UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
FORM
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ____________________
Commission file number:
_________________________________________
(Exact name of registrant as specified in its charter)
(Jurisdiction of incorporation or organization)
,
,
(Address of principal executive offices)
,
,
Telephone: +
-
-
Facsimile:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Over-the-Counter (OTC) Markets
_________________________________________
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
_________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
.
☒
⬜
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Yes
☐
☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.
☒
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non -accelerated filer, or an emerging growth company. See definition of
“large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b -2 of the Exchange Act.
☒
Accelerated filer
☐
Non-accelerated filer
☐
Emerging growth company
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards
Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes -Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive -based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☒
International Financial Reporting Standards as issued by the International Accounting Standards Board
☐
☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17
☐
☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b -2 of the Exchange Act).
Yes
☐
No
☒
(i)
TABLE OF CONTENTS
Page
PART I
4
Item 1.
Identity of Directors, Senior Management and Advisers
4
Item 2.
Offer Statistics and Expected Timetable
4
Item 3.
Key Information
4
Item 3A.
[Reserved]
14
Item 4.
Information on the Company
14
Item 4A.
Unresolved Staff Comments
34
Item 5.
Operating and Financial Review and Prospects
35
Item 6.
Directors, Senior Management and Employees
78
Item 7.
Major Shareholders and Related Party Transactions
139
Item 8.
Financial Information
140
Item 9.
The Offer and Listing
141
Item 10.
Additional Information
142
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
151
Item 12.
Description of Securities Other than Equity Securities
153
PART II
154
Item 13.
Defaults, Dividend Arrearages and Delinquencies
154
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
154
Item 15.
Controls and Procedures
154
Item 16.
[Reserved]
155
Item 16A.
Audit Committee Financial Expert
155
Item 16B.
Code of Ethics
155
Item 16C.
Principal Accountant Fees and Services
156
Item 16D.
Exemptions from the Listing Standards for Audit Committees
156
Item 16E.
Purchase of Equity Securities by Issuer and Affiliated Purchasers
156
Item 16F.
Change in Registrant’s Certifying Accountant
157
Item 16G.
Corporate Governance
157
Item 16H.
Mine Safety Disclosure
157
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
157
Item 16J.
Insider trading policies
157
Item 16K.
Cybersecurity
158
PART III
159
Item 17.
Financial Statements
159
Item 18.
Financial Statements
159
Item 19.
Exhibits
160
1
Introduction
ABB Ltd is a corporation organized under the laws of Switzerland. In this Annual Report on Form 20-F
(Annual Report), “the ABB Group,” “the Group,” “ABB,” the “Company,” “we,” “our” and “us” refer to ABB Ltd
and its consolidated subsidiaries (unless the context otherwise requires). We also use these terms to refer to
ABB Asea Brown Boveri Ltd and its subsidiaries prior to the establishment of ABB Ltd as the holding
company for the entire ABB Group in 1999, as described in this Annual Report under “Item 4. Information on
the Company—Introduction—History of the ABB Group”. Our American Depositary Shares (each
representing one registered share of ABB Ltd) are referred to as “ADSs”. The registered shares of ABB Ltd
are referred to as “shares”. Our principal corporate offices are located at Affolternstrasse 44, CH-8050 Zurich,
Switzerland, telephone number +41-43-317-7111. Our internet address is www.abb.com or global.abb. The
information contained on or accessible from our Web site is not incorporated into this annual report, and you
should not consider it to be a part of this annual report.
Financial and other information
The Consolidated Financial Statements of ABB Ltd, including the Notes thereto, as of December 31, 2023
and 2022, and for each of the years in the three-year period ended December 31, 2023, (our Consolidated
Financial Statements) have been prepared in accordance with United States generally accepted accounting
principles (U.S. GAAP).
In this Annual Report: (i) “$,” “U.S. dollar” and “USD” refer to the lawful currency of the United States of
America; (ii) “CHF” and “Swiss franc” refer to the lawful currency of Switzerland; (iii) “EUR” and “euro” refer to
the lawful currency of the participating member states of the European Economic and Monetary Union
(Eurozone); (iv) “SEK” and “Swedish krona” refer to the lawful currency of Sweden; (v) ‘‘GBP’’ and ‘‘British
pound’’ refer to the lawful currency of the United Kingdom, (vi) “CNY” and “Chinese renminbi” refer to the
lawful currency of the People’s Republic of China; and (vii) “INR” and “Indian Rupee” refer to the lawful
currency of India.
Except as otherwise stated, all monetary amounts in this Annual Report are presented in U.S. dollars. Where
specifically indicated, amounts in Swiss francs have been translated into U.S. dollars. These translations are
provided for convenience only, and they are not representations that the Swiss franc could be converted into
U.S. dollars at the rate indicated. The twelve o’clock buying rate in the City of New York for cable transfers as
certified for customs purposes by the Federal Reserve Bank of New York for Swiss francs on December 29,
2023, was $1.00 = CHF 0.8405. The twelve o’clock buying rate for Swiss francs on February 16, 2024, was
$1.00 = CHF 0.8813.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report includes forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the
safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These
forward-looking statements can be identified by the use of forward-looking terminology, including the terms
“believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will,” or “should” or, in each case, their
negative, or other variations or comparable terminology. These forward-looking statements include all matters
that are not historical facts. They appear in a number of places throughout this Annual Report and include
statements regarding our intentions, beliefs or current expectations concerning, among other things, our
results of operations, financial condition, liquidity, prospects, growth, dispositions, strategies and the
countries and industries in which we operate.
2
These forward looking statements include, but are not limited to, statements about our financial condition and
performance, operating results, liquidity and our ability to fund our business operations and initiatives,
capital expenditure and debt service obligations, plans regarding our capital structure, ability to take
advantage of market opportunities and drive growth, our products and service offerings and their anticipated
performance and impact across various industries and consumer segments, anticipated benefits to the
shareholders, planned divestments, acquisitions and integration, and related synergies and other benefits,
investment and risk management strategies, volatility in the credit markets, oil prices, foreign currency
exchange rates and other market conditions, trends and opportunities, industry trends and expectations,
changing consumer behavior and demands, our ability to respond to changing business and economic
conditions, our comparative advantages, our commitments and contingencies, availability of raw materials,
and other plans, goals, strategies, priorities and initiatives related to our business, including our brand
management initiative, the implementation of ABB Way, and cost-saving measures, as well as, the following:
•
•
management objectives, including our outlook, as well as trends in results, prices, volumes,
operations, margins and overall market trends,
•
certain legal and compliance matters, and
•
on future dividend payments.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future. We caution you that forward-looking
statements are not guarantees of future performance and that our actual results of operations, financial
condition and liquidity, and the development of the countries and industries in which we operate, may differ
materially from those described in or suggested by the forward-looking statements contained in this Annual
Report. In addition, even if our results of operations, financial condition and liquidity, and the development of
the countries and industries in which we operate, are consistent with the forward-looking statements
contained in this Annual Report, those results or developments may not be indicative of results or
developments in subsequent periods. Important factors that could cause actual results to differ materially
from our expectations are contained in cautionary statements in this Annual Report and include, without
limitation, the following:
Business, economic and industry risks
•
political conditions.
•
markets.
•
•
we fail to keep pace with technological changes.
•
•
performance.
•
3
Operational risks
•
in the past, and could in the future, pose a risk to our systems, networks, products, solutions and
services.
•
any divestitures will provide business benefit.
•
ventures or strategic alliances may not be realized.
•
•
consolidated operating results, cash flows, and financial position as well as on our reputation and
our ability to do business.
•
•
‑
term, technically complex projects or projects that are dependent upon factors
not wholly within our control could adversely affect our profitability and future prospects.
•
be prevented from bidding on, or obtaining, some contracts, or our costs with respect to such
contracts could be higher.
•
exchange rates, interest rates, inflation or commodity prices on our earnings and cash flows.
•
our business, results of operations, and financial condition.
Legal and regulatory risks
•
party’s intellectual property rights could adversely affect our business.
•
otherwise protect personal data, may adversely impact our business and financial results.
•
cash flows.
•
incur costs to comply with such regulations, and our ongoing operations may expose us to
environmental liabilities.
•
address climate change concerns, including non-financial reporting disclosure requirements, as
well as the physical effects of climate change.
General risk factors
•
may be adversely affected.
•
could be materially adversely affected if we incur legal liability.
4
We urge you to read the other important factors set forth under sections of this Annual Report entitled
“Item 3. Key Information—Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and
Financial Review and Prospects” for a more complete discussion of the important factors that could affect our
future performance and the countries and industries in which we operate. In light of these risks, uncertainties
and assumptions, the forward-looking circumstances described in this Annual Report and the assumptions
underlying them may not occur.
Except as required by law or applicable stock exchange rules or regulations, we undertake no obligation to
update or revise publicly any forward-looking statement, whether as a result of new information, future events
or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons
acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above
and contained elsewhere in this Annual Report.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable
Item 2. Offer Statistics and Expected Timetable
Not applicable
Item 3. Key Information
—
Risk factors
You should carefully consider all of the information set forth in this Annual Report and the following
description of risks and uncertainties that exist or that we currently believe may exist. Our business, financial
condition or results of operations could be adversely affected by any of these risks. Additional risks of which
we are unaware or that we currently deem immaterial may also impair our business operations. This Annual
Report also contains forward-looking statements that involve risks and uncertainties. Our results could differ
materially from those anticipated in these forward-looking statements as a result of certain factors, including
those described below and elsewhere in this Annual Report. See “Cautionary Note Regarding
Forward-Looking Statements”.
—
Business, economic and industry risks
Our business is exposed to risks associated with the volatile global economic environment and
political conditions.
Adverse changes in economic or political conditions, particularly in locations where our customers or
operations are located, as well as concerns about global trade and global supply chain, global health crises
(such as COVID-19), developments in energy prices, inflation, labor market challenges and terrorist activities,
could have a material adverse effect on our business, financial condition, results of operations and liquidity
and may adversely impact the demand for our products and services. These and other factors may prevent
our customers and suppliers from obtaining the financing required to pursue their business activities as
planned. Financial and other reasons may force them to modify, delay or cancel orders or plans to purchase
or supply our products or services. In addition, if our customers do not generate sufficient revenue, or fail to
timely obtain access to the capital markets, they may not be able to pay, or may delay payment of, the
amounts they owe us. Customers with liquidity issues have delayed payments of amounts they owe us and
5
this has led and may lead to additional expense for credit losses for us, which may adversely affect our
results of operations and cash flows. We are also subject to the risk that the counterparties to our credit
agreements and hedging transactions may go bankrupt if they suffer catastrophic demand on their liquidity
that prevents them from fulfilling their contractual obligations to us.
Our business environment is influenced also by numerous other economic or political uncertainties which
may affect the global economy and the international capital markets. In periods of slow economic growth or
decline, our customers are more likely to buy less of our products and services, and as a result we are more
likely to experience decreased revenues. Our businesses are affected by the level of investments and
demand in the markets that we serve, principally utilities, industry and transport & infrastructure. At various
times during the last several years, we also have experienced, and may experience in the future, gross
margin declines in certain businesses, reflecting the effect of factors such as competitive pricing pressures,
inventory write-downs, charges associated with the cancellation of planned expansion and increases in
component and manufacturing costs resulting from higher labor and material costs borne by our
manufacturers and suppliers that, as a result of competitive pricing pressures or other factors, we are unable
to pass on to our customers. Economic downturns also may lead to restructuring actions and associated
expenses. Uncertainty about future economic conditions makes it difficult for us to forecast operating results
and to make decisions about future investments.
In addition, we are subject to the risks that our business operations in or with certain countries may be
adversely affected by trade tariffs, trade or economic sanctions or other restrictions imposed on these
countries, including sanctions against Russia relating to the war in Ukraine, contributing to our decision to exit
the Russian market, and the trade tensions in recent years with China. These could lead to increased costs
for us or for our customers or limit our ability to do business in or with certain countries. In addition, actual or
potential investors that object to certain of these business operations may adversely affect the price of our
shares by disposing or deciding not to purchase our shares. These countries may from time to time include
countries that are identified by the United States as state sponsors of terrorism. If any countries where or with
whom we do business are subject to such sanctions or restrictions, our business, consolidated operating
results, financial condition and the trading price of our shares may be adversely affected. In 2023, our total
revenues from business with countries identified by the U.S. government as state sponsors of terrorism
represented significantly less than 1 percent of our total revenues. Based on the amount of revenues and
other relevant quantitative and qualitative factors, we have determined that our business in 2023 with
countries identified by the U.S. government as state sponsors of terrorism was not material.
Our operations in emerging markets expose us to risks associated with conditions in those markets.
A significant amount of our operations is conducted in the emerging markets in South America, Asia, and the
Middle East and Africa. In 2023, approximately 40 percent of our consolidated revenues were generated from
these emerging markets. Operations in emerging markets can present risks that are not encountered in
countries with well-established economic and political systems, including:
•
these markets, cause delays in the placement of orders for projects that we have been awarded
and subject us to volatile geographic markets,
•
investments in such regions and could complicate our dealings with governments regarding
permits or other regulatory matters, local businesses and workforces,
•
which we do business or where we seek to do business could adversely affect the ability of our
operations in those countries to obtain the materials necessary to fulfill contracts and our ability
to pursue business or establish operations in those countries,
•
•
6
•
•
•
Additionally, political and social instability resulting from increased violence in certain countries in which we
do business has raised concerns about the safety of our personnel. These concerns may hinder our ability to
send personnel abroad and to hire and retain local personnel. Such concerns may require us to increase
security for personnel traveling to and working in affected countries or to restrict or wind-down operations in
such countries, which may negatively impact us and result in higher costs and inefficiencies.
Consequently, our exposure to the conditions in or affecting emerging markets may adversely affect our
business, financial condition, results of operations and liquidity.
We may encounter difficulty in managing our business due to the global nature of our operations.
We operate in approximately 100 countries around the world and, as of December 31, 2023, employed more
than 105,000 people, of which approximately 48 percent were located in the Europe region, approximately
28 percent in the Asia, Middle East and Africa region and approximately 24 percent in the Americas region.
To manage our day-to-day operations, we must deal with cultural and language barriers and assimilate
different business practices. Due to our global nature, we deal with a range of legal and regulatory systems
some of which are less developed and less well-enforced than others. The laws and regulations to which we
are subject can change rapidly and in unexpected directions. Currency and other local regulatory limitations
related to the transfer of funds exist in a number of countries where we operate, including: China, India,
South Africa, Egypt and Turkiye. All of this may impact our ability to protect our contractual, intellectual
property and other legal rights. In addition, we are required to create compensation programs, employment
policies and other administrative programs that comply with the laws of multiple countries. We also must
communicate, monitor and uphold group-wide standards and directives across our global network, including
in relation to our suppliers, subcontractors and other relevant stakeholders. Our failure to manage
successfully our geographically diverse operations could impair our ability to react quickly to changing
business and market conditions and to enforce compliance with group-wide standards and procedures.
We operate in very competitive and rapidly changing markets and could be adversely affected if we
fail to keep pace with technological changes.
We operate in very competitive and rapidly changing markets where we regularly need to innovate and
develop products, systems, services and solutions that address the business challenges and needs of our
customers. The nature of these challenges varies across the geographic markets and product areas that we
serve. The markets for our products and services are characterized by changing regulatory requirements,
developing ESG expectations and evolving industry standards, which may require us to modify our products
and systems. The continual development of advanced technologies for new products and product
enhancements is an important way in which we remain competitive and maintain acceptable pricing levels. If
we fail to keep pace with technological changes in the industrial sectors that we serve, we may experience
lower revenues, price erosion and lower margins.
Our primary competitors are sophisticated companies with significant resources that may develop products
and services that are superior to our products and services or may adapt more quickly than we do to new
technologies, industry changes or evolving customer requirements. We are also facing increased competition
from low cost competitors in emerging markets, which may give rise to increased pressure to reduce our
prices. Our failure to anticipate or respond quickly to technological developments or customer requirements
could adversely affect our business, results of operations, financial condition and liquidity.
7
Industry consolidation could result in more powerful competitors and fewer customers.
Competitors in the industries in which we operate are consolidating. In particular, the automation industry is
undergoing consolidation that is reducing the number but increasing the size of companies that compete with
us. As our competitors consolidate, they likely will increase their market share, gain economies of scale that
enhance their ability to compete with us and/or acquire additional products and technologies that could
displace our product offerings.
Our customer base also is undergoing consolidation. Consolidation within our customers’ industries (such as
the marine and cruise industry, automotive, aluminum, steel, pulp and paper and pharmaceutical industries
and the oil and gas industry) could affect our customers and their relationships with us. If one of our
competitors’ customers acquires any of our customers, we may lose that business. Additionally, as our
customers become larger and more concentrated, they could exert pricing pressure on all suppliers, including
us. If we were to lose market share or customers or face pricing pressure due to consolidation of our
customers, our results of operations and financial condition could be adversely affected.
Increases in costs or limitation of supplies of raw materials may adversely affect our financial
performance.
We purchase large amounts of commodity-based raw materials, including steel, copper, aluminum and oil.
Prevailing prices for such commodities are subject to fluctuations due to changes in supply and demand and
a variety of additional factors beyond our control, such as global political and economic conditions.
Historically, prices for some of these raw materials have been volatile and unpredictable, and such volatility is
expected to continue. Therefore, commodity price changes may result in unexpected increases in raw
material costs, and we may be unable to increase our prices to offset these increased costs without suffering
reduced volumes, revenues or operating income. We do not fully hedge against changes in commodity prices
and our hedging procedures may not work as planned.
We depend on third parties to supply raw materials and other components and may not be able to obtain
sufficient quantities of these materials and components, which could limit our ability to manufacture products
on a timely basis and could harm our profitability. For some raw materials and components, we rely on a
single supplier or a small number of suppliers. If one of these suppliers were unable to provide us with a raw
material or component we need, our ability to manufacture some of our products could be adversely affected
if we are unable to find a sufficient alternative supply channel in a reasonable period of time, on commercially
reasonable terms, or at all.
In 2023, we experienced some continuing global supply chain challenges such as rising costs, port
congestion, material access issues and some geopolitical uncertainty. Although we were able to mitigate
these disruptions, we cannot assure you that our mitigation efforts will be sufficient to overcome future supply
chain constraints.
If our suppliers are unable to deliver sufficient quantities of materials on a timely basis, the manufacture and
sale of our products may be disrupted, we may be required to assume liability under our agreements with
customers and our sales and profitability could be materially adversely affected.
Our multi-national operations expose us to the risk of fluctuations in currency exchange rates.
Currency exchange rate fluctuations have had, and could continue to have, a material impact on our
operating results, the comparability of our results between periods, the value of assets or liabilities as
recorded on our Consolidated Balance Sheet and the price of our securities. Volatility in exchange rates
makes it harder to predict exchange rates and perform accurate financial planning. Changes in exchange
rates can unpredictably and adversely affect our consolidated operating results and could result in exchange
losses.
Currency Translation Risk.
companies are initially recorded in the currency of the country in which each such company resides, which
we call “local currency”. That financial information is then translated into U.S. dollars at the applicable
8
exchange rates for inclusion in our Consolidated Financial Statements. The exchange rates between local
currencies and the U.S. dollar can fluctuate substantially, which could have a significant translation effect on
our reported consolidated results of operations and financial position.
Increases and decreases in the value of the U.S. dollar versus local currencies will affect the reported value
of our local currency assets, liabilities, revenues and expenses in our Consolidated Financial Statements,
even if the value of these items has not changed in local currency terms. These translations could
significantly and adversely affect our results of operations and financial position from period to period.
Currency Transaction Risk.
denominated in currencies that are different from those in which our manufacturing or sourcing costs are
incurred. In this case, if, after the parties agree on a price, the value of the currency in which the price is to be
paid were to weaken relative to the currency in which we incur manufacturing or sourcing costs, there would
be a negative impact on the profit margin for any such transaction. This transaction risk may exist regardless
of whether there is also a currency translation risk as described above.
Currency exchange rate fluctuations in those currencies in which we incur our principal manufacturing
expenses or sourcing costs may adversely affect our ability to compete with companies whose costs are
incurred in other currencies. If our principal expense currencies appreciate in value against such other
currencies, our competitive position may be weakened.
—
Operational risks
Increased information technology (IT) security threats and more sophisticated cyber-attacks have in
the past, and could in the future, pose a risk to our systems, networks, products, solutions and
services.
We have observed a global increase in IT security threats and more sophisticated cyber-attacks, which pose
a risk to the security of systems and networks and the confidentiality, availability and integrity of data stored
and transmitted on those systems and networks. Although we have experienced occasional cybersecurity
incidents, none have had a material effect on our business operations. Since we have in the past and may in
the future experience cyber-attacks against our systems, networks, products, solutions and services, we have
incurred, and expect that we will continue to incur substantial costs to help mitigate this risk. Similarly, we
have observed a continued increase in attacks generally against industrial control systems as well as against
our customers and the systems we supply to them, which has in the past and may in the future pose a risk to
the security of those systems and networks. Future attacks could potentially lead to the compromising of
confidential information, disruption of our business, improper use or downtime of our systems and networks
or those we supplied to our customers, manipulation, corruption, inaccessibility and destruction of data,
defective products or services, production downtimes and supply shortages. Such attacks may also expose
us to loss of business, claims or regulatory action. Any such impact in turn could adversely affect our
reputation, competitiveness and results of operations. Our insurance coverage may not be adequate to cover
all the costs related to cyber security attacks or disruptions resulting from such events. Due to the nature of
these security threats, the nature and scope of the impact of any future incident cannot be predicted.
Our business strategy includes making strategic divestitures. There can be no assurance that any
divestitures will provide business benefit.
Our strategy includes divesting certain businesses. The divestiture of an existing business could reduce our
future profits and operating cash flows and make our financial results more volatile. We may also retain
certain obligations or grant indemnities in connection with a divestment. We may not find suitable purchasers
for our non-core businesses and may continue to pay operating costs associated with these businesses.
Failed attempts to divest non-core businesses may distract management’s attention from other business
activities, erode employee morale and customers’ confidence, and harm our business. A divestiture could
also cause a decline in the price of our shares and increased reliance on other elements of our core business
operations. Whether we realize the anticipated benefits of a divestment, including the divestment of the
Power Conversion business and the spin-off of the Turbocharging business, depends on whether we
9
successfully manage the related risks. If we do not successfully manage the risks associated with a
divestiture, our business, financial condition, and results of operations could be adversely affected.
Anticipated benefits of historical, existing and potential future mergers, acquisitions, joint ventures
or strategic alliances may not be realized.
As part of our overall strategy, we may, from time to time, acquire businesses or interests in businesses,
including noncontrolling interests, or form joint ventures or create strategic alliances. Whether we realize the
anticipated benefits, including operating synergies and cost savings, from these transactions, depends, in
part, upon the integration between the businesses involved, the performance and development of the
underlying products, capabilities or technologies, our correct assessment of assumed liabilities and the
management of the operations in question. Accordingly, our financial results could be adversely affected by
unanticipated performance and liability issues, transaction-related charges, amortization related to
intangibles, charges for impairment of long-term assets and partner performance.
There is no guarantee that our ongoing efforts to reduce costs will be successful.
We seek continued cost savings through operational excellence and supply chain management. Lowering our
cost base is important for our business and future competitiveness. However, there is no guarantee that we
will achieve this goal. If we are unsuccessful and the shortfall is significant, there could be an adverse effect
on our business, financial condition, and results of operations.
Illegal behavior by any of our employees or agents could have a material adverse impact on our
consolidated operating results, cash flows, and financial position as well as on our reputation and
our ability to do business.
Certain of our employees or agents have taken, and may in the future take, actions that violate or are alleged
to violate the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), legislation promulgated pursuant to the
1997 Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions, applicable antitrust laws, other applicable
laws or regulations or our Code of Conduct. For more information regarding investigations of past actions
taken by certain of our employees, see “Item 8. Financial Information—Legal Proceedings”. Such actions
have resulted, and in the future could result, in governmental investigations, enforcement actions, civil and
criminal penalties, including monetary penalties and other sanctions, and civil litigation. It is possible that any
governmental investigation or enforcement action arising from such matters could conclude that a violation of
applicable law has occurred, and the consequences of any such investigation or enforcement action may
have a material adverse impact on our consolidated operating results, cash flows and financial position. In
addition, such actions, whether actual or alleged, could damage our reputation and ability to do business.
Further, detecting, investigating and resolving such actions could be expensive and could consume
significant time and attention of our senior management. While we are committed to conducting business in a
legal and ethical manner, our internal control systems at times have not been, and in the future may not be,
completely effective to prevent and detect such improper activities by our employees and agents. We are
subject to certain ongoing investigations by governmental agencies.
10
We may be the subject of product liability claims.
We may be required to pay for losses or injuries purportedly caused by the design, manufacture or operation
of our products and systems. Additionally, we may be subject to product liability claims for the improper
installation of products and systems designed and manufactured by others.
Product liability claims brought against us may be based in tort or in contract, and typically involve claims
seeking compensation for personal injury or property damage. Claims brought by commercial businesses are
often made also for financial losses arising from interruption to operations. Depending on the nature and
application of many of the products we manufacture, a defect or alleged defect in one of these products could
have serious consequences. For example:
•
explosions and power surges, and significant damage to electricity generating, transmission and
distribution facilities as well as electrical shock causing injury or death.
•
could suffer significant damage to facilities and equipment that rely on these products and
systems to properly monitor and control their manufacturing processes. Additionally, people
could be exposed to electrical shock and/or other harm causing injury or death.
•
substances could cause injury or death.
•
could cause injury or death.
If we were to incur a very large product liability claim, our insurance protection might not be adequate or
sufficient to cover such a claim in terms of paying any awards or settlements, and/or paying for our defense
costs. Further, some claims may be outside the scope of our insurance coverage. If a litigant were successful
against us, a lack or insufficiency of insurance coverage could result in an adverse effect on our business,
financial condition, results of operations and liquidity. Additionally, a well-publicized actual or perceived issue
relating to us or our products could adversely affect our market reputation, which could result in a decline in
demand for our products and reduce the trading price of our shares. Furthermore, if we were required or we
otherwise determined to make a product recall, the costs could be significant.
Undertaking long-term, technically complex projects or projects that are dependent upon factors not
wholly within our control could adversely affect our profitability and future prospects.
We derive a portion of our revenues from long-term, fixed price and turnkey projects and from other
technically complex projects that can take many months, or even years, to complete. Such contracts typically
involve substantial risks, including the possibility that we may underbid and consequently have no means of
recouping the actual costs incurred, and the assumption of a large portion of the risks associated with
completing related projects, including the warranty obligations. Some projects involve technological risks,
including in cases where we are required to modify our existing products and systems to satisfy the technical
requirements of a project, integrate our products and systems into the existing infrastructure and systems at
the installation site, or undertake ancillary activities such as civil works at the installation site. Our revenue,
cost and gross profit realized on such contracts can vary, sometimes substantially, from our original
projections for numerous reasons, including:
•
products and systems that may require us to incur incremental expenses to remedy such issues,
•
and environments and may lead to premature failure or unplanned degradation of products,
•
11
•
•
global health crises and natural disasters,
•
•
•
•
•
•
These risks are exacerbated if a project is delayed because the circumstances upon which we originally bid
and quoted a price may have changed in a manner that increases our costs or other liabilities relating to the
project. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events. Our
project contracts often subject us to penalties or damages if we cannot complete a project in accordance with
the contract schedule. In certain cases, we may be required to pay back to a customer all or a portion of the
contract price as well as potential damages (which may significantly exceed the contract price), if we fail to
meet contractual obligations.
If we are unable to obtain performance and other guarantees from financial institutions, we may be
prevented from bidding on, or obtaining, some contracts, or our costs with respect to such contracts
could be higher.
In the normal course of our business and in accordance with industry practice, we provide a number of
guarantees including bid bonds, advance payment bonds or guarantees, performance bonds or guarantees
and warranty bonds or guarantees, which guarantee our own performance. These guarantees may include
guarantees that a project will be completed on time or that a project or particular equipment will achieve other
defined performance criteria. If we fail to satisfy any defined criteria, we may be required to make payments
in cash or in kind. Performance guarantees frequently are requested in relation to large projects.
Some customers require that performance guarantees be issued by a financial institution. In considering
whether to issue a guarantee on our behalf, financial institutions consider our credit ratings. If, in the future,
we cannot obtain such a guarantee from a financial institution on commercially reasonable terms or at all, we
could be prevented from bidding on, or obtaining, some contracts, or our costs with respect to such contracts
could be higher, which would reduce the profitability of the contracts. If we cannot obtain guarantees on
commercially reasonable terms or at all from financial institutions in the future, there could be a material
impact on our business, financial condition, results of operations or liquidity.
Our hedging activities may not protect us against the consequences of significant fluctuations in
exchange rates, interest rates, inflation or commodity prices on our earnings and cash flows.
Our policy is to hedge material currency exposures by entering into offsetting transactions with third-party
financial institutions. Given the effective horizons of our risk management activities and the anticipatory
nature of the exposures intended to be hedged, there can be no assurance that our currency hedging
activities will fully offset the adverse financial impact resulting from unfavorable movements in foreign
exchange rates. In addition, the timing of the accounting for recognition of gains and losses related to a
hedging instrument may not coincide with the timing of gains and losses related to the underlying economic
exposures.
As a resource-intensive operation, we are exposed to a variety of market and asset risks, including the
effects of changes in inflation, commodity prices and interest rates. We monitor and manage these exposures
as an integral part of our overall risk management program, which recognizes the unpredictability of markets
12
and seeks to reduce the potentially adverse effects on our business. As part of our effort to manage these
exposures, we may enter into commodity price and interest rate hedging arrangements. Nevertheless,
changes in commodity prices and interest rates cannot always be predicted or hedged.
