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 July 2023
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether
the registrant files or will file
annual reports under cover of Form
20-F or Form 40-F.
Form 20-F
☒
Form 40-F
⬜
Indicate by check mark if the registrant
is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule
101(b)(1):
⬜
Note:
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permits the submission in paper of
a Form 6-K if submitted solely to provide
an
attached annual report to security
holders.
Indication by check mark if the registrant
is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule
101(b)(7):
⬜
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permits the submission in paper of
a Form 6-K if submitted to furnish a
report or
other document that the registrant foreign
private issuer must furnish
and make public under the laws of the
jurisdiction in
which the registrant is incorporated, domiciled
or legally organized (the registrant’s “home country”),
or under the rules of the
home country exchange on which the registrant’s securities
are traded, as long as the report
or other document is not a press
release, is not required to be and has
not been distributed to the registrant’s security holders,
and, if discussing a material event,
has already been the subject of a Form
6-K submission or other Commission
filing on EDGAR.
Indicate by check mark whether
the registrant by furnishing the
information contained in this Form
is also thereby furnishing
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pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
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⬜
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☒
If “Yes” is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82-
This Form 6-K consists of the following:
1.
Press release issued by ABB Ltd dated
July 20, 2023 titled “Q2
2023 results”.
2.
Q2 2023 Financial Information.
3.
Announcements regarding transactions
in ABB Ltd’s Securities made by the directors or the
members of the
Executive Committee.
The information provided by Item
2 above is hereby incorporated by reference
into the Registration Statements
on Form F-3 of
ABB Ltd and ABB Finance (USA) Inc.
(File Nos. 333-223907 and 333-223907-01)
and registration statements on Form
S-8
(File Nos. 333-190180, 333-181583,
333-179472, 333-171971 and
333-129271) each of which was
previously filed with the
Securities and Exchange Commission.
2
—
ZURICH, SWITZERLAND, JULY 20, 2023
Q2 2023 results
Comparable order growth
from a high base and
record-high Operational
EBITA
margin
1
●
Orders $8,667 million,
-2%; comparable
1
+2%
●
Revenues $8,163 million,
+13%; comparable
+17%
●
Income from operations
$1,298 million; margin 15.9%
●
Operational EBITA
1
$1,425 million;
margin
1
17.5%
●
Basic EPS $0.49; +145%
2
●
Cash flow from operating
activities
4
$760 million
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
1
H1 2023
H1 2022
US$
Comparable
1
Orders
8,667
8,807
-2%
2%
18,117
18,180
0%
6%
Revenues
8,163
7,251
13%
17%
16,022
14,216
13%
19%
Gross Profit
2,888
2,290
26%
5,604
4,571
23%
as % of revenues
35.4%
31.6%
+3.8 pts
35.0%
32.2%
+2.8 pts
Income from operations
1,298
587
121%
2,496
1,444
73%
Operational EBITA
1
1,425
1,136
25%
26%
3
2,702
2,133
27%
29%
3
as % of operational revenues
1
17.5%
15.5%
+2 pts
16.9%
14.9%
+2 pts
Income from continuing operations, net of tax
932
406
130%
1,997
1,049
90%
Net income attributable to ABB
906
379
139%
1,942
983
98%
Basic earnings per share ($)
0.49
0.20
145%
2
1.04
0.51
104%
2
Cash flow from operating activities
4
760
382
99%
1,042
(191)
n.a.
1
For a reconciliation of non-GAAP measures, see “supplemental
reconciliations and definitions” in the attached
Q2 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.
—
“The positive book-to-bill ratio and new record-high Operational EBITA earnings and
margin add to our confidence about ABB's 2023 outcome allowing us to
sharpen our margin expectations.”
Björn Rosengren
, CEO
Ad hoc Announcement pursuant to Art.
53 Listing Rules of SIX Swiss Exchange
—
Q2 2023
First six months
Press Release
ABB
INTERIM
REPORT
I
Q2
2023
2
To
summarize the outcome
in the second quarter,
I would first
highlight the 2%
comparable order growth
which was up from
last year's already
high level,
and the positive book-to-bill.
It
was good to see
that the customer activity
remained robust
throughout the period.
Secondly,
the high revenue growth of
13% (17% comparable)
supported by backlog execution.
Thirdly,
the record-high achievements
on both absolute
Operational EBITA
of $1.4 billion and
Operational EBITA
margin of 17.5%, up 200
basis points from last
year, with all
four business areas
above 15%. This was supported
by a
strong price contribution
which more than offset
labor inflation
as well as some
limited cost inflation related
to commodities,
with additional support
from operational leverage
on increased
volumes in production.
And lastly,
the solid cash flow from
operating activities
of $760 million. All the while
we executed on
portfolio optimization
and continued to introduce
leading new
technology to help
our customers become
more sustainable
and resource efficient.
In my view,
the quarter is an additional
indication that we are
establishing ABB's operational
performance at a higher
level.
Order momentum was
strongest in the systems
-
and project-
related businesses,
driven predominantly by
the medium
voltage segment and
process-related industries.
This offset
some softening from
last year's high order
level in the short-
cycle business, mainly
evident in the residential
construction
segment and across
the board in discrete manufacturing
where
customers normalize
order patterns in the face
of shortening
delivery lead times.
In total, the book-to-bill ratio
was 1.06
driven by three out
of four business areas,
and we further
increased order backlog.
It was good to see
our cash flow from operating
activities
improve by $378
million from last year and
I expect us to
improve cash conversion
from here onwards. Over
the first six
months we have
generated just over $1 billion
in Cash flow
from operating activities,
which helps position us
well for what I
expect to be a good
cash delivery this year.
As announced earlier
in the quarter,
we experienced an IT
security incident. I am
grateful to our teams
for the handling of
the challenge and containment
of the incident, and as a
result
we have had no consequential
material financial impact
in the
quarter.
Just after the end of
the second quarter,
we successfully closed
the divestment of the
Power Conversion division at
around
$500
million. As a result,
we expect to record a non-operational
book gain estimated at
approximately
$50
million in Income from operations
in the third quarter of
- With this transaction,
we have completed all divisional
portfolio divestments
announced at the end
of 2020. That said,
we continuously
review the product groups
within all divisions to
optimize the portfolio.
The small acquisition
of Eve Systems is another
example of our
portfolio actions,
this time by the Smart Buildings
division in
business area Electrification.
With around 50 employees
,
Eve
generated approximately
$20
million in revenues in 2022.
It is a
pioneer in the new
Matter connectivity standard
which enables
smart home products
to be fully interoperable,
irrespective of
the manufacturer and
user operating system,
via Thread
wireless technology
for consumer-facing products
tailored to the
retrofit market.
I was pleased to see
Process Automation unveil
its new
revolutionary propulsion
concept initially aimed primarily
at
small-
to medium-sized vessels,
complementing its
current
market leading Azipod®
offering for larger vessels.
This
industry-first electric propulsion
concept ABB Dynafin™ mimics
the movements of a
whale tail for ultimate efficiency
and
emissions avoidance
as it is set to reduce propulsion
energy
consumption by up
to 22% compared to conventional
shaftlines.
The first commercial
prototype is expected
to be available in
2025.
Björn Rosengren
CEO
In the
third quarter of 2023
, we anticipate a low double
-digit
comparable revenue
growth and the Operational
EBITA margin
to be slightly up from
the 16.6% reported in
the third quarter last
year.
In full-year 2023
, despite current market uncertainty,
we
anticipate comparable
revenue growth to be
at least 10%
and
we expect Operational
EBITA margin to
be above 16%.
CEO summary
Outlook
ABB
INTERIM
REPORT
I
Q2
2023
3
Order intake declined
by 2% (up 2% comparable)
year-on-year,
hampered by changes
in exchange rates and in
the portfolio,
while the comparable
orders increased from last
year's high
base.
The strongest order
momentum was recorded
in the systems-
and project-related business,
linked to the medium
voltage
customer offering.
The short-cycle business softened
somewhat
from last year's high
level, impacted by
inventory adjustments
and normalizing order
patterns under the presumption
of further
shortening delivery lead
times. Two out
of four business areas
recorded single digit order
growth, with Process
Automation
declining due to portfolio
changes and Robotics
and Discrete
Automation down from
last year's level which benefited
from
pre-buys in a period
of significant component shortages.
Order intake increased
in the Americas by 5%
(6%
comparable), supported
by mid-single digit growth
in the
United States. Portfolio
changes weighed on
the
year-on-year
development in Europe
while a low comparable
growth was
recorded for a total
decline of 1% (up 1% comparable)
despite
declines in key countries
like Germany and Italy.
Asia, Middle
East and Africa declined
by 10% (1% comparable)
as the
positive development
in countries like India
and Saudi Arabia
did not quite offset
declines in other countries
such as China
with a drop of 15%
(9% comparable).
Automotive remained
broadly stable while the
general
industry and consumer-related
robotics segments declined.
In transport & infrastructure,
there were positive
developments
in marine & ports and
renewables.
In buildings there
was weakness in all three
regions in
residential-related demand
.
In the commercial construction
segment weakness
was noted in China and
Germany,
while
demand was solid
in the US.
Demand in the process
-related business was strong
across
the board, with particular
strength in oil & gas, and
it held up
well also for ports,
refining, petrochemicals
and the energy-
related low carbon
segments.
Revenues increased
by 13% (17% comparable)
to
$8,163 million and
benefitted primarily from
increased
volumes through execution
of the order backlog, combined
with a robust price
contribution in the mid-single
digit range.
These benefits more
than offset the adverse
impacts from
changes in exchange
rates and portfolio changes.
Revenues
increased in all business
areas, supported by
comparable
growth in virtually all
divisions.
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q2 2023
Q2 2022
US$
Comparable
Europe
2,935
2,508
17%
20%
The Americas
2,815
2,397
17%
19%
Asia, Middle East
and Africa
2,413
2,346
3%
13%
ABB Group
8,163
7,251
13%
17%
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q2 2023
Q2 2022
US$
Comparable
Europe
2,931
2,958
-1%
1%
The Americas
3,209
3,050
5%
6%
Asia, Middle East
and Africa
2,527
2,799
-10%
-1%
ABB Group
8,667
8,807
-2%
2%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
2%
17%
FX
-2%
-1%
Portfolio changes
-2%
-3%
Total
-2%
13%
Orders and revenues
ABB
INTERIM
REPORT
I
Q2
2023
4
Gross profit
Gross profit increased
strongly by 26%
(28% constant currency) to
$2,888 million, supported
by a significant gross
margin
improvement of
380 basis points to 35.4
%. Gross margin improved
in all business areas,
with three showing significant
increases.
Income from operations
Income from operations
amounted to $1,298
million and more than
doubled year-on-ye
ar, and margin
on Income from operations
reached 15.9%.
Earnings were mainly supported
by the improved
operational performance
as well as by lower adverse
impacts
from
commodity timing differences
.
Some additional tailwind
to the
strong year-on-year improvement
was due to last year's period
being weighed down by
non-operational items, including
approximately $250
million triggered by the
exits of a legacy project
and the Russia business.
Operational EBITA
Operational EBITA
increased by 25%
(26% constant currency)
year-on-year to $1,42
5
million and the margin was
up by 200 basis
points to 17.5%. A key
driver for the increased
result was the
positive price development
in all business areas,
which more than
offset labor inflation
as well as some limited
cost inflation related to
commodities. Additional
support was provided by higher
volume
output triggered by
execution of the order backlog
.
Selling, general
and administrative
expenses declined in
relation to revenues to
17.0%, from 18.2%
last year. Operational
EBITA in Corporate
and
Other amounted
to -$143
million, of which -$67 million
related to
the E-mobility business,
hampered by some
inventory related
provisions as well as
technology investments
triggered by a shift
back to a more focused
product strategy to secure
a continued
leading market position.
Net finance expenses
Net finance expense
was $25 million and remained
largely stable
compared with last
year.
Income tax
Income tax expense
was $349 million with an
effective tax rate of
27.2%.
Net income and earnings
per share
Net income attributable
to ABB was $906
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 $0.49,
up from $0.20 last year.
Operational EBITA
($ millions)
Q2 2023
Q2 2022
Corporate and Other
E-mobility
(67)
(6)
Corporate costs, intersegment
eliminations and other
1
(76)
(13)
Total
(143)
(19)
1
Majority of which relates to underlying corporate
Earnings
ABB
INTERIM
REPORT
I
Q2
2023
5
Net working capital
Net working capital
amounted to $4,585 million,
increasing
year-on-year from $3,663
million and sequentially
from
$4,164 million.
The sequential increase
was driven mainly
by higher receivables
triggered by high revenue
growth and
higher inventories to
support a positive book
-to-bill ratio. Net
working capital as
a percentage of revenues
1
was 14.7%,
up sequentially from 13.9%
.
Capital expenditures
Purchases of property,
plant and equipment and
intangible
assets amounted to
$180 million.
Net debt
Net debt
1
amounted to $4,165 million
at the end of the quarter
and decreased from $4,235
million year-on-year,
and
increased from $3,
826 million sequentially.
The sequential net
increase was mainly driven
by cash payments related
to the
dividend and the ongoing
share buyback program.
Cash flows
Cash flow from operating
activities was $760
million and
increased year-on-year
from $382 million. This
was driven by
improvements in the
Electrification and Motion
business areas
on the back of higher
earnings and a lower
build-up of net
working capital,
year-on-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 second quarter,
5,778,691 shares
were repurchased on
the second trading line
for approximately
$212 million. ABB’s
total number of issued
shares, including
shares held in treasury,
amounts to 1,882,002,575.
($ millions,
unless otherwise indicated)
Jun. 30
2023
Jun. 30
2022
Dec. 31
2022
Short term debt and current
maturities of long-term debt
3,849
2,830
2,535
Long-term debt
4,451
5,086
5,143
Total debt
8,300
7,916
7,678
Cash & equivalents
2,923
2,412
4,156
Restricted cash - current
19
23
18
Marketable securities and
short-term investments
1,193
945
725
Restricted cash - non-current
–
301
–
Cash and marketable securities
4,135
3,681
4,899
Net debt (cash)*
4,165
4,235
2,779
Net debt (cash)* to EBITDA ratio
0.8
0.7
0.7
Net debt (cash)* to Equity ratio
0.31
0.34
0.21
*
At Jun. 30, 2023, Jun. 30, 2022 and Dec. 31, 2022,
net debt(cash) excludes net pension
(assets)/liabilities of $(328) million $(71) million and $(276)
million, respectively.
Balance sheet & Cash flow
ABB
INTERIM
REPORT
I
Q2
2023
6
Orders and revenues
Customer activity was
yet again at a high level.
At $3,960
million,
orders increased by 1%
(3% comparable), up from
the
high base last year.
●
Order momentum was
strongest in the systems
-related
offering often linked
to the medium voltage segment
which
supported a strong
order growth in the Distribution
Solutions division.
Overall demand remained
firm in most
segments and was
particularly strong in segments
like data
centers and oil & gas.
Weakness was noted
in the buildings
segment where residential
construction declined
in all
regions.
Some weakness was recorded
in commercial
construction in China
and Germany,
while the US remained
broadly stable.
●
High order activity
in the Americas resulted
in regional
growth of 8% (8% comparable),
supported by a strong
increase in the United
States of 6% (6% comparable)
,
resulting in one
of the strongest quarters on
record. Orders
in Asia, Middle East
and Africa declined by 3%
(up 5%
comparable) with the
comparable demand
decline in China
more than offset by
strength in markets such as
India.
Europe declined by
4% (6% comparable) hampered
mainly
by a weak residential
construction market in
Germany.
●
Revenues improved by
9% (11% comparable)
to $3,735
million with double-digit
growth in all divisions except
Smart
Buildings and Installation
Products due mainly to the
adverse impact of residential
construction. Increased
volumes combined
with strong price development,
contributed more or
less equally to comparable
growth.
Profit
The second quarter
was an all-time-high period
for both absolute
Operational EBITA
of $787 million
and the Operational EBITA
margin of 21.1%, supported
by a significant gross margin
improvement. Profitability
improved in all but one division,
with the
strongest improvement
recorded in Distribution
Solutions which is
reaping the rewards
of order backlog execution
and structural
profitability efforts.
