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 October 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.
Form 20-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.
⬜
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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 October 18, 2023 titled “Q3 2023 results”.
2.
Q3 2023 Financial Information.
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, OCTOBER 18, 2023
Q3 2023 results
Positive book-to-bill, high margin and strong cash flow
delivery
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4
Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss Exchange
—
Q3 2023
First nine months
Press Release
—
“Q3 2023 was a strong quarter for ABB including a positive book-to-bill ratio, Operational EBITA
margin again above 17% and a strong cash flow delivery putting us in a good position to
achieve an annual free cash flow of about $3 billion.”
Björn Rosengren
, CEO
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
1
9M 2023
9M 2022
US$
Comparable
1
Orders
8,052
8,188
-2%
2%
26,169
26,368
-1%
4%
Revenues
7,968
7,406
8%
11%
23,990
21,622
11%
16%
Gross Profit
2,762
2,481
11%
8,366
7,052
19%
as % of revenues
34.7%
33.5%
+1.2 pts
34.9%
32.6%
+2.3 pts
Income from operations
1,259
708
78%
3,755
2,152
74%
Operational EBITA
1
1,392
1,231
13%
11%
4,094
3,364
22%
22%
as % of operational revenues
1
17.4%
16.6%
+0.8 pts
17.0%
15.5%
+1.5 pts
Income from continuing operations, net of tax
905
420
115%
2,902
1,469
98%
Net income attributable to ABB
882
360
145%
2,824
1,343
110%
Basic earnings per share ($)
0.48
0.19
149%
2
1.52
0.70
116%
2
Cash flow from operating activities
4
1,351
791
71%
2,393
600
299%
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q3 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.
ABB INTERIM REPORT
I
Q3 2023
The third quarter developed largely as planned, and I am
pleased about the comparable order growth of 2% supporting a
book-to-bill ratio of 1.01. This means we delivered on our
quarterly expectation of book-to-bill in positive territory, despite
a double-digit comparable increase in revenues. We had yet
another quarter with strong operational performance across the
business areas, and this time coupled with a very strong cash
flow generation, setting us up to achieve free cash flow of about
$3 billion in 2023.
In total, Operational EBITA increased by 13% and we achieved
an Operational EBITA margin of 17.4%, an improvement of 80
basis points from the corresponding period last year. This was
supported by a strong price contribution which outweighed the
impacts from inflation in labor costs, with additional support
from efficient execution of higher volumes in production. It was
good to see that our focus on cash conversion yielded results
with Cash flow from operating activities at $1.4 billion, an
increase of $560 million from last year supported mainly by
higher earnings and better Net working capital management.
As in recent quarters, the order development was strong in the
project- and systems-related businesses that is often linked to
our various medium voltage offerings. This more than offset the
impact from a decline in parts of the short-cycle businesses. In
total, most customer segments remained overall stable or
improved, with declines mainly noted in the discrete automation
and construction segments. Order growth was strongest in
business area Process Automation, supported by a strong
underlying market and the added contribution from a large order
amounting to approximately $285 million. In contrast, order
intake in Robotics & Discrete Automation was hampered by
customers normalizing order patterns in a period of shortening
delivery lead times, with added pressure from inventory
adjustments among robotics-related distribution channels in
China.
From a geographical perspective, the Americas region was the
growth engine for orders, driven by double-digit comparable
growth in the United States and supported by the timing of large
orders booked. Also, Asia, Middle East and Africa improved on
a comparable basis where India noted yet another quarter with
strong year-on-year development. In contrast, orders in China
declined at a low single-digit comparable growth rate
particularly hampered by weakness in robotics and construction
demand. Outside of these segments and towards the end of the
quarter we noted some indications of the underlying Chinese
market stabilizing, although uncertainty is admittedly high.
Europe declined to the tune of a low double-digit rate, and while
the underlying market softened, the rate of decline was
accentuated by a high comparable last year due to timing of
larger orders booked.
Sustainability is embedded in everything we do, and I was
pleased to see this being recognized by MSCI and the upgrade
of ABB to the highest ESG rating of AAA, meaning we score in
the top 10% of the peer universe.
During the quarter, Process Automation expanded its
partnership with Northvolt, providing electrification and
automation technologies to power the world’s largest battery
recycling facility, Revolt Ett. The recycling site will process
125,000 tons of end-of-life batteries and battery production
waste each year – making it the largest plant of its kind in the
world.
We recently took additional steps to support our customers on
their journey towards more sustainable and flexible production
with Robotics & Discrete Automation expanding its robot family
with four models in 22 variants and energy savings of up to 20
percent. We have also announced our plans to invest $280
million in our Robotics business in Sweden. The site will serve
as a European hub, and further strengthen our capabilities in
serving our customers in Europe with locally manufactured
products in a growing market. This is to replace the existing old
robotics facilities at the site, and the new Campus is planned to
open in late 2026.
To mark the completion of all divisional portfolio divestments
announced at the end of 2020, we successfully closed the
divestment of the Power Conversion division. Going forward we
will continuously review the product groups within all divisions
to optimize the portfolio as part of the ABB Way operating
model.
Björn Rosengren
CEO
In the
fourth quarter of 2023
, we anticipate low- to mid single
digit comparable revenue growth. Additionally, we expect the
historical pattern to repeat with the Operational EBITA margin in
Q4 to be sequentially lower from Q3, and to be around 16%.
In full-year 2023
, we anticipate comparable revenue growth to
be in the low teens range and we expect Operational EBITA
margin to be in the range of 16.5% - 17.0%.
Outlook
CEO summary
ABB INTERIM REPORT
I
Q3 2023
Strong demand for the project- and systems-related
businesses, often linked to the medium voltage offerings,
more than offset a decline in parts of the short-cycle
businesses hampered by inventory adjustments among
channel partners and normalizing order patterns. In total,
orders declined by 2% (up comparable 2%) year-on-year to
8,052 million. Comparable order growth was driven by the
higher contribution from large orders, including the one in the
Process Automation business area for $285 million, which
will be executed over a multi-year period.
Timing of booking significant orders supported the Americas
growth of 9% (comparable 13%). Orders in Asia, Middle East
and Africa declined by 5% (up comparable 4%) as the
decline in China of 10% (comparable 3%) was more than
offset by strength elsewhere in the region, including strong
growth in India. The sharp order decline of 11% (comparable
13%) in Europe was the result of softer markets including the
impact from customers normalizing inventory levels, but also
impacted by last year’s high comparable supported by timing
of customers placing large orders.
Demand in the automotive segment improved, supported
by EV-related investments, while the general industry and
consumer-related robotics segments declined. In transport
& infrastructure, there were positive developments in
marine, ports and renewables.
The machine builder segment declined as customers
normalized order patterns in the face of shortening delivery
lead times.
In buildings, there was weakness in all three regions in
residential-related demand. In the commercial construction
segment the United States stood out with a continued
robust momentum and outperformed a broadly stable
Europe and declining China.
Demand in the process-related businesses was strong
across the board, with particular strength in the oil & gas
segment, and it held up well also for refining,
petrochemicals and the energy-related low carbon
segments.
Revenues increased by 8% (11% comparable) to
$7,968 million and benefitted primarily from increased
volumes through execution of the order backlog, combined
with a strong price contribution. These benefits more than
offset a slight adverse impact from portfolio changes.
Revenues increased in all business areas, supported by
comparable growth in most divisions as the order backlog
was executed.
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2023
Q3 2022
US$
Comparable
Europe
2,810
2,494
13%
10%
The Americas
2,775
2,452
13%
16%
Asia, Middle East
and Africa
2,383
2,460
-3%
6%
ABB Group
7,968
7,406
8%
11%
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2023
Q3 2022
US$
Comparable
Europe
2,391
2,682
-11%
-13%
The Americas
3,258
2,980
9%
13%
Asia, Middle East
and Africa
2,403
2,526
-5%
4%
ABB Group
8,052
8,188
-2%
2%
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
2%
11%
FX
0%
1%
Portfolio changes
-4%
-4%
Total
-2%
8%
Orders and revenues
ABB INTERIM REPORT
I
Q3 2023
Gross profit
Gross profit increased strongly by 11% (9% constant currency) to
$2,762 million, reflecting a strong gross margin improvement of
120 basis points to 34.7%. Gross margin improved in three out of
four business areas, with only Process Automation declining mainly
due to the absence of the exited high margin Turbocharging
division (Accelleron).
Income from operations
Income from operations amounted to $1,259 million and increased
by 78% year-on-year. The improvement was driven by operational
performance and contribution from gains of $71 million from selling
businesses, including the divestment of the Power Conversion
division, but also by last year’s period being burdened by the
recording of a provision of $325 million relating to the legacy Kusile
project. Margin on Income from operations reached 15.8%, up by
620 basis points year-on-year.
Operational EBITA
Operational EBITA improved by 13% year-on-year to $1,392 million
and the margin was up by 80 basis points to 17.4%. Key drivers to
the higher earnings were the impacts from robust price activities
and operational leverage on higher volumes, which more than
offset adverse impacts from inflation in labor costs and from
divestments. Selling, general and administrative expenses declined
in relation to revenues to 16.7%, from 17.2% last year, mostly due
to the absence of costs related to the spin-off of the Accelleron
business in last year’s period. Operational EBITA in Corporate and
Other amounted to -$109 million, of which -$39 million related to
the E-mobility business where operational performance was
hampered by the ongoing reorganization to ensure a more focused
portfolio, and some inventory-related provisions.
Net finance expenses
Net finance expense was $36 million and increased slightly from
last year’s $28 million.
Income tax
Income tax expense was $326 million with an effective tax rate of
26.5%.
Net income and earnings per share
Net income attributable to ABB was $882 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 $0.48, up from $0.19 last year.
Operational EBITA
($ millions)
Q3 2023
Q3 2022
Corporate and Other
E-mobility
(39)
(4)
Corporate costs, intersegment
eliminations and other
1
(70)
(52)
Total
(109)
(56)
1
Majority of which relates to underlying corporate
Earnings
ABB INTERIM REPORT
I
Q3 2023
Net working capital
Net working capital amounted to $4,041 million, increasing
year-on-year from $3,407 million driven mainly by the
increase in inventories and receivables. Net working capital
decreased sequentially from $4,585 million driven mainly by
strong trade net working capital management and an
increase in accrued expenses related to the timing of
payments of accruals. Net working capital as a percentage
of revenues
1
Capital expenditures
Purchases of property, plant and equipment and intangible
assets amounted to $175 million.
Net debt
Net debt
1
and decreased from $4,117 million year-on-year, and
declined sequentially from $4,165 million. The sequential net
decrease was driven by the strong operational cash flow in
the quarter, and further supported by the proceeds from the
sale of the Power Conversion business.
Cash flows
Cash flow from operating activities was $1,351 million,
representing a steep year-on-year increase from $791 million.
This was driven by strong improvements in all business areas
on the back of higher earnings and a reduction of net working
capital this quarter versus a build-up of net working capital in
the prior 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 third quarter, 5,244,809 shares were
repurchased on the second trading line for approximately $200
million. ABB’s total number of issued shares, including shares
held in treasury, amounts to 1,882,002,575.
($ millions,
unless otherwise indicated)
Sep. 30
2023
Sep. 30
2022
Dec. 31
2022
Short term debt and current
maturities of long -term debt
2,951
3,068
2,535
Long-term debt
4,899
4,530
5,143
Total debt
7,850
7,598
7,678
Cash & equivalents
3,869
2,365
4,156
Restricted cash - current
18
323
18
Marketable securities and
short-term investments
1,091
793
725
Restricted cash - non-current
–
–
–
Cash and marketable securities
4,978
3,481
4,899
Net debt (cash)*
2,872
4,117
2,779
Net debt (cash)* to EBITDA ratio
0.5
0.7
0.7
Net debt (cash)* to Equity ratio
0.21
0.34
0.21
*
At Sep. 30, 2023, Sep. 30, 2022 and Dec. 31, 2022, net debt(cash) excludes net pension
(assets)/liabilities of $(414) million $(114) million and $(276) million, respectively.
Balance sheet & Cash flow
ABB INTERIM REPORT
I
Q3 2023
Orders and revenues
Demand linked to the medium-voltage offerings noted
strong year-on-year development and more than offset
market softness in parts of the short-cycle business which
was hampered by distributors normalizing inventory levels in
the face of shortening delivery lead times. Total orders
amounted to $3,693 million and declined 2% (up
comparable 1%) impacted by the divestment of the Power
Conversion division early in the quarter.