If we are unable to successfully manage the risk of changes in exchange rates, interest rates, inflation or
commodity prices or if our hedging counterparties are unable to perform their obligations under our hedging
agreements with them, then changes in these rates and prices could have an adverse effect on our financial
condition and results of operations.
Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our
business, results of operations, and financial condition
There has been an increased focus from regulators and stakeholders on environmental, social and
governance (ESG) matters. These include greenhouse gas emissions and climate-related risks; diversity,
equity, and inclusion; responsible sourcing; human rights and social responsibility; and corporate
governance. We have established certain ESG goals, commitments and targets. Our ability to accomplish
them presents numerous operational, regulatory, financial, legal, and other challenges, several of which are
outside of our control. Our failure to achieve our ESG goals, commitments and targets or comply with
emerging ESG regulations could adversely affect our business, results of operations, and financial condition.
Any such failure could harm our reputation, adversely impact our ability to attract and retain customers and
talent and expose us to increased scrutiny from the investment community and enforcement authorities.
—
Legal and regulatory risks
An inability to protect our intellectual property rights or actual or alleged infringement of a third
party’s intellectual property rights could adversely affect our business.
Our intellectual property rights are fundamental to all of our businesses. We generate, maintain, utilize and
enforce a substantial portfolio of trademarks, trade dress, patents and other intellectual property rights
globally. Intellectual property protection is subject to applicable laws in various local jurisdictions where
interpretations and protections vary or can be unpredictable and costly to enforce. We use our intellectual
property rights to protect the goodwill of our products, promote our product recognition, protect our
proprietary technology and development activities, enhance our competitiveness and otherwise support our
business goals and objectives. However, there can be no assurance that the steps we take to obtain,
maintain and protect our intellectual property rights will be adequate. Our intellectual property rights may fail
to provide us with significant competitive advantages, particularly in foreign jurisdictions that do not have, or
do not enforce, strong intellectual property rights. The weakening of protection of our trademarks, trade
dress, patents and other intellectual property rights could adversely affect our business. In addition, there
exist risks around actual or alleged infringement of third-party intellectual property rights, which could – even
with mitigation processes in place - lead to claims against us that require significant resources to resolve. We
also may engage in legal action to protect our own intellectual property rights, and enforcing our rights may
require considerable time, money and oversight, and existing laws in the various countries in which we
provide services or solutions may offer only limited protection.
Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise
protect personal data, may adversely impact our business and financial results.
We are subject to many rapidly evolving privacy and data protection laws and regulations around the world
including the General Data Protection Regulation (GDPR) in Europe and the Personal Information Protection
Law in China as well as the California Data Privacy Act and the California Privacy Rights Act (effective in
January 2023) in the United States. This requires us to operate in a complex environment where there are
significant constraints on how we can process personal data across our business. The GDPR, which became
effective in May 2018, has established stringent data protection requirements for companies doing business
in or handling personal data of individuals in the European Union. The GDPR imposes obligations on data
controllers and processors including the requirement to maintain a record of their data processing and to
implement policies and procedures as part of their mandated privacy governance framework. Breaches of the
13
GDPR or other applicable data privacy laws could result in substantial fines, which in some cases could be
up to four percent of our worldwide revenue. In addition, a breach of the GDPR or other data privacy or data
protection laws or regulations could result in regulatory investigations, reputational damage, orders to
cease/change our use of data, enforcement notices, as well as potential civil claims including class action
type litigation. We have invested, and continue to invest, human and technology resources in our data privacy
and data protection compliance efforts. There can be no assurance that any such actions will be sufficient to
prevent cybersecurity breaches, disruptions, unauthorized release of sensitive information or corruption of
data. Despite such actions, there is a risk that we may be subject to fines and penalties, litigation and
reputational harm if we fail to properly process or protect the data or privacy of third parties or comply with the
GDPR or other applicable data privacy and data protection regimes.
Examinations by tax authorities and changes in tax regulations could result in lower earnings and
cash flows.
We operate in approximately 100 countries and therefore are subject to different tax regulations. Changes in
tax laws, including those addressing tax avoidance and profit sharing, could result in a higher tax expense
and higher tax payments. Furthermore, this could materially impact our tax-related receivables and liabilities
as well as deferred income tax assets and liabilities. In addition, the uncertainty of the tax environment in
some regions could limit our ability to enforce our rights. As a globally operating organization, we conduct
business in countries subject to complex tax rules, which may be interpreted in different ways. Future
interpretations or developments of tax regimes may affect our tax liabilities, returns on investments and
business operations. We are regularly examined by tax authorities in various jurisdictions. An adverse
decision by a tax authority could cause a material adverse effect on our business, financial condition and
results of operations.
We are subject to environmental laws and regulations in the countries in which we operate. We incur
costs to comply with such regulations, and our ongoing operations may expose us to environmental
liabilities.
Our operations are subject to U.S., European and other laws and regulations governing the discharge of
materials into the environment or otherwise relating to environmental protection. Our manufacturing facilities
use and produce paint residues, solvents, metals, oils and related residues. We use petroleum-based
insulation in transformers and chloroparaffins as a flame retardant. We have manufactured and sold, and we
are using in some of our factories, certain types of transformers and capacitors containing polychlorinated
biphenyls (PCBs). These are considered to be hazardous substances in many jurisdictions in which we
operate. We may be subject to substantial liabilities for environmental contamination arising from the use of
such substances. All of our manufacturing operations are subject to ongoing compliance costs in respect of
environmental matters and the associated capital expenditure requirements.
In addition, we may be subject to significant fines and penalties if we do not comply with environmental laws
and regulations, including those referred to above. Some environmental laws provide for joint and several or
strict liability for remediation of releases of hazardous substances, which could result in us incurring a liability
for environmental damage without regard to our negligence or fault. Such laws and regulations could expose
us to liability arising out of the conduct of operations or conditions caused by others, or for our acts which
were in compliance with all applicable laws at the time the acts were performed. Additionally, we may be
subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous
substances. Changes in the environmental laws and regulations, or claims for damages to persons, property,
natural resources or the environment, could result in substantial costs and liabilities to us.
14
We have been affected and could in the future be affected by laws or regulations enacted to address
climate change concerns, including non-financial reporting disclosure requirements, as well as the
physical effects of climate change.
Existing or pending laws and regulations intended to address climate change concerns could affect us in the
future. We have incurred, and may need to incur additional costs to comply with these laws and regulations
and any non-compliance could adversely affect our reputation and result in significant fines. We have
incurred, and may need to incur, additional costs and we need to establish additional processes to comply
with new non-financial reporting disclosure requirements. We could also be affected indirectly by increased
prices for goods or services provided to us by companies that are directly affected by these laws and
regulations and pass their increased costs through to their customers. At this time, we cannot estimate what
impact such costs may have on our business, results of operations or financial condition. We could also be
affected by the physical consequences of climate change itself, although we cannot estimate what impact
those consequences might have on our business or operations. Any such changes could also impact our
ability to achieve our 2030 Sustainability targets as well as the related costs and resources necessary to do
so.
—
General risk factors
If we are unable to attract and retain qualified management and personnel then our business may be
adversely affected.
Our success depends in part on our continued ability to hire, assimilate and retain highly qualified personnel,
particularly our senior management team and key employees. Competition for highly qualified management
and technical personnel remains intense in the industries and regions in which we operate. If we are unable
to attract and retain members of our senior management team and key employees, including in connection
with our ongoing organizational transformation, this could have an adverse effect on our business.
Our business subjects us to considerable potential exposure to litigation and legal claims and could
be materially adversely affected if we incur legal liability.
We are subject to, and may become a party to, a variety of litigation or other claims. Our business is subject
to the risk of claims involving current and former employees, customers, partners, subcontractors, suppliers,
competitors, shareholders, government regulatory agencies or others through private actions, class actions,
whistleblower claims, administrative proceedings, regulatory actions or other proceedings. Our acquisition
activities have in the past and may in the future be subject to litigation or other claims. While we maintain
insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential
liabilities and is subject to various exclusions as well as caps on amounts recoverable.
Item 3A. [Reserved]
Item 4. Information on the Company
—
Introduction
About ABB
ABB is 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. Building on more than 140 years of
excellence, ABB’s more than 105,000 employees are committed to driving innovations that accelerate
industrial transformation.
15
We operate in approximately 100 countries across three regions: Europe, the Americas, and Asia, Middle
East and Africa, and generate revenues in numerous currencies. We are headquartered in Zurich,
Switzerland, and we govern our company through our four Business areas: Electrification, Motion, Process
Automation, and Robotics & Discrete Automation. For a breakdown of our consolidated revenues (i) by
Business area, (ii) by geographic region, and (iii) by product type, see “Item 5. Operating and Financial
Review and Prospects—Analysis of results of operations—Revenues” and “Note 23 - Operating segment and
geographic data” to our Consolidated Financial Statements.
Our principal corporate offices are located at Affolternstrasse 44, CH 8050 Zurich, Switzerland, telephone
number +41 43 317 7111. Our agent for U.S. federal securities law purposes is ABB Holdings Inc., located at
305 Gregson Drive, Cary, North Carolina 27511. Our internet address is www.abb.com or global.abb. The
information contained on or accessible from our website is not incorporated into this annual report, and you
should not consider it to be a part of this annual report. The United States Securities and Exchange
Commission (SEC) maintains a website at www.sec.gov which contains in electronic form each of the reports
and other information that we have filed electronically with the SEC.
History of the ABB Group
The ABB Group was formed in 1988 through a merger between Asea AB and BBC Brown Boveri AG. Initially
founded in 1883, Asea AB was a major participant in the introduction of electricity into Swedish homes and
businesses and in the development of Sweden’s railway network. In the 1940s and 1950s, Asea AB
expanded into the power, mining and steel industries. Brown Boveri and Cie. (later renamed BBC Brown
Boveri AG) was formed in Switzerland in 1891 and initially specialized in power generation and turbines. In
the early to mid
‑
1900s, it expanded its operations throughout Europe and broadened its business operations
to include a wide range of electrical engineering activities.
In January 1988, Asea AB and BBC Brown Boveri AG each contributed almost all of their businesses to the
newly formed ABB Asea Brown Boveri Ltd, of which they each owned 50 percent. In 1996, Asea AB was
renamed ABB AB and BBC Brown Boveri AG was renamed ABB AG. In February 1999, the ABB Group
announced a group reconfiguration designed to establish a single parent holding company and a single class
of shares. ABB Ltd was incorporated on March 5, 1999, under the laws of Switzerland. In June 1999,
ABB Ltd became the holding company for the entire ABB Group. This was accomplished by having ABB Ltd
issue shares to the shareholders of ABB AG and ABB AB, the two companies that formerly owned the ABB
Group. The ABB Ltd shares were exchanged for the shares of those two companies, which, as a result of the
share exchange and certain related transactions, became wholly
‑
owned subsidiaries of ABB Ltd.
ABB Ltd shares are currently listed on the SIX Swiss Exchange and the NASDAQ OMX Stockholm
Exchange. On May 12, 2023, we filed the required Form 25 with the SEC to delist ABB’s American
Depositary Shares (ADSs) from trading on the New York Stock Exchange (NYSE). In connection with the
delisting from the NYSE which became effective May 23, 2023, we converted our ADS program from a
sponsored Level II program into a sponsored Level I program. The new Level I ADSs were assigned a new
stock ticker (ABBNY) upon delisting and are now traded on the over-the-counter (OTC) markets.
ABB today
As a global technology leader in electrification and automation enabling sustainability and resource efficiency,
our offering is relevant for the global transition towards low-carbon energy, increased energy efficiency, and
the transition to more adaptive manufacturing and automation, putting us right in the center of long-term
secular trends.
The ABB Purpose
ABB's purpose is to enable a more sustainable and resource-efficient future with our technology leadership in
electrification and automation.
16
Our core competencies
Our leadership in resource efficiency is based on our core competencies, each of which constitutes a barrier
to entry: decades-long domain expertise, cutting-edge technology and innovation as well as the ability to
scale operations and distribution.
With its long history, ABB not only invented or pioneered many power and automation technologies but has
retained technology and market leadership in many of these areas. Being present in various vertical markets
for decades with close long-term relationships with customers and channel partners has resulted in our
unique deep domain expertise, enabling a thorough understanding of customers’ needs and operations.
We continuously evolve our offering to remain a relevant and trusted partner to our customers. Our annual
non-order related research and development spending in 2023 amounted to approximately 4.1 percent of
revenues. We focus our research and development expenditures on key areas of innovation and have spent
approximately $9.2 billion since the beginning of 2016, focusing on developing best-in-class products and
services in the fields of electrification and automation with the goal of helping our customers to create
resource-efficient value.
All our four Business areas are market leaders in their respective areas being in either the number 1 or 2
position. Our global reach along with our extensive local presence assists us in scaling innovations to achieve
stronger returns, which supports higher absolute investments for future growth. Active globally, our revenues
are well-balanced across regions with customers served directly and through a strong channel partner
network.
The ABB Way
The ABB Way is the glue that unites our Group and comprises a select number of common processes
covering our business model, our people and culture, the ABB brand and our governance framework. It
facilitates accountability, transparency and speed in ABB.
In our operating model, the divisions represent the highest level of operating decisions. They are closest to
their respective markets and customer needs. Each division progresses through the strategic mandates and
priorities of stability and profitability before growth. In order to deploy full focus on organic and acquired
growth to the extent of consolidating the market, the business’ structure should be robust and profitability
should be at least in line with industry peers.
Each division has full accountability for its results and carries the responsibility for business development,
and research and development for leading technology to secure a number 1 or 2 market position. During
2023 we cemented the decentralized way of working at ABB within all our divisions, ensuring accountability,
transparency and speed in decision making. Our focus area in 2024 will be to increasingly shift our focus to
profitable growth, and further increase the number of our divisions with this mandate. Strong performance
management is key in a decentralized business model. We apply a monthly scorecard system for the
divisions and Business areas, based on a standardized set of Key Performance Indicators, to support full
transparency of operational performance. It is accompanied by a limited select number of short-term
incentives, including the mandatory target to make annual productivity improvements of at least 3-5 percent
each year.
The corporate functions focus on necessary strategic, financial and governance activities, with a lean
headcount of approximately 800 employees.
17
Enhanced growth profile
Over the past several years, we have taken significant actions to align our business portfolio around our
Purpose, resulting in all divisions now active only within the markets of electrification and automation. Both of
these markets are benefiting from increasing global investments to decarbonize, increase energy efficiency
and to automate and increase flexibility in society, including industrial manufacturing, buildings and process
industries. Additionally, we have increased the proportion of sales stemming from short-cycle businesses,
meaning a reduced proportion from project-related activities, which we believe should reduce the risk and
volatility in our earnings. This ongoing shift towards better quality of revenues is now an integral part of
governance and business execution.
The responsibility for growth has been fully transferred to the divisions, as they are closest to customers. This
includes both organic and acquired growth. The divisions have the best insights into current and future
customer needs and are accountable for building their respective business accordingly. With more divisions
transitioning over time from stability and profitability to growth, we expect to see a gradual strengthening of
our growth profile.
Finally, environmental, social and governance (ESG) drivers are accelerating and translating into increased
demand for our electrification and automation offering. The demand for electricity is growing ten times as fast
as other energy sources, resulting in approximately 50 percent higher average annual investments into
distribution networks over the next seven years (source: IEA World Energy Outlook 2023, Announced
Pledges Scenario). The share of low-carbon sources in the global energy mix is expected to increase to
approximately 70 percent by 2050 from only 20 percent today (source: IEA World Energy Outlook 2023,
Announced Pledges Scenario). The need to improve energy efficiency has never been more relevant, from
both the perspective of sustainable operations and reducing operating costs in a high energy cost
environment. Investments in energy efficiency are expected to increase 46 percent per year over the next
seven years versus the seven previous years (source: IEA World Energy Outlook 2023, Announced Pledges
Scenario). Today approximately 45 percent of the world’s electricity is converted into motion by electric
motors yet only approximately 20 percent of the world’s electric motors are optimized through the control of
drives. Lastly, the global number of working age people (25 to 64 years) per retiree (65 years or over) is
expected to fall by about 20 percent over the next ten years (source: United Nations World Population
Prospects 2019), supporting demand for robotics and automation solutions. We believe ABB’s offering is well
positioned to address these trends.
—
Businesses
Our markets
ABB is a technology leader in electrification and automation with a comprehensive digitalized offering of
electrification, motion and automation solutions. Our exposure to customers is geographically balanced while
catering to multiple end-markets and segments. We believe our customer offering is well positioned to benefit
from secular growth drivers, including urbanization, labor shortage, shift to electrification, automation and
robotization, as well as other data and digitalization trends.
We are focused on creating superior customer value through our comprehensive, modular offering,
combining traditional products and services with software-enabled products and systems as well as digital
services and software that we sell both separately and combined as scalable solutions. Our advanced
software is a key differentiation of our digital offering and about 55 percent of our approximately
7,500 employees in research and development are active in software development.
18
The majority of our businesses are market leaders within their respective segments. We believe market
leadership is critical, as it provides the opportunity for price leadership, which in turn supports profitability,
enabling us to invest further in research and development to sustain our technological leadership. For a
discussion of the geographic distribution of our total revenues, see “Item 5. Operating and Financial Review
and Prospects—Analysis of results of operations—Revenues.”
Industry market
Approximately half of our revenues are derived from customers within the industrial segment where we serve
production facilities and factories all around the world, from process industries such as oil and gas, pulp and
paper as well as mining, to discrete industries including automotive, food and beverage and consumer
electronics. Demand for our electrification and automation offerings with embedded digital solutions
increased as the energy crisis and tight labor markets served as a prominent reminder to companies of the
importance of energy efficiency and flexibility in automated production. This has accelerated customer
demand for the digital services and solutions we offer.
In discrete industries, we saw a normalization of customers’ order patterns following a period of pre-buying
due to extended delivery lead times as a result of the supply chain constraints in 2022. Demand in the
automotive segment remained at a high level due to broadly accelerating investments in the EV segment,
while the general industry and consumer-related robotics segments declined.
Late-cycle process industries were strong across nearly all customer segments. We saw particular strength in
oil & gas-related demand. Strength was also noted in refining, petrochemicals and the energy-related
low-carbon segments.
Transport & infrastructure market
Approximately one-third of our customers operate in the transport & infrastructure market. Our expertise
provides efficient, reliable and sustainable solutions for these customers, with a focus on energy efficiency
and reduced operating costs.
In transport & infrastructure, there was very strong order development across data centers. The buildings
segment saw weakness in all three regions in residential-related demand. Demand in the commercial
construction segments varied by geography, where the U.S. and Europe remained stable through most of the
year but weakness was noted in China towards the latter part of the year. In the marine segment there were
positive developments for the cruise ship sector as well as strong demand in general marine and ports.
Utilities market
We deliver solutions mainly for distribution utilities and renewables customers, while continuing to service
conventional power generation customers with our control and automation solutions.
During 2023, the renewables markets continued to see strong growth. Business levels in the conventional
power generation market remained stable. Demand from electrical distribution utilities remained strong, with
ongoing investments to increase grid reliability and resilience due to increased integration of renewables.
We serve our customers through our operating divisions which are included in our Business areas.
Developments in these Business areas are discussed in more detail below. Revenue figures presented in this
Businesses section are before intersegment eliminations.
19
—
Electrification Business area
Overview
Electrification provides leading electrical distribution and management technologies, solutions and services to
electrify the world in a safe, smart and sustainable way. The portfolio includes medium- and low-voltage
electrical components, switchgear, digital devices, enclosures, and circuit breakers, among others. With our
products, solutions and services, we collaborate with customers to improve power delivery and security,
enhance energy management, efficiency and operational reliability, as we seek to achieve a low carbon
society.
The Electrification Business area delivers products to end customers through a global network of channel
partners and end customers. More than half of the Business area’s revenue is derived from distributors and
approximately a quarter is derived from direct sales to end-users. The remaining revenues are generated
from original equipment manufacturers (OEMs), engineering, procurement and construction (EPC)
contracting companies, system integrators, utilities and panel builders. The proportion of direct compared to
channel partner sales varies by segment, product technology and geographic markets.
The Electrification Business area had approximately 50,300 employees as of December 31, 2023, and
generated $14.6 billion of revenues in 2023.
Customers
The Electrification Business area serves a wide range of customer segments, including residential,
commercial and industrial buildings, utilities, oil and gas, chemicals, data centers, renewables, food and
beverage, transport and infrastructure, among others. From some of the world’s tallest buildings to the
busiest airports, the Business area’s products and solutions cover a wide range of applications and business
segments.
Products and Services
As of December 31, 2023, the Electrification Business area’s products and services are delivered through five
operating divisions. The Business area divested its Power Conversion Division in July 2023, which designed,
developed, and manufactured end-to-end power conversion solutions for mission-critical applications in the
telecommunications, data center, and industrial sectors.
The Distribution Solutions Division facilitates the efficient and reliable distribution, protection and control of
power by improving electric power quality while strengthening the resilience of the grid. The Division offers
segment-specific products and solutions that largely serve utilities, industry and infrastructure segments,
often providing the requisite medium-voltage link between high-voltage transmission systems and low-voltage
users. With ABB Ability™ enabled connected solutions at its core, the offering includes medium-voltage air-
and gas-insulated switchgear (1 to 66 kilovolts), indoor and outdoor circuit breakers, reclosers, fuses,
contactors, relays, instrument transformers, sensors, motor control centers, as well as low-voltage switchgear
for the ANSI standard markets.
The Smart Power Division provides energy distribution solutions for data centers, industrial and
manufacturing plants, critical infrastructure and commercial buildings. The Division’s technical teams work
closely with industry partners, delivering advanced solutions that support rapid growth, energy transition, and
sustainability objectives. The Division’s portfolio includes industrial circuit breakers, low-voltage systems,
motor starting applications, and safety devices like switches and relays. Its Power Protection unit supports
the world’s largest data center companies with advanced energy-efficient UPS solutions. The Division’s ABB
Ability™ Energy Manager provides a scalable, easy-to-use platform that helps organizations save energy and
reduce CO
2
20
The Smart Buildings Division enables optimization of energy efficiency, safety, security and comfort for any
building type, through new installations or retrofit solutions. The Division offers integrated digital technologies
to control HVAC, lighting, shutters, and security, in addition to energy distribution solutions including DIN rail
products, enclosures and emergency lighting through to industrial plugs and sockets and conventional wiring
accessories, accommodating for single family homes, multiple dwellings, commercial buildings, infrastructure
and industrial applications. The Division’s highly innovative technologies and digital solutions serve rising
global demand among real estate developers, owners, and investors for smart building technologies that
optimize energy distribution and building automation. The scalable solutions aim to deliver significant
sustainable and financial benefits, meeting social and environmental demands, while being able to address
even the most complex of customers’ carbon reduction strategies.
The Installation Products Division helps manage the connection, protection and distribution of electrical
power from source to socket. The Division’s products are engineered to provide ease of installation and
perform in demanding and harsh conditions, helping to ensure safety and continuous operation for utilities,
businesses and people around the world. The Commercial Essentials product segment includes electrical
junction boxes, commercial fittings, strut and cable tray metal framing systems for commercial and residential
construction. The Premier Industrial product segment includes multiple product lines, such as Ty-Rap® cable
ties, T&B Liquidtight Systems® protection products, PVC coated and nylon conduit systems, power
connection and grounding systems, and cable protection systems of conduits and fittings for harsh and
industrial applications. The Division also manufactures solutions for medium-voltage applications used in the
utility market under its marquee brands including Elastimold™ reclosers and switchgear, capacitor switches,
current limiting fuses, Homac™ distribution connectors, Hi-Tech Valiant™ full-range current limiting fuse for
fire mitigation, faulted current indicators and distribution connectors, cable accessories and apparatus with
products for overhead and underground distribution. Manufacturing includes made-to-stock and custom-
made solutions.
The Service Division partners with our customers to improve the availability, reliability, predictability and
sustainability of electrical products and installations. The Division’s extensive service portfolio offers product
care, modernization, and advisory services to improve performance, extend equipment lifetime and deliver
new levels of operational and sustainable efficiency. We help customers keep resources in use for as long as
possible, extracting the maximum value from them, and then recovering and regenerating products and
materials at the end of their useful life.
Sales and Marketing
Sales and marketing is generally conducted within the divisions in the Electrification Business area. This
enables the divisions to manage their respective end-to-end activities and create demand across all
channels, products and solutions. They increase focus and speed for our customers to drive faster growth.
Where necessary, the divisions work together on joint services, such as the management of accounts,
channels, and segment-sales, engaging in a range of promotional activities, both internal and external.
Competition
The Electrification Business area’s principal competitors vary by product group and include Atkore, Chint,
Eaton, Hager, Hubbell, Legrand, LS Electric, Mitsubishi Electric, nVent, Panasonic, Schneider Electric,
Siemens and Vertiv.
Capital Expenditures
The Electrification Business area’s capital expenditures for property, plant and equipment totaled $386 million
in 2023, compared to $343 million in 2022. Investments in 2023 principally related to real estate investments,
capacity expansion, as well as equipment replacement and upgrades. Geographically, in 2023, Europe
represented 53 percent of the capital expenditures, followed by the Americas (35 percent) and Asia, Middle
East and Africa (12 percent).
21
—
Motion Business area
Overview
The Motion Business area provides pioneering technology, products, solutions and related services to
industrial customers to increase energy efficiency, improve safety and reliability, and maintain precise control
over processes. The portfolio includes motors, generators and drives for a wide range of applications in all
industrial sectors.
The Motion Business area designs, manufactures and sells drives, motors, generators, and traction
converters. Building on long-standing experience in electric powertrains, the Business area combines domain
expertise and technology to deliver the optimum solution for a wide range of applications for a comprehensive
range of industrial segments. In addition, the Business area, along with its channel partners, has an industry
leading global service presence.
The Motion Business area had approximately 22,300 employees as of December 31, 2023, and generated
$7.8 billion of revenues in 2023.
Customers
The Motion Business area serves a wide range of customers in different industrial segments such as pulp
and paper, oil and gas, metals and mining, food and beverage, HVAC, water and wastewater, transportation,
power generation, marine and offshore.
Products and Services
The Motion Business area’s products and services are delivered through seven operating divisions.
The Drive Products Division serves the industries and infrastructure segments with world-class drives and
programmable logic controllers (PLC). With its products, global scale and local presence, the Division helps
customers to improve energy efficiency, productivity and safety.
The System Drives Division is the market leader in high-power, high-performance drives, drive systems and
packages for industrial process and large infrastructure applications, and a leading supplier of power
conversion equipment for renewable energy and other applications. The Division offers global support to help
customers, partners and equipment manufacturers with asset reliability, performance improvement and
energy efficiency in mission critical applications.
The Service Division serves customers worldwide by maximizing uptime, extending product life cycle and
enhancing the performance and energy efficiency of their electrical motion solutions. The Division is leading
the way in digitalization by securely connecting motors and drives, increasing operational uptime and
improving efficiency. The services offered make the difference for our customers and partners every day by
helping keep their operations running profitably, safely and reliably.
The Traction Division is a recognized leader in onboard propulsion technologies that drive innovation in rail,
bus, and industrial vehicle electrification. A comprehensive range of high-performance and full lifecycle
managed propulsion, auxiliary and energy storage solutions help improve energy efficiency and contribute to
making transportation more sustainable.
The IEC Low Voltage Division is a technology leader delivering a full range of energy-efficient low voltage
motors, including ultra-efficient solutions such as IE5 SynRM (synchronous reluctance motors). Through a
global footprint, domain expertise and rugged designs, the Division provides reliable technology that
improves efficiency and productivity even in the most demanding applications
.
The Large Motors and Generators Division offers a comprehensive product portfolio of large AC motors and
generators. The Division’s induction, synchronous and special design motors and synchronous generators
22
power critical applications across industry, infrastructure and marine transportation. Combining the best
available materials with superior technology, the large motors and generators are designed to operate
efficiently and reliably, even for challenging processes or applications and to have low life cycle costs.
The NEMA Motors Division is a marketer, designer and manufacturer that offers Baldor-Reliance® industrial
electric motors, primarily in North America. The Division focuses on quality, reliability and efficiency to provide
a comprehensive offering of NEMA motors in the market across most industrial segments and applications.
Sales and Marketing
Sales are made both through direct sales forces and through channel partners, such as distributors and
wholesalers, as well as installers, OEMs and system integrators. The proportion of direct sales to end users
compared to channel partner sales varies among the different industries, products and geographic markets.
Competition
The principal competitors of the Motion Business area include Schneider Electric, Siemens, Toshiba, WEG
Industries, Wolong and Danfoss.
Capital Expenditures
Capital expenditures in the Motion Business area for property, plant and equipment totaled $171 million in
2023, compared to $150 million in 2022. Principal expenditures in 2023 related to real estate investments,
capacity expansion, equipment replacement and upgrades across various countries including Finland,
Switzerland, the United States, China and India. Geographically, in 2023, Europe represented 54 percent of
the capital expenditures, followed by the Americas (33 percent) and Asia, Middle East and Africa
(13 percent).
—
Process Automation Business area
Overview
The Process Automation Business area provides a comprehensive range of integrated automation, electrical
and digital systems and services for customers in the process, hybrid and maritime industries. These
offerings, coupled with deep domain knowledge in each end market, help to optimize productivity, energy
efficiency, sustainability and safety of industrial processes and operations.
