UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For
the month of July 2023
Commission
File Number 001-16429
ABB
Ltd
(Translation
of registrant’s name into English)
Affolternstrasse
44, CH-8050, Zurich, Switzerland
(Address of
principal executive office)
Indicate by
check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
☒
⬜
Indicate by
check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
⬜
Note:
attached annual
report to security holders.
Indication
by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
⬜
Note:
other document
that the registrant foreign private issuer must furnish and
make public under the laws of the jurisdiction in
which the
registrant is incorporated, domiciled or legally organized (the registrant’s
“home country”), or under the rules of the
home country
exchange on which the registrant’s securities are traded, as long as the
report or other document is not a press
release, is
not required to be and has not been distributed to the registrant’s security
holders, and, if discussing a material event,
has already
been the subject of a Form 6-K submission or other Commission filing
on EDGAR.
Indicate by
check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing
the information
to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
⬜
☒
If “Yes”
is marked, indicate below the file number assigned to the registrant in connection
with Rule 12g3-2(b): 82-
This Form 6-K
consists of the following:
1.
Press release
issued by ABB Ltd dated July 20, 2023 titled “Q2 2023
results”.
2.
Q2 2023 Financial
Information.
3.
Announcements
regarding transactions in ABB Ltd’s Securities made by the directors or
the members of the
Executive
Committee.
The information
provided by Item 2 above is hereby incorporated by reference into
the Registration Statements on Form F-3 of
ABB Ltd and
ABB Finance (USA) Inc. (File Nos. 333-223907 and 333-223907-01) and
registration statements on Form S-8
(File Nos.
333-190180, 333-181583, 333-179472, 333-171971 and 333-129271)
each of which was previously filed with the
Securities
and Exchange Commission.
2
—
ZURICH, SWITZERLAND,
JULY 20, 2023
Q2
2023 results
Comparable order growth from
a high base and
record-high Operational EBITA margin
1
●
1
●
●
●
1
1
●
2
●
4
KEY
FIGURES
CHANGE
CHANGE
($ millions,
unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
1
H1 2023
H1 2022
US$
Comparable
1
Orders
8,667
8,807
-2%
2%
18,117
18,180
0%
6%
Revenues
8,163
7,251
13%
17%
16,022
14,216
13%
19%
Gross Profit
2,888
2,290
26%
5,604
4,571
23%
as % of revenues
35.4%
31.6%
+3.8 pts
35.0%
32.2%
+2.8 pts
Income from operations
1,298
587
121%
2,496
1,444
73%
Operational EBITA
1
1,425
1,136
25%
26%
2,702
2,133
27%
29%
as % of operational revenues
1
17.5%
15.5%
+2 pts
16.9%
14.9%
+2 pts
Income from continuing operations, net
of tax
932
406
130%
1,997
1,049
90%
Net income attributable to ABB
906
379
139%
1,942
983
98%
Basic earnings per share ($)
0.49
0.20
145%
2
1.04
0.51
104%
2
Cash flow from operating activities
4
760
382
99%
1,042
(191)
n.a.
1
For a reconciliation
of non-GAAP measures, see “supplemental reconciliations and definitions”
in the attached Q2 2023 Financial Information.
2
EPS growth
rates are computed using unrounded amounts.
3
Constant
currency (not adjusted for portfolio changes).
4
Amount
represents total for both continuing and discontinued operations.
—
“The
positive book-to-bill ratio and new record-high Operational EBITA earnings and
margin add
to our confidence about ABB's 2023 outcome allowing us to
sharpen
our margin expectations.”
Björn
Rosengren
,
CEO
Ad hoc Announcement pursuant
to Art. 53 Listing Rules of SIX Swiss Exchange
—
Q2
2023
First
six months
Press
Release
ABB INTERIM REPORT
I
Q2 2023
To summarize
the outcome in the second quarter, I
would first
highlight the 2% comparable
order growth which was up from
last year's already high
level, and the positive book-to-bill. It
was good to see that
the customer activity remained robust
throughout the period. Secondly, the
high revenue growth of
13% (17% comparable) supported
by backlog execution.
Thirdly, the
record-high achievements on both absolute
Operational EBITA of
$1.4 billion and Operational EBITA
margin of 17.5%, up 200 basis
points from last year, with all
four business areas above
15%. This was supported by a
strong price contribution which
more than offset labor inflation
as well as some limited
cost inflation related to commodities,
with additional support from
operational leverage on increased
volumes in production. And
lastly, the solid cash flow from
operating activities of
$760 million. All the while we executed on
portfolio optimization and
continued to introduce leading new
technology to help our
customers become more sustainable
and resource efficient. In
my view, the quarter is an additional
indication that we are establishing
ABB's operational
performance at a higher level.
Order momentum was strongest
in the systems - and project-
related businesses, driven
predominantly by the medium
voltage segment and process-related
industries. This offset
some softening from last
year's high order level in the short-
cycle business, mainly evident
in the residential construction
segment and across the
board in discrete manufacturing where
customers normalize order
patterns in the face of shortening
delivery lead times. In
total, the book-to-bill ratio was 1.06
driven by three out of
four business areas, and we further
increased order backlog.
It was good to see our
cash flow from operating activities
improve by $378 million
from last year and I expect us to
improve cash conversion from
here onwards. Over the first six
months we have generated
just over $1 billion in Cash flow
from operating activities, which
helps position us well for what I
expect to be a good cash
delivery this year.
As announced earlier in
the quarter, we experienced an IT
security incident. I
am grateful to our teams for
the handling of
the challenge and containment of
the incident, and as a result
we have had no consequential material
financial impact in the
quarter.
Just after the end of the
second quarter, we successfully closed
the divestment of the Power
Conversion division at around
$500 million.
As a result, we expect to record a non-operational
book gain estimated
at approximately
$50 million
in Income from operations in the third quarter of
2023. With this transaction, we
have completed all divisional
portfolio divestments announced
at the end of 2020. That said,
we continuously review
the product groups within all divisions to
optimize the portfolio.
The small acquisition of
Eve Systems is another example of our
portfolio actions, this
time by the Smart Buildings division in
business area Electrification. With
around 50 employees , Eve
generated approximately $20 million
in revenues in 2022. It is a
pioneer in the new Matter
connectivity standard which enables
smart home products to
be fully interoperable, irrespective of
the manufacturer and user
operating system, via Thread
wireless technology for
consumer-facing products tailored to the
retrofit market.
I was pleased to see Process
Automation unveil its new
revolutionary propulsion concept
initially aimed primarily at
small- to
medium-sized vessels, complementing its current
market leading Azipod® offering
for larger vessels. This
industry-first electric
propulsion concept ABB Dynafin™ mimics
the movements of a whale
tail for ultimate efficiency and
emissions avoidance as
it is set to reduce propulsion energy
consumption by up to
22% compared to conventional shaftlines.
The first commercial prototype
is expected to be available in
2025.
Björn
Rosengren
CEO
In the
third
quarter of 2023
, we anticipate a low
double -digit
comparable revenue growth
and the Operational EBITA margin
to be slightly up from the
16.6% reported in the third quarter last
year.
In
full-year 2023
, despite current market
uncertainty, we
anticipate comparable revenue
growth to be at least 10% and
we expect Operational EBITA
margin to be above 16%.
CEO
summary
Outlook
ABB INTERIM REPORT
I
Q2 2023
Order intake declined by
2% (up 2% comparable) year-on-year,
hampered by changes in
exchange rates and in the portfolio,
while the comparable orders
increased from last year's high
base.
The strongest order momentum
was recorded in the systems-
and project-related business, linked
to the medium voltage
customer offering. The
short-cycle business softened somewhat
from last year's high level,
impacted by inventory adjustments
and normalizing order patterns
under the presumption of further
shortening delivery lead times.
Two out of four business areas
recorded single digit
order growth, with Process Automation
declining due to portfolio changes
and Robotics and Discrete
Automation down from last
year's level which benefited from
pre-buys in a period of
significant component shortages.
Order intake increased in
the Americas by 5% (6%
comparable), supported by
mid-single digit growth in the
United States. Portfolio changes
weighed on the year-on-year
development in Europe while
a low comparable growth was
recorded for a total decline
of 1% (up 1% comparable) despite
declines in key countries like
Germany and Italy. Asia, Middle
East and Africa declined by
10% (1% comparable) as the
positive development in
countries like India and Saudi Arabia
did not quite offset declines
in other countries such as China
with a drop of 15% (9%
comparable).
Automotive remained broadly
stable while the general
industry and consumer-related robotics
segments declined.
In transport & infrastructure, there
were positive
developments in
marine & ports and renewables.
In buildings there was
weakness in all three regions in
residential-related
demand . In the commercial
construction
segment weakness was
noted in China and Germany, while
demand was solid in
the US.
Demand in the process -related
business was strong across
the board, with particular strength
in oil & gas, and it held up
well also for ports, refining,
petrochemicals and the energy-
related low carbon segments.
Revenues increased by
13% (17% comparable) to
$8,163 million and benefitted
primarily from increased
volumes through execution of
the order backlog, combined
with a robust price contribution
in the mid-single digit range.
These benefits more than
offset the adverse impacts from
changes in exchange rates
and portfolio changes. Revenues
increased in all business areas,
supported by comparable
growth in virtually
all divisions.
Revenues
by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q2 2023
Q2 2022
US$
Comparable
Europe
2,935
2,508
17%
20%
The Americas
2,815
2,397
17%
19%
Asia, Middle East
and Africa
2,413
2,346
3%
13%
ABB Group
8,163
7,251
13%
17%
Orders
by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q2 2023
Q2 2022
US$
Comparable
Europe
2,931
2,958
-1%
1%
The Americas
3,209
3,050
5%
6%
Asia, Middle East
and Africa
2,527
2,799
-10%
-1%
ABB Group
8,667
8,807
-2%
2%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
2%
17%
FX
-2%
-1%
Portfolio changes
-2%
-3%
Total
-2%
13%
Orders
and revenues
ABB INTERIM REPORT
I
Q2 2023
Gross
profit
Gross profit increased strongly
by 26% (28% constant currency) to
$2,888 million, supported by
a significant gross margin
improvement of 380
basis points to 35.4 %. Gross margin improved
in all business areas, with
three showing significant increases.
Income
from operations
Income from operations amounted
to $1,298 million and more than
doubled year-on-ye ar,
and margin on Income from operations
reached 15.9%. Earnings
were mainly supported by the improved
operational performance as
well as by lower adverse impacts from
commodity timing differences . Some
additional tailwind to the
strong year-on-year
improvement was due to last year's period
being weighed down by non-operational
items, including
approximately $250 million
triggered by the exits of a legacy project
and the Russia business.
Operational
EBITA
Operational EBITA increased
by 25% (26% constant currency)
year-on-year to $1,42 5 million
and the margin was up by 200 basis
points to 17.5%. A key driver
for the increased result was the
positive price development in
all business areas, which more than
offset labor inflation as
well as some limited cost inflation related to
commodities. Additional support
was provided by higher volume
output triggered by execution
of the order backlog . Selling,
general
and administrative expenses
declined in relation to revenues to
17.0%, from 18.2% last
year. Operational EBITA in Corporate and
Other amounted to
-$143 million, of which -$67 million related
to
the E-mobility business, hampered
by some inventory related
provisions as well
as technology investments triggered
by a shift
back to a more focused product
strategy to secure a continued
leading market position.
Net
finance expenses
Net finance expense was
$25 million and remained largely stable
compared with last year.
Income
tax
Income tax expense was
$349 million with an effective tax rate of
27.2%.
Net
income and earnings per share
Net income attributable to
ABB was $906 million and more than
doubled from last year driven
by improved operational performance
and lower non-operational items. This
resulted in basic earnings per
share of $0.49, up
from $0.20 last year.
Operational
EBITA
($ millions)
Q2 2023
Q2 2022
Corporate and Other
E-mobility
(67)
(6)
Corporate costs, intersegment
eliminations and other
1
(76)
(13)
Total
(143)
(19)
1
Majority
of which relates to underlying corporate
Earnings
ABB INTERIM REPORT
I
Q2 2023
Net
working capital
Net working capital amounted
to $4,585 million, increasing
year-on-year from $3,663 million
and sequentially from
$4,164 million. The
sequential increase was driven mainly
by higher receivables triggered
by high revenue growth and
higher inventories to support
a positive book -to-bill ratio. Net
working capital as a
percentage of revenues
1
up sequentially from
13.9% .
Capital
expenditures
Purchases of property, plant
and equipment and intangible
assets amounted to $180
million.
Net
debt
Net debt
1
and decreased from $4,235 million
year-on-year, and
increased from $3, 826
million sequentially. The sequential net
increase was mainly
driven by cash payments related to
the
dividend and the ongoing share
buyback program.
Cash
flows
Cash flow from operating activities
was $760 million and
increased year-on-year from
$382 million. This was driven by
improvements in the Electrification
and Motion business areas
on the back of higher earnings
and a lower build-up of net
working capital, year-on-year, mainly
related to inventories.
Share
buyback program
A share buyback program of
up to $1 billion was launched on
April 3, 2023. During the
second quarter, 5,778,691 shares
were repurchased on the
second trading line for approximately
$212 million. ABB’s total
number of issued shares, including
shares held in treasury, amounts
to 1,882,002,575.
($ millions,
unless otherwise indicated)
Jun. 30
2023
Jun. 30
2022
Dec. 31
2022
Short term debt and current
maturities of long-term debt
3,849
2,830
2,535
Long-term debt
4,451
5,086
5,143
Total debt
8,300
7,916
7,678
Cash & equivalents
2,923
2,412
4,156
Restricted cash - current
19
23
18
Marketable securities and
short-term investments
1,193
945
725
Restricted cash - non-current
–
301
–
Cash and marketable
securities
4,135
3,681
4,899
Net debt (cash)*
4,165
4,235
2,779
Net debt (cash)* to
EBITDA ratio
0.8
0.7
0.7
Net debt (cash)* to
Equity ratio
0.31
0.34
0.21
*
At Jun.
30, 2023, Jun. 30, 2022 and Dec. 31, 2022, net debt(cash) excludes net pension
(assets)/liabilities
of $(328) million $(71) million and $(276) million, respectively.
Balance
sheet & Cash flow
ABB INTERIM REPORT
I
Q2 2023
Orders
and revenues
Customer activity was yet
again at a high level. At $3,960
million, orders
increased by 1% (3% comparable), up from the
high base last year.
●
Order momentum was strongest
in the systems -related
offering often linked to
the medium voltage segment which
supported a strong order
growth in the Distribution
Solutions division. Overall
demand remained firm in most
segments and was particularly
strong in segments like data
centers and oil &
gas. Weakness was noted in
the buildings
segment where residential construction
declined in all
regions. Some
weakness was recorded in commercial
construction in China and
Germany, while the US remained
broadly stable.
●
High order activity in
the Americas resulted in regional
growth of 8% (8% comparable), supported
by a strong
increase in the United States
of 6% (6% comparable) ,
resulting in one of
the strongest quarters on record. Orders
in Asia, Middle East and
Africa declined by 3% (up 5%
comparable) with the comparable
demand decline in China
more than offset by strength
in markets such as India.
Europe declined by 4%
(6% comparable) hampered mainly
by a weak residential construction
market in Germany.
●
Revenues improved by 9%
(11% comparable) to $3,735
million with double-digit growth
in all divisions except Smart
Buildings and Installation Products
due mainly to the
adverse impact of residential construction.
Increased
volumes combined with
strong price development,
contributed more or less
equally to comparable growth.
Profit
The second quarter was
an all-time-high period for both absolute
Operational EBITA of
$787 million and the Operational EBITA
margin of 21.1%, supported by
a significant gross margin
improvement. Profitability improved
in all but one division, with the
strongest improvement recorded
in Distribution Solutions which is
reaping the rewards of
order backlog execution and structural
profitability efforts.
●
Positive price impact more
than offset labor inflation, and the
margin was additionally supported
by a reduction in raw materials
and freight costs, year-on-year.
●
Higher volume output in
production supported operational
leverage for an improved Operational
EBITA margin .
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
3%
11%
FX
-2%
-2%
Portfolio changes
0%
0%
Total
1%
9%
—
Electrification
CHANGE
CHANGE
($
millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
3,960
3,913
1%
3%
8,101
8,025
1%
4%
Order backlog
7,298
6,194
18%
19%
7,298
6,194
18%
19%
Revenues
3,735
3,414
9%
11%
7,325
6,650
10%
14%
Operational EBITA
787
605
30%
1,464
1,117
31%
as % of operational revenues
21.1%
17.6%
+3.5 pts
20.0%
16.8%
+3.2 pts
Cash flow from operating activities
697
456
53%
1,092
543
101%
No. of employees (FTE equiv.)
51,800
50,200
3%
ABB INTERIM REPORT
I
Q2 2023
Orders
and revenues
Strong momentum in the
systems-related operations
supported the business area
order increase of 3% (3%
comparable) to
$2,137 million, up from the high comparable
level last year.
●
High customer activity in
the medium voltage operations
triggered a strong order growth
in the System Drive s and
Large Motors and
Generators divisions as well as in the
tightly linked Service business.
This successfully offset
softness in the more
short -cycle divisions.
●
Europe was up by 8%
(4% comparable) and the Americas
was up by 4% (1% comparable)
despite a decline in the
United States. Asia, Middle
East and Africa decreased by
3% (up 3% comparable) as
the slight comparable decline in
China was more than
offset by strength in markets such as
India.
●
Execution of the order backlog
led to very strong revenue
growth of 22% (22%
comparable) to $1,9 81 million. Higher
volumes were the main driver,
along with the robust price
impact triggered by activities
implemented last year. High
double-digit comparable revenue
growth was recorded in
most divisions.
Profit
The 51% year-on-year increase
in Operational EBITA to
$401 million, resulted in
the first ever quarter with margin
surpassing 20% at 20.4%.
●
Earnings and margins improved
from last year in most
divisions, including Large
Motors and Generators that
benefitted from ongoing focused
self-help measures. As a
result, all divisions but
one recorded double-digit margins in the
quarter.
●
Strong price contribution more
than offset cost inflation related
to labor, commodities
and freight and was the main driver of
the profitability increase from
last year.
●
The backlog execution increased
volume output in production
which improved the fixed
cost coverage.
●
A positive divisional mix
contributed to the margin
improvement, supported by
a higher share of revenues
generated in the drives -related
operations.
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
3%
22%
FX
-1%
-1%
Portfolio changes
1%
1%
Total
3%
22%
—
Motion
CHANGE
CHANGE
($
millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
2,137
2,079
3%
3%
4,399
4,281
3%
5%
Order backlog
5,322
4,568
17%
14%
5,322
4,568
17%
14%
Revenues
1,981
1,626
22%
22%
3,921
3,198
23%
25%
Operational EBITA
401
266
51%
767
540
42%
as % of operational revenues
20.4%
16.4%
+4 pts
19.6%
16.9%
+2.7 pts
Cash flow from operating activities
320
241
33%
469
239
96%
No. of employees (FTE equiv.)