●
Positive price impact
more than offset labor
inflation, and the
margin was additionally
supported by a reduction
in raw materials
and freight costs,
year-on-year.
●
Higher volume output
in production supported
operational
leverage for an improved
Operational EBITA margin
.
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
3%
11%
FX
-2%
-2%
Portfolio changes
0%
0%
Total
1%
9%
—
Electrification
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
3,960
3,913
1%
3%
8,101
8,025
1%
4%
Order backlog
7,298
6,194
18%
19%
7,298
6,194
18%
19%
Revenues
3,735
3,414
9%
11%
7,325
6,650
10%
14%
Operational EBITA
787
605
30%
1,464
1,117
31%
as % of operational revenues
21.1%
17.6%
+3.5 pts
20.0%
16.8%
+3.2 pts
Cash flow from operating activities
697
456
53%
1,092
543
101%
No. of employees (FTE equiv.)
51,800
50,200
3%
ABB
INTERIM
REPORT
I
Q2
2023
7
Orders and revenues
Strong momentum in
the systems-related operations
supported the business
area order increase of 3%
(3%
comparable)
to $2,137 million, up from
the high comparable
level last year.
●
High customer activity
in the medium voltage
operations
triggered a strong order
growth in the System Drive
s
and
Large Motors
and Generators
divisions as well as in
the
tightly linked Service
business. This successfully
offset
softness in the more short
-cycle divisions.
●
Europe was up by
8% (4% comparable) and
the Americas
was up by 4% (1%
comparable) despite a decline
in the
United States. Asia,
Middle East and Africa
decreased by
3% (up 3% comparable)
as the slight comparable
decline in
China was more
than offset by strength
in markets such as
India.
●
Execution of the order
backlog led to very strong
revenue
growth of 22%
(22% comparable) to $1,9
81 million. Higher
volumes were the main
driver, along with
the robust price
impact triggered by
activities implemented
last year.
High
double-digit comparable
revenue growth was recorded
in
most divisions.
Profit
The 51% year-on-year
increase in Operational
EBITA to
$401 million, resulted
in the first ever quarter
with margin
surpassing 20% at
20.4%.
●
Earnings and margins
improved from last year
in most
divisions, including
Large Motors and Generators
that
benefitted from ongoing
focused self-help measures.
As a
result, all divisions
but one recorded double-digit
margins in the
quarter.
●
Strong price contribution
more than offset cost inflation
related
to labor,
commodities and freight
and was the main driver
of
the profitability increase
from last year.
●
The backlog execution
increased volume output
in production
which improved the
fixed cost coverage.
●
A positive divisional
mix contributed to the margin
improvement, supported
by a higher share of revenues
generated in the drives
-related operations.
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
3%
22%
FX
-1%
-1%
Portfolio changes
1%
1%
Total
3%
22%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
2,137
2,079
3%
3%
4,399
4,281
3%
5%
Order backlog
5,322
4,568
17%
14%
5,322
4,568
17%
14%
Revenues
1,981
1,626
22%
22%
3,921
3,198
23%
25%
Operational EBITA
401
266
51%
767
540
42%
as % of operational revenues
20.4%
16.4%
+4 pts
19.6%
16.9%
+2.7 pts
Cash flow from operating activities
320
241
33%
469
239
96%
No. of employees (FTE equiv.)
22,200
20,800
7%
ABB
INTERIM
REPORT
I
Q2
2023
8
Orders and revenues
Customer activity remained
at a high level across the
segments, although
some hampering timing-related
effects
were noted. The project
pipeline in the market rema
ined
robust. Primarily the
spin-off of Accelleron
weighed on total
growth year-on-year,
which declined
by 8% (up 6%
comparable) to $1,669
million.
●
Market momentum
was positive across customer
segments
and especially strong
in the oil & gas segment
where the
United States stood
out on the positive side.
Good
developments were
also noted in the ports,
refining,
petrochemicals and
the energy-related low carbon
segments.
●
Both Europe and
Asia, Middle East and Africa
recorded a
positive comparable order
growth which more than
offset a
small decline in the
Americas, while total
growth was
weighed down primarily
by the portfolio change of
Accelleron.
●
All divisions contributed
strongly to the revenue
growth of 2%
(19% comparable)
to $1,553 million, with increased
volumes
being the main contributor
along with additional support
from
price.
Profit
Executing the order
backlog with a higher gross
margin supported
earnings growth of
7% from the same quarter
last year,
to
Operational EBITA
of $239
million. The Operational
EBITA margin
improved by 110
basis points to 15.4%,
just exceeding the previous
recent high.
●
Improved operational
performance in business
area Process
Automation helped
to more than offset
the impact of the
divestment of the
Accelleron business which supported
last
year’s margin by 190 basis
points.
●
Profitability improved
in all divisions except
for Marine & Ports
where the mix weighed
on performance due to
the absence of the
arctic marine propulsion
business. The Measurement
& Analytics
division recorded the
strongest margin improvement
to clearly
above the business
area average on the back
of good mix,
successful business segmentation
for improved transparency
and
performance actions,
including price.
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
6%
19%
FX
-2%
-2%
Portfolio changes
-12%
-15%
Total
-8%
2%
—
Process Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
1,669
1,819
-8%
6%
3,782
3,511
8%
29%
Order backlog
6,821
6,170
11%
17%
6,821
6,170
11%
17%
Revenues
1,553
1,529
2%
19%
2,989
3,035
-2%
17%
Operational EBITA
239
224
7%
444
420
6%
as % of operational revenues
15.4%
14.3%
+1.1 pts
14.8%
13.7%
+1.1 pts
Cash flow from operating activities
188
193
-3%
300
253
19%
No. of employees (FTE equiv.)
20,600
22,200
-7%
ABB
INTERIM
REPORT
I
Q2
2023
9
Orders and revenues
Orders
declined by 23%
(22% comparable)
year-on-year,
to
$850 million. Consistent
with the previous quarter,
customers normalized
order patterns,
adjusting to an
environment with shorter
delivery lead times as
supply
chain constraints eased
compared with last year.
Some
inventory adjustments
among customers put additional
sequential pressure
on orders, mainly in China.
These
impacts are expected
to persist into the third
quarter.
●
Orders declined
at a double-digit rate in both divisions
on
the back of stable development
in the automotive
segment against declines
in the other segments,
particularly in the
machine automation and electronics
segments.
●
Customer inventory
adjustments were most prominent
in
Asia, Middle East and
Africa where orders declined
by
33%
(29%
comparable),
weighed down by a significant
decline in China.
Europe also dropped by 23
%
(24%
comparable) while
the Americas recorded
an increase of
4% (4% comparable),
supported by good
momentum in
Canada and Mexico.
●
Execution of the high
order backlog drove
the strong
revenue
growth of 26% (27% comparable),
with a similar
pattern in both divisions.
While higher volumes were
the
main driver for growth,
pricing also contributed
materially on
the back of last year's
implemented actions.
Profit
Operational EBITA
more than doubled
to $141 million from
last year’s low level when
earnings were impacted
by Covid-
related shut-downs
and strained supply chain
s. Improved
operational performance
supported the 710
basis points
increase in Operational
EBITA margin,
to 15.3%, the highest
level in several years
.
●
Operational leverage
on higher volumes
in production was
the main driver for
higher earnings and marg
in.
●
Positive impact from
earlier implemented price
actions
significantly contributed
to the improved profitability.
Pricing
more than offset
inflation in labor with additional
support
from lower input and
freight costs.
●
Both divisions recorded
margins of above 15% in the
period.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
850
1,109
-23%
-22%
1,851
2,417
-23%
-21%
Order backlog
2,657
2,728
-3%
-2%
2,657
2,728
-3%
-2%
Revenues
922
732
26%
27%
1,859
1,462
27%
31%
Operational EBITA
141
60
135%
281
109
158%
as % of operational revenues
15.3%
8.2%
+7.1 pts
15.1%
7.4%
+7.7 pts
Cash flow from operating activities
44
56
-21%
174
27
544%
No. of employees (FTE equiv.)
10,900
10,800
1%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
-22%
27%
FX
-1%
-1%
Portfolio changes
0%
0%
Total
-23%
26%
—
Robotics & Discrete Automation
ABB
INTERIM
REPORT
I
Q2
2023
10
Quarterly highlights
●
ABB is collaborating with
Lhyfe, a world pioneer
in the
production of renewable
hydrogen, and Skyborn, a
global
leader in renewable
energy, to
jointly realize and optimize
one of Europe’s
most ambitious renewable
hydrogen
projects ever,
SoutH2Port. Powered by
Skyborn’s
planned offshore
wind farm, the plant in Söderhamn,
Sweden, will produce
around 240 tons of hydrogen
per
day, equivalent
to around 1.8 million barrels
of oil per
annum. ABB will apply
critical expertise to optimize
the
integration of the hydrogen
and electricity production
across the entire ecosystem
including automation,
electrical and digital
technologies.
●
From June 17 to 25,
the Special Olympics World
Games
took place in Berlin
and for the first time in Germany
where 7,000 athletes
with diverse abilities from
more than
190 countries competed
in 26 sports with the motto
#Unbeatabletogether.
Around 150 ABB employees
volunteered to support
the athletes during the exciting
and inspiring competitions.
ABB Germany has been a
supporting partner
of the Special Olympics
at the local
and state levels games
for 23 years.
●
A pilot project between
ABB Robotics and US non-profit
organization Junglekeepers
demonstrated the role Cloud
technology can play
in making reforestation
faster, more
efficient and
scalable. ABB’s cobot
YuMi automated
planting tasks in a jungle
laboratory in the Amazon,
speeding the process
and allowing Junglekeepers’
volunteers to focus
on more impactful work.
Through ABB
RobotStudio Cloud
technology,
ABB experts simulated,
refined and deployed
the programming required
for
YuMi’s tasks
in the jungle from 12,000
kms away in
Sweden – enabling
the world’s most remote
robot.
●
ABB has won a 2023
Global Water Award
in the category
“Smart Water
Project of the Year”
for its collaboration with
Wellington Water,
the water services provider
for the
Wellington region
of New Zealand. ABB’s
state-of-the-art
instrumentation technology
and variable frequency drives
enables Wellington
Water to measure
and store data about
the water flow in real
time and delivers up to 10%
in energy
savings per month.
●
In May 2023, ABB E-mobility
and Scania successfully
undertook a first
test for the development of
a megawatt
charging system, representing
the next milestone in
the
development of an
efficient, high power
charging solution
for heavy duty vehicles.
The technology will enable
half the
charging time for heavy
duty vehicles. Developing
a
solution to fast charge
these commercial electric
vehicles,
which will also deliver
significant range, is a
major step
towards increasing
sales of heavy-duty vehicles
that can be
driven fossil-free.
Q2 2023
Q2 2022
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
Ktons scope 1 and 2
1,3
52
73
-28%
201
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
2
0.12
0.17
-32%
0.13
Share of females in senior management
positions, %
20.2
16.8
+3.4 pts
18.6
1
CO
₂
equivalent emissions from site, energy use, SF
₆
and fleet, previous quarter
2
Current quarter Includes all incidents reported until
July 10, 2023
3
Q2 2022 emission data was restated from 88.8 to
72.6 Ktons of CO
₂
e to reflect the application of green energy
certificates retrospectively.
Q2 outcome
●
28% reduction of CO
₂
e emissions in own opera
tions
mainly driven by shifting to
green electricity in our
operations.
●
32% decrease in LTIFR
due to a decrease in incidents
in
absolute numbers.
●
3.4%-points increase in share of women
in senior
management,
demonstrating strong progress
towards our
target.
—
Sustainability
ABB
INTERIM
REPORT
I
Q2
2023
11
During Q2 2023
●
On April 3, ABB launch
ed its previously announced
new
share buyback program
of up to $1 billion. The
maximum
number of shares that
may be repurchased
under this new
program on any given
trading day is 762,196.
●
On April 25, ABB announced
its plans to delist its
American Depositary
Receipts (ADRs) from the
New York
Stock Exchange
(NYSE), and ultimately
to seek to
deregister its ADRs and
the underlying shares under
the
US Securities Act of 1934
(The Securities Exchange
Act).
The delisting became
effective on May
23 and the ADR
program was converted
into a sponsored Level I
ADR
program, trading on
the US over-the-counter (OTC)
market.
●
On June 7, ABB announced
that following the completion
of the cancellation of
82,742,500 of its shares,
ABB held
20,845,438 of its own
shares, which corresponds
to 1.1
percent of total share
capital and voting rights
in the
company.
This includes 4,269,700
shares purchased for
capital reduction.
ABB’s total number of
issued shares,
including shares held
in treasury,
amounts to
1,882,002,575.
After Q2 2023
●
On July 3, ABB announced
the closing of the divestment
of Power Conversion
division at around $500
million. As
a result, ABB expect
s
to record a non-operational
book
gain estimated at appr
oximately $50 million
in Income
from operations in the
third quarter of 2023.
With this
transaction, ABB has
completed all divisional
portfolio
divestments announced
at the end of 2020.
The demand for
ABB’s offering remained
strong in the first six
months of 2023.
Weakness in the residential
construction
market and some softening
in the short-cycle business
from last
year's high level
was offset by strong momentum
in the long-
cycle business driven
predominantly by the
medium voltage
segment and process
related industries. Orders
increased in
three out of four
business areas and remained
stable (up 6%
comparable) for
ABB at $18,11
7
million. Revenues supported
by strong backlog execution
amounted to $16,022 million,
up by
13% (19% comparable),
overall implying a book
-to-bill of 1.13.
Income from operations
amounted to $2,496
million, up from
$1,444 million in
the first half 2022, mostly
reflecting improved
operational performance.
Additionally, the
result in the same
period last year included
charges totalling approximately
$250
million triggered by
the exit of a legacy project
in non-core
and the decision
to exit Russian operations.
Operational EBITA
improved by 27
%
year-on-year to
$2,702
million and the Operational
EBITA margin increased
by
200
basis points to 16.9%, significantly
higher in all business
areas compared
to the same period last
year. Performance
was
driven by operating leverage
from backlog execution
as well as
benefits from successful
price management,
which more than
offset cost inflation
mainly related to labor.
Corporate and Other
Operational EBITA
amounted to
-$254
million, out of which -$95
million related to
the E-mobility business, which
was hampered
by some inventory
related provisions as
well as technology
investments triggered
by a shift back to a more
focused product
strategy to secure a
continued leading market
position.
Net finance expenses
increased $17 million
to $46 million, while
non-operational pension
credits declined by $53
million to
$15
million compared to the
same period last year,
mainly due
to higher interest rates.
Income tax expense was $468
million
with a tax rate of 19.0%,
including a net benefit from the
favorable resolution
of a prior year tax matter relating
to the
divestment of the
Power Grids business.
Net income attributable
to ABB was $1,942
million, up from
$983 million year-on
-year. Basic earnings
per share was
$1.04 more than doubling
from the same period
last year.
Significant events
First six months 2023
ABB
INTERIM
REPORT
I
Q2
2023
12
Note: comparable growth calculation includes acquisitions
and divestments with revenues of greater than
$50 million.
1
Represents the estimated revenues for the last fiscal
year prior to the announcement of the respective
acquisition/divestment unless otherwise stated.
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2023
Process Automation
UK technical engineering consultancy business
1-May
~20
160
2022
Hitachi Energy JV (Power Grids, 19.9% stake)
28-Dec
ABB Group
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
Q1 2023
Q2 2023
EBITDA, $ in million
1,067
794
906
1,384
4,151
1,389
1,494
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
16.50
n.a.
n.a.
