182)
21,622
Three months ended September 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,083
569
582
500
76
2,810
The Americas
1,461
657
411
159
87
2,775
of which: United States
1,113
541
248
94
71
2,067
Asia, Middle East
and Africa
964
582
553
263
21
2,383
of which: China
439
285
163
182
6
1,075
3,508
1,808
1,546
922
184
7,968
Product type
Products
3,288
1,526
924
777
165
6,680
Services and
other
220
282
622
145
19
1,288
3,508
1,808
1,546
922
184
7,968
Third-party revenues
3,508
1,808
1,546
922
184
7,968
Intersegment revenues
53
139
8
7
(207)
–
Total revenues
(1)
3,561
1,947
1,554
929
(23)
7,968
Three months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,005
477
595
358
59
2,494
The Americas
1,354
545
368
139
46
2,452
of which: United States
988
454
221
101
32
1,796
Asia, Middle East
and Africa
1,053
569
488
329
21
2,460
of which: China
514
323
189
264
10
1,300
3,412
1,591
1,451
826
126
7,406
Product type
Products
3,204
1,379
778
705
118
6,184
Services and
other
208
212
673
121
8
1,222
3,412
1,591
1,451
826
126
7,406
Third-party revenues
3,412
1,591
1,451
826
126
7,406
Intersegment revenues
59
111
7
2
(179)
–
Total revenues
(1)
3,471
1,702
1,458
828
(53)
7,406
(1)
Due to rounding, numbers presented
may not add to the totals
provided.
32
Q3 2023 FINANCIAL INFORMATION
Nine months ended
Three months ended
September 30,
September 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA:
Electrification
2,212
1,768
748
651
Motion
1,157
845
390
305
Process Automation
670
645
226
225
Robotics & Discrete
Automation
418
215
137
106
Corporate and Other
‒
E-mobility
(134)
(12)
(39)
(4)
‒ Corporate costs,
Intersegment elimination
and other
(229)
(97)
(70)
(52)
Total
4,094
3,364
1,392
1,231
Acquisition-related amortization
(164)
(174)
(55)
(55)
Restructuring, related
and implementation
costs
(1)
(92)
(300)
(51)
(20)
Changes in obligations
related to divested
businesses
5
17
–
–
Gains and losses
from sale of businesses
97
(4)
71
–
Acquisition-
and divestment
-related expenses
and integration costs
(55)
(171)
(10)
(62)
Foreign exchange/commodity
timing differences
in income from operations:
Unrealized gains and
losses on derivatives
(foreign exchange,
commodities, embedded
derivatives)
(58)
(107)
(48)
(7)
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
(8)
(48)
(2)
(13)
Unrealized foreign exchange
movements on
receivables/payables
(and
related assets/liabilities)
25
55
11
15
Certain other non-operational
items:
Other income/expense
relating to the Power
Grids joint venture
27
(67)
7
(30)
Regulatory,
compliance and
legal costs
–
(333)
–
(329)
Business transformation
costs
(2)
(139)
(114)
(57)
(48)
Changes in pre-acquisition
estimates
(4)
–
–
(1)
Certain other fair value
changes, including
asset impairments
3
58
(3)
24
Other non-operational
items
24
(24)
4
3
Income from operations
3,755
2,152
1,259
708
Interest and dividend
income
115
50
37
17
Interest and other
finance expense
(197)
(107)
(73)
(45)
Non-operational pension
(cost) credit
23
102
8
34
Income from continuing
operations before
taxes
3,696
2,197
1,231
714
(1)
Includes impairment of certain
assets.
(2)
Amount includes ABB Way process
transformation costs of $122
million and $98 million
for nine months ended
September 30, 2023 and
2022, respectively,
and $51 million
and $34 million for the three
months ended September
30, 2023 and 2022,
respectively.
Total assets
(1)
($ in millions)
September 30, 2023
December 31, 2022
Electrification
12,699
12,500
Motion
7,013
6,565
Process Automation
4,900
4,598
Robotics & Discrete
Automation
4,893
4,901
Corporate and Other
(2)
10,594
10,584
Consolidated
40,099
39,148
(1)
Total assets
are after intersegment
eliminations and therefore reflect
third-party assets
only.
(2)
At September 30, 2023, and December
31, 2022,
respectively,
Corporate and Other includes $60
million and $96 million
of assets in the Power
Grids business which is
reported as discontinued
operations (see Note 3).
33
Q3 2023 FINANCIAL INFORMATION
34
Q3 2023 FINANCIAL INFORMATION
—
Supplemental Reconciliations and Definitions
The following
reconciliations
and
definitions
include
measures
which
ABB uses
to supplement
its Consolidated
Financial
Information
(unaudited)
which
is
prepared
in accordance
with
United
States
generally
accepted
accounting
principles
(U.S.