The Business area’s offering can be grouped into two categories, with approximately half of the offering
related to solutions for new and brownfield projects and half related to service, mainly for the existing installed
base. Process Automation also integrates offerings from the Electrification, Motion and
Robotics & Discrete Automation Business areas into its projects. The Business area’s offerings are sold
primarily through its direct sales force with a smaller share through partners and distributors.
The Business area had approximately 21,100 employees as of December 31, 2023, and generated revenues
of $6.3 billion in 2023.
Customers
The Process Automation Business area’s end customers include companies across process, hybrid and
maritime industries. These industries include oil, gas, chemicals, mining, metals, cement, pulp and paper,
pharmaceuticals, battery manufacturing, food and beverage, power generation, water, marine and ports.
23
Products and Services
The Process Automation Business area offering includes an extensive portfolio of products, solutions, digital
applications and services for the control of the simplest to the most complex and critical industrial processes
and infrastructure. These systems can link various process and information flows, allowing customers to
manage and control their entire production process based on real-time information. The Business area’s
automation offering includes the distributed control system (DCS) ABB Ability™ System 800xA
®
, which is
also an electrical control system, a safety system and a collaboration enabler with the capacity to improve
engineering efficiency, operator performance and asset utilization. Other control solutions include Symphony
®
Plus (designed to address automation needs of the power and water industry segments) and the Freelance
DCS solution. Components for basic automation solutions, process controllers, I/O modules, panels, and
Human Machine Interfaces (HMI) are available through the Compact Product Suite offering. The product
portfolio is complemented by a suite of ABB Ability™ Advanced Digital Services and by ABB Care, a
subscription-based lifecycle management program that provides services to maintain and continually
advance and enhance ABB’s distributed
control systems and optimize customers’ lifecycle costs. The ABB
Ability™
Genix Industrial Analytics and Artificial Intelligence Suite unlocks greater value by contextualizing
and integrating data from IT, engineering, and operations systems to provide deep, meaningful and
actionable insights. The portfolio is complemented by a range of industry-specific applications in each
division.
As of December 31, 2023, the Process Automation Business area’s products and services are delivered
through four operating divisions.
The Energy Industries Division serves a wide range of industrial sectors, including hydrocarbons, chemicals,
pharmaceuticals, power generation and water. With its integrated solutions that automate, digitalize and
electrify operations, the Division is committed to supporting traditional industries in their efforts to
decarbonize. The Division also supports the development, integration and scaling up of new and renewable
energy models. The Division’s goal is to help customers adapt and succeed in the rapidly changing global
energy transition. Harnessing data, machine learning and artificial intelligence (AI), the Division brings over
50 years of domain expertise delivering solutions designed to improve energy, process and production
efficiency, as well as reduce risk, operational cost and capital cost, while minimizing waste for customers,
from project start-up and throughout the entire plant lifecycle.
The Process Industries Division serves the mining, minerals processing, metals, cement, pulp and paper,
battery manufacturing, and food and beverage, as well as their associated service industries. The Division
brings deep industry domain expertise coupled with the ability to integrate both automation and electrical
systems, increase productivity and reduce overall capital and operating costs for customers. For mining,
metals and cement customers, solutions include specialized products and services, as well as total
production systems. The Division designs, plans, engineers, supplies, installs and commissions integrated
electrical and motion systems, including electric equipment, drives, motors, high power rectifiers and
equipment for automation and supervisory control within a variety of areas including mineral handling, mining
operations, aluminum smelting, hot and cold steel applications and cement production. The offering for the
pulp and paper industries includes control systems, quality control systems, drive systems, on-line sensors,
actuators and field instruments. Digitalization solutions, including collaborative operations and augmented
reality, help improve plant and enterprise productivity, and reduce maintenance and energy costs.
24
The Marine & Ports Division serves the shipping and ports industries through its extensive portfolio of
integrated systems and solutions that improve the flexibility, reliability and energy efficiency of vessels and
container terminals. By coupling power, propulsion, automation, marine software and services that ensure
maximum vessel uptime, the Division is well positioned to help the marine industry to achieve its
decarbonization targets while improving the profitability and sustainability of our customers’ business
throughout the entire lifecycle of vessels. With ABB Ability™ Marine software solutions and ABB Ability™
Collaborative Operations Centers around the world, shipowners and operators can run their fleets at lower
fuel and maintenance costs, while improving crew, passenger and cargo safety as well as overall productivity
of their operations. Further, the Division delivers automation, electrical systems and digital solutions for
container and bulk cargo handling, from ship to gate. These solutions help terminal operators meet the
challenge of larger ships, taller cranes and bigger volumes per call, and make terminal operations safer,
greener and more productive.
The Measurement & Analytics Division is among the world’s leading manufacturers and suppliers of smart
instrumentation and analyzers, working at the heart of industrial digital transformation. The Measurement &
Analytics Division’s portfolio consists of analyzers measuring compositions of gases and liquids;
instrumentation measuring process variables such as temperature, pressure, flow, and level; force
measurement solutions measuring parameters such as flatness, thickness, and tension; and advanced digital
solutions for device management, device health check and predictive maintenance. The Measurement &
Analytics Division serves key industries such as oil and gas, chemical, water and wastewater, power,
hydrogen, batteries, as well as the marine industry. The Division enables the optimization of industrial
processes by providing and analyzing data collected from sensing and smart measurement devices.
Parameters such as emission levels and production inputs are measured by providing ‘before’ and ‘after’
values, enabling efficient operations and environmental sustainability through measurement.
Sales and Marketing
The Process Automation Business area’s sales are primarily made through its direct sales force as well as
third-party channel partners, such as distributors, system integrators and OEMs. The majority of revenues are
derived through the Business area’s own direct sales channels.
Competition
The Process Automation Business area’s principal competitors vary by industry or product group.
Competitors include: Emerson, Honeywell, Schneider Electric, Siemens, Siemens Energy, Yokogawa,
Endress + Hauser, Kongsberg and Valmet.
Capital Expenditures
The Process Automation Business area’s capital expenditures for property, plant and equipment totaled
$66 million in 2023, compared to $100 million in 2022. Principal investments in 2023 primarily related to
equipment replacement and upgrades, mainly in the Energy Industries Division and Measurement & Analytics
Division. Geographically, in 2023, Europe represented 68 percent of the capital expenditures, followed by the
Americas (19 percent) and Asia, Middle East and Africa (13 percent).
—
Robotics & Discrete Automation Business area
Overview
The Robotics & Discrete Automation Business area provides robotics, and machine and factory automation
including products, software, solutions and services. Revenues are generated both from direct sales to end
users as well as from indirect sales mainly through system integrators and machine builders.
The Robotics & Discrete Automation Business area had approximately 11,300 employees as of
December 31, 2023, and generated $3.6 billion of revenues in 2023.
25
Customers
The Robotics & Discrete Automation Business area serves a wide range of customers. The main customers
are active in industries such as automotive, machine building, metalworking, electronics, food and beverage
and logistics. They include end-users such as manufacturers, system integrators and machine builders.
Products and Services
The Robotics & Discrete Automation Business area’s products and services are delivered through two
operating divisions.
The Robotics Division offers a wide range of products, solutions and services including robots, autonomous
mobile robots, robotics application cells and smart systems, field services, spare parts, digital services,
engineering and operations software. This offering provides customers with increased productivity, quality,
flexibility and simplicity for operations, e.g. to meet the challenge of making smaller lots of a larger number of
specific products in shorter cycles for today’s dynamic global markets and coping with increasing uncertainty.
Robots are also used in activities or environments which may be hazardous to employee health and safety,
such as repetitive or strenuous lifting, dusty, hot or cold rooms, or painting booths and can help customers
address labor shortages. Robotics solutions are used in a wide range of segments from automotive OEMs,
automotive suppliers, electronics, general industry, consumer goods, food and beverage, and
warehouse/logistics center automation. They are increasingly deployed in service applications for life
sciences care, restaurants and retail. Typical robotic applications include welding, material handling, machine
tending, machining, painting, picking, packing, palletizing and assembly.
The Machine Automation Division offers integrated automation solutions based on programmable logical
controllers, industrial PCs, servo motion, industrial transport systems and machine vision. It also provides
software for engineering and optimization. The range of solutions are mainly used by machine builders for
various types of series machines, e.g. for plastics, metals, printing and packaging.
Sales and Marketing
Sales are made both through direct sales as well as through third
‑
party channel partners, such as system
integrators and machine builders. The proportion of direct sales compared to channel partner sales varies
among the different industries, product technologies and geographic markets.
Competition
Competitors of the Robotics & Discrete Automation Business area vary by offering and include companies
such as Fanuc, Kuka, Yaskawa, Epson, Dürr, Stäubli, Universal Robots, Rockwell Automation, Siemens,
Mitsubishi Electric and Beckhoff.
Capital Expenditures
The Robotics & Discrete Automation Business area’s capital expenditures for property, plant and equipment
totaled $71 million in 2023, compared to $86 million in 2022. Principal investments in 2023 were primarily
related to the expansion of the North American robotics headquarters and manufacturing facility in the United
States and production enhancements in both the Robotics Division in China and the Machine Automation
Division in Austria. In 2023, Europe represented 55 percent of capital expenditures, followed by the Americas
(24 percent) and Asia, Middle East and Africa (21 percent).
26
—
Corporate and Other
Corporate and Other includes core headquarter functions, real estate activities, Corporate Treasury,
functional shared services for human resources, finance and information services and other minor business
activities. Certain strategic investments managed by ABB Technology Ventures are also included in
Corporate. The remaining activities of certain EPC projects which we are completing and are in a wind-down
phase are reported as non-core businesses within Corporate and Other. The historical business activities of
certain divested businesses are also presented in Corporate and Other. These include the high-voltage
cables business, steel structures and certain EPC contracts relating to the oil and gas industry. In addition,
effective January 1, 2023, the E-mobility Division became a separate operating segment and is reported in
Corporate and Other for all periods presented.
Corporate headquarters and stewardship activities include the operations of our corporate headquarters in
Zurich, Switzerland, as well as limited corporate
‑
related activities in certain countries. These activities cover
staff functions with group
‑
wide responsibilities, such as accounting and financial reporting, corporate finance
and corporate treasury, taxes, internal audit, legal and integrity, compliance, risk management and insurance,
corporate communications, human resources, information systems and investor relations.
We operate shared service centers globally through a network of hubs which consist of services in the areas
of human resources, finance and information services. We also staff and maintain front offices in various
countries. The costs of these shared services are incurred primarily for the benefit of the Business areas,
which are charged for their use of such services and the related number of employees are allocated to the
Business areas. Similarly, a significant portion of the shared corporate overhead costs are charged to the
operating businesses. We also provide services to third parties under transitional service agreements in
relation to certain divested businesses, the largest of which is Hitachi Energy (the former Power Grids
business).
The E-mobility Division is contributing to a zero-emission mobility future with smart, reliable and emission-free
electric vehicle charging solutions including market leading charging hardware, ABB Ability™ enabled digital
services and energy and fleet management solutions. ABB E-mobility offers a leading portfolio of EV charging
solutions from smart chargers for the home to high-power chargers for the highway stations of the future,
solutions for the electrification of fleets and opportunity charging for electric buses and trucks.
Corporate and Other had approximately 2,900 employees at December 31, 2023, of which approximately
2,100 pertain to the E-mobility Division and our other non-core businesses.
—
Discontinued operations
In 2020, we completed the divestment of our Power Grids business to Hitachi Ltd (Hitachi). As a result, the
Power Grids business was reported as discontinued operations in the Consolidated Financial Statements.
See “Note 3 - Discontinued operations” to our Consolidated Financial Statements.
—
Capital expenditures
Total capital expenditures for property, plant and equipment and intangible assets (excluding intangibles
acquired through business combinations) amounted to $770 million, $762 million and $820 million in 2023,
2022 and 2021, respectively. In 2023 and 2022, capital expenditures were 1 percent and 6 percent lower,
respectively, than depreciation and amortization. Excluding acquisition-related amortization, capital
expenditures were 37 percent higher in 2023 and 30 percent higher in 2022, respectively, than depreciation
and amortization.
27
Capital expenditures in 2023 primarily focused in mature markets, reflecting the geographic distribution of our
existing production facilities. Capital expenditures in Europe and the Americas in 2023 were driven primarily
by upgrades of existing production facilities and capacity expansion, mainly in the U.S., Germany, Italy,
Finland, Switzerland and Austria. In Asia, Middle East and Africa, capital expenditures were made primarily to
increase production capacity by investing in new or expanded facilities, the highest of which were in China
and India. The share of emerging markets capital expenditures as a percentage of total capital expenditures
in 2023 and 2022 was 23 percent and 24 percent, respectively.
At December 31, 2023, construction in progress for property, plant and equipment was $713 million, mainly in
the U.S., Germany, Switzerland and Finland, while at December 31, 2022, construction in progress for
property, plant and equipment was $586 million, mainly in the U.S., Germany, Switzerland, Finland, Austria,
China and Sweden.
Our capital expenditures relate primarily to property, plant and equipment and are funded primarily through
cash flows from operating activities. For 2024, we estimate the expenditures for property, plant and
equipment will be higher than our annual depreciation and amortization charge, excluding acquisition-related
amortization.
—
Supplies and raw materials
We purchase a variety of supplies and products which contain raw materials for use in our production and
project execution processes. The primary materials used in our products, by weight, are copper, steel,
aluminum, mineral oil and various plastics. We also purchase a wide variety of fabricated products, electronic
components and systems. We operate a worldwide supply chain management network with employees
dedicated to this function in our Business areas, divisions and in key countries. Our supply chain operations
consists of a number of teams, each focusing on different product categories. These category teams are
tasked with taking advantage of opportunities to leverage the scale of ABB on a global, Business area and/or
division level, as appropriate, to optimize the efficiency of our supply networks in a sustainable manner.
Our supply chain management organization’s activities and objectives include:
•
•
reporting system linked to our enterprise resource planning (ERP) systems,
•
management structure and extensive competency-based training, and
•
processes used.
We buy many categories of products which contain copper, steel, aluminum, crude oil and other
commodities. Continuing global economic growth in many emerging economies, coupled with the volatility in
foreign currency exchange rates, has led to significant fluctuations in these raw material costs over the last
few years. While we expect global commodity prices to remain highly volatile, we expect to offset some
market volatility through the use of long-term contracts and global sourcing.
28
We seek to mitigate the majority of our exposure to commodity price risk by entering into derivative contracts.
For example, we manage copper, steel, aluminum, and silver price risk using principally swap contracts
based on prices for these commodities quoted on leading exchanges. ABB’s hedging policy is designed to
safeguard margins by minimizing price volatility and providing a stable cost base during order execution. In
addition to using derivatives to reduce our exposure to fluctuations in raw materials prices, in some cases we
can reduce this risk by incorporating changes in raw materials prices into the prices of our end products
(through price escalation clauses).
Throughout 2023, we continued to optimize our value chain in all aspects of our business, while ensuring
high standards of quality and delivery. Despite some continuing global supply chain challenges such as rising
costs, port congestion, material access issues and some geopolitical uncertainty, we were able to mitigate
these difficulties with efforts from our dedicated category teams, supply chain management personnel and
Business area task forces. We also enhanced our rigorous supplier onboarding process involving
comprehensive integrity due diligence and competitive bidding for our potential and existing vendors. This
helps in reducing the risk of fraud, corruption and non-compliance as well as in securing the best value and
quality for our products and services. As a result, we were able to minimize the impact of supply chain
disruptions, maintain a high level of customer satisfaction and support our business growth.
Through our Sustainable Supply Base Management (SSBM) approach, we assess environment, social and
governance (ESG) risks, compliance, and the performance of our suppliers in these areas to make sure they
meet our expectations. These expectations are detailed in the ABB Supplier Code of Conduct and the ABB
Code of Conduct. In 2023, the Supplier Code of Conduct was revised and updated to reflect the increasing
legal and stakeholder requirements as well as our Sustainability Framework 2030.
In August 2012, the SEC issued its final rules regarding “Conflict Minerals”, as required by section 1502 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act. We initiated conflict mineral processes in
2013 and have continuously aimed at improving and tailoring the processes to our value chain. We continue
to work with our suppliers and customers, to enable us to comply with the rules and disclosure obligations.
Further information on ABB’s Conflict Minerals policy and supplier requirements can be found under
“Responsible Minerals Sourcing” at https://global.abb/group/en/about/supplying/responsible-minerals.
Furthermore, ABB has developed a list of prohibited and restricted substances to ensure that the materials
we use do not contribute to environmental degradation. We update this list regularly in line with international
regulations, including the U.S. Toxic Substances Control Act (TSCA) regulations and California Proposition
65. More information on our Product Material Compliance program and supplier requirements can be found
under “Material Compliance” at https://global.abb/group/en/about/supplying/material-compliance.
As announced in 2022, ABB is working closely with its most impactful suppliers to reduce GHG emissions
along the supply chain. In 2023, we partnered with EcoVadis, a leading service provider in the ESG domain,
to engage with suppliers for GHG emission data collection and supplier education on this topic.
—
Patents and trademarks
While we are not materially dependent on any one of our intellectual properties, as a technology-driven
company, we believe that intellectual property rights are crucial to protect the assets of our business. We
continue to file new patent applications to protect our new inventions. As of December 31, 2023, we have a
portfolio of approximately 26,000 pending patent applications and granted patents, of which approximately
5,700 are pending applications. This portfolio includes approximately 3,600 utility models and design rights,
of which approximately 170 are pending applications. In 2023, we filed over 650 priority patents, utility model
and design applications, each covering a unique invention or unique angle on an invention. Additionally, we
filed approximately 1,900 secondary patents, utility model and design applications, each extending the
coverage of a previously filed priority application.
29
Based on our existing intellectual property strategy, we believe that we have adequate control over our core
technologies. The “ABB” trademarks and logo are protected in all of the countries in which we operate. We
proactively assert our intellectual property rights to safeguard the reputation associated with the ABB
technology and brand. While these intellectual property rights are fundamental to all of our businesses, there
is no dependency of the business on any single patent, utility model or design application.
—
Sustainability activities
Sustainability is key to our purpose which is to enable a more sustainable and resource-efficient future with
our technology leadership in electrification and automation. We believe that sustainable development means
progress towards a healthier and more prosperous world today and for future generations. This means
balancing the needs of society, the environment and the economy. To achieve this, we act and embed this
approach to business across our value chain, including our own operations, our suppliers, our customers and
the communities we serve. We strive to always be an exemplary corporate citizen wherever we operate.
Our Sustainability Agenda consists of three pillars:
Enabling a low-carbon society
target sectors that account for three quarters of global energy consumption. Our ambition is to support our
customers in avoiding emissions. We intend to have our updated targets validated against the Science Based
Targets initiative’s new Net-Zero Standard in 2024. We are following the World Business Council for
Sustainable Development (WBCSD) guidance on avoided emissions and are hence no longer focusing on a
limited number of cases linked to the 100 megatons emissions avoidance but rather on our complete portfolio
of offerings. Our net-zero commitments for emissions reductions in our own operations and across our value
chain are:
•
2
e (CO
2
by 100 percent by 2050 compared to baseline year 2019, and
•
2
e (CO
2
25 percent by 2030, and by 90 percent by 2050 compared to baseline year 2022.
Preserving resources
considerations across our value chain. Our solutions reduce waste, provide increased recyclability and foster
reusability. Our 2030 commitments are:
•
Approach, and
•
Promoting social progress
to cause zero harm to our people and contractors, increase the proportion of women in senior management
roles, achieve a top-tier employee engagement score, respect and promote human rights along our value
chain and expand our programs for community engagement. Our 2030 commitments:
•
reduction in lost time from incidents,
•
within our comprehensive diversity and inclusion framework,
•
•
30
All three pillars of our Sustainability Agenda are underpinned by our commitment to embedding a culture of
integrity and transparency across our value chain. We have established four concrete targets:
•
risk-based due diligence and life cycle monitoring by 2030,
•
management strategy gained from insights through targeted learnings, transparent reporting and
monitoring by 2030,
•
Base Management (SSBM) approach by 2030. The 2025 mid-term target is to cover at least
80 percent of our high-risk supply spending in these focus countries by SSBM. This approach
includes regular assessments of environmental, social and governance performance, and
•
Reflecting the importance of sustainability as a strategic topic, ABB’s Board of Directors reviews and
approves our Sustainability Agenda and related targets. The Governance and Nomination Committee of the
Board of Directors is responsible for overseeing ABB’s Sustainability Agenda (including corporate social
responsibility, health, safety and environment), while the Compensation Committee ensures that ABB’s
executive compensation policies are appropriately aligned with its Sustainability Agenda.
In 2023, we continued to make good progress towards our sustainability targets. We see a further
improvement in the share of electricity from renewable sources we use, from 81 percent in 2022 to
94 percent in 2023. We have reduced our own emissions by 76 percent to 151 kilotons since 2019.
86 percent of our waste in 2023 was recycled, and 6.3 percent was sent to landfill, down from 6.4 percent in
2022. Of the 338 ABB sites mapped in 2023, 61 face an extremely high level of water stress and 55 face a
high level of water stress. For all ABB sites in stressed watersheds, total water withdrawals in 2023 amounted
to 1,242 kilotons, representing 49 percent of our total water withdrawals. There are 12 projects currently
under way to improve water management across ABB.
In 2023, ABB recorded one workplace-related fatality and zero travel-related fatalities. An investigation into
the fatal incident is currently underway, and we will draw on the lessons learned to prevent any future
recurrence. In spite of this fatality, the total number of serious and high-potential incidents decreased
compared to 2022. In 2023, our lost time incident frequency rate decreased from 0.14 per 200,000 hours
worked in 2022 to 0.13 in 2023. The number of women in senior management positions increased from
17.8 percent in 2022 to 21 percent in 2023.
Our employee engagement score increased from 76 (out of 100) in 2022 to 77 in 2023, while the response
rate increased from 82 percent to 84 percent. We continued to provide impactful support for community-
building initiatives across all regions. Our community engagement initiatives will be expanded around four
focus areas (4Es): education, emergency and disaster relief, empowering communities, and the environment
and conservation.
ABB is committed to respecting and promoting the dignity and human rights of all people, as expressed in the
International Bill of Human Rights. In December 2023, we published an updated edition of ABB’s Human
Rights Policy, which includes our documented HRDD (Human Rights Due Diligence) Framework. The update
was drafted concurrently with business area risk and HRDD reviews and incorporates feedback from internal
and external stakeholders and subject-matter experts gathered during 2023, along with the requirements of
the latest relevant international frameworks, standards and legislation governing responsible business
practices.
In 2023, all Executive Committee members had at least two sustainability-related goals (e.g., CO
2
e
emission
reduction, safety, female leadership) in their individual component of the Annual Incentive Plan (AIP).
31
—
Regulation
Our operations are subject to numerous governmental laws and regulations including those governing
antitrust and competition, corruption, the environment, securities transactions and disclosures, import and
export of products, currency conversions and repatriation, taxation of foreign earnings and earnings of
expatriate personnel and use of local employees and suppliers.
As a reporting company under Section 12 of the Exchange Act, we are subject to the FCPA’s anti-bribery
provisions with respect to our conduct around the world.
Our operations are also subject to the 1997 OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions. The convention obliges signatories to adopt national
legislation that makes it a crime to bribe foreign public officials. Those countries which have adopted
implementing legislation and have ratified the convention include the U.S., several European nations and
certain other countries in which we have significant operations.
We conduct business in certain countries known to experience governmental corruption. While we are
committed to conducting business in a legal and ethical manner, our employees or agents have taken, and in
the future may take, actions that violate the U.S. FCPA, legislation promulgated pursuant to the 1997 OECD
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, antitrust
laws or other laws or regulations. These actions have resulted and could result in monetary or other penalties
against us and could damage our reputation and, therefore, our ability to do business. For more information,
see “Item 8. Financial Information—Legal Proceedings”.
The U.S. Iran Threat Reduction and Syria Human Rights Act of 2012 requires companies with securities
registered in the U.S. to disclose information relating to certain transactions with Iran. In 2018, certain
non-U.S. subsidiaries of ABB, in accordance with applicable laws, provided electrical equipment, automation
systems and on-site services to OEMs, distributors, panel builders, EPC contracting companies and other
customers for Iranian business. ABB discontinued its Iranian business on November 4, 2018. As previously
disclosed, ABB is completing minor work on a long-term contract which is being performed in line with
applicable sanctions. The revenues attributable to this work in 2023 amounted to approximately $0.2 million.
—
Organizational structure
ABB Ltd is the ultimate parent company of the ABB Group. It is the sole shareholder of ABB Asea Brown
Boveri Ltd which directly or indirectly owns the other companies in the ABB Group. The table below both sets
forth, as of December 31, 2023, the name, place of incorporation and ownership interest of the significant
direct and indirect subsidiaries of ABB Ltd, Switzerland. ABB’s operational group structure is described above
in the “Businesses” section of Item 4.
Name
Location
Country
Group
Interest %
ABB Australia Pty. Limited
Moorebank
Australia
100.00
ABB Group Holdings Pty. Ltd.
Moorebank
Australia
100.00
ABB Group Investment Management Pty. Ltd.
Moorebank
Australia
100.00
ABB AG
Wiener Neudorf
Austria
100.00
B&R Holding GmbH
Eggelsberg
Austria
100.00
B&R Industrial Automation GmbH
Eggelsberg
Austria
100.00
ABB N.V.
Zaventem
Belgium
100.00
32
Name
Location
Country
Group
Interest %
ABB AUTOMAÇÃO LTDA.
Sorocaba
Brazil
100.00
ABB ELETRIFICAÇÃO LTDA.
Sorocaba
Brazil
100.00
ABB Bulgaria EOOD
Sofia
Bulgaria
100.00
ABB Electrification Canada Inc.
Saint-Laurent
Canada
100.00
ABB Inc.
Saint-Laurent
Canada
100.00
ABB S.A.
Santiago
Chile
100.00
ABB (China) Investment Limited
Beijing
China
100.00
ABB (China) Ltd.
Beijing
China
100.00
ABB Beijing Drive Systems Co. Ltd.
Beijing
China
90.00
ABB Beijing Switchgear Limited
Beijing
China
60.00
ABB Electrical Machines Ltd.
Shanghai
China
100.00
ABB Engineering (Shanghai) Ltd.
Shanghai
China
100.00
ABB LV Installation Materials Co. Ltd. Beijing
Beijing
China
85.70
ABB Shanghai Free Trade Zone Industrial Co., Ltd.
Shanghai
China
100.00
ABB Shanghai Motors Co. Ltd.
Shanghai
China
75.00
ABB Xiamen Low Voltage Equipment Co. Ltd.
Xiamen
China
100.00
ABB Xiamen Switchgear Co. Ltd.
Xiamen
China
66.52
ABB Xinhui Low Voltage Switchgear Co. Ltd.
Xinhui
China
90.00
ABB s.r.o.
Prague
Czech Republic
100.00
ABB A/S
Skovlunde
Denmark
100.00
ABB for Electrical Industries (ABB ARAB) S.A.E.
Cairo
Egypt
100.00
Asea Brown Boveri S.A.E.
Cairo
Egypt
100.00
ABB AS
Jüri
Estonia
100.00
ABB Oy
Helsinki
Finland
100.00
ABB France
Cergy Pontoise
France
99.84
ABB SAS
Cergy Pontoise
France
100.00
ABB AG
Mannheim
Germany
100.00
ABB Beteiligungs- und Verwaltungsgesellschaft mbH
Mannheim
Germany
100.00
ABB Stotz-Kontakt GmbH
Heidelberg
Germany
100.00
ABB Striebel & John GmbH
Sasbach
Germany
100.00
B + R Industrie-Elektronik GmbH
Bad Homburg
Germany
100.00
Busch-Jaeger Elektro GmbH
Lüdenscheid
Germany
100.00
ABB Global Business Services and Contracting India
Private Limited
Bangalore
India
100.00
ABB Global Industries and Services Private Limited
Bangalore
India
100.00
ABB India Limited
Bangalore
India
75.00
ABB Limited
Dublin
Ireland
100.00
ABB E-mobility S.p.A.
Milan
Italy
74.70
ABB S.p.A.
Milan
Italy
100.00
ABB K.K.
Tokyo
Japan
100.00
ABB Ltd.
Seoul
Korea, Republic of
100.00
ABB Electrical Control Systems S. de R.L. de C.V.
Monterrey
Mexico
100.00
33
Name
Location
Country
Group
Interest %
ABB Mexico S.A. de C.V.
San Luis Potosi
Mexico
100.00
Asea Brown Boveri S.A. de C.V.
San Luis Potosi
Mexico
100.00
ABB B.V.
Rotterdam
Netherlands
100.00
ABB E-mobility B.V.
Delft
Netherlands
74.70
ABB Finance B.V.
Rotterdam
Netherlands
100.00
ABB Holdings B.V.
Rotterdam
Netherlands
100.00
ABB AS
Fornebu
Norway
100.00
ABB Electrification Norway AS
Skien
Norway
100.00
ABB Holding AS
Fornebu
Norway
100.00
ABB Business Services Sp. z o.o.
Warsaw
Poland
99.94
ABB Sp. z o.o.
Warsaw
Poland
99.94
Industrial C&S of P.R. LLC
Arecibo
Puerto Rico
100.00
ABB Electrical Industries Co. Ltd.
Riyadh
Saudi Arabia
65.00
ABB Pte. Ltd.
Singapore
Singapore
100.00
ABB Holdings (Pty) Ltd.
Modderfontein
South Africa
100.00
ABB Investments (Pty) Ltd.