22,200
20,800
7%
ABB INTERIM REPORT
I
Q2 2023
Orders
and revenues
Customer activity remained at
a high level across the
segments, although some
hampering timing-related effects
were noted. The project pipeline
in the market rema ined
robust. Primarily the spin-off
of Accelleron weighed on total
growth year-on-year, which
declined by 8% (up 6%
comparable) to $1,669 million.
●
Market momentum was
positive across customer segments
and especially strong in
the oil & gas segment where the
United States stood out
on the positive side. Good
developments were also
noted in the ports, refining,
petrochemicals and the
energy-related low carbon
segments.
●
Both Europe and Asia,
Middle East and Africa recorded a
positive comparable
order growth which more than offset
a
small decline in the Americas,
while total growth was
weighed down primarily by
the portfolio change of
Accelleron.
●
All divisions contributed strongly
to the revenue growth of 2%
(19% comparable) to
$1,553 million, with increased volumes
being the main contributor along
with additional support from
price.
Profit
Executing the order backlog
with a higher gross margin supported
earnings growth of 7%
from the same quarter last year, to
Operational EBITA of
$239 million. The Operational EBITA
margin
improved by 110 basis
points to 15.4%, just exceeding the previous
recent high.
●
Improved operational performance
in business area Process
Automation helped to
more than offset the impact of the
divestment of the Accelleron
business which supported last
year’s margin by
190 basis points.
●
Profitability improved in
all divisions except for Marine & Ports
where the mix weighed on
performance due to the absence of the
arctic marine propulsion business.
The Measurement & Analytics
division recorded the strongest
margin improvement to clearly
above the business area
average on the back of good mix,
successful business segmentation for
improved transparency and
performance actions, including
price.
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
6%
19%
FX
-2%
-2%
Portfolio changes
-12%
-15%
Total
-8%
2%
—
Process
Automation
CHANGE
CHANGE
($
millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
1,669
1,819
-8%
6%
3,782
3,511
8%
29%
Order backlog
6,821
6,170
11%
17%
6,821
6,170
11%
17%
Revenues
1,553
1,529
2%
19%
2,989
3,035
-2%
17%
Operational EBITA
239
224
7%
444
420
6%
as % of operational revenues
15.4%
14.3%
+1.1 pts
14.8%
13.7%
+1.1 pts
Cash flow from operating activities
188
193
-3%
300
253
19%
No. of employees (FTE equiv.)
20,600
22,200
-7%
ABB INTERIM REPORT
I
Q2 2023
Orders
and revenues
Orders declined
by 23% (22% comparable) year-on-year, to
$850 million. Consistent with
the previous quarter,
customers normalized order
patterns, adjusting to an
environment with shorter delivery
lead times as supply
chain constraints eased compared
with last year. Some
inventory adjustments among
customers put additional
sequential pressure on
orders, mainly in China. These
impacts are expected to
persist into the third quarter.
●
Orders declined at
a double-digit rate in both divisions on
the back of stable development in
the automotive
segment against declines in
the other segments,
particularly in the machine
automation and electronics
segments.
●
Customer inventory adjustments
were most prominent in
Asia, Middle East and Africa
where orders declined by
33% (29% comparable), weighed
down by a significant
decline in China. Europe
also dropped by 23 % (24%
comparable) while the
Americas recorded an increase of
4% (4% comparable), supported
by good momentum in
Canada and Mexico.
●
Execution of the high order
backlog drove the strong
revenue growth
of 26% (27% comparable), with a similar
pattern in both divisions. While
higher volumes were the
main driver for growth, pricing
also contributed materially on
the back of last year's implemented
actions.
Profit
Operational EBITA more
than doubled to $141 million from
last year’s low
level when earnings were impacted by
Covid-
related shut-downs and
strained supply chain s. Improved
operational performance supported
the 710 basis points
increase in Operational EBITA
margin, to 15.3%, the highest
level in several years .
●
Operational leverage on
higher volumes in production was
the main driver for higher
earnings and marg in.
●
Positive impact from earlier
implemented price actions
significantly contributed to
the improved profitability. Pricing
more than offset inflation
in labor with additional support
from lower input and freight
costs.
●
Both divisions recorded margins
of above 15% in the
period.
CHANGE
CHANGE
($
millions, unless otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
H1 2023
H1 2022
US$
Comparable
Orders
850
1,109
-23%
-22%
1,851
2,417
-23%
-21%
Order backlog
2,657
2,728
-3%
-2%
2,657
2,728
-3%
-2%
Revenues
922
732
26%
27%
1,859
1,462
27%
31%
Operational EBITA
141
60
135%
281
109
158%
as % of operational revenues
15.3%
8.2%
+7.1 pts
15.1%
7.4%
+7.7 pts
Cash flow from operating activities
44
56
-21%
174
27
544%
No. of employees (FTE equiv.)
10,900
10,800
1%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
-22%
27%
FX
-1%
-1%
Portfolio changes
0%
0%
Total
-23%
26%
—
Robotics
& Discrete Automation
ABB INTERIM REPORT
I
Q2 2023
10
Quarterly
highlights
●
ABB is collaborating
with Lhyfe, a world pioneer in
the
production of renewable hydrogen,
and Skyborn, a global
leader in renewable energy,
to jointly realize and optimize
one of Europe’s most
ambitious renewable hydrogen
projects ever, SoutH2Port.
Powered by Skyborn’s
planned offshore wind
farm, the plant in Söderhamn,
Sweden, will produce around
240 tons of hydrogen per
day, equivalent to
around 1.8 million barrels of oil per
annum. ABB will apply critical
expertise to optimize the
integration of the hydrogen and
electricity production
across the entire ecosystem including
automation,
electrical and digital technologies.
●
From June 17 to 25, the
Special Olympics World Games
took place in Berlin and
for the first time in Germany
where 7,000 athletes with
diverse abilities from more than
190 countries competed in
26 sports with the motto
#Unbeatabletogether. Around
150 ABB employees
volunteered to support the
athletes during the exciting
and inspiring competitions. ABB
Germany has been a
supporting partner of
the Special Olympics at the local
and state levels games for
23 years.
●
A pilot project between ABB
Robotics and US non-profit
organization Junglekeepers demonstrated
the role Cloud
technology can play in
making reforestation faster, more
efficient and scalable.
ABB’s cobot YuMi automated
planting tasks in a
jungle laboratory in the Amazon,
speeding the process and
allowing Junglekeepers’
volunteers to focus on
more impactful work. Through ABB
RobotStudio Cloud technology, ABB
experts simulated,
refined and deployed the
programming required for
YuMi’s tasks in
the jungle from 12,000 kms away in
Sweden – enabling the
world’s most remote robot.
●
ABB has won a 2023 Global
Water Award in the category
“Smart Water Project
of the Year” for its collaboration with
Wellington Water, the
water services provider for the
Wellington region of
New Zealand. ABB’s state-of-the-art
instrumentation technology and
variable frequency drives
enables Wellington Water
to measure and store data about
the water flow in real time
and delivers up to 10% in energy
savings per month.
●
In May 2023, ABB E-mobility and
Scania successfully
undertook a first test
for the development of a megawatt
charging system, representing the
next milestone in the
development of an efficient,
high power charging solution
for heavy duty vehicles. The
technology will enable half the
charging time for heavy duty
vehicles. Developing a
solution to fast charge these
commercial electric vehicles,
which will also deliver significant
range, is a major step
towards increasing sales
of heavy-duty vehicles that can be
driven fossil-free.
Q2 2023
Q2 2022
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
Ktons scope 1 and 2
1,3
52
73
-28%
201
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
2
0.12
0.17
-32%
0.13
Share of females in senior management
positions, %
20.2
16.8
+3.4 pts
18.6
1
CO
₂
₆
2
Current
quarter Includes all incidents reported until July 10, 2023
3
Q2 2022
emission data was restated from 88.8 to 72.6 Ktons of CO
₂
e to reflect
the application of green energy certificates retrospectively.
Q2
outcome
●
28% reduction of CO
₂
e emissions in own opera tions
mainly driven by shifting
to green electricity in our
operations.
●
32% decrease in LTIFR due
to a decrease in incidents in
absolute numbers.
●
3.4%-points increase
in share of women in senior
management, demonstrating
strong progress towards our
target.
—
Sustainability
ABB INTERIM REPORT
I
Q2 2023
11
During
Q2 2023
●
On April 3, ABB launch ed
its previously announced new
share buyback program of
up to $1 billion. The maximum
number of shares that may
be repurchased under this new
program on any given trading
day is 762,196.
●
On April 25, ABB announced its
plans to delist its
American Depositary Receipts
(ADRs) from the New York
Stock Exchange (NYSE),
and ultimately to seek to
deregister its ADRs
and the underlying shares under the
US Securities Act of
1934 (The Securities Exchange Act).
The delisting became effective
on May 23 and the ADR
program was converted into
a sponsored Level I ADR
program, trading on the
US over-the-counter (OTC)
market.
●
On June 7, ABB announced that
following the completion
of the cancellation
of 82,742,500 of its shares, ABB
held
20,845,438 of its own shares,
which corresponds to 1.1
percent of total share capital
and voting rights in the
company. This
includes 4,269,700 shares purchased for
capital reduction. ABB’s
total number of issued shares,
including shares held in
treasury, amounts to
1,882,002,575.
After
Q2 2023
●
On July 3, ABB announced the
closing of the divestment
of Power Conversion division
at around $500 million. As
a result, ABB expect s to
record a non-operational book
gain estimated at appr oximately
$50 million in Income
from operations in the third
quarter of 2023. With this
transaction, ABB has completed
all divisional portfolio
divestments announced at
the end of 2020.
The demand for ABB’s
offering remained strong in the first six
months of 2023. Weakness
in the residential construction
market and some softening in
the short-cycle business from last
year's high level was
offset by strong momentum in the long-
cycle business driven predominantly
by the medium voltage
segment and process related
industries. Orders increased in
three out of four business
areas and remained stable (up 6%
comparable) for ABB
at $18,11 7 million.
Revenues supported
by strong backlog execution amounted
to $16,022 million, up by
13% (19% comparable), overall
implying a book -to-bill of 1.13.
Income from operations amounted
to $2,496 million, up from
$1,444 million in the
first half 2022, mostly reflecting improved
operational performance. Additionally,
the result in the same
period last year included charges
totalling approximately $250
million triggered by the
exit of a legacy project in non-core
and the decision to
exit Russian operations.
Operational EBITA improved
by 27 % year-on-year
to
$2,702 million
and the Operational EBITA margin increased by
200 basis
points to 16.9%, significantly higher in all business
areas compared to
the same period last year. Performance was
driven by operating
leverage from backlog execution as
well as
benefits from successful price
management, which more than
offset cost inflation mainly
related to labor. Corporate and Other
Operational EBITA amounted
to -$254 million, out
of which -$95
million related to the
E-mobility business, which was hampered
by some inventory related
provisions as well as technology
investments triggered by
a shift back to a more focused product
strategy to secure a continued
leading market position.
Net finance expenses increased
$17 million to $46 million, while
non-operational pension credits
declined by $53 million to
$15 million
compared to the same period last year, mainly
due
to higher interest
rates. Income tax expense was $468 million
with a tax rate of 19.0%, including
a net benefit from the
favorable resolution of
a prior year tax matter relating to the
divestment of the Power
Grids business.
Net income attributable to
ABB was $1,942 million, up from
$983 million year-on -year.
Basic earnings per share was
$1.04 more than doubling from
the same period last year.
Significant
events
First
six months 2023
ABB INTERIM REPORT
I
Q2 2023
12
Note:
comparable growth calculation includes acquisitions and divestments with revenues
of greater than $50 million.
1
Represents
the estimated revenues for the last fiscal year prior to the announcement of
the respective acquisition/divestment unless otherwise stated.
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2023
Process Automation
UK technical engineering consultancy business
1-May
~20
160
2022
Hitachi Energy JV (Power Grids, 19.9%
stake)
28-Dec
ABB Group
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
Q1 2023
Q2 2023
EBITDA, $ in million
1,067
794
906
1,384
4,151
1,389
1,494
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
16.50
n.a.
n.a.
Net debt/Equity
0.20
0.34
0.34
0.21
0.21
0.30
0.31
Net debt/ EBITDA 12M rolling
0.4
0.7
0.7
0.7
0.7
0.9
0.8
Net working capital, % of 12M rolling
revenues
12.1%
12.8%
11.7%
11.1%
11.1%
13.9%
14.7%
Earnings per share, basic, $
0.31
0.20
0.19
0.61
1.30
0.56
0.49
Earnings per share, diluted, $
0.31
0.20
0.19
0.60
1.30
0.55
0.48
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.84
n.a.
n.a.
Share price at the end of period, CHF
1
29.12
24.57
24.90
28.06
28.06
31.37
35.18
Share price at the end of period, $
1
30.76
25.43
24.41
30.46
30.46
34.30
39.32
Number of employees (FTE equivalents)
104,720
106,380
106,830
105,130
105,130
106,170
108,320
No. of shares outstanding at end of period
(in millions)
1,929
1,892
1,875
1,865
1,865
1,862
1,860
1
Data prior
to October 3, 2022, has been adjusted for the Accelleron spin-off (Source: FactSet).
Additional
figures
Additional
2023 guidance
($ in millions, unless
otherwise stated)
FY 2023
Net finance expenses
~(130)
from ~(150)
Effective tax rate
~21%
unchanged
Capital Expenditures
~(800)
unchanged
($ in millions, unless
otherwise stated)
FY 2023
1
Q3 2023
Corporate and Other Operational EBITA
2
~(300)
~(75)
unchanged
Non-operating items
Acquisition-related amortization
~(220)
~(55)
unchanged
Restructuring and related
3
~(150)
~(40)
unchanged
ABB Way transformation
~(180)
~(50)
unchanged
1
Excludes
one project estimated to a total of ~$100 million, that is ongoing in the non-core
business. Exact exit timing is difficult to assess due to legal proceedings etc.
2
Excludes
Operational EBITA from E-mobility business.
3
Includes
restructuring and restructuring-related as well as separation costs.
4
Includes
net positive tax impact of $206 million linked to a favorable resolution of certain
prior year tax matters in Q1 2023 but excludes the impact of acquisitions or
divestments or any
significant
non-operational items.
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2023
Electrification
Eve Systems
1-Jun
~20
50
Motion
Siemens low voltage NEMA Motors
2-May
~60
600
2022
Motion
PowerTech Converter business
1-Dec
~60
300
Electrification
ASKI Industrie Elektronik GmbH
3-Oct
~2
16
Electrification
Numocity Technologies Private
Ltd. (majority stake)
22-Jul
<1
20
Acquisitions
and divestments, last twelve months
ABB INTERIM REPORT
I
Q2 2023
13
For
additional information please contact:
Media
Relations
Phone: +41 43 317 71
11
Email:
Investor
Relations
Phone: +41 43 317 71
11
Email:
ABB
Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Financial
calendar
2023
October 18 Q3
2023 results
November 30 Capital
Markets Day in Frosinone, Italy
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 “CEO summary,” “Outlook,” “Earnings,”
“Balance sheet
& cash flow,” “Sustainability” and
“Significant events”. 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,” “estimates,” “plans,” “targets ,”
“likely”
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. Some 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.
The Q2 2023 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. CET.
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.
Important
notice about forward-looking information
Q2
results presentation on July 20, 2023
ABB
resource-efficient future. The
company’s solutions connect engineering know -how
and software to optimize how
things are manufactured, moved,
powered and operated. Building on more than 130 years
of excellence,
ABB’s ~105,000
employees are committed to driving innovations that
accelerate industrial transformation.
1 Q2
2023 FINANCIAL INFORMATION
July 20, 2023
Q2 2023
Financial information
2 Q2
2023 FINANCIAL INFORMATION
—
Financial Information
Contents
03
─
07 Key Figures
08
─
33 Consolidated
Financial Information (unaudited)
34
─
46 Supplemental
Reconciliations and Definitions
3 Q2
2023 FINANCIAL INFORMATION
—
Key
Figures
CHANGE
($ in millions, unless
otherwise indicated)
Q2 2023
Q2 2022
US$
Comparable
(1)
Orders
8,667
8,807
-2%
2%
Order backlog (end June)
21,938
19,477
13%
14%
Revenues
8,163
7,251
13%
17%
Gross Profit
2,888
2,290
26%
as % of revenues
35.4%
31.6%
+3.8 pts
Income from operations
1,298
587
121%
Operational EBITA
(1)
1,425
1,136
25%
26%
(2)
as % of operational revenues
(1)
17.5%
15.5%
+2 pts
Income from continuing operations, net
of tax
932
406
130%
Net income attributable to ABB
906
379
139%
Basic earnings per share ($)
0.49
0.20
145%
(3)
Cash flow from operating activities
(4)
760
382
99%
Cash flow from operating activities in
continuing operations
759
385
97%
CHANGE
($ in millions, unless
otherwise indicated)
H1 2023
H1 2022
US$
Comparable
(1)
Orders
18,117
18,180
0%
6%
Revenues
16,022
14,216
13%
19%
Gross Profit
5,604
4,571
23%
as % of revenues
35.0%
32.2%
+2.8 pts
Income from operations
2,496
1,444
73%
Operational EBITA
(1)
2,702
2,133
27%
29%
(2)
as % of operational revenues
(1)
16.9%
14.9%
+2 pts
Income from continuing operations, net
of tax
1,997
1,049
90%
Net income attributable to ABB
1,942
983
98%
Basic earnings per share ($)
1.04
0.51
104%
(3)
Cash flow from operating activities
(4)
1,042
(191)
n.a.
Cash flow from operating activities in
continuing operations
1,043
(179)
n.a.
(1) For
a reconciliation of non-GAAP measures see “
” on page 34.
(2) Constant
currency (not adjusted for portfolio changes).
(3) EPS
growth rates are computed using unrounded amounts.
(4) Cash
flow from operating activities includes both continuing and discontinued operations.