●
Demand was particularly strong in the datacenters and
chemical, oil & gas segments with a solid development
noted in rail and green energy-linked areas like solar.
However, weakness was noted in construction with the
residential segment down in all three regions while in
commercial construction the United States stood out with
a continued robust momentum and outperformed a
broadly stable Europe and declining China.
●
In Asia, Middle East and Africa orders decreased by 5%
(up comparable 2%) including a slight comparable
improvement in China, where signs of sequential
stabilization emerged towards the latter part of the quarter
outside of the construction segment. The Americas
declined by 2% (up comparable 4%) with United States
down by 2% (up comparable 6%). Europe was stable
(down comparable 3%), including a 6% decline in
Germany where weakness in the residential construction
market weighed on the Smart Buildings division.
●
Revenues amounted to $3,561 million and weakness in
the buildings segment weighed on growth in Smart
Buildings and Installation Products, while the remaining
divisions contributed to revenue growth of 3%
(comparable 6%) with a strong contribution from price as
the key driver.
Profit
Operational EBITA increased by 15% year-on-year and
amounted to $748 million, supported by strong operational
performance which more than offset the absent earnings
from portfolio changes. The Operational EBITA margin
remained sequentially strong at 20.8%, representing an
improvement of 210 basis points year-on-year.
●
Benefits from a strong price execution was the main
driver to the earnings improvement, with some additional
support from operational leverage on slightly higher
volumes.
●
The positive impact from lower commodity costs year-on-
year, was virtually offset by inflation linked to labor.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
3,693
3,772
-2%
1%
11,794
11,797
0%
3%
Order backlog
6,994
6,317
11%
16%
6,994
6,317
11%
16%
Revenues
3,561
3,471
3%
6%
10,886
10,121
8%
11%
Operational EBITA
748
651
15%
2,212
1,768
25%
as % of operational revenues
20.8%
18.7%
+2.1 pts
20.3%
17.4%
+2.9 pts
Cash flow from operating activities
1,051
715
47%
2,143
1,258
70%
No. of employees (FTE equiv.)
50,500
50,500
0%
Growth
Q3
Q3
Change year-on -year
Orders
Revenues
Comparable
1%
6%
FX
0%
1%
Portfolio changes
-3%
-4%
Total
-2%
3%
—
Electrification
ABB INTERIM REPORT
I
Q3 2023
Orders and revenues
Total orders declined due to a high level of larger bookings in
last year’s period. Looking beyond this impact, it was a more
stable development with a strong order momentum reported for
the long-cycle businesses, while weakness was noted in parts
of the short-cycle businesses. Order intake amounted to
$1,886 million, representing a decrease of 4% (7%
comparable).
●
Demand improved in the process-related segments of
chemicals, oil & gas, pulp & paper and mining, however
declined in the more short-cycle segments including HVAC
linked to weakness in construction, food & beverage and
electronics.
●
Order intake increased by 10% (comparable 15%) in Asia,
Middle East and Africa, supported by a double-digit
comparable growth in China. Europe declined sharply by
22% (comparable 28%) mainly due to the Traction-related
high order level last year. The Americas increased by 3%
(down comparable 3%) as the acquired contribution was
more than offset by softness in demand for the low voltage
motors.
●
Execution of the order backlog resulted in high revenues of
$1,947 million, representing an increase of 14% (comparable
11%) year-on-year. Higher volumes and earlier implemented
pricing activities both contributed strongly to comparable
growth.
Profit
All divisions contributed to the strong 28% year-on-year
improvement in Operational EBITA to $390 million, driving the
Operational EBITA margin up by 200 basis points to 19.8%.
●
Results were mainly supported by the benefits from a strong
price execution which more than offset cost inflation related to
labor and raw materials.
●
Higher volume output supported the fixed cost absorption in
production.
●
Strongest profitability improvements were reported in the motor
divisions, with Large Motors & Generators as the outperformer.
●
Divisional mix was slightly positive due to strong deliveries from
the drives and service-related businesses.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
-7%
11%
FX
1%
1%
Portfolio changes
2%
2%
Total
-4%
14%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
1,886
1,966
-4%
-7%
6,285
6,247
1%
1%
Order backlog
5,108
4,613
11%
5%
5,108
4,613
11%
5%
Revenues
1,947
1,702
14%
11%
5,868
4,900
20%
20%
Operational EBITA
390
305
28%
1,157
845
37%
as % of operational revenues
19.8%
17.8%
+2 pts
19.7%
17.2%
+2.5 pts
Cash flow from operating activities
466
268
74%
935
507
84%
No. of employees (FTE equiv.)
22,100
20,700
7%
ABB INTERIM REPORT
I
Q3 2023
Orders and revenues
On a broad robust underlying activity across the customer
segments, with the added contribution of large orders, order
intake reached $1,883 million and increased by 20%
(comparable 38%) year-on-year.
●
Order intake included the booking of an order at a value
of $285 million with fulfillment due over a multi-year
period.
●
The Energy Industries division benefited from strong
demand in the traditional oil & gas segment, but also
seeing high activity levels in low carbon-related areas
such as hydrogen, LNG and carbon capture. One
example of how Energy Industries builds further on its
value creation offer enabling the clean energy transition,
is that it was contracted to support the Danish company
H2 Energy Esbjerg ApS with electrical engineering at its
hydrogen production and distribution hub. The plant will
convert renewable electricity from offshore wind into
about 90,000 tons of green hydrogen per year – the
equivalent of 1.9 million barrels of oil, supporting the
decarbonization of heavy industry and road
transportation.
●
All divisions contributed with a double-digit growth in
revenues, which amounted to $1,554 million, up by 7%
(comparable 23%) year-on-year, supported mainly by
volumes but also by a positive price development. Total
revenue growth was hampered mainly by the absence of
the Accelleron business which was spun-off in early
October 2022, meaning this is the last quarter of structural
impact.
Profit
The Operational EBITA was largely stable year-on-year at
$226 million, the result of a strong revenue execution which
offset the absence of earnings related to the exited
Accelleron business. The Operational EBITA margin
amounted to 14.6%, representing a decline of 70 basis
points as operational improvements did not quite offset the
adverse impact of 190 basis points due to the portfolio
change.
●
Operational EBITA margin remained stable or increased
in all divisions except for a decline in Marine & Ports,
which was somewhat impacted by an adverse mix due to
lower share of revenues stemming from the arctic marine
propulsion business.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
1,883
1,568
20%
38%
5,665
5,079
12%
31%
Order backlog
7,135
6,006
19%
20%
7,135
6,006
19%
20%
Revenues
1,554
1,458
7%
23%
4,543
4,493
1%
19%
Operational EBITA
226
225
0%
670
645
4%
as % of operational revenues
14.6%
15.3%
-0.7 pts
14.7%
14.2%
+0.5 pts
Cash flow from operating activities
258
217
19%
558
470
19%
No. of employees (FTE equiv.)
20,900
22,400
-6%
Growth
Q3
Q3
Change year-on -year
Orders
Revenues
Comparable
38%
23%
FX
2%
1%
Portfolio changes
-20%
-17%
Total
20%
7%
—
Process Automation
ABB INTERIM REPORT
I
Q3 2023
Orders and revenues
With both divisions in negative growth, total orders declined
by 26% (comparable 27%), weighed down by normalizing
order patterns and weakening of the Chinese robotics market.
Although it is difficult to exactly assess, we expect these
pressures to persist also in the next couple of quarters.
●
In Machine Automation order intake was impacted by
customers normalizing order patterns to align with
shortening delivery lead times, and awaiting deliveries from
the Machine Automation order backlog which extends into
the second half of 2024.
●
In the Robotics division, orders declined at a mid-single
digit rate. This was driven by a sequential softening of the
underlying Chinese market, with some additional pressure
from local inventory reductions among channel partners
outside of the automotive segment. Outside of China
demand was more resilient with growth in the United States
and the decline in Europe limited to a mid-single digit rate.
●
From a geographical perspective, orders in the Americas
declined by 10% (12% comparable). The decline in Europe
was 35% (comparable 38%) triggered by machine
automation-related customers normalizing order patterns. In
Asia, Middle East and Africa orders declined by 20%
(comparable 17%), hampered by China being down by 32%
(comparable 28%) weighed down mainly by robotics-related
channel partners adjusting inventories.
●
Revenues increased in both divisions as the order backlog
was executed and amounted to $929 million, an
improvement of 12% (comparable 9%), supported by
positive impacts from both price and volumes.
Profit
Steep improvement of 29% in Operational EBITA to
$137 million was supported by both divisions, and Operational
EBITA margin was up by 190 basis points and reached 14.7%.
●
Higher gross margin was the key contributor to the strong
earnings improvement, mainly supported by positive impacts
from earlier implemented price increases and improved
operational execution, which more than offset the impacts
from higher labor costs as well as increased spend in
Research & Development.
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
9M 2023
9M 2022
US$
Comparable
Orders
665
901
-26%
-27%
2,516
3,318
-24%
-22%
Order backlog
2,363
2,659
-11%
-14%
2,363
2,659
-11%
-14%
Revenues
929
828
12%
9%
2,788
2,290
22%
23%
Operational EBITA
137
106
29%
418
215
94%
as % of operational revenues
14.7%
12.8%
+1.9 pts
15.0%
9.4%
+5.6 pts
Cash flow from operating activities
92
82
12%
266
109
144%
No. of employees (FTE equiv.)
11,000
10,700
3%
Growth
Q3
Q3
Change year-on -year
Orders
Revenues
Comparable
-27%
9%
FX
1%
3%
Portfolio changes
0%
0%
Total
-26%
12%
—
Robotics & Discrete Automation
ABB INTERIM REPORT
I
Q3 2023
10
Quarterly highlights
●
ABB was upgraded from AA to AAA in the MSCI ESG
rating. ESG ratings from MSCI ESG Research are
designed to measure a company’s resilience to financially
material environmental, societal and governance (ESG)
risks. Achieving the highest possible rating of AAA, ABB
ranks in the top ten percent of industry peers.
●
As part of its commitment to increase the circularity of its
low-voltage solutions, ABB expanded its portfolio of
electrification products that are made of sustainable
plastics in the Nordics, Germany and Spain. ABB’s Smart
Buildings division is progressively substituting about
1,000 tonnes per year of conventional fossil-based
plastics with sustainable alternatives including
mechanically recycled or bio-based plastics.
●
ABB’s Motion business area and WindESCo have signed
a strategic partnership, where ABB has acquired a
minority stake in the company. US-based WindESCo is
the leading analytics software provider for improving the
performance and reliability of wind turbines. Leveraging
WindESCo’ solutions, the investment will strengthen
ABB’s position as a key enabler of a low carbon society
and its position in the renewable power generation sector.
●
ABB will deliver complete power, propulsion and
automation systems for two newbuild short-sea container
ships of global logistics company Samskip Group. The
vessels will be among the world’s first of their kind to use
hydrogen as a fuel. Both vessels will be operating between
Oslo Fjord and Rotterdam, a distance of approximately 700
nautical miles.
●
ABB has expanded its large robot range with four new
models and 22 variants offering more choice, increased
coverage and greater performance. The next generation
models offer customers superior performance and up to
20% energy savings thanks to their lighter robot design and
use of regenerative braking.
●
In August and September 2023, ABB organized a range of
courses and trainings for its employees to better
understand the differences between generations, how to
challenge biases, and benefit from intergenerational
collaboration. The events were part of the company’s
commitment to the generations dimension of its D&I
strategy that is focused on ensuring that all generations are
welcomed and skills and strengths are utilized and bridged
across.
Q3 outcome
●
34% reduction year-on-year of CO
₂
e emissions in own
operations mainly driven by shifting to green electricity in
our operations.
●
9% increase year-on-year in LTIFR due to a slight
increase in incidents in absolute numbers .
●
3%-points increase year-on-year in share of women in
senior management, demonstrating steady progress
towards our target.
—
Sustainability
Q3 2023
Q3 2022
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
Ktons scope 1 and 2
1
36
55
-34%
182
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
2
0.15
0.14
9%
0.13
Share of females in senior management
positions, %
20.4
17.4
+3 pts
19.4
1
CO
₂
₆
2
Current quarter Includes all incidents reported until October 5, 2023
ABB INTERIM REPORT
I
Q3 2023
11
During Q3 2023
●
On July 3, ABB announced the closing of the divestment
of the Power Conversion division at around $530 million.