Modderfontein
South Africa
51.00
ABB South Africa (Pty) Ltd.
Modderfontein
South Africa
74.91
Asea Brown Boveri S.A.
Madrid
Spain
100.00
ABB AB
Västerås
Sweden
100.00
ABB Electrification Sweden AB
Västerås
Sweden
100.00
ABB Norden Holding AB
Västerås
Sweden
100.00
ABB Asea Brown Boveri Ltd
Zurich
Switzerland
100.00
ABB Capital AG
Zurich
Switzerland
100.00
ABB E-mobility Holding Ltd
Zurich
Switzerland
74.70
ABB Schweiz AG
Baden
Switzerland
100.00
ABB Ltd.
Taipei
Taiwan (Chinese
Taipei)
100.00
ABB Elektrik Sanayi A.S.
Istanbul
Turkiye
99.99
ABB Industries (L.L.C.)
Dubai
United Arab
Emirates
49.00
(1)
ABB Industries FZE
Dubai
United Arab
Emirates
100.00
ABB Holdings Limited
Warrington
United Kingdom
100.00
ABB Limited
Warrington
United Kingdom
100.00
ABB E-mobility Inc.
Wilmington, DE
United States
74.70
ABB Finance (USA) Inc.
Wilmington, DE
United States
100.00
ABB Holdings Inc.
Cary, NC
United States
100.00
ABB Inc.
Cary, NC
United States
100.00
ABB Installation Products Inc.
Memphis, TN
United States
100.00
ABB Motors and Mechanical Inc.
Fort Smith, AR
United States
100.00
ABB Treasury Center (USA), Inc.
Wilmington, DE
United States
100.00
Edison Holding Corporation
Wilmington, DE
United States
100.00
Industrial Connections & Solutions LLC
Cary, NC
United States
100.00
(1) Company consolidated as ABB exercises full management control.
34
—
Description of property
As of December 31, 2023, we occupy real estate in around 100 countries throughout the world. The facilities
consist mainly of manufacturing plants, office buildings, research centers and warehouses. A substantial
portion of our production and development facilities is situated in China, the U.S., Germany, Finland, Austria,
Sweden, Italy, Canada, Poland, India and Mexico. We also own or lease other properties, including office
buildings, warehouses, research and development facilities and sales offices in many countries. We own
substantially all of the machinery and equipment used in our manufacturing operations.
From time to time, we have a surplus of space arising from acquisitions, production efficiencies and/or
restructuring of operations. Normally, we seek to sell such surplus space which may involve leasing property
to third parties for an interim period.
The net book value of our property, plant and equipment at December 31, 2023, was $4,142 million, of which
machinery and equipment represented $1,353 million, land and buildings represented $2,085 million and
construction in progress represented $704 million. We believe that our current facilities are in good condition
and are adequate to meet the requirements of our present and foreseeable future operations.
Item 4A. Unresolved Staff Comments
None
35
Item 5. Operating and Financial Review and Prospects
The discussion in Item 5 below provides a comparative analysis between 2023 and 2022. For a comparative
analysis between 2022 and 2021 see “Item 5. Operating and Financial Review and Prospects” in our Annual
Report on Form 20-F for the year ended December 31, 2022, with the exception of subsections
"Electrification" and "Corporate and Other" under "Business analysis" below, where a comparative analysis
between 2022 and 2021 has been provided to reflect the realignment of E-mobility (see “Note 23 - Operating
segment and geographic data” for details).
—
Management overview
In 2023 we delivered a strong operational result as we executed on our strong order backlog which was built
up during a period of a strained value chain, inflation and an energy crisis. It was also another year of robust
price execution where the linked benefits more than offset the inflation in labor costs while the margin was
further supported by lower inflation-affected input costs and freight. In the wake of normalizing value chains,
price management progressively returned to be customer value driven. The energy crisis triggered a series of
customer investments throughout the year and further highlighted their need to ramp up investments in
energy efficiency and transition to renewable energy sources. During the year we saw high customer activity
in the areas of LNG and hydrogen, highlighting how relevant our offering and technologies are to address
these energy challenges.
The ABB Way operating model facilitates more efficient ways of working which, combined with a strong
market situation, led to increased operational results. We delivered record segment profit
(Operational EBITA) and continued to see our divisions progress through their strategic mandates of stability
and profitability before growth. With approximately 70 percent of division revenues now covered under a
growth mandate we are increasingly shifting our focus to growth.
We continued to be active in portfolio management and completed the sale of our Power Conversion Division
in July 2023, marking the completion of the three announced divisional exits.
Active portfolio management continues to be part of our performance culture and is an integrated part of the
responsibilities of divisional management teams. This includes identifying areas for inorganic growth through
acquisitions related to new segments, new market access, better economies of scale or filling technology
gaps. The divisions also assess, based on systematic portfolio reviews, whether, ultimately, their division is
the best owner of their different businesses. During 2023, we also continued to make strategic venture capital
investments focused in the areas of digital capabilities and software, completing nine new investments during
the year and a number of follow-on investments in existing ventures. The divisions continue to build up their
acquisition target pipelines and, during 2023, we completed the acquisitions of the Siemens low-voltage
motor business led by the NEMA Motors Division, strengthened our smart home technology portfolio with the
acquisition of EVE systems led by the Smart Buildings Division, and completed four other smaller bolt-on
acquisitions primarily related to software and AI technology. As part of our future strategy, we continue to aim
to complete five to ten small to mid-size bolt-on acquisitions each year. On the divestment side, the Energy
Industries Division completed the divestment of its technical engineering consultancy business in the United
Kingdom and the Smart Buildings Division divested their industrial plugs & sockets product line.
36
Business progress
During 2023, underlying demand for ABB’s offering remained resilient from the previous year’s already high
level with reported orders being steady, somewhat negatively impacted by exchange rates and business
divestments. Throughout the year we noted that order momentum was strongest in the systems- and project-
related businesses, driven predominantly by utilities and datacenters as well as process-related industries.
This offset some softening of demand in the short-cycle business from the previous year's high order level,
mainly in the residential construction segment and in the discrete manufacturing sectors apart from the
automotive segment, as customers normalized order patterns in the face of shortening delivery lead times. In
total, orders continued to exceed revenues in three out of four Business areas, and we further increased total
order backlog.
While our orders decreased 1 percent (increased 1 percent in local currencies) in 2023, revenue growth was
stronger, reaching 9 percent (11 percent in local currencies). As supply chain constraints and imbalances in
the overall supply chain eased we were able to effectively convert orders into deliveries.
Group profitability showed strong improvement during 2023 with the level of segment profit improving in all
Business areas. The result was driven by strong pricing execution, increased volumes and improved internal
efficiency. Active price management and productivity gains were able to offset increasing labor inflation as
well as some limited cost inflation related to commodities which were still present in the first half of the year.
The profitability improvement as well as our ability to keep working capital steady facilitated by the
normalization of supply chains allowed us to achieve strong operating cashflows. Cash flows from operating
activities in continuing operations improved to $4.3 billion in 2023, an increase of $3 billion compared
to 2022. This improvement was further helped as the previous year’s results included significant cash
outflows relating to the exit of a non-core business, the payment for the settlement related to regulatory
penalties for the Kusile project, costs for the spinoff of the Turbocharging Division as well as ongoing
restructuring and business transformation costs.
We continued to make organic growth investments in a disciplined manner, prioritizing research and
development while reducing administrative costs. Total non-order related research and development was
$1.3 billion in 2023, or 4.1 percent of revenues.
Updated financial targets
During 2023, we raised our growth target to 5 to 7 percent (up from 3 to 5 percent) for comparable average
revenue growth, through an economic cycle, in constant currencies and excluding acquisitions and
divestments. In addition we continue to target 1 to 2 percent acquired revenue growth through the economic
cycle net of acquisitions and divestments.
For the Operational EBITA margin, having reached our target of at least 15 percent a year earlier than
planned, we raised our target to be in the range of 16 to 19 percent on an annual basis commencing in 2024.
As a result of our higher growth and Operational EBITA margin targets and increasing focus on capital
returns, including in the annual employee incentive plans, we have increased our Return on Capital
Employed (ROCE) target to be above 18 percent excluding transformative deals defined as being larger than
3 percent of Group revenues annually (up from the range of 15 to 20 percent).
Additionally, we have sharpened our EPS growth target to be at least high-single digit through the economic
cycle (from basic EPS growth above revenue growth) reflecting our confidence in our ability to sustainably
reduce the gap between Operational EBITA and Income from operations.
Lastly, we maintain our target to achieve Free cash flow conversion of approximately 100 percent on an
annual basis.
37
Capital allocation
Our capital allocation priorities are unchanged:
•
•
•
•
We expect that our strong cash generation, on the back of the ABB Way operating model, will enhance our
flexibility to invest in both organic growth and bolt-on acquisitions, while providing attractive returns to
shareholders.
At the 2024 Annual General Meeting (AGM), the Board of Directors is proposing a dividend of 0.87 Swiss
francs per share. Under the various share buyback programs we repurchased $893 million of shares in 2023.
Sustainability Agenda
With our sustainability agenda, we are actively contributing to a more sustainable world, leading by example
in our own operations and partnering with customers and suppliers to enable a low-carbon society, preserve
resources and promote social progress. All three pillars of our sustainability agenda are underpinned by our
commitment to create a culture of integrity and transparency across our value chain.
Amongst other focus areas in 2023, we’ve reinforced and accelerated our sustainability efforts, aligning our
methodologies with recognized international frameworks. We have submitted updated SBTi (Science Based
Targets initiative) targets to be net-zero aligned. In this context, we increased our scope 3 emissions
reduction target to 25 percent by 2030. By 2050, we target to have a 100 percent reduction in Scope 1 and 2
emissions versus the 2019 baseline and a 90 percent reduction in Scope 3 emissions versus the 2022
baseline. Furthermore, we aligned our methodology for our avoided emissions to the World Business Council
for Sustainable Development (WBCSD) 2023 guidance and moved from a target to an ambition to avoid 600
megatons of CO
2
e emissions by 2030, providing increased credibility and comparability to our contribution of
enabling a low carbon society. For a detailed discussion of our sustainability strategy 2030 and our progress
in 2023, see “Item 4. Information on the Company—Sustainability activities”.
—
Critical accounting policies and estimates
General
We prepare our Consolidated Financial Statements in accordance with U.S. GAAP and present these in U.S.
dollars unless otherwise stated.
The preparation of our financial statements requires us to make assumptions and estimates that affect the
reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent
assets and liabilities. We evaluate our estimates on an ongoing basis (see “Note 2 - Significant accounting
policies” to our Consolidated Financial Statements for a listing of our most significant accounting estimates).
Where appropriate, we base our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from our estimates and assumptions.
38
We deem an accounting policy to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is made and if different
estimates that reasonably could have been used, or if changes in the accounting estimates that are
reasonably likely to occur periodically, could materially impact our Consolidated Financial Statements. We
also deem an accounting policy to be critical when the application of such policy is essential to our ongoing
operations. We believe the following critical accounting policies require us to make subjective judgments,
often as a result of the need to make estimates regarding matters that are inherently uncertain and material
to our Consolidated Financial Statements. These policies should be considered when reading our
Consolidated Financial Statements.
Revenue recognition
A customer contract exists if collectability under the contract is considered probable, the contract has
commercial substance, contains payment terms, the rights and commitments of both parties, and has been
approved. By analyzing the type, terms and conditions of each contract or arrangement with a customer, we
determine which revenue recognition method applies.
We recognize revenues when control of goods or services is transferred to customers in an amount that
reflects the consideration we expect to be entitled to in exchange for these goods or services. Control is
transferred when the customer has the ability to direct the use and obtain the benefits from the goods or
services.
The percentage
‑
of
‑
completion method of accounting is generally used when recognizing revenue on an over
time basis and involves the use of assumptions and projections, principally relating to future material, labor,
subcontractor and project
‑
related overhead costs as well as estimates of the amount of variable
consideration to which we expect to be entitled. As a consequence, there is a risk that total contract costs or
the amount of variable consideration will, respectively, either exceed or be lower than those we originally
estimated (based on all information reasonably available to us) and the margin will decrease or the contract
may become unprofitable. This risk increases if the duration of a contract increases because there is a higher
probability that the circumstances upon which we originally developed our estimates will change, resulting in
increased costs that we may not recover. Factors that could cause costs to increase include:
•
us to incur additional costs to remedy,
•
•
•
•
•
Changes in our initial assumptions, which we review on a regular basis between balance sheet dates, may
result in revisions to estimated costs, current earnings and anticipated earnings. We recognize these
changes in the period in which the changes in estimates are determined. By recognizing changes in
estimates cumulatively, recorded revenue and costs to date reflect the current estimates of the stage of
completion of each project. Additionally, losses on such contracts are recognized in the period when they are
identified and are based upon the anticipated excess of contract costs over the related contract revenues.
39
Pension and other postretirement benefits
As more fully described in “Note 17 - Employee benefits” to our Consolidated Financial Statements, we have
a number of defined benefit pension and other postretirement plans and recognize an asset for a plan’s
overfunded status or a liability for a plan’s underfunded status in our Consolidated Balance Sheets. We
measure such a plan’s assets and obligations that determine its funded status as of the end of the year.
Significant differences between assumptions and actual experience, or significant changes in assumptions,
may materially affect the pension obligations. The effects of actual results differing from assumptions and the
changing of assumptions are included in net actuarial loss within Accumulated other comprehensive loss.
We recognize actuarial gains and losses gradually over time. Any cumulative unrecognized actuarial gain or
loss that exceeds 10 percent of the greater of the present value of the projected benefit obligation (PBO) and
the fair value of plan assets is recognized in earnings over the expected average remaining working lives of
the employees participating in the plan, or the expected average remaining lifetime of the inactive plan
participants if the plan is comprised of all or almost all inactive participants. Otherwise, the actuarial gain or
loss is not recognized in the Consolidated Income Statements.
We use actuarial valuations to determine our pension costs and credits. The amounts calculated depend on a
variety of key assumptions, including discount rates, mortality rates and expected return on plan assets.
Under U.S. GAAP, we are required to consider current market conditions in making these assumptions. In
particular, the discount rates are reviewed annually based on changes in long
‑
term, highly
‑
rated corporate
bond yields. Decreases in the discount rates result in an increase in the PBO and a decrease in pension
costs. Conversely, an increase in the discount rates results in a decrease in the PBO and an increase in
pension costs. The mortality assumptions are reviewed annually by management. Decreases in mortality
rates result in an increase in the PBO and in pension costs. Conversely, an increase in mortality rates results
in a decrease in the PBO and in pension costs.
Holding all other assumptions constant, a 0.25 percentage-point decrease in the discount rate would have
increased the PBO related to our defined benefit pension plans by $157 million while a 0.25 percentage-point
increase in the discount rate would have decreased the PBO related to our defined benefit pension plans by
$153 million.
The expected return on plan assets is reviewed regularly and considered for adjustment annually based upon
the target asset allocations and represents the long
‑
term return expected to be achieved. Decreases in the
expected return on plan assets result in an increase to pension costs. Holding all other assumptions constant,
an increase or decrease of 0.25 percentage points in the expected long
‑
term rate of asset return would have
decreased or increased, respectively, the net periodic benefit cost in 2023 by $16 million.
The funded status, which can increase or decrease based on the performance of the financial markets or
changes in our assumptions, does not represent a mandatory short
‑
term cash obligation. Instead, the funded
status of a defined benefit pension plan is the difference between the PBO and the fair value of the plan
assets. Our defined benefit pension plans were overfunded by $212 million and $326 million at December 31,
2023 and 2022, respectively.
40
Income taxes
In preparing our Consolidated Financial Statements, we are required to estimate income taxes in each of the
jurisdictions in which we operate. Tax expense from continuing operations is reconciled from the
weighted
‑
average global tax rate (rather than from the Swiss domestic statutory tax rate). As the parent
company of the ABB Group, ABB Ltd, is domiciled in Switzerland, income which has been generated in
jurisdictions outside of Switzerland (hereafter “foreign jurisdictions”) and has already been subject to
corporate income tax in those foreign jurisdictions is, to a large extent, tax exempt in Switzerland. Therefore,
generally no or only limited Swiss income tax has to be provided for on the repatriated earnings of foreign
subsidiaries. There is no requirement in Switzerland for a parent company of a group to file a tax return of the
group determining domestic and foreign pre
‑
tax income and as our consolidated income from continuing
operations is predominantly earned outside of Switzerland, corporate income tax in foreign jurisdictions
largely determines our global weighted
‑
average tax rate.
We account for deferred taxes by using the asset and liability method. Under this method, we determine
deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax
bases of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates
and laws that are expected to be in effect when the differences are expected to reverse. We recognize a
deferred tax asset when it is more likely than not that the asset will be realized. We regularly review our
deferred tax assets for recoverability and establish a valuation allowance based upon historical losses,
projected future taxable income and the expected timing of the reversals of existing temporary differences. To
the extent we increase or decrease this allowance in a period, we recognize the change in the allowance
within Income tax expense in the Consolidated Income Statements unless the change relates to discontinued
operations, in which case the change is recorded in Loss from discontinued operations, net of tax.
Unforeseen changes in tax rates and tax laws, as well as differences in the projected taxable income as
compared to the actual taxable income, may affect these estimates.
Certain countries levy withholding taxes, dividend distribution taxes or additional corporate income taxes
(hereafter “withholding taxes”) on dividend distributions. Such taxes cannot always be fully reclaimed by the
shareholder, although they have to be declared and withheld by the subsidiary. Switzerland has concluded
double taxation treaties with many countries in which we operate. These treaties either eliminate or reduce
such withholding taxes on dividend distributions. It is our policy to distribute retained earnings of subsidiaries,
insofar as such earnings are not permanently reinvested or no other reasons exist that would prevent the
subsidiary from distributing them. No deferred tax liability is set up if retained earnings are considered as
indefinitely reinvested and used for financing current operations as well as business growth through working
capital and capital expenditure in those countries.
We operate in numerous tax jurisdictions and, as a result, are regularly subject to audit by tax authorities,
including for transfer pricing. We provide for tax contingencies whenever it is deemed more likely than not
that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or
changes in tax laws. Contingency provisions are recorded based on the technical merits of our filing position,
considering the applicable tax laws and OECD guidelines and are based on our evaluations of the facts and
circumstances as of the end of each reporting period. Changes in the facts and circumstances could result in
a material change to the tax accruals. Although we believe that our tax estimates are reasonable and that
appropriate tax reserves have been made, the final determination of tax audits and any related litigation could
be different than that which is reflected in our income tax provisions and accruals.
An estimated loss from a tax contingency must be accrued as a charge to income if it is more likely than not
that a tax asset has been impaired or a tax liability has been incurred and the amount of the loss can be
reasonably estimated. We apply a two
‑
step approach to recognize and measure uncertainty in income taxes.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained on audit, including resolution of
related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest
amount which is more than 50 percent likely of being realized upon ultimate settlement. The required amount
of provisions for contingencies of any type may change in the future due to new developments.
41
Goodwill and intangible assets
We review goodwill for impairment annually as of October 1, or more frequently if events or circumstances
indicate the carrying value may not be recoverable. We use either a qualitative or quantitative assessment
method for each reporting unit.
As each of our divisions have full ownership and accountability for their respective strategies, performance
and resources, we have determined our reporting units to be at the division level, which is generally one level
below our reportable segments of Electrification, Motion, Process Automation and Robotics & Discrete
Automation.
When performing the qualitative assessment, we first determine, for a reporting unit, factors which would
affect the fair value of the reporting unit including: (i) macroeconomic conditions related to the business,
(ii) industry and market trends, and (iii) the overall future financial performance and future opportunities in the
markets in which the business operates. We then consider how these factors would impact the most recent
quantitative analysis of the reporting unit’s fair value. Key assumptions in determining the fair value of the
reporting unit include the projected level of business operations including future expected profit margins, the
reporting unit’s weighted
‑
average cost of capital and the terminal growth rate.
During 2023, we divested our Power Conversion Division resulting in nineteen divisions and reporting units.
There were no additions to our divisions and reporting units during 2023. For each change in reporting unit
which arose during 2023, an interim impairment test was conducted before and after the change. In both the
“before” and “after” tests, it was concluded that the fair value of the reporting units exceeded the carrying
value by a significant amount.
In 2023, we elected to perform quantitative assessments for seven divisions, being Installation Products, IEC
LV Motors, Large Motors and Generators, NEMA Motors, Robotics, Machine Automation and E-mobility. For
each of these divisions the fair value was determined using a discounted cash flow fair value estimate based
on objective information available at the measurement date. The significant assumptions used to develop the
estimates of fair value for each division included management’s best estimates of the expected future results,
as well as discount and terminal growth rates specific to the reporting unit. The fair value estimates were
based on assumptions that a market participant would expect to use, but which are inherently uncertain and
thus, actual results may differ from those estimates. The fair values for each of the individual reporting units
and their associated goodwill were determined using Level 3 measurements. In each of the above
quantitative assessments, it was concluded that the fair value of the reporting unit exceeded its carrying value
by more than 100 percent. For the remaining divisions, we performed qualitative assessments and
determined that it was not more likely than not that the fair value for each of these reporting units was below
the carrying value.
Intangible assets are reviewed for recoverability upon the occurrence of certain triggering events (such as a
decision to divest a business or projected losses of an entity) or whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. We record impairment charges
other than impairments of goodwill in Other income (expense), net, in our Consolidated Income Statements,
unless they relate to a discontinued operation, in which case the charges are recorded in Loss from
discontinued operations, net of tax.
—
New accounting pronouncements
For a description of accounting changes and recent accounting pronouncements, including the expected
dates of adoption and estimated effects, if any, on our Consolidated Financial Statements, see “Note 2 -
Significant accounting policies” to our Consolidated Financial Statements.
42
—
Research and development
Each year, we invest significantly in research and development. Our research and development focuses on
developing and commercializing the technologies, products and solutions of our businesses that are of
strategic importance to our future growth. In 2023, we invested $1,317 million, or approximately 4.1 percent
of our 2023 consolidated revenues, on research and development activities in our continuing operations. We
also had expenditures of approximately $55 million on order-related development activities. These are
customer
‑
‑
specific development efforts that we undertake to develop or adapt equipment and
systems to the unique needs of our customers in connection with specific orders or projects.
In addition to continuous product development, and order
‑
related engineering work, we develop platforms for
technology applications in our businesses in our research and development laboratories, which operate on a
global basis. Through active management of our investment in research and development, we seek to
maintain a balance between short
‑
term and long
‑
term research and development programs and optimize our
return on investment. We protect these results by holding patents, copyrights and other appropriate
intellectual property protection.
To complement our business-focused product development, our businesses invest together in collaborative
research activities covering topics such as artificial intelligence, software, sensors, control and optimization,
mechatronics and robotics, power electronics, communication technologies, material and manufacturing,
electrodynamics and electrical switching technologies. This results in advancing the state-of-the-art
technologies used in our products and in common technology platforms that can be applied across multiple
product lines.
Universities are incubators of future technology, and one task of our research and development teams is to
transform university research into industry
‑
ready technology platforms. We collaborate with multiple
universities and research institutions to build research networks and foster new technologies. We believe
these collaborations shorten the amount of time required to turn basic ideas into viable products, and they
additionally help us to recruit and train new personnel. We have built numerous university strategic
relationships with a number of leading institutions in various countries around the world.
We are also leveraging our ecosystem to enhance our innovation efforts and gain speed with strategic
partners with complementary competencies. In addition, we invest and collaborate with start-ups worldwide
via our corporate venture arm ABB Technology Ventures and our start-up collaboration arm SynerLeap.
The result of our investment in research and development is that ABB is widely recognized for its world-class
technology.
—
Acquisitions and divestments
Acquisitions
During 2023, 2022 and 2021, ABB paid $175 million, $195 million and $212 million to purchase seven, five
and two businesses, respectively.
The principal acquisition in 2022 was InCharge Energy, Inc. (In-Charge), where we increased our ownership
to a 60 percent controlling interest, expanding the market presence of the E-mobility operating segment,
particularly in the North American market. In-Charge is headquartered in Santa Monica, United States, and is
a provider of turn-key commercial electric vehicle charging hardware and software solutions. See “Note 4 -
Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements.
43
The principal acquisition in 2021 was ASTI Mobile Robotics Group SL (ASTI). ASTI is headquartered in
Burgos, Spain.
There were no significant acquisitions in 2023.
Divestments and spin-offs
Divestment of the Power Conversion Division
In July 2023, we completed the sale of our Power Conversion Division to AcBel Polytech Inc. for cash
proceeds of $496 million, net of transaction costs and cash disposed, and recognized a net gain on sale of
$59 million. Prior to its disposal, the Power Conversion Division was part of our Electrification Business area.
See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial
Statements.
Spin-off of the Turbocharging Division
In September 2022, the shareholders approved the spin-off of our Turbocharging Division into an
independent, publicly traded company, Accelleron Industries AG (Accelleron), which was completed through
the distribution of common stock of Accelleron to the stockholders of ABB on October 3, 2022. As a result of
the spin-off of this Division, we distributed net assets of $272 million, net of amounts attributable to
noncontrolling interests of $12 million, which was reflected as a reduction in Retained earnings. In addition,
total accumulated comprehensive income of $95 million, including the cumulative translation adjustment, was
reclassified to Retained earnings. Cash and cash equivalents distributed with Accelleron was $172 million.
Prior to being spun-off, the Turbocharging Division was part of our Process Automation Business area. See
“Note 4 - Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial
Statements.
Divestment of the Mechanical Power Transmission Division
In November 2021, we completed the sale of our Mechanical Power Transmission Division (Dodge) to RBC
Bearings Inc. for cash proceeds of $2,862 million, net of transaction costs and cash disposed, and
recognized a net gain on sale of $2,195 million. Prior to its disposal, the Dodge business was part of our
Motion Business area. See “Note 4 - Acquisitions, divestments and equity-accounted companies” to our
Consolidated Financial Statements.
Divestment of the Power Grids business
On July 1, 2020, we completed the divestment of 80.1 percent of our former Power Grids business (Hitachi
Energy) to Hitachi. As this divestment represented a strategic shift that would have a major effect on our
operations and financial results, the results of operations for this business are presented as discontinued
operations and the assets and liabilities are reflected as held for sale for all periods presented. For more
information on the divestment of the Power Grids business see “Note 3 - Discontinued operations” to our
Consolidated Financial Statements.
Hitachi held a call option which required ABB to sell the remaining 19.9 percent interest in Hitachi Energy at a
price consistent with what was paid by Hitachi to acquire the initial 80.1 percent or at fair value, if higher. In
September 2022, we agreed with Hitachi that we would sell our remaining investment in Hitachi Energy and
concurrently settle certain outstanding contractual obligations relating to the initial sale of the business,
including certain indemnification guarantees (see Note 15 - Commitments and contingencies). The
transaction was completed in December 2022, and we received proceeds of $1,552 million. See “Note 4 -
Acquisitions, divestments and equity-accounted companies” to our Consolidated Financial Statements.
44
—
Exchange rates
We report our financial results in U.S. dollars. Due to our global operations, a significant amount of our
revenues, expenses, assets and liabilities are denominated in other currencies. As a consequence,
movements in exchange rates between currencies may affect: (i) our profitability, (ii) the comparability of our
results between periods and (iii) the reported carrying value of our assets and liabilities.
We translate non
‑
USD denominated results of operations, assets and liabilities to USD in our Consolidated
Financial Statements. Balance sheet items are translated to USD using year
‑
end currency exchange rates.
Income statement and cash flow items are translated to USD using the relevant monthly average currency
exchange rate.
Increases and decreases in the value of the USD against other currencies will affect the reported results of
operations in our Consolidated Income Statements and the value of certain of our assets and liabilities in our
Consolidated Balance Sheets, even if our results of operations or the value of those assets and liabilities
have not changed in their original currency. As foreign exchange rates impact our reported results of
operations and the reported value of our assets and liabilities, changes in foreign exchange rates could
significantly affect the comparability of our reported results of operations between periods and result in
significant changes to the reported value of our assets, liabilities and stockholders’ equity.
While we operate globally and report our financial results in USD, exchange rate movements between the
USD and the EUR, the CNY and the CHF are of particular importance to us due to (i) the location of our
significant operations and (ii) our corporate headquarters being in Switzerland.
The exchange rates between the USD and the EUR, the USD and the CHF and the USD and the CNY at
December 31, 2023, 2022 and 2021, were as follows:
Exchange rates into $
2023
2022
2021
EUR 1.00
1.11
1.07
1.13
CHF 1.00
1.20
1.08
1.10
CNY 1.00
0.14
0.14
0.16
The average exchange rates between the USD and the EUR, the USD and the CHF and the USD and the
CNY for the years ended December 31, 2023, 2022 and 2021, were as follows:
Exchange rates into $
2023
2022
2021
EUR 1.00
1.08
1.05
1.18
CHF 1.00
1.11
1.05
1.09
CNY 1.00
0.14
0.15
0.16
When we incur expenses that are not denominated in the same currency as the related revenues, foreign
exchange rate fluctuations could affect our profitability. To mitigate the impact of exchange rate movements
on our profitability, it is our policy to enter into forward foreign exchange contracts to manage the foreign
exchange transaction risk of our operations.
In 2023, approximately 74 percent of our consolidated revenues were reported in currencies other than the
USD. The following percentages of consolidated revenues were reported in the following currencies:
•
•
45
In 2023, approximately 72 percent of our cost of sales and selling, general and administrative expenses were
reported in currencies other than the USD. The following percentages of consolidated cost of sales and
selling, general and administrative expenses were reported in the following currencies:
•
•
We also incur expenses other than cost of sales and selling, general and administrative expenses in various
currencies.