Net debt/Equity
0.20
0.34
0.34
0.21
0.21
0.30
0.31
Net debt/ EBITDA 12M rolling
0.4
0.7
0.7
0.7
0.7
0.9
0.8
Net working capital, % of 12M rolling revenues
12.1%
12.8%
11.7%
11.1%
11.1%
13.9%
14.7%
Earnings per share, basic, $
0.31
0.20
0.19
0.61
1.30
0.56
0.49
Earnings per share, diluted, $
0.31
0.20
0.19
0.60
1.30
0.55
0.48
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.84
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
Share price at the end of period, $
1
30.76
25.43
24.41
30.46
30.46
34.30
39.32
Number of employees (FTE equivalents)
104,720
106,380
106,830
105,130
105,130
106,170
108,320
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
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
~(130)
from ~(150)
Effective tax rate
~21%
4
unchanged
Capital Expenditures
~(800)
unchanged
($ in millions, unless otherwise stated)
FY 2023
1
Q3 2023
Corporate and Other Operational EBITA
2
~(300)
~(75)
unchanged
Non-operating items
Acquisition-related amortization
~(220)
~(55)
unchanged
Restructuring and related
3
~(150)
~(40)
unchanged
ABB Way transformation
~(180)
~(50)
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 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
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
Electrification
ASKI Industrie Elektronik GmbH
3-Oct
~2
16
Electrification
Numocity Technologies
Private Ltd. (majority stake)
22-Jul
<1
20
Acquisitions and divestments, last twelve months
ABB
INTERIM
REPORT
I
Q2
2023
13
For additional information please contact:
Media Relations
Phone: +41 43 317
71 11
Email:
Investor Relations
Phone: +41 43 317
71 11
Email:
ABB Ltd
Affolternstrasse
44
8050 Zurich
Switzerland
Financial calendar
2023
October 18
Q3 2023 results
November 30
Capital Markets Day
in Frosinone, Italy
This press release
includes forward-looking information
and
statements as well
as other statements concerning
the
outlook for our business,
including those in the sections
of
this
release titled “CEO summary,”
“Outlook,” “Earnings,”
“Balance sheet & cash
flow,” “Sustainability” and
“Significant events”.
These statements are based
on current
expectations, estimates
and projections about the
factors
that may affect
our future performance,
including global
economic conditions,
the economic conditions
of the
regions and industries
that are major markets for
ABB.
These expectations, estimates
and projections are generally
identifiable by statements
containing words such as
“anticipates,” “expects,”
“estimates,” “plans,” “targets
,”
“likely” or similar expressions.
However, there
are many
risks and uncertainties,
many of which are beyond
our
control, that could cause
our actual results to differ
materially from the
forward-looking information
and
statements
made in this press
release and which could
affect our ability
to achieve any or all of
our stated targets. Some important
factors that could cause
such differences include,
among
others, business risks
associated with the volatile
global
economic environment
and political conditions,
costs
associated with compliance
activities, market acceptance
of
new products and services,
changes in governmental
regulations and currency
exchange rates and such
other
factors as may be discussed
from time to time in
ABB Ltd’s
filings with the U.S. Securities
and Exchange Commission,
including its Annual
Reports on Form 20-F.
Although ABB
Ltd believes that
its expectations reflected in
any such
forward looking statement
are based upon reasonable
assumptions, it can
give no assurance that those
expectations will be
achieved.
The Q2 2023
results press release
and presentation slides
are available on the
ABB News Center at
www.abb.com/news
and on the Investor
Relations
homepage at www.abb.com/investorrelations.
A conference call and
webcast for analysts
and investors is
scheduled to begin
today at 10:00 a.m. CET.
To
pre-register for the conference
call or to join the
webcast, please
refer to the ABB website:
www.abb.com/investorrelations.
The recorded session
will be available after
the event on
ABB’s website.
Important notice about forward-looking information
Q2 results presentation on July 20, 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
Q2 2023 FINANCIAL INFORMATION
July 20, 2023
Q2 2023
Financial information
2
Q2 2023 FINANCIAL INFORMATION
—
Financial
Information
Contents
03
─ 07
Key Figures
08 ─
33
Consolidated Financial Information
(unaudited)
34 ─
46
Supplemental Reconciliations and Definitions
3
Q2 2023 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
(1)
Orders
8,667
8,807
-2%
2%
Order backlog (end June)
21,938
19,477
13%
14%
Revenues
8,163
7,251
13%
17%
Gross Profit
2,888
2,290
26%
as % of revenues
35.4%
31.6%
+3.8 pts
Income from operations
1,298
587
121%
Operational EBITA
(1)
1,425
1,136
25%
26%
(2)
as % of operational revenues
(1)
17.5%
15.5%
+2 pts
Income from continuing operations, net of tax
932
406
130%
Net income attributable to ABB
906
379
139%
Basic earnings per share ($)
0.49
0.20
145%
(3)
Cash flow from operating activities
(4)
760
382
99%
Cash flow from operating activities in continuing operations
759
385
97%
CHANGE
($ in millions, unless otherwise indicated)
H1 2023
H1 2022
US$
Comparable
(1)
Orders
18,117
18,180
0%
6%
Revenues
16,022
14,216
13%
19%
Gross Profit
5,604
4,571
23%
as % of revenues
35.0%
32.2%
+2.8 pts
Income from operations
2,496
1,444
73%
Operational EBITA
(1)
2,702
2,133
27%
29%
(2)
as % of operational revenues
(1)
16.9%
14.9%
+2 pts
Income from continuing operations, net of tax
1,997
1,049
90%
Net income attributable to ABB
1,942
983
98%
Basic earnings per share ($)
1.04
0.51
104%
(3)
Cash flow from operating activities
(4)
1,042
(191)
n.a.
Cash flow from operating activities in continuing operations
1,043
(179)
n.a.
(1)
For a reconciliation of non-GAAP measures see “
Supplemental Reconciliations and Definitions
” on page 34.
(2)
Constant currency (not adjusted for portfolio changes).
(3)
EPS growth rates are computed using unrounded amounts.
(4)
Cash flow from operating activities includes both continuing and discontinued operations.
4
Q2 2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Local
Comparable
Orders
ABB Group
8,667
8,807
-2%
0%
2%
Electrification
3,960
3,913
1%
3%
3%
Motion
2,137
2,079
3%
4%
3%
Process Automation
1,669
1,819
-8%
-6%
6%
Robotics & Discrete Automation
850
1,109
-23%
-22%
-22%
Corporate and Other
264
77
Intersegment eliminations
(213)
(190)
Order backlog (end June)
ABB Group
21,938
19,477
13%
13%
14%
Electrification
7,298
6,194
18%
19%
19%
Motion
5,322
4,568
17%
16%
14%
Process Automation
6,821
6,170
11%
12%
17%
Robotics & Discrete Automation
2,657
2,728
-3%
-2%
-2%
Corporate and Other
(incl. intersegment eliminations)
(160)
(183)
Revenues
ABB Group
8,163
7,251
13%
14%
17%
Electrification
3,735
3,414
9%
11%
11%
Motion
1,981
1,626
22%
23%
22%
Process Automation
1,553
1,529
2%
4%
19%
Robotics & Discrete Automation
922
732
26%
27%
27%
Corporate and Other
177
140
Intersegment eliminations
(205)
(190)
Income from operations
ABB Group
1,298
587
Electrification
713
474
Motion
380
231
Process Automation
270
175
Robotics & Discrete Automation
119
43
Corporate and Other
(incl. intersegment eliminations)
(184)
(336)
Income from operations %
ABB Group
15.9%
8.1%
Electrification
19.1%
13.9%
Motion
19.2%
14.2%
Process Automation
17.4%
11.4%
Robotics & Discrete Automation
12.9%
5.9%
Operational EBITA
ABB Group
1,425
1,136
25%
26%
Electrification
787
605
30%
33%
Motion
401
266
51%
51%
Process Automation
239
224
7%
9%
Robotics & Discrete Automation
141
60
135%
141%
Corporate and Other
(1)
(incl. intersegment eliminations)
(143)
(19)
Operational EBITA %
ABB Group
17.5%
15.5%
Electrification
21.1%
17.6%
Motion
20.4%
16.4%
Process Automation
15.4%
14.3%
Robotics & Discrete Automation
15.3%
8.2%
Cash flow from operating activities
ABB Group
760
382
Electrification
697
456
Motion
320
241
Process Automation
188
193
Robotics & Discrete Automation
44
56
Corporate and Other
(incl. intersegment eliminations)
(490)
(561)
Discontinued operations
1
(3)
(1)
Corporate and Other at Q2 2023 and Q2 2022 includes losses of $67 million and $6 million, respectively, relating to E-mobility.
5
Q2 2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
H1 2023
H1 2022
US$
Local
Comparable
Orders
ABB Group
18,117
18,180
0%
3%
6%
Electrification
8,101
8,025
1%
4%
4%
Motion
4,399
4,281
3%
6%
5%
Process Automation
3,782
3,511
8%
12%
29%
Robotics & Discrete Automation
1,851
2,417
-23%
-21%
-21%
Corporate and Other
460
382
Intersegment eliminations
(476)
(436)
Order backlog (end June)
ABB Group
21,938
19,477
13%
13%
14%
Electrification
7,298
6,194
18%
19%
19%
Motion
5,322
4,568
17%
16%
14%
Process Automation
6,821
6,170
11%
12%
17%
Robotics & Discrete Automation
2,657
2,728
-3%
-2%
-2%
Corporate and Other
Intersegment eliminations
(160)
(183)
Revenues
ABB Group
16,022
14,216
13%
16%
19%
Electrification
7,325
6,650
10%
14%
14%
Motion
3,921
3,198
23%
26%
25%
Process Automation
2,989
3,035
-2%
2%
17%
Robotics & Discrete Automation
1,859
1,462
27%
31%
31%
Corporate and Other
346
254
Intersegment eliminations
(418)
(383)
Income from operations
ABB Group
2,496
1,444
Electrification
1,368
955
Motion
733
485
Process Automation
470
326
Robotics & Discrete Automation
234
65
Corporate and Other
(incl. intersegment eliminations)
(309)
(387)
Income from operations %
ABB Group
15.6%
10.2%
Electrification
18.7%
14.4%
Motion
18.7%
15.2%
Process Automation
15.7%
10.7%
Robotics & Discrete Automation
12.6%
4.4%
Operational EBITA
ABB Group
2,702
2,133
27%
29%
Electrification
1,464
1,117
31%
35%
Motion
767
540
42%
46%
Process Automation
444
420
6%
10%
Robotics & Discrete Automation
281
109
158%
172%
Corporate and Other
(1)
(incl. intersegment eliminations)
(254)
(53)
Operational EBITA %
ABB Group
16.9%
14.9%
Electrification
20.0%
16.8%
Motion
19.6%
16.9%
Process Automation
14.8%
13.7%
Robotics & Discrete Automation
15.1%
7.4%
Cash flow from operating activities
ABB Group
1,042
(191)
Electrification
1,092
543
Motion
469
239
Process Automation
300
253
Robotics & Discrete Automation
174
27
Corporate and Other
(incl. intersegment eliminations)
(992)
(1,241)
Discontinued operations
(1)
(12)
(1)
Corporate and Other at H1 2023 and H1 2022 includes losses of $95 million and $8 million, respectively, relating to E-mobility.
6
Q2 2023 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Revenues
8,163
7,251
3,735
3,414
1,981
1,626
1,553
1,529
922
732
Foreign exchange/commodity timing
differences in total revenues
(10)
70
2
18
(11)
(4)
–
32
(1)
1
Operational revenues
8,153
7,321
3,737
3,432
1,970
1,622
1,553
1,561
921
733
Income from operations
1,298
587
713
474
380
231
270
175
119
43
Acquisition-related amortization
55
59
22
28
9
7
2
1
19
19
Restructuring, related and
implementation costs
(1)
13
264
4
8
1
–
2
–
–
2
Changes in obligations related to
divested businesses
(8)
(3)
1
–
–
–
–
–
–
–
Gains and losses from sale of businesses
(26)
4
–
–
–
4
(26)
–
–
–
Acquisition- and divestment-related
expenses and integration costs
26
50
12
10
8
3
(2)
36
2
2
Certain other non-operational items
41
65
6
20
1
–
–
–
1
(1)
Foreign exchange/commodity timing
differences in income from operations
26
110
29
65
2
21
(7)
12
–
(5)
Operational EBITA
1,425
1,136
787
605
401
266
239
224
141
60
Operational EBITA margin (%)
17.5%
15.5%
21.1%
17.6%
20.4%
16.4%
15.4%
14.3%
15.3%
8.2%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
Revenues
16,022
14,216
7,325
6,650
3,921
3,198
2,989
3,035
1,859
1,462
Foreign exchange/commodity timing
differences in total revenues
(26)
67
(20)
8
(11)
(1)
10
31
–
6
Operational revenues
15,996
14,283
7,305
6,658
3,910
3,197
2,999
3,066
1,859
1,468
Income from operations
2,496
1,444
1,368
955
733
485
470
326
234
65
Acquisition-related amortization
109
119
44
56
17
15
3
2
39
40
Restructuring, related and
implementation costs
(1)
41
280
12
10
2
8
4
5
–
3
Changes in obligations related to
divested businesses
(5)
(17)
1
–
–
–
–
–
–
–
Gains and losses from sale of businesses
(26)
4
–
–
–
4
(26)
–
–
–
Acquisition- and divestment-related
expenses and integration costs
45
109
19
28
12
8
1
69
4
3
Certain other non-operational items
40
99
9
23
3
–
–
–
3
(1)
Foreign exchange/commodity timing
differences in income from operations
2
95
11
45
–
20
(8)
18
1
(1)
Operational EBITA
2,702
2,133
1,464
1,117
767
540
444
420
281
109
Operational EBITA margin (%)
16.9%
14.9%
20.0%
16.8%
19.6%
16.9%
14.8%
13.7%
15.1%
7.4%
(1)
Includes impairment of certain assets.