GAAP).
Certain
of these
financial
measures
are,
or may
be,
considered
non-GAAP
financial
measures
as defined
in the
rules
of
the U.S.
Securities
and
Exchange
Commission
(SEC).
While
ABB’s
management
believes
that
the non
-GAAP financial
measures
herein
are
useful
in evaluating
ABB’s
operating
results,
this
information
should
be considered
as supplemental
in nature
and
not as
a substitute
for
the related
financial
information
prepared
in accordance
with
U.S.
GAAP.
Therefore
these
measures
should
not be
viewed
in isolation
but considered
together
with
the Consolidated
Financial
Information
(unaudited)
prepared
in accordance
with
U.S.
GAAP
as of
and for
the nine
and
three
months
ended
September
30, 2023.
Comparable growth rates
Growth rates for certain
key figures may be
presented and
discussed
on a “comparable” basis.
The comparable
growth rate measures
growth on a constant
currency basis.
Since we are a global
company,
the comparability of
our operating
results reported in U.S.
dollars is affected
by foreign currency
exchange rate
fluctuations. We
calculate the
impacts from
foreign currency
fluctuations by
translating the current
-year periods’ reported
key figures into U.S.
dollar amounts
using
the exchange
rates in effect for the
comparable periods
in the previous
year.
Comparable growth
rates are also adjusted
for changes
in our business
portfolio. Adjustments
to our business
portfolio occur
due to acquisitions,
divestments,
or
by exiting specific
business activities or
customer markets.
The adjustment
for portfolio changes
is calculated as
follows: where the
results of any business
acquired or divested
have not been
consolidated
and reported for the
entire duration
of both the current
and comparable
periods, the
reported key figures
of such
business are adjusted
to exclude the relevant
key figures of any
corresponding
quarters which are not
comparable when
computing the
comparable growth
rate.
Certain portfolio changes
which do not qualify
as divestments
under U.S. GAAP
have been
treated in a similar
manner to divestments.
Changes in our
portfolio
where we have
exited certain business
activities or customer
markets are adjusted
as if the relevant
business was
divested in the
period when
the decision to
cease business
activities was taken. We
do not adjust
for portfolio changes
where the relevant business
has annualized
revenues of
less than $50 million.
The following tables
provide reconciliations
of reported growth
rates of certain
key figures to their
respective comparable
growth rate.
Comparable growth
rate reconciliation
by Business
Area
Q3 2023 compared
to Q3 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
-2%
0%
3%
1%
3%
-1%
4%
6%
Motion
-4%
-1%
-2%
-7%
14%
-1%
-2%
11%
Process
Automation
20%
-2%
20%
38%
7%
-1%
17%
23%
Robotics & Discrete
Automation
-26%
-1%
0%
-27%
12%
-3%
0%
9%
ABB Group
-2%
0%
4%
2%
8%
-1%
4%
11%
9M 2023 compared to 9M 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
0%
2%
1%
3%
8%
2%
1%
11%
Motion
1%
1%
-1%
1%
20%
2%
-2%
20%
Process
Automation
12%
2%
17%
31%
1%
2%
16%
19%
Robotics & Discrete
Automation
-24%
2%
0%
-22%
22%
1%
0%
23%
ABB Group
-1%
2%
3%
4%
11%
2%
3%
16%
35
Q3 2023 FINANCIAL INFORMATION
Regional comparable
growth rate
reconciliation
Regional comparable
growth rate
reconciliation
for ABB Group -
Quarter
Q3 2023 compared
to Q3 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-11%
-5%
3%
-13%
13%
-7%
4%
10%
The Americas
9%
-1%
5%
13%
13%
-1%
4%
16%
of which: United States
8%
-1%
6%
13%
15%
0%
4%
19%
Asia, Middle East
and Africa
-5%
5%
4%
4%
-3%
5%
4%
6%
of which: China
-10%
5%
2%
-3%
-17%
4%
3%
-10%
ABB Group
-2%
0%
4%
2%
8%
-1%
4%
11%
Regional comparable
growth rate
reconciliation by
Business Area
- Quarter