The results of operations and financial position of our subsidiaries outside of the U.S. are generally
accounted for in the currencies of the countries in which those subsidiaries are located. We refer to these
currencies as “local currencies”. Local currency financial information is then translated into USD at applicable
exchange rates for inclusion in our Consolidated Financial Statements.
The discussion of our results of operations below provides certain information with respect to orders,
revenues, income from operations and other measures as reported in USD (as well as in local currencies).
We measure period
‑
to
‑
period variations in local currency results by using a constant foreign exchange rate
for all periods under comparison. Differences in our results of operations in local currencies as compared to
our results of operations in USD are caused exclusively by changes in currency exchange rates.
While we consider our results of operations as measured in local currencies to be a significant indicator of
business performance, local currency information should not be relied upon to the exclusion of U.S. GAAP
financial measures. Instead, local currencies reflect an additional measure of comparability and provide a
means of viewing aspects of our operations that, when viewed together with the U.S. GAAP results, provide a
more complete understanding of factors and trends affecting the business. As local currency information is
not standardized, it may not be possible to compare our local currency information to other companies’
financial measures that have the same or a similar title. We encourage investors to review our financial
statements and publicly filed reports in their entirety and not to rely on any single financial measure.
—
Orders
Our policy is to book and report an order when a binding contractual agreement has been concluded with a
customer covering, at a minimum, the price and scope of products or services to be supplied, the delivery
schedule and the payment terms. The reported value of an order corresponds to the undiscounted value of
revenues that we expect to recognize following delivery of the goods or services subject to the order, less any
trade discounts and excluding any value added or sales tax. The value of orders received during a given
period of time represents the sum of the value of all orders received during the period, adjusted to reflect the
aggregate value of any changes to the value of orders received during the period and orders existing at the
beginning of the period. These adjustments, which may in the aggregate increase or decrease the orders
reported during the period, may include changes in the estimated order price up to the date of contractual
performance, changes in the scope of products or services ordered and cancellations of orders. The
undiscounted value of future revenues we expect to generate from our orders at any point in time is
represented by our order backlog.
The level of orders fluctuates from year to year. Portions of our business involve orders for long
‑
term projects
that can take months or years to complete and many larger orders result in revenues in periods after the
order is booked. Consequently, the level of orders generally cannot be used to accurately predict future
revenues or operating performance. Orders that have been placed can often be cancelled, delayed or
modified by the customer. These actions can reduce or delay any future revenues from the order or may
result in the elimination of the order.
46
—
Performance measures
We evaluate the performance of our operating segments based on orders received, revenues and
Operational EBITA.
Operational EBITA represents income from operations excluding:
•
•
•
divestment date (changes in obligations related to divested businesses),
•
held for sale),
•
•
•
(a) unrealized gains and losses on derivatives (foreign 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, 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.
See “Note 23 - Operating segment and geographic data” to our Consolidated Financial Statements for a
reconciliation of the total Operational EBITA to income from continuing operations before taxes.
47
—
Analysis of results of operations
Our consolidated results from operations were as follows:
Income Statement Data:
($ in millions, except per share data in $)
2023
2022
2021
Revenues
32,235
29,446
28,945
Cost of sales
(21,021)
(19,736)
(19,478)
Gross profit
11,214
9,710
9,467
Selling, general and administrative expenses
(5,543)
(5,132)
(5,162)
Non-order related research and development expenses
(1,317)
(1,166)
(1,219)
Other income (expense), net
517
(75)
2,632
Income from operations
4,871
3,337
5,718
Interest and dividend income
165
72
51
Interest and other finance expense
(275)
(130)
(148)
Non-operational pension (cost) credit
17
115
166
Income tax expense
(930)
(757)
(1,057)
Income from continuing operations, net of tax
3,848
2,637
4,730
Loss from discontinued operations, net of tax
(24)
(43)
(80)
Net income
3,824
2,594
4,650
Net income attributable to noncontrolling
interests and redeemable noncontrolling interests
(79)
(119)
(104)
Net income attributable to ABB
3,745
2,475
4,546
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
3,769
2,517
4,625
Loss from discontinued operations, net of tax
(24)
(42)
(79)
Net income
3,745
2,475
4,546
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
2.03
1.33
2.31
Loss from discontinued operations, net of tax
(0.01)
(0.02)
(0.04)
Net income
2.02
1.30
2.27
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
2.02
1.32
2.29
Loss from discontinued operations, net of tax
(0.01)
(0.02)
(0.04)
Net income
2.01
1.30
2.25
A more detailed discussion of the orders, revenues, income from operations and Operational EBITA for our
Business areas follows in the sections of “Business analysis” below for Electrification, Motion, Process
Automation, Robotics & Discrete Automation, and Corporate and Other. Orders and revenues of our
businesses include intersegment transactions which are eliminated in the “Corporate and Other” line in the
tables below.
48
Orders
% Change
($ in millions)
2023
2022
2021
2023
2022
Electrification
15,189
15,182
13,850
0%
10%
Motion
8,222
7,896
7,616
4%
4%
Process Automation
7,535
6,825
6,779
10%
1%
Robotics & Discrete Automation
3,066
4,116
3,844
(26)%
7%
Total Business areas
34,012
34,019
32,089
0%
6%
Corporate and Other
E-mobility, Non-core and divested businesses
720
787
593
(9)%
33%
Intersegment eliminations
(914)
(818)
(814)
n.a.
n.a.
Total
33,818
33,988
31,868
(1)%
7%
In 2023, total orders decreased 1 percent compared with 2022 (increased 1 percent in local currencies). The
decrease reflects the steep decline in orders for the Robotics & Discrete Automation Business area as
customers normalized order patterns in response to shortened delivery lead times, as well as an overall
weakness in the Robotics market outside the automotive segment. Orders in the Electrification Business area
were steady despite the sale of the Power Conversion Division in July 2023. The Process Automation
Business area had a strong increase, reflecting the receipt of higher large orders which more than offset the
impact from the spin-off of the Turbocharging Division in October 2022 which affected total order growth by
1 percent. The increase in Orders in the Motion Business area reflects strong demand in long-cycle markets
and project businesses. For additional information about individual Business area order performance, refer to
the relevant sections of “Business analysis” below.
We determine the geographic distribution of our orders based on the location of the ultimate destination of the
products’ end use, if known, or the location of the customer. The geographic distribution of our consolidated
orders was as follows:
% Change
($ in millions)
2023
2022
2021
2023
2022
Europe
11,458
11,778
11,857
(3)%
(1)%
The Americas
12,437
11,825
9,940
5%
19%
of which: United States
9,204
8,920
7,453
3%
20%
Asia, Middle East and Africa
9,923
10,385
10,071
(4)%
3%
of which: China
4,488
5,087
5,036
(12)%
1%
Total
33,818
33,988
31,868
(1)%
7%
In 2023, orders increased 5 percent in the Americas (5 percent in local currencies), with orders growing in the
U.S., Canada and Chile. The increase in the U.S. includes two large orders with multi-year fulfillment periods
for $285 million and $150 million, respectively. In Europe, orders decreased 3 percent (4 percent in local
currencies). Orders were higher in Norway and the United Kingdom while they declined in Switzerland and
Poland. Despite the impact of an order reversal of approximately $170 million recorded in 2022, orders
decreased in Germany as well. In Asia, Middle East and Africa, orders decreased 4 percent (increased
1 percent in local currencies). In local currencies, order growth in India and Saudi Arabia more than offset the
decline in China. The spin-off of the Turbocharging Division in October 2022 also had a negative impact of
3 percent on the order growth in Asia, Middle East and Africa and 2 percent in Europe.
49
Order backlog
% Change
December 31, ($ in millions)
2023
2022
2021
2023
2022
Electrification
6,808
6,404
5,105
6%
25%
Motion
5,343
4,726
3,749
13%
26%
Process Automation
7,519
6,229
6,079
21%
2%
Robotics & Discrete Automation
2,141
2,679
1,919
(20)%
40%
Total Business areas
21,811
20,038
16,852
9%
19%
Corporate and Other
508
552
467
(8)%
18%
(752)
(723)
(712)
n.a.
n.a.
Total
21,567
19,867
16,607
9%
20%
At December 31, 2023, consolidated order backlog was 9 percent higher (7 percent in local currencies)
compared to December 31, 2022. Order backlog increased in all Business areas except Robotics & Discrete
Automation. The order backlog in the Process Automation Business area was supported by a strong order
increase in most Divisions except the Measurement & Analytics Division. The increase also includes the
impact of two large orders with multi-year fulfillment periods for $285 million and $150 million, respectively, in
the Marine & Ports Division. The order backlog in the Electrification Business area was driven by order
growth in the Smart Power Division, partially offset by a decrease from the divestment of the Power
Conversion Division in July 2023. An increase in orders in both the Systems Drives and Traction Divisions
contributed to the increase in the order backlog in the Motion Business area while the decrease in the order
backlog in the Robotics & Discrete Automation Business area was a result of the decline in orders in both
Divisions.
Revenues
% Change
($ in millions)
2023
2022
2021
2023
2022
Electrification
14,584
13,619
12,894
7%
6%
Motion
7,814
6,745
6,925
16%
(3)%
Process Automation
6,270
6,044
6,259
4%
(3)%
Robotics & Discrete Automation
3,640
3,181
3,297
14%
(4)%
Total Business areas
32,308
29,589
29,375
9%
1%
Corporate and Other
E-mobility, Non-core and divested businesses
769
653
348
18%
88%
Intersegment eliminations
(842)
(796)
(778)
n.a.
n.a.
Total
32,235
29,446
28,945
9%
2%
In 2023, revenues increased by 9 percent (11 percent in local currencies). The normalization of supply chains
facilitated strong execution of our order backlog into revenue growth during the year. All Business areas
reported revenue growth, with both increased volumes and product prices. Growth was highest in the
Robotics & Discrete Automation and Motion Business areas. The increase in the Robotics & Discrete
Automation Business area reflects improved order backlog execution as supply chain constraints eased in
2023. The Electrification Business area achieved a high single-digit growth rate despite the adverse impact
from the divestment of the Power Conversion Division in July 2023, while the Process Automation Business
area achieved single-digit growth in local currencies despite the spin-off of the Turbocharging Division in
October 2022. These two business portfolio changes had a combined negative impact on the growth in total
Revenues of 2 percent. For additional analysis of revenues for each of the Business areas, refer to the
relevant sections of “Business analysis” below.
50
We determine the geographic distribution of our revenues based on the location of the ultimate destination of
the products’ end use, if known, or the location of the customer. The geographic distribution of our
consolidated revenues was as follows:
% Change
($ in millions)
2023
2022
2021
2023
2022
Europe
11,568
10,285
10,529
12%
(2)%
The Americas
11,090
9,573
8,686
16%
10%
of which: United States
8,248
7,023
6,397
17%
10%
Asia, Middle East and Africa
9,577
9,588
9,730
0%
(1)%
of which: China
4,468
4,696
4,932
(5)%
(5)%
Total
32,235
29,446
28,945
9%
2%
In 2023, revenues increased 16 percent in the Americas (15 percent in local currencies), where revenues in
the United States increased 17 percent (17 percent in local currencies). Revenues in the Americas also
experienced strong growth in Canada, Brazil, Argentina and Chile. In Europe, revenues increased 12 percent
(11 percent in local currencies) and were higher across all Business areas. Revenue growth was the highest
in Italy, Turkiye, Sweden, Norway and the United Kingdom. In Asia, Middle East and Africa, revenues were
flat (increased 5 percent in local currencies) compared to 2022. Revenues grew strongest in India and Saudi
Arabia while they decreased in China and South Korea. The spin-off of the Turbocharging Division in October
2022 also had a negative impact of 3 percent on the revenue growth in Asia, Middle East and Africa, 2
percent in Europe and 1 percent in the Americas.
Cost of sales
Cost of sales consists primarily of labor, raw materials and component costs but also includes indirect
production costs, expenses for warranties, contract and project charges, as well as order-related
development expenses incurred in connection with projects for which corresponding revenues have been
recognized.
In 2023, costs of sales increased 7 percent (8 percent in local currencies) to $21,021 million. Cost of sales as
a percentage of revenues decreased to 65.2 percent from 67.0 percent in 2022. The increase in the gross
margin was primarily due to the stabilization of commodity and freight costs and certain mitigation actions
taken in response to higher labor costs as well as some positive impact from changes in the product portfolio.
The improvement in 2023 was realized in all Business areas.
Selling, general and administrative expenses
The components of selling, general and administrative expenses were as follows:
($ in millions)
2023
2022
2021
Selling expenses
3,415
3,248
3,281
General and administrative expenses
2,128
1,884
1,881
Total
5,543
5,132
5,162
In 2023, general and administrative expenses increased 13 percent (15 percent in local currencies)
compared to 2022. As a percentage of revenues, general and administrative expenses slightly increased to
6.6 percent from 6.4 percent in 2022. The increase represents inflation impacts as well as increased business
transformation and employee short-term incentive compensation costs. General and administrative expenses
in 2023 also includes the ongoing costs required to deliver services to Hitachi Energy Ltd and Accelleron
under transition service agreements for which we are compensated. We have recorded $121 million in Other
income (expense), net, during 2023 compared to $162 million in 2022 related to these agreements with
Hitachi Energy and Accelleron.
51
In 2023, selling expenses increased 5 percent (5 percent in local currencies) compared to 2022 and was
higher across all Business areas apart from Process Automation. Selling expenses as a percentage of orders
increased from 9.6 percent in 2022 to 10.1 percent in 2023.
Non
‑
order related research and development expenses
In 2023, non
‑
order related research and development expenses increased 13 percent (14 percent in local
currencies) compared to 2022. In 2023, non
‑
order related research and development expenses as a
percentage of revenues remained similar to prior year levels (4.1 percent in 2023 compared to 4.0 percent in
2022) as we continued investing in research and development in line with revenue growth.
Other income (expense), net
($ in millions)
2023
2022
2021
Income from provision of services under transition services agreements
175
221
173
Net gain from sale of property, plant and equipment
116
84
38
Gain (loss) from change in fair value of investments in equity securities
3
52
108
Brand income from Hitachi Energy
39
57
89
Net gain from sale of businesses and equity-accounted investments
(1)
101
36
2,193
Asset impairments
(49)
(55)
(33)
Income (loss) from equity-accounted companies
(16)
(102)
(100)
Restructuring and restructuring-related expenses
(2)
(20)
(227)
(48)
Regulatory penalties in connection with Kusile project
—
(313)
—
Other income (expense)
168
172
212
Total
517
(75)
2,632
(1) 2022 includes gain on sale of the remaining 19.9 percent investment in Hitachi Energy Ltd.
(2) Excluding asset impairments
In 2023, Other income (expense), net, was a gain of $517 million compared to a loss of $75 million in 2022.
The primary reason for the change was that in 2022, we recorded costs of $313 million associated with
regulatory penalties assessed in connection with the Kusile project and $195 million of restructuring and
restructuring-related expenses in connection with the exit of the full train retrofit business. The amount in
2022 also included higher losses from equity-accounted companies which principally represented losses in
Hitachi Energy. In 2023, we recorded higher gains from sales of businesses primarily due to the sale of the
Power Conversion Division. In 2022, we recorded a gain of $43 million relating to the sale of the remaining
19.9 percent of Hitachi Energy to Hitachi. In 2023, we recorded lower gains for net fair value increases in
various equity investments compared to 2022, the most significant of which in 2022 related to InCharge
Energy, Inc.
52
Income from operations
% Change
($ in millions)
2023
2022
2021
2023
2022
Electrification
2,800
2,140
1,827
31%
17%
Motion
1,390
1,092
3,276
27%
(67)%
Process Automation
947
663
713
43%
(7)%
Robotics & Discrete Automation
446
247
269
81%
(8)%
Total Business areas
5,583
4,142
6,085
35%
(32)%
Corporate and Other
(711)
(804)
(371)
n.a.
n.a.
Intersegment elimination
(1)
(1)
4
n.a.
n.a.
Total
4,871
3,337
5,718
46%
(42)%
In 2023 and 2022, changes in income from operations were a result of the factors discussed above and in
“Business analysis” below.
Financial income and expenses
Financial income and expenses include Interest and dividend income and Interest and other finance expense.
Interest and other finance expense includes interest expense on our debt, the amortization of upfront
transaction costs associated with long
‑
term debt and committed credit facilities, commitment fees on credit
facilities, foreign exchange gains and losses on financial items, and gains and losses on marketable
securities. In addition, interest costs relating to uncertain tax positions are included within interest expense.
($ in millions)
2023
2022
2021
Interest and dividend income
165
72
51
Interest and other finance expense
(275)
(130)
(148)
In 2023, both interest income and interest expense reflect increases in market interest rates especially for the
U.S. dollar and the euro. Interest on cash deposits reflects primarily interest income on U.S. dollar deposits.
Interest expense on our external debt increased due to higher debt levels as well as higher interest rates on
floating rate obligations. Due to our internal funding structure and the resulting currency hedging
requirements, our interest expense reflects more the short-term Swiss franc interest rates than the direct
underlying interest costs incurred in the currencies of our external debt, especially the euro.
Non-operational pension (cost) credit
A non-operational pension credit of $17 million was recorded in 2023 compared to a $115 million credit in
2022. The decrease in the non-operational pension credit compared to 2022 is primarily due to higher interest
costs on the benefit obligations (see “Note 17 - Employee benefits” to our Consolidated Financial
Statements).
53
Income tax expense
($ in millions)
2023
2022
2021
Income from continuing operations before taxes
4,778
3,394
5,787
Income tax expense
(930)
(757)
(1,057)
Effective tax rate for the year
19.5%
22.3%
18.3%
In 2023, the effective tax rate decreased to 19.5 percent from 22.3 percent in 2022. In 2023, the effective tax
rate benefited from a favorable resolution of an uncertain tax position early in the year which reduced the
effective tax rate by approximately 4 percentage points. In 2022, the effective tax was approximately
2 percentage points higher due to the non-deductible regulatory penalties in connection with the Kusile
project and 3 percentage points higher due to not benefiting losses in entities having a participation
exemption. The effective tax rate in 2022 also reflects a benefit of approximately 6 percentage points due to
changes in assessment of recoverability of deferred tax assets.
See “Note 16 - Income taxes” to our Consolidated Financial Statements for additional information.
Income from continuing operations, net of tax
As a result of the factors discussed above, compared to 2022, Income from continuing operations, net of tax,
increased by $1,211 million to $3,848 million in 2023.
Loss from discontinued operations, net of tax
In 2020, we completed the divestment of 80.1 percent of our former Power Grids business to Hitachi. As a
result of the sale, 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 our operations and financial
results, the results of operations for this business were presented as discontinued operations. In addition, we
also have retained obligations (primarily for environmental and taxes) related to other businesses disposed or
otherwise exited that qualified as discontinued operations. Changes to these retained obligations are also
included in Loss from discontinued operations, net of tax.
For additional information on the divestment and discontinued operations, see “Note 3 - Discontinued
operations” to our Consolidated Financial Statements.
Net income attributable to ABB
As a result of the factors discussed above, compared to 2022, Net income attributable to ABB increased by
$1,270 million to $3,745 million in 2023.
54
Earnings per share attributable to ABB shareholders
(in $)
2023
2022
2021
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
2.03
1.33
2.31
Loss from discontinued operations, net of tax
(0.01)
(0.02)
(0.04)
Net income
2.02
1.30
2.27
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
2.02
1.32
2.29
Loss from discontinued operations, net of tax
(0.01)
(0.02)
(0.04)
Net income
2.01
1.30
2.25
Basic earnings per share is calculated by dividing income by the weighted
‑
average number of shares
outstanding during the year. Diluted earnings per share is calculated by dividing income by the
weighted
‑
average number of shares outstanding during the year, assuming that all potentially dilutive
securities were exercised, if dilutive. Potentially dilutive securities comprise: outstanding written call options
and outstanding options and shares granted subject to certain conditions under our share
‑
based payment
arrangements. See “Note 20 - Earnings per share” to our Consolidated Financial Statements.
55
—
Business analysis
Electrification Business area
The financial results of our Electrification Business area were as follows:
% Change
($ in millions)
2023
2022
2021
2023
2022
Orders
15,189
15,182
13,850
0%
10%
Order backlog at December 31,
6,808
6,404
5,105
6%
25%
Revenues
14,584
13,619
12,894
7%
6%
Income from operations
2,800
2,140
1,827
31%
17%
Operational EBITA
2,937
2,343
2,120
25%
11%
Orders
Approximately two-thirds of the Business area’s orders are for products with short lead times; these orders
are usually recorded and delivered within a three-month period and thus are generally considered as short-
cycle. The remainder is comprised of smaller project orders that require longer lead times, as well as larger
solutions requiring engineering and installation. Approximately half of the Business area’s orders are received
via third-party distributors. As a consequence, end-customer market data is based partially on management
estimates.
In 2023, orders were flat (increased 1 percent in local currencies) compared to 2022, despite the divestment
of the Power Conversion Division in July 2023, which negatively impacted the growth rate by approximately 2
percent. Order growth was strong in the Smart Power Division, partially offset by decreased demand in the
Smart Buildings and Installation Products Divisions. Orders improved on strength in demand in customer
segments such as data centers, utilities, chemical, and oil and gas. This was partially offset by weakness in
the building segment, the Electrification Business area’s largest end-user segment, led by a slowdown in
residential construction while commercial construction showed positive momentum, mainly in the United
States.
56
In 2022, orders increased 10 percent (16 percent in local currencies) as demand improved across all key
end-user segments. Demand in the buildings segment was robust, with strong growth particularly in the non-
residential building sector. Solid growth in the residential building sector in the first half of the year was
partially offset by a slowdown in the second half of 2022, particularly in certain European markets. We
experienced strong growth in data centers, food and beverage, infrastructure and renewables. Demand from
the oil and gas segment increased significantly during the year, while growth in the utilities and rail segments
was solid even if geographically uneven.
The geographic distribution of orders for our Electrification Business area was as follows:
($ in millions)
2023
2022
2021
Europe
4,629
4,595
4,789
The Americas
6,567
6,509
5,000
of which: United States
5,001
5,062
3,733
Asia, Middle East and Africa
3,993
4,078
4,061
of which: China
1,815
1,992
2,103
Total
15,189
15,182
13,850
In 2023, orders in Europe increased 1 percent (decreased 1 percent in local currencies) as a result of growth
in markets such as the United Kingdom, Turkiye and Ireland. This was partially offset by a decrease in
demand in Germany, particularly in the building segment, as well as in the Netherlands and France. Orders in
the Americas increased 1 percent (1 percent in local currencies) despite the divestment of the Power
Conversion Division, which had a large market presence in the Americas and negatively impacted growth in
the region by 2 percent. Orders decreased 2 percent in Asia, Middle East and Africa (increased 5 percent in
local currencies) as a lower level of orders in China, reflecting a slowdown in demand, were more than offset
by strong growth in Saudi Arabia and India.
In 2022, orders in local currencies increased in all regions. The pandemic-related challenges improved
compared to 2021 in most geographies. Orders in the Americas increased 30 percent (31 percent in local
currencies), with demand strengthening across all key markets, led by increases in the U.S. and Brazil.
Orders in Europe decreased 4 percent, reflecting the weakening of many European currencies against the
U.S. dollar, but increased 6 percent in local currencies, with growth across the region including in key
markets such as Italy and Germany. Orders in Asia, Middle East and Africa were on the same level as in
2021, but increased 6 percent in local currencies, with strong order growth in India throughout the year
offsetting a slowdown in China. Orders in China were lower in most end-user segments mainly as business
activity was hampered by pandemic-related measures and also reflected a challenging comparable due to
strong order performance in 2021.
Order backlog
In 2023, the order backlog increased 6 percent (6 percent in local currencies). The divestment of the Power
Conversion Division in July 2023 negatively impacted the growth rate by approximately 8 percent. Order
backlog benefited from the strong order intake in the Smart Power Division.
In 2022, order backlog increased 25 percent (32 percent in local currencies). Order backlog benefited from
strong order intake, but was also impacted by execution challenges caused by material shortages,
transportation constraints as well as pandemic-related production pressures in some local markets.
57
Revenues
In 2023, revenues increased 7 percent (8 percent in local currencies) compared to 2022. The divestment of
the Power Conversion Division in July 2023 negatively impacted the growth rate by approximately 2 percent.
The supply chain tightness that negatively impacted revenues in 2022 normalized in 2023, however, inflation
and labor market shortages continued to pose challenges. Pricing actions taken to mitigate increasing
material, labor and transportation costs again contributed strongly to the higher revenue level and accounted
for almost half of the revenue growth in 2023, excluding the negative impact from the divestment of the
Power Conversion Division. The revenue growth was led by the Distribution Solutions and Smart Power
Divisions, reflecting high demand as well as strong order backlog execution, while revenues in the Smart
Buildings and Installation Products Divisions decreased.
In 2022, revenues increased 6 percent (12 percent in local currencies). Revenues in local currencies
increased in all divisions reflecting the strong demand across regions and end-user segments, however
growth was hampered by component shortages, logistics challenges and a tight labor market. Pricing actions
taken to mitigate increasing material, labor and transportation costs contributed strongly to the higher
revenue level and accounted for around three quarters of the revenue growth in 2022. The revenue growth
was led by the Smart Power Division, mirroring the very high demand in this segment. There was also strong
double-digit revenue growth in local currencies in the Power Conversion Division as well as in the Installation
Products Division.
The geographic distribution of revenues for our Electrification Business area was as follows:
($ in millions)
2023
2022
2021
Europe
4,641
4,318
4,489
The Americas
5,968
5,181
4,418
of which: United States
4,480
3,791
3,252
Asia, Middle East and Africa
3,975
4,120
3,987
of which: China
1,797
1,969
2,079
Total
14,584
13,619
12,894
In 2023, revenues in the Americas increased 15 percent (15 percent in local currencies) compared to 2022,
despite the divestment of the Power Conversion Division, which negatively impacted growth in the region by
4 percent. Revenues increased 7 percent (5 percent in local currencies) in Europe, led by growth in the
United Kingdom, Turkiye and Italy and supported by the strengthening of key European currencies against
the U.S. dollar. Revenues in Asia, Middle East and Africa decreased 4 percent (increased 3 percent in local
currencies), mainly reflecting lower revenues in China caused by a slowdown in demand.
In 2022, revenues in the Americas increased 17 percent (18 percent in local currencies) with widespread
regional growth. Revenues increased 3 percent (10 percent in local currencies) in Asia, Middle East and
Africa, supported by strong growth in India, while revenues in China were lower than the previous year.
Revenues in Europe decreased 4 percent, impacted by weakening currencies in many European countries
versus the U.S. dollar, while revenues in the region grew 6 percent in local currencies.
58
Income from operations
In 2023, income from operations increased 31 percent, supported by higher volumes as well as pricing
actions to offset the adverse impact from cost inflation, primarily in labor. Gains from sale of businesses
amounted to $75 million primarily reflecting the gain from the divestment of the Power Conversion Division in
July 2023. Benefits of savings realized from ongoing restructuring and cost savings programs also positively
influenced income from operations. These positive effects were partially dampened by widespread
inflationary cost pressures in 2023. The level of research and development spending was higher in 2023 than
in 2022, driven mainly by our expansion in the United States, as well as increased investments in
sustainability and in our service offering. Restructuring-related expenses and implementation costs increased
in 2023 compared to 2022 mainly due to right-sizing actions following lower demand in certain market
segments. Changes in foreign currencies, including the impacts from FX/commodity timing differences
summarized in the table below, negatively impacted income from operations in 2023 by 1 percent.
In 2022, income from operations increased 17 percent supported by higher volumes as well as strong price
management, which helped offset the adverse impact from cost inflation in raw materials, freight and labor.
Benefits of savings realized from ongoing restructuring and cost savings programs also positively influenced
income from operations. Restructuring-related expenses and implementation costs in our operating divisions
were lower in 2022 than in 2021, mainly due to the substantial completion of the integration of GEIS, which
we acquired in 2018. Also, lower GEIS integration costs contributed to the higher income from operations in
2022 compared to 2021. These positive effects were partially dampened by widespread inflationary cost
pressures in 2022, as well as higher personnel expenses driven by a ramp-up of manufacturing capacity to
meet higher demand. Changes in foreign currencies, including the impacts from FX/commodity timing
differences summarized in the table below, negatively impacted income from operations by approximately
6 percent.
Operational EBITA
The reconciliation of Income from operations to Operational EBITA for the Electrification Business area was
as follows:
($ in millions)
2023
2022
2021
Income from operations
2,800
2,140
1,827
Acquisition-related amortization
88
104
115
Restructuring, related and implementation costs
76
28
66
Changes in obligations related to divested businesses
1
1
—
Gains and losses from sale of businesses
(75)
(1)
13
Acquisition- and divestment-related expenses and integration costs
30
36
69
Certain other non-operational items
16
41
7
FX/commodity timing differences in income from operations
1
(6)
23
Operational EBITA
2,937
2,343
2,120
In 2023, Operational EBITA increased 25 percent (27 percent excluding the impact from changes in foreign
currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from
operations”, excluding the explanations related to the reconciling items in the table above.
In 2022, Operational EBITA increased 11 percent (20 percent excluding the impact from changes in foreign
currency exchange rates) compared to 2021, primarily due to the reasons described under “Income from
operations”, excluding the explanations related to the reconciling items in the table above.
