ABB LTD Industrial Automation (IA)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 1,305 1,622 -20% -17% 3,062 3,288 -7% -4%
Order backlog 5,210 5,240 -1% +3% 5,210 5,240 -1% +3%
Revenues 1,382 1,580 -13% -9% 2,844 3,098 -8% -5%
Operational
EBITA(1) 115 190 -39% 259 395 -34%
as % of
operational -3.7 -3.7
revenues 8.4% 12.1% pts 9.1% 12.8% pts
-- Orders reflect a sharp downturn across energy and process industries as
well as a fall-off in marine, even while the business area benefited
from select large order wins. Orders were lower in all regions, with a
severe drop in the Americas.
-- Revenues were impacted by a substantial drop in book-and-bill
activities, particularly mobility constrained services.
-- Aside from lower volumes, margins were held back by under-absorption and
negative mix, mainly from lower service activities.
Motion (MO)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 1,586 1,762 -10% -7% 3,487 3,562 -2% 0%
Order backlog 3,384 3,050 +11% +13% 3,384 3,050 +11% +13%
Revenues 1,583 1,641 -4% -1% 3,093 3,246 -5% -3%
Operational
EBITA(1) 279 275 +1% 509 538 -5%
as % of
operational +1.0 -0.1
revenues 17.7% 16.7% pts 16.5% 16.6% pts
-- A broad-based short-cycle downturn weighed on orders, even while orders
remained healthy in the rail and chemicals sectors. Orders across the
Americas fell steeply, substantially mitigated by a strong rebound in
China.
-- Resilient revenue development mainly reflects strong backlog execution.
-- Margin expansion was driven by strong cost actions and favorable mix.
Robotics & Discrete Automation (RA)
KEY FIGURES CHANGE CHANGE
($ millions,
unless
otherwise Q2 Q2 H1 H1
indicated) 2020 2019 US$ Comparable 2020 2019 US$ Comparable
Orders 638 883 -28% -25% 1,449 1,850 -22% -19%
Order backlog 1,478 1,586 -7% -4% 1,478 1,586 -7% -4%
Revenues 629 845 -26% -23% 1,300 1,696 -23% -21%
Operational
EBITA(1) 43 105 -59% 102 200 -49%
as % of
operational -5.5 -4.0
revenues 6.8% 12.3% pts 7.8% 11.8% pts
-- Against a tough comparison base for large orders, RA's order result
moved sharply lower, as expected. Activity levels declined materially
across key end-markets, including automotive, general industry and
machine builders. Orders fell sharply in Europe and the Americas, while
demand from the AMEA region remained weak.
-- Revenues were severely impacted by lower systems business and service
activities, as well as lower product volumes.
-- Margin contraction reflects steep volume decline, which outweighed
supportive cost actions.
Corporate and Other
KEY FIGURES CHANGE CHANGE
($ millions, unless
otherwise indicated) Q2 2020 Q2 2019 US$ H1 2020 H1 2019 US$
Orders (212) (205) (7) (456) (388) (68)
Revenues (204) (167) (37) (404) (351) (53)
Income from operations (153) (285) +132 (326) (515) +189
Operational EBITA(1) (134) (185) +51 (249) (359) +110
-- Corporate and Other operational EBITA improved to -$134 million.
Compared to a year ago this reflects lower stranded and lower ongoing
corporate costs.
-- In the second quarter of 2020, stranded costs of $19 million were
recognized, impacting operational EBITA margin by 30 basis points.
Corporate and Other orders and revenues primarily represent intersegment
eliminations.
Capital structure optimization
ABB divested 80.1 percent of its Power Grids business to Hitachi on July 1, 2020, as planned, delivering on an important milestone in the company's transformation agenda as announced in December 2018.
ABB is committed to returning to shareholders net cash proceeds from the Power Grids divestment of $7.6-7.8 billion. ABB will initially launch a share buyback program of 10 percent(6) of the company's share capital to begin imminently. This represents about 180 million shares in addition to those already held in treasury.
Also, as part of the overall capital structure optimization program, ABB has now repaid fully the EUR2 billion short-term revolving credit facility put in place to strengthen liquidity in the face of COVID-19. The Group plans to implement further deleveraging actions, including a review of certain defined benefit pension structures, as well as repayment of a EUR1 billion bond that matures in October 2020. ABB aims to maintain its single A credit rating.
"ABB's capital structure optimization during the coming years will focus on shareholder returns, by executing on its share buyback program, as planned, as well as by improving the company's risk profile and finance costs through an efficient deleveraging strategy. In these challenging times, ABB has a resilient financial framework and strong balance sheet, " said Timo Ihamuotila, CFO of ABB.
Transformation progress
ABB's CEO presented his First Perspectives to investors on June 10, 2020, outlining ABB's way forward on creating value for shareholders, customers and employees. Following a new ABB Way of working, the Group intends to accelerate its transition to a fully decentralized operating model. This comprises four business areas -- Electrification, Industrial Automation, Motion and Robotics & Discrete Automation -- with 18 divisions, governed by a lean corporate. Going forward, the 18 divisions will have full accountability for their P&L and operational balance sheet. ABB's management team will prioritize improvement of the Group's financial performance, with a clear profitability focus for underperforming divisions, as well as active portfolio management. A new, division level, scorecard system using standardized KPIs to measure performance and drive continuous improvement will be introduced in the third quarter of 2020. ABB is on track for faster delivery of $500 million per annum net savings initiated through the ABB-OS simplification program.
ABB plans to host a Capital Markets Day in November 2020 that will provide more detail on the portfolio's evolution and business area and divisional strategies, while also setting out ABB's 2030 sustainability targets.
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 a recovery in economic activity in China in the second quarter, macro-indicators continue to point to a deep global recession with uncertainty around the pace of recovery. Many countries continue to face ongoing or new restrictions, with anticipated long-term economic consequences.
The impact of COVID-19 continues to weigh on the short-term outlook across many end-markets, and particularly in oil and gas, conventional power generation, automotive, marine and buildings. Some end markets such as electrical distribution, transport, data centers and food and beverage continue to show relative resilience.
Potential easing of COVID-19 impacts remain subject to considerable uncertainties. Against this background, ABB expects some improvement in year-on-year order decline already in the third quarter. Revenues are expected to remain strongly impacted on a year-on-year basis, at best recovering somewhat in the fourth quarter.
As ABB continues to adapt its operations and cost base to safeguard profitability, it expects its operational margin to steady on a sequential basis. The company anticipates resilient cash delivery for the full year.
More information
The Q2 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 leading global technology company that energizes the transformation of society and industry to achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back more than 130 years, ABB's success is driven by about 110,000 talented employees in over 100 countries.
INVESTOR CALENDAR Q3 2020 results October 23, 2020 Capital Markets Day November 2020
Important notice about forward-looking information
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07-22-20 0059ET