Q3 2023 compared to Q3 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
0%
-6%
3%
-3%
7%
-7%
2%
2%
The Americas
-2%
0%
6%
4%
8%
-1%
6%
13%
of which: United States
-2%
0%
8%
6%
13%
0%
6%
19%
Asia, Middle East
and Africa
-5%
6%
1%
2%
-8%
5%
3%
0%
of which: China
-6%
6%
1%
1%
-15%
5%
3%
-7%
Electrification
-2%
0%
3%
1%
3%
-1%
4%
6%
Q3 2023 compared
to Q3 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-22%
-5%
-1%
-28%
21%
-9%
-1%
11%
The Americas
3%
-2%
-4%
-3%
21%
-1%
-5%
15%
of which: United States
-3%
0%
-4%
-7%
19%
0%
-5%
14%
Asia, Middle East
and Africa
10%
5%
0%
15%
3%
5%
0%
8%
of which: China
5%
6%
0%
11%
-12%
5%
0%
-7%
Motion
-4%
-1%
-2%
-7%
14%
-1%
-2%
11%
Q3 2023 compared
to Q3 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
18%
-3%
22%
37%
-2%
-3%
13%
8%
The Americas
63%
-5%
22%
80%
12%
-2%
15%
25%
of which: United States
75%
-6%
27%
96%
13%
-1%
19%
31%
Asia, Middle East
and Africa
-11%
2%
14%
5%
13%
4%
22%
39%
of which: China
-22%
4%
17%
-1%
-14%
5%
15%
6%
Process Automation
20%
-2%
20%
38%
7%
-1%
17%
23%
Q3 2023 compared
to Q3 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-35%
-3%
0%
-38%
40%
-9%
0%
31%
The Americas
-10%
-2%
0%
-12%
14%
-3%
0%
11%
of which: United States
-9%
0%
0%
-9%
-6%
0%
0%
-6%
Asia, Middle East
and Africa
-20%
3%
0%
-17%
-19%
3%
0%
-16%
of which: China
-32%
4%
0%
-28%
-31%
4%
0%
-27%
Robotics & Discrete
Automation
-26%
-1%
0%
-27%
12%
-3%
0%
9%
36
Q3 2023 FINANCIAL INFORMATION
Regional comparable
growth rate
reconciliation
for ABB Group –
Year to date
9M 2023 compared to 9M 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-3%
0%
3%
0%
15%
-1%
3%
17%
The Americas
6%
-1%
3%
8%
17%
0%
3%
20%
of which: United States
3%
-1%
3%
5%
20%
0%
3%
23%
Asia, Middle East
and Africa
-5%
6%
4%
5%
1%
6%
5%
12%
of which: China
-13%
6%
2%
-5%
-4%
5%
3%
4%
ABB Group
-1%
2%
3%
4%
11%
2%
3%
16%
Regional comparable
growth rate
reconciliation by
Business Area
– Year to date
9M 2023 compared to 9M 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-1%
-1%
1%
-1%
8%
-1%
1%
8%
The Americas
2%
0%
2%
4%
16%
0%
2%
18%
of which: United States
-1%
0%
3%
2%
19%
0%
2%
21%
Asia, Middle East
and Africa
-1%
8%
0%
7%
-3%
7%
1%
5%
of which: China
-9%
6%
0%
-3%
-10%
5%
1%
-4%
Electrification
0%
2%
1%
3%
8%
2%
1%
11%
9M 2023 compared to 9M 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-3%
-1%
-1%
-5%
28%
-2%
-1%
25%
The Americas
2%
0%
-2%
0%
23%
0%
-3%
20%
of which: United States
0%
-1%
-2%
-3%
23%
0%
-3%
20%
Asia, Middle East
and Africa
3%
6%
0%
9%
9%
7%
0%
16%
of which: China
-3%
6%
0%
3%
-1%
6%
0%
5%
Motion
1%
1%
-1%
1%
20%
2%
-2%
20%
9M 2023 compared to 9M 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
18%
4%
21%
43%
-4%
1%
15%
12%
The Americas
26%
-1%
14%
39%
13%
0%
13%
26%
of which: United States
24%
-3%
17%
38%
17%
0%
18%
35%
Asia, Middle East
and Africa
-5%
4%
17%
16%
-2%
5%
17%
20%
of which: China
-2%
5%
20%
23%
1%
5%
19%
25%
Process Automation
12%
2%
17%
31%
1%
2%
16%
19%
9M 2023 compared to 9M 2022
Order growth rate
Revenue growth
rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-26%
0%
0%
-26%
36%
-1%
0%
35%
The Americas
-8%
-2%
0%
-10%
15%
-1%
0%
14%
of which: United States
-17%
0%
0%
-17%
1%
0%
0%
1%
Asia, Middle East
and Africa
-28%
4%
0%
-24%
6%
6%
0%
12%
of which: China
-34%
4%
0%
-30%
2%
5%
0%
7%
Robotics & Discrete
Automation
-24%
2%
0%
-22%
22%
1%
0%
23%
37
Q3 2023 FINANCIAL INFORMATION
Order backlog growth
rate reconciliation
September 30, 2023
compared
to September 30,
2022
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
11%
-2%
7%
16%
Motion
11%
-5%
-1%
5%
Process Automation
19%
-3%
4%
20%
Robotics & Discrete
Automation
-11%
-3%
0%
-14%
ABB Group
11%
-3%
3%
11%
Other growth rate
reconciliations
Q3 2023 compared