4 Q2
2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless
otherwise indicated)
Q2 2023
Q2 2022
US$
Local
Comparable
Orders
ABB Group
8,667
8,807
-2%
0%
2%
Electrification
3,960
3,913
1%
3%
3%
Motion
2,137
2,079
3%
4%
3%
Process Automation
1,669
1,819
-8%
-6%
6%
Robotics & Discrete Automation
850
1,109
-23%
-22%
-22%
Corporate and Other
264
77
Intersegment eliminations
(213)
(190)
Order backlog (end June)
ABB Group
21,938
19,477
13%
13%
14%
Electrification
7,298
6,194
18%
19%
19%
Motion
5,322
4,568
17%
16%
14%
Process Automation
6,821
6,170
11%
12%
17%
Robotics & Discrete Automation
2,657
2,728
-3%
-2%
-2%
Corporate and Other
(incl. intersegment
eliminations)
(160)
(183)
Revenues
ABB Group
8,163
7,251
13%
14%
17%
Electrification
3,735
3,414
9%
11%
11%
Motion
1,981
1,626
22%
23%
22%
Process Automation
1,553
1,529
2%
4%
19%
Robotics & Discrete Automation
922
732
26%
27%
27%
Corporate and Other
177
140
Intersegment eliminations
(205)
(190)
Income from operations
ABB Group
1,298
587
Electrification
713
474
Motion
380
231
Process Automation
270
175
Robotics & Discrete Automation
119
43
Corporate and Other
(incl. intersegment
eliminations)
(184)
(336)
Income from operations
%
ABB Group
15.9%
8.1%
Electrification
19.1%
13.9%
Motion
19.2%
14.2%
Process Automation
17.4%
11.4%
Robotics & Discrete Automation
12.9%
5.9%
Operational EBITA
ABB Group
1,425
1,136
25%
26%
Electrification
787
605
30%
33%
Motion
401
266
51%
51%
Process Automation
239
224
7%
9%
Robotics & Discrete Automation
141
60
135%
141%
Corporate and Other
(1)
(incl. intersegment
eliminations)
(143)
(19)
Operational EBITA %
ABB Group
17.5%
15.5%
Electrification
21.1%
17.6%
Motion
20.4%
16.4%
Process Automation
15.4%
14.3%
Robotics & Discrete Automation
15.3%
8.2%
Cash flow from operating
activities
ABB Group
760
382
Electrification
697
456
Motion
320
241
Process Automation
188
193
Robotics & Discrete Automation
44
56
Corporate and Other
(incl. intersegment
eliminations)
(490)
(561)
Discontinued operations
1
(3)
(1)
Corporate and Other at
Q2 2023 and Q2 2022 includes losses of $67 million and $6 million, respectively, relating to E-mobility.
5 Q2
2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless
otherwise indicated)
H1 2023
H1 2022
US$
Local
Comparable
Orders
ABB Group
18,117
18,180
0%
3%
6%
Electrification
8,101
8,025
1%
4%
4%
Motion
4,399
4,281
3%
6%
5%
Process Automation
3,782
3,511
8%
12%
29%
Robotics & Discrete Automation
1,851
2,417
-23%
-21%
-21%
Corporate and Other
460
382
Intersegment eliminations
(476)
(436)
Order backlog (end June)
ABB Group
21,938
19,477
13%
13%
14%
Electrification
7,298
6,194
18%
19%
19%
Motion
5,322
4,568
17%
16%
14%
Process Automation
6,821
6,170
11%
12%
17%
Robotics & Discrete Automation
2,657
2,728
-3%
-2%
-2%
Corporate and Other
Intersegment eliminations
(160)
(183)
Revenues
ABB Group
16,022
14,216
13%
16%
19%
Electrification
7,325
6,650
10%
14%
14%
Motion
3,921
3,198
23%
26%
25%
Process Automation
2,989
3,035
-2%
2%
17%
Robotics & Discrete Automation
1,859
1,462
27%
31%
31%
Corporate and Other
346
254
Intersegment eliminations
(418)
(383)
Income from operations
ABB Group
2,496
1,444
Electrification
1,368
955
Motion
733
485
Process Automation
470
326
Robotics & Discrete Automation
234
65
Corporate and Other
(incl. intersegment
eliminations)
(309)
(387)
Income from operations
%
ABB Group
15.6%
10.2%
Electrification
18.7%
14.4%
Motion
18.7%
15.2%
Process Automation
15.7%
10.7%
Robotics & Discrete Automation
12.6%
4.4%
Operational EBITA
ABB Group
2,702
2,133
27%
29%
Electrification
1,464
1,117
31%
35%
Motion
767
540
42%
46%
Process Automation
444
420
6%
10%
Robotics & Discrete Automation
281
109
158%
172%
Corporate and Other
(1)
(incl. intersegment
eliminations)
(254)
(53)
Operational EBITA %
ABB Group
16.9%
14.9%
Electrification
20.0%
16.8%
Motion
19.6%
16.9%
Process Automation
14.8%
13.7%
Robotics & Discrete Automation
15.1%
7.4%
Cash flow from operating
activities
ABB Group
1,042
(191)
Electrification
1,092
543
Motion
469
239
Process Automation
300
253
Robotics & Discrete Automation
174
27
Corporate and Other
(incl. intersegment
eliminations)
(992)
(1,241)
Discontinued operations
(1)
(12)
(1)
Corporate and Other at
H1 2023 and H1 2022 includes losses of $95 million and $8 million, respectively, relating to E-mobility.
6 Q2
2023 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics
& Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Revenues
8,163
7,251
3,735
3,414
1,981
1,626
1,553
1,529
922
732
Foreign exchange/commodity timing
differences in total revenues
(10)
70
2
18
(11)
(4)
–
32
(1)
1
Operational revenues
8,153
7,321
3,737
3,432
1,970
1,622
1,553
1,561
921
733
Income from operations
1,298
587
713
474
380
231
270
175
119
43
Acquisition-related amortization
55
59
22
28
9
7
2
1
19
19
Restructuring, related and
implementation costs
(1)
13
264
4
8
1
–
2
–
–
2
Changes in obligations related to
divested businesses
(8)
(3)
1
–
–
–
–
–
–
–
Gains and losses from sale of businesses
(26)
4
–
–
–
4
(26)
–
–
–
Acquisition- and divestment-related
expenses and integration costs
26
50
12
10
8
3
(2)
36
2
2
Certain other non-operational items
41
65
6
20
1
–
–
–
1
(1)
Foreign exchange/commodity timing
differences in income from operations
26
110
29
65
2
21
(7)
12
–
(5)
Operational EBITA
1,425
1,136
787
605
401
266
239
224
141
60
Operational EBITA margin
(%)
17.5%
15.5%
21.1%
17.6%
20.4%
16.4%
15.4%
14.3%
15.3%
8.2%
Process
Robotics
& Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
Revenues
16,022
14,216
7,325
6,650
3,921
3,198
2,989
3,035
1,859
1,462
Foreign exchange/commodity timing
differences in total revenues
(26)
67
(20)
8
(11)
(1)
10
31
–
6
Operational revenues
15,996
14,283
7,305
6,658
3,910
3,197
2,999
3,066
1,859
1,468
Income from operations
2,496
1,444
1,368
955
733
485
470
326
234
65
Acquisition-related amortization
109
119
44
56
17
15
3
2
39
40
Restructuring, related and
implementation costs
(1)
41
280
12
10
2
8
4
5
–
3
Changes in obligations related to
divested businesses
(5)
(17)
1
–
–
–
–
–
–
–
Gains and losses from sale of businesses
(26)
4
–
–
–
4
(26)
–
–
–
Acquisition- and divestment-related
expenses and integration costs
45
109
19
28
12
8
1
69
4
3
Certain other non-operational items
40
99
9
23
3
–
–
–
3
(1)
Foreign exchange/commodity timing
differences in income from operations
2
95
11
45
–
20
(8)
18
1
(1)
Operational EBITA
2,702
2,133
1,464
1,117
767
540
444
420
281
109
Operational EBITA margin
(%)
16.9%
14.9%
20.0%
16.8%
19.6%
16.9%
14.8%
13.7%
15.1%
7.4%
(1) Includes
impairment of certain assets.
7 Q2
2023 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics
& Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Q2 23
Q2 22
Depreciation
129
136
64
65
27
26
12
16
14
15
Amortization
67
71
27
34
10
9
3
3
20
20
including
total acquisition-related amortization of:
55
59
22
28
9
7
2
1
19
19
Process
Robotics
& Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
H1 23
H1 22
Depreciation
254
272
126
129
53
53
23
34
29
30
Amortization
133
145
54
68
20
18
5
6
40
41
including
total acquisition-related amortization of:
109
119
44
56
17
15
3
2
39
40
Orders received and
revenues by region
($ in millions, unless
otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q2 23
Q2 22
US$
Local
parable
Q2 23
Q2 22
US$
Local
parable
Europe
2,931
2,958
-1%
-1%
1%
2,935
2,508
17%
16%
20%
The Americas
3,209
3,050
5%
5%
6%
2,815
2,397
17%
17%
19%
of which United States
2,319
2,234
4%
4%
4%
2,092
1,746
20%
20%
21%
Asia, Middle East and Africa
2,527
2,799
-10%
-4%
-1%
2,413
2,346
3%
9%
13%
of which China
1,194
1,409
-15%
-10%
-9%
1,174
1,163
1%
6%
9%
ABB Group
8,667
8,807
-2%
0%
2%
8,163
7,251
13%
14%
17%
($ in millions, unless
otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
H1 23
H1 22
US$
Local
parable
H1 23
H1 22
US$
Local
parable
Europe
6,513
6,492
0%
3%
6%
5,807
5,026
16%
18%
21%
The Americas
6,194
5,947
4%
4%
6%
5,468
4,566
20%
20%
22%
of which United States
4,449
4,459
0%
0%
1%
4,076
3,328
22%
23%
24%
Asia, Middle East and Africa
5,410
5,741
-6%
2%
5%
4,747
4,624
3%
11%
15%
of which China
2,549
2,946
-13%
-8%
-6%
2,328
2,263
3%
10%
12%
ABB Group
18,117
18,180
0%
3%
6%
16,022
14,216
13%
16%
19%
8 Q2
2023 FINANCIAL INFORMATION
—
Consolidated
Financial Information
ABB Ltd Consolidated Income
Statements (unaudited)
Six months ended
Three months ended
($ in millions, except
per share data in $)
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Sales of products
13,530
11,762
6,886
6,013
Sales of services and other
2,492
2,454
1,277
1,238
Total revenues
16,022
14,216
8,163
7,251
Cost of sales of products
(8,946)
(8,222)
(4,528)
(4,254)
Cost of services and other
(1,472)
(1,423)
(747)
(707)
Total cost of sales
(10,418)
(9,645)
(5,275)
(4,961)
Gross profit
5,604
4,571
2,888
2,290
Selling, general and administrative expenses
(2,727)
(2,556)
(1,388)
(1,317)
Non-order related research and development
expenses
(637)
(572)
(333)
(295)
Other income (expense), net
256
1
131
(91)
Income from operations
2,496
1,444
1,298
587
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Non-operational pension (cost) credit
15
68
8
32
Income from continuing
operations before taxes
2,465
1,483
1,281
599
Income tax expense
(468)
(434)
(349)
(193)
Income from continuing
operations, net of tax
1,997
1,049
932
406
Loss from discontinued operations, net
of tax
(9)
(20)
(4)
(9)
Net income
1,988
1,029
928
397
Net income attributable to noncontrolling
interests and
redeemable noncontrolling interests
(46)
(46)
(22)
(18)
Net income attributable
to ABB
1,942
983
906
379
Amounts attributable
to ABB shareholders:
Income from continuing operations, net
of tax
1,951
1,003
910
388
Loss from discontinued operations, net
of tax
(9)
(20)
(4)
(9)
Net income
1,942
983
906
379
Basic earnings per share
attributable to ABB shareholders:
Income from continuing operations, net
of tax
1.05
0.52
0.49
0.20
Loss from discontinued operations, net
of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.49
0.20
Diluted earnings per
share attributable to ABB shareholders:
Income from continuing operations, net
of tax
1.04
0.52
0.49
0.20
Loss from discontinued operations, net
of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.48
0.20
Weighted-average number
of shares outstanding (in millions) used to compute:
Basic earnings per share attributable
to ABB shareholders
1,861
1,922
1,862
1,909
Diluted earnings per share attributable
to ABB shareholders
1,873
1,935
1,873
1,918
Due to rounding, numbers
presented may not add to the totals provided.
See Notes
to the Consolidated Financial Information
9 Q2
2023 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated
Statements of Comprehensive
Income (unaudited)
Six months ended
Three months ended
($ in millions)
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Total comprehensive
income, net of tax
1,914
708
761
131
Total comprehensive income attributable
to noncontrolling interests and
redeemable noncontrolling interests,
net of tax
(43)
(26)
(13)
(3)
Total comprehensive
income attributable to ABB shareholders, net of tax
1,871
682
748
128
Due to rounding, numbers
presented may not add to the totals provided.
See Notes to
the Consolidated Financial Information
10 Q2
2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance
Sheets (unaudited)
($ in millions)
Jun. 30, 2023
Dec. 31, 2022
Cash and equivalents
2,923
4,156
Restricted cash
19
18
Marketable securities and short-term
investments
1,193
725
Receivables, net
7,481
6,858
Contract assets
1,010
954
Inventories, net
6,448
6,028
Prepaid expenses
290
230
Other current assets
500
505
Current assets held for sale and in discontinued
operations
628
96
Total current assets
20,492
19,570
Property, plant and equipment, net
3,923
3,911
Operating lease right-of-use assets
852
841
Investments in equity-accounted companies
154
130
Prepaid pension and other employee benefits
964
916
Intangible assets, net
1,257
1,406
Goodwill
10,420
10,511
Deferred taxes
1,320
1,396
Other non-current assets
474
467
Total assets
39,856
39,148
Accounts payable, trade
4,881
4,904
Contract liabilities
2,394
2,216
Short-term debt and current maturities
of long-term debt
3,849
2,535
Current operating leases
223
220
Provisions for warranties
1,076
1,028
Other provisions
1,124
1,171
Other current liabilities
4,277
4,323
Current liabilities held for sale and
in discontinued operations
207
132
Total current liabilities
18,031
16,529
Long-term debt
4,451
5,143
Non-current operating leases
652
651
Pension and other employee benefits
721
719
Deferred taxes
699
729
Other non-current liabilities
1,853
2,085
Non-current liabilities held for sale
and in discontinued operations
20
20
Total liabilities
26,427
25,876
Commitments and contingencies
Redeemable noncontrolling interest
89
85
Stockholders’
equity:
Common stock, CHF 0.12 par value
(1,882 million and 1,965 million shares
issued at June 30, 2023, and December 31, 2022, respectively)
163
171
Additional paid-in capital
11
141
Retained earnings
17,958
20,082
Accumulated other comprehensive loss
(4,627)
(4,556)
Treasury stock, at cost
(22 million and 100 million shares at June
30, 2023, and December 31, 2022, respectively)
(709)
(3,061)
Total ABB stockholders’
equity
12,796
12,777
Noncontrolling interests
544
410
Total stockholders’
equity
13,340
13,187
Total liabilities and
stockholders’ equity
39,856
39,148
Due to rounding, numbers
presented may not add to the totals provided.
See Notes
to the Consolidated Financial Information
11 Q2
2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements
of Cash Flows (unaudited)
Six months ended
Three months ended
($ in millions)
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Operating activities:
Net income
1,988
1,029
928
397
Loss from discontinued operations, net
of tax
9
20
4
9
Adjustments
to reconcile net income (loss) to
net cash
provided by (used in) operating activities:
Depreciation and amortization
387
417
196
207
Changes in fair values of investments
(24)
(15)
(11)
9
Pension and other employee benefits
(12)
(83)
(13)
(37)
Deferred taxes
37
(148)
11
(32)
Loss (income) from equity-accounted companies
7
62
–
14
Net loss (gain) from derivatives and foreign
exchange
(54)
77
(17)
105
Net gain from sale of property, plant
and equipment
(33)
(55)
(7)
(23)
Net loss (gain) from sale of businesses
(26)
4
(26)
4
Other
92
63
65
27
Changes in operating assets
and liabilities:
Trade receivables, net
(667)
(621)
(301)
(304)
Contract assets and liabilities
79
252
69
145
Inventories, net
(450)
(1,083)
(186)
(541)
Accounts payable, trade
(2)
213
(29)
206
Accrued liabilities
(202)
(255)
122
135
Provisions, net
56
126
16
179
Income taxes payable and receivable
(86)
(52)
29
(66)
Other assets and liabilities, net
(56)
(130)
(91)
(49)
Net cash
provided by (used in) operating activities – continuing operations
1,043
(179)
759
385
Net cash
provided by (used in) operating activities – discontinued operations
(1)
(12)
1
(3)
Net cash provided by
(used in) operating activities
1,042
(191)
760
382
Investing activities:
Purchases of investments
(760)
(256)
(100)
(128)
Purchases of property, plant and equipment
and intangible assets
(331)
(338)
(180)
(151)
Acquisition of businesses (net of cash
acquired)
and increases in cost- and
equity-accounted companies
(135)
(179)
(116)
(34)
Proceeds from sales of investments
176
506
156
201
Proceeds from maturity of investments
138
–
138
–
Proceeds from sales of property, plant
and equipment
57
66
26
31
Proceeds from sales of businesses (net
of transaction costs
and cash disposed) and cost- and
equity-accounted companies
43
(13)
43
(13)
Net cash from settlement of foreign currency
derivatives
(18)
56
(54)
(10)
Changes in loans receivable, net
1
9
(7)
(2)
Other investing activities
9
(17)
10
(16)
Net cash
used in investing activities – continuing operations
(820)
(166)
(84)
(122)
Net cash
used in investing activities – discontinued operations
(21)
(91)
(16)
(70)
Net cash used in investing
activities
(841)
(257)
(100)
(192)
Financing activities:
Net changes in debt with original maturities
of 90 days or less
(35)
1,191
679
(114)
Increase in debt
1,648
3,181
15
639
Repayment of debt
(1,128)
(1,483)
(1,092)
(1,442)
Delivery of shares
96
370
1
–
Purchase of treasury stock
(476)
(2,661)
(202)
(1,100)
Dividends paid
(1,713)
(1,698)
(419)
(809)
Dividends paid to noncontrolling shareholders
(83)
(76)
(80)
(75)
Proceeds from issuance of subsidiary
shares
328
–
(13)
–
Other financing activities
–
(53)
(12)
(19)
Net cash
used in financing activities – continuing operations
(1,363)
(1,229)
(1,123)
(2,920)
Net cash
provided by financing activities – discontinued operations
–
–
–
–
Net cash used in financing
activities
(1,363)
(1,229)
(1,123)
(2,920)
Effects of exchange rate changes on cash
and equivalents and restricted cash
(42)
(76)
(37)
(80)
Adjustment for the net change in cash
and equivalents and restricted cash
in Assets held for sale
(28)
–
(15)
–
Net change in cash and
equivalents and restricted cash
(1,232)
(1,753)
(515)
(2,810)
Cash and equivalents and restricted cash,
beginning of period
4,174
4,489
3,457
5,546
Cash and equivalents
and restricted cash, end of period
2,942
2,736
2,942
2,736
Supplementary disclosure
of cash flow information:
Interest paid
108
36
60
27
Income taxes paid
527
638
320
298
Due to rounding, numbers
presented may not add to the totals provided.
