ABB: Q2 2021 Results

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

Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss Exchange

“I am very encouraged that we have delivered a clearly improved performance. The strong upturn in Operational EBITA margin reflects the recovery in demand in combination with increased internal efficiency and the strength of ABB’s electrification and automation offerings. We will continue to sharpen our focus on profitability through innovation, sustainability and digitalization, while actively managing our portfolio.”

Björn Rosengren, CEO

CEO Summary

The underlying customer activity in the second quarter increased slightly on a sequential basis. However, orders and revenues increased significantly compared with last year’s low levels, when the adverse business impact of the COVID-19 pandemic was at its peak. Double-digit order growth was reported in all business areas driven by a broad-based improvement across most short-cycle customer segments and a positive development in several process-related businesses. Growth was to some extent supported by customers stock-building.

We improved Operational EBITA by 71% and the Operational EBITA margin increased to the high level of 15.0%, up 440 basis points, year-on-year. Results were supported by the recovery in demand in combination with the impact from earlier implemented cost measures, as well as ongoing restricted travel spending. An additional effect was derived from proactive price measures taken to mitigate the expected increase in headwinds from higher commodity prices. I am pleased to see how well the team has handled certain component shortages, whereby managing to limit the impact on customer deliveries. Despite active management of the situation the tight supply of certain components, such as semiconductors, is expected to continue in the coming quarter. The strong earnings converted into cash flow from operating activities in continuing operations of $663 million, improving slightly from last year. I am pleased with how the team managed to keep net working capital broadly stable year-on-year in this strong growth environment. Our strong cash generation in the first half of the year provides a good base to deliver on our guidance of a solid cash flow in 2021.

During the second quarter Robotics & Discrete Automation broadened its automation offering to the construction segment. Robotic automation is not yet widely used in this industry and we see potential to increase efficiency in areas such as fabrication of modular homes, welding and material handling. Additionally, it was good to receive the prestigious Innovation and Entrepreneurship in Robotics & Automation (IERA) award for our PixelPaint robotic non-overspray technology for the automotive industry.

We made further progress toward our long-term sustainability target of reducing emissions and achieving carbon neutrality in our own operations by 2030 by joining three initiatives led by the international non-profit Climate Group. They include electrifying our fleet of more than 10,000 vehicles, sourcing 100% renewable electricity, as well as establishing energy efficiency targets and continuing to deploy energy management systems at our sites. Furthermore, our targets have received approval by the Science Based Targets initiative (SBTi) confirming they are in line with the Paris Agreement. ABB also joined the Business Ambition for 1.5°C Campaign, a global coalition of UN agencies, business and industry leaders, led by the UN Global Compact (UNGC).

I am pleased to see that our increased focus on acquired growth resulted in Robotics & Discrete Automation acquiring ASTI, after the close of the second quarter. It is a leading global mobile robotics manufacturer and this transaction will expand our offering to make ABB the only company to offer a holistic automation portfolio for the entire value chain, helping customers replace today’s linear production lines with fully flexible networks. Going forward, I expect to see more of these small- to mid-sized bolt-on deals as the divisions fill up their target pipelines. We have also made good progress with the announced portfolio changes and I expect to announce an agreement for a divestment during the third quarter.

Björn Rosengren

CEO

Outlook

ABB anticipates growth rates in the third quarter of 2021 to reflect the low level of business activity in Q3 2020. Based on the current market situation, comparable revenues are expected to grow ~10%, with orders growing more than revenues.

In the third quarter, higher demand and service revenues should be supportive to the Operational EBITA margin year-on-year, however some sequential adverse impact is expected from rising raw material costs, component shortages as well as increasing travel spend as pandemic-related restrictions ease.

ABB anticipates comparable revenue growth of just below 10% (update from ~5% or more) for full-year 2021, with the process industry related part of the business expected to recover during the second half of the year.

In 2021, ABB expects a strong (update from steady) pace of improvement from 2020 toward the 2023 operational EBITA margin target of the upper half of the 13%-16% range.

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.

<sup>1 For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q2 2021 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.</sup>