to Q3 2022
Service orders growth
rate
Services revenues
growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
12%
0%
0%
12%
6%
-2%
0%
4%
Motion
6%
-2%
0%
4%
33%
-1%
0%
32%
Process
Automation
30%
-3%
37%
64%
-8%
-1%
25%
16%
Robotics & Discrete
Automation
10%
-3%
0%
7%
19%
-4%
0%
15%
ABB Group
22%
-3%
17%
36%
5%
-1%
14%
18%
9M 2023 compared to 9M 2022
Service orders growth
rate
Services revenues
growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
6%
2%
0%
8%
8%
2%
0%
10%
Motion
7%
3%
0%
10%
23%
3%
0%
26%
Process
Automation
-2%
1%
26%
25%
-9%
1%
25%
17%
Robotics & Discrete
Automation
9%
2%
0%
11%
20%
0%
0%
20%
ABB Group
2%
2%
14%
18%
3%
2%
14%
19%
38
Q3 2023 FINANCIAL INFORMATION
Operational EBITA
as % of operational
revenues (Operational
EBITA
margin)
Definition
Operational EBITA
margin
Operational EBITA margin is Operational EBITA as a percentage of operational revenues.
Operational EBITA
Operational earnings
before interest,
taxes and acquisition
-related amortization
(Operational EBITA)
represents Income
from operations excluding:
●
acquisition-related amortization
(as defined below),
●
restructuring, related
and implementation
costs,
●
changes
in the amount recorded
for obligations related
to divested businesses
occurring after the divestment
date (changes
in obligations related
to
divested businesses),
●
gains and losses
from sale of businesses
(including fair value
adjustment on assets
and liabilities
held for sale,
if any),
●
acquisition-
and divestment
-related expenses
and integration costs,
●
certain other non-operational
items, as well as
●
foreign exchange/commodity
timing differences
in income from operations
consisting of:
(a) unrealized
gains and losses
on derivatives (foreign
exchange, commodities,
embedded
derivatives), (b)
realized gains and
losses on derivatives
where the underlying
hedged transaction
has not yet been
realized, and (c) unrealized
foreign exchange
movements on
receivables/payables
(and related assets/liabilities).
Certain other non-operational
items generally
includes certain regulatory,
compliance and
legal costs, other
income/expense
relating to the Power
Grids joint
venture, certain asse
t
write downs/impairments
and certain other
fair value changes,
changes
in estimates relating to opening
balance sheets
of acquired
businesses (changes
in pre-acquisition estimates),
as well as other
items which are determined
by management
on a case-by-case
basis.
Operational EBITA
is our measure
of segment profit
but is also used
by management
to evaluate the profitability
of the Compan
y
as a whole.
Acquisition-related amortization
Amortization expense
on intangibles arising
upon acquisitions.
Restructuring,
related and implementation
costs
Restructuring, related
and implementation
costs consists
of restructuring
and other related
expenses,
as well as internal
and external costs
relating to the
implementation of group
-wide restructuring
programs.
Operational revenues
The Company
presents operational
revenues solely
for the purpose
of allowing the computation
of Operational EBITA
margin. Operational
revenues are
Total
revenues adjusted
for foreign exchange/commodity
timing differences
in total revenues of:
(i) unrealized gains
and losses
on derivatives, (ii)
realized gains and
losses on derivatives
where the underlying
hedged transaction
has not yet been
realized, and
(iii) unrealized foreign
exchange
movements on
receivables (and
related assets). Operational
revenues are
not intended to be an
alternative measure
to Total
revenues, which
represent our revenues
measured in accordance
with U.S. GAAP.
Reconciliation
The following tables
provide reconciliations
of consolidated
Operational EBITA
to Net Income and
Operational EBITA
Margin by business.