As a result, ABB recorded a non-operational book gain of
$53 million in Income from operations in the third quarter
of 2023. Net cash impact was approximately $500
million. With this transaction, ABB has completed all
divisional portfolio divestments announced at the end of
2020.
The demand for ABB’s offering was robust in the first nine
months of 2023. Weakness in the short-cycle businesses
from last year's high level was offset by strong momentum in
the project- and systems businesses. Orders remained stable
or increased in three out of four business areas, with a
decline noted only in Robotics & Discrete Automation, for a
combined total decrease of 1% (up 4% comparable) at
$26,169 million. Revenues were supported by strong
execution of the order backlog and amounted to
$23,990 million, up by 11% (16% comparable), overall
implying a book-to-bill of 1.09.
Income from operations amounted to $3,755 million, up from
$2,152 million year-on-year. This increase can be attributed
mostly to an improved operational performance. In addition,
the result in the first three quarters last year was hampered by
charges of approximately $195 million due to the exit of a
legacy project in non-core business as well as a provision of
$325 million related to the legacy Kusile project.
Operational EBITA increased by 22% year-on-year to
$4,094 million, up from $3,364 million in last year’s period
and the Operational EBITA margin improved by 150 basis
points to 17.0%. The increase was driven by higher margins
across all business areas. Main drivers of the margin
expansion were operating leverage on higher volumes from
backlog execution as well as the impacts from earlier
implemented price increases, which more than offset
inflation in labor and input cost. Corporate and Other
Operational EBITA amounted to -$363 million. Thereof, an
amount of -$134 million can be attributed to the E-mobility
business, which was negatively affected by the ongoing
reorganization to ensure a more focused portfolio, and
some inventory-related provisions.
Net finance expenses increased by $25 million to
$82 million, whereas non-operational pension credits
decreased by $79 million to $23 million in comparison to
last year’s period, reflecting the impact of higher interest
rates. Income tax expense was $794 million reflecting a tax
rate of 21.5%. This includes a net benefit realized on a
favorable resolution of a prior year tax matter relating to the
Power Grids business in the current year, as well as the
impact of non-deductible regulatory penalties related to the
Kusile project in the prior year.
Net income attributable to ABB was $2,824 million, up from
$1,343 million year-on-year. Basic earnings per share was
$1.52, representing an increase of 116% compared with the
first nine months last year.
Significant events
First nine months 2023
ABB INTERIM REPORT
I
Q3 2023
12
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2023
Electrification
Power Conversion division
3-Jul
~440
1,500
Electrification
Industrial Plugs & Sockets business
3-Jul
~12
2
Process Automation
UK technical engineering consultancy business
1-May
~20
160
2022
Hitachi Energy JV (Power Grids, 19.9% stake)
28-Dec
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
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.
ABB Group
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
Q1 2023
Q2 2023
Q3 2023
EBITDA, $ in million
1,067
794
906
1,384
4,151
1,389
1,494
1,453
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
16.50
n.a.
n.a.
n.a.
Net debt/Equity
0.20
0.34
0.34
0.21
0.21
0.30
0.31
0.21
Net debt/ EBITDA 12M rolling
0.4
0.7
0.7
0.7
0.7
0.9
0.8
0.5
Net working capital, % of 12M rolling revenues
12.1%
12.8%
11.7%
11.1%
11.1%
13.9%
14.7%
12.8%
Earnings per share, basic, $
0.31
0.20
0.19
0.61
1.30
0.56
0.49
0.48
Earnings per share, diluted, $
0.31
0.20
0.19
0.60
1.30
0.55
0.48
0.47
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.84
n.a.
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
32.80
Share price at the end of period, $
1
30.76
25.43
24.41
30.46
30.46
34.30
39.32
35.86
Number of employees (FTE equivalents)
104,720
106,380
106,830
105,130
105,130
106,170
108,320
107,430
No. of shares outstanding at end of period (in
millions)
1,929
1,892
1,875
1,865
1,865
1,862
1,860
1,849
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
~(100)
from ~(130)
Effective tax rate
~21%
unchanged
Capital Expenditures
~(800)
unchanged
($ in millions, unless otherwise stated)
FY 2023
1
Q4 2023
Corporate and Other Operational EBITA
2
~(300)
~(75)
unchanged
Non-operating items
Acquisition-related amortization
~(220)
~(55)
unchanged
Restructuring and related
3
~(180)
~(40)
from ~(150)
ABB Way transformation
~(180)
~(55)
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 and integration 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 and divestments, last twelve months
ABB INTERIM REPORT
I
Q3 2023
13
For additional information please contact:
Media Relations
Phone: +41 43 317 71 11
Email:
media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317 71 11
Email:
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Financial calendar
2023
November 30 Capital Markets Day in Frosinone, Italy
2024
February 1
Q4 and FY 2023 results
March 21
Annual General Meeting, Zurich
April 18 Q1 2024 results
July 18 Q2 2024 results
October 17 Q3 2024 results
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,” and
“Sustainability”. 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,”
“guidance,” “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 Q3 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 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
Q3 results presentation on October 18, 2023
ABB
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
Q3 2023 FINANCIAL INFORMATION
October 18, 2023
Q3 2023
Financial information
2
Q3 2023 FINANCIAL INFORMATION
—
Financial
Information
Contents
03
─ 07 Key Figures
08 ─
33 Consolidated Financial Information (unaudited)
34 ─
46 Supplemental Reconciliations and Definitions
3
Q3 2023 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Comparable
(1)
Orders
8,052
8,188
-2%
2%
Order backlog (end September)
21,445
19,393
11%
11%
Revenues
7,968
7,406
8%
11%
Gross Profit
2,762
2,481
11%
as % of revenues
34.7%
33.5%
+1.2 pts
Income from operations
1,259
708
78%
Operational EBITA
(1)
1,392
1,231
13%
11%
(2)
as % of operational revenues
(1)
17.4%
16.6%
+0.8 pts
Income from continuing operations, net of tax
905
420
115%
Net income attributable to ABB
882
360
145%
Basic earnings per share ($)
0.48
0.19
149%
(3)
Cash flow from operating activities
(4)
1,351
791
71%
Cash flow from operating activities in continuing operations
1,361
793
72%
CHANGE
($ in millions, unless otherwise indicated)
9M 2023
9M 2022
US$
Comparable
(1)
Orders
26,169
26,368
-1%
4%
Revenues
23,990
21,622
11%
16%
Gross Profit
8,366
7,052
19%
as % of revenues
34.9%
32.6%
+2.3 pts
Income from operations
3,755
2,152
74%
Operational EBITA
(1)
4,094
3,364
22%
22%
(2)
as % of operational revenues
(1)
17.0%
15.5%
+1.5 pts
Income from continuing operations, net of tax
2,902
1,469
98%
Net income attributable to ABB
2,824
1,343
110%
Basic earnings per share ($)
1.52
0.70
116%
(3)
Cash flow from operating activities
(4)
2,393
600
299%
Cash flow from operating activities in continuing operations
2,404
614
n.a.
(1) For a reconciliation of non-GAAP measures see “
” on page 34.
(2) Constant currency (not adjusted for portfolio changes).
(3) EPS growth rates are computed using unrounded amounts.
(4) Cash flow from operating activit ies includes both continuing and discontinued operations.
4
Q3 2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q3 2023
Q3 2022
US$
Local
Comparable
Orders
ABB Group
8,052
8,188
-2%
-2%
2%
Electrification
3,693
3,772
-2%
-2%
1%
Motion
1,886
1,966
-4%
-5%
-7%
Process Automation
1,883
1,568
20%
18%
38%
Robotics & Discrete Automation
665
901
-26%
-27%
-27%
Corporate and Other
135
147
Intersegment eliminations
(210)
(166)
Order backlog (end September)
ABB Group
21,445
19,393
11%
8%
11%
Electrification
6,994
6,317
11%
9%
16%
Motion
5,108
4,613
11%
6%
5%
Process Automation
7,135
6,006
19%
16%
20%
Robotics & Discrete Automation
2,363
2,659
-11%
-14%
-14%
Corporate and Other
(incl. intersegment eliminations)
(155)
(202)
Revenues
ABB Group
7,968
7,406
8%
7%
11%
Electrification
3,561
3,471
3%
2%
6%
Motion
1,947
1,702
14%
13%
11%
Process Automation
1,554
1,458
7%
6%
23%
Robotics & Discrete Automation
929
828
12%
9%
9%
Corporate and Other
194
141
Intersegment eliminations
(217)
(194)
Income from operations
ABB Group
1,259
708
Electrification
762
616
Motion
365
291
Process Automation
218
154
Robotics & Discrete Automation
113
81
Corporate and Other
(incl. intersegment eliminations)
(199)
(434)
Income from operations %
ABB Group
15.8%
9.6%
Electrification
21.4%
17.7%
Motion
18.7%
17.1%
Process Automation
14.0%
10.6%
Robotics & Discrete Automation
12.2%
9.8%
Operational EBITA
ABB Group
1,392
1,231
13%
11%
Electrification
748
651
15%
14%
Motion
390
305
28%
25%
Process Automation
226
225
0%
0%
Robotics & Discrete Automation
137
106
29%
27%
Corporate and Other
(1)
(incl. intersegment eliminations)
(109)
(56)
Operational EBITA %
ABB Group
17.4%
16.6%
Electrification
20.8%
18.7%
Motion
19.8%
17.8%
Process Automation
14.6%
15.3%
Robotics & Discrete Automation
14.7%
12.8%
Cash flow from operating activities
ABB Group
1,351
791
Electrification
1,051
715
Motion
466
268
Process Automation
258
217
Robotics & Discrete Automation
92
82
Corporate and Other
(incl. intersegment eliminations)
(506)
(489)
Discontinued operations
(10)
(2)
(1)
Corporate and Other at Q3 2023 and Q3 2022 includes losses of $39 million and $4 million, respectively, relating to E-mobility.
5
Q3 2023 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
9M 2023
9M 2022
US$
Local
Comparable
Orders
ABB Group
26,169
26,368
-1%
1%
4%
Electrification
11,794
11,797
0%
2%
3%
Motion
6,285
6,247
1%
2%
1%
Process Automation
5,665
5,079
12%
14%
31%
Robotics & Discrete Automation
2,516
3,318
-24%
-22%
-22%
Corporate and Other
595
530
Intersegment eliminations
(686)
(603)
Order backlog (end September)
ABB Group
21,445
19,393
11%
8%
11%
Electrification
6,994
6,317
11%
9%
16%
Motion
5,108
4,613
11%
6%
5%
Process Automation
7,135
6,006
19%
16%
20%
Robotics & Discrete Automation
2,363
2,659
-11%
-14%
-14%
Corporate and Other
(incl. intersegment eliminations)
(155)
(202)
Revenues
ABB Group
23,990
21,622
11%
13%
16%
Electrification
10,886
10,121
8%
10%
11%
Motion
5,868
4,900
20%
22%
20%
Process Automation
4,543
4,493
1%
3%
19%
Robotics & Discrete Automation
2,788
2,290
22%
23%
23%
Corporate and Other
540
395
Intersegment eliminations
(635)
(577)
Income from operations
ABB Group
3,755
2,152
Electrification
2,130
1,571
Motion
1,098
776
Process Automation
688
480
Robotics & Discrete Automation
347
146
Corporate and Other
(incl. intersegment eliminations)
(508)
(821)
Income from operations %
ABB Group
15.7%
10.0%
Electrification
19.6%
15.5%
Motion
18.7%
15.8%
Process Automation
15.1%
10.7%
Robotics & Discrete Automation
12.4%
6.4%
Operational EBITA
ABB Group
4,094
3,364
22%
22%
Electrification
2,212
1,768
25%
27%
Motion
1,157
845
37%
38%
Process Automation
670
645
4%
6%
Robotics & Discrete Automation
418
215
94%
98%
Corporate and Other
(1)
(incl. intersegment eliminations)
(363)
(109)
Operational EBITA %
ABB Group
17.0%
15.5%
Electrification
20.3%
17.4%
Motion
19.7%
17.2%
Process Automation
14.7%
14.2%
Robotics & Discrete Automation
15.0%
9.4%
Cash flow from operating activities
ABB Group
2,393
600
Electrification
2,143
1,258
Motion
935
507
Process Automation
558
470
Robotics & Discrete Automation
266
109
Corporate and Other
(incl. intersegment eliminations)
(1,498)
(1,730)
Discontinued operations
(11)
(14)
(1)
Corporate and Other at 9M 2023 and 9M 2022 includes losses of $134 million and $12 million, respectively, relating to E-mobility.
