ABB(ABBNY) - 2022 Q1 - Earnings Call Transcript

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]