Reconciliation of consolidated
Operational
EBITA
to Net Income
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA
4,094
3,364
1,392
1,231
Acquisition-related amortization
(164)
(174)
(55)
(55)
Restructuring, related
and implementation
costs
(1)
(92)
(300)
(51)
(20)
Changes in obligations
related to divested
businesses
5
17
–
–
Gains and losses
from sale of businesses
97
(4)
71
–
Acquisition-
and divestment
-related expenses
and integration costs
(55)
(171)
(10)
(62)
Certain other non-operational
items
(89)
(480)
(49)
(381)
Foreign exchange/commodity
timing differences
in income from operations
(41)
(100)
(39)
(5)
Income from operations
3,755
2,152
1,259
708
Interest and dividend
income
115
50
37
17
Interest and other
finance expense
(197)
(107)
(73)
(45)
Non-operational pension
(cost) credit
23
102
8
34
Income from continuing
operations before
taxes
3,696
2,197
1,231
714
Income tax expense
(794)
(728)
(326)
(294)
Income from continuing
operations, net
of tax
2,902
1,469
905
420
Loss from discontinued
operations, net of
tax
(16)
(36)
(7)
(16)
Net income
2,886
1,433
898
404
(1)
Includes impairment of certain
assets.
39
Q3 2023 FINANCIAL INFORMATION
Reconciliation of Operational
EBITA
margin by business
Three months ended
September 30,
2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,561
1,947
1,554
929
(23)
7,968
Foreign exchange/commodity
timing
differences
in total revenues:
Unrealized gains and
losses
on derivatives
45
20
(13)
(4)
2
50
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
–
(1)
2
1
1
3
Unrealized foreign exchange
movements
on receivables
(and related assets)
(13)
4
4
5
(2)
(2)
Operational revenues
3,593
1,970
1,547
931
(22)
8,019
Income (loss) from
operations
762
365
218
113
(199)
1,259
Acquisition-related amortization
22
9
1
20
3
55
Restructuring, related
and
implementation costs
(1)
14
3
3
–
31
51
Changes in obligations
related to
divested businesses
–
–
–
–
–
–
Gains and losses
from sale of businesses
(71)
–
–
–
–
(71)
Acquisition-
and divestment
-related expenses
and integration costs
4
3
(4)
3
4
10
Certain other non-operational
items
2
1
–
1
45
49
Foreign exchange/commodity
timing
differences
in income from operations:
Unrealized gains and
losses on derivatives
(foreign exchange,
commodities,
embedded
derivatives)
26
10
9
(5)
8
48
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
1
(1)
–
2
–
2
Unrealized foreign exchange
movements
on receivables/payables
(and related assets/liabilities)
(12)
–
(1)
3
(1)
(11)
Operational EBITA
748
390
226
137
(109)
1,392
Operational EBITA
margin (%)
20.8%
19.8%
14.6%
14.7%
n.a.
17.4%
(1)
Includes impairment of certain
assets.
In the three months
ended September
30, 2023, Certain
other non-operational
items in the table
above includes
the following:
Three months ended September 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational
items:
Other income/expense
relating to the
Power Grids joint venture
–
–
–
–
(7)
(7)
Business transformation
costs
(1)
3
1
–
1
52
57
Changes in pre-acquisition
estimates
–
–
–
–
–
–
Certain other fair values
changes,
including asset
impairments
–
1
–
–
2
3
Other non-operational
items
(1)
(1)
–
–
(2)
(4)
Total
2
1
–
1
45
49
(1)
Amounts include ABB Way
process transformation costs
of $51 million for the three
months ended September
30, 2023.
40
Q3 2023 FINANCIAL INFORMATION
Three months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,471
1,702
1,458
828
(53)
7,406
Foreign exchange/commodity
timing
differences
in total revenues:
Unrealized gains and
losses
on derivatives
8
14
14
3
6
45
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
4
–
9
–
(1)
12
Unrealized foreign exchange
movements
on receivables
(and related assets)
(9)
(5)
(9)
(4)
(7)
(34)
Operational revenues
3,474
1,711
1,472
827
(55)
7,429
Income (loss) from
operations
616
291
154
81
(434)
708
Acquisition-related amortization
24
8
1
19
3
55
Restructuring, related
and
implementation costs
(1)
8
3
1
6
2
20
Changes in obligations
related to
divested businesses
–
–
–
–
–
–
Gains and losses
from sale of businesses
(1)
1
–
–
–
–
Acquisition-
and divestment
-related expenses
and integration costs
3
4
53
1
1
62
Certain other non-operational
items
7
–
–
1
373
381
Foreign exchange/commodity
timing
differences
in income from operations:
Unrealized gains and
losses on derivatives
(foreign exchange,
commodities,
embedded
derivatives)
(3)
–
9
(1)
2
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)
(6)
(2)
–
(2)
(5)
(15)
Operational EBITA
651
305
225
106
(56)
1,231
Operational EBITA
margin (%)
18.7%
17.8%
15.3%
12.8%
n.a.
16.6%
(1)
Includes impairment of certain
assets.