See Notes
to the Consolidated Financial Information
12 Q2
2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements
of Changes in Stockholders’ Equity (unaudited)
($ in millions)
Common
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total
ABB
stockholders’
equity
Non-
controlling
interests
Total
stockholders’
equity
Balance at January
1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Net income
(1)
983
983
48
1,031
Foreign currency translation
adjustments, net of tax of $1
(392)
(392)
(22)
(414)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(4)
(17)
(17)
(17)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $37
106
106
106
Change in derivative instruments
and hedges, net of tax of $2
2
2
2
Changes in noncontrolling interests
(2)
(2)
(13)
(15)
Dividends to
noncontrolling shareholders
–
(74)
(74)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
28
28
28
Purchase of treasury stock
(2,693)
(2,693)
(2,693)
Delivery of shares
(38)
(130)
538
370
370
Other
6
6
6
Balance at June 30,
2022
171
12
18,767
(4,389)
(2,290)
12,271
315
12,586
Balance at January
1, 2023
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
Net income
(1)
1,942
1,942
47
1,989
Foreign currency translation
adjustments, net of tax of $(2)
(76)
(76)
(3)
(79)
Effect of change in fair value of
available-for-sale securities,
net of tax of $2
7
7
7
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $4
(5)
(5)
(5)
Change in derivative instruments
and hedges, net of tax of $1
3
3
3
Issuance of subsidiary shares
170
170
168
338
Other changes in
noncontrolling interests
(6)
(6)
4
(2)
Dividends to
noncontrolling shareholders
–
(84)
(84)
Dividends to shareholders
(1,706)
(1,706)
(1,706)
Cancellation of treasury shares
(7)
(201)
(2,359)
2,567
–
–
Share-based payment arrangements
62
62
1
63
Purchase of treasury stock
(464)
(464)
(464)
Delivery of shares
(153)
249
96
96
Other
(3)
(3)
(3)
Balance at June 30,
2023
163
11
17,958
(4,627)
(709)
12,796
544
13,340
(1)
Amounts attributable to
noncontrolling interests for the six months ended June 30, 2023 and 2022, exclude net losses of $2 million and $2 million, respectively,
related to redeemable
noncontrolling interests,
which are reported in the mezzanine equity section on the Consolidated Balance Sheets. See Note 4 for details.
Due to rounding, numbers
presented may not add to the totals provided.
See Notes
to the Consolidated Financial Information
13 Q2
2023 FINANCIAL INFORMATION
—
Notes to the Consolidated
Financial Information (unaudited)
─
Note
1
The Company
and basis of presentation
ABB Ltd and its subsidiaries (collectively, the
Company) together form a technology leader in electrification and automation, enabling
a more sustainable and
resource-efficient future. The Company’s
solutions connect engineering know-how and software to optimize how things are
manufactured, moved, powered and
operated.
The Company’s Consolidated Financial
Information is prepared in accordance with United States of America generally
accepted accounting principles (U.S.
GAAP) for interim financial reporting.
As such, the Consolidated Financial Information does not include all the information
and notes required under U.S. GAAP for
annual consolidated financial statements.
Therefore, such financial information should be read in conjunction with the
audited consolidated financial statements in
the Company’s Annual Report for
the year ended December 31, 2022.
The preparation of financial information
in conformity with U.S. GAAP requires management to make assumptions and estimates
that directly affect the amounts
reported in the Consolidated Financial
Information. These accounting assumptions and estimates include:
●
estimates to determine valuation allowances
for deferred tax assets and amounts recorded for unrecognized tax benefits,
●
estimates related to credit losses
expected to occur over the remaining life of financial assets such as trade and
other receivables, loans and other
instruments,
●
estimates used to record expected costs
for employee severance in connection with restructuring programs,
●
estimates of loss contingencies associated
with litigation or threatened litigation and other claims and inquiries, environmental damages,
product
warranties, self-insurance reserves,
regulatory and other proceedings,
●
assumptions and projections, principally
related to future material, labor and project-related overhead costs, used in determining
the percentage-of-
completion on projects where revenue
is recognized over time, as well as the amount of variable consideration the Company
expects to be entitled to,
●
assumptions used in the calculation
of pension and postretirement benefits and the fair value of pension plan assets,
●
assumptions used in determining inventory
obsolescence and net realizable value,
●
growth rates, discount rates and other
assumptions used to determine impairment of long-lived assets and in testing goodwill for
impairment,
●
estimates and assumptions used in determining
the fair values of assets and liabilities assumed in business combinations,
and
●
estimates and assumptions used in determining
the initial fair value of retained noncontrolling interests and
certain obligations in connection with
divestments.
The actual results and outcomes may
differ from the Company’s estimates and assumptions.
A portion of the Company’s activities
(primarily long-term construction activities) has an operating cycle that exceeds
one year. For classification of current assets
and liabilities related to such activities,
the Company elected to use the duration of the individual contracts as its
operating cycle. Accordingly, there are accounts
receivable, contract assets, inventories
and provisions related to these contracts which will not be realized within one year
that have been classified as current.
Basis of presentation
In the opinion of management, the unaudited
Consolidated Financial Information contains all necessary adjustments
to present fairly the financial position, results
of operations and cash flows for the
reported periods. Management considers all such adjustments to be of a normal
recurring nature. The Consolidated Financial
Information is presented in United States
dollars ($) unless otherwise stated. Due to rounding, numbers presented in
the Consolidated Financial Information may
not add to the totals provided.
Certain amounts reported in the Consolidated
Financial Information for prior periods have been reclassified to conform to
the current year’s presentation. These
changes relate primarily to the reorganization
of the Company’s operating segments (see Note 17 for details).
14 Q2
2023 FINANCIAL INFORMATION
─
Note
2
Recent
accounting pronouncements
Applicable for current
periods
Disclosure
about supplier finance program obligations
In January 2023, the Company adopted
an accounting standard update which requires entities to disclose information related to
supplier finance programs. Under
the update, the Company is required
to disclose annually (i) the key terms of the program, (ii) the amount of the
supplier finance obligations outstanding and where
those obligations are presented in the
balance sheet at the reporting date, and (iii) a rollforward of the supplier
finance obligation program within the reporting
period. The Company adopted this update
retrospectively for all in-scope transactions, with the exception of the rollforward disclosures,
which will be adopted
prospectively for annual periods beginning
January 1, 2024. Apart from the additional disclosure requirements, this update
does not have a significant impact on
the Company’s consolidated financial
statements.
The total outstanding supplier finance
obligation included in “Accounts payable, trade” in the Consolidated
Balance Sheets at June 30, 2023 and December 31,
2022, amounted to $457 million and $477
million, respectively. The Company’s payment terms related to suppliers’ finance
programs are not impacted by the
suppliers’ decisions to sell amounts
under the arrangements and are typically consistent with local market practices.
Facilitation
of the effects of reference rate reform on financial reporting
In January 2023, the Company adopted
an accounting standard update which provides temporary optional expedients and exceptions
to the current guidance on
contract modifications and hedge accounting
to ease the financial reporting burdens related to the expected market transition
from the London Interbank Offered
Rate (LIBOR) and other interbank offered
rates to alternative reference rates. The Company is applying this standard update
as relevant contract and hedge
accounting relationship modifications
are made during the course of the transition period ending December 31, 2024.
This update does not have a significant
impact on the Company’s consolidated
financial statements.
─
Note
3
Discontinued
operations and assets held for sale
Divestment of the Power
Grids business
In 2020, the Company completed the divestment
of its Power Grids business to Hitachi Ltd (Hitachi). Upon
closing of the sale, the Company entered into various
transition services agreements (TSAs), some
of which continue to have services performed. Pursuant to these TSAs, the Company
and Hitachi Energy provide to
each other, on a transitional basis,
various services. The services provided by the Company primarily
include finance, information technology, human resources
and certain other administrative services.
The TSAs were to be performed for up to 3 years with the possibility to
agree on extensions on an exceptional basis for
business-critical services which are
reasonably necessary to avoid a material adverse impact on the business. The
TSA for information technology services was
extended until mid-2025. In the six
and three months ended June 30, 2023, the Company has recognized within its continuing operations,
general and
administrative expenses incurred to
perform the TSAs, offset by $76 million and $39 million in TSA-related income
for such services that is reported in Other
income (expense), net. In
the six and three months ended June 30, 2022, the Company has recognized within
its continuing operations, general and administrative
expenses incurred to perform the TSAs,
offset by $76 million and $38 million in TSA-related income for such services that
is reported in Other income (expense),
net.
Discontinued operations
As a result of the sale of the Power
Grids business, substantially all Power Grids-related assets and liabilities
have been sold. As this divestment represented a
strategic shift that would have a major
effect on the Company’s operations and financial results, the results
of operations for this business are presented as
discontinued operations and the assets
and liabilities are presented as held for sale and in discontinued operations. Certain
of the business contracts in the Power
Grids business continue to be executed
by subsidiaries of the Company for the benefit/risk of Hitachi Energy. Assets
and liabilities relating to, as well as the net
financial results of, these contracts
will continue to be included in discontinued operations until they have been
completed or otherwise transferred to Hitachi
Energy. The remaining business activities
of the Power Grids business being executed by the Company is not significant.
In addition, the Company also has retained
obligations (primarily for environmental and taxes) related to other businesses disposed
or otherwise exited that
qualified as discontinued operations
at the time of their disposal. Changes to these retained obligations are also
included in Loss from discontinued operations, net
of tax.
At June 30, 2023, the balances reported
as held for sale and in discontinued operations pertaining to the activities of
the Power Grids business and other
obligations will remain with the Company
until such time as the obligations are
settled or the activities are fully wound down . These
balances amounted to
$74 million of current assets, $97 million
of current liabilities and $20 million of non-current liabilities.
Planned business divestments
classified as held for sale
The Company classifies its long-lived
assets or disposal groups to be sold as held for sale in the period in which
all of the held for sale criteria are met. The
Company initially measures a long-lived
asset or disposal group that is classified as held for sale at the lower of its
carrying value or fair value less any costs to
sell. Any resulting loss is recognized
in the period in which the held for sale criteria are met, while
gains are not recognized on the sale of a long-lived asset or
disposal group until the date of sale.
The Company assesses the fair value of a long-lived asset or disposal group less
any costs to sell at each reporting period
and until the asset or disposal group
is no longer classified as held for sale.
In January 2023, the Company entered
into an agreement to divest its Power Conversion Division to AcBel Polytech Inc.
for cash proceeds of $505 million. The
Power Conversion Division is part of
the Company’s Electrification operating segment and the divestment, subject
to regulatory approvals, is expected to be
completed in the second half of 2023.
15 Q2
2023 FINANCIAL INFORMATION
As this planned divestment does not qualify
as a discontinued operation, the results of operations for this business are
included in the Company’s continuing
operations for all periods presented. The
assets and liabilities of this business are shown as assets and liabilities held
fo r sale in the Company’s
Consolidated
Balance Sheet at June 30, 2023. The
carrying amounts of the major classes of assets and liabilities held for sale
relating to this planned divestment are as follows:
($ in millions)
June 30, 2023
Assets
Receivables, net
97
Inventories, net
104
Property, plant and equipment, net
44
Other intangible assets, net
74
Goodwill
175
Other assets
60
Current assets held
for sale
554
Liabilities
Accounts payable, trade
48
Other liabilities
62
Current liabilities
held for sale
110
In the six and three months ended June
30, 2023, Income from continuing operations before taxes includes
income of $30 million and $13 million, respectively,
from the Power Conversion Division. In
the six and three months ended June 30, 2022, Income from continuing operations
before taxes includes income of
$12 million and $11 million, respectively, from
this Division.
Subsequent events
On July 3, 2023, the Company completed
the divestment of its Power Conversion Division to AcBel Polytech Inc.
─
Note 4
Acquisitions
and equity-accounted companies
Acquisition of controlling
interests
Acquisitions of controlling interests
were as follows:
Six months ended June
30,
Three months ended
June 30,
($ in millions, except number of acquired
businesses)
2023
2022
2023
2022
Purchase price for acquisitions (net
of cash acquired)
(1)
114
138
113
-
Aggregate excess of purchase price over
fair value of net assets acquired
(2)
54
191
50
-
Number of acquired businesses
2
1
2
-
(1) Excluding
changes in cost- and equity-accounted companies.
(2) Recorded
as goodwill.
In the table above, the “Purchase
price for acquisitions” and “Aggregate excess of purchase price over
fair value of net assets acquired” amounts in the six months
ended June 30, 2022, relate
primarily to the acquisition of InCharge Energy, Inc. (In-Charge).
Acquisitions of controlling interests
have been accounted for under the acquisition method and have been included in the
Company’s consolidated financial
statements since the date of acquisition.
On January 26, 2022, the Company increased
its ownership in In-Charge to a 60 percent controlling interest through a
stock purchase agreement. In-Charge is
headquartered in Santa Monica, USA, and
is a provider of turn-key commercial electric vehicle charging hardware and software
solutions. The resulting cash
outflows for the Company amounted to
$134 million (net of cash acquired of $4 million). The acquisition expands
the market presence of the E-mobility operating
segment, particularly in the North American
market. In connection with the acquisition, the Company’s pre-existing
13.2 percent ownership of In-Charge was
revalued to fair value and a gain of
$32 million was recorded in “Other income (expense), net”
in the six months ended June 30, 2022. The Company entered into
an agreement with the remaining noncontrolling
shareholders allowing either party to put or call the remaining 40 percent of
the shares until 2027. The amount for
which either party can exercise their
option is dependent on a formula based on revenues and thus, the amount is
subject to change. As a result of this agreement,
the noncontrolling interest is classified
as Redeemable noncontrolling interest (i.e. mezzanine equity) in the Consolidated Balance
Sheets and was initially
recognized at fair value.
While the Company uses its best estimates
and assumptions as part of the purchase price allocation process to
value assets acquired and liabilities assumed at
the acquisition date, the purchase price
allocation for acquisitions is preliminary for up to 12 months after the acquisition date
and is subject to refinement as more
detailed analyses are completed and
additional information about the fair values of the assets and liabilities becomes
available.
Investments in equity-accounted
companies
In connection with the divestment of its
Power Grids business to Hitachi in 2020 (see Note 3), the Company initially
retained a 19.9 percent interest in the business
until December 2022, when the retained
investment was sold to Hitachi. During the Company’s period of ownership
of the retained 19.9 percent interest, based on
its continuing involvement with the
Power Grids business, including the membership in its governing board of directors, the
Company concluded that it had
significant influence over Hitachi Energy. As
a result, the investment was accounted for using the equity method through
to the date of its sale.
16 Q2
2023 FINANCIAL INFORMATION
In the six and three months ended June
30, 2023 and 2022 , the
Company recorded its share of the earnings of investees accounted for under the
equity method of
accounting in Other income (expense),
net, as follows:
Six months ended June
30,
Three months ended June
30,
($ in millions)
2023
2022
2023
2022
Income (loss) from equity-accounted companies,
net of taxes
(7)
(10)
–
1
Basis difference amortization (net of
deferred income tax benefit)
–
(52)
–
(15)
Income (loss) from
equity-accounted companies
(7)
(62)
–
(14)
─
Note
5
Cash
and equivalents, marketable securities and short-term investments
Cash and equivalents, marketable securities
and short-term investments consisted of the following:
June 30, 2023
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
1,743
1,743
1,743
Time deposits
1,541
1,541
1,199
342
Equity securities
622
16
638
638
3,906
16
–
3,922
2,942
980
Changes in fair value
recorded
in other comprehensive
income
Debt securities available-for-sale:
U.S. government obligations
225
1
(13)
213
213
225
1
(13)
213
–
213
Total
4,131
17
(13)
4,135
2,942
1,193
Of which:
Restricted cash, current
19
December 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
1,715
1,715
1,715
Time deposits
2,459
2,459
2,459
Equity securities
345
10
355
355
4,519
10
–
4,529
4,174
355
Changes in fair value
recorded
in other comprehensive
income
Debt securities available-for-sale:
U.S. government obligations
269
1
(15)
255
255
Other government obligations
58
58
58
Corporate
64
(7)
57
57
391
1
(22)
370
–
370
Total
4,910
11
(22)
4,899
4,174
725
Of which:
Restricted cash, current
18
17 Q2
2023 FINANCIAL INFORMATION
─
Note
6
Derivative
financial instruments
The Company is exposed to certain currency, commodity,
interest rate and equity risks arising from its global operating, financing and investing
activities. The
Company uses derivative instruments
to reduce and manage the economic impact of these exposures.
Currency risk
Due to the global nature of the Company’s
operations, many of its subsidiaries are exposed to currency risk in
their operating activities from entering into
transactions in currencies other than
their functional currency. To manage such currency
risks, the Company’s policies require its subsidiaries to hedge their
foreign currency exposures from binding
sales and purchase contracts denominated in foreign currencies. For forecasted
foreign currency denominated sales of
standard products and the related foreign
currency denominated purchases, the Company’s policy is to hedge up to
a maximum of 100 percent of the forecasted
foreign currency denominated exposures,
depending on the length of the forecasted exposures. Forecasted exposures
greater than 12 months are not hedged.
Forward foreign exchange contracts are
the main instrument used to protect the Company against the volatility of future
cash flows (caused by changes in
exchange rates) of contracted and forecasted
sales and purchases denominated in foreign currencies. In addition, within its
treasury operations, the Company
primarily uses foreign exchange swaps
and forward foreign exchange contracts to manage the currency and timing mismatches arising
in its liquidity management
activities.
Commodity risk
Various commodity products are
used in the Company’s manufacturing activities. Consequently it is exposed
to volatility in future cash flows arising from changes
in commodity prices. To manage
the price risk of commodities, the Company’s policies require that its
subsidiaries hedge the commodity price risk exposures from
binding contracts, as well as at least
50 percent (up to a maximum of 100 percent) of the forecasted commodity exposure
over the next 12 months or longer (up to
a maximum of 18 months). Primarily swap
contracts are used to manage the associated price risks of commodities.
Interest rate risk
The Company has issued bonds at fixed
rates. Interest rate swaps and cross-currency interest rate swaps are used to
manage the interest rate and foreign
currency risk associated with certain
debt and generally such swaps are designated as fair value hedges. In addition,
from time to time, the Company uses
instruments such as interest rate swaps,
interest rate futures, bond futures or forward rate agreements to manage interest
rate risk arising from the Company’s
balance sheet structure but does not
designate such instruments as hedges.
Equity risk
The Company is exposed to fluctuations
in the fair value of its warrant appreciation rights (WARs) issued
under its management incentive plan. A WAR gives its
holder the right to receive cash equal
to the market price of an equivalent listed warrant on the date of exercise. To
eliminate such risk, the Company has
purchased cash-settled call options, indexed
to the shares of the Company, which entitle the Company to
receive amounts equivalent to its obligations under the
outstanding WARs.
Volume of derivative
activity
In general, while the Company’s
primary objective in its use of derivatives is to minimize exposures arising
from its business, certain derivatives are designated
and qualify for hedge accounting treatment
while others either are not designated or do not qualify for hedge accounting.
Foreign
exchange and interest rate derivatives
The gross notional amounts of outstanding
foreign exchange and interest rate derivatives (whether designated as hedges
or not) were as follows:
Type of derivative
Total notional amounts at
($ in millions)
June 30, 2023
December 31, 2022
June 30, 2022
Foreign exchange contracts
14,256
13,509
14,470
Embedded foreign exchange derivatives
1,374
933
850
Cross-currency interest rate swaps
868
855
833
Interest rate contracts
2,198
2,830
3,049
Derivative
commodity contracts
The Company uses derivatives to hedge
its direct or indirect exposure to the movement in the prices of commodities
which are primarily copper, silver, steel
and
aluminum. The following table shows
the notional amounts of outstanding derivatives (whether designated as hedges
or not), on a net basis, to reflect the
Company’s requirements for these
commodities:
Type of derivative
Unit
Total notional amounts at
June 30, 2023
December 31, 2022
June 30, 2022
Copper swaps
metric tonnes
32,894
29,281
42,961
Silver swaps
ounces
1,726,172
2,012,213
2,844,285
Steel swaps
metric tonnes
11,158
–
–
Aluminum swaps
metric tonnes
5,950
6,825
7,350
Equity
derivatives
At June 30, 2023, December 31, 2022,
and June 30, 2022, the Company held 3 million, 8 million and 9 million
cash-settled call options indexed to ABB Ltd shares
(conversion ratio 5:1) with a total
fair value of $12 million, $15 million and $12 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses
forward foreign exchange contracts to manage the foreign exchange risk of
its operations, commodity swaps to
manage its commodity risks and cash-settled
call options to hedge its WAR liabilities. The Company applies cash
flow hedge accounting in only limited cases. In
these cases, the effective portion of
the changes in their fair value is recorded in “Accumulated other comprehensive loss”
and subsequently reclassified into
earnings in the same line item and in
the same period as the underlying hedged transaction affects earnings.
For the six and three months ended June 30, 2023
and 2022, there
were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate
exposure arising primarily from its debt issuance activities, the Company uses
interest rate swaps and cross -currency interest rate
swaps. Where such instruments are designated
as fair value hedges, the changes in the fair value of these instruments, as
well as the changes in the fair value of
the risk component of the underlying
debt being hedged, are recorded as offsetting gains and losses in “Interest and
other finance expense”.
18 Q2
2023 FINANCIAL INFORMATION
The effect of derivative instruments,
designated and qualifying as fair value hedges, on the Consolidated Income Statements
was as follows:
Six months ended June
30,
Three months ended
June 30,
($ in millions)
2023
2022
2023
2022
Gains (losses) recognized
in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
18
(55)
8
(26)
Hedged item
(18)
56
(8)
27
Cross-currency interest rate swaps
Designated as fair value hedges
(10)
(94)
1
(49)
Hedged item
–
90
(2)
46
Derivatives not designated
in hedge relationships
Derivative instruments that are not
designated as hedges or do not qualify as either cash flow or fair value hedges are
economic hedges used for risk management
purposes. Gains and losses from changes
in the fair values of such derivatives are recognized in the same line in the income
statement as the economically
hedged transaction.
Furthermore, under certain circumstances,
the Company is required to split and account separately for foreign currency derivatives
that are embedded within
certain binding sales or purchase contracts
denominated in a currency other than the functional currency of the subsidiary and
the counterparty.
The gains (losses) recognized in the
Consolidated Income Statements on derivatives not designated in hedging relationships were
as follows:
Type of derivative
not
Gains (losses) recognized
in income
designated as a hedge
Six months ended June
30,
Three months ended June
30,
($ in millions)
Location
2023
2022
2023
2022
Foreign exchange contracts
Total revenues
5
(119)
(6)
(123)
Total cost of sales
(12)
34
(11)
40
SG&A expenses
(1)
14
23
8
15
Non-order related research
and development
(1)
1
(1)
–
Interest and other finance expense
(62)
(54)
(104)
(76)
Embedded foreign exchange
Total revenues
45
5
38
7
contracts
Total cost of sales
(1)
(2)
–
(3)
Commodity contracts
Total cost of sales
(15)
(51)
(26)
(86)
Other
Interest and other finance expense
1
3
1
2
Total
(26)
(160)
(101)
(224)
(1) SG&A
expenses represent “Selling, general and administrative
expenses”.
The fair values of derivatives included
in the Consolidated Balance Sheets were as follows:
June 30, 2023
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives
designated as hedging instruments:
Foreign exchange contracts
–
–
4
2
Interest rate contracts
–
–
45
–
Cross-currency interest rate swaps
–
–
–
282
Cash-settled call options
12
–
–
–
Total
12
–
49
284
Derivatives
not designated as hedging instruments:
Foreign exchange contracts
145
25
122
22
Commodity contracts
4
–
16
–
Interest rate contracts
2
–
2
–
Other equity contracts
10
–
–
–
Embedded foreign exchange derivatives
36
10
15
3
Total
197
35
155
25
Total fair value
209
35
204
309
19 Q2
2023 FINANCIAL INFORMATION
December 31, 2022
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives
designated as hedging instruments:
Foreign exchange contracts
–
–
4
4
Interest rate contracts
–
–
5
57
Cross-currency interest rate swaps
–
–
–
288
Cash-settled call options
15
–
–
–
Total
15
–
9
349
Derivatives
not designated as hedging instruments:
Foreign exchange contracts
140
21
80
5
Commodity contracts
13
–
12
–
Interest rate contracts
5
–
3
–
Embedded foreign exchange derivatives
11
6
17
13
Total
169
27
112
18
Total fair value
184
27
121
367
Close-out netting agreements provide
for the termination, valuation and net settlement of some or all outstanding
transactions between two counterparties on the
occurrence of one or more pre-defined
trigger events.
Although the Company is party to close-out
netting agreements with most derivative counterparties, the fair values in the tables
above and in the Consolidated
Balance Sheets at June 30, 2023, and
December 31, 2022, have been presented on a gross basis.
The Company’s netting agreements
and other similar arrangements allow net settlements under certain conditions. At
June 30, 2023, and December 31, 2022,
information related to these offsetting
arrangements was as follows:
($ in millions)
June 30, 2023
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
198
(103)
–
–
95
Total
198
(103)
–
–
95
($ in millions)
June 30, 2023
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
495
(103)
–
–
392
Total
495
(103)
–
–
392
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net asset
similar arrangement
in case of default
received
received
exposure
Derivatives
194
(96)
–
–
98
Total
194
(96)
–
–
98
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
Net liability
similar arrangement
liabilities
pledged
pledged
exposure
Derivatives
458
(96)
–
–
362
Total
458
(96)
–
–
362
20 Q2
2023 FINANCIAL INFORMATION
─
Note
7
Fair
values
The Company uses fair value measurement
principles to record certain financial assets and liabilities on a recurring
basis and, when necessary, to
record certain
non-financial assets at fair value on
a non-recurring basis, as well as to determine fair value disclosures for certain
financial instruments carried at amortized cost
in the financial statements. Financial
assets and liabilities recorded at fair value on a recurring basis include foreign
currency, commodity and interest rate
derivatives, as well as cash-settled
call options and available -for-sale securities. Non-financial
assets recorded at fair value on a non-recurring basis include
long-lived assets that are reduced to
their estimated fair value due to impairments.
Fair value is the price that would be
received when selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the
measurement date. In determining fair
value, the Company uses various valuation techniques including the market approach
(using observable market data for
identical or similar assets and liabilities),
the income approach (discounted cash flow models) and the cost approach (using
costs a market participant would incur
to develop a comparable asset). Inputs
used to determine the fair value of assets and liabilities are defined by a three-level hierarchy,
depending on the natur e of
those inputs. The Company has categorized
its financial assets and liabilities and non-financial assets measured at fair
value within this hierarchy based on
whether the inputs to the valuation
technique are observable or unobservable. An observable input is based on market
data obtained from independent sources,
while an unobservable input reflects
the Company’s assumptions about market data.
The levels of the fair value hierarchy
are as follows:
Level
1:
Valuation inputs consist of
quoted prices in an active market for identical assets or liabilities (observable
quoted prices). Assets and liabilities valued
using Level 1 inputs include exchange
‑
traded equity securities, listed derivatives which
are actively traded such as commodity futures, interest rate
futures and certain actively traded debt
securities.
Level
2:
Valuation inputs consist of
observable inputs (other than Level 1 inputs) such as actively quoted prices
for similar assets, quoted prices in inactive
markets and inputs other than quoted
prices such as interest rate yield curves, credit spreads, or inputs derived
from other observable data by
interpolation, correlation, regression
or other means. The adjustments applied to quoted prices or the inputs used in
valuation models may be both
observable and unobservable. In these
cases, the fair value measurement is classified as Level 2 unless the unobservable
portion of the adjustment or
the unobservable input to the valuation
model is significant, in which case the fair value measurement would be classified
as Level 3. Assets and
liabilities valued or disclosed using
Level 2 inputs include investments in certain funds, certain debt securities
that are not actively traded, interest rate
swaps, cross-currency interest rate swaps,
commodity swaps, cash-settled call options, forward foreign exchange contracts,
foreign exchange swaps and
forward rate agreements, time deposits,
as well as financing receivables and debt.
Level
3:
Valuation inputs are based on the
Company’s assumptions of relevant market data (unobservable input).
Whenever quoted prices involve bid-ask
spreads, the Company ordinarily determines fair values based on mid-market quotes.
However, for the purpose of
determining the fair value of cash-settled
call options serving as hedges of the Company’s management incentive plan,
bid prices are used.
When determining fair values based on
quoted prices in an active market, the Company considers if the level
of transaction activity for the financial instrument has
significantly decreased or would not
be considered orderly. In such cases, the resulting changes in valuation techniques
would be disclosed. If the market is
considered disorderly or if quoted prices
are not available, the Company is required to use another valuation technique,
such as an income approach.
Recurring fair value
measures
The fair values of financial assets
and liabilities measured at fair value on a recurring basis were as follows:
June 30, 2023
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities
and short-term investments”:
Equity securities
–
638
–
638
Debt securities—U.S. government
obligations
213
–
–
213
Derivative assets—current in “Other
current assets”
–
209
–
209
Derivative assets—non-current in
“Other non-current assets”
–
35
–
35
Total
213
882
–
1,095
Liabilities
Derivative liabilities—current in
“Other current liabilities”
–
204
–
204
Derivative liabilities—non-current
in “Other non-current liabilities”
–
309
–
309
Total
–
513
–
513
21 Q2
2023 FINANCIAL INFORMATION
December 31, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities
and short-term investments”:
Equity securities
–
355
–
355
Debt securities—U.S. government
obligations
255
–
–
255
Debt securities—European government
obligations
–
58
–
58
Debt securities—Corporate
–
57
–
57
Derivative assets—current in “Other
current assets”
–
184
–
184
Derivative assets—non-current
in “Other non-current assets”
–
27
–
27
Total
255
681
–
936
Liabilities
Derivative liabilities—current
in “Other current liabilities”
–
121
–
121
Derivative liabilities—non-current
in “Other non-current liabilities”
–
367
–
367
Total
–
488
–
488
The Company uses the following methods
and assumptions in estimating fair values of financial assets and
liabilities measured at fair value on a recurring basis:
●
If quoted market prices in active markets
for identical assets are available, these are
considered Level 1 inputs; however, when
markets are not active, these inputs are considered Level 2. If such quoted market
prices are not available,
fair value is determined using market
prices for similar assets or present value techniques, applying an appropriate risk-free
interest rate adjusted for
non-performance risk. The inputs used
in present value techniques are observable and fall into the Level 2 category.
●
: The fair values of derivative instruments
are determined using quoted prices of identical instruments from an active
market, if available
(Level 1 inputs). If quoted prices
are not available, price quotes for similar instruments, appropriately adjusted,
or present value techniques, based on
available market data, or option pricing
models are used. Cash-settled call options hedging the Company’s WAR liability
are valued based on bid prices
of the equivalent listed warrant. The
fair values obtained using price quotes for similar instruments or valuation
techniques represent a Level 2 input
unless significant unobservable inputs
are used.
Non-recurring fair
value measures
There were no significant non-recurring
fair value measurements during the six and three months ended June 30, 2023 and
2022.
Disclosure about financial
instruments carried on a cost basis
The fair values of financial instruments
carried on a cost basis were as follows:
June 30, 2023
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities
with original
maturities up to 3 months):
Cash
1,724
1,724
–
–
1,724
Time deposits
1,199
–
1,199
–
1,199
Restricted cash
19
19
–
–
19
Marketable securities and short-term
investments
(excluding securities):
Time deposits
342
–
342
–
342
Liabilities
Short-term debt and current maturities
of long-term debt
(excluding finance lease obligations)
3,821
2,412
1,409
–
3,821
Long-term debt (excluding finance lease
obligations)
4,316
4,222
16
–
4,238
December 31, 2022
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities
with original
maturities up to 3 months):
Cash
1,697
1,697
–
–
1,697
Time deposits
2,459
–
2,459
–
2,459
Restricted cash
18
18
–
–
18
Liabilities
Short-term debt and current maturities
of long-term debt
(excluding finance lease obligations)
2,500
1,068
1,432
–
2,500
Long-term debt (excluding finance lease
obligations)
4,976
4,813
30
–
4,843
22 Q2
2023 FINANCIAL INFORMATION
The Company uses the following methods
and assumptions in estimating fair values of financial instruments carried on
a cost basis:
●
investments (excluding
securities):
The carrying amounts approximate the
fair values as the items are short-term in nature or, for
cash held in banks,
are equal to the deposit amount.
●
Short-term debt includes commercial paper, bank
borrowings and overdrafts. The carrying
amounts of short-term debt and current maturities of long-term debt, excluding
finance lease obligations,
approximate their fair values.
●
Fair values of bonds are determined
using quoted market prices (Level 1 inputs), if available. For
bonds without available quoted market
prices and other long-term debt, the fair values are determined using a discounted
cash flow methodology
based upon borrowing rates of similar
debt instruments and reflecting appropriate adjustments for non-performance risk (Level
2 inputs).
─
Note
8
Contract
assets and liabilities
The following table provides information
about Contract assets and Contract liabilities:
($ in millions)
June 30, 2023
December 31, 2022
June 30, 2022
Contract assets
1,010
954
965
Contract liabilities
2,394
2,216
2,141
Contract assets primarily relate to
the Company’s right to receive consideration for work completed but for
which no invoice has been issued at the reporting date.
Contract assets are transferred to receivables
when rights to receive payment become unconditional. Management expects that
the majority of the amounts will be
collected within one year of the respective
balance sheet date.
Contract liabilities primarily relate
to up-front advances received on orders from customers as well as amounts invoiced to
customers in excess of revenues
recognized predominantly on long-term
projects. Contract liabilities are reduced as work is performed and as revenues
are reco gnized.
The significant changes in the Contract
assets and Contract liabilities balances were as follows:
Six months ended June
30,
2023
2022
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included
in the Contract liabilities balance at Jan 1, 2023/2022
(966)
(763)
Additions to Contract liabilities -
excluding amounts recognized as revenue during the period
1,102
1,102
Receivables recognized that were included
in the Contract assets balance at Jan 1, 2023/2022
(465)
(423)
The Company considers its order backlog
to represent its unsatisfied performance obligations. At June 30, 2023, the Company had
unsatisfied performance
obligations totaling $21,938 million and,
of this amount, the Company expects to fulfill approximately 51 percent of
the obligations in 2023, approximately 36
percent of the obligations in 2024 and
the balance thereafter.
23 Q2
2023 FINANCIAL INFORMATION
─
Note
9
Debt
The Company’s total debt at June
30, 2023, and December 31, 2022, amounted to $8,300 million and $7,678 million, respectively.
Short-term debt and
current maturities of long-term debt
The Company’s “Short-term
debt and current maturities of long-term debt” consisted of the following:
($ in millions)
June 30, 2023
December 31, 2022
Short-term debt
1,434
1,448
Current maturities of long-term debt
2,415
1,087
Total
3,849
2,535
Short-term debt primarily represented
issued commercial paper and short-term bank borrowings from various banks. At
June 30, 2023, and December 31, 2022,
$1,352 million and $1,383 million, respectively,
was outstanding under the $2 billion Euro-commercial paper program. No amount
was outstanding under the
$2 billion commercial paper program
in the United States at June 30, 2023, or
at December 31, 2022.
In May 2023, the Company repaid on maturity
its EUR 700 million 0.625% Instruments, equivalent to $772 million
on date of repayment.
Long-term debt
The Company’s long-term debt at
June 30, 2023, and December 31, 2022, amounted to $4,451 million and
$5,143 million, respectively.
Outstanding bonds (including maturities
within the next 12 months) were as follows:
June 30, 2023
December 31, 2022
(in millions)
Nominal outstanding
(1)
Nominal outstanding
(1)
Bonds:
0.625% EUR Instruments, due 2023
EUR
700
$
742
0% CHF Bonds, due 2023
CHF
275
$
305
CHF
275
$
298
0.625% EUR Instruments, due 2024
EUR
700
$
739
EUR
700
$
720
Floating Rate EUR Instruments, due 2024
EUR
500
$
544
EUR
500
$
536
0.75% EUR Instruments, due 2024
EUR
750
$
788
EUR
750
$
769
0.3% CHF Bonds, due 2024
CHF
280
$
310
CHF
280
$
303
2.1% CHF Bonds, due 2025
CHF
150
$
166
CHF
150
$
162
3.25% EUR Instruments, due 2027
EUR
500
$
539
0.75% CHF Bonds, due 2027
CHF
425
$
470
CHF
425
$
460
3.8% USD Notes, due 2028
(2)
USD
383
$
382
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
188
CHF
170
$
184
0% EUR Instruments, due 2030
EUR
800
$
691
EUR
800
$
677
2.375% CHF Bonds, due 2030
CHF
150
$
166
CHF
150
$
162
3.375% EUR Instruments, due 2031
EUR
750
$
801
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
590
Total
$
6,679
$
5,984
(1) USD
carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting,
where appropriate.
(2) Prior
to completing a cash tender offer in November 2020, the original principal amount outstanding, on
each of the 3.8% USD Notes, due 2028, and
the 4.375% USD Notes, due
2042, was USD 750 million.
In January 2023, the Company issued
the following EUR Instruments: (i) EUR 500 million of 3.25 percent Instruments, due
2027, and (ii) EUR 750 million of
3.375 percent Instruments, due 2031,
both paying interest annually in arrears. The aggregate net proceeds of
these EUR Instruments, after discount and fees,
amounted to EUR 1,235 million (equivalent
to approximately $1,338 million on date of issuance).
24 Q2
2023 FINANCIAL INFORMATION
─
Note
10
Commitments
and contingencies
Contingencies—Regulatory,
Compliance and Legal
Regulatory
Based on findings during an internal
investigation, the Company self-reported to the SEC and the DoJ, in the United States,
to the Special Investigating Unit (SIU)
and the National Prosecuting Authority
(NPA) in South Africa as well as to various authorities in other countries potential
suspect payments and other compliance
concerns in connection with some of the
Company’s dealings with Eskom and related persons. Many of those parties have
expressed an interest in, or
commenced an investigation into, these
matters and the Company is cooperating fully with them. The Company paid $104 million
to Eskom in December 2020 as
part of a full and final settlement
with Eskom and the Special Investigating Unit relating to improper payments and
other compliance issues associated with the
Controls and Instrumentation Contract,
and its Variation Orders for Units 1 and 2 at Kusile. The Company made
a provision of approximately $325 million which
was recorded in Other income (expense),
net, during the third quarter of 2022. In December 2022, the Company settled with
the SEC and DOJ as well as the
authorities in South Africa and Switzerland.
The matter is still pending with the authorities in Germany, but
the Company does not believe that it will need to record
any additional provisions for this matter.
General
The Company is aware of proceedings,
or the threat of proceedings, against it and others in respect of private claims by
customers and other third parties with
regard to certain actual or alleged
anticompetitive practices. Also, the Company is subject to other claims and legal
proceedings, as well as investigations carried
out by various law enforcement authorities.
With respect to the above-mentioned claims, regulatory matters, and any related
proceedings, the Company will bear
the related costs, including costs necessary
to resolve them.
Liabilities
recognized
At June 30, 2023, and December 31, 2022,
the Company had aggregate liabilities of $95 million and $86 million, respectively, included
in “Other provisions” and
“Other non
‑
current liabilities”, for the above
regulatory, compliance and legal contingencies, and none of the individual liabilities
recognized was significant. As it is
not possible to make an informed judgment
on, or reasonably predict, the outcome of certain matters and as it is not possible, based
on information currently
available to management, to estimate
the maximum potential liability on other matters, there could be adverse outcomes
beyond the amounts accrued.
Guarantees
General
The following table provides quantitative
data regarding the Company’s third-party guarantees. The
maximum potential payments represent a “worst -case
scenario”, and do not reflect
management’s expected outcomes.
Maximum potential payments
($ in millions)
June 30, 2023
December 31, 2022
Performance guarantees
3,546
4,300
Financial guarantees
94
96
Total
(1)
3,640
4,396
(1) Maximum
potential payments include amounts in both continuing and discontinued operations.
The carrying amount of liabilities recorded
in the Consolidated Balance Sheets reflects the Company’s best estimate
of future payments, which it may incur as part
of fulfilling its guarantee obligations.
In respect of the above guarantees, the carrying amounts of liabilities at June
30, 2023, and December 31, 2022, were not
significant.
The Company is party to various guarantees
providing financial or performance assurances to certain third parties. These guarantees, which
have various
maturities up to 2035, mainly consist
of performance guarantees whereby (i) the Company guarantees the
performance of a third party’s product or service
according to the terms of a contract
and (ii) as member of a consortium/joint-venture that includes third parties, the Company
guarantees not only its own
performance but also the
work of third parties. Such guarantees may include guarantees that a project
will be completed within a specified time. If the third party
does not fulfill the obligation, the
Company will compensate the guaranteed party in cash or in kind. The original maturity
dates for the majority of these
performance guarantees range from one
to ten years.
In conjunction with the divestment of
the high-voltage cable and cables accessories businesses, the Company has entered
into various performance guarantees
with other parties with respect to certain
liabilities of the divested business. At both June 30, 2023, and December 31, 2022,
the maximum potential payable under
these guarantees amounts to $843 million,
respectively, and these guarantees have various original maturities ranging from
five to ten years.
The Company retained obligations for
financial, performance and indemnification guarantees related to the sale of the Power
Grids business (see Note 3 for
details). The performance and financial
guarantees have been indemnified by Hitachi Ltd. These guarantees, which have
various maturities up to 2035, primarily
consist of bank guarantees, standby
letters of credit, business performance guarantees and other trade-related guarantees,
the majority of which have original
maturity dates ranging from one to ten
years. The maximum amount payable under these guarantees at June 30, 2023, and
December 31, 2022, is approximately
$2.3 billion and $3.0 billion, respectively.
Commercial
commitments
In addition, in the normal course of
bidding for and executing certain projects, the Company has entered into standby letters
of credit, bid/performance bonds and
surety bonds (collectively “performance
bonds”) with various financial institutions. Customers can draw on such performance
bonds in the event that the Company
does not fulfill its contractual obligations.
The Company would then have an obligation to reimburse the financial institution
for amounts paid under the performance
bonds. At June 30, 2023, and December
31, 2022, respectively, the total outstanding performance bonds aggregated to
$3.0 billion and $2.9 billion. There have
been no significant amounts reimbursed
to financial institutions under these types of arrangements in the six and three months ended
June 30, 2023 and 2022.
25 Q2
2023 FINANCIAL INFORMATION
Product
and order-related contingencies
The Company calculates its provision for
product warranties based on historical claims experience and specific review of
certain contracts. The reconciliation of the
“Provisions for warranties”,
including guarantees of product performance, was as follows:
($ in millions)
2023
2022
Balance at January
1,
1,028
1,005
Claims paid in cash or in kind
(85)
(82)
Net increase in provision for changes
in estimates, warranties issued and warranties expired
136
103
Exchange rate differences
(3)
(54)
Balance at June 30,
1,076
972
─
Note
11
Income
taxes
In calculating income tax expense, the
Company uses an estimate of the annual effective tax rate based upon the facts
and circumstances known at each interim
period. On a quarterly basis, the actual
effective tax rate is adjusted, as appropriate, based upon changed facts and
circumstances, if any, as compared to those
forecasted at the beginning of the year
and each interim period thereafter.
The effective tax rate of 19.0 percent
in the six months ended June 30, 2023, was lower than the effective tax rate
of 29.3 percent in the six months ended June
30, 2022, primarily due to a net benefit
realized on a favorable resolution of an uncertain tax position. In February 2023,
on completion of a tax audit, the Company
obtained resolution of the uncertain
tax position for which an amount was recorded within Other non-current liabilities
as of December 31, 2022. In the six months
ended June 30, 2023, the Company released
the provision of $206 million, due to the resolution of this matter, which
resulted in an increase of $0.11 in earnings
per share (basic and diluted) for the
six months ended June 30, 2023.
─
Note
12
Employee
benefits
The Company operates defined benefit
pension plans, defined contribution pension plans, and termination indemnity plans,
in accordance with local regulations
and practices. At June 30, 2023, the Company’s
most significant defined benefit pension plans are in Switzerland as well as
in Germany, the United Kingdom, and
the United States. These plans cover
a large portion of the Company’s employees and provide benefits to employees in
the event of death, disability, retirement, or
termination of employment. Certain of
these plans are multi-employer plans. The Company also operates other postretirement
benefit plans including
postretirement health care benefits
and other employee-related benefits for active employees including long-service award
plans. The measurement date used for
the Company’s employee benefit
plans is December 31. The funding policies of the Company’s plans are
consistent with the local government and tax
requirements.
Net periodic benefit cost of the Company’s
defined benefit pension and other postretirement benefit plans consisted of the
following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Six months ended June
30,
2023
2022
2023
2022
2023
2022
Operational
pension cost:
Service cost
19
27
14
17
–
–
Operational pension cost
19
27
14
17
–
–
Non-operational
pension cost (credit):
Interest cost
24
1
82
43
1
1
Expected return on plan assets
(63)
(58)
(74)
(77)
–
–
Amortization of prior service cost (credit)
(4)
(4)
(1)
(1)
(1)
(1)
Amortization of net actuarial loss
–
–
23
30
(2)
(2)
Non-operational pension
cost (credit)
(43)
(61)
30
(5)
(2)
(2)
Net periodic benefit
cost (credit)
(24)
(34)
44
12
(2)
(2)
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended June
30,
2023
2022
2023
2022
2023
2022
Operational
pension cost:
Service cost
10
13
6
8
–
–
Operational pension
cost
10
13
6
8
–
–
Non-operational
pension cost (credit):
Interest cost
12
–
42
21
–
1
Expected return on plan assets
(30)
(28)
(35)
(36)
–
–
Amortization of prior service cost (credit)
(4)
(2)
(1)
(1)
(1)
–
Amortization of net actuarial loss
–
–
10
15
(1)
(2)
Non-operational pension
cost (credit)
(22)
(30)
16
(1)
(2)
(1)
Net periodic benefit
cost (credit)
(12)
(17)
22
7
(2)
(1)
The components of net periodic benefit
cost other than the service cost component are included in the line “Non-operational pension
cost (credit)” in the income
statement.
26 Q2
2023 FINANCIAL INFORMATION
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Six months ended June
30,
2023
2022
2023
2022
2023
2022
Total contributions to
defined benefit pension and
other postretirement benefit plans
5
31
21
19
4
4
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended
June 30,
2023
2022
2023
2022
2023
2022
Total contributions to
defined benefit pension and
other postretirement benefit plans
3
15
10
9
2
1
The Company expects to make contributions
totaling approximately $95 million and $34 million to its defined pension plans and
other postretirement benefit plans,
respectively, for the full year 2023.
─
Note 13
Stockholder's
equity
At the Annual General Meeting of Shareholders
(AGM) on March 23, 2023, shareholders approved the proposal of the Board
of Directors to distribute 0.84 Swiss
francs per share to shareholders. The
declared dividend amounted to $1,706 million, with the Company disburs ing
a portion in March and the remaining amounts
in April.
In March 2023, the Company completed
the share buyback program that was launched in April 2022. This program was executed on
a second trading line on the
SIX Swiss Exchange. Through this program,
the Company purchased a total of 67 million shares for approximately $2.0 billion,
of which 8 million shares were
purchased in the first quarter of 2023
(resulting in an increase in Treasury stock of $253 million ).
Also in March 2023, the Company announced
a new share buyback program of up to $1 billion. This program, which was launched
in April 2023, is being executed
on a second trading line on the SIX
Swiss Exchange and is planned to run until the Company’s 2024 AGM. Through this
program, the Company purchased, from
the program’s launch in April
2023 to June 30, 2023, 6 million shares, resulting in an increase in Treasury stock
of $212 million.
In the second quarter of 2023, the Company
cancelled 83 million shares which had been purchased under its share buyback
program. This resulted in a decrease
in Treasury stock of $2,567 million
and a corresponding total decrease in Capital stock, Additional paid-in capital
and Retained earnings.
During the first quarter of 2023, the
Company delivered, out of treasury stock, approximately 5 million shares in
connection with its Management Incentive Plan.
In February 2023, the Company obtained
funding through a private placement of shares in its ABB E-Mobility subsidiary, ABB
E-mobility Holding Ltd
(ABB E-Mobility), receiving
gross proceeds of 325 million Swiss francs (approximately $351 million) and reducing
the Company’s ownership in ABB E-Mobility from
92 percent to 81 percent. This resulted
in an increase in Additional paid-in capital of $170 million.
27 Q2
2023 FINANCIAL INFORMATION
─
Note
14
Earnings
per share
Basic earnings per share is calculated
by dividing income by the weighted-average number of shares outstanding during the
period. Diluted earnings per share is
calculated by dividing income by the
weighted-average number of shares outstanding during the period, assuming that all
potentially dilutive securities were
exercised, if dilutive. Potentially
dilutive securities comprise outstanding written call options, and outstanding
options and shares granted subject to certain
conditions under the Company’s
share-based payment arrangements.
Basic earnings per
share
Six months ended June
30,
Three months ended
June 30,
($ in millions, except
per share data in $)
2023
2022
2023
2022
Amounts attributable to
ABB shareholders:
Income from continuing operations, net
of tax
1,951
1,003
910
388
Loss from discontinued operations, net
of tax
(9)
(20)
(4)
(9)
Net income
1,942
983
906
379
Weighted-average number
of shares outstanding (in millions)
1,861
1,922
1,862
1,909
Basic earnings per share
attributable to ABB shareholders:
Income from continuing operations, net
of tax
1.05
0.52
0.49
0.20
Loss from discontinued operations, net
of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.49
0.20
Diluted earnings per
share
Six months ended June
30,
Three months ended
June 30,
($ in millions, except
per share data in $)
2023
2022
2023
2022
Amounts attributable to
ABB shareholders:
Income from continuing operations, net
of tax
1,951
1,003
910
388
Loss from discontinued operations, net
of tax
(9)
(20)
(4)
(9)
Net income
1,942
983
906
379
Weighted-average number of shares outstanding
(in millions)
1,861
1,922
1,862
1,909
Effect of dilutive securities:
Call options and shares
12
13
11
9
Adjusted weighted-average
number of shares outstanding (in millions)
1,873
1,935
1,873
1,918
Diluted earnings per share
attributable to ABB shareholders:
Income from continuing operations, net
of tax
1.04
0.52
0.49
0.20
Loss from discontinued operations, net
of tax
0.00
(0.01)
0.00
0.00
Net income
1.04
0.51
0.48
0.20
28 Q2
2023 FINANCIAL INFORMATION
─
Note
15
Reclassifications
out of accumulated other comprehensive loss
The following table shows changes in
“Accumulated other comprehensive loss” (OCI) attributable to ABB,
by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1,
2022
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss)
income:
Other comprehensive (loss) income
before reclassifications
(419)
(17)
91
(12)
(357)
Amounts reclassified from OCI
5
–
15
14
34
Total other comprehensive
(loss) income
(414)
(17)
106
2
(323)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(22)
–
–
–
(22)
Balance at June 30,
2022
(3,385)
(15)
(983)
(6)
(4,389)
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January
1, 2023
(3,691)
(19)
(838)
(8)
(4,556)
Other comprehensive (loss)
income:
Other comprehensive (loss) income
before reclassifications
(79)
2
(13)
(1)
(91)
Amounts reclassified from OCI
–
5
8
4
17
Total other comprehensive
(loss) income
(79)
7
(5)
3
(74)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(3)
(3)
Balance at June 30,
2023
(3,767)
(12)
(843)
(5)
(4,627)
The amounts reclassified out of OCI for
the six and three months ended June 30, 2023 and 2022, were not significant.
29 Q2
2023 FINANCIAL INFORMATION
─
Note
16
Restructuring
and related expenses
Other restructuring-related
activities
In the six and three months ended June
30, 2023 and 2022, the Company executed various other restructuring -related
activities and incurred the following
expenses:
Six months ended June
30,
Three months ended
June 30,
($
in millions)
2023
2022
2023
2022
Employee severance costs
26
43
7
35
Estimated contract settlement, loss order
and other costs
2
202
1
195
Inventory and long-lived asset impairments
–
5
–
1
Total
28
250
8
231
Expenses associated with these activities
are recorded in the following line items in the Consolidated Income Statements:
Six months ended June
30,
Three months ended
June 30,
($
in millions)
2023
2022
2023
2022
Total cost of sales
10
8
3
4
Selling, general and administrative
expenses
13
28
1
24
Non-order related research and development
expenses
–
2
(1)
2
Other income (expense), net
5
212
5
201
Total
28
250
8
231
During the second quarter of 2022, the
Company completed a plan to fully exit its full train retrofit business by transferring
the remaining contracts to a third party.
The Company recorded $195 million of restructuring
expenses in connection with this business exit primarily for contract settlement
costs. Prior to exiting this
business, the business was reported
as part of the Company’s non-core business activities within Corporate and
Other.
At June 30, 2023 and December 31, 2022, $193
million and $198 million, respectively, was recorded for other restructuring-related
liabilities and is included
primarily in Other provisions.
─
Note 17
Operating
segment data
The Chief Operating Decision Maker (CODM)
is the Chief Executive Officer. The CODM allocates
resources to and assesses the performance of each operating
segment using the information outlined
below. The Company is organized into the following segments, based on
products and services: Electrification, Motion,
Process Automation and Robotics &
Discrete Automation. The remain ing operations of the Company are included in
Corporate and Other.
Effective January 1, 2023, the E-mobility
Division is no longer managed within the Electrification segment and
has become a separate operating segment. This
new segment does not currently meet
any of the size thresholds to be considered a reportable segment and as such
is presented within Corporate and Other. The
segment information for the six and
three months ended June 30, 2023 and 2022, and at December 31, 2022, has
been recast to reflect this change.
A description of the types of products
and services provided by each reportable segment is as follows:
●
manufactures and sells electrical products
and solutions which are designed to provide safe, smart and sustainable electrical
flow from
the substation to the socket. The portfolio
of increasingly digital and connected solutions includes renewable power solutions,
modular substation
packages, distribution automation products,
switchboard and panelboards, switchgear, UPS solutions, circuit breakers, measuring
and sensing devices,
control products, wiring accessories,
enclosures and cabling systems and intelligent home and building solutions, designed
to integrate and automate
lighting, heating, ventilation, security
and data communication networks. The
products and services are delivered through six operating Divisions:
Distribution Solutions, Smart Power,
Smart Buildings, Installation Products, Power
Conversion and Service.
●
infrastructure and transportation.
These products, digital technology and related services enable industrial customers
to increase energy efficiency,
improve safety and reliability, and
achieve precise control of their processes. Building on over 130 years
of cumulative experience in electric
powertrains, Motion combines domain
expertise and technology to deliver the optimum solution for a wide range of applications
in all industrial
segments. In addition, Motion, along
with its partners, has a leading global service presence. These products and
services are delivered through seven
operating Divisions: Large Motors and
Generators, IEC LV Motors, NEMA Motors, Drive Products, System Drives, Service
and Traction.
30 Q2
2023 FINANCIAL INFORMATION
●
the process, hybrid
and marine industries. The product portfolio includes control technologies, industrial
software, advanced analytics, sensing and
measurement technology, and marine propulsion
systems. In addition, Process Automation offers a comprehensive range of
services, from repair to
advanced digital capabilities such as
remote monitoring, preventive maintenance, asset performance management, emission monitoring
and
cybersecurity. The
products, systems and services are currently delivered through four operating Divisions:
Energy Industries, Process Industries,
Marine & Ports and Measurement &
Analytics as well as, prior to its spin-off in October 2022, the Turbocharging Division
(Accelleron).
●
Robotics includes industrial robots,
autonomous mobile robotics, software, robotic solutions, field services, spare
parts, and digital services. Machine
Automation specializes in solutions
based on its programmable logic controllers (PLC), industrial PCs (IPC), servo motion,
transport systems and
machine vision. Both
Divisions offer engineering and simulation software as well as a comprehensive
range of digital solutions.
Corporate and Other:
segment, historical operating activities
of certain divested businesses , and
other non-core operating activities.
The primary measure of profitability
on which the operating segments are evaluated is Operational EBITA, which represents
income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
exchange, commodities, embedded derivatives),
(b) realized gains and losses on derivatives where the underlying hedged transaction
has not yet been
realized, and (c) unrealized foreign
exchange movements on receivables/payables (and related assets/liabilities).
Certain other non-operational items
generally includes certain regulatory, compliance and legal costs, other income/expense
relating to the Power Grids joint
venture, certain asset write downs/impairments
and certain other fair value changes, changes in estimates relating to opening balance
sheets of acquired
businesses (changes in pre-acquisition
estimates), as well as other items which are determined by management on a
case-by-case basis.
The CODM primarily reviews the results
of each segment on a basis that is before the elimination of profits made
on inventory sales between segments. Segment
results below are presented before these
eliminations, with a total deduction for intersegment profits to arrive at the
Company’s consolidated Operational EBITA.
Intersegment sales and transfers are
accounted for as if the sales and transfers were to third parties, at current market
prices.
The following tables present disaggregated
segment revenues from contracts with customers, Operational EBITA, and
the reconciliations of consolidated
Operational EBITA to Income from co ntinuing
operations before taxes for the six and three months ended June 30, 2023 and
2022, as well as total assets at
June 30, 2023, and December 31, 2022.
Six months ended June
30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
2,328
1,289
1,081
956
153
5,807
The Americas
2,932
1,267
868
272
129
5,468
of which: United States
2,179
1,061
550
175
111
4,076
Asia, Middle East and Africa
1,948
1,117
1,027
623
32
4,747
of which: China
917
581
339
475
17
2,329
7,208
3,673
2,976
1,851
314
16,022
Product type
Products
6,762
3,169
1,743
1,576
280
13,530
Services and other
446
504
1,233
275
34
2,492
7,208
3,673
2,976
1,851
314
16,022
Third-party revenues
7,208
3,673
2,976
1,851
314
16,022
Intersegment revenues
117
248
13
8
(386)
–
Total revenues
(1)
7,325
3,921
2,989
1,859
(72)
16,022
31 Q2
2023 FINANCIAL INFORMATION
Six months ended June 30,
2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
2,120
953
1,131
712
110
5,026
The Americas
2,445
1,029
767
238
87
4,566
of which: United States
1,789
853
460
166
60
3,328
Asia, Middle East and Africa
1,967
995
1,119
509
34
4,624
of which: China
992
565
309
382
15
2,263
6,532
2,977
3,017
1,459
231
14,216
Product type
Products
6,124
2,552
1,642
1,230
214
11,762
Services and other
408
425
1,375
229
17
2,454
6,532
2,977
3,017
1,459
231
14,216
Third-party revenues
6,532
2,977
3,017
1,459
231
14,216
Intersegment revenues
118
221
18
3
(360)
–
Total revenues
(1)
6,650
3,198
3,035
1,462
(129)
14,216
Three months ended
June 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,166
651
562
482
74
2,935
The Americas
1,525
635
447
136
72
2,815
of which: United States
1,136
528
286
84
58
2,092
Asia, Middle East and Africa
991
568
538
299
17
2,413
of which: China
460
300
177
227
10
1,174
3,682
1,854
1,547
917
163
8,163
Product type
Products
3,456
1,586
916
785
143
6,886
Services and other
226
268
631
132
20
1,277
3,682
1,854
1,547
917
163
8,163
Third-party revenues
3,682
1,854
1,547
917
163
8,163
Intersegment revenues
53
127
6
5
(191)
–
Total revenues
(1)
3,735
1,981
1,553
922
(28)
8,163
Three months ended
June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,058
487
546
358
59
2,508
The Americas
1,281
537
399
130
50
2,397
of which: United States
940
446
239
94
27
1,746
Asia, Middle East and Africa
1,016
496
573
242
19
2,346
of which: China
535
278
159
185
6
1,163
3,355
1,520
1,518
730
128
7,251
Product type
Products
3,143
1,304
829
618
119
6,013
Services and other
212
216
689
112
9
1,238
3,355
1,520
1,518
730
128
7,251
Third-party revenues
3,355
1,520
1,518
730
128
7,251
Intersegment revenues
59
106
11
2
(178)
–
Total revenues
(1)
3,414
1,626
1,529
732
(50)
7,251
(1) Due
to rounding, numbers presented may not add to the totals provided.
32 Q2
2023 FINANCIAL INFORMATION
Six months ended
Three months ended
June 30,
June 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA:
Electrification
1,464
1,117
787
605
Motion
767
540
401
266
Process Automation
444
420
239
224
Robotics & Discrete Automation
281
109
141
60
Corporate and Other
‒
E-mobility
(95)
(8)
(67)
(6)
‒ Corporate costs, Intersegment
elimination and other
(159)
(45)
(76)
(13)
Total
2,702
2,133
1,425
1,136
Acquisition-related amortization
(109)
(119)
(55)
(59)
Restructuring, related and implementation
costs
(1)
(41)
(280)
(13)
(264)
Changes in obligations related to divested
businesses
5
17
8
3
Gains and losses from sale of businesses
26
(4)
26
(4)
Acquisition- and divestment-related
expenses and integration costs
(45)
(109)
(26)
(50)
Foreign exchange/commodity
timing differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange,
commodities, embedded derivatives)
(10)
(100)
(32)
(118)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(6)
(35)
(1)
(33)
Unrealized foreign exchange movements
on receivables/payables (and
related assets/liabilities)
14
40
7
41
Certain other non-operational
items:
Other income/expense relating to the
Power Grids joint venture
20
(37)
7
(2)
Regulatory, compliance and legal costs
–
(4)
–
(5)
Business transformation costs
(2)
(82)
(66)
(48)
(40)
Changes in pre-acquisition estimates
(4)
1
(4)
2
Certain other fair value changes, including
asset impairments
6
34
7
–
Other non-operational items
20
(27)
(3)
(20)
Income from operations
2,496
1,444
1,298
587
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Non-operational pension (cost) credit
15
68
8
32
Income from continuing
operations before taxes
2,465
1,483
1,281
599
(1) Includes
impairment of certain assets.
(2) Amount
includes ABB Way process transformation costs of $71 million and $64 million for six months ended June 30, 2023 and 2022, respectively,
and $41 million and $39 million for
the three months ended
June 30, 2023 and 2022, respectively.
Total assets
(1)
($ in millions)
June 30, 2023
December 31, 2022
Electrification
13,300
12,500
Motion
7,043
6,565
Process Automation
4,761
4,598
Robotics & Discrete Automation
4,931
4,901
Corporate and Other
(2)
9,821
10,584
Consolidated
39,856
39,148
(1) Total
assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At
June 30, 2023, and December 31, 2022, respectively, Corporate and Other includes $74 million and $96 million of assets in the Power Grids
business which is reported as
discontinued operations
(see Note 3).
33 Q2
2023 FINANCIAL INFORMATION
34 Q2
2023 FINANCIAL INFORMATION
—
Supplemental
Reconciliations and Definitions
The following reconciliations
and definitions include measures which ABB uses to supplement its Consolidated Financial
Information (unaudited) which is
prepared in accordance
with United States generally accepted accounting principles (U.S. GAAP). Certain of
these financial measures are, or may be,
considered non-GAAP
financial measures as defined in the rules of the U.S. Securities and Exchange Commission
(SEC).
While ABB’s
management believes that the non-GAAP financial measures herein are useful in
evaluating ABB’s operating results, this information should
be considered
as supplemental in nature and not as a substitute for the related financial information prepared
in accordance with U.S. GAAP. Therefore
these measures
should not be viewed in isolation but considered together with the Consolidated
Financial Information (unaudited) prepared in accordance
with U.S. GAAP
as of and for the six and three months ended June 30,
2023.
Comparable
growth rates
Growth rates for certain key figures
may be presented and discussed on a “comparable” basis. The comparable
growth rate measures growth on a constant
currency basis. Since we are a global
company, the comparability of our operating results reported in
U.S. dollars is affected by foreign currency exchange rate
fluctuations. We calculate the impacts
from foreign currency fluctuations by translating the current-year periods’
reported key figures into U.S. dollar amounts using
the exchange rates in effect for the
comparable periods in the previous year.
Comparable growth rates are also adjusted
for changes in our business portfolio. Adjustments to our business portfolio
occur due to acquisitions, divestments, or
by exiting specific business activities
or customer markets. The adjustment for portfolio changes is calculated as follows:
where the results of any business
acquired or divested have not been consolidated
and reported for the entire duration of both the current and comparable periods,
the reported key figures of such
business are adjusted to exclude the
relevant key figures of any corresponding quarters which are not comparable when computing
the comparable growth rate.
Certain portfolio changes
which do not qualify as divestments under U.S. GAAP have been treated in a similar
manner to divestments. Changes in our portfolio
where we have exited certain business
activities or customer markets are adjusted as if the relevant business was
divested in the period when the decision to
cease business activities was taken.
We do not adjust for portfolio changes where the relevant business has
annualized revenues of less than $50 million.
The following tables provide reconciliations
of reported growth rates of certain key figures to their respective comparable
growth rate.
Comparable growth rate
reconciliation by Business Area
Q2 2023 compared to
Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
2%
0%
3%
9%
2%
0%
11%
Motion
3%
1%
-1%
3%
22%
1%
-1%
22%
Process Automation
-8%
2%
12%
6%
2%
2%
15%
19%
Robotics & Discrete Automation
-23%
1%
0%
-22%
26%
1%
0%
27%
ABB Group
-2%
2%
2%
2%
13%
1%
3%
17%
H1 2023 compared to
H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
3%
0%
4%
10%
4%
0%
14%
Motion
3%
3%
-1%
5%
23%
3%
-1%
25%
Process Automation
8%
4%
17%
29%
-2%
4%
15%
17%
Robotics & Discrete Automation
-23%
2%
0%
-21%
27%
4%
0%
31%
ABB Group
0%
3%
3%
6%
13%
3%
3%
19%
35 Q2
2023 FINANCIAL INFORMATION
Regional comparable
growth rate reconciliation
Regional
comparable growth rate reconciliation for ABB Group - Quarter
Q2 2023 compared to Q2
2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-1%
0%
2%
1%
17%
-1%
4%
20%
The Americas
5%
0%
1%
6%
17%
0%
2%
19%
of which: United States
4%
0%
0%
4%
20%
0%
1%
21%
Asia, Middle East and Africa
-10%
6%
3%
-1%
3%
6%
4%
13%
of which: China
-15%
5%
1%
-9%
1%
5%
3%
9%
ABB Group
-2%
2%
2%
2%
13%
1%
3%
17%
Regional
comparable growth rate reconciliation by Business Area - Quarter
Q2 2023 compared to
Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-4%
-2%
0%
-6%
9%
-1%
0%
8%
The Americas
8%
0%
0%
8%
19%
0%
0%
19%
of which: United States
6%
0%
0%
6%
21%
0%
0%
21%
Asia, Middle East and Africa
-3%
8%
0%
5%
-2%
7%
0%
5%
of which: China
-9%
6%
0%
-3%
-14%
4%
0%
-10%
Electrification
1%
2%
0%
3%
9%
2%
0%
11%
Q2 2023 compared to
Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
8%
-2%
-2%
4%
31%
-2%
-1%
28%
The Americas
4%
-1%
-2%
1%
20%
0%
-3%
17%
of which: United States
0%
-1%
-2%
-3%
20%
0%
-3%
17%
Asia, Middle East and Africa
-3%
6%
0%
3%
14%
8%
0%
22%
of which: China
-6%
5%
0%
-1%
8%
6%
0%
14%
Motion
3%
1%
-1%
3%
22%
1%
-1%
22%
Q2 2023 compared to
Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-6%
3%
13%
10%
3%
0%
17%
20%
The Americas
-8%
-1%
8%
-1%
12%
0%
12%
24%
of which: United States
-2%
0%
9%
7%
19%
0%
16%
35%
Asia, Middle East and Africa
-10%
3%
15%
8%
-7%
5%
15%
13%
of which: China
-6%
4%
14%
12%
11%
6%
21%
38%
Process Automation
-8%
2%
12%
6%
2%
2%
15%
19%
Q2 2023 compared to
Q2 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-23%
-1%
0%
-24%
35%
-2%
0%
33%
The Americas
4%
0%
0%
4%
6%
-1%
0%
5%
of which: United States
-16%
1%
0%
-15%
-9%
0%
0%
-9%
Asia, Middle East and Africa
-33%
4%
0%
-29%
23%
6%
0%
29%
of which: China
-41%
4%
0%
-37%
23%
7%
0%
30%
Robotics & Discrete
Automation
-23%
1%
0%
-22%
26%
1%
0%
27%
36 Q2
2023 FINANCIAL INFORMATION
Regional
comparable growth rate reconciliation for ABB Group – Year to date
H1 2023 compared to
H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
0%
3%
3%
6%
16%
2%
3%
21%
The Americas
4%
0%
2%
6%
20%
0%
2%
22%
of which: United States
0%
0%
1%
1%
22%
1%
1%
24%
Asia, Middle East and Africa
-6%
8%
3%
5%
3%
8%
4%
15%
of which: China
-13%
5%
2%
-6%
3%
7%
2%
12%
ABB Group
0%
3%
3%
6%
13%
3%
3%
19%
Regional
comparable growth rate reconciliation by Business Area – Year to date
H1 2023 compared to
H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-2%
2%
0%
0%
9%
2%
0%
11%
The Americas
3%
1%
0%
4%
20%
0%
0%
20%
of which: United States
0%
0%
0%
0%
22%
0%
0%
22%
Asia, Middle East and Africa
1%
9%
0%
10%
-1%
9%
0%
8%
of which: China
-10%
6%
0%
-4%
-8%
6%
0%
-2%
Electrification
1%
3%
0%
4%
10%
4%
0%
14%
H1 2023 compared to
H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
6%
3%
-1%
8%
31%
2%
-1%
32%
The Americas
2%
0%
-1%
1%
24%
0%
-1%
23%
of which: United States
1%
-1%
-1%
-1%
25%
0%
-1%
24%
Asia, Middle East and Africa
-1%
8%
0%
7%
13%
9%
0%
22%
of which: China
-7%
6%
0%
-1%
5%
7%
0%
12%
Motion
3%
3%
-1%
5%
23%
3%
-1%
25%
H1 2023 compared to
H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
18%
7%
20%
45%
-4%
3%
16%
15%
The Americas
8%
0%
12%
20%
13%
1%
13%
27%
of which: United States
-5%
0%
12%
7%
20%
0%
17%
37%
Asia, Middle East and Africa
-2%
5%
18%
21%
-8%
5%
15%
12%
of which: China
5%
7%
20%
32%
9%
7%
21%
37%
Process Automation
8%
4%
17%
29%
-2%
4%
15%
17%
H1 2023 compared to
H1 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-22%
2%
0%
-20%
35%
2%
0%
37%
The Americas
-8%
-1%
0%
-9%
16%
-1%
0%
15%
of which: United States
-20%
0%
0%
-20%
6%
1%
0%
7%
Asia, Middle East and Africa
-31%
5%
0%
-26%
22%
9%
0%
31%
of which: China
-35%
4%
0%
-31%
24%
9%
0%
33%
Robotics & Discrete
Automation
-23%
2%
0%
-21%
27%
4%
0%
31%
37 Q2
2023 FINANCIAL INFORMATION
Order backlog growth
rate reconciliation
June 30, 2023 compared
to June 30, 2022
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
18%
1%
0%
19%
Motion
17%
-1%
-2%
14%
Process Automation
11%
1%
5%
17%
Robotics & Discrete Automation
-3%
1%
0%
-2%
ABB Group
13%
0%
1%
14%
Other growth rate reconciliations
Q2 2023 compared to
Q2 2022
Service orders growth
rate
Services revenues
growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
1%
0%
2%
7%
3%
0%
10%
Motion
10%
3%
0%
13%
24%
3%
0%
27%
Process Automation
-16%
2%
20%
6%
-8%
1%
25%
18%
Robotics & Discrete Automation
8%
0%
0%
8%
18%
0%
0%
18%
ABB Group
-6%
2%
11%
7%
3%
2%
14%
19%
H1 2023 compared to
H1 2022
Service orders growth
rate
Services revenues
growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
3%
3%
0%
6%
10%
3%
0%
13%
Motion
8%
4%
0%
12%
18%
6%
0%
24%
Process Automation
-16%
3%
22%
9%
-10%
3%
25%
18%
Robotics & Discrete Automation
9%
3%
0%
12%
20%
3%
0%
23%
ABB Group
-6%
4%
12%
10%
2%
3%
14%
19%
38 Q2
2023 FINANCIAL INFORMATION
Operational
EBITA as % of operational revenues (Operational EBITA margin)
Definition
Operational
EBITA margin
Operational EBITA margin is Operational EBITA
as a percentage of operational revenues.
Operational
EBITA
Operational earnings before interest,
taxes and acquisition-related amortization (Operational EBITA) represents
Income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
exchange, commodities, embedded derivatives),
(b) realized gains and losses on derivatives where the underlying hedged transaction
has not yet been
realized, and (c) unrealized foreign
exchange movements on receivables/payables (and related assets/liabilities).
Certain other non-operational items
generally includes certain regulatory, compliance and legal costs, other income/expense
relating to the Power Grids joint
venture, certain asset write
downs/impairments and certain other fair value changes, changes in estimates
relating to opening balance sheets of acquired
businesses (changes in pre-acquisition
estimates), as well as other items which are determined by management on a
case-by-case basis.
Operational EBITA is our measure of segment
profit but is also used by management to evaluate the profitability of the Company as
a whole.
Acquisition-related
amortization
Amortization expense on intangibles
arising upon acquisitions.
Restructuring,
related and implementation costs
Restructuring, related and implementation
costs consists of restructuring and other related expenses, as well as internal
and external costs relating to the
implementation of group-wide restructuring
programs.
Operational
revenues
The Company presents operational revenues
solely for the purpose of allowing the computation of Operational EBITA margin.
Operational revenues are Total
revenues adjusted for foreign exchange/commodity
timing differences in total revenues of: (i) unrealized gains and losses on
derivatives, (ii) realized gains and
losses on derivatives where the underlying
hedged transaction has not yet been realized, and (iii) unrealized foreign exchange
movements on receivables (and
related assets). Operational revenues
are not intended to be an alternative measure to Total revenues,
which represent our revenues measured in accordance
with U.S. GAAP.
Reconciliation
The following tables provide reconciliations
of consolidated Operational EBITA to Net Income and Operational EBITA
Margin by business.
Reconciliation
of consolidated Operational EBITA to Net Income
Six
months ended June 30,
Three
months ended June 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA
2,702
2,133
1,425
1,136
Acquisition-related amortization
(109)
(119)
(55)
(59)
Restructuring, related and implementation
costs
(1)
(41)
(280)
(13)
(264)
Changes in obligations related to divested
businesses
5
17
8
3
Gains and losses from sale of businesses
26
(4)
26
(4)
Acquisition- and divestment-related
expenses and integration costs
(45)
(109)
(26)
(50)
Certain other non-operational items
(40)
(99)
(41)
(65)
Foreign exchange/commodity timing differences
in income from operations
(2)
(95)
(26)
(110)
Income from operations
2,496
1,444
1,298
587
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Non-operational pension (cost) credit
15
68
8
32
Income from continuing
operations before taxes
2,465
1,483
1,281
599
Income tax expense
(468)
(434)
(349)
(193)
Income from continuing
operations, net of tax
1,997
1,049
932
406
Loss from discontinued operations, net
of tax
(9)
(20)
(4)
(9)
Net income
1,988
1,029
928
397
(1) Includes
impairment of certain assets.
39 Q2
2023 FINANCIAL INFORMATION
Reconciliation
of Operational EBITA margin by business
Three months ended June
30, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,735
1,981
1,553
922
(28)
8,163
Foreign exchange/commodity
timing
differences in total revenues:
Unrealized gains and losses
on derivatives
6
(9)
3
6
8
14
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(4)
–
5
–
(2)
(1)
Unrealized foreign exchange movements
on receivables (and related assets)
–
(2)
(8)
(7)
(6)
(23)
Operational revenues
3,737
1,970
1,553
921
(28)
8,153
Income (loss) from operations
713
380
270
119
(184)
1,298
Acquisition-related amortization
22
9
2
19
3
55
Restructuring, related and
implementation costs
(1)
4
1
2
–
6
13
Changes in obligations related to
divested businesses
1
–
–
–
(9)
(8)
Gains and losses from sale of businesses
–
–
(26)
–
–
(26)
Acquisition- and divestment-related expenses
and integration costs
12
8
(2)
2
6
26
Certain other non-operational items
6
1
–
1
33
41
Foreign exchange/commodity
timing
differences in income
from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
31
5
(8)
4
–
32
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(2)
–
5
–
(2)
1
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
–
(3)
(4)
(4)
4
(7)
Operational EBITA
787
401
239
141
(143)
1,425
Operational EBITA margin
(%)
21.1%
20.4%
15.4%
15.3%
n.a.
17.5%
(1) Includes
impairment of certain assets.
In the three months ended June 30, 2023,
Certain other non-operational items in the table above includes the following:
Three months ended June
30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational
items:
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
(7)
(7)
Business transformation costs
(1)
5
–
–
1
42
48
Changes in pre-acquisition estimates
1
–
–
–
3
4
Certain other fair values changes,
including asset impairments
–
–
–
–
(7)
(7)
Other non-operational items
–
1
–
–
2
3
Total
6
1
–
1
33
41
(1) Amounts include
ABB Way process transformation costs of $41 million for the three months ended June 30, 2023.
40 Q2
2023 FINANCIAL INFORMATION
Three months ended June
30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,414
1,626
1,529
732
(50)
7,251
Foreign exchange/commodity
timing
differences in total revenues:
Unrealized gains and losses
on derivatives
30
(1)
37
9
10
85
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
6
1
5
–
26
38
Unrealized foreign exchange movements
on receivables (and related assets)
(18)
(4)
(10)
(8)
(13)
(53)
Operational revenues
3,432
1,622
1,561
733
(27)
7,321
Income (loss) from
operations
474
231
175
43
(336)
587
Acquisition-related amortization
28
7
1
19
4
59
Restructuring, related and
implementation costs
(1)
8
–
–
2
254
264
Changes in obligations related to
divested businesses
–
–
–
–
(3)
(3)
Gains and losses from sale of businesses
–
4
–
–
–
4
Acquisition- and divestment-related
expenses
and integration costs
10
3
36
2
(1)
50
Certain other non-operational items
20
–
–
(1)
46
65
Foreign exchange/commodity
timing
differences in income
from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
74
23
12
1
8
118
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
4
1
7
(1)
22
33
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(13)
(3)
(7)
(5)
(13)
(41)
Operational EBITA
605
266
224
60
(19)
1,136
Operational EBITA margin
(%)
17.6%
16.4%
14.3%
8.2%
n.a.
15.5%
(1) Includes
impairment of certain assets.
In the three months ended June 30, 2022,
Certain other non-operational items in the table above includes the following:
Three months ended June
30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational
items:
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
2
2
Regulatory, compliance and legal costs
–
–
–
–
5
5
Business transformation costs
(1)
1
–
–
–
39
40
Changes in pre-acquisition estimates
–
–
–
(2)
–
(2)
Other non-operational items
19
–
–
1
–
20
Total
20
–
–
(1)
46
65
(1) Amounts include
ABB Way process transformation costs of $39 million for the three months ended June 30, 2022.
41 Q2
2023 FINANCIAL INFORMATION
Six months ended June
30, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
7,325
3,921
2,989
1,859
(72)
16,022
Foreign exchange/commodity
timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(8)
(5)
16
8
4
15
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(5)
–
6
–
–
1
Unrealized foreign exchange movements
on receivables (and related assets)
(7)
(6)
(12)
(8)
(9)
(42)
Operational revenues
7,305
3,910
2,999
1,859
(77)
15,996
Income (loss) from
operations
1,368
733
470
234
(309)
2,496
Acquisition-related amortization
44
17
3
39
6
109
Restructuring, related and
implementation costs
(1)
12
2
4
–
23
41
Changes in obligations related to
divested businesses
1
–
–
–
(6)
(5)
Gains and losses from sale of businesses
–
–
(26)
–
–
(26)
Acquisition- and divestment-related
expenses
and integration costs
19
12
1
4
9
45
Certain other non-operational items
9
3
–
3
25
40
Foreign exchange/commodity
timing
differences in income
from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
16
5
(10)
6
(7)
10
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(2)
–
7
–
1
6
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(3)
(5)
(5)
(5)
4
(14)
Operational EBITA
1,464
767
444
281
(254)
2,702
Operational EBITA margin
(%)
20.0%
19.6%
14.8%
15.1%
n.a.
16.9%
(1) Includes
impairment of certain assets.
In the six months ended June 30, 2023,
Certain other non-operational items in the table above includes the following:
Six months ended June
30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational
items:
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
(20)
(20)
Business transformation costs
(1)
9
–
–
2
71
82
Changes in pre-acquisition estimates
1
–
–
–
3
4
Certain other fair values changes,
including asset impairments
1
1
–
1
(9)
(6)
Other non-operational items
(2)
2
–
–
(20)
(20)
Total
9
3
–
3
25
40
(1) Amounts include
ABB Way process transformation costs of $71 million for the six months ended June 30, 2023.
42 Q2
2023 FINANCIAL INFORMATION
Six months ended June
30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
6,650
3,198
3,035
1,462
(129)
14,216
Foreign exchange/commodity
timing
differences in total revenues:
Unrealized gains and losses
on derivatives
19
3
36
11
8
77
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
7
2
2
–
30
41
Unrealized foreign exchange movements
on receivables (and related assets)
(18)
(6)
(7)
(5)
(15)
(51)
Operational revenues
6,658
3,197
3,066
1,468
(106)
14,283
Income (loss) from
operations
955
485
326
65
(387)
1,444
Acquisition-related amortization
56
15
2
40
6
119
Restructuring, related and
implementation costs
(1)
10
8
5
3
254
280
Changes in obligations related to
divested businesses
–
–
–
–
(17)
(17)
Gains and losses from sale of businesses
–
4
–
–
–
4
Acquisition- and divestment-related
expenses
and integration costs
28
8
69
3
1
109
Certain other non-operational items
23
–
–
(1)
77
99
Foreign exchange/commodity
timing
differences in income
from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
53
22
18
4
3
100
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
6
1
4
(1)
25
35
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(14)
(3)
(4)
(4)
(15)
(40)
Operational EBITA
1,117
540
420
109
(53)
2,133
Operational EBITA margin
(%)
16.8%
16.9%
13.7%
7.4%
n.a.
14.9%
(1) Includes
impairment of certain assets.
In the six months ended June 30, 2022,
certain other non -operational items in the table above includes the following:
Six months ended June
30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless
otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational
items:
Other income/expense related to the
Power Grids joint venture
–
–
–
–
37
37
Regulatory, compliance and legal costs
–
–
–
–
4
4
Business transformation costs
2
–
–
–
64
66
Changes in pre-acquisition estimates
1
–
–
(2)
–
(1)
Certain other fair values changes,
–
–
–
–
(34)
(34)
Other non-operational items
20
–
–
1
6
27
Total
23
–
–
(1)
77
99
(1) Amounts include
ABB Way process transformation costs of $64 million for the six months ended June 30, 2022.
43 Q2
2023 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total debt
less Cash and marketable securities.
Total
debt
Total debt is the sum of
Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash
and marketable securities
Cash and marketable securities is the
sum of Cash and equivalents, Restricted cash (current and non-current) and
Marketable securities and short-term
investments.
Reconciliation
($ in millions)
June 30, 2023
December 31, 2022
Short-term debt and current maturities
of long-term debt
3,849
2,535
Long-term debt
4,451
5,143
Total debt
8,300
7,678
Cash and equivalents
2,923
4,156
Restricted cash - current
19
18
Marketable securities and short-term
investments
1,193
725
Cash and marketable
securities
4,135
4,899
Net debt
4,165
2,779
Net
debt/Equity ratio
Definition
Net debt/Equity
ratio
Net debt/Equity ratio is defined as Net
debt divided by Equity.
Equity
Equity is defined as Total stockholders’
equity.
Reconciliation
($ in millions, unless
otherwise indicated)
June 30, 2023
December 31, 2022
Total stockholders' equity
13,340
13,187
Net debt (as defined above)
4,165
2,779
Net debt / Equity ratio
0.31
0.21
Net
debt/EBITDA ratio
Definition
Net debt/EBITDA
ratio
Net debt/EBITDA ratio is defined as
Net debt divided by EBITDA.
EBITDA
EBITDA is defined as Income from operations
for the trailing twelve months preceding the balance sheet date before depreciati on
and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless
otherwise indicated)
June 30, 2023
June 30, 2022
Income from operations
for the three months ended:
September 30, 2022 / 2021
708
852
December 31, 2022 / 2021
1,185
2,975
March 31, 2023 / 2022
1,198
857
June 30, 2023 / 2022
1,298
587
Depreciation and Amortization
for the three months ended:
September 30, 2022 / 2021
198
220
December 31, 2022 / 2021
199
216
March 31, 2023 / 2022
191
210
June 30, 2023 / 2022
196
207
EBITDA
5,173
6,124
Net debt (as defined
above)
4,165
4,235
Net debt / EBITDA
0.8
0.7
44 Q2
2023 FINANCIAL INFORMATION
Net working
capital as a percentage of revenues
Definition
Net working
capital as a percentage of revenues
Net working capital as a percentage of
revenues is calculated as Net working capital divided by Adjusted revenues for
the trailing twelve months.
Net working
capital
Net working capital is the sum of (i)
receivables, net, (ii) contract assets, (iii) inventories, net, and (iv) prepaid
expenses; less (v) accounts payable, trade, (vi)
contract liabilities (including non-current
amounts) and (vii) other current liabilities (excluding primarily: (a)
income taxes payable, (b) current derivative liabilities, (c)
pension and other employee benefits,
(d) payables under the share buyback program, (e) liabilities related to certain
other restructuring -related activities and
(f) liabilities related to the divestment
of the Power Grids business ); and including the amounts related to these accounts
which have been presented as either
assets or liabilities held for sale
but excluding any amounts included in discontinued operations.
Adjusted
revenues for the trailing twelve months
Adjusted revenues for the trailing twelve
months includes total revenues recorded by ABB in the twelve months preceding
the relevant balance sheet date adjusted
to eliminate revenues of divested businesses
and the estimated impact of annualizing revenues of certain acquisitions which
were completed in the same trailing
twelve-month period.
Reconciliation
($ in millions, unless
otherwise indicated)
June 30, 2023
June 30, 2022
Net working capital:
Receivables, net
7,481
6,960
Contract assets
1,010
965
Inventories, net
6,448
5,595
Prepaid expenses
290
262
Accounts payable, trade
(4,881)
(4,805)
Contract liabilities
(2,394)
(2,141)
Other current liabilities
(1)
(3,506)
(3,173)
Net working capital in assets and liabilities
held for sale
137
–
Net working capital
4,585
3,663
Total revenues for the
three months ended:
September 30, 2022 / 2021
7,406
7,028
December 31, 2022 / 2021
7,824
7,567
March 31, 2023 / 2022
7,859
6,965
June 30, 2023 / 2022
8,163
7,251
Adjustment to annualize/eliminate revenues
of certain acquisitions/divestments
(162)
(213)
Adjusted revenues for
the trailing twelve months
31,090
28,598
Net working capital as
a percentage of revenues (%)
14.7%
12.8%
(1) Amounts
exclude $771 million and $1,104 million at June 30, 2023 and 2022, respectively, related primarily to (a) income taxes payable, (b) current
derivative liabilities, (c) pension
and other employee benefits,
(d) payables under the share buyback program, (e) liabilities related to certain restructuring-related activities and (f) liabilities
related to the divestment of
the Power Grids business.
45 Q2
2023 FINANCIAL INFORMATION
Free
cash flow conversion to net income
Definition
Free cash
flow conversion to net income
Free cash flow conversion to net income
is calculated as free cash flow divided by Adjusted net income attributable to ABB.
Adjusted
net income attributable to ABB
Adjusted net income attributable to
ABB is calculated as net income attributable to ABB adjusted for: (i) impairment
of goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the
sale of both the Hitachi Energy Joint Venture and Power Grids
business, the latter being included in discontinued operations.
Free
cash flow
Free cash flow is calculated as net
cash provided by operating activities adjusted for: (i) purchases of property, plant
and equipment and intangible assets, and (ii)
proceeds from sales of property, plant
and equipment.
Free
cash flow for the trailing twelve months
Free cash flow for the trailing twelve
months includes free cash flow recorded by ABB in the twelve months preceding the
relevant balance sheet date.
Net income
for the trailing twelve months
Net income for the trailing twelve months
includes net income recorded by ABB (as adjusted) in the twelve months preceding
the relevant balance sheet date.
Free cash flow conversion
to net income
Twelve months to
($ in millions, unless
otherwise indicated)
June 30, 2023
December 31, 2022
Net cash provided by
operating activities – continuing operations
2,555
1,334
Adjusted for the effects
of continuing operations:
Purchases of property, plant and equipment
and intangible assets
(755)
(762)
Proceeds from sale of property, plant
and equipment
118
127
Free cash flow from
continuing operations
1,918
699
Net cash used in operating
activities – discontinued operations
(35)
(47)
Free cash flow
1,883
652
Adjusted net income
attributable to ABB
(1)
3,392
2,442
Free cash flow conversion
to net income
56%
27%
(1) Adjusted
net income attributable to ABB for the year ended December 31, 2022, is adjusted to exclude the gain on the sale of Hitachi Energy Joint
Venture of $43 million and
reductions to the gain
on the sale of Power Grids of $10 million.
Reconciliation of the
trailing twelve months to June 30, 2023
Continuing operations
Discontinued
operations
($ in millions)
Net cash provided
by
continuing operating
activities
Purchases of
property, plant and
equipment and
intangible assets
Proceeds
from sale of property,
plant and equipment
Net cash provided
by (used in)
discontinued
operating activities
Adjusted net income
attributable to ABB
(1)
Q3 2022
793
(165)
19
(2)
362
Q4 2022
720
(259)
42
(33)
1,088
Q1 2023
283
(151)
31
(1)
1,036
Q2 2023
759
(180)
26
1
906
Total for the trailing
twelve
months to June 30,
2023
2,555
(755)
118
(35)
3,392
(1) Adjusted
net income attributable to ABB for Q3 and Q4 2022, is adjusted to exclude reductions to
the gain on the sale of Power Grids of $2 million and $(1) million, respectively. In
addition, Q4 2022 is also
adjusted to exclude the gain on the sale of Hitachi Energy Joint Venture of $43 million.
46 Q2
2023 FINANCIAL INFORMATION
Net finance
expenses
Definition
Net finance expenses is calculated as
Interest and dividend income less Interest and other finance expense.
Reconciliation
Six months ended June
30,
Three months ended
June 30,
($ in millions)
2023
2022
2023
2022
Interest and dividend income
78
33
38
20
Interest and other finance expense
(124)
(62)
(63)
(40)
Net finance expenses
(46)
(29)
(25)
(20)
Book-to-bill
ratio
Definition
Book-to-bill ratio is calculated as
Orders received divided by Total revenues.
Reconciliation
Six months ended June
30,
2023
2022
($ in millions, except
Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
8,101
7,325
1.11
8,025
6,650
1.21
Motion
4,399
3,921
1.12
4,281
3,198
1.34
Process Automation
3,782
2,989
1.27
3,511
3,035
1.16
Robotics & Discrete Automation
1,851
1,859
1.00
2,417
1,462
1.65
Corporate and Other
(16)
(72)
n.a.
(54)
(129)
n.a.
ABB Group
18,117
16,022
1.13
18,180
14,216
1.28
Three months ended June
30,
2023
2022
($ in millions, except
Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,960
3,735
1.06
3,913
3,414
1.15
Motion
2,137
1,981
1.08
2,079
1,626
1.28
Process Automation
1,669
1,553
1.07
1,819
1,529
1.19
Robotics & Discrete Automation
850
922
0.92
1,109
732
1.52
Corporate and Other
51
(28)
n.a.
(113)
(50)
n.a.
ABB Group
8,667
8,163
1.06
8,807
7,251
1.21
47 Q2
2023 FINANCIAL INFORMATION
—
ABB
Ltd
Corporate
Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41
(0)43 317 71
11
www.abb.com
April
1 — June 30, 2023
ABB Ltd announces
that the following members of the Executive Committee or
Board of Directors of ABB have purchased,
sold or
been granted ABB’s registered shares, call options and warrant appreciation
rights (“WARs”), in the following amounts:
Name
Date
Type
of Instrument
Received*
Purchased
Sold
Price
/ Instrument
Peter Terwiesch
May 15,
2023
Share
-
41’205
CHF
32.96
Timo Ihamuotila
May 15,
2023
Share
-
44’644
CHF
32.08
Gunnar Brock
May 08, 2023
Share
2’048
CHF
32.22
David Constable
May 08, 2023
Share
1’988
CHF
32.22
Frederico
Curado
May 08,
2023
Share
4’130
CHF
32.22
Lars Förberg
May 08,
2023
Share
4’945
CHF
32.22
Jennifer Xin-Zhe
Li
May 08, 2023
Share
2’018
CHF
32.22
Geraldine
Matchett
May 08, 2023
Share
2’683
CHF
32.22
David Meline
May 08,
2023
Share
2’485
CHF
32.22
Peter Voser
May 08,
2023
Share
18’607
CHF
32.22
Jacob Wallenberg
May 08,
2023
Share
2’796
CHF
32.22
Tarak Mehta
May 03, 2023
Share
-
22’131
CHF
32.17
Tarak Mehta
April 28,
2023
Share
-
27’869
CHF
31.86
Sami Atiya
April 27,
2023
Share
81’205
CHF
32.25
Tarak Mehta
April 27,
2023
Share
91’357
CHF
32.25
Peter Terwiesch
April 27,
2023
Share
81’205
CHF
32.25
Morten Wierod
April 27,
2023
Share
76’130
CHF
32.25
Timo Ihamuotila
April 27,
2023
Share
57’610
CHF
32.25
Björn
Rosengren
April 27,
2023
Share
154’635
CHF
32.25
Sami Atiya
April 26,
2023
Share
71’678
CHF
31.82
Key:
* Received
instruments were delivered as part of the ABB Ltd Director’s or Executive
Committee Member’s compensation or as compensation for
foregone
benefits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on
its behalf
by the undersigned, thereunto duly authorized.
ABB
LTD
Date: July
20, 2023.
By:
/s/ Ann-Sofie
Nordh
Name:
Ann-Sofie
Nordh
Title:
Group Senior
Vice President and
Head of Investor
Relations
Date: July
20, 2023.
By:
/s/ Richard
A. Brown
Name:
Richard
A. Brown
Title:
Group Senior
Vice President and
Chief Counsel
Corporate & Finance