6
Q3 2023 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Revenues
7,968
7,406
3,561
3,471
1,947
1,702
1,554
1,458
929
828
Foreign exchange/commodity timing
differences in total revenues
51
23
32
3
23
9
(7)
14
2
(1)
Operational revenues
8,019
7,429
3,593
3,474
1,970
1,711
1,547
1,472
931
827
Income from operations
1,259
708
762
616
365
291
218
154
113
81
Acquisition-related amortization
55
55
22
24
9
8
1
1
20
19
Restructuring, related and
implementation costs
(1)
51
20
14
8
3
3
3
1
–
6
Changes in obligations related to
divested businesses
–
–
–
–
–
–
–
–
–
–
Gains and losses from sale of businesses
(71)
–
(71)
(1)
–
1
–
–
–
–
Acquisition- and divestment -related
expenses and integration costs
10
62
4
3
3
4
(4)
53
3
1
Certain other non-operational items
49
381
2
7
1
–
–
–
1
1
Foreign exchange/commodity timing
differences in income from operations
39
5
15
(6)
9
(2)
8
16
–
(2)
Operational EBITA
1,392
1,231
748
651
390
305
226
225
137
106
Operational EBITA margin (%)
17.4%
16.6%
20.8%
18.7%
19.8%
17.8%
14.6%
15.3%
14.7%
12.8%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
Revenues
23,990
21,622
10,886
10,121
5,868
4,900
4,543
4,493
2,788
2,290
Foreign exchange/commodity timing
differences in total revenues
25
90
12
11
12
8
3
45
2
5
Operational revenues
24,015
21,712
10,898
10,132
5,880
4,908
4,546
4,538
2,790
2,295
Income from operations
3,755
2,152
2,130
1,571
1,098
776
688
480
347
146
Acquisition-related amortization
164
174
66
80
26
23
4
3
59
59
Restructuring, related and
implementation costs
(1)
92
300
26
18
5
11
7
6
–
9
Changes in obligations related to
divested businesses
(5)
(17)
1
–
–
–
–
–
–
–
Gains and losses from sale of businesses
(97)
4
(71)
(1)
–
5
(26)
–
–
–
Acquisition- and divestment -related
expenses and integration costs
55
171
23
31
15
12
(3)
122
7
4
Certain other non-operational items
89
480
11
30
4
–
–
–
4
–
Foreign exchange/commodity timing
differences in income from operations
41
100
26
39
9
18
–
34
1
(3)
Operational EBITA
4,094
3,364
2,212
1,768
1,157
845
670
645
418
215
Operational EBITA margin (%)
17.0%
15.5%
20.3%
17.4%
19.7%
17.2%
14.7%
14.2%
15.0%
9.4%
(1) Includes impairment of certain assets.
7
Q3 2023 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Q3 23
Q3 22
Depreciation
130
129
64
62
27
25
12
17
14
16
Amortization
64
69
27
30
11
8
2
2
21
19
including total acquisition-related amortization of:
55
55
22
24
9
8
1
1
20
19
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
9M 23
9M 22
Depreciation
384
401
190
191
80
78
35
51
43
46
Amortization
197
214
81
98
31
26
7
8
61
60
including total acquisition-related amortization of:
164
174
66
80
26
23
4
3
59
59
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q3 23
Q3 22
US$
Local
parable
Q3 23
Q3 22
US$
Local
parable
Europe
2,391
2,682
-11%
-16%
-13%
2,810
2,494
13%
6%
10%
The Americas
3,258
2,980
9%
8%
13%
2,775
2,452
13%
12%
16%
of which United States
2,479
2,294
8%
7%
13%
2,067
1,796
15%
15%
19%
Asia, Middle East and Africa
2,403
2,526
-5%
0%
4%
2,383
2,460
-3%
2%
6%
of which China
1,044
1,166
-10%
-5%
-3%
1,075
1,300
-17%
-13%
-10%
ABB Group
8,052
8,188
-2%
-2%
2%
7,968
7,406
8%
7%
11%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
9M 23
9M 22
US$
Local
parable
9M 23
9M 22
US$
Local
parable
Europe
8,904
9,174
-3%
-3%
0%
8,617
7,520
15%
14%
17%
The Americas
9,452
8,927
6%
5%
8%
8,243
7,018
17%
17%
20%
of which United States
6,928
6,753
3%
2%
5%
6,143
5,124
20%
20%
23%
Asia, Middle East and Africa
7,813
8,267
-5%
1%
5%
7,130
7,084
1%
7%
12%
of which China
3,593
4,114
-13%
-7%
-5%
3,404
3,563
-4%
1%
4%
ABB Group
26,169
26,368
-1%
1%
4%
23,990
21,622
11%
13%
16%
8
Q3 2023 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Nine months ended
Three months ended
($ in millions, except per share data in $)
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Sales of products
20,210
17,946
6,680
6,184
Sales of services and other
3,780
3,676
1,288
1,222
Total revenues
23,990
21,622
7,968
7,406
Cost of sales of products
(13,393)
(12,439)
(4,447)
(4,217)
Cost of services and other
(2,231)
(2,131)
(759)
(708)
Total cost of sales
(15,624)
(14,570)
(5,206)
(4,925)
Gross profit
8,366
7,052
2,762
2,481
Selling, general and administrative expenses
(4,058)
(3,833)
(1,331)
(1,277)
Non-order related research and development expenses
(951)
(844)
(314)
(272)
Other income (expense), net
398
(223)
142
(224)
Income from operations
3,755
2,152
1,259
708
Interest and dividend income
115
50
37
17
Interest and other finance expense
(197)
(107)
(73)
(45)
Non-operational pension (cost) credit
23
102
8
34
Income from continuing operations before taxes
3,696
2,197
1,231
714
Income tax expense
(794)
(728)
(326)
(294)
Income from continuing operations, net of tax
2,902
1,469
905
420
Loss from discontinued operations, net of tax
(16)
(36)
(7)
(16)
Net income
2,886
1,433
898
404
Net income attributable to noncontrolling interests and
redeemable noncontrolling interests
(62)
(90)
(16)
(44)
Net income attributable to ABB
2,824
1,343
882
360
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,840
1,379
889
376
Loss from discontinued operations, net of tax
(16)
(36)
(7)
(16)
Net income
2,824
1,343
882
360
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.53
0.72
0.48
0.20
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.52
0.70
0.48
0.19
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.52
0.72
0.48
0.20
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.51
0.70
0.47
0.19
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,859
1,909
1,854
1,882
Diluted earnings per share attributable to ABB shareholders
1,871
1,920
1,865
1,889
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Total comprehensive income, net of tax
2,729
775
815
67
Total comprehensive income attributable to noncontrolling interests and
redeemable noncontrolling interests, net of tax
(54)
(58)
(11)
(32)
Total comprehensive income attributable to ABB shareholders, net of tax
2,675
717
804
35
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Sep. 30, 2023
Dec. 31, 2022
Cash and equivalents
3,869
4,156
Restricted cash
18
18
Marketable securities and short-term investments
1,091
725
Receivables, net
7,586
6,858
Contract assets
1,073
954
Inventories, net
6,332
6,028
Prepaid expenses
280
230
Other current assets
527
505
Current assets held for sale and in discontinued operations
60
96
Total current assets
20,836
19,570
Property, plant and equipment, net
3,891
3,911
Operating lease right -of-use assets
850
841
Investments in equity -accounted companies
186
130
Prepaid pension and other employee benefits
969
916
Intangible assets, net
1,181
1,406
Goodwill
10,356
10,511
Deferred taxes
1,366
1,396
Other non-current assets
464
467
Total assets
40,099
39,148
Accounts payable, trade
4,777
4,904
Contract liabilities
2,610
2,216
Short-term debt and current maturities of long-term debt
2,951
2,535
Current operating leases
234
220
Provisions for warranties
1,108
1,028
Other provisions
1,114
1,171
Other current liabilities
4,597
4,323
Current liabilities held for sale and in discontinued operations
79
132
Total current liabilities
17,470
16,529
Long-term debt
4,899
5,143
Non-current operating leases
643
651
Pension and other employee benefits
642
719
Deferred taxes
675
729
Other non-current liabilities
1,908
2,085
Non-current liabilities held for sale and in discontinued operations
19
20
Total liabilities
26,256
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 September 30, 2023, and December 31, 2022, respectively)
163
171
Additional paid-in capital
19
141
Retained earnings
18,840
20,082
Accumulated other comprehensive loss
(4,705)
(4,556)
Treasury stock, at cost
(33 million and 100 million shares at September 30, 2023, and December 31, 2022, respectively)
(1,111)
(3,061)
Total ABB stockholders’ equity
13,206
12,777
Noncontrolling interests
548
410
Total stockholders’ equity
13,754
13,187
Total liabilities and stockholders’ equity
40,099
39,148
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Operating activities:
Net income
2,886
1,433
898
404
Loss from discontinued operations, net of tax
16
36
7
16
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
581
615
194
198
Changes in fair values of investments
(28)
(39)
(4)
(24)
Pension and other employee benefits
(67)
(107)
(55)
(24)
Deferred taxes
(42)
(183)
(79)
(35)
Loss from equity -accounted companies
11
100
4
38
Net loss (gain) from derivatives and foreign exchange
(44)
44
10
(33)
Net gain from sale of property, plant and equipment
(39)
(64)
(6)
(9)
Net loss (gain) from sale of businesses
(97)
4
(71)
–
Other
115
61
23
(2)
Changes in operating assets and liabilities:
Trade receivables, net
(819)
(657)
(152)
(36)
Contract assets and liabilities
243
353
164
101
Inventories, net
(438)
(1,667)
12
(584)
Accounts payable, trade
(37)
390
(35)
177
Accrued liabilities
140
52
342
307
Provisions, net
106
312
50
186
Income taxes payable and receivable
(9)
19
77
71
Other assets and liabilities, net
(74)
(88)
(18)
42
Net cash provided by operating activities – continuing operations
2,404
614
1,361
793
Net cash used in operating activities – discontinued operations
(11)
(14)
(10)
(2)
Net cash provided by operating activities
2,393
600
1,351
791
Investing activities:
Purchases of investments
(1,103)
(271)
(343)
(15)
Purchases of property, plant and equipment and intangible assets
(506)
(503)
(175)
(165)
Acquisition of businesses (net of cash acquired)
and increases in cost- and equity-accounted companies
(160)
(226)
(25)
(47)
Proceeds from sales of investments
598
654
422
148
Proceeds from maturity of investments
138
–
–
–
Proceeds from sales of property, plant and equipment
67
85
10
19
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost- and equity-accounted companies
552
(8)
509
5
Net cash from settlement of foreign currency derivatives
(76)
(154)
(58)
(210)
Changes in loans receivable, net
8
11
7
2
Other investing activities
9
(10)
–
7
Net cash provided by (used in) investing activities – continuing operations
(473)
(422)
347
(256)
Net cash provided by (used in) investing activities – discontinued operations
(22)
(91)
(1)
–
Net cash provided by (used in) investing activities
(495)
(513)
346
(256)
Financing activities:
Net changes in debt with original maturities of 90 days or less
(997)
1,475
(962)
284
Increase in debt
2,584
3,554
936
373
Repayment of debt
(1,437)
(2,025)
(309)
(542)
Delivery of shares
118
389
22
19
Purchase of treasury stock
(909)
(3,251)
(433)
(590)
Dividends paid
(1,713)
(1,698)
–
–
Dividends paid to noncontrolling shareholders
(89)
(83)
(6)
(7)
Proceeds from issuance of subsidiary shares
328
–
–
–
Other financing activities
4
(58)
4
(5)
Net cash used in financing activities – continuing operations
(2,111)
(1,697)
(748)
(468)
Net cash provided by financing activities – discontinued operations
–
–
–
–
Net cash used in financing activities
(2,111)
(1,697)
(748)
(468)
Effects of exchange rate changes on cash and equivalents and restricted cash
(74)
(191)
(32)
(115)
Adjustment for the net change in cash and equivalents and restricted cash
in Assets held for sale
–
–
28
–
Net change in cash and equivalents and restricted cash
(287)
(1,801)
945
(48)
Cash and equivalents and restricted cash, beginning of period
4,174
4,489
2,942
2,736
Cash and equivalents and restricted cash, end of period
3,887
2,688
3,887
2,688
Supplementary disclosure of cash flow information:
Interest paid
151
47
43
11
Income taxes paid
865
907
338
269
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12
Q3 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)
1,343
1,343
93
1,436
Foreign currency translation
adjustments, net of tax of $1
(774)
(774)
(32)
(806)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(6)
(24)
(24)
(24)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $57
172
172
172
Change in derivative instruments
and hedges, net of tax of $3
–
–
–
Changes in noncontrolling interests
(3)
(3)
(22)
(25)
Dividends to
noncontrolling shareholders
–
(81)
(81)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
33
33
33
Purchase of treasury stock
(3,201)
(3,201)
(3,201)
Delivery of shares
(46)
(130)
565
389
389
Other
7
7
7
Balance at September 30, 2022
171
9
19,127
(4,715)
(2,770)
11,822
336
12,158
Balance at January 1, 2023
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
Net income
(1)
2,824
2,824
65
2,889
Foreign currency translation
adjustments, net of tax of $0
(177)
(177)
(8)
(185)
Effect of change in fair value of
available-for-sale securities,
net of tax of $1
6
6
6
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $8
19
19
19
Change in derivative instruments
and hedges, net of tax of $0
3
3
3
Issuance of subsidiary shares
170
170
168
338
Other changes in
noncontrolling interests
(7)
(7)
5
(2)
Dividends to
noncontrolling shareholders
–
(93)
(93)
Dividends to shareholders
(1,706)
(1,706)
(1,706)
Cancellation of treasury shares
(7)
(201)
(2,359)
2,567
–
–
Share-based payment arrangements
82
82
1
83
Purchase of treasury stock
(898)
(898)
(898)
Delivery of shares
(163)
281
118
118
Other
(4)
(4)
(4)
Balance at September 30, 2023
163
19
18,840
(4,705)
(1,111)
13,206
548
13,754
(1)
Amounts attributable to noncontrolling interests for the nine months ended September 30, 2023 and 2022, exclude net losses of $3 million and $3 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
Q3 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 rece ivables, 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 ass umptions 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
Q3 2023 FINANCIAL INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Disclosure about supplier finance program obligations
In January 202 3, 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 September 30, 2023 and
December 31, 2022, amounted to $448 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 202 3, 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 nine and three months ended September 30, 2023, the Company has recognized within its continuing operations, general and
administrative expenses incurred to perform the TSAs, offset by $114 million and $38 million in TSA-related income for such services that is reported in Other
income (expense), net. In the nine and three months ended September 30, 2022, the Company has recognized within its continuing operations, general and
administrative expenses incurred to perform the TSAs, offset by $115 million and $39 million in TSA-related income for such services that is reported in Other
income (expense), net.