7
Q2 2023 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Depreciation
129
136
64
65
27
26
12
16
14
15
Amortization
67
71
27
34
10
9
3
3
20
20
including total acquisition-related amortization of:
55
59
22
28
9
7
2
1
19
19
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
Depreciation
254
272
126
129
53
53
23
34
29
30
Amortization
133
145
54
68
20
18
5
6
40
41
including total acquisition-related amortization of:
109
119
44
56
17
15
3
2
39
40
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q2 23
Q2 22
US$
Local
parable
Q2 23
Q2 22
US$
Local
parable
Europe
2,931
2,958
-1%
-1%
1%
2,935
2,508
17%
16%
20%
The Americas
3,209
3,050
5%
5%
6%
2,815
2,397
17%
17%
19%
of which United States
2,319
2,234
4%
4%
4%
2,092
1,746
20%
20%
21%
Asia, Middle East and Africa
2,527
2,799
-10%
-4%
-1%
2,413
2,346
3%
9%
13%
of which China
1,194
1,409
-15%
-10%
-9%
1,174
1,163
1%
6%
9%
ABB Group
8,667
8,807
-2%
0%
2%
8,163
7,251
13%
14%
17%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
H1 23
H1 22
US$
Local
parable
H1 23
H1 22
US$
Local
parable
Europe
6,513
6,492
0%
3%
6%
5,807
5,026
16%
18%
21%
The Americas
6,194
5,947
4%
4%
6%
5,468
4,566
20%
20%
22%
of which United States
4,449
4,459
0%
0%
1%
4,076
3,328
22%
23%
24%
Asia, Middle East and Africa
5,410
5,741
-6%
2%
5%
4,747
4,624
3%
11%
15%
of which China
2,549
2,946
-13%
-8%
-6%
2,328
2,263
3%
10%
12%
ABB Group
18,117
18,180
0%
3%
6%
16,022
14,216
13%
16%
19%
8
Q2 2023 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Six months ended
Three months ended
($ in millions, except per share data in $)
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Sales of products
13,530
11,762
6,886
6,013
Sales of services and other
2,492
2,454
1,277
1,238
Total revenues
16,022
14,216
8,163
7,251
Cost of sales of products
(8,946)
(8,222)
(4,528)
(4,254)
Cost of services and other
(1,472)
(1,423)
(747)
(707)
Total cost of sales
(10,418)
(9,645)
(5,275)
(4,961)
Gross profit
5,604
4,571
2,888
2,290
Selling, general and administrative expenses
(2,727)
(2,556)
(1,388)
(1,317)
Non-order related research and development expenses
(637)
(572)
(333)
(295)
Other income (expense), net
256
1
131
(91)
Income from operations
2,496
1,444
1,298
587
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Non-operational pension (cost) credit
15
68
8
32
Income from continuing operations before taxes
2,465
1,483
1,281
599
Income tax expense
(468)
(434)
(349)
(193)
Income from continuing operations, net of
tax
1,997
1,049
932
406
Loss from discontinued operations, net of tax
(9)
(20)
(4)
(9)
Net income
1,988
1,029
928
397
Net income attributable to noncontrolling interests and
redeemable noncontrolling interests
(46)
(46)
(22)
(18)
Net income attributable to ABB
1,942
983
906
379
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,951
1,003
910
388
Loss from discontinued operations, net of tax
(9)
(20)
(4)
(9)
Net income
1,942
983
906
379
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.05
0.52
0.49
0.20
Loss from discontinued operations, net of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.49
0.20
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.04
0.52
0.49
0.20
Loss from discontinued operations, net of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.48
0.20
Weighted-average number of shares outstanding
(in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,861
1,922
1,862
1,909
Diluted earnings per share attributable to ABB shareholders
1,873
1,935
1,873
1,918
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9
Q2 2023 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Six months ended
Three months ended
($ in millions)
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Total comprehensive income, net of
tax
1,914
708
761
131
Total comprehensive income
attributable to noncontrolling interests and
redeemable noncontrolling interests, net of tax
(43)
(26)
(13)
(3)
Total comprehensive income attributable
to ABB shareholders, net of tax
1,871
682
748
128
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10
Q2 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Jun. 30, 2023
Dec. 31, 2022
Cash and equivalents
2,923
4,156
Restricted cash
19
18
Marketable securities and short-term investments
1,193
725
Receivables, net
7,481
6,858
Contract assets
1,010
954
Inventories, net
6,448
6,028
Prepaid expenses
290
230
Other current assets
500
505
Current assets held for sale and in discontinued operations
628
96
Total current assets
20,492
19,570
Property, plant and equipment, net
3,923
3,911
Operating lease right-of-use assets
852
841
Investments in equity-accounted companies
154
130
Prepaid pension and other employee benefits
964
916
Intangible assets, net
1,257
1,406
Goodwill
10,420
10,511
Deferred taxes
1,320
1,396
Other non-current assets
474
467
Total assets
39,856
39,148
Accounts payable, trade
4,881
4,904
Contract liabilities
2,394
2,216
Short-term debt and current maturities of long-term debt
3,849
2,535
Current operating leases
223
220
Provisions for warranties
1,076
1,028
Other provisions
1,124
1,171
Other current liabilities
4,277
4,323
Current liabilities held for sale and in discontinued operations
207
132
Total current liabilities
18,031
16,529
Long-term debt
4,451
5,143
Non-current operating leases
652
651
Pension and other employee benefits
721
719
Deferred taxes
699
729
Other non-current liabilities
1,853
2,085
Non-current liabilities held for sale and in discontinued operations
20
20
Total liabilities
26,427
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 June 30,
2023, and December 31, 2022, respectively)
163
171
Additional paid-in capital
11
141
Retained earnings
17,958
20,082
Accumulated other comprehensive loss
(4,627)
(4,556)
Treasury stock, at cost
(22 million and 100 million shares at June 30, 2023, and December
31, 2022, respectively)
(709)
(3,061)
Total ABB stockholders’ equity
12,796
12,777
Noncontrolling interests
544
410
Total stockholders’ equity
13,340
13,187
Total liabilities and stockholders’
equity
39,856
39,148
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11
Q2 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Six months ended
Three months ended
($ in millions)
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Operating activities:
Net income
1,988
1,029
928
397
Loss from discontinued operations, net of tax
9
20
4
9
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization
387
417
196
207
Changes in fair values of investments
(24)
(15)
(11)
9
Pension and other employee benefits
(12)
(83)
(13)
(37)
Deferred taxes
37
(148)
11
(32)
Loss (income) from equity-accounted companies
7
62
–
14
Net loss (gain) from derivatives and foreign exchange
(54)
77
(17)
105
Net gain from sale of property,
plant and equipment
(33)
(55)
(7)
(23)
Net loss (gain) from sale of businesses
(26)
4
(26)
4
Other
92
63
65
27
Changes in operating assets and liabilities:
Trade receivables, net
(667)
(621)
(301)
(304)
Contract assets and liabilities
79
252
69
145
Inventories, net
(450)
(1,083)
(186)
(541)
Accounts payable, trade
(2)
213
(29)
206
Accrued liabilities
(202)
(255)
122
135
Provisions, net
56
126
16
179
Income taxes payable and receivable
(86)
(52)
29
(66)
Other assets and liabilities, net
(56)
(130)
(91)
(49)
Net cash provided by (used in) operating activities – continuing
operations
1,043
(179)
759
385
Net cash provided by (used in) operating activities – discontinued
operations
(1)
(12)
1
(3)
Net cash provided by (used in) operating activities
1,042
(191)
760
382
Investing activities:
Purchases of investments
(760)
(256)
(100)
(128)
Purchases of property, plant and
equipment and intangible assets
(331)
(338)
(180)
(151)
Acquisition of businesses (net of cash acquired)
and increases in cost-
and equity-accounted companies
(135)
(179)
(116)
(34)
Proceeds from sales of investments
176
506
156
201
Proceeds from maturity of investments
138
–
138
–
Proceeds from sales of property,
plant and equipment
57
66
26
31
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost-
and equity-accounted companies
43
(13)
43
(13)
Net cash from settlement of foreign currency derivatives
(18)
56
(54)
(10)
Changes in loans receivable, net
1
9
(7)
(2)
Other investing activities
9
(17)
10
(16)
Net cash used in investing activities – continuing operations
(820)
(166)
(84)
(122)
Net cash used in investing activities – discontinued
operations
(21)
(91)
(16)
(70)
Net cash used in investing activities
(841)
(257)
(100)
(192)
Financing activities:
Net changes in debt with original maturities of 90 days or less
(35)
1,191
679
(114)
Increase in debt
1,648
3,181
15
639
Repayment of debt
(1,128)
(1,483)
(1,092)
(1,442)
Delivery of shares
96
370
1
–
Purchase of treasury stock
(476)
(2,661)
(202)
(1,100)
Dividends paid
(1,713)
(1,698)
(419)
(809)
Dividends paid to noncontrolling shareholders
(83)
(76)
(80)
(75)
Proceeds from issuance of subsidiary shares
328
–
(13)
–
Other financing activities
–
(53)
(12)
(19)
Net cash used in financing activities – continuing
operations
(1,363)
(1,229)
(1,123)
(2,920)
Net cash provided by financing activities – discontinued
operations
–
–
–
–
Net cash used in financing activities
(1,363)
(1,229)
(1,123)
(2,920)
Effects of exchange rate changes on cash and equivalents
and restricted cash
(42)
(76)
(37)
(80)
Adjustment for the net change in cash and equivalents and restricted
cash
in Assets held for sale
(28)
–
(15)
–
Net change in cash and equivalents and restricted cash
(1,232)
(1,753)
(515)
(2,810)
Cash and equivalents and restricted cash, beginning of period
4,174
4,489
3,457
5,546
Cash and equivalents and restricted cash, end of period
2,942
2,736
2,942
2,736
Supplementary disclosure of cash flow information:
Interest paid
108
36
60
27
Income taxes paid
527
638
320
298
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12
Q2 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)
983
983
48
1,031
Foreign currency translation
adjustments, net of tax of $1
(392)
(392)
(22)
(414)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(4)
(17)
(17)
(17)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $37
106
106
106
Change in derivative instruments
and hedges, net of tax of $2
2
2
2
Changes in noncontrolling interests
(2)
(2)
(13)
(15)
Dividends to
noncontrolling shareholders
–
(74)
(74)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
28
28
28
Purchase of treasury stock
(2,693)
(2,693)
(2,693)
Delivery of shares
(38)
(130)
538
370
370
Other
6
6
6
Balance at June 30, 2022
171
12
18,767
(4,389)
(2,290)
12,271
315
12,586
Balance at January 1, 2023
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
Net income
(1)
1,942
1,942
47
1,989
Foreign currency translation
adjustments, net of tax of $(2)
(76)
(76)
(3)
(79)
Effect of change in fair value of
available-for-sale securities,
net of tax of $2
7
7
7
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $4
(5)
(5)
(5)
Change in derivative instruments
and hedges, net of tax of $1
3
3
3
Issuance of subsidiary shares
170
170
168
338
Other changes in
noncontrolling interests
(6)
(6)
4
(2)
Dividends to
noncontrolling shareholders
–
(84)
(84)
Dividends to shareholders
(1,706)
(1,706)
(1,706)
Cancellation of treasury shares
(7)
(201)
(2,359)
2,567
–
–
Share-based payment arrangements
62
62
1
63
Purchase of treasury stock
(464)
(464)
(464)
Delivery of shares
(153)
249
96
96
Other
(3)
(3)
(3)
Balance at June 30, 2023
163
11
17,958
(4,627)
(709)
12,796
544
13,340
(1)
Amounts attributable to noncontrolling interests for the six months ended June 30, 2023 and 2022, exclude net losses of $2 million and $2 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
Q2 2023 FINANCIAL INFORMATION
—
Notes to the Consolidated Financial Information (unaudited)
─
Note 1
The Company and basis of presentation
ABB Ltd and its subsidiaries (collectively,
the Company) together form a technology
leader in electrification and automation, enabling a more sustainable
and
resource-efficient future. The Company’s solutions connect
engineering know-how and software to optimize how things
are manufactured, moved, powered and
operated.
The Company’s Consolidated Financial Information is prepared
in accordance with United States of America generally accepted
accounting principles (U.S.
GAAP) for interim financial reporting. As such, the Consolidated
Financial Information does not include all the
information and notes required under U.S. GAAP
for
annual consolidated financial statements. Therefore, such financial
information should be read in conjunction with the audited
consolidated financial statements in
the Company’s Annual Report for the year ended December
31, 2022.
The preparation of financial information in conformity with U.S. GAAP
requires management to make assumptions and
estimates that directly affect the amounts
reported in the Consolidated Financial Information. These accounting
assumptions and estimates include:
●
estimates to determine valuation allowances for deferred tax assets
and amounts recorded for unrecognized tax benefits,
●
estimates related to credit losses expected to occur over
the remaining life of financial assets such as trade and other
receivables, loans and other
instruments,
●
estimates used to record expected costs for employee severance
in connection with restructuring programs,
●
estimates of loss contingencies associated with litigation or
threatened litigation and other claims and inquiries, environmental
damages, product
warranties, self-insurance reserves, regulatory and other proceedings,
●
assumptions and projections, principally related to future material,
labor and project-related overhead costs, used in determining the
percentage-of-
completion on projects where revenue is recognized over time,
as well as the amount of variable consideration the
Company expects to be entitled to,
●
assumptions used in the calculation of pension and postretirement
benefits and the fair value of pension plan assets,
●
assumptions used in determining inventory obsolescence and net
realizable value,
●
growth rates, discount rates and other assumptions used to determine
impairment of long-lived assets and in testing goodwill
for impairment,
●
estimates and assumptions used in determining the fair
values of assets and liabilities assumed in business
combinations, and
●
estimates and assumptions used in determining the initial fair value
of retained noncontrolling interests
and certain obligations in connection with
divestments.
The actual results and outcomes may differ from the Company’s
estimates and assumptions.
A portion of the Company’s activities (primarily long-term
construction activities) has an operating cycle that
exceeds one year. For classification
of current assets
and liabilities related to such activities, the Company elected to
use the duration of the individual contracts as
its operating cycle. Accordingly,
there are accounts
receivable, contract assets, inventories and provisions related to
these contracts which will not be realized within one
year that have been classified as current.
Basis of presentation
In the opinion of management, the unaudited Consolidated Financial
Information contains all necessary
adjustments to present fairly the financial position, results
of operations and cash flows for the reported periods. Management considers
all such adjustments to be of a normal recurring nature. The
Consolidated Financial
Information is presented in United States dollars ($)
unless otherwise stated. Due to rounding, numbers presented
in the Consolidated Financial Information may
not add to the totals provided.
Certain amounts reported in the Consolidated Financial Information for
prior periods have been reclassified to conform to the
current year’s presentation. These
changes relate primarily to the reorganization of the Company’s
operating segments (see Note 17 for details).
14
Q2 2023 FINANCIAL INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Disclosure about supplier finance program obligations
In January 2023, the Company adopted an accounting standard
update which requires entities to disclose information related
to supplier finance programs. Under
the update, the Company is required to disclose annually
(i) the key terms of the program, (ii) the amount of the supplier
finance obligations outstanding and where
those obligations are presented in the balance sheet at the reporting
date, and (iii) a rollforward of the supplier finance obligation
program within the reporting
period. The Company adopted this update retrospectively for all
in-scope transactions, with the exception of the rollforward
disclosures, which will be adopted
prospectively for annual periods beginning January 1, 2024.
Apart from the additional disclosure requirements, this
update does not have a significant impact on
the Company’s consolidated financial statements.
The total outstanding supplier finance obligation included in “Accounts
payable, trade” in the Consolidated Balance Sheets
at June 30, 2023 and December 31,
2022, amounted to $457 million and $477 million, respectively.
The Company’s payment terms related to suppliers’
finance programs are not impacted by the
suppliers’ decisions to sell amounts under the arrangements
and are typically consistent with local market practices.
Facilitation of the effects of reference rate reform on financial
reporting
In January 2023, the Company adopted an accounting standard
update which provides temporary optional expedients and
exceptions to the current guidance on
contract modifications and hedge accounting to ease the financial
reporting burdens related to the expected market
transition from the London Interbank Offered
Rate (LIBOR) and other interbank offered rates to alternative
reference rates. The Company is applying this standard
update as relevant contract and hedge
accounting relationship modifications are made during the course
of the transition period ending December 31, 2024. This
update does not have a significant
impact on the Company’s consolidated financial statements.
─
Note 3
Discontinued operations and assets held for sale
Divestment of the Power Grids business
In 2020, the Company completed the divestment of its
Power Grids business to Hitachi Ltd (Hitachi).
Upon closing of the sale, the Company entered into various
transition services agreements (TSAs),
some of which continue to have services performed. Pursuant
to these TSAs, the Company and Hitachi Energy provide
to
each other, on a transitional basis, various
services. The services provided by the Company
primarily include finance, information technology,
human resources
and certain other administrative services. The TSAs were to
be performed for up to 3 years with the possibility
to agree on extensions on an exceptional basis
for
business-critical services which are reasonably necessary
to avoid a material adverse impact on the business. The TSA for
information technology services was
extended until mid-2025. In the six and three months ended
June 30, 2023, the Company has recognized within its continuing
operations, general and
administrative expenses incurred to perform the TSAs, offset
by $76 million and $39 million in TSA-related
income for such services that is reported in Other
income (expense), net.
In the six and three months ended June 30, 2022, the
Company has recognized within its continuing operations, general
and administrative
expenses incurred to perform the TSAs, offset by $76
million and $38 million in TSA-related income for such services
that is reported in Other income (expense),
net.
Discontinued operations
As a result of the sale of the Power Grids business, substantially
all Power Grids-related assets and liabilities have
been sold. As this divestment represented
a
strategic shift that would have a major effect on the Company’s
operations and financial results, the
results of operations for this business are presented
as
discontinued operations and the assets and liabilities are presented
as held for sale and in discontinued operations.
Certain of the business contracts in the Power
Grids business continue to be executed by subsidiaries of the Company
for the benefit/risk of Hitachi Energy.
Assets and liabilities relating to, as well as the net
financial results of, these contracts will continue to be included
in discontinued operations until they have been completed or otherwise
transferred to Hitachi
Energy. The remaining business
activities of the Power Grids business being executed
by the Company is not significant.
