ABB Ltd (ABB) Q2 2022 Earnings Conference Call July 21, 2022 4:00 AM ET Company Participants Bjorn Rosengren - Chief Executive Officer Timo Ihamuotila - Chief Financial Officer Ann-Sofie Nordh - Head of Investor Relations Conference Call Participants Ben Uglow - Morgan Stanley Andreas Willi - J.P. Morgan Mattias Holmberg - DNB Markets Gael de-Bray - Deutsche Bank Guillermo Peigneux - UBS Alexander Virgo - Bank of America Andre Kukhnin - Credit Suisse Ann-Sofie Nordh Greetings to all, and nice to connect aga ...

Financial Data and Key Metrics Changes - Orders reached $9.4 billion, the highest quarterly level in recent years, resulting in a book-to-bill ratio of 1.35, marking the fifth consecutive quarter with a positive book-to-bill [4][5] - Revenue improved by 7%, driven by positive volume growth and effective pricing execution, with all business areas reporting positive comparable revenue growth except for Robotics and Discrete Automation [10][12] - Gross margin was 32.7%, a slight decline of 20 basis points from the previous year, primarily due to the divestment of the high-margin Dodge business and a drop in Robotics and Discrete Automation [12][13] Business Line Data and Key Metrics Changes - **Electrification**: Orders exceeded $4 billion with a comparable growth rate of 29%, and revenues grew by 10% despite supply chain disruptions [15][17] - **Motion**: Comparable order growth was 32%, with revenues improving by 9% and a margin increase of 30 basis points to 17.4% [20][22] - **Process Automation**: Total order growth was 6%, with a comparable revenue growth of 11% and an operational EBITA margin of 13%, up 200 basis points from last year [24][26] - **Robotics & Discrete Automation**: Orders increased by 60% on a comparable basis, but revenue generation was adversely impacted by semiconductor shortages, leading to a margin decline of 570 basis points to 6.7% [28][30] Market Data and Key Metrics Changes - Strong double-digit growth was observed in all three regions: Americas (46%), Europe (with Germany at 4%), and AMEA (24%), with China showing a 26% improvement [11][12] - The service market, comprising over 30% of the business, grew by 15%, indicating strong activity in the market [78] Company Strategy and Development Direction - A new division in Electrification was formed to enhance transparency and accountability, aiming to drive growth and profitability [6] - The company launched a new buyback program covering up to $3 billion, exceeding the promise to return at least $1.2 billion from power grid proceeds [7] - The company is focusing on energy transition and sustainability, with a target to reduce greenhouse gas emissions by at least 100 megatons by 2030 [40][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges such as inflation, supply chain imbalances, and the war in Ukraine, but expressed confidence in managing these issues [5][38] - For Q2, the company expects strong underlying market activity to continue, with a seasonal increase in revenues and slight margin improvement [43] Other Important Information - The company anticipates completing the full exit of one of its two main exposures in non-core business, which may trigger a non-operational charge of approximately $200 million [35] - The company is actively managing its portfolio, with plans for a potential spin-off or sale of turbocharging [36] Q&A Session Summary Question: Dynamics in China and impact on end markets - Management noted strong order intake in China, with a 26% increase, but acknowledged the impact of lockdowns on operations, particularly in Shanghai [50][51] Question: Corporate costs lower than expected - Corporate costs came in at $32 million, significantly lower than the estimated $80 million, due to unexpected real estate gains and provision releases [56][57] Question: Free cash flow guidance - Management indicated that free cash flow might be lower than 2021 due to headwinds but expects strong cash flow delivery overall [61] Question: Energy transition and LNG CapEx - The company sees potential growth from energy transition initiatives in Europe and anticipates positive effects from increased investments in energy efficiency [65][66] Question: Leadership changes in Electrification and Motion - Management explained that leadership changes were made to bring fresh perspectives and drive profitable growth through acquisitions [71] Question: Demand in Europe and customer base development - Management reported strong demand across all regions, with a robust order outlook for Q2 despite uncertainties in the market [76][78] Question: Robotics division performance and cost inflation - Management acknowledged challenges in the Robotics division due to semiconductor shortages but remains optimistic about future performance improvements [81][102]

Q1 2022 Financial Performance - Orders increased by 28% year-over-year, demonstrating strong customer activity[9, 12] - Revenues increased by 7% year-over-year[9, 13] - Operational EBITA margin was 143%, a 50 bps increase year-over-year, despite inflation[9] - Basic EPS was $031, up $006[20, 21] Regional Orders Growth - Americas orders increased by 40%, with the USA showing steep growth across all Business Areas (BAs) at 46%[16] - Europe orders increased by 24%, with Italy and France experiencing significant growth at 65% and 66% respectively[16] - AMEA (Africa, Middle East, and Asia) orders increased by 24%, with China growing by 26%[16] Business Area Performance - Electrification (EL) orders were $4397 million, with a book-to-bill ratio of 132x[24] - Motion (MO) orders reached $2202 million, with a book-to-bill ratio of 140x[28, 30] - Process Automation (PA) orders were $1692 million, with a book-to-bill ratio of 112x[33] - Robotics & Discrete Automation (RA) orders were $1308 million, with a book-to-bill ratio of 179x[35] Portfolio Management - A new share buyback program of up to $3 billion was launched[10] - The company plans to list a minority part of the E-mobility business on the SIX Swiss Exchange during Q2 2022[51]

Financial Performance - ABB generated $13.2 billion in revenues in 2021 from its Electrification Business Area, employing approximately 50,800 people[118]. - The Motion Business Area generated approximately $6.9 billion in revenues in 2021, with around 20,000 employees[131]. - The Process Automation Business Area generated revenues of $6.3 billion in 2021, employing approximately 22,000 people[147]. - The Robotics & Discrete Automation Business Area generated $3.3 billion in revenues in 2021, with approximately 10,600 employees[159]. - In 2021, orders increased by 20% year-on-year, while revenues grew by 11%, resulting in an order backlog of $16.6 billion, up 16% from the previous year[222]. - The company achieved cash flows from operating activities of $3.3 billion in 2021, marking a 78% increase compared to 2020[224]. Research and Development - ABB's annual non-order related research and development spending in 2021 was approximately 4.2% of revenues, totaling around $7 billion since 2016[96]. - Total non-order related research and development expenses were $1.2 billion in 2021, representing 4.2% of revenues[225]. - In 2021, ABB invested $1,219 million in research and development, representing approximately 4.2% of its consolidated revenues[263]. - The company filed over 2,250 patents in 2021, reflecting its commitment to innovation and intellectual property protection[192]. - ABB has approximately 25,000 patent applications and registrations, with about 5,500 pending applications, indicating a strong focus on protecting its technological advancements[192]. - ABB's research and development efforts include collaborations with universities and start-ups to foster new technologies and enhance innovation[266][267]. Capital Expenditures - The Electrification Business Area's capital expenditures for property, plant, and equipment totaled $345 million in 2021, up from $316 million in 2020, with 54% of expenditures in Europe[130]. - Capital expenditures in the Motion Business Area reached $230 million in 2021, compared to $118 million in 2020, with 49% of expenditures in Asia, Middle East, and Africa[144]. - Capital expenditures for the Process Automation Business Area totaled $85 million in 2021, an increase from $75 million in 2020, with 73% of expenditures in Europe[158]. - The Robotics Division's capital expenditures for property, plant, and equipment totaled $96 million in 2021, up from $65 million in 2020, with 75% of expenditures in Europe[166]. - Total capital expenditures for property, plant, and equipment and intangible assets amounted to $820 million in 2021, which was 8% lower than depreciation and amortization[181]. - In 2021, the share of emerging markets capital expenditures was 33%, compared to 22% in 2020, indicating a significant increase in investment focus[183]. Sustainability and Environmental Impact - The company aims to enable a low-carbon society and reduce carbon emissions through its technologies, targeting sectors that account for three-quarters of global energy consumption[195]. - The share of green electricity used by ABB increased from 32% in 2020 to 51% in 2021, while waste sent to landfill decreased from 15.1 thousand tons to 12.6 thousand tons[199]. - ABB aims to support customers in reducing annual CO2 emissions by at least 100 megatons, equivalent to the emissions of 30 million combustion cars[30]. - ABB's new circularity approach will cover at least 80% of its products and solutions, evaluated against a transparent scoring system[200]. - By 2030, ABB aims for at least 80% of supply spend in focus countries to be covered by its Sustainable Supply Base Management program[30]. - ABB's Board of Directors oversees the sustainability strategy and ensures remuneration policies are linked to sustainability targets[198]. Business Strategy and Growth - ABB has transitioned two-thirds of its Divisions, representing about 60% of Group revenues, to a growth mandate, focusing on organic and acquired growth[99]. - The company has increased its focus on discrete industries and transport and infrastructure, aligning its business portfolio to more attractive growth markets[102]. - The ongoing shift towards short-cycle businesses aims to reduce risk and volatility in ABB's earnings[102]. - The growth target has been raised to an annual average revenue growth of 4% to 7%, up from the previous target of 3% to 5%[228]. - The Operational EBITA margin target has been increased to at least 15% starting in 2023[228]. - The company plans to complete five or more bolt-on acquisitions each year as part of its growth strategy[220]. Challenges and Risks - The company reported that supply chain management faced challenges in 2021, including delays in supplier deliveries and product shortages, but implemented measures to mitigate disruptions[190]. - ABB's tax estimates are subject to change based on audits and litigation, which could materially affect tax accruals[251]. - Approximately 74 percent of the cost of sales and selling, general and administrative expenses were reported in currencies other than USD[281]. Employee Engagement and Diversity - ABB's employee engagement score decreased by 1 percentage point to 74%, with the response rate increasing from 73% to 78%[201]. - The number of women in senior management positions increased from 13.5% to 16.3%[201]. - ABB recorded no fatalities in 2021, and the lost time incident frequency rate dropped from 0.16 to 0.14 per 200,000 hours worked[201]. Acquisitions and Divestments - The company acquired ASTI Mobile Robotics Group in 2021, expanding its portfolio of autonomous mobile robot vehicles and solutions[161]. - ABB completed the divestment of its Mechanical Power Transmission Division for cash proceeds of $2,862 million, recognizing a net gain of $2,195 million[272]. - The principal acquisition in 2021 was ASTI Mobile Robotics Group SL, with ABB paying $212 million for this acquisition[270]. - The company is pursuing a dual track process for the exit of the Turbocharging Division and plans to carve out the E-mobility Division for an initial public offering[219]. Currency and Financial Reporting - Approximately 77% of ABB's consolidated revenues in 2021 were reported in currencies other than USD, with 23% in Euro and 17% in Chinese renminbi[280]. - The average exchange rate for EUR to USD in 2021 was 1.18, compared to 1.14 in 2020[279]. - Local currency financial information is translated into USD at applicable exchange rates for inclusion in the Consolidated Financial Statements[282]. - Period-to-period variations in local currency results are measured using a constant foreign exchange rate for all periods under comparison[283]. - Local currency information is considered a significant indicator of business performance but should not be relied upon exclusively over U.S. GAAP financial measures[284].