Discontinued op erations
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 busin ess activities of the Power Grids business being executed by the Company are 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 September 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 balanc es amounted to
$60 million of current assets, $79 million of current liabilities and $19 million of non-current liabilities.
15
Q3 2023 FINANCIAL INFORMATION
─
Note 4
Acquisitions and equity -accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Nine months ended September 30,
Three months ended September 30,
($ in millions, except number of acquired businesses)
2023
2022
2023
2022
Purchase price for acquisitions (net of cash acquired)
(1)
115
150
1
12
Aggregate excess of purchase price over
fair value of net assets acquired
(2)
55
205
1
14
Number of acquired businesses
3
3
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 nine
months ended September 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 acquisi tion.
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 nine months ended September 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.
Business divestments
In the nine and three months ended September 30, 2023, the Company received proceeds (net of transaction costs and cash disposed) of $552 million and
$509 million, respectively, relating to divestments of consolidated businesses and recorded gains of $97 million and $71 million, respectively, in “Other income
(expense), net” on the sale of such businesses. These are primarily due the divestment of the Company’s Power Conversion Division to AcBel Polytech Inc., which
prior to its sale was part of the Company’s Electrification operating segment. Certain amounts included in the net gain for the sale of Power Conversion Division
are estimated or otherwise subject to change in value and, as a result, the Company may record additional adjustments to the gain in future periods which are not
expected to have a material impact on the consolidated financial statements.
Investments in equity -accounted companies
In connection with the divestment of its Power Grids business to Hitachi in 2020 (see Note 3), the Company initially retained a 19.9 percent interest in the business
until December 2022, when the retained investment was sold to Hitachi. During the Company’s period of ownership of the retained 19.9 percent interest, based on
its continuing involvement with the Power Grids business, including the membership in its governing board of directors, the Company concluded that it had
significant influence over Hitachi Energy. As a result, the investment was accounted for using the equity method through to the date of its sale.
In the nine and three months ended September 30, 2023 and 2022, the Company recorded its share of the earnings of investees accounted for under the equity
method of accounting in Other income (expense), net, as follows:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Loss from equity -accounted companies, net of taxes
(11)
(34)
(4)
(24)
Basis difference amortization (net of deferred income tax benefit)
–
(66)
–
(14)
Loss from equity -accounted companies
(11)
(100)
(4)
(38)
16
Q3 2023 FINANCIAL INFORMATION
─
Note 5
Cash and equivalents , marketable securities and short-term investments
Cash and equivalents, marketable securities and short-term investments consisted of the following:
September 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
1,425
1,425
1,425
Time deposits
2,709
2,709
2,462
247
Equity securities
620
24
644
644
4,754
24
–
4,778
3,887
891
Changes in fair value recorded
in other comprehensive income
Debt securities available -for-sale:
U.S. government obligations
200
1
(13)
188
188
European government obligations
12
12
12
212
1
(13)
200
–
200
Total
4,966
25
(13)
4,978
3,887
1,091
Of which:
Restricted cash, current
18
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
Q3 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 managemen t 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)
September 30, 2023
December 31, 2022
September 30, 2022
Foreign exchange contracts
13,090
13,509
15,501
Embedded foreign exchange derivatives
1,291
933
864
Cross-currency interest rate swaps
849
855
781
Interest rate contracts
1,751
2,830
2,598
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 derivat ive
Unit
Total notional amounts at
September 30, 2023
December 31, 2022
September 30, 2022
Copper swaps
metric tonnes
32,223
29,281
36,264
Silver swaps
ounces
1,702,359
2,012,213
2,787,909
Steel swaps
metric tonnes
11,476
–
–
Aluminum swaps
metric tonnes
5,800
6,825
6,925
Equity derivatives
At September 30, 2023, December 31, 2022, and September 30, 2022, the Company held 3 million, 8 million and 8 million cash-settled call options indexed to ABB
Ltd shares (conversion ratio 5:1) with a total fair value of $9 million, $15 million and $11 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to
manage its commodity risks and cash -settled call options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their fair value is recorded in “Accumulated other comprehensive loss” and subsequently reclassified into
earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. For the nine and three months ended September 30,
2023 and 2022, there were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”.
18
Q3 2023 FINANCIAL INFORMATION
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
30
(83)
12
(28)
Hedged item
(31)
85
(13)
29
Cross-currency interest rate swaps
Designated as fair value hedges
(13)
(125)
(3)
(31)
Hedged item
2
119
2
29
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
Nine months ended September 30,
Three months ended September 30,
($ in millions)
Location
2023
2022
2023
2022
Foreign exchange contracts
Total revenues
(13)
(201)
(18)
(82)
Total cost of sales
(20)
57
(8)
23
SG&A expenses
(1)
24
35
10
12
Non-order related research
(4)
and development
2
(3)
1
Interest and other finance expense
(16)
(139)
46
(85)
Embedded foreign exchange
Total revenues
39
12
(6)
7
contracts
Total cost of sales
–
(12)
1
(10)
Commodity contracts
Total cost of sales
(7)
(72)
8
(21)
Other
Interest and other finance expense
1
4
–
1
Total
4
(314)
30
(154)
(1) SG&A expenses represent “Selling, general and administrative expenses”.
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
September 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
1
Interest rate contracts
–
–
32
–
Cross-currency interest rate swaps
–
–
–
304
Cash-settled call options
9
–
–
–
Total
9
–
36
305
Derivatives not designated as hedging instruments:
Foreign exchange contracts
179
17
91
16
Commodity contracts
3
–
8
–
Interest rate contracts
1
–
4
–
Other equity contracts
9
–
–
–
Embedded foreign exchange derivatives
26
10
22
4
Total
218
27
125
20
Total fair value
227
27
161
325
19
Q3 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 September 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 September 30, 2023, and December 31,
2022, information related to these offsett ing arrangements was as follows:
($ in millions)
September 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
218
(70)
–
–
148
Total
218
(70)
–
–
148
($ in millions)
September 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
460
(70)
–
–
390
Total
460
(70)
–
–
390
($ 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
Q3 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 nature of
those inputs. The Company has categorized its finan cial 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 valuati on 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:
September 30, 2023
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
–
644
–
644
Debt securities—U.S. government obligations
188
–
–
188
Debt securities—European government obligations
12
–
–
12
Derivative assets —current in “Other current assets”
–
227
–
227
Derivative assets —non-current in “Other non-current assets”
–
27
–
27
Total
200
898
–
1,098
Liabilities
Derivative liabilities —current in “Other current liabilities”
–
161
–
161
Derivative liabilities —non-current in “Other non-current liabilities”
–
325
–
325
Total
–
486
–
486
21
Q3 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 nine and three months ended September 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:
September 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
1,407
1,407
–
–
1,407
Time deposits
2,462
–
2,462
–
2,462
Restricted cash
18
18
–
–
18
Marketable securities and short-term investments
(excluding securities):
Time deposits
247
–
247
–
247
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
2,923
2,380
543
–
2,923
Long-term debt (excluding finance lease obligations)
4,768
4,618
13
–
4,631
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
Q3 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)
September 30, 2023
December 31, 2022
September 30, 2022
Contract assets
1,073
954
955
Contract liabilities
2,610
2,216
2,115
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 recognized.
The significant changes in the Contract assets and Contract liabilities balances were as follows:
Nine months ended September 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
(1,230)
(923)
Additions to Contract liabilities - excluding amounts recognized as revenue during the period
1,602
1,320
Receivables recognized that were included in the Contract assets balance at Jan 1, 2023/2022
(553)
(501)
The Company considers its order backlog to represent its unsatisfied performance obligations. At September 30, 2023, the Company had unsatisfied performance
obligations totaling $21,445 million and, of this amount, the Company expects to fulfill approximately 30% percent of the obligations in 2023, approximately 49%
percent of the obligations in 2024 and the balance thereafter.
23
Q3 2023 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s total debt at September 30, 2023, and December 31, 2022, amounted to $7,850 million and $7,678 million, respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and cu rrent maturities of long-term debt” consisted of the following:
($ in millions)
September 30, 2023
December 31, 2022
Short-term debt
568
1,448
Current maturities of long-term debt
2,383
1,087
Total
2,951
2,535
Short-term debt primarily represented issued commercial paper and short-term bank borrowings from various banks. At September 30, 2023, and December 31,
2022, $486 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 September 30, 2023, or at December 31, 2022 .
In September 2023, the Company repaid at maturity its CHF 275 million 0% Bonds, equivalent to $302 million on date of repayment. In May 2023, the Company
repaid at 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 September 30, 2023, and December 31, 2022, amounted to $4,899 million and $5,143 million, respectively.
Outstanding bonds (including maturities within the next 12 months) were as follows:
September 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
$
298
0.625% EUR Instruments, due 2024
EUR
700
$
729
EUR
700
$
720
Floating Rate EUR Instruments, due 2024
EUR
500
$
531
EUR
500
$
536
0.75% EUR Instruments, due 2024
EUR
750
$
777
EUR
750
$
769
0.3% CHF Bonds, due 2024
CHF
280
$
307
CHF
280
$
303
2.1% CHF Bonds, due 2025
CHF
150
$
164
CHF
150
$
162
1.965% CHF Bonds, due 2026
CHF
325
$
356
3.25% EUR Instruments, due 2027
EUR
500
$
527
0.75% CHF Bonds, due 2027
CHF
425
$
466
CHF
425
$
460
3.8% USD Notes, due 2028
(2)
USD
383
$
382
USD
383
$
381
1.9775% CHF Bonds, due 2028
CHF
150
$
165
1.0% CHF Bonds, due 2029
CHF
170
$
186
CHF
170
$
184
0% EUR Instruments, due 2030
EUR
800
$
670
EUR
800
$
677
2.375% CHF Bonds, due 2030
CHF
150
$
164
CHF
150
$
162
3.375% EUR Instruments, due 2031
EUR
750
$
783
2.1125% CHF Bonds, due 2033
CHF
275
$
301
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
590
Total
$
7,098
$
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).
In September 2023, the Company issued the following CHF Bonds: (i) CHF 325 million of 1.965 percent Bond s, due 2026, (ii) CHF 150 million of 1.9775 percent
Bonds, due 2028 , and (iii) CHF 275 million of 2.1125 percent Bonds, due 2033, all paying interest annually in arrears. The aggregate net proceeds of these CHF
Bonds, after fees, amounted to CHF 748 million (equivalent to approximately $825 million on date of issuance).
24
Q3 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 September 30, 2023, and December 31, 2022, the Company had aggregate liabilities of $94 million and $86 million, respectively, included in “Other provisions”
and “Other non
‑
current liabilities”, for the above regulatory, compliance and legal contingencies, and none of the individual liabilities recognized was significant. As
it is not possible to make an informed judgment on, or reasonably predict, the outcome of certain matters and as it is not possible, based on information currently
available to manage ment, to estimate the maximum potential liability on other matters, there could be adverse outcomes beyond the amounts accrue d.
Guarantees
General
The following table provides quantitative data regarding the Company’s third-party guarantees . The maximum potential payments represent a “worst -case
scenario”, and do not reflect management’s expected outcomes.
Maximum potential payments
($ in millions)
September 30, 2023
December 31, 2022
Performance guarantees
3,358
4,300
Financial guarantees
92
96
Total
(1)
3,450
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 September 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 2032, 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 September 30, 2023, and December 31, 2022, the maximum potential payable under
these guarantees amounts to $830 million and $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 2032, 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 September 30, 2023, and December 31, 2022, is
approximately $2.2 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 September 30, 2023, and December 31, 2022, respectively, the total outstandin g performance bonds aggregated to $3.0 billion and $2.9 billion. There
have been no significant amounts reimbursed to financial institutions under these types of arrangements in the nine and three months ended September 30, 2023
and 2022.
25
Q3 2023 FINANCIAL INFORMATION
Product and order -related contingencies
The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the
“Provisions for warranties ”, including guarantees of product performance, was as follows:
($ in millions)
2023
2022
Balance at January 1,
1,028
1,005
Claims paid in cash or in kind
(132)
(122)
Net increase in provision for changes in estimates, warranties issued and warranties expired
228
173
Exchange rate differences
(16)
(94)
Balance at September 30,
1,108
962
─
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 21.5 percent in the nine months ended September 30, 2023, was lower than the effective tax rate of 33.1 percent in the nine months
ended September 30, 2022, primarily due to a net benefit realized on a favorable resolution of an uncertain tax position in the nine months ended September 30,
2023, as well as the impact of non-deductible regulatory penalties in connection with the Kusile project in the nine months ended September 30, 2022.
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 nine months ended September 30, 2023, the Company released the provision of $206 million, due to the
resolution of this matter , which resulted in an increase of $0.11 in earnings per share (basic and diluted) for the nine months ended September 30, 2023.
─
Note 12
Employee benefits
The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations
and practices. At September 30, 2023, the Company’s most significant defined benefit pension plans are in Switzerland as well as in Germany, the United
Kingdom, and the United States. These plans cover a large portion of the Company’s employees and provide benefits to employees in the event of death,
disability, retirement, or termination of employment. Certain of these plans are multi-employer plans. The Company also operates other postretirement benefit
plans including postretirement health care benefits and other employee -related benefits for active employees including long-service award plans. The
measurement date used for the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with the local
government and tax requirements.
Net periodic benefit cost of the Company’s defined benefit pension and other postretirement benefit plans consisted of the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Nine months ended September 30,
2023
2022
2023
2022
2023
2022
Operational pension cost:
Service cost
29
40
21
26
–
–
Operational pension cost
29
40
21
26
–
–
Non-operational pension cost (credit):
Interest cost
35
2
122
61
1
1
Expected return on plan assets
(94)
(87)
(116)
(113)
–
–
Amortization of prior service cost (credit)
(6)
(5)
(2)
(2)
(1)
(1)
Amortization of net actuarial loss
–
–
39
44
(3)
(2)
Curtailments, settlements and special termination benefits
–
–
18
–
(16)
–
Non-operational pension cost (credit)
(65)
(90)
61
(10)
(19)
(2)
Net periodic benefit cost (credit)
(36)
(50)
82
16
(19)
(2)
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2023
2022
2023
2022
2023
2022
Operational pension cost:
Service cost
10
13
7
9
–
–
Operational pension cost
10
13
7
9
–
–
Non-operational pension cost (credit):
Interest cost
11
1
40
18
–
–
Expected return on plan assets
(31)
(29)
(42)
(36)
–
–
Amortization of prior service cost (credit)
(2)
(1)
(1)
(1)
–
–
Amortization of net actuarial loss
–
–
16
14
(1)
–
Curtailments, settlements and special termination benefits
–
–
18
–
(16)
–
Non-operational pension cost (credit)
(22)
(29)
31
(5)
(17)
–
Net periodic benefit cost (credit)
(12)
(16)
38
4
(17)
–
26
Q3 2023 FINANCIAL INFORMATION
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.
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Nine months ended September 30,
2023
2022
2023
2022
2023
2022
Total con tributions to defined benefit pension and
other postretirement benefit plans
8
33
85
24
29
5
Of which, discretionary contributions to defined benefit
–
–
56
–
25
–
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2023
2022
2023
2022
2023
2022
Total con tributions to defined benefit pension and
other postretirement benefit plans
3
2
64
5
25
1
Of which, discretionary contributions to defined benefit
pension plans
–
–
56
–
25
–
The Company expects to make contributions totaling approximately $91 million and $31 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 disbursing 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 202 3, 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 September 30, 2023, 11 million shares, resulting in an increase in Treasury stock of $411 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 .
In addition to the share buyback programs, the Company purchased 6 million of its own shares on the open market in the nine months ended September 30, 2023,
mainly for use in connection with its employee share plans, resulting in an increase in Treasury stock of $234 million.
In the nine months ended September 30, 2023, the Company delivered, out of treasury stock, approximately 6 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 $17 0 million.
27
Q3 2023 FINANCIAL INFORMATION
─
Note 14
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted -average number of shares outstanding during the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares outstanding during the period, assuming that all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options, and outstanding options and shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Nine months ended September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2023
2022
2023
2022
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,840
1,379
889
376
Loss from discontinued operations, net of tax
(16)
(36)
(7)
(16)
Net income
2,824
1,343
882
360
Weighted-average number of shares outstanding (in millions)
1,859
1,909
1,854
1,882
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.53
0.72
0.48
0.20
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.52
0.70
0.48
0.19
Diluted earnings per share
Nine months ended September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2023
2022
2023
2022
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,840
1,379
889
376
Loss from discontinued operations, net of tax
(16)
(36)
(7)
(16)
Net income
2,824
1,343
882
360
Weighted-average number of shares outstanding (in millions)
1,859
1,909
1,854
1,882
Effect of dilutive securities:
Call options and shares
12
11
11
7
Adjusted weighted-average number of shares outstanding (in millions)
1,871
1,920
1,865
1,889
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.52
0.72
0.48
0.20
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
(0.01)
Net income
1.51
0.70
0.47
0.19
28
Q3 2023 FINANCIAL INFORMATION
─
Note 15
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ 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
(811)
(25)
148
(15)
(703)
Amounts reclassified from OCI
5
1
24
15
45
Total other comprehensive (loss) income
(806)
(24)
172
–
(658)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(32)
–
–
–
(32)
Balance at September 30, 2022
(1)
(3,767)
(22)
(917)
(8)
(4,715)
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
(194)
–
(9)
(5)
(208)
Amounts reclassified from OCI
9
6
28
8
51
Total other comprehensive (loss) income
(185)
6
19
3
(157)
Less:
Amounts attributable to
noncontrolling interests and
redeemable noncontrolling interests
(8)
–
–
–
(8)
Balance at September 30, 2023
(3,868)
(13)
(819)
(5)
(4,705)
(1) Due to rounding, numbers presented may not add to the totals provided.
The following table reflects amounts reclassified out of OCI in respect of Foreign currency translation adjustments and Pension and other postretirement plan
adjustments:
Nine months ended
Three months ended
($ in millions)
Location of (gains) losses
September 30,
September 30,
Details about OCI components
reclassified from OCI
2023
2022
2023
2022
Foreign currency translation adjustments:
Changes attributable to divestments
Other income (expense), net
9
–
9
–
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
–
5
–
–
Amounts reclassified from OCI
9
5
9
–
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(9)
(8)
(3)
(2)
Amortization of net actuarial loss
Non-operational pension (cost) credit
36
42
15
14
Net gain (loss) from settlements and curtailments
Non-operational pension (cost) credit
2
–
2
–
Total before tax
29
34
14
12
Tax
Income tax expense
(1)
(10)
6
(3)
Amounts reclassified from OCI
28
24
20
9
The amounts in respect of Unrealized gains (losses) on available-for-sale securities and Derivative instruments and hedges were not significant for the nine and
three months ended September 30, 2023 and 2022.
29
Q3 2023 FINANCIAL INFORMATION
─
Note 16
Restructuring and related expenses
Other restructuring-related activities
In the nine and three months ended September 30, 2023 and 2022, the Company executed various other restructuring-related activities and incurred the following
expenses:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Employee severance costs
38
64
12
21
Estimated contract settlement, loss order and other costs
4
205
2
3
Inventory and long -lived asset impairments
18
5
18
–
Total
60
274
32
24
Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Total cost of sales
19
13
9
5
Selling, general and administrative expenses
14
39
1
11
Non-order related research and development expenses
–
2
–
–
Other income (expense), net
27
220
22
8
Total
60
274
32
24
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 September 30, 2023, and December 31, 2022, $179 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 remaining 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 nine and three months ended September 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 and Service, as well as, prior to its sale in July 2023, the Power Conversion
Division.
●
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
Q3 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 operati ng 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 continuing operations before taxes for the nine and three months ended September 30, 2023 and 2022, as well as total assets
at September 30, 2023, and December 31, 2022.
Nine months ended September 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,411
1,858
1,663
1,456
229
8,617
The Americas
4,393
1,924
1,279
431
216
8,243
of which: United States
3,292
1,602
798
269
182
6,143
Asia, Middle East and Africa
2,912
1,699
1,580
886
53
7,130
of which: China
1,356
866
502
657
23
3,404
10,716
5,481
4,522
2,773
498
23,990
Product type
Products
10,050
4,695
2,667
2,353
445
20,210
Services and other
666
786
1,855
420
53
3,780
10,716
5,481
4,522
2,773
498
23,990
Third-party revenues
10,716
5,481
4,522
2,773
498
23,990
Intersegment revenues
170
387
21
15
(593)
–
Total revenues
(1)
10,886
5,868
4,543
2,788
(95)
23,990
31
Q3 2023 FINANCIAL INFORMATION
Nine months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,125
1,430
1,726
1,070
169
7,520
The Americas
3,799
1,574
1,135
377
133
7,018
of which: United States
2,777
1,307
681
267
92
5,124
Asia, Middle East and Africa
3,020
1,564
1,607
838
55
7,084
of which: China
1,506
888
498
646
25
3,563
9,944
4,568
4,468
2,285
357
21,622
Product type
Products
9,328
3,931
2,420
1,935
332
17,946
Services and other
616
637
2,048
350
25
3,676
9,944
4,568
4,468
2,285
357
21,622
Third-party revenues
9,944
4,568
4,468
2,285
357
21,622
Intersegment revenues
177
332
25
5
(539)
–
Total revenues
(1)
10,121
4,900
4,493
2,290
(182)
21,622
Three months ended September 30, 2023
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,083
569
582
500
76
2,810
The Americas
1,461
657
411
159
87
2,775
of which: United States
1,113
541
248
94
71
2,067
Asia, Middle East and Africa
964
582
553
263
21
2,383
of which: China
439
285
163
182
6
1,075
3,508
1,808
1,546
922
184
7,968
Product type
Products
3,288
1,526
924
777
165
6,680
Services and other
220
282
622
145
19
1,288
3,508
1,808
1,546
922
184
7,968
Third-party revenues
3,508
1,808
1,546
922
184
7,968
Intersegment revenues
53
139
8
7
(207)
–
Total revenues
(1)
3,561
1,947
1,554
929
(23)
7,968
Three months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,005
477
595
358
59
2,494
The Americas
1,354
545
368
139
46
2,452
of which: United States
988
454
221
101
32
1,796
Asia, Middle East and Africa
1,053
569
488
329
21
2,460
of which: China
514
323
189
264
10
1,300
3,412
1,591
1,451
826
126
7,406
Product type
Products
3,204
1,379
778
705
118
6,184
Services and other
208
212
673
121
8
1,222
3,412
1,591
1,451
826
126
7,406
Third-party revenues
3,412
1,591
1,451
826
126
7,406
Intersegment revenues
59
111
7
2
(179)
–
Total revenues
(1)
3,471
1,702
1,458
828
(53)
7,406
(1) Due to rounding, numbers presented may not add to the totals provided.
32
Q3 2023 FINANCIAL INFORMATION
Nine months ended
Three months ended
September 30,
September 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA:
Electrification
2,212
1,768
748
651
Motion
1,157
845
390
305
Process Automation
670
645
226
225
Robotics & Discrete Automation
418
215
137
106
Corporate and Other
‒
E-mobility
(134)
(12)
(39)
(4)
‒ Corporate costs, Intersegment elimination and other
(229)
(97)
(70)
(52)
Total
4,094
3,364
1,392
1,231
Acquisition-related amortization
(164)
(174)
(55)
(55)
Restructuring, related and implementation costs
(1)
(92)
(300)
(51)
(20)
Changes in obligations related to divested businesses
5
17
–
–
Gains and losses from sale of businesses
97
(4)
71
–
Acquisition- and divestment -related expenses and integration costs
(55)
(171)
(10)
(62)
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
(58)
(107)
(48)
(7)
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(8)
(48)
(2)
(13)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
25
55
11
15
Certain other non-operational items:
Other income/expense relating to the Power Grids joint venture
27
(67)
7
(30)
Regulatory, compliance and legal costs
–
(333)
–
(329)
Business transformation costs
(2)
(139)
(114)
(57)
(48)
Changes in pre-acquisition estimates
(4)
–
–
(1)
Certain other fair value changes, including asset impairments
3
58
(3)
24
Other non-operational items
24
(24)
4
3
Income from operations
3,755
2,152
1,259
708
Interest and dividend income
115
50
37
17
Interest and other finance expense
(197)
(107)
(73)
(45)
Non-operational pension (cost) credit
23
102
8
34
Income from continuing operations before taxes
3,696
2,197
1,231
714
(1) Includes impairment of certain assets.
(2) Amount includes ABB Way process transformation costs of $122 million and $98 million for nine months ended September 30, 2023 and 2022, respectively, and $51 million
and $34 million for the three months ended September 30, 2023 and 2022, respectively.
Total assets
(1)
($ in millions)
September 30, 2023
December 31, 2022
Electrification
12,699
12,500
Motion
7,013
6,565
Process Automation
4,900
4,598
Robotics & Discrete Automation
4,893
4,901
Corporate and Other
(2)
10,594
10,584
Consolidated
40,099
39,148
(1) Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At September 30, 2023, and December 31, 2022, respectively, Corporate and Other includes $60 million and $96 million of assets in the Power Grids business which is
reported as discontinued operations (see Note 3).
33
Q3 2023 FINANCIAL INFORMATION
34
Q3 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 nine and three months ended September 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 $50 million.
The following tables provide reconciliations of reported growth rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by Business Area
Q3 2023 compared to Q3 2022
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
-2%
0%
3%
1%
3%
-1%
4%
6%
Motion
-4%
-1%
-2%
-7%
14%
-1%
-2%
11%
Process Automation
20%
-2%
20%
38%
7%
-1%
17%
23%
Robotics & Discrete Automation
-26%
-1%
0%
-27%
12%
-3%
0%
9%
ABB Group
-2%
0%
4%
2%
8%
-1%
4%
11%
9M 2023 compared to 9M 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
0%
2%
1%
3%
8%
2%
1%
11%
Motion
1%
1%
-1%
1%
20%
2%
-2%
20%
Process Automation
12%
2%
17%
31%
1%
2%
16%
19%
Robotics & Discrete Automation
-24%
2%
0%
-22%
22%
1%
0%
23%
ABB Group
-1%
2%
3%
4%
11%
2%
3%
16%
35
Q3 2023 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group - Quarter
Q3 2023 compared to Q3 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
-11%
-5%
3%
-13%
13%
-7%
4%
10%
The Americas
9%
-1%
5%
13%
13%
-1%
4%
16%
of which: United States
8%
-1%
6%
13%
15%
0%
4%
19%
Asia, Middle East and Africa
-5%
5%
4%
4%
-3%
5%
4%
6%
of which: China
-10%
5%
2%
-3%
-17%
4%
3%
-10%
ABB Group
-2%
0%
4%
2%
8%
-1%
4%
11%
Regional comparable growth rate reconciliation by Business Area - Quarter
Q3 2023 compared to Q3 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%
-6%
3%
-3%
7%
-7%
2%
2%
The Americas
-2%
0%
6%
4%
8%
-1%
6%
13%
of which: United States
-2%
0%
8%
6%
13%
0%
6%
19%
Asia, Middle East and Africa
-5%
6%
1%
2%
-8%
5%
3%
0%
of which: China
-6%
6%
1%
1%
-15%
5%
3%
-7%
Electrification
-2%
0%
3%
1%
3%
-1%
4%
6%
Q3 2023 compared to Q3 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%
-5%
-1%
-28%
21%
-9%
-1%
11%
The Americas
3%
-2%
-4%
-3%
21%
-1%
-5%
15%
of which: United States
-3%
0%
-4%
-7%
19%
0%
-5%
14%
Asia, Middle East and Africa
10%
5%
0%
15%
3%
5%
0%
8%
of which: China
5%
6%
0%
11%
-12%
5%
0%
-7%
Motion
-4%
-1%
-2%
-7%
14%
-1%
-2%
11%
Q3 2023 compared to Q3 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%
-3%
22%
37%
-2%
-3%
13%
8%
The Americas
63%
-5%
22%
80%
12%
-2%
15%
25%
of which: United States
75%
-6%
27%
96%
13%
-1%
19%
31%
Asia, Middle East and Africa
-11%
2%
14%
5%
13%
4%
22%
39%
of which: China
-22%
4%
17%
-1%
-14%
5%
15%
6%
Process Automation
20%
-2%
20%
38%
7%
-1%
17%
23%
Q3 2023 compared to Q3 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
-35%
-3%
0%
-38%
40%
-9%
0%
31%
The Americas
-10%
-2%
0%
-12%
14%
-3%
0%
11%
of which: United States
-9%
0%
0%
-9%
-6%
0%
0%
-6%
Asia, Middle East and Africa
-20%
3%
0%
-17%
-19%
3%
0%
-16%
of which: China
-32%
4%
0%
-28%
-31%
4%
0%
-27%
Robotics & Discrete Automation
-26%
-1%
0%
-27%
12%
-3%
0%
9%
36
Q3 2023 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation for ABB Group – Year to date
9M 2023 compared to 9M 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
-3%
0%
3%
0%
15%
-1%
3%
17%
The Americas
6%
-1%
3%
8%
17%
0%
3%
20%
of which: United States
3%
-1%
3%
5%
20%
0%
3%
23%
Asia, Middle East and Africa
-5%
6%
4%
5%
1%
6%
5%
12%
of which: China
-13%
6%
2%
-5%
-4%
5%
3%
4%
ABB Group
-1%
2%
3%
4%
11%
2%
3%
16%
Regional comparable growth rate reconciliation by Business Area – Year to date
9M 2023 compared to 9M 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%
-1%
1%
-1%
8%
-1%
1%
8%
The Americas
2%
0%
2%
4%
16%
0%
2%
18%
of which: United States
-1%
0%
3%
2%
19%
0%
2%
21%
Asia, Middle East and Africa
-1%
8%
0%
7%
-3%
7%
1%
5%
of which: China
-9%
6%
0%
-3%
-10%
5%
1%
-4%
Electrification
0%
2%
1%
3%
8%
2%
1%
11%
9M 2023 compared to 9M 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
-3%
-1%
-1%
-5%
28%
-2%
-1%
25%
The Americas
2%
0%
-2%
0%
23%
0%
-3%
20%
of which: United States
0%
-1%
-2%
-3%
23%
0%
-3%
20%
Asia, Middle East and Africa
3%
6%
0%
9%
9%
7%
0%
16%
of which: China
-3%
6%
0%
3%
-1%
6%
0%
5%
Motion
1%
1%
-1%
1%
20%
2%
-2%
20%
9M 2023 compared to 9M 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%
4%
21%
43%
-4%
1%
15%
12%
The Americas
26%
-1%
14%
39%
13%
0%
13%
26%
of which: United States
24%
-3%
17%
38%
17%
0%
18%
35%
Asia, Middle East and Africa
-5%
4%
17%
16%
-2%
5%
17%
20%
of which: China
-2%
5%
20%
23%
1%
5%
19%
25%
Process Automation
12%
2%
17%
31%
1%
2%
16%
19%
9M 2023 compared to 9M 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
-26%
0%
0%
-26%
36%
-1%
0%
35%
The Americas
-8%
-2%
0%
-10%
15%
-1%
0%
14%
of which: United States
-17%
0%
0%
-17%
1%
0%
0%
1%
Asia, Middle East and Africa
-28%
4%
0%
-24%
6%
6%
0%
12%
of which: China
-34%
4%
0%
-30%
2%
5%
0%
7%
Robotics & Discrete Automation
-24%
2%
0%
-22%
22%
1%
0%
23%
37
Q3 2023 FINANCIAL INFORMATION
Order backlog growth rate reconciliation
September 30, 2023 compared to September 30, 2022
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
11%
-2%
7%
16%
Motion
11%
-5%
-1%
5%
Process Automation
19%
-3%
4%
20%
Robotics & Discrete Automation
-11%
-3%
0%
-14%
ABB Group
11%
-3%
3%
11%
Other growth rate reconciliations
Q3 2023 compared to Q3 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
12%
0%
0%
12%
6%
-2%
0%
4%
Motion
6%
-2%
0%
4%
33%
-1%
0%
32%
Process Automation
30%
-3%
37%
64%
-8%
-1%
25%
16%
Robotics & Discrete Automation
10%
-3%
0%
7%
19%
-4%
0%
15%
ABB Group
22%
-3%
17%
36%
5%
-1%
14%
18%
9M 2023 compared to 9M 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
6%
2%
0%
8%
8%
2%
0%
10%
Motion
7%
3%
0%
10%
23%
3%
0%
26%
Process Automation
-2%
1%
26%
25%
-9%
1%
25%
17%
Robotics & Discrete Automation
9%
2%
0%
11%
20%
0%
0%
20%
ABB Group
2%
2%
14%
18%
3%
2%
14%
19%
38
Q3 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 asse t 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 Compan y 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
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Operational EBITA
4,094
3,364
1,392
1,231
Acquisition-related amortization
(164)
(174)
(55)
(55)
Restructuring, related and implementation costs
(1)
(92)
(300)
(51)
(20)
Changes in obligations related to divested businesses
5
17
–
–
Gains and losses from sale of businesses
97
(4)
71
–
Acquisition- and divestment -related expenses and integration costs
(55)
(171)
(10)
(62)
Certain other non-operational items
(89)
(480)
(49)
(381)
Foreign exchange/commodity timing differences in income from operations
(41)
(100)
(39)
(5)
Income from operations
3,755
2,152
1,259
708
Interest and dividend income
115
50
37
17
Interest and other finance expense
(197)
(107)
(73)
(45)
Non-operational pension (cost) credit
23
102
8
34
Income from continuing operations before taxes
3,696
2,197
1,231
714
Income tax expense
(794)
(728)
(326)
(294)
Income from continuing operations, net of tax
2,902
1,469
905
420
Loss from discontinued operations, net of tax
(16)
(36)
(7)
(16)
Net income
2,886
1,433
898
404
(1) Includes impairment of certain assets.