59
Motion Business area
The financial results of our Motion Business area were as follows:
% Change
($ in millions)
2023
2022
2021
2023
2022
Orders
8,222
7,896
7,616
4%
4%
Order backlog at December 31,
5,343
4,726
3,749
13%
26%
Revenues
7,814
6,745
6,925
16%
(3)%
Income from operations
1,390
1,092
3,276
27%
(67)%
Operational EBITA
1,475
1,163
1,183
27%
(2)%
Orders
In 2023, orders increased 4 percent, (5 percent in local currencies) compared to 2022. The Business area
experienced strong double-digit order growth in long-cycle markets and project businesses served by the
System Drives, Large Motors and Generators, and Traction Divisions, partially offset by decreased demand
in the short-cycle product-related divisions. The Business area recorded strong double-digit order growth in
process-related segments such as chemical, oil and gas, and also growth in cement, mining and minerals.
Transport segments related to rail and marine also experienced order growth during the year while orders
declined in the buildings segment (heating, ventilation and air conditioning) as well as food and beverage.
Overall, the Business area has benefited from the market shift towards carbon reduction and increased
energy efficiency in critical processes, such as the electrification of propulsion systems and investments in
hydrogen and renewables.
The geographic distribution of orders for our Motion Business area was as follows:
($ in millions)
2023
2022
2021
Europe
2,797
2,710
2,617
The Americas
2,715
2,583
2,677
of which: United States
2,186
2,128
2,200
Asia, Middle East and Africa
2,710
2,603
2,322
of which: China
1,300
1,314
1,232
Total
8,222
7,896
7,616
60
In 2023, orders increased 3 percent (1 percent in local currencies) in Europe as orders increased particularly
in Norway, Austria, Finland and Spain partially offset by lower orders in Sweden, France, Switzerland and
Italy. In Asia, Middle East and Africa, orders increased 4 percent (10 percent in local currencies) driven by
growth in India and China, with the latter impacted by a weakened Chinese currency. In the Americas, orders
increased 5 percent (4 percent in local currencies) driven by increased orders in the U.S. and Canada.
Order backlog
Order backlog in 2023 increased 13 percent (9 percent in local currencies) compared to 2022 reaching
$5.3 billion. Order backlog increase was driven by large orders in the long-cycle business. In the short-cycle
business, supply chain constraints eased from the prior year and resulted in a reduction of the high backlog
built up in 2022.
Revenues
In 2023, revenues increased 16 percent (17 percent in local currencies) compared to 2022. Strong revenue
growth was delivered across all divisions, both in the short- and long-cycle businesses. The revenue growth
was supported by strong demand and execution of the order backlog, as well as a positive full-year impact
from successful price increases in the prior year.
The geographic distribution of revenues for our Motion Business area was as follows:
($ in millions)
2023
2022
2021
Europe
2,704
2,271
2,258
The Americas
2,650
2,208
2,396
of which: United States
2,176
1,823
1,974
Asia, Middle East and Africa
2,460
2,266
2,271
of which: China
1,256
1,245
1,256
Total
7,814
6,745
6,925
In 2023, revenues in Europe increased 19 percent (16 percent in local currencies) compared to 2022. The
revenue increase was driven by Italy, Germany, Sweden, Turk iye and Spain while revenues declined in
Switzerland. In Asia, Middle East and Africa, revenues increased by 9 percent (14 percent in local currencies)
with solid revenue growth in India, Australia and China with the latter partially impacted by a weakened
Chinese currency. In the Americas, revenues increased 20 percent (20 percent in local currencies) with
strong growth in the U.S., Canada and Mexico.
Income from operations
In 2023, income from operations increased 27 percent. The increase was driven by higher revenues
reflecting a strong demand, solid order backlog execution and benefits from a strong price execution which
more than offset cost inflation related to labor and materials. Profitability was also supported by continued
cost discipline and a positive divisional mix. All divisions apart from the Traction and IEC LV Motors Divisions
reported strong profitability improvements in 2023. Changes in foreign currencies, including the impacts from
FX/commodity timing differences summarized in the table below, positively impacted income from operations
by approximately 1 percent.
61
Operational EBITA
The reconciliation of Income from operations to Operational EBITA for the Motion Business area was as
follows:
($ in millions)
2023
2022
2021
Income from operations
1,390
1,092
3,276
Acquisition-related amortization
35
31
43
Restructuring, related and implementation costs
46
16
22
Gains and losses from sale of businesses
—
8
(2,196)
Acquisition- and divestment-related expenses and integration costs
17
15
26
Certain other non-operational items
6
—
1
FX/commodity timing differences in income from operations
(19)
1
11
Operational EBITA
1,475
1,163
1,183
In 2023, Operational EBITA increased 27 percent (27 percent excluding the impact from changes in foreign
currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from
operations”, excluding the explanations related to the reconciling items in the table above.
Process Automation Business area
The financial results of our Process Automation Business area were as follows:
% Change
($ in millions)
2023
2022
2021
2023
2022
Orders
7,535
6,825
6,779
10%
1%
Order backlog at December 31,
7,519
6,229
6,079
21%
2%
Revenues
6,270
6,044
6,259
4%
(3)%
Income from operations
947
663
713
43%
(7)%
Operational EBITA
909
848
801
7%
6%
62
Orders
In 2023, orders increased 10 percent (12 percent in local currencies) compared to 2022. Order growth was
negatively impacted by approximately 12 percent due to the spin-off of the Turbocharging Division in October
2022. Orders grew in all divisions excluding the Measurement & Analytics Division and was strong in
long-cycle projects, reflecting a significant increase in large orders. Strong demand was seen for the product,
systems and service businesses and supported by most customer segments. Demand was particularly strong
in sectors such as marine and ports, and oil and gas, with additional positive developments in the areas of
mining and metals. Customer activities increased in the power generation segments, and were flat in
chemicals and refining, whereas demand in pulp and paper was lower. Customer interest continued to be
high in the hydrogen segment, which remains a growing part of the business.
The geographic distribution of orders for our Process Automation Business area was as follows:
($ in millions)
2023
2022
2021
Europe
2,662
2,361
2,614
The Americas
2,441
1,994
1,645
of which: United States
1,506
1,201
1,047
Asia, Middle East and Africa
2,432
2,470
2,520
of which: China
729
748
821
Total
7,535
6,825
6,779
Orders in Europe increased 13 percent (14 percent in local currencies). In local currencies, orders increased
in Norway, Italy and Germany, however the increase in Germany included the impact of an order reversal of
approximately $170 million recorded in 2022. Orders in Asia, Middle East and Africa decreased 2 percent
(increased 2 percent in local currencies). Higher orders in Saudi Arabia were more than offset by lower order
volumes in Japan, Singapore and South Africa. In the Americas, orders increased 22 percent (21 percent in
local currencies) supported by strong demand in the U.S. and Canada, with the former impacted by two large
orders with multi-year fulfillment periods for $285 million and $150 million, respectively, in the Marine & Ports
Division. This is partially offset by declined demand in Argentina which received several large order bookings
in 2022.
Order backlog
In 2023, Order backlog increased 21 percent (19 percent in local currencies) compared to 2022. Order
backlog increased in all divisions except the Measurement & Analytics Division due to strong order intake
during 2023. The increase in Order backlog also includes the impact of the two large orders with multi-year
fulfillment periods in the Marine & Ports Division.
Revenues
In 2023, revenues increased 4 percent (increased 5 percent in local currencies) in 2023. Revenue growth
was negatively impacted by approximately 11 percent due to the spin-off of the Turbocharging Division in
October 2022. Revenues increased in all divisions, reflecting strong execution of the order backlog in the
long-cycle businesses and strong underlying demand in the current year.
63
The geographic distribution of revenues for our Process Automation Business area was as follows:
($ in millions)
2023
2022
2021
Europe
2,311
2,266
2,439
The Americas
1,741
1,569
1,439
of which: United States
1,077
943
836
Asia, Middle East and Africa
2,218
2,209
2,381
of which: China
708
668
742
Total
6,270
6,044
6,259
Revenues in 2023 were 11 percent higher (10 percent in local currencies) in the Americas, flat (5 percent
higher in local currencies) in Asia, Middle East and Africa and 2 percent higher (2 percent in local currencies)
in Europe compared to 2022. The spin-off of the Turbocharging Division in October 2022 had a negative
impact on the growth rate in 2023 of 10 percent in the Americas, 12 percent in Asia, Middle East and Africa,
and 12 percent in Europe. In the Americas, revenue growth was driven by the U.S. and Argentina. In Asia,
Middle East and Africa, revenues were higher in India and Saudi Arabia but declined in South Korea and the
United Arab Emirates. Growth in Europe was reported in key markets including Norway, Sweden and Poland.
Income from operations
In 2023, income from operations increased 43 percent compared to 2022, driven by strong business
performance in all divisions, partly offset by the impact of the spin-off of the Turbocharging Division. All
divisions reported higher income from operations. Growth was driven by higher revenue volumes, continued
operational improvements in project execution and a favorable business mix. The impact of inflation on input
costs was more than offset by the impact of successful pricing actions taken in 2022, especially in the short-
cycle business. The increase in income from operations is also impacted by gains from sales of businesses
of $26 million while 2022 included significant costs in connection with the spin-off of the Turbocharging
Division. Changes in foreign currencies, including the effect from changes in the FX/commodity timing
differences summarized in the table below, positively impacted income from operations by approximately
2 percent.
Operational EBITA
The reconciliation of Income from operations to Operational EBITA for the Process Automation Business area
was as follows:
($ in millions)
2023
2022
2021
Income from operations
947
663
713
Acquisition-related amortization
5
4
5
Restructuring, related and implementation costs
3
29
48
Gains and losses from sale of businesses
(26)
—
(13)
Acquisition- and divestment-related expenses and integration costs
(7)
134
35
Certain other non-operational items
—
—
1
FX/commodity timing differences in income from operations
(13)
18
12
Operational EBITA
909
848
801
In 2023, Operational EBITA increased 7 percent (8 percent excluding the impact from changes in foreign
currency exchange rates) compared to 2022, primarily due to the reasons described under “Income from
operations”, excluding the explanations related to the reconciling items in the table above.
64
Robotics & Discrete Automation Business area
The financial results of our Robotics & Discrete Automation Business area were as follows:
% Change
($ in millions)
2023
2022
2021
2023
2022
Orders
3,066
4,116
3,844
(26)%
7%
Order backlog at December 31,
2,141
2,679
1,919
(20)%
40%
Revenues
3,640
3,181
3,297
14%
(4)%
Income from operations
446
247
269
81%
(8)%
Operational EBITA
536
340
355
58%
(4)%
Orders
In 2023, orders decreased 26 percent (25 percent in local currencies) as customers normalized order
patterns and the market in China softened. In the Machine Automation Division, the shortening of delivery
lead times and easing of supply chain constraints led to customers normalizing order patterns, as the
previous year saw customers placing orders early in an effort to secure deliveries. In the Robotics Division,
lower orders were driven by the weakness in the underlying market in China with additional pressure from
local inventory reductions among channel partners, apart from the automotive segment.
The geographic distribution of orders for our Robotics & Discrete Automation Business area was as follows:
($ in millions)
2023
2022
2021
Europe
1,481
2,043
1,978
The Americas
544
609
530
of which: United States
335
404
371
Asia, Middle East and Africa
1,041
1,464
1,336
of which: China
752
1,151
976
Total
3,066
4,116
3,844
In 2023, orders decreased in all regions. Orders in Europe decreased 28 percent (28 percent in local
currencies) driven by decreased demand, mainly in Germany, Italy, France and Austria. Orders in the
Americas decreased 11 percent (12 percent in local currencies) compared to 2022, driven by the
normalization of orders in the U.S. due to shortened delivery lead times. Orders in Asia, Middle East and
Africa decreased 29 percent (25 percent in local currencies) with lower demand in China, primarily in the
Robotics Division.
65
Order backlog
In 2023, order backlog decreased 20 percent (20 percent in local currencies) compared to 2022. Order
backlog decreased in both divisions due primarily to lower order intake, along with improved order backlog
execution.
Revenues
In 2023, revenues increased 14 percent (14 percent in local currencies) compared to 2022. Revenues
increased in both divisions due to improved order backlog execution, higher volumes from book-and-bill
business and the realization of the impacts of successful price increases. Service revenues also increased in
2023, driven by strong demand from the automotive segment. The higher revenues in 2023 also reflects the
impacts of the COVID-19 shutdown of the robotics factory in China during April 2022.
The geographic distribution of revenues for our Robotics & Discrete Automation Business area was as
follows:
($ in millions)
2023
2022
2021
Europe
1,942
1,498
1,582
The Americas
577
525
441
of which: United States
361
374
309
Asia, Middle East and Africa
1,121
1,158
1,274
of which: China
805
899
950
Total
3,640
3,181
3,297
Revenues from Asia, Middle East and Africa decreased 3 percent (increased 1 percent in local currencies)
compared to 2022 due to improved order backlog execution. Revenues in Europe increased 30 percent
(27 percent in local currencies) with strong deliveries to Germany, Italy and France. In the Americas,
revenues increased 10 percent (8 percent in local currencies) due to improved order backlog execution in
Mexico and Canada.
Income from operations
In 2023, the Business area recorded income from operations of $446 million compared to $247 million in
2022, with both divisions contributing to the higher income level. The operational performance in 2023
reflected improved sales volumes, price increases, a favorable change in the revenue mix, and the benefit of
cost reduction measures put in place in the second half of 2022. These positive drivers were partially offset
by inflationary cost pressures in 2023 as well as some under absorption of fixed costs in the Robotics
Division as demand softened towards the second half of the year. Changes in foreign currencies, including
the impacts from FX/commodity timing differences summarized in the table below, negatively impacted
income from operations by approximately 1 percent.
66
Operational EBITA
The reconciliation of Income (loss) from operations to Operational EBITA for the Robotics & Discrete
Automation Business area was as follows:
($ in millions)
2023
2022
2021
Income from operations
446
247
269
Acquisition-related amortization
79
78
83
Restructuring, related and implementation costs
6
11
7
Acquisition- and divestment-related expenses and integration costs
14
6
1
Certain other non-operational items
(10)
(8)
—
FX/commodity timing differences in income from operations
1
6
(5)
Operational EBITA
536
340
355
In 2023, Operational EBITA increased 58 percent (increased 60 percent excluding the impact from changes
in foreign currency exchange rates) compared to 2022, primarily due to the reasons described under “Income
from operations”, excluding the explanations related to the reconciling items in the table above.
Corporate and Other
Net loss from operations for Corporate and Other was as follows:
($ in millions)
2023
2022
2021
Corporate headquarters and stewardship
(557)
(430)
(399)
Other corporate costs
(18)
(25)
(29)
Loss from equity-accounted companies
(6)
(101)
(102)
Fair value adjustment on equity securities
(2)
(4)
94
Regulatory penalty in connection with Kusile project
—
(313)
—
Net gain (loss) from sale of businesses
(1)
—
43
(3)
Corporate brand income from Hitachi Energy
39
57
89
Corporate real estate
103
66
41
E-mobility Division
(234)
19
14
Divested businesses and other non-core activities
(37)
(117)
(72)
Total Corporate and Other
(712)
(805)
(367)
(1) 2022 includes gain on sale of the remaining 19.9 percent investment in Hitachi Energy Ltd.
In 2023, the net loss from operations within Corporate and Other decreased by $93 million to $712 million
compared to 2022. This decrease was primarily driven by the impact of certain charges incurred in 2022
including the regulatory penalties in connection with the Kusile project and the loss from equity-accounted
companies recorded for our investment in Hitachi Energy, which was sold in December 2022, partially offset
by the net loss from operations in the E-mobility Division in 2023.
Corporate
In 2023, Corporate headquarters and stewardship costs increased by $127 million, mainly due to higher
external consulting costs for system implementations and related process design, as well as higher costs in
2023 for employee short-term incentive compensation.
Corporate brand income results from granting the use of the ABB Brand to Hitachi Energy, the fair value of
which was initially determined on the date of the divestment of the former Power Grids business in 2020. A
portion of the proceeds received for the sale was allocated to the fair value of the granting of the use of the
brand and is being amortized over the expected period of benefit received by Hitachi Energy.
67
Corporate real estate primarily includes income and expenses from property rentals and gains from the sale
of real estate properties. In 2023, income from operations in corporate real estate included gains from the
sale of real estate properties of approximately $102 million compared to $73 million in 2022.
Other corporate costs consists of operational costs of Corporate Treasury and other minor items.
Other - E-mobility
Commencing in 2023, the E-mobility Division became an independent Division and separate operating
segment within ABB. Previously, the Division was managed in the Electrification Business area. In connection
with this change, the results of the Division for all periods are reported within Corporate and Other as the
Division does not meet any of the size thresholds in any period to be considered a reportable segment.
In 2023, the E-mobility Division reported a net loss from operations of $234 million compared to income from
operations of $19 million in 2022. The loss in 2023 was impacted by combined charges in connection with
excess and obsolete components and unfavorable inventory purchase commitments of $70 million,
restructuring, related and implementation costs of $27 million and higher costs for system implementations
and related process design. The amount in 2023 also reflects higher personnel costs as the Division
continues its growth strategy as the revenues within the Division grew 33 percent. The change compared to
2022 also reflects $54 million of gains recorded in 2022 for net fair value gains on investments.
The E-mobility Division experienced revenue growth of 89 percent from 2021 to 2022. The income from
operations in 2022 included the fair value gains as described above, while in 2021 it included $17 million of
fair value gains. The Division also experienced increases in administrative costs in 2022 as it expanded its
cost base in anticipation of significant revenue growth.
Other - Divested businesses and other non-core activities
The results of operations for certain divested businesses and other non
‑
core activities are presented in
Corporate and Other. Divested businesses include the high-voltage cables business, steel structures
business and the oil & gas EPC business. Other continuing non
‑
core activities include the execution and
wind
‑
down of certain legacy EPC and other contracts.
In 2023 and 2022, the amounts represent charges and losses relating to divested businesses and the
winding down of the remaining EPC projects. We recorded losses of $37 million in 2023, down significantly
from 2022, in which we recorded a restructuring expense of $195 million in connection with the exit of the full
train retrofit business primarily for contract settlement costs, partially offset by the reversal of a provision of
$61 million that we had previously recorded related to one of our divested businesses based on a settlement
proposal issued by the ruling court.
At December 31, 2023, our remaining non
‑
core activities primarily include the completion of the remaining
EPC contracts for substations and oil & gas.
—
Liquidity and capital resources
Principal sources of funding
We meet our liquidity needs principally using cash from operations, proceeds from the issuance of debt
instruments (bonds and commercial paper), and short
‑
term bank borrowings. In 2023, we also received funds
from the sale of our Power Conversion Division.
68
Our net debt is shown in the table below:
December 31, ($ in millions)
2023
2022
Short-term debt and current maturities of long-term debt
2,607
2,535
Long-term debt
5,221
5,143
Cash and equivalents
(3,891)
(4,156)
Restricted cash - current
(18)
(18)
Marketable securities and short-term investments
(1,928)
(725)
Net debt
(defined as the sum of the above lines)
1,991
2,779
During 2023, although we continued to return high amounts of cash to shareholders in the form of dividends
and purchases of treasury stock, we significantly increased cash from operating activities, resulting in a
decrease in net debt, as presented in the table above.
During 2023, our net debt decreased $788 million to a net debt position of $1,991 million at December 31,
2023. The effect of exchange rate movements increased net debt by approximately $433 million. In 2023, we
received net proceeds of $553 million for the sales of businesses. We generated cash flows from operating
activities during 2023 of $4,290 million and sold treasury stock in relation to our employee share plans for
$154 million. We also issued shares in our subsidiary ABB E-Mobility to third parties in private placements for
$328 million. These items were mostly offset by amounts for purchases of treasury shares of $1,258 million,
including $909 million relating to the announced buybacks of our shares, as well as $1,713 million for the
payment of the dividend to our shareholders. We made net purchases of property, plant and equipment and
intangible assets of $623 million and made payments of dividends to noncontrolling shareholders totaling
$93 million. See “Financial position”, “Investing activities” and “Financing activities” for further details.
Our Corporate Treasury is responsible for providing a range of treasury management services to our Group
companies, including investing cash in excess of current business requirements. At December 31, 2023 and
2022, the proportion of our aggregate “Cash and equivalents” (including restricted cash) and “Marketable
securities and short
‑
term investments” managed by Corporate Treasury amounted to approximately
59 percent and 51 percent, respectively.
Our investment strategy for cash (in excess of current business requirements) has generally been to invest in
short-term time deposits with maturities of less than 3 months, supplemented at times by investments in
money market funds and in some cases, government securities. We actively monitor credit risk in our
investment and derivative portfolios. Credit risk exposures are controlled in accordance with policies
approved by our senior management to identify, measure, monitor and control credit risks. We have minimum
rating requirements for our counterparts and closely monitor developments in the credit markets making
appropriate changes to our investment policy as deemed necessary. In addition to minimum rating criteria,
we have strict investment parameters and specific approved instruments as well as restrictions on the types
of investments we make. These parameters are closely monitored on an ongoing basis and amended as we
consider necessary.
Our cash is held in various currencies around the world. Approximately 51 percent of our cash and
equivalents held at December 31, 2023, was in U.S. dollars, while the most significant foreign currencies in
which cash and equivalents was held was euros (15 percent) and Chinese Renminbi (5 percent).
We believe the ongoing cash flows generated from our business, supplemented, when necessary, through
access to the capital markets (including short
‑
term commercial paper) and our credit facilities are sufficient to
support business operations, capital expenditures, business acquisitions, the payment of dividends to
shareholders and contributions to pension plans. Consequently, we believe that our ability to obtain funding
from these sources will continue to provide the cash flows necessary to satisfy our working capital and capital
expenditure requirements, as well as meet our debt repayments and other financial commitments for the next
12 months. See “Contractual obligations and commitments”.
69
Due to the nature of our operations, including the timing of annual incentive payments to employees, our
cash flow from operations generally tends to be weaker in the first half of the year than in the second half of
the year.
Debt and interest rates
Total outstanding debt was as follows:
December 31, ($ in millions)
2023
2022
Short-term debt and current maturities of long-term debt
2,607
2,535
Long-term debt:
Bonds
5,051
4,944
Other long-term debt
170
199
Total debt
7,828
7,678
In 2023, while the reduction of commercial paper outstanding and the repayment of long-term debt due in
2023 offset the reclassifications to short-term of long-term debt due in 2024, movements in foreign exchange
rates resulted in a small increase of short-term debt of 3 percent.
At December 31, 2023, Long-term debt was $78 million higher compared to the end of 2022. We issued five
new instruments in 2023 which remain classified as Long-term debt at December 31, 2023 (CHF 325 million
1.965% Bonds due 2026, EUR 500 million 3.25% Instruments due 2027, CHF 150 million 1.9775% Bonds
due 2028, EUR 750 million 3.375% Instruments due 2031, and CHF 275 million 2.1125% Bonds due 2033).
This was more than offset by the reclassification to current of the EUR 700 million 0.625% Instruments due
2024, EUR 500 million floating rate Instruments due 2024, EUR 750 million 0.75% Instruments due 2024, and
CHF 150 million 0.3% Bonds due 2024. Decreases in interest rates also resulted in an increase in our long-
term debt of approximately $97 million due to the application of fair value hedge accounting on certain
outstanding instruments.
Our debt has been obtained in a range of currencies and maturities and with various interest rate terms. For
certain of our debt obligations, we use derivatives to manage the fixed interest rate exposure. For example,
we use interest rate swaps and cross-currency interest rate swaps to effectively convert fixed rate debt into
floating rate liabilities. After considering the effects of interest rate swaps and cross-currency interest rate
swaps, at December 31, 2023, the effective average interest rate on our floating rate long-term debt
(including current maturities) of $2,907 million and our fixed rate long-term debt (including current maturities)
of $4,834 million was 4.8 percent and 2.7 percent, respectively. This compares with an effective rate of
2.8 percent for floating rate long-term debt of $3,459 million and 2.2 percent for fixed rate long-term debt of
$2,771 million at December 31, 2022.
For a discussion of our use of derivatives to modify the interest characteristics of certain of our individual
bond issuances, see “Note 12 - Debt” to our Consolidated Financial Statements.
Credit facility
In December 2019, we replaced our previous multicurrency revolving credit facility with a new $2 billion
multicurrency revolving credit facility, maturing in 2024. In 2021 we exercised our option to extend the
maturity of this facility to 2026. No amount was drawn under the facility at December 31, 2023 and 2022. The
facility is available for general corporate purposes and contains cross-default clauses whereby an event of
default would occur if we were to default on indebtedness, as defined in the facility, at or above a specified
threshold. In February 2023, we amended and restated our facility for the purpose of addressing the
discontinuation of LIBOR. Under the amended and restated credit facility, the margin is unchanged, but
advances in USD are referenced to CME Term SOFR, whilst advances in CHF and GBP are referenced to
overnight SARON and SONIA, respectively, and subject to applicable credit adjustment spreads.
70
The credit facility does not contain financial covenants that would restrict our ability to pay dividends or raise
additional funds in the capital markets. For further details of the credit facility, see “Note 12 - Debt” to our
Consolidated Financial Statements.
Commercial paper
At December 31, 2023, we had two commercial paper programs in place:
•
commercial paper in the United States, and
•
currencies.
At December 31, 2023 and 2022, there were no amounts outstanding under the $2 billion program in the
United States.
At December 31, 2023, there was no amount outstanding under the $2 billion Euro-commercial paper
program while at December 31, 2022, there was $1,383 million outstanding.
European program for the issuance of debt
The European program for the issuance of debt allows the issuance of up to the equivalent of $8 billion in
certain debt instruments. The terms of the program do not obligate any third party to extend credit to us and
the terms and possibility of issuing any debt under the program are determined with respect to, and as of the
date of issuance of, each debt instrument. At December 31, 2023, six bonds (principal amount of
EUR 700 million due in 2024, principal amount of EUR 500 million due in 2024, principal amount of
EUR 750 million due in 2024, principal amount of EUR 500 million due in 2027, principal amount of
EUR 800 million due in 2030, and principal amount of EUR 750 million due in 2031) having a combined
carrying amount of $4,259 million were outstanding under the program. The carrying amount of the five
bonds outstanding under the program at December 31, 2022, was $3,444 million.
Credit ratings
Credit ratings are assessments by the rating agencies of the credit risk associated with ABB and are based
on information provided by us or other sources that the rating agencies consider reliable. Higher ratings
generally result in lower borrowing costs and increased access to capital markets. Our ratings are of
“investment grade” which is defined as Baa3 (or above) from Moody’s and BBB− (or above) from Standard &
Poor’s.
At December 31, 2023 and 2022, our long-term debt was rated A3 by Moody’s and with a Stable outlook. At
December 31, 2023 and 2022, our long-term debt was rated A- by Standard & Poor’s and with a Stable
outlook.
71
Limitations on transfers of funds
Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries
where we operate or otherwise have bank deposits, including: Argentina, Egypt, India, Indonesia, Malaysia,
the Russian Federation, South Africa, South Korea, Thailand, Turkiye and Vietnam. Funds, other than regular
dividends, fees or loan repayments, cannot be readily transferred offshore from these countries and are
therefore deposited and used for working capital needs in those countries. In addition, there are certain
countries where, for tax reasons, it is not considered optimal to transfer the cash offshore. Consequently,
these funds are not available within Corporate Treasury to meet short-term cash obligations outside the
relevant country. The above-described funds are reported as cash in our Consolidated Balance Sheets, but
we do not consider these funds immediately available for the repayment of debt outside the respective
countries where the cash is situated, including those described above. At December 31, 2023 and 2022, the
balance of “Cash and equivalents” and “Marketable securities and other short-term investments” under such
limitations (either regulatory or sub-optimal from a tax perspective) totaled $1,479 million and $1,381 million,
respectively.
During 2023, we continued to direct our subsidiaries in countries with restrictions to place such cash with our
core banks or investment grade banks, where possible, in order to minimize credit risk on such cash
positions. We continue to closely monitor the situation to ensure bank counterparty risks are minimized.
—
Financial position
Balance sheets
December 31, ($ in millions)
2023
2022
% Change
Current assets
Cash and equivalents
3,891
4,156
(6)%
Restricted cash
18
18
0%
Marketable securities and short-term investments
1,928
725
166%
Receivables, net
7,446
6,858
9%
Contract assets
1,090
954
14%
Inventories, net
6,149
6,028
2%
Prepaid expenses
235
230
2%
Other current assets
520
601
(13)%
Total current assets
21,277
19,570
9%
For a discussion on Cash and equivalents, see sections “Liquidity and Capital Resources—Principal sources
of funding” and “Cash flows” for further details.
Marketable securities and short-term investments increased in 2023. The change primarily reflects higher
amounts placed in bank time deposits and an increase in amounts placed in money market funds classified
as equity securities (see “Note 5 - Cash and equivalents, marketable securities and short-term investments”
to our Consolidated Financial Statements).
Receivables, net, increased 9 percent (7 percent in local currencies) reflecting the higher revenues in all
Business areas primarily a result of higher business in 2023 compared to 2022.
Contract assets increased 14 percent (12 percent in local currencies) due to the higher level of business
activity in all Business areas as well as timing of invoices issued. The increase is primarily driven by the
Process Automation Business area.
72
Inventories, net, increased 2 percent primarily due to movements in foreign currencies. In local currency,
Inventories, net, decreased 1 percent, reflecting a net decrease from acquisitions and divestments of
approximately 1 percent. Inventory was stable on increased business volumes as the previous year included
some stockpiling of certain key components due to supply chain challenges.