In addition, the Company also has retained obligations (primarily for
environmental and taxes) related to other businesses
disposed or otherwise exited that
qualified as discontinued operations at the time of their
disposal. Changes to these retained obligations are also included
in Loss from discontinued operations, net
of tax.
At June 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 balances amounted to
$74 million of current assets, $97 million of current liabilities
and $20 million of non-current liabilities.
Planned business divestments classified as held for sale
The Company classifies its long-lived assets or disposal
groups to be sold as held for sale in the period in which all of
the held for sale criteria are met. The
Company initially measures a long-lived asset or disposal group
that is classified as held for sale at the lower of its carrying
value or fair value less any costs
to
sell. Any resulting loss is recognized in the period in which
the held for sale criteria are met,
while gains are not recognized on the sale of a
long-lived asset or
disposal group until the date of sale. The Company assesses
the fair value of a long-lived asset or disposal group less any costs
to sell at each reporting period
and until the asset or disposal group is no longer classified
as held for sale.
In January 2023, the Company entered into an agreement to
divest its Power Conversion Division to AcBel Polytech
Inc. for cash proceeds of $505 million.
The
Power Conversion Division is part of the Company’s
Electrification operating segment and the divestment,
subject to regulatory approvals, is expected to be
completed in the second half of 2023.
15
Q2 2023 FINANCIAL INFORMATION
As this planned divestment does not qualify as a discontinued operation,
the results of operations for this business are included
in the Company’s continuing
operations for all periods presented. The assets and liabilities of
this business are shown as assets and liabilities held fo
r
sale in the Company’s Consolidated
Balance Sheet at June 30, 2023.
The carrying amounts of the major classes
of assets and liabilities held for sale relating to this planned divestment are
as follows:
($ in millions)
June 30, 2023
Assets
Receivables, net
97
Inventories, net
104
Property, plant and equipment, net
44
Other intangible assets, net
74
Goodwill
175
Other assets
60
Current assets held for sale
554
Liabilities
Accounts payable, trade
48
Other liabilities
62
Current liabilities held for sale
110
In the six and three months ended June 30, 2023,
Income from continuing operations before taxes
includes income of $30 million and $13 million, respectively,
from the Power Conversion Division. In the six and three months
ended June 30, 2022, Income from continuing operations before
taxes includes income of
$12 million and $11 million, respectively,
from this Division.
Subsequent events
On July 3, 2023, the Company completed the divestment of its
Power Conversion Division to AcBel Polytech Inc.
─
Note 4
Acquisitions and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Six months ended June 30,
Three months ended June 30,
($ in millions, except number of acquired businesses)
2023
2022
2023
2022
Purchase price for acquisitions (net of cash acquired)
(1)
114
138
113
-
Aggregate excess of purchase price over
fair value of net assets acquired
(2)
54
191
50
-
Number of acquired businesses
2
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 six months
ended June 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 acquisition.
On January 26, 2022, the Company increased its ownership in
In-Charge to a 60 percent controlling interest through
a stock purchase agreement. In-Charge
is
headquartered in Santa Monica, USA, and is a provider of
turn-key commercial electric vehicle charging hardware and
software solutions. The resulting cash
outflows for the Company amounted to $134
million (net of cash acquired of $4 million). The acquisition
expands the market presence of the E-mobility
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 six months ended June 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.
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.
16
Q2 2023 FINANCIAL INFORMATION
In the six and three months ended June 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:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2023
2022
2023
2022
Income (loss) from equity-accounted companies, net of taxes
(7)
(10)
–
1
Basis difference amortization (net of deferred income tax benefit)
–
(52)
–
(15)
Income (loss) from equity-accounted companies
(7)
(62)
–
(14)
─
Note 5
Cash and equivalents, marketable securities and short-term investments
Cash and equivalents, marketable securities and short-term
investments consisted of the following:
June 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
1,743
1,743
1,743
Time deposits
1,541
1,541
1,199
342
Equity securities
622
16
638
638
3,906
16
–
3,922
2,942
980
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
225
1
(13)
213
213
225
1
(13)
213
–
213
Total
4,131
17
(13)
4,135
2,942
1,193
Of which:
Restricted cash, current
19
December 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
1,715
1,715
1,715
Time deposits
2,459
2,459
2,459
Equity securities
345
10
355
355
4,519
10
–
4,529
4,174
355
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
269
1
(15)
255
255
Other government obligations
58
58
58
Corporate
64
(7)
57
57
391
1
(22)
370
–
370
Total
4,910
11
(22)
4,899
4,174
725
Of which:
Restricted cash, current
18
17
Q2 2023 FINANCIAL INFORMATION
─
Note 6
Derivative financial instruments
The Company is exposed to certain currency,
commodity, interest rate and equity
risks arising from its global operating, financing and
investing activities. The
Company uses derivative instruments to reduce and manage the
economic impact of these exposures.
Currency risk
Due to the global nature of the Company’s operations, many
of its subsidiaries are exposed to currency risk
in their operating activities from entering into
transactions in currencies other than their functional currency.
To manage such
currency risks, the Company’s policies require its
subsidiaries to hedge their
foreign currency exposures from binding sales and purchase
contracts denominated in foreign currencies. For forecasted foreign currency
denominated sales of
standard products and the related foreign currency denominated purchases,
the Company’s policy is to hedge up to a maximum of
100 percent of the forecasted
foreign currency denominated exposures, depending on the
length of the forecasted exposures. Forecasted
exposures greater than 12 months are not hedged.
Forward foreign exchange contracts are the main instrument used to
protect the Company against the volatility of future cash
flows (caused by changes in
exchange rates) of contracted and forecasted sales and purchases
denominated in foreign currencies. In addition, within
its treasury operations, the Company
primarily uses foreign exchange swaps and forward foreign exchange
contracts to manage the currency and timing mismatches
arising in its liquidity management
activities.
Commodity risk
Various commodity products
are used in the Company’s manufacturing activities.
Consequently it is exposed to volatility in future cash flows
arising from changes
in commodity prices. To
manage the price risk of commodities, the Company’s
policies require that its subsidiaries hedge the commodity
price risk exposures from
binding contracts, as well as at least 50 percent (up to a maximum
of 100 percent) of the forecasted commodity exposure over
the next 12 months or longer (up to
a maximum of 18 months). Primarily swap contracts are used to
manage the associated price risks of commodities.
Interest rate risk
The Company has issued bonds at fixed rates. Interest rate swaps
and cross-currency interest rate swaps are used to manage
the interest rate and foreign
currency risk associated with certain debt and generally such
swaps are designated as fair value hedges. In addition, from time
to time, the Company uses
instruments such as interest rate swaps, interest rate futures,
bond futures or forward rate agreements to manage
interest rate risk arising from the Company’s
balance sheet structure but does not designate such instruments
as hedges.
Equity risk
The Company is exposed to fluctuations in the fair value of
its warrant appreciation rights (WARs)
issued under its management
incentive plan. A WAR gives its
holder the right to receive cash equal to the market price of
an equivalent listed warrant on the date of exercise.
To eliminate
such risk, the Company has
purchased cash-settled call options, indexed to the shares of the
Company, which entitle the Company
to receive amounts equivalent to its obligations
under the
outstanding WARs.
Volume of derivative activity
In general, while the Company’s primary objective in
its use of derivatives is to minimize exposures arising from
its business, certain derivatives are designated
and qualify for hedge accounting treatment while others either are
not designated or do not qualify for hedge accounting.
Foreign exchange and interest rate derivatives
The gross notional amounts of outstanding foreign exchange and
interest rate derivatives (whether designated as
hedges or not) were as follows:
Type of derivative
Total notional amounts
at
($ in millions)
June 30, 2023
December 31, 2022
June 30, 2022
Foreign exchange contracts
14,256
13,509
14,470
Embedded foreign exchange derivatives
1,374
933
850
Cross-currency interest rate swaps
868
855
833
Interest rate contracts
2,198
2,830
3,049
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 derivative
Unit
Total notional amounts
at
June 30, 2023
December 31, 2022
June 30, 2022
Copper swaps
metric tonnes
32,894
29,281
42,961
Silver swaps
ounces
1,726,172
2,012,213
2,844,285
Steel swaps
metric tonnes
11,158
–
–
Aluminum swaps
metric tonnes
5,950
6,825
7,350
Equity derivatives
At June 30, 2023, December 31, 2022, and June 30, 2022,
the Company held 3 million, 8 million and 9
million cash-settled call options indexed to ABB Ltd shares
(conversion ratio 5:1) with a total fair value of $12 million, $15
million and $12 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange
contracts to manage the foreign exchange risk
of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to
hedge its WAR liabilities. The Company applies
cash flow hedge accounting in only limited cases.
In
these cases, the effective portion of the changes in their
fair value is recorded in “Accumulated other comprehensive
loss” and subsequently reclassified into
earnings in the same line item and in the same period as
the underlying hedged transaction affects
earnings. For the six and three months ended June 30,
2023
and 2022,
there were no significant amounts recorded for
cash flow hedge accounting activities.
Fair value hedges
To reduce its interest
rate exposure arising primarily from its debt issuance activities,
the Company uses interest rate swaps and cross
-currency interest rate
swaps. Where such instruments are designated as fair value
hedges, the changes in the fair value of these instruments,
as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded
as offsetting gains and losses in “Interest
and other finance expense”.
18
Q2 2023 FINANCIAL INFORMATION
The effect of derivative instruments, designated and qualifying
as fair value hedges, on the Consolidated Income
Statements was as follows:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2023
2022
2023
2022
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
18
(55)
8
(26)
Hedged item
(18)
56
(8)
27
Cross-currency interest rate swaps
Designated as fair value hedges
(10)
(94)
1
(49)
Hedged item
–
90
(2)
46
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
Six months ended June 30,
Three months ended June 30,
($ in millions)
Location
2023
2022
2023
2022
Foreign exchange contracts
Total revenues
5
(119)
(6)
(123)
Total cost of sales
(12)
34
(11)
40
SG&A expenses
(1)
14
23
8
15
Non-order related research
and development
(1)
1
(1)
–
Interest and other finance expense
(62)
(54)
(104)
(76)
Embedded foreign exchange
Total revenues
45
5
38
7
contracts
Total cost of sales
(1)
(2)
–
(3)
Commodity contracts
Total cost of sales
(15)
(51)
(26)
(86)
Other
Interest and other finance expense
1
3
1
2
Total
(26)
(160)
(101)
(224)
(1)
SG&A expenses represent
“Selling, general and
administrative expenses”.
The fair values of derivatives included in the Consolidated Balance
Sheets were as follows:
June 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
2
Interest rate contracts
–
–
45
–
Cross-currency interest rate swaps
–
–
–
282
Cash-settled call options
12
–
–
–
Total
12
–
49
284
Derivatives not designated as hedging instruments:
Foreign exchange contracts
145
25
122
22
Commodity contracts
4
–
16
–
Interest rate contracts
2
–
2
–
Other equity contracts
10
–
–
–
Embedded foreign exchange derivatives
36
10
15
3
Total
197
35
155
25
Total fair value
209
35
204
309
19
Q2 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 June 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 June 30, 2023, and December 31, 2022,
information related to these offsetting arrangements was as
follows:
($ in millions)
June 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
198
(103)
–
–
95
Total
198
(103)
–
–
95
($ in millions)
June 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
495
(103)
–
–
392
Total
495
(103)
–
–
392
($ 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
Q2 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 natur
e
of
those inputs. The Company has categorized its financial assets
and liabilities and non-financial assets measured at
fair value within this hierarchy based on
whether the inputs to the valuation technique are observable or unobservable.
An observable input is based on market data obtained from
independent sources,
while an unobservable input reflects the Company’s
assumptions about market data.
The levels of the fair value hierarchy are as follows:
Level 1:
Valuation inputs consist
of quoted prices in an active market for identical
assets or liabilities (observable quoted prices). Assets
and liabilities valued
using Level 1 inputs include exchange
‑
traded equity securities, listed derivatives
which are actively traded such as commodity futures, interest rate
futures and certain actively traded debt securities.
Level 2:
Valuation inputs consist
of observable inputs (other than Level 1 inputs)
such as actively quoted prices for similar assets, quoted prices in
inactive
markets and inputs other than quoted prices such
as interest rate yield curves, credit spreads, or inputs derived from
other observable data by
interpolation, correlation, regression or other means. The adjustments
applied to quoted prices or the inputs used in valuation
models may be both
observable and unobservable. In these cases, the fair value measurement
is classified as Level 2 unless the unobservable portion
of the adjustment or
the unobservable input to the valuation model is significant, in
which case the fair value measurement would be
classified as Level 3. Assets and
liabilities valued or disclosed using Level 2 inputs include investments
in certain funds, certain debt securities that are not actively traded,
interest rate
swaps, cross-currency interest rate swaps, commodity
swaps, cash-settled call options, forward foreign exchange
contracts, foreign exchange swaps and
forward rate agreements, time deposits, as well as financing receivables
and debt.
Level 3:
Valuation inputs are based on
the Company’s assumptions of relevant market
data (unobservable input).
Whenever quoted prices involve bid-ask spreads, the Company
ordinarily determines fair values based on mid-market
quotes. However, for the purpose of
determining the fair value of cash-settled call options serving
as hedges of the Company’s management incentive
plan, bid prices are used.
When determining fair values based on quoted prices
in an active market, the Company considers if the
level of transaction activity for the financial instrument
has
significantly decreased or would not be considered orderly.
In such cases, the resulting changes in valuation
techniques would be disclosed. If the market
is
considered disorderly or if quoted prices are not available, the Company
is required to use another valuation technique, such
as an income approach.
Recurring fair value measures
The fair values of financial assets and liabilities measured at
fair value on a recurring basis were as follows:
June 30, 2023
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
–
638
–
638
Debt securities—U.S. government obligations
213
–
–
213
Derivative assets—current in “Other current assets”
–
209
–
209
Derivative assets—non-current in “Other non-current assets”
–
35
–
35
Total
213
882
–
1,095
Liabilities
Derivative liabilities—current in “Other current liabilities”
–
204
–
204
Derivative liabilities—non-current in “Other non-current liabilities”
–
309
–
309
Total
–
513
–
513
21
Q2 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 six and three months ended June 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:
June 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
1,724
1,724
–
–
1,724
Time deposits
1,199
–
1,199
–
1,199
Restricted cash
19
19
–
–
19
Marketable securities and short-term investments
(excluding securities):
Time deposits
342
–
342
–
342
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
3,821
2,412
1,409
–
3,821
Long-term debt (excluding finance lease obligations)
4,316
4,222
16
–
4,238
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
Q2 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)
June 30, 2023
December 31, 2022
June 30, 2022
Contract assets
1,010
954
965
Contract liabilities
2,394
2,216
2,141
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 reco
gnized.
The significant changes in the Contract assets and Contract liabilities
balances were as follows:
Six months ended June 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
(966)
(763)
Additions to Contract liabilities - excluding amounts recognized as
revenue during the period
1,102
1,102
Receivables recognized that were included in the Contract
assets balance at Jan 1, 2023/2022
(465)
(423)
The Company considers its order backlog to represent its
unsatisfied performance obligations. At June 30, 2023, the Company
had unsatisfied performance
obligations totaling $21,938 million and, of this amount, the
Company expects to fulfill approximately 51 percent
of the obligations in 2023, approximately 36
percent of the obligations in 2024 and the balance thereafter.
23
Q2 2023 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s total debt at June 30, 2023, and December
31, 2022, amounted to $8,300 million and $7,678 million,
respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of
long-term debt” consisted of the following:
($ in millions)
June 30, 2023
December 31, 2022
Short-term debt
1,434
1,448
Current maturities of long-term debt
2,415
1,087
Total
3,849
2,535
Short-term debt primarily represented issued commercial paper and
short-term bank borrowings from various banks.
At June 30, 2023,
and December 31, 2022,
$1,352 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 June 30, 2023,
or at December 31, 2022.
In May 2023, the Company repaid on 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 June 30, 2023, and
December 31, 2022, amounted to $4,451 million
and $5,143 million, respectively.