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:
Other income/expense
relating to the
Power Grids joint venture
–
–
–
–
30
30
Regulatory,
compliance and
legal costs
–
–
–
–
329
329
Business transformation
costs
(1)
13
–
–
–
35
48
Changes in pre-acquisition
estimates
1
–
–
–
–
1
Certain other fair values
changes,
including asset
impairments
(3)
–
–
–
(21)
(24)
Other non-operational
items
(4)
–
–
1
–
(3)
Total
7
–
–
1
373
381
(1)
Amounts include ABB Way process
transformation costs of $34 million
for the three months
ended September 30,
2022.
41
Q3 2023 FINANCIAL INFORMATION
Nine months ended
September 30,
2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
10,886
5,868
4,543
2,788
(95)
23,990
Foreign exchange/commodity
timing
differences
in total revenues:
Unrealized gains and
losses
on derivatives
37
15
3
4
6
65
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
(5)
(1)
8
1
1
4
Unrealized foreign exchange
movements
on receivables
(and related assets)
(20)
(2)
(8)
(3)
(11)
(44)
Operational revenues
10,898
5,880
4,546
2,790
(99)
24,015
Income (loss) from operations
2,130
1,098
688
347
(508)
3,755
Acquisition-related amortization
66
26
4
59
9
164
Restructuring, related
and
implementation costs
(1)
26
5
7
–
54
92
Changes in obligations
related to
divested businesses
1
–
–
–
(6)
(5)
Gains and losses
from sale of businesses
(71)
–
(26)
–
–
(97)
Acquisition-
and divestment
-related expenses
and integration costs
23
15
(3)
7
13
55
Certain other non-operational
items
11
4
–
4
70
89
Foreign exchange/commodity
timing
differences
in income from operations:
Unrealized gains and
losses on derivatives
(foreign exchange,
commodities,
embedded
derivatives)
42
15
(1)
1
1
58
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
(1)
(1)
7
2
1
8
Unrealized foreign exchange
movements
on receivables/payables
(and related assets/liabilities)
(15)
(5)
(6)
(2)
3
(25)
Operational EBITA
2,212
1,157
670
418
(363)
4,094
Operational EBITA
margin (%)
20.3%
19.7%
14.7%
15.0%
n.a.
17.0%
(1)
Includes impairment of certain
assets.
In the nine months ended
September 30,
2023, Certain other
non-operational
items in the table
above includes
the following:
Nine months ended
September 30,
2023
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational
items:
Other income/expense
relating to the
Power Grids joint venture
–
–
–
–
(27)
(27)
Business transformation
costs
(1)
12
1
–
3
123
139
Changes in pre-acquisition
estimates
1
–
–
–
3
4
Certain other fair values
changes,
including asset
impairments
1
2
–
1
(7)
(3)
Other non-operational
items
(3)
1
–
–
(22)
(24)
Total
11
4
–
4
70
89
(1)
Amounts include ABB Way process
transformation costs of $122
million for the nine months
ended September 30,
2023.
42
Q3 2023 FINANCIAL INFORMATION
Nine months ended
September 30,
2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
10,121
4,900
4,493
2,290
(182)
21,622
Foreign exchange/commodity
timing
differences
in total revenues:
Unrealized gains and
losses
on derivatives
27
17
50
14
14
122
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
11
2
11
–
29
53
Unrealized foreign exchange
movements
on receivables
(and related assets)
(27)
(11)
(16)
(9)
(22)
(85)
Operational revenues
10,132
4,908
4,538
2,295
(161)
21,712
Income (loss) from operations
1,571
776
480
146
(821)
2,152
Acquisition-related amortization
80
23
3
59
9
174
Restructuring, related
and
implementation costs
(1)
18
11
6
9
256
300
Changes in obligations
related to
divested businesses
–
–
–
–
(17)
(17)
Gains and losses
from sale of businesses
(1)
5
–
–
–
4
Acquisition-
and divestment
-related expenses
and integration costs
31
12
122
4
2
171
Certain other non-operational
items
30
–
–
–
450
480
Foreign exchange/commodity
timing
differences
in income from operations:
Unrealized gains and
losses on derivatives
(foreign exchange,
commodities,
embedded
derivatives)
50
22
27
3
5
107
Realized gains and
losses on derivatives
where the underlying
hedged
transaction has
not yet been realized
9
1
11
–
27
48
Unrealized foreign exchange
movements
on receivables/payables
(and related assets/liabilities)
(20)
(5)
(4)
(6)
(20)
(55)
Operational EBITA
1,768
845
645
215
(109)
3,364
Operational EBITA
margin (%)
17.4%
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:
Other income/expense
related to the
Power Grids joint venture
–
–
–
–
67
67
Regulatory,
compliance and
legal costs
–
–
–
–
333
333
Business transformation
costs
15
–
–
–
99
114
Changes in pre-acquisition
estimates
2
–
–
(2)
–
–
Certain other fair values
changes,
including asset
impairments
(3)
–
–
–
(55)
(58)
Other non-operational
items
16
–
–
2
6
24
Total
30
–
–
–
450
480
(1)
Amounts include ABB Way process
transformation costs of $98 million
for the nine months
ended September 30, 2022.