December 31, ($ in millions)
2023
2022
% Change
Current liabilities
Accounts payable, trade
4,847
4,904
(1)%
Contract liabilities
2,844
2,216
28%
Short-term debt and current maturities of long-term debt
2,607
2,535
3%
Current operating leases
249
220
13%
Provisions for warranties
1,210
1,028
18%
Other provisions
1,201
1,171
3%
Other current liabilities
5,046
4,455
13%
Total current liabilities
18,004
16,529
9%
Accounts payable, trade, decreased 1 percent (3 percent in local currencies) reflecting some decrease in
average days payable in 2023 compared to 2022.
Contract liabilities increased 28 percent (27 percent in local currency) primarily due to higher levels of
progress billings and advances at the end of 2023 compared to 2022. The increase reflects higher levels in
all Business areas except for Robotics & Discrete Automation.
The increase in short-term debt and current maturities of long-term debt in 2023 reflects the reclassification to
current of the EUR 700 million 0.625% Instruments due 2024, EUR 500 million Floating Rate Instruments due
2024, EUR 750 million 0.75% Instruments due 2024 and the CHF 280 million 0.3% Bonds due 2024, offset
by the repayment at maturity of the EUR 700 million 0.625% Instruments due 2023 and the CHF 275 million
0% Bonds due 2023 as well as by the full repayment of commercial paper borrowings under the
Euro-commercial program in 2023. Movements in foreign currency rates increased short-term debt by
6 percent.
Current operating leases includes the portion of the operating lease liabilities that are due to be paid in the
next 12 months. For a summary of operating lease liabilities, see “Note 14 - Leases” to our Consolidated
Financial Statements.
Provisions for warranties increased 18 percent (15 percent in local currencies). The increase reflects the
higher provisioning in 2023 on increased revenues as well as increases in expected costs for certain newer
product lines. For details on the change in the Provisions for warranties, see “Note 15 - Commitments and
contingencies” to our Consolidated Financial Statements.
December 31, ($ in millions)
2023
2022
% Change
Non-current assets
Property, plant and equipment, net
4,142
3,911
6%
Operating lease right-of-use assets
893
841
6%
Investments in equity-accounted companies
187
130
44%
Prepaid pension and other employee benefits
780
916
(15)%
Intangible assets, net
1,223
1,406
(13)%
Goodwill
10,561
10,511
0%
Deferred taxes
1,381
1,396
(1)%
Other non-current assets
496
467
6%
Total non-current assets
19,663
19,578
0%
In 2023, Property, plant and equipment, net, increased 6 percent (3 percent in local currencies) as capital
expenditures exceeded the annual depreciation expense.
73
In 2023, Goodwill remained flat (flat in local currencies). While currency movements increased goodwill by
1 percent, the net impact of acquisitions and divestments mostly offset this movement.
Intangible assets, net, decreased 13 percent (15 percent in local currencies). The decrease primarily
represents the amortization recorded during the year. While the divestment of the Power Conversion division
decreased Intangible assets, net, by 5 percent this was mostly offset by other acquisitions in 2023. For
additional information on goodwill and intangible assets see “Note 11 - Goodwill and intangible assets” to our
Consolidated Financial Statements.
Prepaid pension and other employee benefits decreased 15 percent (22 percent in local currencies). For
additional information on Pension and employee benefits see “Note 17 - Employee benefits” to our
Consolidated Financial Statements.
In 2023, Deferred taxes decreased 1 percent (4 percent in local currencies). For details on deferred tax
assets see “Note 16 - Income taxes” to our Consolidated Financial Statements.
December 31, ($ in millions)
2023
2022
% Change
Non-current liabilities
Long-term debt
5,221
5,143
2%
Non-current operating leases
666
651
2%
Pension and other employee benefits
686
719
(5)%
Deferred taxes
669
729
(8)%
Other non-current liabilities
1,548
2,105
(26)%
Total non-current liabilities
8,790
9,347
(6)%
Long-term debt increased 2 percent (decreased 3 percent in local currencies). The balance at December 31,
2023, includes five instruments newly issued in 2023: (i) CHF 325 million 1.965% Bonds due 2026,
(ii) EUR 500 million 3.25% Instruments due 2027, (iii) CHF 150 million 1.9775% Bonds due 2028,
(iv) EUR 750 million 3.375% Instruments due 2031 and (v) CHF 275 million 2.1125% Bonds due 2033. The
increase was more than offset by the reclassification to current of the EUR 700 million 0.625% Instruments
due 2024, EUR 500 million Floating Rate Instruments due 2024, EUR 750 million 0.75% Instruments due
2024 and CHF 280 million 0.3% Bonds due 2024. For additional information on Long-term debt, see “Liquidity
and Capital Resources—Debt and interest rates” as well as “Note 12 - Debt” to our Consolidated Financial
Statements.
Non-current operating leases includes the portion of the operating lease liabilities that are due to be paid in
more than 12 months.
Pension and employee benefits decreased 5 percent (6 percent in local currencies). For additional
information on Pension and employee benefits see “Note 17 - Employee benefits” to our Consolidated
Financial Statements.
For a breakdown of Other non
‑
current liabilities, see “Note 13 - Other provisions, other current liabilities and
other non-current liabilities” to our Consolidated Financial Statements.
74
Cash flows
The Consolidated Statements of Cash Flows are shown on a continuing operations basis, with the effects of
discontinued operations shown in aggregate for each major cash flow activity and also include the impact
from changes in restricted cash.
The Consolidated Statements of Cash Flows can be summarized as follows:
($ in millions)
2023
2022
2021
Net cash provided by operating activities
4,290
1,287
3,330
Net cash provided by (used in) investing activities
(1,615)
981
2,307
Net cash used in financing activities
(2,897)
(2,394)
(4,968)
Effects of exchange rate changes on cash and equivalents
(43)
(189)
(81)
Net change in cash and equivalents and restricted cash
(265)
(315)
588
Operating activities
($ in millions)
2023
2022
2021
Net income
3,824
2,594
4,650
Loss from discontinued operations, net of tax
24
43
80
Depreciation and amortization
780
814
893
Total adjustments to reconcile net income to net cash provided by
operating activities (excluding depreciation and amortization)
(200)
(434)
(2,593)
Total changes in operating assets and liabilities
(127)
(1,683)
308
Net cash provided by operating activities — continuing operations
4,301
1,334
3,338
Net cash used in operating activities — discontinued operations
(11)
(47)
(8)
Cash flows from operating activities in continuing operations in 2023 provided net cash of $4,301 million,
more than three times the amount reported in 2022. In 2023, we had significantly higher cash effective net
income (i.e. net income from continuing operations adjusted for depreciation, amortization and other non-
cash items) reflecting the increase in business volumes and operating margins. Lower cash flows in 2022
were also partially due to costs relating to business restructurings as well as costs for the spin-off of the
Turbocharging Division and other business portfolio transactions. In 2022, the amount also includes
payments of approximately $315 million in relation to regulatory penalties for the Kusile project.
Our cash flows in 2023 improved on stronger working capital management especially in the area of
inventories which contributed more than $1 billion of improvements in cash flows with some additional
modest improvements in the timing of collections of cash from customers. In 2023, we were able to keep our
working capital steady even while realizing increasing business volumes and some inflation-driven cost and
price changes. This compares to the increase in working capital in 2022 which was driven by the significant
buildup of inventories. In 2023 and 2022, there were no significant cash flows from operating activities of
discontinued operations.
75
Investing activities
($ in millions)
2023
2022
2021
Purchases of investments
(1,957)
(321)
(1,528)
Purchases of property, plant and equipment and intangible assets
(770)
(762)
(820)
Acquisition of businesses (net of cash acquired) and
increases in cost- and equity-accounted companies
(225)
(288)
(241)
Proceeds from sales of investments
610
697
2,272
Proceeds from maturity of investments
149
73
81
Proceeds from sales of property, plant and equipment
147
127
93
Proceeds from sales of businesses (net of transaction costs and cash
disposed) and cost- and equity-accounted companies
553
1,541
2,958
Net cash from settlement of foreign currency derivatives
(109)
(166)
(121)
Changes in loans receivable, net
3
320
(19)
Other investing activities
7
(14)
(4)
Net cash provided by (used in) investing activities — continuing
operations
(1,592)
1,207
2,671
Net cash used in investing activities — discontinued operations
(23)
(226)
(364)
Net cash used in investing activities for continuing operations in 2023 was $1,592 million compared to
$1,207 million provided by investing activities during 2022, a change of $2,799 million. This difference
primarily represents changes in amounts invested in money market funds as well as other short-term
investments as the significantly higher operating cash flows generated in 2023 resulted in higher investments
made, especially at the end of the year. In 2023, net proceeds from sales of businesses was lower at
$553 million, primarily representing the sale of our Power Conversion Division, while in 2022 we received net
proceeds in connection with the sale of our remaining equity-method investment in Hitachi Energy of
$1,552 million. In addition, during 2022, Changes in loans receivable, net, includes funds collected from a
subsidiary of Accelleron in October 2022, related to a short-term intercompany loan granted in anticipation of
the Turbocharging Division spin-off.
The following presents purchases of property, plant and equipment and intangible assets by significant asset
category:
($ in millions)
2023
2022
2021
Construction in progress
532
540
479
Purchase of machinery and equipment
176
127
150
Purchase of land and buildings
11
26
158
Purchase of intangible assets
51
69
33
Purchases of property, plant and equipment and intangible assets
770
762
820
There were no significant acquisitions in 2023 while the amount in 2022 primarily reflects the amount paid to
acquire In-Charge.
Cash flows used in investing activities for discontinued operations includes amounts relating to the original
sale of the Power Grids business to Hitachi in 2020. Certain amounts related to the purchase price were
subject to adjustment, including the final settlement for working capital balances as well as other payments
which were contractually due to be transferred to Hitachi in periods after the initial sale. In 2023 and 2022,
payments totaling $23 million and $227 million, respectively, were made.
76
Financing activities
($ in millions)
2023
2022
2021
Net changes in debt with maturities of 90 days or less
(1,365)
1,366
(83)
Increase in debt
2,586
3,849
1,400
Repayment of debt
(1,567)
(2,703)
(1,538)
Delivery of shares
154
394
826
Purchase of treasury stock
(1,258)
(3,553)
(3,708)
Dividends paid
(1,713)
(1,698)
(1,726)
Cash associated with the spin-off of the Turbocharging Division
—
(172)
—
Dividends paid to noncontrolling shareholders
(93)
(99)
(98)
Proceeds from issuance of subsidiary shares
328
216
—
Other financing activities
31
6
(41)
Net cash used in financing activities — continuing operations
(2,897)
(2,394)
(4,968)
Net cash provided by financing activities — discontinued
operations
—
—
—
Our financing cash flow activities primarily include debt transactions (both from the issuance of debt
securities and borrowings directly from banks), share transactions (including share transactions in
consolidated subsidiaries) and payments of distributions to controlling and noncontrolling shareholders.
In 2023, the net outflow for debt with maturities of 90 days or less related to net repayments of amounts
outstanding under the Euro-commercial paper program and various local country borrowings.
In 2023, “Increase in debt” primarily represents initial borrowings for terms longer than 90 days under the
Euro-commercial paper program of $400 million and borrowings under the following five long-term debt
transactions (total cashflow amount at date of borrowings of approximately $2,170 million):
•
•
•
•
•
In 2023, “Repayment of debt” includes the repayment at maturity of the EUR 700 million 0.625% Instruments
and CHF 275 million 0% Bonds and repayments of $418 million under the Euro-commercial paper program
for borrowings having terms longer than 90 days.
“Delivery of shares” in 2023 primarily reflects cash received from the exercise of options in connection with
our Management Incentive Plan (resulting in a delivery of 6 million shares). All shares were delivered out of
Treasury stock.
“Proceeds from issuance of subsidiary shares” in 2023 relates to the sale of shares by ABB E-mobility
Holdings Ltd through a private placement of $328 million.
In 2023, “Purchase of treasury stock” reflects $909 million of cash payments to purchase 25 million of our
own shares in connection with the announced share buyback programs. It also reflects $349 million paid to
purchase 9 million shares on the open market during the year.
77
Contractual obligations and commitments
The contractual obligations presented in the table below represent our estimates of future payments under
fixed contractual obligations and commitments. These amounts may differ from those reported in our
Consolidated Balance Sheet at December 31, 2023. Changes in our business needs, cancellation provisions
and changes in interest rates, as well as actions by third parties and other factors, may cause these
estimates to change. Therefore, our actual payments in future periods may vary from those presented below.
The table below summarizes certain of our cash requirements for known contractual obligations and principal
and interest payments under our debt instruments and purchase obligations at December 31, 2023, and the
timing thereof. For details of future operating and finance lease payments, see “Note 14 - Leases” to our
Consolidated Financial Statements.
At December 31, 2023 ($ in millions)
Current
Non-current
Total
Long-term debt obligations
2,507
5,237
7,744
Interest payments related to long-term debt obligations
131
910
1,041
Purchase obligations
3,150
1,297
4,447
Total
5,788
7,444
13,232
In the table above, the “Long
‑
term debt obligations” reflect the cash amounts to be repaid upon maturity of
those debt obligations. The cash obligations above will differ from Long
‑
term debt due to the impacts of fair
value hedge accounting adjustments and premiums or discounts on certain debt.
We have determined the interest payments related to long
‑
term debt obligations by reference to the
payments due under the terms of our debt obligations at the time such obligations were incurred. However,
we use interest rate swaps to modify the interest characteristics of certain of our debt obligations. The net
effect of these swaps may increase or decrease the actual amount of our cash interest payment obligations,
which may differ from those stated in the above table. For further details on our debt obligations and the
related hedges, see “Note 12 - Debt” to our Consolidated Financial Statements.
Purchase obligations are defined as agreements to purchase goods and services that are enforceable and
legally binding, that specify all significant terms, including the quantities to be purchased, price provisions and
the approximate timing of the transactions. Purchase obligations includes procurement contracts for raw
materials, sub-contracted work, supplies and services. Purchase obligations include amounts recorded as
well as amounts that are not recorded in the Consolidated Balance Sheets.
Off
‑
balance sheet arrangements
Commercial commitments
We disclose the maximum potential exposure of certain guarantees, as well as possible recourse provisions
that may allow us to recover from third parties amounts paid out under such guarantees. The maximum
potential exposure does not allow any discounting of our assessment of actual exposure under the
guarantees. The information below reflects our maximum potential exposure under the guarantees, which is
higher than our assessment of the expected exposure.
78
Guarantees
The following table provides quantitative data regarding our third
‑
party guarantees. The maximum potential
payments represent a worst
‑
case scenario, and do not reflect our expected outcomes.
Maximum potential payments
December 31, ($ in millions)
2023
2022
Performance guarantees
3,451
4,300
Financial guarantees
94
96
Total
3,545
4,396
The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects our best estimate of
future payments, which we may incur as part of fulfilling our guarantee obligations. In respect of the above
guarantees, the carrying amounts of liabilities at December 31, 2023 and 2022, were not significant.
In addition, in the normal course of bidding for and executing certain projects, we have 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 we do not fulfill our
contractual obligations. We would then have an obligation to reimburse the financial institution for amounts
paid under the performance bonds. At December 31, 2023 and 2022, the total outstanding performance
bonds aggregated to $3.1 billion and $2.9 billion, respectively. There have been no significant amounts
reimbursed to financial institutions under these types of arrangements in 2023 and 2022.
For additional descriptions of our performance, financial and indemnification guarantees see “Note 15 -
Commitments and contingencies” to our Consolidated Financial Statements.
Item 6. Directors, Senior Management and Employees
—
Summary of corporate governance approach
Corporate governance - general principles
ABB is committed to the highest international standards of corporate governance and this is reinforced in its
structure, processes and rules as outlined in this report. In line with this, ABB complies with the general
principles as set forth in the Swiss Code of Best Practice for Corporate Governance, as well as those of the
capital markets where its shares are listed and traded. In addition to the provisions of the Swiss Code of
Obligations, ABB’s key principles and rules on corporate governance are laid down in ABB’s Articles of
Incorporation, the ABB Ltd Board Governance Rules (which include the governance rules of ABB’s Board
committees and the ABB Ltd Related Party Transaction Policy, which defines the criteria to determine the
independence of the members of ABB Ltd’s Board of Directors), and the ABB Code of Conduct. These
documents are available on ABB’s website at
https://new.abb.com/about/corporate-governance
. It is the duty
of ABB’s Board of Directors (the Board) to review and amend or propose amendments to those documents
from time to time to reflect the most recent developments and practices, as well as to ensure compliance with
applicable laws and regulations. Shareholders and other interested parties may communicate with the
Chairman of the Board or the independent directors by writing to ABB Ltd (Attn: Chairman of the
Board/independent directors), at Affolternstrasse 44, CH-8050 Zurich, Switzerland.
Swiss corporate law has been revised, effective as of January 1, 2023. The main objectives of the revision
were to strengthen shareholder rights, improve corporate governance and modernize corporate law in
general. Swiss corporations are required to amend their articles of incorporation and other organizational
regulations, as applicable, for compliance with the new law by the end of 2024 at the latest. The shareholders
of ABB approved the necessary changes to ABB’s Articles of Incorporation as proposed by the Board at
ABB’s Annual General Meeting in March 2023.
79
Compensation governance and Board and EC compensation
Information about ABB’s compensation governance as well as Board and Executive Committee (EC)
compensation and shareholdings is provided in the section titled "Compensation" below.
—
Board of Directors
Board and Board committees (2023–2024 Board term)
Board of Directors
Chairman:
Gunnar Brock
Denise C. Johnson
Vice
‑
Chairman:
David Constable
Jennifer Xin-Zhe Li
Frederico Fleury Curado
Geraldine Matchett
Lars Förberg
David Meline
Finance, Audit and Compliance
Committee
Governance and Nomination
Committee
Compensation
Committee
David Meline (chairman)
Peter R. Voser (chairman)
Frederico Fleury Curado (chairman)
Gunnar Brock
Lars Förberg
David Constable
Denise C. Johnson
Jennifer Xin-Zhe Li
Jennifer Xin
‑
Zhe Li
Geraldine Matchett
Jacob Wallenberg
Board governance
The Board
The Board defines the ultimate direction of the business of ABB and issues the necessary instructions. It
determines the organization of the ABB Group and appoints, removes and supervises the persons entrusted
with the executive management and representation of ABB. The internal organizational structure and the
definition of the areas of responsibility of the Board, as well as the information and control instruments
vis-à-vis the Executive Committee are set forth in the ABB Ltd Board Governance Rules (available at
https://new.abb.com/about/corporate-governance
).
The Board takes decisions as a whole, supported by its three committees: the Finance, Audit and
Compliance Committee (FACC), the Governance and Nomination Committee (GNC), and the Compensation
Committee (CC). These committees assist the Board in its tasks and report regularly to the Board. The Board
and its committees meet regularly throughout the year.
The directors and officers of a Swiss corporation are bound, as specified in the Swiss Code of Obligations, to
perform their duties with all due care, to safeguard the interests of the corporation in good faith and to extend
equal treatment to shareholders in like circumstances. Prior to proposing new candidates for election to the
Board, checks are performed to ensure that they are independent and that there are no conflicts of interest.
80
The Swiss Code of Obligations does not specify what standard of due care is required of the directors of a
corporate board. However, it is generally held by Swiss legal scholars and jurisprudence that the directors
must have the requisite capability and skills to fulfill their function, and must devote the necessary time to the
discharge of their duties. Moreover, the directors must exercise all due care that a prudent and diligent
director would have taken in like circumstances. Finally, the directors are required to take actions in the best
interests of the corporation and may not take any actions that may be harmful to the corporation.
Although the Swiss Code of Obligations does not discuss specifically conflicts of interest for board members,
the ABB Ltd Board Governance Rules (available at
https://new.abb.com/about/corporate-governance
) state
that Board members shall avoid entering into any situation in which their personal or financial interests may
conflict with the interests of ABB.
Chairman of the Board
The Chairman is elected by the shareholders to represent their interests in creating sustainable value through
effective governance. In addition, the Chairman (1) takes provisional decisions on behalf of the Board on
urgent matters where a regular Board decision cannot be obtained, (2) calls for Board meetings and sets the
related agendas, (3) interacts with the CEO and other EC members on a more frequent basis outside of
Board meetings and (4) represents the Board internally and in the public sphere.
Vice-Chairman of the Board
The Vice
‑
Chairman is elected by the Board and handles the responsibilities of the Chairman to the extent the
Chairman is unable to do so or would have a conflict of interest in doing so. He also acts as
counselor/advisor to the Chairman on any matters that are Company or Board relevant and as appropriate or
as the Chairman may require and with a particular focus on strategic aspects related to the Company and its
business in general. In addition, the Vice
‑
Chairman takes such other actions as may be decided by the Board
or requested by the Chairman.
Finance, Audit and Compliance Committee
The FACC is responsible for overseeing (1) the integrity of ABB’s financial statements, (2) ABB’s compliance
with legal, tax and regulatory requirements, (3) the external auditors’ qualifications and independence, (4) the
performance and role of ABB’s internal audit function and the performance of the external auditors, (5) ABB’s
capital structure, funding requirements and financial and risk policies, and (6) ABB’s implementation and
maintenance of an integrity program and internal controls designed to mitigate integrity risk.
The FACC must comprise three or more independent directors who have a thorough understanding of
finance and accounting. The Chairman of the Board and, upon invitation by the committee’s chairman, the
CEO or other members of the Executive Committee may participate in the committee meetings, provided that
any potential conflict of interest is avoided and confidentiality of the discussions is maintained. In addition, the
chief integrity officer, the head of internal audit and the external auditors participate in the meetings as
appropriate. The Board has determined that David Meline, chairman of the FACC, is an audit committee
financial expert, in accordance with the rules of the New York Stock Exchange.
Governance and Nomination Committee
The GNC is responsible for (1) overseeing corporate governance practices within ABB, (2) overseeing ABB’s
sustainability agenda (including corporate social responsibility, health, safety and environment),
(3) nominating candidates for the Board, the role of the CEO and other positions on the Executive
Committee, and (4) succession planning and employment matters relating to the Board and the Executive
Committee. The GNC is also responsible for maintaining an orientation program for new Board members and
an ongoing education program for existing Board members.
The GNC must comprise three or more independent directors. Upon invitation by the committee’s chairman,
the CEO or other members of the Executive Committee may participate in the committee meetings, provided
that any potential conflict of interest is avoided and confidentiality of the discussions is maintained.
Compensation Committee
The CC is responsible for compensation matters relating to the Board and the Executive Committee.
81
The CC must comprise three or more directors who are elected by the shareholders. The Chairman of the
Board and, upon invitation by the committee’s chairman, the CEO or other members of the Executive
Committee may participate in the committee meetings, provided that any potential conflict of interest is
avoided and confidentiality of the discussions is maintained.
Board membership
Board composition
In proposing individuals to be elected to the Board, the Board seeks to align the composition and skills of the
Board with the Company’s strategic needs, business portfolio, geographic reach and culture. The Board
strives for diversity in all aspects including gender, nationalities, ethnicity, geographic/regional experience
and business experience. In addition, the average tenure of the members of the Board should be
well
‑
balanced. The Board also considers the number of other mandates of each Board member to ensure
that he/she will have sufficient time to dedicate to his/her role as an ABB Board member.
Elections and term of office
The members of the Board of Directors and the Chairman of the Board as well as the members of the
Compensation Committee are elected by the shareholders at the general meeting of shareholders for a term
of office extending until completion of the next ordinary general meeting of shareholders. Members whose
terms of office have expired shall be immediately eligible for re
‑
election. ABB’s Articles of Incorporation
(available at
https://new.abb.com/about/corporate-governance
) do not provide for the retirement of directors
based on their age. However, an age limit for members of the Board is set forth in the ABB Ltd Board
Governance Rules (available at
https://new.abb.com/about/corporate-governance
), although waivers are
possible and subject to Board discretion. If the office of the Chairman of the Board of Directors or any position
on the Compensation Committee becomes vacant during a Board term, the Board of Directors may appoint
(shall appoint in the case of the Chairman of the Board) another individual from among its members to that
position for the remainder of that term. The Board of Directors shall consist of no less than 7 and no more
than 13 members.
Members of the Board (2023–2024 Board term)
Board Experience
Corporate Officer
Experience
Other Business Experience
Global Experience
Country of Origin /
Nationality
Gender
Non
-
Executive
Independent
Board Member
ABB Board
Tenure (years)
Other Public
Board
Experience
CEO
CFO
Operations
Risk
Management
Sustainability
Digital /
Technology
Peter R. Voser
9
●
●
●
●
●
●
●
●
CH
M
Yes
Yes
Jacob Wallenberg
25
●
●
●
●
●
●
●
SE
M
Yes
Yes
Gunnar Brock
6
●
●
●
●
●
●
SE
M
Yes
Yes
David Constable
9
●
●
●
●
●
●
CA, US
M
Yes
Yes
Frederico Fleury Curado
8
●
●
●
●
●
●
●
BR, PT
M
Yes
Yes
Lars Förberg
7
●
●
●
●
●
SE, CH
M
Yes
Yes
Denise C. Johnson
1
●
●
●
●
●
●
US
F
Yes
Yes
Jennifer Xin-Zhe Li
6
●
●
●
●
●
●
●
CN, CA
F
Yes
Yes
Geraldine Matchett
6
●
●
●
●
●
CH, UK, FR
F
Yes
Yes
David Meline
8
●
●
●
●
US, CH
M
Yes
Yes
82
Peter R. Voser
and Chairman of ABB’s Board of
Directors since April 2015. He was
also ABB’s Chief Executive Officer
from April 2019 to February 2020.
He is a member of the board of directors of IBM
Corporation (US). He is also a member of the
board of directors of Temasek Holdings (Private)
Limited (Singapore) as well as chairman of the
board of PSA International Pte Ltd (Singapore),
one of its subsidiaries. In addition, he is the
chairman of the board of trustees of the St. Gallen
Foundation for International Studies. He was
previously the chief executive officer of Royal
Dutch Shell plc (The Netherlands). Mr. Voser was
born in 1958 and is a Swiss citizen.
Jacob Wallenberg
member of ABB’s Board of
Directors since June 1999 and Vice-
Chairman since April 2015. He is
the chairman of the board of
Investor AB (Sweden). He is vice
‑
chairman of the
boards of Telefonaktiebolaget LM Ericsson,
Wallenberg Investments AB, FAM AB and
Patricia Industries (all Sweden). He is also a
member of the board of directors of the Knut and
Alice Wallenberg Foundation as well as a
member of the nomination committee of SAS AB
(both Sweden). Mr. Wallenberg was born in 1956
and is a Swedish citizen.
Gunnar Brock
of ABB’s Board of Directors since
March 2018. He is chairman of the
boards of directors of Neptunia
Invest AB and Stena AB (both
Sweden) and a member of the boards of directors
of Investor AB and Patricia Industries (both
Sweden). He was formerly president and chief
executive officer of Atlas Copco AB (Sweden).
Mr. Brock was born in 1950 and is a Swedish
citizen.
David Constable
member of ABB’s Board of
Directors since April 2015. He is the
chairman of the board of directors
and chief executive officer of Fluor
Corporation (US). He was formerly the chief
executive officer and president as well as a
member of the board of directors of Sasol Limited
(South Africa). He joined Sasol after more than 29
years with Fluor Corporation (US). Mr. Constable
was born in 1961 and is a Canadian and US
citizen.
Frederico Fleury Curado
member of ABB’s Board of
Directors since April 2016. He is a
member of the boards of directors
of Transocean Ltd. (Switzerland)
and LATAM Airlines Group S.A. (Chile). Through
April 2023, he was a member of the board of
directors of Ultrapar S.A. (Brazil). He was
formerly the chief executive officer of Ultrapar
S.A. and Embraer S.A. (both Brazil). Mr. Curado
was born in 1961 and is a Brazilian and
Portuguese citizen.
Lars Förberg
ABB’s Board of Directors since April
2017. He is co
‑
founder and
managing partner of Cevian Capital.
Mr. Förberg was born in 1965 and is
a Swedish and Swiss citizen.
Denise C. Johnson
member of ABB’s Board of
Directors since March 2023. She is
a member of the boards of directors
of the US National Mining
Association, the National Association of
Manufacturers and the US Chamber of
Commerce (all US). Through December 2023,
she was a member of the board of directors of the
Mosaic Company (US). Ms. Johnson is group
president of Caterpillar Inc. (US), responsible for
Resource Industries. Before joining Caterpillar in
2011, she worked for General Motors (GM) in
different managerial roles in the US and as
president and managing director of GM in Brazil.
Ms. Johnson was born in 1966 and is a US
citizen.
83
Jennifer Xin-Zhe Li
member of ABB’s Board of
Directors since March 2018. She is
a member of the boards of directors
of SAP SE (Germany) and Full
Truck Alliance Co. Ltd. (Cayman Islands/P.R.C.).
Through February 2023, she was a member of
the board of directors of Kone Oy (Finland).
Ms. Li is a founder and general partner of
Changcheng Investment Partners (P.R.C.), a
private investment fund. From 2008 to 2018, she
served as chief financial officer of Baidu Inc.
(P.R.C.) and chief executive officer of Baidu
Capital (P.R.C.). Prior to that, Ms. Li spent 14
years with General Motors, holding various senior
finance positions, including chief financial officer
of GM China and corporate controller for GMAC
North American Operations.
Ms. Li was born in
1967 and is a Canadian citizen.
Geraldine Matchett
member of ABB’s Board of
Directors since March 2018.