Outstanding bonds (including maturities within the next 12 months)
were as follows:
June 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
$
305
CHF
275
$
298
0.625% EUR Instruments, due 2024
EUR
700
$
739
EUR
700
$
720
Floating Rate EUR Instruments, due 2024
EUR
500
$
544
EUR
500
$
536
0.75% EUR Instruments, due 2024
EUR
750
$
788
EUR
750
$
769
0.3% CHF Bonds, due 2024
CHF
280
$
310
CHF
280
$
303
2.1% CHF Bonds, due 2025
CHF
150
$
166
CHF
150
$
162
3.25% EUR Instruments, due 2027
EUR
500
$
539
0.75% CHF Bonds, due 2027
CHF
425
$
470
CHF
425
$
460
3.8% USD Notes, due 2028
(2)
USD
383
$
382
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
188
CHF
170
$
184
0% EUR Instruments, due 2030
EUR
800
$
691
EUR
800
$
677
2.375% CHF Bonds, due 2030
CHF
150
$
166
CHF
150
$
162
3.375% EUR Instruments, due 2031
EUR
750
$
801
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
590
Total
$
6,679
$
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).
24
Q2 2023 FINANCIAL INFORMATION
─
Note 10
Commitments and contingencies
Contingencies—Regulatory, Compliance
and Legal
Regulatory
Based on findings during an internal investigation, the Company
self-reported to the SEC and the DoJ, in the United
States, to the Special Investigating Unit (SIU)
and the National Prosecuting Authority (NPA)
in South Africa as well as to various authorities in other countries
potential suspect payments and other compliance
concerns in connection with some of the Company’s dealings
with Eskom and related persons. Many of those parties
have expressed an interest in, or
commenced an investigation into, these matters and the Company is
cooperating fully with them. The Company paid $104
million to Eskom in December 2020 as
part of a full and final settlement with Eskom and the Special Investigating
Unit relating to improper payments and other compliance
issues associated with the
Controls and Instrumentation Contract, and its Variation
Orders for Units 1 and 2 at Kusile. The Company
made a provision of approximately $325 million which
was recorded in Other income (expense), net, during the third
quarter of 2022. In December 2022, the Company settled
with the SEC and DOJ as well as the
authorities in South Africa and Switzerland. The matter is still pending
with the authorities in Germany,
but the Company does not believe that it will
need to record
any additional provisions for this matter.
General
The Company is aware of proceedings, or the threat of proceedings,
against it and others in respect of private claims
by customers and other third parties with
regard to certain actual or alleged anticompetitive practices.
Also, the Company is subject to other claims and legal proceedings,
as well as investigations carried
out by various law enforcement authorities. With respect to the above-mentioned
claims, regulatory matters, and any related proceedings,
the Company will bear
the related costs, including costs necessary to resolve
them.
Liabilities recognized
At June 30, 2023, and December 31, 2022, the Company
had aggregate liabilities of $95 million and $86 million, respectively,
included in “Other provisions” and
“Other non
‑
current liabilities”, for the above regulatory,
compliance and legal contingencies, and none of the individual
liabilities recognized was significant. As it is
not possible to make an informed judgment on, or reasonably predict,
the outcome of certain matters and as it is not possible,
based on information currently
available to management, to estimate the maximum potential
liability on other matters, there could be adverse outcomes beyond
the amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s
third-party guarantees.
The maximum potential payments represent a “worst
-case
scenario”, and do not reflect management’s expected
outcomes.
Maximum potential payments
($ in millions)
June 30, 2023
December 31, 2022
Performance guarantees
3,546
4,300
Financial guarantees
94
96
Total
(1)
3,640
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 June 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 2035, mainly consist of performance guarantees
whereby (i) the Company guarantees
the performance of a third party’s product or service
according to the terms of a contract and (ii) as member
of a consortium/joint-venture that includes third parties, the
Company guarantees not only its own
performance but also
the work of third parties. Such guarantees may
include guarantees that a project will be completed within a specified
time. If the third party
does not fulfill the obligation, the Company will compensate the
guaranteed party in cash or in kind. The original
maturity dates for the majority of these
performance guarantees range from one to ten years.
In conjunction with the divestment of the high-voltage cable
and cables accessories businesses, the Company has
entered into various performance guarantees
with other parties with respect to certain liabilities of the
divested business. At both June 30, 2023, and December 31,
2022, the maximum potential payable under
these guarantees amounts to $843 million, respectively,
and these guarantees have various original maturities ranging
from five to ten years.
The Company retained obligations for financial, performance
and indemnification guarantees related to the sale of the
Power Grids business (see Note 3 for
details). The performance and financial guarantees have been
indemnified by Hitachi Ltd. These guarantees, which
have various maturities up to 2035, primarily
consist of bank guarantees, standby letters of credit, business
performance guarantees and other trade-related
guarantees, the majority of which have original
maturity dates ranging from one to ten years. The maximum amount
payable under these guarantees at June 30, 2023,
and December 31, 2022, is approximately
$2.3 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 June 30, 2023, and December 31, 2022, respectively,
the total outstanding performance bonds aggregated
to $3.0 billion and $2.9 billion.
There have
been no significant amounts reimbursed to financial institutions
under these types of arrangements in the six and three
months
ended June 30, 2023 and 2022.
25
Q2 2023 FINANCIAL INFORMATION
Product and order-related contingencies
The Company calculates its provision for product warranties
based on historical claims experience and specific review
of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance,
was as follows:
($ in millions)
2023
2022
Balance at January 1,
1,028
1,005
Claims paid in cash or in kind
(85)
(82)
Net increase in provision for changes in estimates, warranties
issued and warranties expired
136
103
Exchange rate differences
(3)
(54)
Balance at June 30,
1,076
972
─
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 19.0 percent in the six months ended
June 30, 2023, was lower than the effective tax
rate of 29.3 percent in the six months ended June
30, 2022, primarily due to a net benefit realized on a favorable
resolution of an uncertain tax position. 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 six months
ended June 30, 2023, the Company released the provision of
$206 million, due to the resolution of this matter,
which resulted in an increase of $0.11
in earnings
per share (basic and diluted) for the six months ended June
30, 2023.
─
Note 12
Employee benefits
The Company operates defined benefit pension plans, defined contribution
pension plans, and termination indemnity
plans, in accordance with local regulations
and practices. At June 30, 2023, the Company’s most significant
defined benefit pension plans are in Switzerland as well
as in Germany, the United
Kingdom, and
the United States. These plans cover a large portion of the Company’s
employees and provide benefits to employees
in the event of death, disability,
retirement, or
termination of employment. Certain of these plans are multi-employer
plans. The Company also operates other postretirement benefit plans
including
postretirement health care benefits and other employee-related
benefits for active employees including long-service
award plans. The measurement date used for
the Company’s employee benefit plans is December
- The funding policies of the Company’s plans
are consistent with the local government and tax
requirements.
Net periodic benefit cost of the Company’s defined benefit
pension and other postretirement benefit plans consisted of
the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Six months ended June 30,
2023
2022
2023
2022
2023
2022
Operational pension cost:
Service cost
19
27
14
17
–
–
Operational pension cost
19
27
14
17
–
–
Non-operational pension cost (credit):
Interest cost
24
1
82
43
1
1
Expected return on plan assets
(63)
(58)
(74)
(77)
–
–
Amortization of prior service cost (credit)
(4)
(4)
(1)
(1)
(1)
(1)
Amortization of net actuarial loss
–
–
23
30
(2)
(2)
Non-operational pension cost (credit)
(43)
(61)
30
(5)
(2)
(2)
Net periodic benefit cost (credit)
(24)
(34)
44
12
(2)
(2)
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended June 30,
2023
2022
2023
2022
2023
2022
Operational pension cost:
Service cost
10
13
6
8
–
–
Operational pension cost
10
13
6
8
–
–
Non-operational pension cost (credit):
Interest cost
12
–
42
21
–
1
Expected return on plan assets
(30)
(28)
(35)
(36)
–
–
Amortization of prior service cost (credit)
(4)
(2)
(1)
(1)
(1)
–
Amortization of net actuarial loss
–
–
10
15
(1)
(2)
Non-operational pension cost (credit)
(22)
(30)
16
(1)
(2)
(1)
Net periodic benefit cost (credit)
(12)
(17)
22
7
(2)
(1)
The components of net periodic benefit cost other than the service
cost component are included in the line “Non-operational
pension cost (credit)” in the income
statement.
26
Q2 2023 FINANCIAL INFORMATION
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Six months ended June 30,
2023
2022
2023
2022
2023
2022
Total contributions
to defined benefit pension and
other postretirement benefit plans
5
31
21
19
4
4
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended June 30,
2023
2022
2023
2022
2023
2022
Total contributions
to defined benefit pension and
other postretirement benefit plans
3
15
10
9
2
1
The Company expects to make contributions totaling approximately
$95 million and $34 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 disburs
ing a portion in March and the remaining amounts
in April.
In March 2023, the Company completed the share buyback
program that was launched in April 2022. This program was executed
on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased
a total of 67 million shares for approximately $2.0
billion, of which 8 million shares were
purchased in the first quarter of 2023 (resulting in an
increase in Treasury stock of $253 million
).
Also in March 2023, the Company announced a new share buyback
program of up to $1 billion. This program, which was
launched in April 2023, is being executed
on a second trading line on the SIX Swiss Exchange and is planned
to run until the Company’s 2024 AGM. Through
this program, the Company purchased, from
the program’s launch in April 2023 to June 30, 2023, 6
million shares, resulting in an increase in Treasury
stock of $212 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.
During the first quarter of 2023, the Company delivered, out
of treasury stock, approximately 5 million shares
in connection with its Management Incentive Plan.
In February 2023, the Company obtained funding through
a private placement of shares in its ABB E-Mobility subsidiary,
ABB E-mobility Holding Ltd
(ABB E-Mobility),
receiving gross proceeds of 325 million Swiss francs
(approximately $351 million) and reducing the Company’s
ownership in ABB E-Mobility from
92 percent to 81 percent. This resulted in an increase
in Additional paid-in capital of $170
million.
27
Q2 2023 FINANCIAL INFORMATION
─
Note 14
Earnings per share
Basic earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during
the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number
of shares outstanding during the period, assuming that
all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding
written call options, and outstanding options and
shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Six months ended June 30,
Three months ended June 30,
($ in millions, except per share data in $)
2023
2022
2023
2022
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,951
1,003
910
388
Loss from discontinued operations, net of tax
(9)
(20)
(4)
(9)
Net income
1,942
983
906
379
Weighted-average number of shares outstanding
(in millions)
1,861
1,922
1,862
1,909
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.05
0.52
0.49
0.20
Loss from discontinued operations, net of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.49
0.20
Diluted earnings per share
Six months ended June 30,
Three months ended June 30,
($ in millions, except per share data in $)
2023
2022
2023
2022
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,951
1,003
910
388
Loss from discontinued operations, net of tax
(9)
(20)
(4)
(9)
Net income
1,942
983
906
379
Weighted-average number of shares outstanding (in millions)
1,861
1,922
1,862
1,909
Effect of dilutive securities:
Call options and shares
12
13
11
9
Adjusted weighted-average number of shares outstanding
(in millions)
1,873
1,935
1,873
1,918
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.04
0.52
0.49
0.20
Loss from discontinued operations, net of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.48
0.20
28
Q2 2023 FINANCIAL INFORMATION
─
Note 15
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive
loss” (OCI) attributable to ABB, by component, net
of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ 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
(419)
(17)
91
(12)
(357)
Amounts reclassified from OCI
5
–
15
14
34
Total other comprehensive (loss)
income
(414)
(17)
106
2
(323)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(22)
–
–
–
(22)
Balance at June 30, 2022
(3,385)
(15)
(983)
(6)
(4,389)
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
(79)
2
(13)
(1)
(91)
Amounts reclassified from OCI
–
5
8
4
17
Total other comprehensive (loss)
income
(79)
7
(5)
3
(74)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(3)
(3)
Balance at June 30, 2023
(3,767)
(12)
(843)
(5)
(4,627)
The amounts reclassified out of OCI
for the six and three months ended June
30, 2023 and 2022, were not significant.
29
Q2 2023 FINANCIAL INFORMATION
─
Note 16
Restructuring and related expenses
Other restructuring-related activities
In the six and three months ended June 30, 2023 and 2022,
the Company executed various other restructuring
-related activities and incurred the following
expenses:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2023
2022
2023
2022
Employee severance costs
26
43
7
35
Estimated contract settlement, loss order and other costs
2
202
1
195
Inventory and long-lived asset impairments
–
5
–
1
Total
28
250
8
231
Expenses associated with these activities are recorded in the following
line items in the Consolidated Income Statements:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2023
2022
2023
2022
Total cost of sales
10
8
3
4
Selling, general and administrative expenses
13
28
1
24
Non-order related research and development expenses
–
2
(1)
2
Other income (expense), net
5
212
5
201
Total
28
250
8
231
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 June 30, 2023 and December 31, 2022,
$193 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 remain
ing 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 six and three months ended June
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,
Power Conversion and Service.
●
Motion:
designs, manufactures, and sells drives, motors, generators
and traction converters that are driving the low-carbon future
for industries, cities,
infrastructure and transportation. These products, digital technology
and related services enable industrial customers to increase
energy efficiency,
improve safety and reliability, and achieve
precise control of their processes. Building on over 130
years of cumulative experience in electric
powertrains, Motion combines domain expertise and technology
to deliver the optimum solution for a wide range of
applications in all industrial
segments. In addition, Motion, along with its partners,
has a leading global service presence. These products
and services are delivered through seven
operating Divisions: Large Motors and Generators, IEC LV
Motors, NEMA Motors, Drive Products, System Drives,
Service and Traction.
30
Q2 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 Treas
ury Operations, the E-mobility operating
segment, historical operating activities of certain divested businesses
,
and other non-core operating activities.
The primary measure of profitability on which the operating segments
are evaluated is Operational EBITA, which
represents income from operations excluding:
●
amortization expense on intangibles arising upon acquisition (acquisition
-related amortization),
●
restructuring, related and implementation costs,
●
changes in the amount recorded for obligations related to divested
businesses occurring after the divestment date (changes
in obligations related to
divested businesses),
●
gains and losses from sale of businesses (including fair value adjustment
on assets and liabilities held for sale),
●
acquisition- and divestment-related expenses and integration costs,
●
certain other non-operational items, as well as
●
foreign exchange/commodity timing differences in income
from operations consisting of: (a) unrealized gains
and losses on derivatives (foreign
exchange, commodities, embedded derivatives), (b) realized
gains and losses on derivatives where the underlying hedged
transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/payables
(and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory,
compliance and legal costs, other income/expense relating
to the Power Grids joint
venture, certain asset write downs/impairments and certain
other fair value changes, changes in estimates relating to opening
balance sheets of acquired
businesses (changes in pre-acquisition estimates), as well as
other items which are determined by management on
a case-by-case basis.
The CODM primarily reviews the results of each segment on
a basis that is before the elimination of profits
made on inventory sales between segments. Segment
results below are presented before these eliminations, with a total deduction
for intersegment profits to arrive at the Company’s
consolidated Operational EBITA.
Intersegment sales and transfers are accounted for as if the sales
and transfers were to third parties, at current
market prices.
The following tables present disaggregated segment revenues from
contracts with customers, Operational EBITA,
and the reconciliations of consolidated
Operational EBITA to Income from co
ntinuing operations before taxes for the six
and three months ended June 30, 2023 and 2022, as well as
total assets at
June 30, 2023, and December 31, 2022.