39
Q3 2023 FINANCIAL INFORMATION
Reconciliation of Operational EBITA margin by business
Three months ended September 30, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,561
1,947
1,554
929
(23)
7,968
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
45
20
(13)
(4)
2
50
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
(1)
2
1
1
3
Unrealized foreign exchange movements
on receivables (and related assets)
(13)
4
4
5
(2)
(2)
Operational revenues
3,593
1,970
1,547
931
(22)
8,019
Income (loss) from operations
762
365
218
113
(199)
1,259
Acquisition-related amortization
22
9
1
20
3
55
Restructuring, related and
implementation costs
(1)
14
3
3
–
31
51
Changes in obligations related to
divested businesses
–
–
–
–
–
–
Gains and losses from sale of businesses
(71)
–
–
–
–
(71)
Acquisition- and divestment -related expenses
and integration costs
4
3
(4)
3
4
10
Certain other non-operational items
2
1
–
1
45
49
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
26
10
9
(5)
8
48
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
(1)
–
2
–
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(12)
–
(1)
3
(1)
(11)
Operational EBITA
748
390
226
137
(109)
1,392
Operational EBITA margin (%)
20.8%
19.8%
14.6%
14.7%
n.a.
17.4%
(1) Includes impairment of certain assets.
In the three months ended September 30, 2023, Certain other non-operational items in the table above includes the following:
Three months ended September 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)
3
1
–
1
52
57
Changes in pre-acquisition estimates
–
–
–
–
–
–
Certain other fair values changes,
including asset impairments
–
1
–
–
2
3
Other non-operational items
(1)
(1)
–
–
(2)
(4)
Total
2
1
–
1
45
49
(1) Amounts include ABB Way process transformation costs of $51 million for the three months ended September 30, 2023.
40
Q3 2023 FINANCIAL INFORMATION
Three months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,471
1,702
1,458
828
(53)
7,406
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
8
14
14
3
6
45
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
4
–
9
–
(1)
12
Unrealized foreign exchange movements
on receivables (and related assets)
(9)
(5)
(9)
(4)
(7)
(34)
Operational revenues
3,474
1,711
1,472
827
(55)
7,429
Income (loss) from operations
616
291
154
81
(434)
708
Acquisition-related amortization
24
8
1
19
3
55
Restructuring, related and
implementation costs
(1)
8
3
1
6
2
20
Changes in obligations related to
divested businesses
–
–
–
–
–
–
Gains and losses from sale of businesses
(1)
1
–
–
–
–
Acquisition- and divestment -related expenses
and integration costs
3
4
53
1
1
62
Certain other non-operational items
7
–
–
1
373
381
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(3)
–
9
(1)
2
7
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
–
7
1
2
13
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(6)
(2)
–
(2)
(5)
(15)
Operational EBITA
651
305
225
106
(56)
1,231
Operational EBITA margin (%)
18.7%
17.8%
15.3%
12.8%
n.a.
16.6%
(1) Includes impairment of certain assets.
In the three months ended September 30, 2022, Certain other non-operational items in the table above includes the following:
Three months ended September 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
–
–
–
–
30
30
Regulatory, compliance and legal costs
–
–
–
–
329
329
Business transformation costs
(1)
13
–
–
–
35
48
Changes in pre-acquisition estimates
1
–
–
–
–
1
Certain other fair values changes,
including asset impairments
(3)
–
–
–
(21)
(24)
Other non-operational items
(4)
–
–
1
–
(3)
Total
7
–
–
1
373
381
(1) Amounts include ABB Way process transformation costs of $34 million for the three months ended September 30, 2022.
41
Q3 2023 FINANCIAL INFORMATION
Nine months ended September 30, 2023
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
10,886
5,868
4,543
2,788
(95)
23,990
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
37
15
3
4
6
65
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(5)
(1)
8
1
1
4
Unrealized foreign exchange movements
on receivables (and related assets)
(20)
(2)
(8)
(3)
(11)
(44)
Operational revenues
10,898
5,880
4,546
2,790
(99)
24,015
Income (loss) from operations
2,130
1,098
688
347
(508)
3,755
Acquisition-related amortization
66
26
4
59
9
164
Restructuring, related and
implementation costs
(1)
26
5
7
–
54
92
Changes in obligations related to
divested businesses
1
–
–
–
(6)
(5)
Gains and losses from sale of businesses
(71)
–
(26)
–
–
(97)
Acquisition- and divestment -related expenses
and integration costs
23
15
(3)
7
13
55
Certain other non-operational items
11
4
–
4
70
89
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
42
15
(1)
1
1
58
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(1)
(1)
7
2
1
8
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(15)
(5)
(6)
(2)
3
(25)
Operational EBITA
2,212
1,157
670
418
(363)
4,094
Operational EBITA margin (%)
20.3%
19.7%
14.7%
15.0%
n.a.
17.0%
(1) Includes impairment of certain assets.
In the nine months ended September 30, 2023, Certain other non-operational items in the table above includes the following:
Nine months ended September 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
–
–
–
–
(27)
(27)
Business transformation costs
(1)
12
1
–
3
123
139
Changes in pre-acquisition estimates
1
–
–
–
3
4
Certain other fair values changes,
including asset impairments
1
2
–
1
(7)
(3)
Other non-operational items
(3)
1
–
–
(22)
(24)
Total
11
4
–
4
70
89
(1) Amounts include ABB Way process transformation costs of $122 million for the nine months ended September 30, 2023.
42
Q3 2023 FINANCIAL INFORMATION
Nine months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
10,121
4,900
4,493
2,290
(182)
21,622
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
27
17
50
14
14
122
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
11
2
11
–
29
53
Unrealized foreign exchange movements
on receivables (and related assets)
(27)
(11)
(16)
(9)
(22)
(85)
Operational revenues
10,132
4,908
4,538
2,295
(161)
21,712
Income (loss) from operations
1,571
776
480
146
(821)
2,152
Acquisition-related amortization
80
23
3
59
9
174
Restructuring, related and
implementation costs
(1)
18
11
6
9
256
300
Changes in obligations related to
divested businesses
–
–
–
–
(17)
(17)
Gains and losses from sale of businesses
(1)
5
–
–
–
4
Acquisition- and divestment -related expenses
and integration costs
31
12
122
4
2
171
Certain other non-operational items
30
–
–
–
450
480
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
50
22
27
3
5
107
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
9
1
11
–
27
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(20)
(5)
(4)
(6)
(20)
(55)
Operational EBITA
1,768
845
645
215
(109)
3,364
Operational EBITA margin (%)
17.4%
17.2%
14.2%
9.4%
n.a.
15.5%
(1) Includes impairment of certain assets.
In the nine months ended September 30, 2022, certain other non-operational items in the table above includes the following:
Nine months ended September 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
–
–
–
–
67
67
Regulatory, compliance and legal costs
–
–
–
–
333
333
Business transformation costs
15
–
–
–
99
114
Changes in pre-acquisition estimates
2
–
–
(2)
–
–
Certain other fair values changes,
including asset impairments
(3)
–
–
–
(55)
(58)
Other non-operational items
16
–
–
2
6
24
Total
30
–
–
–
450
480
(1) Amounts include ABB Way process transformation costs of $98 million for the nine months ended September 30, 2022.
43
Q3 2023 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents, Restricted cash (current and non -current) and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
September 30, 2023
December 31, 2022
Short-term debt and current maturities of long-term debt
2,951
2,535
Long-term debt
4,899
5,143
Total debt
7,850
7,678
Cash and equivalents
3,869
4,156
Restricted cash - current
18
18
Marketable securities and short-term investments
1,091
725
Cash and marketable securities
4,978
4,899
Net debt
2,872
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)
September 30, 2023
December 31, 2022
Total stockholders' equity
13,754
13,187
Net debt (as defined above)
2,872
2,779
Net debt / Equity ratio
0.21
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 depreciation and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
September 30, 2023
September 30, 2022
Income from operations for the three months ended:
December 31, 2022 / 2021
1,185
2,975
March 31, 2023 / 2022
1,198
857
June 30, 2023 / 2022
1,298
587
September 30, 2023 / 2022
1,259
708
Depreciation and Amortization for the three months ended:
December 31, 2022 / 2021
199
216
March 31, 2023 / 2022
191
210
June 30, 2023 / 2022
196
207
September 30, 2023 / 2022
194
198
EBITDA
5,720
5,958
Net debt (as defined above)
2,872
4,117
Net debt / EBITDA
0.5
0.7
44
Q3 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 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)
September 30, 2023
September 30, 2022
Net working capital:
Receivables, net
7,586
6,695
Contract assets
1,073
955
Inventories, net
6,332
5,849
Prepaid expenses
280
261
Accounts payable, trade
(4,777)
(4,769)
Contract liabilities
(2,610)
(2,178)
Other current liabilities
(1)
(3,843)
(3,406)
Net working capital
4,041
3,407
Total revenues for the three months ended:
December 31, 2022 / 2021
7,824
7,567
March 31, 2023 / 2022
7,859
6,965
June 30, 2023 / 2022
8,163
7,251
September 30, 2023 / 2022
7,968
7,406
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(267)
(55)
Adjusted revenues for the trailing twelve months
31,547
29,134
Net working capital as a percentage of revenues (%)
12.8%
11.7%
(1) Amounts exclude $754 million and $795 million at September 30, 2023 and 2022, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities,
(c) pension and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain restructuring -related activities and (f) liabilities related
to the divestment of the Power Grids business.
45
Q3 2023 FINANCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash flow divided by Adjusted net income attributable to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of the Power Conversion Division, the Hitachi Energy Joint Venture and the Power Grids business, the latter being included
in discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets, and (ii)
proceeds from sales of property, plant and equipment .
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow recorded by ABB in the twelve months preceding the relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income recorded by ABB (as adjusted) in the twelve months preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
September 30, 2023
December 31, 2022
Net cash provided by operating activities – continuing operations
3,123
1,334
Adjusted for the effects of continuing operations:
Purchases of property, plant and equipment and intangible assets
(765)
(762)
Proceeds from sale of property, plant and equipment
109
127
Free cash flow from continuing operations
2,467
699
Net cash used in operating activities – discontinued operations
(43)
(47)
Free cash flow
2,424
652
Adjusted net income attributable to ABB
(1)
3,859
2,442
Free cash flow conversion to net income
63%
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 $10 million.
Reconciliation of the trailing twelve months to September 30, 2023
Continuing operations
Discontinued
operations
($ 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)
Q4 2022
720
(259)
42
(33)
1,088
Q1 2023
283
(151)
31
(1)
1,036
Q2 2023
759
(180)
26
1
906
Q3 2023
1,361
(175)
10
(10)
829
Total for the trailing twelve
months to September 30, 2023
3,123
(765)
109
(43)
3,859
(1) Adjusted net income attributable to ABB for Q3 2023, is adjusted to exclude the gain on sale of the Power Conversion Division of $53 million, while Q4 2022, is adjusted to
exclude reductions to the gain on the sale of Power Grids of $(1) million. In addition, Q4 2022 is also adjusted to exclude the gain on the sale of Hitachi Energy Joint Venture of
$43 million.
46
Q3 2023 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income less Interest and other finance expense.
Reconciliation
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2023
2022
2023
2022
Interest and dividend income
115
50
37
17
Interest and other finance expense
(197)
(107)
(73)
(45)
Net finance expenses
(82)
(57)
(36)
(28)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total revenues.
Reconciliation
Nine months ended September 30,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
11,794
10,886
1.08
11,797
10,121
1.17
Motion
6,285
5,868
1.07
6,247
4,900
1.27
Process Automation
5,665
4,543
1.25
5,079
4,493
1.13
Robotics & Discrete Automation
2,516
2,788
0.90
3,318
2,290
1.45
Corporate and Other
(91)
(95)
n.a.
(73)
(182)
n.a.
ABB Group
26,169
23,990
1.09
26,368
21,622
1.22
Three months ended September 30,
2023
2022
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,693
3,561
1.04
3,772
3,471
1.09
Motion
1,886
1,947
0.97
1,966
1,702
1.16
Process Automation
1,883
1,554
1.21
1,568
1,458
1.08
Robotics & Discrete Automation
665
929
0.72
901
828
1.09
Corporate and Other
(75)
(23)
n.a.
(19)
(53)
n.a.
ABB Group
8,052
7,968
1.01
8,188
7,406
1.11
47
Q3 2023 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71
11
www.abb.com
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: October 18, 2023.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: October 18, 2023.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance