"The COVID-19 pandemic impacted our first quarter results,
lowering revenues and operating margins in all our businesses,
although order growth held up well. We are doing our utmost to
ensure the health and safety of our employees while maintaining
business continuity, serving our customers and continuing to invest
in R&D for the long-term," said Björn Rosengren, CEO of
ABB.
"In the second quarter, we expect ABB's operations to be
significantly challenged by a sharp drop in demand due to lockdowns
in many parts of the world. Nevertheless, we will accelerate our
efforts to manage our costs and safeguard liquidity, while moving
ahead with decentralizing the group and our target to complete the
divestment of Power Grids at the end of the second quarter."
KEY FIGURES CHANGE
($ millions, unless otherwise
indicated) Q1 2020 Q1 2019 US$ Comparable
Orders 7,346 7,613 -4% +1%
Revenues 6,216 6,847 -9% -7%
Income from operations 373 590 -37%
Operational EBITA(1) 636 766 -17% -16%(3)
as % of operational revenues 10.2 11.2 -1.0 pts
Income from continuing operations, net
of tax 326 415 -21%
Net income attributable to ABB 376 535 -30%
Basic EPS ($) 0.18 0.25 -30%(2)
Operational EPS ($)(1) 0.30 0.30 -2%(2) -1%(2)
Cash flow from operating activities(4) (577) (256) -125%
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.
Summary
Against the backdrop of COVID-19, orders for the first quarter
remained robust, with Motion and Industrial Automation both
benefiting from strong large orders. However, revenues declined in
all businesses, reflecting a drop in product demand due to the
pandemic, at first in China, and then across other parts of the
world, with mobility restrictions also constraining system
installation and services activities. These developments, in turn,
weighed on operating margins in all businesses, reflecting that
certain costs remain essential for business continuity.
Orders
Orders were 4 percent lower (up 1 percent comparable) in the
quarter compared to the prior year period. Foreign exchange
translation effects had a net negative impact of 3 percent and
portfolio changes a net negative impact of 2 percent. The order
backlog was 1 percent lower (up 8 percent comparable) at the end of
the quarter.
Regional overview
-- Orders from Europe were 1 percent higher (5 percent comparable),
supported by large orders. At the country level, performance was mixed.
Sweden, Norway, the Netherlands and the UK were strong, but in Germany,
Switzerland, Italy and Spain, where COVID-19 impacted earlier, orders
declined when compared to the prior year period. In Germany, orders were
7 percent lower (4 percent comparable).
-- Orders from the Americas were steady (up 2 percent comparable),
reflecting the later onset of COVID-19 in the region. Orders from the
United States were 2 percent higher (up 2 percent comparable).
-- In Asia, Middle East and Africa (AMEA), orders were 12 percent lower (7
percent comparable). Orders from India, South Korea, Thailand and
Indonesia advanced well while orders from Australia, Singapore and Japan
fell back. In China, where the impacts of COVID-19 materialized first,
orders declined 21 percent (16 percent comparable).
End-market overview
-- In discrete industries, orders were disrupted in most end-markets, while
orders from automotive and automotive-sector related industries were
materially lower.
-- In process industries, ABB saw solid demand from customers in the mining
and pulp & paper segments. Unconventional oil & gas and conventional
power generation remained challenged.
-- In transport & infrastructure, investments were robust, with strong
growth in ports, rail and water & wastewater, as well as good order
growth in distribution utilities.
-- Buildings market activity eased as construction companies faced increased
constraints to activities from quarantine efforts.
Revenues
Revenues were 9 percent lower (7 percent comparable)
year-on-year. Foreign exchange translation effects had a net
negative impact of 1 percent and portfolio changes a net negative
impact of 1 percent. The book-to-bill ratio for the quarter was
1.18x(1) , compared to 1.11x in the prior year period.
Income from operations and operational EBITA
Income from operations of $373 million declined 37 percent. The
result includes a combined $263 million of non-operational items,
including $65 million acquisition-related amortization, a net $80
million loss related to timing differences on commodities and
foreign exchange, restructuring charges for the ABB-OS
simplification program, as well as transaction and separation costs
related to the carve-out of Power Grids and the Solar inverters
business.
Operational EBITA(1) of $636 million was 17 percent lower (16
percent in local currencies). The operational EBITA margin(1) of
10.2 percent was 100 basis points lower year-on-year. All
businesses reported lower margins compared to the prior year
period, partly offset by improved Corporate and Other, mainly due
to lower non-core and stranded costs. Stranded costs of $21 million
were reflected in Corporate and Other.
Net income and basic earnings per share
Net income from continuing operations was $326 million, 21
percent lower year-on-year. Net income from discontinued operations
of $54 million was lower, with the business impacted by the
transfer of stranded costs, ongoing restructuring costs and net
losses related to timing differences on commodities and foreign
exchange.
Group net income attributable to ABB was $376 million and basic
EPS $0.18, both 30 percent(2) lower year-on-year. The group's
effective tax rate was 19.5 percent and includes the positive
effects from resolving certain estimated tax contingencies.
Operational EPS of $0.30(1) was 2 percent(2) lower compared to the
prior year period.
Cash flow from operating activities
Cash flow from operating activities declined to -$577 million,
compared to -$256 million in the first quarter of 2019, including
$22 million lower cash flow from operating activities from
discontinued operations relative to a year ago.
Cash flow from continuing operating activities was impacted
versus the prior year period mainly by timing differences on
employee incentive payments, which were distributed in the first
quarter this year as opposed to the second quarter last year, as
well as by lower income from operations and less favorable timing
of tax payments. This was partly offset by improvements in working
capital management, including better harmonization of payment terms
for trade payables. Net working capital as a percent of revenues
was 12.3 percent at quarter end.
Q1 2020 Business results
Electrification (EL)
-- Subdued
short-cycle
industrial
demand and
slowing
buildings demand
drove orders
lower, while
select markets
including
distribution
utilities and
infrastructure
proved
resilient. By
region, in
comparable
terms, orders
were slightly up
in Europe,
subdued in the
Americas and
challenged in
AMEA,
particularly
China. --
Revenues were
lower due to
curtailed
project
activities and
lower product
sales arising
from production
outages, mainly
in Asia. --
Margins were
held back by
lower volumes
and weak
performance in
solar. This was
partly mitigated
by improving
performance in
Installation
Products and
cost
KEY FIGURES CHANGE initiatives.
($ millions,
unless otherwise
indicated) Q1 2020 Q1 2019 US$ Comparable
Orders 3,121 3,363 -7% -2%
Order backlog 4,386 4,394 0% +9%
Revenues 2,773 3,057 -9% -7%
Operational
EBITA(1) 318 377 -16%
as % of
operational
revenues 11.4% 12.4% -1.0 pts
Industrial Automation (IA)
-- IA's strong
order
development was
driven by large
orders awarded
in the mining,
pulp and paper
and ports
segments.
Conventional
power generation
remained
challenged while
oil & gas,
particularly
unconventional,
slowed. Orders
were up in all
regions, led by
Europe. --
Comparable
revenue
development
reflects ongoing
challenges to
book-and-bill
activities and
increasingly
curtailed
project
installation and
service
activities. --
Margins moved
lower due to
unfavorable
business mix,
project
execution delays
and mobility
constrained
service
KEY FIGURES CHANGE activities.
($ millions,
unless otherwise
indicated) Q1 2020 Q1 2019 US$ Comparable
Orders 1,757 1,666 +5% +8%
Order backlog 5,183 5,139 +1% +6%
Revenues 1,462 1,518 -4% -1%
Operational
EBITA(1) 144 205 -30%
as % of
operational
revenues 9.7% 13.5% -3.8 pts
Motion (MO)
-- Strong
long-cycle order
growth was led
by large orders
in rail and for
water
applications. In
addition, the
business also
won orders from
new OEM
customers and
saw a strong end
of the quarter
in China. These
positives
outpaced a
broad-based
deterioration in
short-cycle
demand,
particularly for
drives. Order
growth was led
by Europe and
AMEA, while the
Americas were
steady. --
Revenues reflect
lower
book-and-bill
and postponement
of deliveries
where customer
sites closed. --
Margin
contraction was
driven by lower
volumes and
incremental
logistics costs,
partly offset by
cost
KEY FIGURES CHANGE mitigation.
($ millions,
unless otherwise
indicated) Q1 2020 Q1 2019 US$ Comparable
Orders 1,901 1,800 +6% +8%
Order backlog 3,259 2,942 +11% +15%
Revenues 1,510 1,605 -6% -4%
Operational
EBITA(1) 230 263 -13%
as % of
operational
revenues 15.3% 16.4% -1.1 pts
Robotics & Discrete Automation (RA)
-- Order
developments for
robotics reflect
continued
deterioration in
the automotive
and related
industries plus
weakening in
general
industries and
3C demand.
Machine
automation
recorded strong
growth,
benefiting from
prior design
wins and
customer
stockpiling. --
Growth was
strong in the
Americas,
however orders
were weak in
Europe, and
challenged in
AMEA. --
Revenues were
impacted by
lower demand,
particularly for
systems business
and service
activities,
exacerbated in
China because of
COVID-19
lockdowns. --
Margin
contraction
reflects mainly
lower volumes,
partly mitigated
by cost
KEY FIGURES CHANGE savings.
($ millions,
unless otherwise
indicated) Q1 2020 Q1 2019 US$ Comparable
Orders 811 967 -16% -14%
Order backlog 1,454 1,556 -7% -2%
Revenues 671 851 -21% -19%
Operational
EBITA(1) 59 95 -38%
as % of
operational
revenues 8.8% 11.2% -2.4 pts
Corporate and Other
-- Corporate and Other
operational EBITA
improved to -$115
million. Compared to a
year ago this reflects
lower stranded and
non-core costs and
lower ongoing
corporate costs,
partly offset by the
absence of gains that
benefited the result
in the first quarter
of 2019. -- In the
first quarter of 2020,
stranded costs of $21
million were
recognized, impacting
operational EBITA by
KEY FIGURES CHANGE 30 basis points.
($ millions, unless
otherwise indicated) Q1 2020 Q1 2019 US$
Orders (244) (183) +61
Revenues (200) (184) +16
Income from operations (173) (230) (57)
Operational EBITA(1) (115) (174) (59)
Corporate and Other orders and revenues primarily represent intersegment
eliminations.
COVID-19 response
ABB's primary focus is on securing the health and safety of our
employees while maintaining business continuity. ABB is constantly
monitoring the evolving situation and taking all necessary
precautions, in line with local government and WHO guidelines. With
the COVID-19 pandemic ongoing, ABB is working constantly with
customers and partners to maintain the supply of goods and
services. As part of this response, ABB is maximizing use of remote
service tools and ABB Ability(TM) digital solutions, including free
remote services. The majority of ABB's production facilities remain
fully or partly operational at this time, with some disruption
being experienced at production and service sites in specific
countries. Where possible the company is adjusting resources to
meet the anticipated slow-down in demand and eliminating
non-essential costs.
The Board of Directors and the Executive Committee of ABB are
voluntarily taking a 10 percent reduction in board compensation and
salary for the duration of the crisis. In addition, ABB will
contribute CHF 1 million to the International Committee of the Red
Cross (ICRC) COVID-19 effort.
The company and its employees are helping communities, for
example by using ABB's resources to deliver protective equipment to
hospitals and frontline workers in some of the most badly affected
countries, such as China and Italy, as well as through equipment
donations and fundraising efforts.
Transformation progress
In preparation for its divestment, Power Grids is fully
operational on a stand-alone basis. ABB has eliminated the majority
of the $290 million annual stranded costs that resulted when Power
Grids was deconsolidated. ABB aims to resolve any remaining
dis-synergies from the carve-out through the ABB-OS simplification
program. The divestment is targeted for completion at the end of
the second quarter, as planned, and ABB remains committed to a
share buyback program using net cash proceeds from the transaction.
ABB is planning to execute this in an efficient and responsible
way, taking account of the prevailing circumstances.
Decentralization and the refinement of ABB's operating model
through ABB-OS is continuing, enabling the businesses to act
quickly to respond to the circumstances around COVID-19 while
working towards delivering the cost savings for the Group as
planned.
During the quarter, the Electrification business completed the
divestment of the solar inverters activities to FIMER SpA on
February 29, 2020. On March 17, 2020, ABB Electrification completed
the acquisition of a majority stake in Chargedot Shanghai New
Energy Technology Co., Ltd. The purchase expands ABB's relationship
with leading electric vehicle manufacturers in China and broadens
its offering with hardware and software developed specifically for
local requirements. Further, ABB Electrification acquired Cylon
Controls Ltd, on March 3, 2020, enhancing its Smart Buildings
portfolio in the commercial buildings segment.
Short-term outlook
The global economy is expected to contract in 2020 after a rapid
deterioration in outlook driven by the COVID-19 pandemic. Despite
unprecedented stimuli by governments and central banks around the
world and initial signs of recovering economic activity in China,
macro-indicators point to a global recession of uncertain duration,
as many countries, including the United States, continue to face
restrictions with anticipated long-term economic consequences.
The impact of COVID-19, as well as the fall in oil prices, has
significantly impacted the short-term outlook in specific end
markets such as oil and gas, conventional power generation,
automotive and marine. Some end markets such as distribution
utilities, data centers, logistics and rail continue to show
relative resilience.
ABB is not currently providing guidance for full year 2020. ABB
expects its results to be significantly impacted in the second
quarter. Orders and revenues are expected to show material
sequential decline in all businesses, with Robotics & Discrete
Automation expected to decline by more than 30 percent
year-on-year. While the company is taking prompt action to adapt
its operations and cost base to safeguard profitability, it also
expects the loss of volume to further dampen margins. Despite
short-term disruptions, ABB is confident in the underlying
resilience of its businesses and operating model. The company has a
strong balance sheet and is confident that its liquidity needs will
be well covered.
More information
The Q1 2020 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. CEST (9:00 a.m. BST). 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.
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(TM) digital platform.
ABB's Power Grids business will be divested to Hitachi in 2020. ABB
operates in more than 100 countries with about 144,000
employees.
INVESTOR CALAR
CEO first perspectives (webcast) June 10, 2020
Q2 2020 results July 22, 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 "COVID-19 response", "Transformation progress" and
"Short-term outlook". 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," "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, April 28, 2020
Björn Rosengren, CEO
__________
(1) For a reconciliation of non-GAAP measures, see "supplemental
reconciliations and definitions" in the attached Q1 2020 Financial
Information.
(2) EPS growth rates are computed using unrounded amounts. Comparable
operational earnings per share is in constant currency (2019 exchange rates
not adjusted for changes in the business portfolio).
(3) Constant currency (not adjusted for portfolio changes).
(4) Amount represents total for both continuing and discontinued operations.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20200427005920/en/
CONTACT: ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Media Relations
Phone: +41 43 317 71 11
Email: media.relations@ch.abb.com
or
Investor Relations
Phone: +41 43 317 71 11
Email: investor.relations@ch.abb.com
SOURCE: ABB
Copyright Business Wire 2020
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April 28, 2020 01:03 ET (05:03 GMT)
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