Six months ended June 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
2,328
1,289
1,081
956
153
5,807
The Americas
2,932
1,267
868
272
129
5,468
of which: United States
2,179
1,061
550
175
111
4,076
Asia, Middle East and Africa
1,948
1,117
1,027
623
32
4,747
of which: China
917
581
339
475
17
2,329
7,208
3,673
2,976
1,851
314
16,022
Product type
Products
6,762
3,169
1,743
1,576
280
13,530
Services and other
446
504
1,233
275
34
2,492
7,208
3,673
2,976
1,851
314
16,022
Third-party revenues
7,208
3,673
2,976
1,851
314
16,022
Intersegment revenues
117
248
13
8
(386)
–
Total revenues
(1)
7,325
3,921
2,989
1,859
(72)
16,022
31
Q2 2023 FINANCIAL INFORMATION
Six months ended June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
2,120
953
1,131
712
110
5,026
The Americas
2,445
1,029
767
238
87
4,566
of which: United States
1,789
853
460
166
60
3,328
Asia, Middle East and Africa
1,967
995
1,119
509
34
4,624
of which: China
992
565
309
382
15
2,263
6,532
2,977
3,017
1,459
231
14,216
Product type
Products
6,124
2,552
1,642
1,230
214
11,762
Services and other
408
425
1,375
229
17
2,454
6,532
2,977
3,017
1,459
231
14,216
Third-party revenues
6,532
2,977
3,017
1,459
231
14,216
Intersegment revenues
118
221
18
3
(360)
–
Total revenues
(1)
6,650
3,198
3,035
1,462
(129)
14,216
Three months ended June 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,166
651
562
482
74
2,935
The Americas
1,525
635
447
136
72
2,815
of which: United States
1,136
528
286
84
58
2,092
Asia, Middle East and Africa
991
568
538
299
17
2,413
of which: China
460
300
177
227
10
1,174
3,682
1,854
1,547
917
163
8,163
Product type
Products
3,456
1,586
916
785
143
6,886
Services and other
226
268
631
132
20
1,277
3,682
1,854
1,547
917
163
8,163
Third-party revenues
3,682
1,854
1,547
917
163
8,163
Intersegment revenues
53
127
6
5
(191)
–
Total revenues
(1)
3,735
1,981
1,553
922
(28)
8,163
Three months ended June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,058
487
546
358
59
2,508
The Americas
1,281
537
399
130
50
2,397
of which: United States
940
446
239
94
27
1,746
Asia, Middle East and Africa
1,016
496
573
242
19
2,346
of which: China
535
278
159
185
6
1,163
3,355
1,520
1,518
730
128
7,251
Product type
Products
3,143
1,304
829
618
119
6,013
Services and other
212
216
689
112
9
1,238
3,355
1,520
1,518
730
128
7,251
Third-party revenues
3,355
1,520
1,518
730
128
7,251
Intersegment revenues
59
106
11
2
(178)
–
Total revenues
(1)
3,414
1,626
1,529
732
(50)
7,251
(1)
Due to rounding, numbers presented may not add to the totals provided.
32
Q2 2023 FINANCIAL INFORMATION
Six months ended
Three months ended
June 30,
June 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA:
Electrification
1,464
1,117
787
605
Motion
767
540
401
266
Process Automation
444
420
239
224
Robotics & Discrete Automation
281
109
141
60
Corporate and Other
‒
E-mobility
(95)
(8)
(67)
(6)
‒ Corporate costs, Intersegment elimination and other
(159)
(45)
(76)
(13)
Total
2,702
2,133
1,425
1,136
Acquisition-related amortization
(109)
(119)
(55)
(59)
Restructuring, related and implementation costs
(1)
(41)
(280)
(13)
(264)
Changes in obligations related to divested businesses
5
17
8
3
Gains and losses from sale of businesses
26
(4)
26
(4)
Acquisition- and divestment-related expenses and integration
costs
(45)
(109)
(26)
(50)
Foreign exchange/commodity timing differences in
income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
(10)
(100)
(32)
(118)
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(6)
(35)
(1)
(33)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
14
40
7
41
Certain other non-operational items:
Other income/expense relating to the Power Grids joint venture
20
(37)
7
(2)
Regulatory, compliance and legal costs
–
(4)
–
(5)
Business transformation costs
(2)
(82)
(66)
(48)
(40)
Changes in pre-acquisition estimates
(4)
1
(4)
2
Certain other fair value changes, including asset impairments
6
34
7
–
Other non-operational items
20
(27)
(3)
(20)
Income from operations
2,496
1,444
1,298
587
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Non-operational pension (cost) credit
15
68
8
32
Income from continuing operations before taxes
2,465
1,483
1,281
599
(1)
Includes impairment of certain assets.
(2)
Amount includes ABB Way process transformation costs of $71 million and $64 million for six months ended June 30, 2023 and 2022, respectively, and $41 million and $39 million for
the three months ended June 30, 2023 and 2022, respectively.
Total assets
(1)
($ in millions)
June 30, 2023
December 31, 2022
Electrification
13,300
12,500
Motion
7,043
6,565
Process Automation
4,761
4,598
Robotics & Discrete Automation
4,931
4,901
Corporate and Other
(2)
9,821
10,584
Consolidated
39,856
39,148
(1)
Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2)
At June 30, 2023, and December 31, 2022, respectively, Corporate and Other includes $74 million and $96 million of assets in the Power Grids business which is reported as
discontinued operations (see Note 3).
33
Q2 2023 FINANCIAL INFORMATION
34
Q2 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 six and three months ended June
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 $50 million.
The following tables provide reconciliations of reported growth rates
of certain key figures to their respective comparable growth
rate.
Comparable growth rate reconciliation by Business Area
Q2 2023 compared to Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
2%
0%
3%
9%
2%
0%
11%
Motion
3%
1%
-1%
3%
22%
1%
-1%
22%
Process Automation
-8%
2%
12%
6%
2%
2%
15%
19%
Robotics & Discrete Automation
-23%
1%
0%
-22%
26%
1%
0%
27%
ABB Group
-2%
2%
2%
2%
13%
1%
3%
17%
H1 2023 compared to H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
3%
0%
4%
10%
4%
0%
14%
Motion
3%
3%
-1%
5%
23%
3%
-1%
25%
Process Automation
8%
4%
17%
29%
-2%
4%
15%
17%
Robotics & Discrete Automation
-23%
2%
0%
-21%
27%
4%
0%
31%
ABB Group
0%
3%
3%
6%
13%
3%
3%
19%
35
Q2 2023 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group
- Quarter
Q2 2023 compared to Q2 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%
0%
2%
1%
17%
-1%
4%
20%
The Americas
5%
0%
1%
6%
17%
0%
2%
19%
of which: United States
4%
0%
0%
4%
20%
0%
1%
21%
Asia, Middle East and Africa
-10%
6%
3%
-1%
3%
6%
4%
13%
of which: China
-15%
5%
1%
-9%
1%
5%
3%
9%
ABB Group
-2%
2%
2%
2%
13%
1%
3%
17%
Regional comparable growth rate reconciliation by Business
Area - Quarter
Q2 2023 compared to Q2 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
-4%
-2%
0%
-6%
9%
-1%
0%
8%
The Americas
8%
0%
0%
8%
19%
0%
0%
19%
of which: United States
6%
0%
0%
6%
21%
0%
0%
21%
Asia, Middle East and Africa
-3%
8%
0%
5%
-2%
7%
0%
5%
of which: China
-9%
6%
0%
-3%
-14%
4%
0%
-10%
Electrification
1%
2%
0%
3%
9%
2%
0%
11%
Q2 2023 compared to Q2 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
8%
-2%
-2%
4%
31%
-2%
-1%
28%
The Americas
4%
-1%
-2%
1%
20%
0%
-3%
17%
of which: United States
0%
-1%
-2%
-3%
20%
0%
-3%
17%
Asia, Middle East and Africa
-3%
6%
0%
3%
14%
8%
0%
22%
of which: China
-6%
5%
0%
-1%
8%
6%
0%
14%
Motion
3%
1%
-1%
3%
22%
1%
-1%
22%
Q2 2023 compared to Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-6%
3%
13%
10%
3%
0%
17%
20%
The Americas
-8%
-1%
8%
-1%
12%
0%
12%
24%
of which: United States
-2%
0%
9%
7%
19%
0%
16%
35%
Asia, Middle East and Africa
-10%
3%
15%
8%
-7%
5%
15%
13%
of which: China
-6%
4%
14%
12%
11%
6%
21%
38%
Process Automation
-8%
2%
12%
6%
2%
2%
15%
19%
Q2 2023 compared to Q2 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
-23%
-1%
0%
-24%
35%
-2%
0%
33%
The Americas
4%
0%
0%
4%
6%
-1%
0%
5%
of which: United States
-16%
1%
0%
-15%
-9%
0%
0%
-9%
Asia, Middle East and Africa
-33%
4%
0%
-29%
23%
6%
0%
29%
of which: China
-41%
4%
0%
-37%
23%
7%
0%
30%
Robotics & Discrete Automation
-23%
1%
0%
-22%
26%
1%
0%
27%
36
Q2 2023 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation for ABB Group
– Year to date
H1 2023 compared to H1 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%
3%
3%
6%
16%
2%
3%
21%
The Americas
4%
0%
2%
6%
20%
0%
2%
22%
of which: United States
0%
0%
1%
1%
22%
1%
1%
24%
Asia, Middle East and Africa
-6%
8%
3%
5%
3%
8%
4%
15%
of which: China
-13%
5%
2%
-6%
3%
7%
2%
12%
ABB Group
0%
3%
3%
6%
13%
3%
3%
19%
Regional comparable growth rate reconciliation by Business
Area – Year to date
H1 2023 compared to H1 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
-2%
2%
0%
0%
9%
2%
0%
11%
The Americas
3%
1%
0%
4%
20%
0%
0%
20%
of which: United States
0%
0%
0%
0%
22%
0%
0%
22%
Asia, Middle East and Africa
1%
9%
0%
10%
-1%
9%
0%
8%
of which: China
-10%
6%
0%
-4%
-8%
6%
0%
-2%
Electrification
1%
3%
0%
4%
10%
4%
0%
14%
H1 2023 compared to H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
6%
3%
-1%
8%
31%
2%
-1%
32%
The Americas
2%
0%
-1%
1%
24%
0%
-1%
23%
of which: United States
1%
-1%
-1%
-1%
25%
0%
-1%
24%
Asia, Middle East and Africa
-1%
8%
0%
7%
13%
9%
0%
22%
of which: China
-7%
6%
0%
-1%
5%
7%
0%
12%
Motion
3%
3%
-1%
5%
23%
3%
-1%
25%
H1 2023 compared to H1 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%
7%
20%
45%
-4%
3%
16%
15%
The Americas
8%
0%
12%
20%
13%
1%
13%
27%
of which: United States
-5%
0%
12%
7%
20%
0%
17%
37%
Asia, Middle East and Africa
-2%
5%
18%
21%
-8%
5%
15%
12%
of which: China
5%
7%
20%
32%
9%
7%
21%
37%
Process Automation
8%
4%
17%
29%
-2%
4%
15%
17%
H1 2023 compared to H1 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%
2%
0%
-20%
35%
2%
0%
37%
The Americas
-8%
-1%
0%
-9%
16%
-1%
0%
15%
of which: United States
-20%
0%
0%
-20%
6%
1%
0%
7%
Asia, Middle East and Africa
-31%
5%
0%
-26%
22%
9%
0%
31%
of which: China
-35%
4%
0%
-31%
24%
9%
0%
33%
Robotics & Discrete Automation
-23%
2%
0%
-21%
27%
4%
0%
31%
37
Q2 2023 FINANCIAL INFORMATION
Order backlog growth rate reconciliation
June 30, 2023 compared to June 30, 2022
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
18%
1%
0%
19%
Motion
17%
-1%
-2%
14%
Process Automation
11%
1%
5%
17%
Robotics & Discrete Automation
-3%
1%
0%
-2%
ABB Group
13%
0%
1%
14%
Other growth rate reconciliations
Q2 2023 compared to Q2 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
1%
1%
0%
2%
7%
3%
0%
10%
Motion
10%
3%
0%
13%
24%
3%
0%
27%
Process Automation
-16%
2%
20%
6%
-8%
1%
25%
18%
Robotics & Discrete Automation
8%
0%
0%
8%
18%
0%
0%
18%
ABB Group
-6%
2%
11%
7%
3%
2%
14%
19%
H1 2023 compared to H1 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
3%
3%
0%
6%
10%
3%
0%
13%
Motion
8%
4%
0%
12%
18%
6%
0%
24%
Process Automation
-16%
3%
22%
9%
-10%
3%
25%
18%
Robotics & Discrete Automation
9%
3%
0%
12%
20%
3%
0%
23%
ABB Group
-6%
4%
12%
10%
2%
3%
14%
19%
38
Q2 2023 FINANCIAL INFORMATION
Operational EBITA as
% of operational revenues (Operational EBITA margin)
Definition
Operational EBITA margin
Operational EBITA margin is Operational
EBITA as a percentage of
operational revenues.
Operational EBITA
Operational earnings before interest, taxes and acquisition-related
amortization (Operational EBITA)
represents Income from operations excluding:
●
acquisition-related amortization (as defined below),
●
restructuring, related and implementation costs,
●
changes in the amount recorded for obligations related to divested
businesses occurring after the divestment date (changes
in obligations related to
divested businesses),
●
gains and losses from sale of businesses (including fair value adjustment
on assets and liabilities held for sale),
●
acquisition- and divestment-related expenses and integration costs,
●
certain other non-operational items, as well as
●
foreign exchange/commodity timing differences in income
from operations consisting of: (a) unrealized gains
and losses on derivatives (foreign
exchange, commodities, embedded derivatives), (b) realized
gains and losses on derivatives where the underlying hedged
transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/payables
(and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory,
compliance and legal costs, other income/expense relating
to the Power Grids joint
venture, certain asset
write downs/impairments and certain other fair
value changes, changes in estimates relating to opening balance
sheets of acquired
businesses (changes in pre-acquisition estimates), as well as
other items which are determined by management on
a case-by-case basis.
Operational EBITA is our measure of
segment profit but is also used by management to evaluate
the profitability of the Company
as a whole.
Acquisition-related amortization
Amortization expense on intangibles arising upon acquisitions.
Restructuring, related and implementation costs
Restructuring, related and implementation costs consists
of restructuring and other related expenses, as well as internal and external
costs relating to the
implementation of group-wide restructuring programs.
Operational revenues
The Company presents operational revenues solely for the purpose
of allowing the computation of Operational EBITA
margin. Operational revenues are Total
revenues adjusted for foreign exchange/commodity timing differences
in total revenues of: (i) unrealized gains and losses
on derivatives, (ii) realized gains and
losses on derivatives where the underlying hedged transaction
has not yet been realized, and (iii) unrealized foreign
exchange movements on receivables (and
related assets). Operational revenues are not intended to be an
alternative measure to Total
revenues, which represent our revenues measured
in accordance
with U.S. GAAP.
Reconciliation
The following tables provide reconciliations of consolidated Operational
EBITA to Net Income and Operational
EBITA Margin by business.
Reconciliation of consolidated Operational EBITA
to Net Income
Six months ended June 30,
Three months ended June 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA
2,702
2,133
1,425
1,136
Acquisition-related amortization
(109)
(119)
(55)
(59)
Restructuring, related and implementation costs
(1)
(41)
(280)
(13)
(264)
Changes in obligations related to divested businesses
5
17
8
3
Gains and losses from sale of businesses
26
(4)
26
(4)
Acquisition- and divestment-related expenses and integration
costs
(45)
(109)
(26)
(50)
Certain other non-operational items
(40)
(99)
(41)
(65)
Foreign exchange/commodity timing differences in
income from operations
(2)
(95)
(26)
(110)
Income from operations
2,496
1,444
1,298
587
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Non-operational pension (cost) credit
15
68
8
32
Income from continuing operations before taxes
2,465
1,483
1,281
599
Income tax expense
(468)
(434)
(349)
(193)
Income from continuing operations, net of
tax
1,997
1,049
932
406
Loss from discontinued operations, net of tax
(9)
(20)
(4)
(9)
Net income
1,988
1,029
928
397
(1)
Includes impairment of certain assets.