—ZURICH, SWITZERLAND | FEBRUARY 3, 2022 | BJÖRN ROSENGREN, CEO; TIMO IHAMUOTILA, CFO Q4 2021 results Strong demand, increased earnings and margin support a robust cash flow — Important notices This presentation includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions, and the eco ...

ABB Ltd. (ABB) Q4 2021 Earnings Conference Call February 3, 2022 4:00 AM ET Company Participants Ann-Sofie Nordh – Head-Investor Relations Bjorn Rosengren – Chief Executive Officer Timo Ihamuotila – Chief Financial Officer Conference Call Participants Ben Uglow – Morgan Stanley Alex Virgo – Bank of America Merrill Lynch Andreas Willi – J.P. Morgan Martin Wilkie – Citi Phil Buller – Berenberg Guillermo Peigneux-Lojo – UBS Ann-Sofie Nordh Greetings to all and welcome to the Presentation of ABB's Q4 Results. I ...

—ZURICH, SWITZERLAND | OCTOBER 21, 2021 | BJÖRN ROSENGREN, CEO; TIMO IHAMUOTILA, CFO Q3 2021 results Strong demand, supply chain constraints impacting revenues — Important notices This presentation includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions, and the economic conditi ...

Financial Data and Key Metrics Changes - Strong order growth of 26% year-over-year, with margins at 15.1%, supported by low corporate costs [2][4][6] - Cash flow from operating activities reached $1.1 billion, an improvement of approximately $720 million from the previous year [16][17] - Full-year revenue guidance adjusted to a growth range of 6% to 8%, down from just below 10% [21][22] Business Line Data and Key Metrics Changes - Electrification orders grew by 17%, with a notable increase in the Americas and mid-single-digit growth in China [7][8] - Motion orders increased by 22%, but revenues were adversely impacted by semiconductor shortages, resulting in a 2% revenue growth [9][10] - Process Automation saw a 40% increase in orders and a 5% increase in revenues, with a significant order of $120 million booked in Australia [11][12] - Robotics and Discrete Automation had a 26% increase in order intake, but revenues declined by 3% due to supply chain issues [14][15] Market Data and Key Metrics Changes - Strong growth in the U.S. market at 31%, with double-digit growth in Europe and a 9% increase in China [5][6] - The order backlog reached a record high of $5.2 billion, indicating strong demand despite supply chain challenges [8][9] Company Strategy and Development Direction - The company aims to enhance its product offerings, including the launch of the world's fastest EV charger and a focus on sustainable mining solutions [2][3] - There is a commitment to maintaining stringent cost control and improving operational performance across all divisions [6][12] - The company is exploring options for the Turbo business, considering a spin-off or sale, while emphasizing the importance of the Process Automation segment [42][43][74] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued challenges in supply chain delivery capabilities, with expectations for comparable revenue growth in Q4 to be similar to Q3 [20][21] - The company remains optimistic about the strong order book and expects to deliver on it despite supply chain constraints [40][41] - Management highlighted the importance of multiple sourcing strategies to mitigate supply chain risks moving forward [32][33] Other Important Information - The company is focusing on cash flow sustainability, with expectations of reaching approximately $2.5 billion in free cash flow for the full year [51] - There is a strong emphasis on quality in the order backlog, with no significant order cancellations reported [34][83] Q&A Session Questions and Answers Question: What is the expected margin for Electrification in 2022? - Management indicated that the margin for Electrification is expected to improve in principle in 2022 compared to 2021, despite current challenges [24] Question: What is the situation regarding supply chain issues in China? - Management stated that power shortages have not yet impacted operations significantly, and demand remains strong in the Chinese market [52][53] Question: How is the company addressing the semiconductor shortages? - Management acknowledged the challenges posed by semiconductor shortages but emphasized that there have been no order cancellations, indicating strong demand [60][63] Question: What is the outlook for the Turbo business? - Management confirmed that the Turbo business is resilient and has seen a strong demand pickup, with plans for a potential spin-off or sale [74][77] Question: What measures are being taken to improve Process Automation? - Management is focused on enhancing operational performance in Process Automation and believes there is significant potential for improvement [86]

Financial Data and Key Metrics Changes - The company reported a strong performance in Q2 2021, with comparable orders up by 24% year-over-year, driven by increased customer activity in most segments of the short cycle business [7][10] - Cash flow from operating activities in Q2 amounted to $663 million, contributing to a total of $1.2 billion generated so far this year [6][28] - The operational EBITDA margin improved to 15% in Q2, with a gross margin increase of 140 basis points [11][12] Business Line Data and Key Metrics Changes - **Electrification**: Comparable orders grew by 28% and revenues by 17%, with operational EBITDA margin increasing by 480 basis points to 17.4% [15][16] - **Motion**: Comparable orders were up by 16% and revenues increased by 11%, maintaining an operational EBITDA margin of 17.7% [18] - **Process Automation**: Comparable orders and revenues returned to positive territory, growing by 11% and 4% respectively, with a significant lift in operational EBITDA margin by 410 basis points [20][22] - **Robotics and Discrete Automation**: Comparable orders grew by 41% and revenues rose by 22%, with an operational EBITDA margin of 11.5% [23][25] Market Data and Key Metrics Changes - Growth was strong across all three regions, with the Americas and Europe improving by more than 40% and 20% respectively, while China noted strong growth of 50% [10][11] - The company noted that the quality of the order book was safeguarded despite stockpiling, with a slight impact of 1% to 2% on group growth attributed to inventory building [39][40] Company Strategy and Development Direction - The acquisition of ASTI, a leader in autonomous mobile robots, is part of the company's strategy to enhance its robotics division and expand its offerings [4][33] - The company aims to achieve carbon neutrality in its operations by 2030, aligning its targets with the Paris Agreement [34][35] - The focus is on moving away from low-margin automotive systems to higher-margin general industry and logistics sectors [72][73] Management's Comments on Operating Environment and Future Outlook - Management expects continued challenges in the supply chain, particularly regarding raw material costs and component shortages [6][12] - The company anticipates comparable revenue growth in 2021 to be just below 10%, reflecting stronger conviction in the recovery of process-related businesses [29][30] - There is cautious optimism regarding margin improvements, with expectations of sequential pressure from rising input costs [31] Other Important Information - The company plans to host a capital markets day in September and a group CMD in December to discuss strategy and sustainability [37] - The management emphasized the importance of maintaining a strong balance sheet to support future acquisitions and growth initiatives [33][80] Q&A Session All Questions and Answers Question: Can you provide more detail on divisional performance in demand terms in China? - Management noted double-digit growth in the Chinese market, particularly in electrification and motion, with a 15% growth rate overall [39] Question: How much has inventory building contributed to growth in Electrification and Motion? - The impact from stockpiling was estimated at about 1.5% for the group and around 3% for electrification [40] Question: What headwinds could affect margin guidance for 2023? - Management highlighted potential challenges from material prices and semiconductor supplies, indicating a cautious outlook [44][45] Question: Can you clarify the raw material impact on margins for different divisions? - Management provided insights on expected negative impacts from raw materials, particularly in electrification and motion, while process automation is less affected [51][52] Question: What is the strategy regarding the ASTI acquisition and future M&A? - The acquisition aligns with the company's strategy to enhance its robotics capabilities, with plans for further acquisitions in technology sectors [54][80]

—ZURICH, SWITZERLAND | JULY 22, 2021 | BJÖRN ROSENGREN, CEO; TIMO IHAMUOTILA, CFO Q2 2021 results Strong performance in a recovery quarter — Important notices This presentation includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including global economic conditions, and the economic conditions of the regions an ...