ZURICH--(BUSINESS WIRE)--ABB (SWX:ABBN):

“In the third quarter, we delivered high order growth, a strong top-line development and a historically high margin. We have not seen any material changes in the underlying customer activity. It looks like we are likely to achieve our 2023 margin target one year early. We are now starting to see the real benefits of the ABB Way operating model.”

Björn Rosengren, CEO

CEO summary
There were several positive takeaways from the third quarter 2022. Strong order growth of 4% (16% comparable), resulted in a book-to-bill ratio of above one for the seventh consecutive quarter. Revenues were supported by the sequential easing of component supply constraints facilitating customer deliveries but also by a significantly lower level of interruptions from Covid-related lockdowns in China.

I was pleased to see the Operational EBITA increase by 16% year-on-year and the high Operational EBITA margin of 16.6%, with improvements noted in all business areas. An excellent achievement, driven by higher volumes and operational improvements including good pricing execution which offset cost inflation related to raw materials, freight and labor. Importantly, this signals that our new way of working, with higher accountability, transparency and speed, is really starting to take hold. I am proud that we are likely to achieve our target of Operational EBITA margin of at least 15% already in 2022, one year ahead of plan.

It was good to see cash flow from operating activities of $791 million, a higher level than in the previous quarter, and I anticipate an additional step up in the fourth quarter.

Orders increased in all regions, led by a very strong development in the Americas. In total, Europe improved strongly although some normalization of inventory levels was noted in Germany for parts of our customer base. Asia, Middle East and Africa improved despite softness noted in China.

Customer activity was at a high level in the quarter with overall stable to positive development in most segments outside of discrete industries. In the latter we noted some customers normalizing order patterns in anticipation of shorter delivery lead-times as supply constraints ease. Overall, demand increased for both the short-cycle flow business and the systems-driven offerings. Changes in exchange rates weighed on total orders in all business areas, however the underlying customer activity improved. In total, our order backlog remained at a high level of $19.4 billion.

Income from operations amounted to $708 million and declined by 17% (7% constant currency) year-on-year. This includes the non-operational provision of approximately $325 million related to the remaining matters for the legacy Kusile project, with a similar cash flow impact expected in subsequent quarters. We are now resolving this matter, related to a project awarded in 2015. The new ABB Way operating model is guided by our code of conduct and is part of our regular and transparent business reviews.

I am pleased about the multiple portfolio management activities in the quarter. Importantly, Motion signed two acquisitions – in the NEMA motors and Traction divisions – which will further cement their leading market positions. I also want to highlight our investment into an accelerated strategic collaboration between Process Automation and Canada’s Hydrogen Optimized launched in 2020. Together we are advancing the deployment of economic large-scale green hydrogen production systems to decarbonize hard-to-abate industries.

We also announced the early divestment of the remaining 19.9% of the Hitachi Energy joint venture to Hitachi as they exercised the call option that was agreed in 2018. We do not foresee any significant gain or loss as a result of the sale and anticipate net positive cash inflows of approximately $1.4 billion upon closing, expected in the fourth quarter 2022. This will further strengthen our balance sheet and give us additional flexibility in our capital allocation decisions. With regards to E-mobility, we remain committed to our plans to list the division, although we no longer expect it to happen this year due to the current volatility in capital markets. Finally, just after the close of the third quarter we distributed Accelleron to shareholders as a dividend in kind. I was delighted to mark the first day of trading of Accelleron by joining the management team in ringing the bell on the Swiss stock exchange. I wish the team great success as a separately listed company.

Björn Rosengren
CEO

Outlook
In the fourth quarter of 2022, we anticipate a low double-digit comparable revenue growth, impacted by the high level of revenues recorded last year. We expect the typical pattern of a sequentially lower Operational EBITA margin.

In full-year 2022, we are likely to achieve early the 2023 target of an Operational EBITA margin of at least 15%, supported by increased efficiency as we fully incorporate the decentralized operating model and performance culture in all our divisions and strong top-line execution.

The complete press release including the appendices is available at www.abb.com/news.

ABB (ABBN: SIX Swiss Ex) is a leading global technology company that energizes the transformation of society and industry to achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back more than 130 years, ABB’s success is driven by about 105,000 talented employees in over 100 countries.

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