39
Q2 2023 FINANCIAL INFORMATION
Reconciliation of Operational EBITA
margin by business
Three months ended June 30, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,735
1,981
1,553
922
(28)
8,163
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
6
(9)
3
6
8
14
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(4)
–
5
–
(2)
(1)
Unrealized foreign exchange movements
on receivables (and related assets)
–
(2)
(8)
(7)
(6)
(23)
Operational revenues
3,737
1,970
1,553
921
(28)
8,153
Income (loss) from operations
713
380
270
119
(184)
1,298
Acquisition-related amortization
22
9
2
19
3
55
Restructuring, related and
implementation costs
(1)
4
1
2
–
6
13
Changes in obligations related to
divested businesses
1
–
–
–
(9)
(8)
Gains and losses from sale of businesses
–
–
(26)
–
–
(26)
Acquisition- and divestment-related expenses
and integration costs
12
8
(2)
2
6
26
Certain other non-operational items
6
1
–
1
33
41
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
31
5
(8)
4
–
32
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(2)
–
5
–
(2)
1
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
–
(3)
(4)
(4)
4
(7)
Operational EBITA
787
401
239
141
(143)
1,425
Operational EBITA margin (%)
21.1%
20.4%
15.4%
15.3%
n.a.
17.5%
(1)
Includes impairment of certain assets.
In the three months ended June 30, 2023, Certain other
non-operational items in the table above includes the following:
Three months ended June 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)
5
–
–
1
42
48
Changes in pre-acquisition estimates
1
–
–
–
3
4
Certain other fair values changes,
including asset impairments
–
–
–
–
(7)
(7)
Other non-operational items
–
1
–
–
2
3
Total
6
1
–
1
33
41
(1)
Amounts
include ABB Way process transformation costs of $41 million for the three months ended June 30, 2023.
40
Q2 2023 FINANCIAL INFORMATION
Three months ended June 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,414
1,626
1,529
732
(50)
7,251
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
30
(1)
37
9
10
85
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
6
1
5
–
26
38
Unrealized foreign exchange movements
on receivables (and related assets)
(18)
(4)
(10)
(8)
(13)
(53)
Operational revenues
3,432
1,622
1,561
733
(27)
7,321
Income (loss) from operations
474
231
175
43
(336)
587
Acquisition-related amortization
28
7
1
19
4
59
Restructuring, related and
implementation costs
(1)
8
–
–
2
254
264
Changes in obligations related to
divested businesses
–
–
–
–
(3)
(3)
Gains and losses from sale of businesses
–
4
–
–
–
4
Acquisition- and divestment-related expenses
and integration costs
10
3
36
2
(1)
50
Certain other non-operational items
20
–
–
(1)
46
65
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
74
23
12
1
8
118
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
4
1
7
(1)
22
33
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(13)
(3)
(7)
(5)
(13)
(41)
Operational EBITA
605
266
224
60
(19)
1,136
Operational EBITA margin (%)
17.6%
16.4%
14.3%
8.2%
n.a.
15.5%
(1)
Includes impairment of certain assets.
In the three months ended June 30, 2022, Certain other
non-operational items in the table above includes the following:
Three months ended June 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
–
–
–
–
2
2
Regulatory, compliance and legal costs
–
–
–
–
5
5
Business transformation costs
(1)
1
–
–
–
39
40
Changes in pre-acquisition estimates
–
–
–
(2)
–
(2)
Other non-operational items
19
–
–
1
–
20
Total
20
–
–
(1)
46
65
(1)
Amounts
include ABB Way process transformation costs of $39 million for the three months ended June 30, 2022.
41
Q2 2023 FINANCIAL INFORMATION
Six months ended June 30, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
7,325
3,921
2,989
1,859
(72)
16,022
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(8)
(5)
16
8
4
15
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(5)
–
6
–
–
1
Unrealized foreign exchange movements
on receivables (and related assets)
(7)
(6)
(12)
(8)
(9)
(42)
Operational revenues
7,305
3,910
2,999
1,859
(77)
15,996
Income (loss) from operations
1,368
733
470
234
(309)
2,496
Acquisition-related amortization
44
17
3
39
6
109
Restructuring, related and
implementation costs
(1)
12
2
4
–
23
41
Changes in obligations related to
divested businesses
1
–
–
–
(6)
(5)
Gains and losses from sale of businesses
–
–
(26)
–
–
(26)
Acquisition- and divestment-related expenses
and integration costs
19
12
1
4
9
45
Certain other non-operational items
9
3
–
3
25
40
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
16
5
(10)
6
(7)
10
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(2)
–
7
–
1
6
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(3)
(5)
(5)
(5)
4
(14)
Operational EBITA
1,464
767
444
281
(254)
2,702
Operational EBITA margin (%)
20.0%
19.6%
14.8%
15.1%
n.a.
16.9%
(1)
Includes impairment of certain assets.
In the six months ended June 30, 2023, Certain other non-operational
items in the table above includes the following:
Six months ended June 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
–
–
–
–
(20)
(20)
Business transformation costs
(1)
9
–
–
2
71
82
Changes in pre-acquisition estimates
1
–
–
–
3
4
Certain other fair values changes,
including asset impairments
1
1
–
1
(9)
(6)
Other non-operational items
(2)
2
–
–
(20)
(20)
Total
9
3
–
3
25
40
(1)
Amounts
include ABB Way process transformation costs of $71 million for the six months ended June 30, 2023.
42
Q2 2023 FINANCIAL INFORMATION
Six months ended June 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
6,650
3,198
3,035
1,462
(129)
14,216
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
19
3
36
11
8
77
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
7
2
2
–
30
41
Unrealized foreign exchange movements
on receivables (and related assets)
(18)
(6)
(7)
(5)
(15)
(51)
Operational revenues
6,658
3,197
3,066
1,468
(106)
14,283
Income (loss) from operations
955
485
326
65
(387)
1,444
Acquisition-related amortization
56
15
2
40
6
119
Restructuring, related and
implementation costs
(1)
10
8
5
3
254
280
Changes in obligations related to
divested businesses
–
–
–
–
(17)
(17)
Gains and losses from sale of businesses
–
4
–
–
–
4
Acquisition- and divestment-related expenses
and integration costs
28
8
69
3
1
109
Certain other non-operational items
23
–
–
(1)
77
99
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
53
22
18
4
3
100
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
6
1
4
(1)
25
35
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(14)
(3)
(4)
(4)
(15)
(40)
Operational EBITA
1,117
540
420
109
(53)
2,133
Operational EBITA margin (%)
16.8%
16.9%
13.7%
7.4%
n.a.
14.9%
(1)
Includes impairment of certain assets.
In the six months ended June 30, 2022, certain other non
-operational items in the table above includes the following:
Six months ended June 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
–
–
–
–
37
37
Regulatory, compliance and legal costs
–
–
–
–
4
4
Business transformation costs
2
–
–
–
64
66
Changes in pre-acquisition estimates
1
–
–
(2)
–
(1)
Certain other fair values changes,
including asset impairments
–
–
–
–
(34)
(34)
Other non-operational items
20
–
–
1
6
27
Total
23
–
–
(1)
77
99
(1)
Amounts
include ABB Way process transformation costs of $64 million for the six months ended June 30, 2022.
43
Q2 2023 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total
debt less Cash and marketable securities.
Total debt
Total debt is the sum
of Short-term debt and current maturities of long-term
debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents,
Restricted cash (current and non-current)
and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
June 30, 2023
December 31, 2022
Short-term debt and current maturities of long-term debt
3,849
2,535
Long-term debt
4,451
5,143
Total debt
8,300
7,678
Cash and equivalents
2,923
4,156
Restricted cash - current
19
18
Marketable securities and short-term investments
1,193
725
Cash and marketable securities
4,135
4,899
Net debt
4,165
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)
June 30, 2023
December 31, 2022
Total stockholders'
equity
13,340
13,187
Net debt (as defined above)
4,165
2,779
Net debt / Equity ratio
0.31
0.21
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA ratio is defined as Net debt divided by
EBITDA.
EBITDA
EBITDA is defined as Income from operations for the trailing
twelve months preceding the balance sheet date before depreciati
on and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
June 30, 2023
June 30, 2022
Income from operations for the three months ended:
September 30, 2022 / 2021
708
852
December 31, 2022 / 2021
1,185
2,975
March 31, 2023 / 2022
1,198
857
June 30, 2023 / 2022
1,298
587
Depreciation and Amortization for the three months
ended:
September 30, 2022 / 2021
198
220
December 31, 2022 / 2021
199
216
March 31, 2023 / 2022
191
210
June 30, 2023 / 2022
196
207
EBITDA
5,173
6,124
Net debt (as defined above)
4,165
4,235
Net debt / EBITDA
0.8
0.7
44
Q2 2023 FINANCIAL INFORMATION
Net working capital as a percentage of revenues
Definition
Net working capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated
as Net working capital divided by Adjusted revenues for the
trailing twelve months.
Net working capital
Net working capital is the sum of (i) receivables, net, (ii) contract
assets, (iii) inventories, net, and (iv) prepaid expenses; less
(v) accounts payable, trade, (vi)
contract liabilities (including non-current amounts)
and (vii) other current liabilities (excluding primarily:
(a) income taxes payable, (b) current derivative liabilities,
(c)
pension and other employee benefits, (d) payables under the share
buyback program, (e) liabilities related to certain other restructuring
-related activities and
(f) liabilities related to the divestment of the Power Grids business
); and including the amounts related to these accounts which have been
presented as either
assets or liabilities held for sale but excluding any amounts included
in discontinued operations.
Adjusted revenues for the trailing twelve months
Adjusted revenues for the trailing twelve months includes total revenues
recorded by ABB in the twelve months preceding the relevant
balance sheet date adjusted
to eliminate revenues of divested businesses and the estimated
impact of annualizing revenues of certain acquisitions
which were completed in the same trailing
twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
June 30, 2023
June 30, 2022
Net working capital:
Receivables, net
7,481
6,960
Contract assets
1,010
965
Inventories, net
6,448
5,595
Prepaid expenses
290
262
Accounts payable, trade
(4,881)
(4,805)
Contract liabilities
(2,394)
(2,141)
Other current liabilities
(1)
(3,506)
(3,173)
Net working capital in assets and liabilities held for sale
137
–
Net working capital
4,585
3,663
Total revenues for the three months
ended:
September 30, 2022 / 2021
7,406
7,028
December 31, 2022 / 2021
7,824
7,567
March 31, 2023 / 2022
7,859
6,965
June 30, 2023 / 2022
8,163
7,251
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(162)
(213)
Adjusted revenues for the trailing twelve months
31,090
28,598
Net working capital as a percentage of revenues (%)
14.7%
12.8%
(1)
Amounts exclude $771 million and $1,104 million at June 30, 2023 and 2022, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities, (c) pension
and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain restructuring-related activities and (f) liabilities related to the divestment of
the Power Grids business.
45
Q2 2023 FINANCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash
flow divided by Adjusted net income attributable to
ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income
attributable to ABB adjusted for: (i) impairment of
goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of both the Hitachi
Energy Joint Venture and Power
Grids business, the latter being included in discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities
adjusted for: (i) purchases of property,
plant and equipment and intangible assets,
and (ii)
proceeds from sales of property,
plant and equipment.
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow
recorded by ABB in the twelve months preceding
the relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income
recorded by ABB (as adjusted) in the twelve months
preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
June 30, 2023
December 31, 2022
Net cash provided by operating activities – continuing
operations
2,555
1,334
Adjusted for the effects of continuing operations:
Purchases of property, plant and
equipment and intangible assets
(755)
(762)
Proceeds from sale of property, plant and
equipment
118
127
Free cash flow from continuing operations
1,918
699
Net cash used in operating activities – discontinued operations
(35)
(47)
Free cash flow
1,883
652
Adjusted net income attributable to ABB
(1)
3,392
2,442
Free cash flow conversion to net income
56%
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 $10 million.
Reconciliation of the trailing twelve months to
June 30, 2023
Continuing operations
Discontinued
operations
($ 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)
Q3 2022
793
(165)
19
(2)
362
Q4 2022
720
(259)
42
(33)
1,088
Q1 2023
283
(151)
31
(1)
1,036
Q2 2023
759
(180)
26
1
906
Total for the trailing twelve
months to June 30, 2023
2,555
(755)
118
(35)
3,392
(1)
Adjusted net income attributable to ABB for Q3 and Q4 2022, is adjusted to exclude reductions
to the gain on the sale of Power Grids of $2 million and $(1) million,
respectively.
In
addition, Q4 2022 is also adjusted to exclude the gain on the sale of Hitachi Energy Joint Venture of $43 million.
46
Q2 2023 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income
less Interest and other finance expense.
Reconciliation
Six months ended June 30,
Three months ended June 30,
($ in millions)
2023
2022
2023
2022
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Net finance expenses
(46)
(29)
(25)
(20)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total
revenues.
Reconciliation
Six months ended June 30,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
8,101
7,325
1.11
8,025
6,650
1.21
Motion
4,399
3,921
1.12
4,281
3,198
1.34
Process Automation
3,782
2,989
1.27
3,511
3,035
1.16
Robotics & Discrete Automation
1,851
1,859
1.00
2,417
1,462
1.65
Corporate and Other
(incl. intersegment eliminations)
(16)
(72)
n.a.
(54)
(129)
n.a.
ABB Group
18,117
16,022
1.13
18,180
14,216
1.28
Three months ended June 30,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,960
3,735
1.06
3,913
3,414
1.15
Motion
2,137
1,981
1.08
2,079
1,626
1.28
Process Automation
1,669
1,553
1.07
1,819
1,529
1.19
Robotics & Discrete Automation
850
922
0.92
1,109
732
1.52
Corporate and Other
(incl. intersegment eliminations)
51
(28)
n.a.
(113)
(50)
n.a.
ABB Group
8,667
8,163
1.06
8,807
7,251
1.21
47
Q2 2023 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box
8131
8050
Zurich
Switzerland
Tel:
+41 (0)43
317 71
11
www.abb.com
April 1 — June 30, 2023
ABB Ltd announces that the following
members of the Executive Committee
or Board of Directors of ABB
have purchased,
sold or been granted ABB’s registered shares, call options
and warrant appreciation rights (“WARs”), in the following amounts:
Name
Date
Type of Instrument
Received*
Purchased
Sold
Price / Instrument
Peter Terwiesch
May 15, 2023
Share
-
41’205
CHF
32.96
Timo Ihamuotila
May 15, 2023
Share
-
44’644
CHF
32.08
Gunnar Brock
May 08, 2023
Share
2’048
CHF
32.22
David Constable
May 08, 2023
Share
1’988
CHF
32.22
Frederico Curado
May 08, 2023
Share
4’130
CHF
32.22
Lars Förberg
May 08, 2023
Share
4’945
CHF
32.22
Jennifer Xin-Zhe Li
May 08, 2023
Share
2’018
CHF
32.22
Geraldine Matchett
May 08, 2023
Share
2’683
CHF
32.22
David Meline
May 08, 2023
Share
2’485
CHF
32.22
Peter Voser
May 08, 2023
Share
18’607
CHF
32.22
Jacob Wallenberg
May 08, 2023
Share
2’796
CHF
32.22
Tarak Mehta
May 03, 2023
Share
-
22’131
CHF
32.17
Tarak Mehta
April 28, 2023
Share
-
27’869
CHF
31.86
Sami Atiya
April 27, 2023
Share
81’205
CHF
32.25
Tarak Mehta
April 27, 2023
Share
91’357
CHF
32.25
Peter Terwiesch
April 27, 2023
Share
81’205
CHF
32.25
Morten Wierod
April 27, 2023
Share
76’130
CHF
32.25
Timo Ihamuotila
April 27, 2023
Share
57’610
CHF
32.25
Björn Rosengren
April 27, 2023
Share
154’635
CHF
32.25
Sami Atiya
April 26, 2023
Share
71’678
CHF
31.82
Key:
* Received instruments were delivered
as part of the ABB Ltd Director’s or
Executive Committee Member’s
compensation or as compensation
for foregone
benefits
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant
has duly caused this report to be signed
on
its behalf by the undersigned, thereunto duly
authorized.
ABB LTD
Date: July 20, 2023.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: July 20, 2023.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance