ZURICH-Wednesday 23 October 2019 [ AETOS Wire ]
(BUSINESS WIRE)--
Holding course in tougher markets
– Total orders -1%1,
order backlog +3%
– Steady revenues and book-to-bill2
– Operational EBITA margin2 11.7%, +20 basis points; impacted 70 basis points by stranded costs
– Income from continuing operations, net of tax $422 million, -1%
– Net income $515 million, -15%
– Operational EPS2 $0.33, -7%3
– Cash flow from operating activities $670 million, +19%, solid cash delivery expected for the full year
– Björn Rosengren appointed Chief Executive Officer, effective March 1, 2020
– Steady revenues and book-to-bill2
– Operational EBITA margin2 11.7%, +20 basis points; impacted 70 basis points by stranded costs
– Income from continuing operations, net of tax $422 million, -1%
– Net income $515 million, -15%
– Operational EPS2 $0.33, -7%3
– Cash flow from operating activities $670 million, +19%, solid cash delivery expected for the full year
– Björn Rosengren appointed Chief Executive Officer, effective March 1, 2020
“The Group delivered a robust
performance for the quarter in the face of weaker macroeconomic conditions
impacting some of our customer markets, above all robotics and automation,”
said Peter Voser, Chairman and CEO of ABB.
He added: “We are holding course and
pursuing long-term growth, staying firmly focused on managing costs in response
to softer demand while progressing our transformation agenda. We continue to
drive the strategy forward while instilling a culture of empowerment and high
performance.”
|
Key Figures
|
Change
|
|
Change
|
||||||||
|
($ in millions, unless otherwise
indicated)
|
Q3 2019
|
Q3 2018
|
US$
|
Comparable1
|
9M 2019
|
9M 2018
|
US$
|
Comparable1
|
|||
|
Orders
|
6,688
|
6,917
|
-3%
|
-1%
|
21,702
|
21,605
|
0%
|
+1%
|
|||
|
Revenues
|
6,892
|
7,095
|
-3%
|
0%
|
20,910
|
20,267
|
+3%
|
+2%
|
|||
|
Income from operations
|
577
|
617
|
-6%
|
|
1,290
|
1,951
|
-34%
|
|
|||
|
Operational EBITA2
|
806
|
814
|
-1%
|
0%4
|
2,397
|
2,421
|
-1%
|
+3%4
|
|||
|
as % of operational revenues
|
11.7%
|
11.5%
|
+02pts
|
|
11.5%
|
11.9%
|
-0.4pts
|
|
|||
|
Income (loss) from continuing
operations, net of tax
|
422
|
427
|
-1%
|
|
783
|
1,365
|
-43%
|
|
|||
|
Net income attributable to ABB
|
515
|
603
|
-15%
|
|
1,114
|
1,856
|
-40%
|
|
|||
|
Basic EPS ($)
|
0.24
|
0.28
|
-15%3
|
|
0.52
|
0.87
|
-40%3
|
|
|||
|
Operational EPS ($)2
|
0.33
|
0.34
|
-3%3
|
-7%3
|
0.98
|
1.03
|
-6%3
|
-5%3
|
|||
|
Cash flow from operating
activities5
|
670
|
565
|
+19%
|
|
414
|
1,057
|
-61%
|
|
|||
On December 17, 2018, ABB announced
an agreed sale of its Power Grids business. Consequently, the results of the
Power Grids business are presented as discontinued operations. The company’s
results for all periods have been adjusted accordingly.
1 Growth rates for orders, order backlog and revenues are on
a comparable basis (local currency adjusted for acquisitions and divestitures).
2 For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q3 2019 Financial Information
3 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates not adjusted for changes in the business portfolio).
4 Constant currency (not adjusted for portfolio changes).
5 Amount represents total for both continuing and discontinued operations.
2 For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q3 2019 Financial Information
3 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates not adjusted for changes in the business portfolio).
4 Constant currency (not adjusted for portfolio changes).
5 Amount represents total for both continuing and discontinued operations.
Short-term outlook
Macroeconomic indicators are mixed
in Europe and China, while they weaken in the US. Global markets overall remain
affected by geopolitical uncertainties.
Compared to the macroeconomic
indicators the end-markets ABB operates in are showing resilience, with
headwinds in some markets, particularly discrete industries. Oil prices and
foreign exchange translation effects are expected to continue to influence the
company’s results.
Q3 2019 Group results
“The Group delivered a solid result
in Electrification and Motion while holding up against strong headwinds in
Robotics and Discrete Automation. We recognized a negative impact from
revaluing a large project in Industrial Automation,” said Timo Ihamuotila, CFO
of ABB.
“For the year as a whole we continue
to expect slight revenue growth and improved operating margins. We are
encouraged to see the integration of GEIS and the roll-out of our ABB-OS
operating model starting to improve the performance of the Group for the
long-term.”
Group results summary
In the quarter, the Industrial
Automation business had a specific project revaluation which reduced total
revenues by 1 percent. Operational EBITA margin of 11.7 percent was impacted by
a combined 190 basis points, including approximately 90 basis points due to the
specific project revaluation in Industrial Automation, approximately 70 basis
points from stranded costs and approximately 30 basis points from a charge in
the legacy non-core business.
Continuing operations otherwise
reflected resilient performance from the businesses, despite headwinds in the
Robotics & Discrete Automation business. Compared to the prior year period,
the result benefited from a lower run-rate in Corporate & Other operational
EBITA consistent with savings delivered through the simplification program,
ongoing elimination of stranded costs and improvement in the non-core business.
Net income was, in addition,
impacted by lower net income from discontinued operations.
Orders
Orders were 1 percent lower (3
percent in US dollars) in the quarter compared to the prior year period.
Moderate growth in Industrial Automation and slight growth in Electrification
and Motion was outweighed by weaker demand in Robotics & Discrete
Automation. Foreign exchange translation effects had a net negative impact of 1
percent on orders and portfolio changes had a net negative impact of 1 percent.
Service orders, which represented 19
percent of total orders, were 2 percent lower (5 percent in US dollars) on a
year-on-year basis. Large orders made up 5 percent of orders, down 1 percent on
the prior year period.
The order backlog rose 3 percent (3
percent lower in US dollars).
Market overview
On a regional basis:
– Orders from Europe were 2 percent
lower (6 percent in US dollars). Large country markets including Sweden and
Italy held steady. Orders from France, the UK and Spain advanced, while in
Switzerland, Finland and Norway orders declined when compared to the prior year
period. In Germany, orders were 1 percent lower (5 percent in US dollars).
– Orders from the Americas were 1
percent lower (1 percent in US dollars), with good order development from
Canada but mixed performance elsewhere. Orders from the United States were 1
percent lower (1 percent in US dollars).
– In Asia, Middle East and Africa
(AMEA), orders were up 1 percent (3 percent lower in US dollars). Orders were
lower in China and South Korea, but grew well in India, Japan, Singapore and
the UAE. In China, orders were 5 percent lower (7 percent lower in US dollars).
In ABB’s key customer segments:
– In process industries, ongoing
operational expenditure, particularly from oil and gas and chemicals customers,
was reflected in solid order growth. Conventional power generation markets were
subdued.
– In discrete industries,
traditional automotive and automotive-sector related industries as well as 3C
and machine builders’ markets faced ongoing headwinds which dampened ABB’s
growth. ABB continued to see strong growth in warehouse automation.
– In the transport and
infrastructure sectors, investments in rail and marine and ports continued,
absent the large orders that benefited the comparative period. Strong demand
was evident in data centers, e-mobility and renewables markets. Building
activity was robust, with strong growth in building automation solutions.
Revenues
Revenues were steady (3 percent
lower in US dollars). Motion and Electrification were up, however revenues were
lower in Industrial Automation and Robotics & Discrete Automation. The
Industrial Automation business had a specific project revaluation which reduced
total revenues by 1 percent. Changes in exchange rates resulted in a negative
translation impact on reported revenues of 2 percent and portfolio changes also
had a negative impact of 1 percent.
Service revenues increased 5 percent
(3 percent in US dollars). Services represented 19 percent of total revenues.
The book-to-bill ratio for the
quarter was 0.97x2, the same level as in the previous year period.
Against a backdrop of continued
weakness in some end-markets, ABB expects slight growth in annual revenues on a
comparable basis in 2019, supported by its order backlog.
Operational EBITA
Operational EBITA2 of
$806 million was 1 percent lower in US dollars (steady in local currencies).
The operational EBITA margin2 of 11.7 percent expanded 20 basis
points year-on-year.
Revaluation of an Industrial
Automation project lowered the Group operational EBITA margin by approximately
90 basis points in the quarter.
The margin was impacted
approximately 70 basis points by stranded costs recognition. Stranded costs are
services provided by the Group to Power Grids that do not qualify to be
reported as discontinued operations and which the Group expects to be
predominantly transferred to Power Grids or eliminated by the closing of the
transaction. Stranded costs of $52 million were recognized in the Corporate and
Other operational EBITA result, $19 million lower than in the third quarter of
2018.
Also booked in the Corporate &
Other operational EBITA result is a charge in non-core activities that had an
approximately 30 basis points impact on Group operational EBITA margin.
ABB expects annual operational EBITA
margins to improve in 2019, aided by an improved GEIS performance, ongoing
stranded cost elimination, non-core improvement and ABB’s simplification
program.
Net income, basic and operational
earnings per share
Net income from continuing
operations was $422 million, 1 percent lower year-on-year.
Net income from discontinued
operations was $97 million, weighed by approximately $80 million of pre-tax
project revaluations of certain large projects in the Power Grids backlog. ABB
anticipates a significant improvement in the performance of its discontinued
operations from the fourth quarter of 2019 onwards.
Group net income attributable to ABB
was $515 million, impacted by lower net income from discontinued operations.
Basic earnings per share was $0.24, 15 percent lower year-on-year. Operational
earnings per share of $0.332 declined 7 percent3
year-on-year.
Cash flow from operating activities
Cash flow from operating activities
of $670 million compares to $565 million in third quarter of 2018. Versus the
prior year period, cash flow from operating activities in continuing operations
declined to $611 million from $625 million, while cash flow from discontinued
operations improved to $59 million from -$60 million.
Relative to a year ago, cash flow
from continuing operating activities reflects higher restructuring payments,
partially mitigated by more favorable timing of cash tax payments and working
capital developments compared to the same period last year. Net working capital
as a percentage of revenues was 12.8 percent.
ABB expects solid cash delivery for
the full year from continuing operating activities, not including cash outflows
for the simplification program and carve-out activities and associated cash tax
impacts.
Q3 business performance
|
($ in millions, unless otherwise
indicated)
|
Orders
|
CHANGE
|
Revenues
|
CHANGE
|
Op EBITA
|
CHANGE
|
||
|
US$
|
Comparable1
|
US$
|
Comparable1
|
|||||
|
Electrification
|
3,188
|
-1%
|
+1%
|
3,161
|
-1%
|
+1%
|
14.2%
|
+0.7pts
|
|
Industrial Automation
|
1,438
|
+1%
|
+3%
|
1,492
|
-3%
|
-2%
|
9.0%
|
-5.2pts
|
|
Motion
|
1,618
|
-1%
|
+1%
|
1,630
|
+1%
|
+3%
|
17.8%
|
+0.5pts
|
|
Robotics & Discrete Automation
|
709
|
-18%
|
-16%
|
831
|
-6%
|
-3%
|
12.9%
|
-2.3pts
|
|
Corporate & Other
|
(265)
|
|
|
(222)
|
|
|
(176)
|
|
|
ABB Group
|
6,688
|
-3%
|
-1%
|
6,892
|
-3%
|
0%
|
11.7%
|
+0.2pts
|
Effective October 1, 2018, the Power
Grids business was moved from continuing to discontinued operations. All
previously reported amounts have been restated consistent with these portfolio
changes. Corporate & Other result is inclusive of intersegment eliminations.
Electrification
Orders were up 1 percent (1 percent
lower in US dollars), as demand in Europe offset softness in China. Orders
benefited from higher large orders compared to the prior year period, with
strong demand for distribution solutions and from the buildings market.
Revenues grew 1 percent (1 percent lower in US dollars). The operational EBITA
margin expanded 70 basis points year-on-year to 14.2 percent, supported by GEIS
integration, cost productivity and pricing actions.
Industrial Automation
Orders grew 3 percent (1 percent in
US dollars). Order growth was strongest in AMEA and the Americas, supported by
solid demand from process industries including oil and gas, dampened by
weakness in conventional power generation. The order backlog held steady (4
percent lower in US dollars). Revenues were 2 percent lower (3 percent lower in
US dollars). Operational EBITA margin of 9.0 percent was 520 basis points
lower.
Industrial Automation results were
impacted by the revaluation of a project in South Africa, which is part of its
power generation business and was awarded in 2015. This revaluation lowered
orders by 2 percent, revenues by 5 percent and operational EBITA margin by
approximately 400 basis points.
In addition, margin development was
impacted by unfavorable mix and the absence of one-time effects that benefited
the comparative period.
Motion
Orders rose 1 percent (1 percent
lower in US dollars). On a regional basis, Europe was solid and AMEA grew
slightly while the Americas slowed. The order backlog increased 4 percent (1
percent in US dollars). Revenues were up 3 percent (1 percent in US dollars).
Operational EBITA margin expanded 50 basis points compared to the prior year
period, reaching 17.8 percent, due to strong project execution and ongoing cost
management.
Robotics & Discrete Automation
Orders were 16 percent lower (18
percent in US dollars), reflecting a tough comparison base and challenging
markets in all regions. Headwinds remained particularly strong for robotics in
the traditional automotive and automotive-sector related industries, while
machine automation was less impacted. The order backlog was up 2 percent (2
percent lower in US dollars). Revenues were 3 percent lower (6 percent in US
dollars), supported by strong backlog execution. The operational EBITA margin
of 12.9 percent was 230 basis points below the prior year level, reflecting
lower volumes and adverse mix, partly mitigated by cost measures.
Transformation progress
The transformation of ABB into a
simpler, agile and more customer-focused organization is well underway. A key
focus of ABB Operating System (ABB-OS) work in the year to date has been to
redefine the way ABB is organized. The reassignment of Group employees in
functions and countries to the businesses was fully defined by October 1, 2019.
The dismantling of the Group’s regional structure is expected to be largely
completed by year end.
From implementing the simplification
program, ABB expects a total of ~$500 million annual run-rate cost reductions
across the Group. It expects to meet the $150-200 million run-rate targeted
during 2019 and the full run-rate targeted during 2021.
Work to carve-out Power Grids
continues. The majority of former Group employees in functions or countries
that will support the future organization are in the process of being
transferred. ABB expects Power Grids to be operational on a stand-alone basis
within ABB from January 1, 2020. ABB is on track to close the transaction in
the first half of 2020.
More information
The Q3 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 10.30
a.m. CEST (9:30 a.m. BST, 04:30 a.m. EDT). To pre-register for the conference
call or to join the webcast, please refer to the ABB website: new.abb.com/investorrelations/. A recorded
session will be available as a webcast one hour after the end of the conference
call.
ABB (ABBN: SIX Swiss Ex) is a technology leader that is driving
the digital transformation of industries. With a history of innovation spanning
more than 130 years, ABB has four, customer-focused, globally leading
businesses: Electrification, Industrial Automation, Motion, and Robotics &
Discrete Automation, supported by the ABB Ability™ digital platform. ABB’s
Power Grids business will be divested to Hitachi in 2020. ABB operates in more
than 100 countries with about 147,000 employees. www.abb.com
|
|
|
Investor calendar 2019/20
|
|
Electrification investor event
|
November 5, 2019
|
|
|
Q4 2019 results
|
February 5, 2020
|
|
|
Annual General Meeting
|
March 26, 2020
|
|
|
Q1 2020 results
|
April 28, 2020
|
|
Important notice about
forward-looking information
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
“Short-term outlook”, “Revenues”, “Operational EBITA”, “Net income, basic and
operational earnings per share”, “Cash flow from operating activities” and
“Transformation progress”. 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 Ltd. These
expectations, estimates and projections are generally identifiable by
statements containing words such as “anticipates”, “expects,” “believes,” “estimates,”
“plans”, “targets” 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. The 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.
Zurich, October 23, 2019
Peter Voser, Chairman and CEO
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Affolternstrasse 44
8050 Zurich
Switzerland
View source version on
businesswire.com: https://www.businesswire.com/news/home/20191022006232/en/
Contacts
For more information, please
contact:
Media Relations
Phone: +41 43 317 71 11
E-mail: media.relations@ch.abb.com
Media Relations
Phone: +41 43 317 71 11
E-mail: media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317 71 11
E-mail: investor.relations@ch.abb.com
Phone: +41 43 317 71 11
E-mail: investor.relations@ch.abb.com
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