43
Q3 2023 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined
as Total
debt less Cash
and marketable securities.
Total debt
Total debt
is the sum of
Short-term debt
and current maturities
of long-term debt,
and Long-term debt.
Cash and marketable
securities
Cash and marketable
securities is
the
sum of Cash
and equivalents,
Restricted cash
(current and non
-current) and Marketable
securities and
short-term
investments.
Reconciliation
($ in millions)
September 30, 2023
December 31, 2022
Short-term debt and
current maturities
of long-term debt
2,951
2,535
Long-term debt
4,899
5,143
Total debt
7,850
7,678
Cash and equivalents
3,869
4,156
Restricted cash
- current
18
18
Marketable securities
and short-term investments
1,091
725
Cash and marketable
securities
4,978
4,899
Net debt
2,872
2,779
Net debt/Equity ratio
Definition
Net debt/Equity
ratio
Net debt/Equity
ratio is defined
as Net debt divided
by Equity.
Equity
Equity is defined
as Total
stockholders’ equity.
Reconciliation
($ in millions, unless otherwise indicated)
September 30, 2023
December 31, 2022
Total stockholders'
equity
13,754
13,187
Net debt (as defined
above)
2,872
2,779
Net debt / Equity
ratio
0.21
0.21
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA
ratio is defined
as Net debt divided
by EBITDA.
EBITDA
EBITDA is defined
as Income from
operations for the
trailing twelve months
preceding the balance
sheet date before
depreciation and
amortization for
the same
trailing twelve-month
period.
Reconciliation
($ in millions, unless otherwise indicated)
September 30, 2023
September 30, 2022
Income from operations
for the three
months ended:
December 31, 2022
/ 2021
1,185
2,975
March 31, 2023 / 2022
1,198
857
June 30, 2023 / 2022
1,298
587
September 30, 2023
/ 2022
1,259
708
Depreciation and Amortization
for the three months
ended:
December 31, 2022
/ 2021
199
216
March 31, 2023 / 2022
191
210
June 30, 2023 / 2022
196
207
September 30, 2023
/ 2022
194
198
EBITDA
5,720
5,958
Net debt (as defined
above)
2,872
4,117
Net debt / EBITDA
0.5
0.7
44
Q3 2023 FINANCIAL INFORMATION
Net working capital as
a percentage of revenues
Definition
Net working capital
as a percentage
of revenues
Net working capital
as a percentage
of revenues
is calculated as
Net working capital divided
by Adjusted revenues
for the trailing twelve
months.
Net working capital
Net working capital
is the sum of
(i) receivables, net,
(ii) contract assets,
(iii) inventories,
net, and (iv) prepaid
expenses; less
(v)
accounts payable,
trade, (vi)
contract liabilities 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, 2023
September 30, 2022
Net working capital:
Receivables,
net
7,586
6,695
Contract assets
1,073
955
Inventories, net
6,332
5,849
Prepaid expenses
280
261
Accounts payable,
trade
(4,777)
(4,769)
Contract liabilities
(2,610)
(2,178)
Other current liabilities
(1)
(3,843)
(3,406)
Net working capital
4,041
3,407
Total revenues
for the three
months ended:
December 31, 2022
/ 2021
7,824
7,567
March 31, 2023 / 2022
7,859
6,965
June 30, 2023 / 2022
8,163
7,251
September 30, 2023
/ 2022
7,968
7,406
Adjustment to annualize/eliminate
revenues of
certain acquisitions/divestments
(267)
(55)
Adjusted revenues
for the trailing
twelve months
31,547
29,134
Net working capital
as a percentage
of revenues
(%)
12.8%
11.7%
(1)
Amounts exclude $754 million
and $795 million at September
30, 2023 and 2022, respectively,
related primarily to (a)
income taxes payable, (b) current
derivative liabilities,
(c) pension and other employee
benefits, (d) payables
under the share buyback
program, (e) liabilities
related to certain restructuring
-related activities
and (f) liabilities
related
to the divestment of the Power
Grids business.
45
Q3 2023 FINANCIAL INFORMATION
Free cash flow conversion
to net income
Definition
Free cash flow conversion
to net income
Free cash flow
conversion
to net income is calculated
as free cash
flow divided by
Adjusted net income
attributable to
ABB.
Adjusted net income
attributable to
ABB
Adjusted net income
attributable to ABB
is calculated
as net income attributable
to ABB adjusted for:
(i) impairment of
goodwill, (ii) losses
from extinguishment
of
debt, and (iii) gains
arising on the sale
of the Power Conversion
Division, the Hitachi
Energy Joint
Venture and
the Power Grids
business, the latter
being included
in discontinued
operations.
Free cash flow
Free cash flow
is calculated as
net cash provided
by operating activities
adjusted for:
(i) purchases
of property,
plant and equipment
and intangible assets,
and (ii)
proceeds from
sales of property,
plant and equipment
.
Free cash flow for
the trailing twelve
months
Free cash flow
for the trailing twelve
months includes
free cash
flow recorded by
ABB in the twelve
months preceding
the relevant balance
sheet date.
Net income for the
trailing twelve months
Net income for the
trailing twelve months
includes net income
recorded by ABB
(as adjusted) in
the twelve months
preceding
the relevant balance
sheet date.
Free cash flow conversion
to net income
Twelve months
to
($ in millions, unless otherwise indicated)
September 30, 2023
December 31, 2022
Net cash provided
by operating activities
– continuing
operations
3,123
1,334
Adjusted for the effects
of continuing operations:
Purchases
of property, plant
and equipment
and intangible assets
(765)
(762)
Proceeds from
sale of property,
plant and equipment
109
127
Free cash flow from
continuing operations
2,467
699
Net cash used
in operating activities
– discontinued
operations
(43)
(47)
Free cash flow
2,424
652
Adjusted net income
attributable to
ABB
(1)
3,859
2,442
Free cash flow conversion
to net income
63%
27%
(1)
Adjusted net income attributable
to ABB for the year ended
December 31, 2022, is
adjusted to exclude the gain
on the sale of Hitachi
Energy Joint Venture
of $43 million and
reductions to the gain on the sale
of Power Grids of
$10 million.
Reconciliation of the
trailing twelve
months to September
30, 2023
Continuing operations
Discontinued
operations
($ in millions)
Net cash provided
by
continuing operating
activities
Purchases of
property, plant and
equipment and
intangible assets
Proceeds
from sale of property,
plant and equipment
Net cash provided
by (used in)
discontinued
operating activities
Adjusted net income
attributable to ABB
(1)
Q4 2022
720
(259)
42
(33)
1,088
Q1 2023
283
(151)
31
(1)
1,036
Q2 2023
759
(180)
26
1
906
Q3 2023
1,361
(175)
10
(10)
829
Total for
the trailing twelve
months to September 30, 2023
3,123
(765)
109
(43)
3,859
(1)
Adjusted net income attributable
to ABB for Q3 2023, is
adjusted to exclude
the gain on sale of the
Power Conversion Division
of $53 million,
while Q4 2022,
is adjusted to
exclude reductions
to the gain on the
sale of Power Grids
of $(1) million.
In addition, Q4 2022
is also adjusted to
exclude the gain on the sale
of Hitachi Energy
Joint Venture of
$43 million.
46
Q3 2023 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses
is calculated as
Interest and dividend
income less Interest
and other finance
expense.
Reconciliation
Nine months ended
September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Interest and dividend
income
115
50
37
17
Interest and other
finance expense
(197)
(107)
(73)
(45)
Net finance expenses
(82)
(57)
(36)
(28)
Book-to-bill ratio
Definition
Book-to-bill ratio
is calculated as
Orders received
divided by Total
revenues.
Reconciliation
Nine months ended
September 30,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
11,794
10,886
1.08
11,797
10,121
1.17
Motion
6,285
5,868
1.07
6,247
4,900
1.27
Process Automation
5,665
4,543
1.25
5,079
4,493
1.13
Robotics & Discrete
Automation
2,516
2,788
0.90
3,318
2,290
1.45
Corporate and Other
(incl. intersegment
eliminations)
(91)
(95)
n.a.
(73)
(182)
n.a.
ABB Group
26,169
23,990
1.09
26,368
21,622
1.22
Three months ended September 30,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,693
3,561
1.04
3,772
3,471
1.09
Motion
1,886
1,947
0.97
1,966
1,702
1.16
Process Automation
1,883
1,554
1.21
1,568
1,458
1.08
Robotics & Discrete
Automation
665
929
0.72
901
828
1.09
Corporate and Other
(incl. intersegment
eliminations)
(75)
(23)
n.a.
(19)
(53)
n.a.
ABB Group
8,052
7,968
1.01
8,188
7,406
1.11
47
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O.
Box 8131
8050 Zurich
Switzerland
Tel:
+41 (0)43
317 71
11
www.abb.com
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 18, 2023.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: October 18, 2023.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance