(BUSINESS WIRE)--
SECOND QUARTER HIGHLIGHTS
·
Total and base orders
grew 3%1; higher orders in all regions
·
Revenues up 1%
·
Operational EBITA
margin2 12.4%, dampened this quarter by
commodity prices and some overcapacity
·
Net income $525
million
·
Cash flow from
operating activities $467 million reflects timing of short-term incentive
payments
·
Net working capital as
a percentage of revenues 14.1%, reduced 90 bps on an annual basis
·
Active portfolio
management: B&R acquisition closed July 6, KEYMILE’s communication business
to be acquired Q3
“In
Q2, ABB continued to build its growth momentum as our targeted initiatives are
delivering. Order growth was broad-based and across all regions,” said ABB CEO
Ulrich Spiesshofer. “Our industry-leading digital offering, ABB Ability, is taking
off and starting to contribute to growth.”
“Operational
performance in the Power Grids and Industrial Automation divisions was solid in
the quarter. Electrification Products and Robotics and Motion improved margins
sequentially, but were not able to fully compensate commodity price headwinds
and overcapacity during the quarter,” he said. “While we are pleased with the
growth momentum, especially the double-digit order growth in Robotics and
Motion, we remain firmly focused on further improving operational execution and
our cost base.”
“The
successful completion of the B&R acquisition and the handover of our last
legacy off-shore wind project, Dolwin 2, are solid examples of the disciplined
execution of our Next Level strategy.”
KEY FIGURES
|
CHANGE
|
CHANGE
|
||||||||||||||||
($ in millions,
unless otherwise
indicated) |
Q2 2017
|
Q2 2016
|
US$
|
Compa-
rable1 |
H1 2017
|
H1 2016
|
US$
|
Compa-
rable1 |
||||||||||
Orders
|
8,349
|
8,316
|
0%
|
+3%
|
16,752
|
17,569
|
-5%
|
0%
|
||||||||||
Revenues
|
8,454
|
8,677
|
-3%
|
+1%
|
16,308
|
16,580
|
-2%
|
+2%
|
||||||||||
Operational EBITA2
|
1,042
|
1,120
|
-7%
|
-5%3
|
1,985
|
2,071
|
-4%
|
-2%3
|
||||||||||
as % of operational
revenues |
12.4%
|
12.9%
|
-0.5pts
|
12.3%
|
12.5%
|
-0.2pts
|
||||||||||||
Net income
|
525
|
406
|
29%
|
1,249
|
906
|
38%
|
||||||||||||
Basic EPS ($)
|
0.25
|
0.19
|
30%4
|
0.58
|
0.42
|
39%4
|
||||||||||||
Operational EPS2 ($)
|
0.30
|
0.35
|
-15%4
|
-11%4
|
0.58
|
0.64
|
-9%4
|
-6%4
|
||||||||||
Cash flow from
operating
activities |
467
|
1,082
|
-57%
|
976
|
1,334
|
-27%
|
||||||||||||
Short-term outlook
Macroeconomic
and geopolitical developments are signaling a mixed picture with continued
uncertainty. Some macroeconomic signs in the US remain positive and growth in
China is expected to continue. The overall global market remains impacted by
modest growth and increased uncertainties, e.g., Brexit in Europe and
geopolitical tensions in various parts of the world. Oil prices and foreign
exchange translation effects are expected to continue to influence the
company’s results. With this and the ongoing transformation of ABB, we expect
2017 to be a transitional year.
Q2 2017 Group results
Orders
Total
orders were 3 percent higher (stable in US dollars) compared with the second
quarter a year ago, as the significant increase in Robotics and Motion and
Industrial Automation more than offset the decline in Electrification Products
and Power Grids. Large orders grew 5 percent (1 percent in US dollars) and
represented 8 percent of the total orders, unchanged compared with the same
quarter a year ago. A stronger US dollar versus the prior year period resulted
in a negative translation impact on reported orders of 3 percent.
Base
orders (below $15 million) increased 3 percent (stable in US dollars),
improving in Robotics and Motion, Industrial Automation and Power Grids.
Electrification Products decreased 1 percent (4 percent in US dollars),
impacted primarily by fewer trading days in the quarter compared with the same
period a year ago.
Total
service and software orders rose 8 percent (5 percent in US dollars) and increased
to 20 percent of total orders compared with 19 percent a year ago.
The
order backlog at the end of June 2017 amounted to $23.6 billion, 1 percent
lower (7 percent in US dollars) compared with the end of the second quarter a
year ago. The book-to-bill2 ratio in the second quarter was 0.99x
compared with 0.96x in the second quarter of 2016.
Market overview
Demand
patterns in all of ABB’s regions were positive in the quarter:
·
Europe benefited from
positive market developments in industry, transport and infrastructure and
timing of large capital investments. Total orders improved 6 percent (1 percent
in US dollars) with positive contributions from the United Kingdom, Finland,
Turkey and Spain more than offsetting declines in Norway and France. Base
orders improved 1 percent (4 percent lower in US dollars) with Spain, Sweden
and Turkey as the main contributors.
·
The Americas was
positive, driven by the need for energy-efficient solutions for industry,
transport and infrastructure and increased demand for automation in general.
Total orders grew 2 percent in the quarter (2 percent in US dollars) on
increased large order awards. Base orders declined 2 percent (2 percent in US
dollars) as higher demand in the United States and Brazil could not offset
declines in Canada. The United States grew 7 percent overall (6 percent in US
dollars) and 1 percent in base orders (stable in US dollars).
·
Asia, Middle East and
Africa (AMEA) grew due to increased demand in industry, transport and
infrastructure for energy-efficient and automation solutions. Utilities made
selective investments in the quarter. Total orders increased 2 percent (2
percent lower in US dollars) driven primarily by substantial growth in India,
Saudi Arabia and South Africa. Total orders in China declined, as higher base
orders could not offset lower large order awards. Increased demand in India
reflects the continuing need for industrial automation and reliable power
solutions. Base orders for the region increased 9 percent (6 percent in US
dollars) with positive contributions from China and India.
Demand
patterns in ABB’s three major customer sectors were mixed:
·
Utilities continued
their selective investments, adding new capacity in emerging markets, upgrading
the aging power infrastructure in mature markets and integrating renewable
energy globally. They are also investing in automation and control solutions to
enhance the stability of the grid.
·
In industry,
investments in robotics solutions and the automotive and food and beverage
sectors remained positive. Investments in process industries, especially
offshore oil and gas, remained subdued. Selective investments in mining,
exploration and downstream oil and gas are expected to continue.
·
Transport &
infrastructure demand has been mixed. Demand for building automation solutions
as well as solutions involving energy efficiency for rail transport remained
strong while the marine sector, except for cruise ships, suffered from a sharp
decline due to the subdued oil and gas sector. Electric Vehicle charging remained
a highlight in the quarter.
Revenues
Revenues
increased 1 percent (3 percent lower in US dollars) in the second quarter and
were higher in Electrification Products and Robotics and Motion. Power Grids
was stable and Industrial Automation was lower on the reduced order backlog.
Total services and software revenues were stable (2 percent lower in US
dollars) and represented 17 percent of total revenues, unchanged compared with
a year ago.
Operational EBITA
Operational
EBITA was $1,042 million, 5 percent lower in constant currencies (7 percent
lower in US dollars). Operational EBITA margin was 12.4 percent, 0.5 percent
lower compared with the same period a year ago. Operational EBITA margin
improved in Industrial Automation and Power Grids but decreased in the
Electrification Products and Robotics and Motion divisions. Operational EBITA
was impacted by commodity price increases and overcapacity in some businesses
which could not offset the positive net savings effect.
Net income, Basic and Operational earnings per
share
Net
income increased to $525 million from $406 million and basic earnings per share
was $0.25 compared with $0.19 for the same quarter of 2016. This result was
impacted by lower restructuring and restructuring-related expenses and a higher
tax rate of 30% versus 25.1% compared with the same period a year ago.
Operational EPS was $0.30 compared to $0.35 for the same quarter of 2016, a
decrease of 11 percent in constant currencies2.
Cash flow from operating activities
Cash
flow from operating activities was $467 million compared with $1,082 million in
2016 due to the change in timing of short-term incentive payments to the second
quarter from the first quarter in 2017. It was also impacted by timing of tax
payments, delays in payment from Middle Eastern customers and the positive cash
contribution in the previous year from the recently divested cables business.
Share cancelation
In
July 2017, based on the shareholders’ vote at the company’s annual general
meeting on April 13, 2017, ABB canceled 46.6 million shares. This will be
reflected in the third quarter.
Executive Committee changes
Effective
April 1, 2017, Timo Ihamuotila joined ABB from Nokia as Chief Financial Officer
and a member of the Executive Committee. Effective July 1, 2017, Chunyuan Gu,
Managing Director of ABB in China, became President of the Asia, Middle East
and Africa (AMEA) region and a member of the Executive Committee. Chunyuan
takes over AMEA from Frank Duggan, who was appointed President of the Europe
region, succeeding Bernhard Jucker, who retired on June 30 after a long and
distinguished career at ABB.
Q2 divisional performance
($ in millions,
unless otherwise
indicated) |
Orders
|
CHANGE
|
Revenues
|
CHANGE
|
Operational
EBITA % |
CHANGE
|
||||||||||||
US$
|
Compa
rable1
|
US$
|
Compa
rable1
|
|||||||||||||||
Electrification Products
|
2,512
|
-4%
|
-1%
|
2,509
|
-1%
|
+2%
|
15.0%
|
-0.8pts
|
||||||||||
Robotics and Motion
|
2,219
|
+12%
|
+14%
|
2,087
|
+3%
|
+5%
|
14.9%
|
-1.3pts
|
||||||||||
Industrial Automation
|
1,499
|
+6%
|
+8%
|
1,608
|
-9%
|
-7%
|
12.7%
|
+0.3pts
|
||||||||||
Power Grids
|
2,484
|
-6%
|
-3%
|
2,647
|
-3%
|
0%
|
9.8%
|
+0.5pts
|
||||||||||
Corporate &
other (incl.
inter-division elimination) |
-365
|
-397
|
||||||||||||||||
ABB Group
|
8,349
|
0%
|
+3%
|
8,454
|
-3%
|
+1%
|
12.4%
|
-0.5 pts
|
||||||||||
Electrification Products
Total
orders were impacted by fewer trading days in the second quarter versus the
second quarter of 2016; total orders for the first half of 2017 were up 1
percent (2 percent lower in US dollars). Revenues grew 2 percent in the quarter
(1 percent lower in US dollars). Operational EBITA margin improved sequentially
but was lower in the quarter versus a year ago mainly due to higher material
costs, which more than offset productivity and cost savings.
Robotics and Motion
Total
orders were 14 percent higher (12 percent in US dollars) as all regions and
business units contributed to the significant growth. Third-party base orders
increased 10 percent (8 percent in US dollars) on continued strong growth in
robotics and light industry. Revenues improved 5 percent (3 percent in US
dollars). Operational EBITA margin was impacted by product mix, significantly
higher commodity prices and under absorption, which more than offset the
cost-out measures.
Industrial Automation
Total
orders grew 8 percent (6 percent in US dollars) due to selective capital
expenditure investments in oil and gas and in mining. Third party base orders
continued to be positive. Revenues were 7 percent lower (9 percent in US
dollars), reflecting the execution of a lower order backlog. Operational EBITA
margin increased slightly as cost and productivity savings offset the lower
revenue contribution.
Power Grids
Third
party base orders grew 2 percent (stable in US dollars) on investments in
emerging markets while total orders were impacted by the timing of large order
awards. Revenues were steady (3 percent lower in US dollars) on solid order
backlog execution. Operational EBITA margin increased 50 basis points to 9.8
percent, reflecting improved productivity, project execution and continued cost
savings. The division’s ‘Power Up’ program to drive transformation and value
creation is underway and the company will continue to invest in this initiative
in the coming quarters.
Next Level strategy – Stage 3
ABB
continued the implementation of its Next Level strategy during the quarter by
further shifting its center of gravity to higher growth segments, strengthening
its competitiveness and de-risking the portfolio.
On
July 6, ABB announced the completion of its acquisition of B&R (Bernecker +
Rainer Industrie-Elektronik GmbH), the largest independent provider focused on
product- and software-based, open-architecture solutions for machine and
factory automation worldwide. This acquisition closes ABB’s historic gap in
machine and factory automation and will create a uniquely comprehensive
automation portfolio for customers globally. This all-cash acquisition is
expected to be EPS-accretive in the first year.
ABB
successfully launched its new industry-leading digital offering, ABB Ability,
at its customer events in Houston, Hanover and Hangzhou. With more than 180
solutions, across all customer segments, ABB Ability has seen very positive
customer response and is contributing to sustainable growth.
On
July 3, ABB announced that it had agreed to acquire the mission-critical
communication network business from the KEYMILE Group to strengthen its
portfolio and further enhance ABB Ability. It will add reliable communications
technologies that are essential to maintain today’s dynamic and complex digital
electrical grids. The acquisition will bring with it products, software and
service solutions, as well as research and development expertise. It is
expected to close during the third quarter of 2017.
ABB
continues to build on its existing momentum and is further accelerating its
operational performance.
The
company’s White-Collar Productivity savings program has exceeded expectations
since its launch in 2015. ABB is on track to achieve the program’s increased
cost reduction target of $1.3 billion within the initially announced timeframe
and approximately $200 million lower combined restructuring program and
implementation costs than initially announced. ABB is continuing its regular
cost-savings programs, leveraging operational excellence and world-class supply
chain management to achieve savings equivalent to 3-5 percent of cost of sales
each year.
ABB
reaffirms the target of its Net Working Capital program to free up
approximately $2 billion by the end of 2017. The program is on track; Net
Working Capital as a percentage of revenues decreased 90 bps compared with the
same period a year ago.
Outlook
Macroeconomic
and geopolitical developments are signaling a mixed picture with continued
uncertainty. Some macroeconomic signs remain positive in the United States and
growth in China is expected to continue. The overall global market remains
impacted by modest growth and increased uncertainties, e.g., Brexit in Europe
and geopolitical tensions in various parts of the world. Oil prices and foreign
exchange translation effects are expected to continue to influence the
company’s results. With this and the ongoing transformation of ABB, we expect
2017 to be a transitional year.
The
attractive long-term demand outlook in ABB’s three major customer sectors —
utilities, industry and transport & infrastructure — is driven by the
Energy and Fourth Industrial Revolutions.
ABB
is well-positioned to tap into these opportunities for long-term profitable
growth with its strong market presence, broad geographic and business scope,
technology leadership and financial strength.
More information
The
Q2 2017 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.
ABB
will host a press conference today starting at 10:00 a.m. Central European Time
(CET) (9:00 a.m. BST, 4:00 a.m. EDT). The event will be accessible by
conference call. Callers from the UK should dial +44 203 059 58 62. From
Sweden, the number to dial is +46 85 051 00 31, and from the rest of Europe,
+41 58 310 50 00. Callers from the US and Canada should dial +1 866 291 41 66
(toll-free) or +1 631 570 56 13 (long-distance charges apply). Lines will be
open 10-15 minutes before the start of the call.
A
conference call and webcast for analysts and investors is scheduled to begin
today at 2:00 p.m. CET (1:00 p.m. BST, 8:00 a.m. EDT). Callers from the UK
should dial +44 203 059 58 62. From Sweden, the number to dial is +46 85 051 00
31, and from the rest of Europe, +41 58 310 50 00. Callers from the US and
Canada should dial +1 866 291 41 66 (toll-free) or +1 631 570 56 13
(long-distance charges apply). Callers are requested to phone in 10 minutes
before the start of the call. The call will also be accessible on the ABB
website and a recorded session will be available as a podcast one hour after
the end of the conference call and can be downloaded from our website. www.abb.com/investorrelations
ABB (ABBN: SIX Swiss Ex) is a pioneering technology leader in
electrification products, robotics and motion, industrial automation and power
grids, serving customers in utilities, industry and transport &
infrastructure globally. Continuing more than a 125-year history of innovation,
ABB today is writing the future of industrial digitalization and driving the
Energy and Fourth Industrial Revolutions. ABB operates in more than 100
countries with about 132,000 employees. www.abb.com
INVESTOR CALENDAR
2017
|
||||||||||||
Innovation and Technology Day
|
September 6, 2017
|
|||||||||||
Third quarter 2017 results
|
October 26, 2017
|
|||||||||||
Fourth quarter and full year 2017
results
|
February 8, 2018
|
|||||||||||
Annual General Meeting
|
March 29, 2018
|
|||||||||||
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”, “Outlook”, and “Next
Level strategy – Stage 3”. 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 “expects,” “believes,” “estimates,”
“targets,” “plans,” “is likely”, “intends” 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,
July 20, 2017
Ulrich Spiesshofer, CEO
Ulrich Spiesshofer, CEO
___________
|
1 Growth rates for orders, base orders, revenues and
order backlog are on a comparable basis (local currency adjusted for
acquisitions and divestitures). US$ growth rates are presented in Key Figures
table
|
2 For a reconciliation of non-GAAP measures, see
“Supplemental Reconciliations and Definitions” in the attached Q2 2017
Financial Information
|
3 Constant currency (not adjusted for portfolio changes)
|
4 EPS growth rates are computed using unrounded amounts.
Comparable operational earnings per share is in constant currency (2014
exchange rates and not adjusted for changes in the business portfolio)
|
Contacts
Media
Relations
+41 43 317 65 68
media.relations@ch.abb.com
or
Investor Relations
+41 43 317 71 11
investor.relations@ch.abb.com
or
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
+41 43 317 65 68
media.relations@ch.abb.com
or
Investor Relations
+41 43 317 71 11
investor.relations@ch.abb.com
or
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
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