Through September 2023, she was
the
co-chief executive officer and
the chief financial officer of DSM-Firmenich
(Switzerland), and prior to the DSM-Firmenich
merger of DSM (The Netherlands). She was
previously the chief financial officer of SGS Ltd
(Switzerland). Prior to joining SGS she worked as
an auditor at Deloitte Ltd (Switzerland) and
KPMG LLP (UK). Ms. Matchett was born in 1972
and is a Swiss, British and French citizen.
David Meline
ABB’s Board of Directors since April
2016. He is a member of the boards
of directors of HP Inc. and Pacific
Biosciences of California, Inc. (both
US). From 2011 through 2022, he held chief
financial officer roles at Moderna Inc., Amgen Inc.
and the 3M Company (all US). From 2008
through 2011 he was the corporate controller and
chief accounting officer of the 3M Company (US).
Prior to joining 3M, Mr. Meline worked for more
than 20 years for General Motors Company (US).
Mr. Meline was born in 1957 and is a US and
Swiss citizen.
As of December 31, 2023, none of the Board members held any official functions or political posts. Further
information on ABB’s Board members can be found on ABB’s website under the ABB Board of Directors link
(available at
https://new.abb.com/about/corporate-governance
).
Board meetings and attendance
The Board and its committees have regularly scheduled meetings throughout the year. These meetings are
supplemented by additional meetings (either in person or by conference call), as necessary. Board meetings
are convened by the Chairman or upon request by any other Board member or the CEO. Documentation
covering the various items of the agenda for each Board meeting is sent out in advance to each Board
member in order to allow each member time to study the covered matters prior to the meetings. Each Board
meeting has a private session without management or others being present. Decisions made at the Board
meetings are recorded in written minutes of the meetings. Some decisions are also taken by circular
resolution.
The table below shows the number of meetings held during 2023 by the Board and its committees, their
average duration, as well as the attendance of the individual Board members. The Board meetings shown
include a strategic retreat attended by the members of the Board and the EC.
84
2023 Board and Board Committee Meetings
Pre Annual General Meeting 2023
Post Annual General Meeting 2023
Board
Board
Meetings and attendance
Mtg.
Conf.
Call
FACC
GNC
CC
Mtg.
Conf.
Call
FACC
GNC
CC
Average duration (hours)
7.75
1
2.75
1.75
1.75
7.75
1.25
3.25
1.25
1.25
Number of meetings
1
1
3
2
2
4
2
4
3
5
Meetings attended:
Peter R. Voser
1
1
2
4
2
3
Jacob Wallenberg
1
1
2
4
1
3
Gunnar Brock
1
1
3
4
2
4
David Constable
1
1
2
4
2
5
Frederico Fleury Curado
1
1
2
4
2
5
Lars Förberg
1
1
2
4
2
3
Denise C. Johnson
(1)
4
2
4
Jennifer Xin-Zhe Li
1
1
1
2
4
2
3
4
Geraldine Matchett
1
1
3
4
1
3
David Meline
1
1
3
4
2
4
Satish Pai
(2)
1
1
2
(1) Elected at ABB’s Annual General Meeting 2023.
(2) Did not stand for re-election at ABB’s Annual General Meeting 2023.
Mandates of Board members outside the ABB Group
No member of the Board may hold more than ten additional mandates, of which no more than four may be in
listed companies. Certain types of mandates, such as those in our subsidiaries, those in the same group of
companies and those in non
‑
profit and charitable institutions, are not subject to those limits. Additional details
can be found in Article 38 of ABB’s Articles of Incorporation (available at
https://new.abb.com/about/corporate-governance
).
Business relationships between ABB and its Board members
This section describes important business relationships between ABB and its Board members, or companies
and organizations represented by them.
Fluor Corporation (Fluor) is an important customer of ABB. ABB sells primarily electrical switchgears, control
systems and electrical solutions through its Electrification and Process Automation businesses to Fluor.
David Constable is the chairman of the board of directors and CEO of Fluor.
Caterpillar Inc. (Caterpillar) is an important customer of ABB. ABB sells primarily motors and generators
through its Motion business to Caterpillar. Denise Johnson is a group president of Caterpillar.
After reviewing the level of business with Fluor and Caterpillar, the Board has determined that ABB’s
business relationships with these companies are not unusual in their nature or conditions and do not
constitute material business relationships. As a result, the Board concluded that all members of the Board are
independent.
These determinations were made in accordance with ABB Ltd's Related Party Transaction Policy, which is
contained in the ABB Ltd Board Governance Rules (available at
https://new.abb.com/about/corporate-
governance
).
85
Information and control systems of the Board vis-à-vis the Executive Committee
Information from the Executive Committee
In accordance with the ABB Board Governance Rules (available at
https://new.abb.com/about/corporate-
governance
), the CEO reports regularly to the Board about ABB’s overall business and when circumstances
require on any extraordinary events that may arise. This includes:
•
•
•
matters of strategy and compliance); and
•
At each Board meeting, Board members are briefed by the Chairman, CEO, CFO and other EC members on
ABB’s business performance and on material developments affecting ABB. Outside of Board meetings,
Board members generally channel any requests for information through the Chairman. Board members also
obtain information through offsite retreats with the Executive Committee and visits to ABB sites. In addition,
Board members obtain information through the Board committees in which they participate and which are
also attended by relevant EC members and management representatives from human resources, finance,
legal and the business.
Internal Audit
ABB has an Internal Audit team that provides independent objective assurance and other services to help
ensure that ABB operates in accordance with applicable laws as well as internal policies and procedures.
Internal Audit reports to the FACC and to the CFO. The FACC reviews and approves the internal audit plan,
and material changes to the plan. Investigations of potential fraud and inappropriate business conduct are an
integral part of the internal audit process. Depending on circumstances, Internal Audit may act together with
ABB’s Integrity Investigations and Monitoring department, which is part of ABB’s Integrity function. Internal
Audit reports on a regular basis its main observations and recommendations to the relevant members of the
EC and to the FACC as appropriate.
Risk Management
ABB has an enterprise risk management program (ERM) in place which takes into account ABB’s size and
complexity. ERM provides the EC and the Board with a comprehensive and holistic view of the risks facing
the business. ERM involves managing the acceptance of risk to achieve the objectives of the business. The
ERM process is typically cyclical in nature, conveying the idea of continuous refinement of the risk
management approach in a dynamic business environment. Furthermore, ABB runs a mitigation process for
the identified risks that is key to the success of this process. ERM assessments are both top down and
bottom up. They cover strategic, financial, and operational risks, both current and long term. Key risks
identified and managed in 2023 were those related to information and cyber security, availability of
components and price volatility, lack of qualified and available resources and geopolitical instability. ERM
results are reported to the FACC and the entire Board. This information becomes part of the overall strategic
and risk discussions by the Board to help create value for stakeholders.
86
Information to the Board and the Finance, Audit and Compliance Committee
Supervisory and control instruments vis-à-vis the auditors
Our auditors, KPMG, attend each meeting of the FACC and each meeting includes a private session between
the auditors and the FACC without management being present. In 2023, the FACC had 7 meetings (either in
person or via telephone call). On at least an annual basis, the FACC reviews and discusses with the external
auditors all significant relationships that the auditors have with the Company that could impair their
independence. The FACC reviews the auditor engagement letter and the audit plan including discussion of
scope, staffing, locations and general audit approach. The FACC also reviews and evaluates the auditors’
judgment on the quality and appropriateness of the Company’s accounting principles as applied in the
financial reporting. In addition, the FACC approves in advance any non-audit services to be performed by the
auditors.
At least annually, the FACC obtains and reviews a report by the auditors that includes discussion on:
•
•
•
•
auditors and management as well as the related ramifications; and
•
or schedule of audit differences.
Taking into account the opinions of management, the FACC evaluates the qualifications, independence and
performance of the auditors. The FACC reports the material elements of its supervision of the auditors to the
Board and on an annual basis recommends to the Board the auditors to be proposed for election at the
general meeting of shareholders.
87
—
Executive Committee
Composition of the Executive Committee (at December 31, 2023)
Björn Rosengren
Chief Executive Officer
CORPORATE OFFICERS
BUSINESS AREA PRESIDENTS
Timo Ihamuotila
Morten Wierod
Chief Financial Officer
Electrification
Carolina Granat
Peter Terwiesch
Chief Human Resources Officer
Process Automation
Karin Lepasoon
Tarak Mehta
Chief Communications and Sustainability Officer
Motion
Sami Atiya
Robotics & Discrete Automation
Executive Committee responsibilities and organization
The Board has delegated the executive management of ABB to the CEO. The CEO and, under his direction,
the other members of the Executive Committee are responsible for ABB’s overall business and affairs and
day-to-day management. The CEO reports to the Board regularly, and whenever extraordinary circumstances
so require, on the course of ABB’s business and financial performance and on all organizational and
personnel matters, transactions and other issues material to the Group. Each member of the Executive
Committee is appointed and discharged by the Board.
Members of the Executive Committee (at December 31, 2023):
Björn Rosengren
Chief Executive Officer and member
of the Executive Committee
effective March 2020. He is a
member of the board of directors of
the World Childhood Foundation (Sweden).
Before joining ABB, he was the president and
chief executive officer of Sandvik AB (Sweden)
since 2015. Prior to that, Mr. Rosengren was the
chief executive officer of Wärtsilä Corporation
(Finland) from 2011 to 2015. He held a variety of
management roles at Atlas Copco AB (Sweden)
from 1998 to 2011. Mr. Rosengren was born in
1959 and is a Swedish citizen.
Timo Ihamuotila
Chief Financial Officer and member
of the Executive Committee
effective April 2017. He is a
member of the board of directors of
SoftwareONE Holding AG (Switzerland). Through
May 2023, he was a member of the board of
directors of Hitachi Energy Ltd (Switzerland).
From 2009 to 2016, Mr. Ihamuotila was chief
financial officer and an executive vice president of
the Nokia Corporation (Finland). From 1999 to
2009, he held various senior roles with Nokia.
Mr. Ihamuotila was born in 1966 and is a Finnish
citizen.
88
Carolina Granat
Chief Human Resources Officer and
member of the Executive Committee
effective January 2021. She joined
ABB in 2020 as Head of People
Development. Prior to that, she was globally
responsible for human resources at the machining
solutions business area of Sandvik AB (Sweden).
Ms. Granat was born in 1972 and is a Swedish
citizen.
Karin Lepasoon
Communications and Sustainability
Officer and member of the Executive
Committee effective October 2022.
She joined ABB from Vattenfall,
where she served as head of group
communications and public & regulatory affairs
and member of the company’s group executive
management team. Prior to that, Ms. Lepasoon
also served as head of global marketing and
communications at SEB, director of sustainability,
communications and HR at Nordic Capital, head
of strategy and chief of staff at Skanska, and held
various other roles in the area of communications.
Ms. Lepasoon was born in 1968 and is a Swedish
citizen.
Morten Wierod
President of the Electrification
business area effective April 2022
and has been a member of the
Executive Committee since April
2019, when he was appointed President of the
Motion business area. From 2015 until April 2019,
he was the Managing Director of the Drives
business unit in the Robotics and Motion division.
During 2011 to 2015, Mr. Wierod was the
Managing Director of the Control Products
business unit in the Low Voltage Products
division. Between 1998 to 2011, he held various
management roles with ABB. Mr. Wierod was born
in 1972 and is a Norwegian citizen.
Peter Terwiesch
President of the Process
Automation business area and
member of the Executive
Committee effective January 2015
(Process Automation known as Industrial
Automation from 2017 until 2020). He is a
member of the board of directors of Hilti AG
(Liechtenstein). From 2011 to 2014,
Mr. Terwiesch was Head of ABB’s Central Europe
region. He was ABB’s Chief Technology Officer
from 2005 to 2011. From 1994 to 2005, he held
several positions with ABB. Mr. Terwiesch was
born in 1966 and is a German and Swiss citizen.
Tarak Mehta
President of the Motion business
area effective April 2022 and has
been a member of the Executive
Committee since October 2010. He
is a member of the board of directors of Prysmian
S.p.A. (Italy). He was President of the
Electrification business area since April 2019 and
President of the Electrification Products division
from 2016 to 2019. From October 2010 through
December 2015, he was President of the Low
Voltage Products division. From 2007 to 2010, he
was Head of ABB’s transformers business.
Between 1998 and 2006, he held several
management positions with ABB. Mr. Mehta was
born in 1966 and is a US and Swiss citizen.
Sami Atiya
of the Robotics & Discrete
Automation business area effective
April 2019 and has been a member
of the Executive Committee since
June 2016. He is a member of the board of
directors of SGS SA (Switzerland). He had
previously been President of the Robotics and
Motion division since January 2017. From June to
December 2016 he was President of the Discrete
Automation and Motion division. Prior to joining
ABB, Mr. Atiya held senior roles at Siemens in
Germany from 1997 to 2015, including as chief
executive officer of the mobility and logistics
division in the infrastructure and cities sector from
2011. Mr. Atiya was born in 1964 and is a
German citizen.
89
On October 30, 2023, ABB announced that
Mathias Gaertner
has been appointed General
Counsel and Company Secretary and a member of
the Executive Committee. He will join ABB in 2024
from Holcim, a global construction materials
company, where he has been head legal &
compliance and a member of its group executive
committee since 2021. Mr. Gaertner was born in
1973 and is a German citizen.
Further information about the members of the
Executive Committee can be found on ABB’s
website under the Executive Committee link
(available at
https://new.abb.com/about/corporate-
governance
).
Mandates of EC members outside the ABB Group
No member of the EC may hold more than five additional mandates, of which no more than one may be in a
listed company. Certain types of mandates, such as those in our subsidiaries, those in the same group of
companies and those in non
‑
profit and charitable institutions, are not subject to those limits. Additional details
can be found in Article 38 of ABB’s Articles of Incorporation (available at
https://new.abb.com/about/corporate-governance
).
Business relationships between ABB and its EC members
The Company has determined that there are no important business relationships between ABB and its EC
members, or companies and organizations represented by them. This determination was made in
accordance with ABB Ltd's Related Party Transaction Policy, which is contained in the ABB Ltd Board
Governance Rules (available at
https://new.abb.com/about/corporate-governance
).
—
Shares
Share capital of ABB
At December 31, 2023, ABB’s ordinary share capital (including treasury shares) as registered with the
commercial register amounted to CHF 225,840,309, divided into 1,882,002,575 fully paid registered shares
with a par value of CHF 0.12 per share.
ABB Ltd’s shares are listed on the SIX Swiss Exchange and the NASDAQ OMX Stockholm Exchange. On
April 25, 2023, ABB announced its plans to delist its American Depositary Receipts (ADR) from the New York
Stock Exchange, and ultimately to seek to deregister its ADRs and the underlying shares under the US
Securities Act of 1934. The delisting became effective on May 23, 2023, and the ADR program was
converted into a sponsored Level I ADR program, trading on the US over-the-counter market. At
December 31, 2023, ABB Ltd had a market capitalization based on outstanding shares (total number of
outstanding shares: 1,841,507,246) of approximately CHF 67 billion ($82 billion, SEK 820 billion). The only
consolidated subsidiary in the ABB Group with listed shares is ABB India Limited, Bangalore, India, which is
listed on the BSE Ltd. (Bombay Stock Exchange) and the National Stock Exchange of India. At December 31,
2023, ABB Ltd, Switzerland, directly or indirectly owned 75 percent of ABB India Limited, Bangalore, India,
which at that time had a market capitalization of approximately INR 990 billion.
90
Stock exchange listings (at December 31, 2023)
Stock exchange
Security
Ticker symbol
ISIN code
SIX Swiss Exchange
ABB Ltd, Zurich, share
ABBN
CH0012221716
SIX Swiss Exchange
ABB Ltd, Zurich, share buyback
(second trading line)
ABBNE
CH0357679619
NASDAQ OMX Stockholm Exchange
ABB Ltd, Zurich, share
ABB
CH0012221716
BSE Ltd. (Bombay Stock Exchange)
ABB India Limited, Bangalore, share
ABB
(1)
INE117A01022
National Stock Exchange of India
ABB India Limited, Bangalore, share
ABB
INE117A01022
(1) Also called Scrip ID.
Share repurchases and cancellation
Following the introduction of a capital band as approved by ABB’s shareholders at its Annual General
Meeting 2023, the Board of Directors resolved to cancel 82,742,500 shares repurchased under ABB’s
2021/22 and 2022/23 share buyback programs. These shares were cancelled in June 2023, resulting in a
reduced total number of issued ABB Ltd shares of 1,882,002,575.
In April 2023, ABB launched a follow-up share buyback program of up to $1 billion. This new program is
consistent with ABB’s capital allocation principles and its capital structure optimization program targeting to
maintain a strong investment grade rating. Under that share buyback program, ABB repurchased a total of
17,167,000 shares as per December 31, 2023.
ABB intends to use the capital band (see “Capital band” below) again for cancellation of shares repurchased
under the share buyback program 2023/24.
Further information on ABB’s share buyback programs can be found at
https://global.abb/group/en/investors/investor-and-shareholder-resources/share-buybacks
.
In addition, ABB repurchased a total of 9,100,000 shares as per December 31, 2023, primarily for use in
connection with employee share programs. Further information can be found at
https://www.abb.com/investorrelations
.
Changes to the ordinary share capital
Except for the share cancellations described above and in ABB’s Annual Report 2022 and 2021 on Form
20-F, there were no other changes to ABB’s ordinary share capital during 2023, 2022 and 2021.
Convertible bonds and options
ABB does not have any bonds outstanding that are convertible into ABB shares. For information about
options on shares issued by ABB, please refer to “Note 19 – Stockholders' equity” to ABB’s Consolidated
Financial Statements.
91
Contingent share capital
At December 31, 2023, ABB’s share capital may be increased by an amount not to exceed CHF 24,000,000
through the issuance of up to 200,000,000 fully paid registered shares with a par value of CHF 0.12 per share
through the exercise of conversion rights and/or warrants granted in connection with the issuance on national
or international capital markets of newly or already issued bonds or other financial market instruments. If this
contingent share capital were fully issued, this would increase the existing share capital by approximately
10.6 percent. The contingent share capital has not changed during the last three years.
At December 31, 2023, ABB’s share capital may be increased by an amount not to exceed CHF 1,200,000
through the issuance of up to 10,000,000 fully paid registered shares with a par value of CHF 0.12 per share
through the exercise of warrant rights granted to its shareholders. If this contingent share capital were fully
issued, this would increase the existing share capital by approximately 0.5 percent. This contingent share
capital has not changed during the last three years. The Board may grant warrant rights not taken up by
shareholders for other purposes in the interest of ABB.
The pre
‑
emptive rights of the shareholders are excluded in connection with the issuance of convertible or
warrant-bearing bonds or other financial market instruments or the grant of warrant rights. The then current
owners of conversion rights and/or warrants will be entitled to subscribe for new shares. The conditions of the
conversion rights and/or warrants will be determined by the Board.
The acquisition of shares through the exercise of warrants and each subsequent transfer of the shares will be
subject to the restrictions of ABB’s Articles of Incorporation (see “Limitations on transferability of shares and
nominee registration” in the Shareholders section below) (available at
https://new.abb.com/about/corporate-
governance
).
In connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments,
the Board is authorized to restrict or deny the advance subscription rights of shareholders if such bonds or
other financial market instruments are for the purpose of financing or refinancing the acquisition of an
enterprise, parts of an enterprise, participations or new investments or an issuance on national or
international capital markets. If the Board denies advance subscription rights, the convertible or
warrant
‑
bearing bonds or other financial market instruments will be issued at the relevant market conditions
and the new shares will be issued pursuant to the relevant market conditions taking into account the share
price and/or other comparable instruments having a market price. Conversion rights may be exercised during
a maximum ten
‑
year period, and warrants may be exercised during a maximum seven
‑
year period, in each
case from the date of the respective issuance. The advance subscription rights of the shareholders may be
granted indirectly.
At December 31, 2023, ABB’s share capital may be increased by an amount not to exceed CHF 11,284,656
through the issuance of up to 94,038,800 fully paid shares with a par value of CHF 0.12 per share to
employees. If this contingent share capital were fully issued, this would increase the existing share capital by
approximately 5.0 percent. This contingent share capital has not changed during the last three years. The
pre
‑
emptive and advance subscription rights of ABB’s shareholders are excluded. The shares or rights to
subscribe for shares will be issued to employees pursuant to one or more regulations to be issued by the
Board, taking into account performance, functions, level of responsibility and profitability criteria. ABB may
issue shares or subscription rights to employees at a price lower than that quoted on a stock exchange. The
acquisition of shares within the context of employee share ownership and each subsequent transfer of the
shares will be subject to the restrictions of ABB’s Articles of Incorporation (see “Limitations on transferability
of shares and nominee registration” in the Shareholders section below).
92
Capital band
In line with the revised provisions of the Swiss Code of Obligations effective since January 1, 2023,
shareholders approved at ABB’s Annual General Meeting 2023 the introduction of a capital band ranging
from CHF 212,192,469 (lower limit) to CHF 259,346,349 (upper limit), i.e. from 90 percent to 110 percent of
the share capital entered in the commercial register at that time. The capital band replaced the authorized
capital, which expired in March 2023 and no longer exists under the revised law.
Within this capital band, the Board of Directors is authorized to increase or reduce the share capital once or
several times until March 23, 2028, or until an earlier expiry of the capital band. In the event of a capital
increase within the capital band, the Board is authorized, to the extent necessary, to determine the date of
issue of new shares, the issue price, the type of contribution, the conditions for the exercise of pre
‑
emptive
rights and the beginning date for dividend entitlement. In this regard, the Board may issue new shares by
means of a firm underwriting through a financial institution, a syndicate of financial institutions or another third
party and a subsequent offer of these shares to the existing shareholders or third parties (if the pre-emptive
rights of the existing shareholders have been withdrawn or have not been duly exercised). The Board is
entitled to permit, to restrict or to exclude the trade with pre-emptive rights. It may permit the expiration of
pre
‑
emptive rights that have not been duly exercised, or it may place such rights or shares as to which
pre
‑
emptive rights have been granted, but not duly exercised, at market conditions or may use them
otherwise in the interest of the Company. The Board is further authorized to restrict or deny the pre
‑
emptive
rights of shareholders and allocate such rights to third parties if the shares are to be used (1) for the
acquisition of an enterprise, parts of an enterprise, or participations, or for new investments, or, in case of a
share placement, for the financing or refinancing of such transactions; or (2) for the purpose of broadening
the shareholder constituency in connection with a listing of shares on domestic or foreign stock exchanges.
The subscription and the acquisition of the new shares, as well as each subsequent transfer of the shares,
will be subject to the restrictions of ABB’s Articles of Incorporation (available at
https://new.abb.com/about/corporate-governance
).
If ABB’s share capital increases as a result of an increase from ABB’s contingent capital, the upper and lower
limits of the capital band shall increase in an amount corresponding to such increase in the share capital.
In the event of a capital reduction within the capital band, the Board of Directors is authorized, to the extent
necessary, to determine the use of the reduction amount.
ABB used the capital band for cancellation of shares repurchased under the share buyback programs
2021/22 and 2022/23 and intends to use it again for cancellation of shares repurchased under the share
buyback program 2023/24 (see “Share repurchases and cancellation” above).
Exclusion of pre-emptive or advance subscription rights
Until March 23, 2028, or an earlier expiry of the capital band, the total number of newly issued shares which
may be issued with the restriction or withdrawal of (advance) subscription rights from (i) ABB’s contingent
share capital and from (ii) ABB’s capital band in any event shall not exceed 196,474,500 shares,
i. e. 10 percent of the share capital entered in the commercial register at the time when the capital band was
introduced.
—
Shareholders
Shareholder structure
At December 31, 2023, the total number of shareholders directly registered with ABB Ltd was approximately
88,000 and another 550,000 shareholders held shares indirectly through nominees. In total, as of that date,
ABB had approximately 638,000 shareholders.
93
Significant shareholders
Under the Swiss Financial Market Infrastructure Act, shareholders and groups of shareholders acting in
concert who directly or indirectly acquire or sell shares of a listed Swiss corporation or rights based thereon
and thereby reach, exceed or fall below the thresholds of 3 percent, 5 percent, 10 percent, 15 percent,
20 percent, 25 percent, 33
1
/
3
2
/
3
notify the corporation and the SIX Swiss Exchange of such holdings. Based on the disclosure notifications
made to ABB and the SIX Swiss Exchange, the following shareholders hold or control voting rights of
3 percent or more of ABB Ltd’s issued shares. Except where indicated otherwise, the shareholdings
described below are based on the notices provided to ABB and the SIX Swiss Exchange and do not reflect
any subsequent changes in shareholdings and share capital and votes.
Investor AB, Sweden, disclosed to ABB and the SIX Swiss Exchange that as per November 9, 2015, it owned
232,165,142 ABB Ltd shares and controlled 10.03 percent of the voting rights in ABB Ltd
.
In its latest
quarterly financial report, Investor AB, Sweden, disclosed that as per December 31, 2023, it owned
265,385,142 ABB Ltd shares and controlled 14.1 percent of the voting rights in ABB Ltd. The number of
shares held by Investor AB does not include shares held by Mr. Jacob Wallenberg, the chairman of Investor
AB and a director of ABB, in his individual capacity.
BlackRock, Inc., U.S.A., disclosed to ABB and the SIX Swiss Exchange that as per June 1, 2023, it owned
82,027,197 ABB Ltd shares and controlled 5.05 percent of the voting rights in ABB Ltd.
At December 31, 2023, to the best of ABB’s knowledge, no other shareholder held 3 percent or more of
ABB’s total share capital and voting rights as registered in the commercial register on that date.
ABB Ltd has no cross shareholdings in excess of 5 percent of capital, or voting rights with any other
company.
Announcements related to disclosure notifications made by shareholders during 2023 can be found via the
search facility on the platform of the Disclosure Office of the SIX Swiss Exchange:
ag.com/en/resources/notifications-market-participants/significant-shareholders.html
#/.
Under ABB’s Articles of Incorporation (available at
https://new.abb.com/about/corporate-governance
), each
registered share represents one vote. Significant shareholders do not have different voting rights. To our
knowledge, we are not directly or indirectly owned or controlled by any government or by any other
corporation or person.
Shareholders’ rights
Shareholders have the right to receive dividends, to vote and to execute such other rights as granted under
Swiss law and the Articles of Incorporation (available at
https://new.abb.com/about/corporate-governance
).
Right to vote
ABB has one class of shares and each registered share carries one vote at the general meeting of
shareholders. Voting rights may be exercised only after a shareholder has been registered in the share
register of ABB as a shareholder with the right to vote, or with Euroclear Sweden AB (Euroclear), which
maintains a subregister of the share register of ABB.
A shareholder may be represented at the general meeting of shareholders by the independent proxy elected
by the shareholders (“Unabhängiger Stimmrechtsvertreter”), its legal representative or, by means of a written
proxy, any other proxy who need not be a shareholder. If the Company does not have an independent proxy,
the Board of Directors shall appoint the independent proxy for the next general meeting of shareholders. All
shares held by one shareholder may be represented by one representative only.
94
For practical reasons shareholders must be registered in the share register no later than 6 business days
before the general meeting of shareholders in order to be entitled to vote. Except for the cases described
under “Limitations on transferability of shares and nominee registration” below, there are no voting rights
restrictions limiting ABB’s shareholders’ rights.
Powers of General Meeting of Shareholders
The ordinary general meeting of shareholders must be held each year within 6 months after the close of the
fiscal year of the Company; the business report, the compensation report, the auditors’ reports, and the report
on non-financial matters shall be made available to the shareholders by no later than 20 days prior to the
meeting.
The following powers shall be vested exclusively in the general meeting of shareholders:
•
•
members of the Compensation Committee, the auditors and the independent proxy;
•
•
balance sheet, in particular with regard to dividends;
•
required for this purpose;
•
•
Committee pursuant to Article 34 of the Articles of Incorporation;
•
management;
•
•
•
shareholders by law or under the Articles of Incorporation or that are submitted to the general
meeting of shareholders by the Board of Directors, subject to Article 716a of the Swiss Code of
Obligations.
Resolutions and elections at General Meetings of Shareholders
Unless otherwise required by law or the Company’s Articles of Incorporation, the general meeting of
shareholders shall pass resolutions and decide elections upon a majority of the votes represented.
One or more shareholders who, alone or together, hold at least 0.02 percent of the share capital or votes may
demand that an item be included on the agenda or that a proposal relating to an agenda item be included in
the notice convening the general meeting of shareholders. Such a request must be received by the Company
in writing at least 40 days prior to the meeting and shall specify the agenda items and the proposal or
proposals together with a brief statement of the reasons.
ABB’s Articles of Incorporation do not contain provisions on the convocation of the general meeting of
shareholders that differ from the applicable legal provisions.
95
Shareholders’ dividend rights
The unconsolidated statutory financial statements of ABB Ltd are prepared in accordance with Swiss law.
Based on these financial statements, dividends may be paid only if ABB Ltd has sufficient distributable profits
from previous years or sufficient free reserves to allow the distribution of a dividend. Swiss law requires that
ABB Ltd retain at least 5 percent of its annual net profits as legal reserves until these reserves amount to at
least 20 percent of ABB Ltd’s share capital. Any net profits remaining in excess of those reserves are at the
disposal of the general meeting of shareholders.
Under Swiss law, ABB Ltd may only pay out a dividend if it has been proposed by a shareholder or the Board
of Directors and approved at a general meeting of shareholders, and the auditors confirm that the dividend
conforms to statutory law and ABB’s Articles of Incorporation. In practice, the general meeting of
shareholders usually approves dividends as proposed by the Board of Directors.
Dividends are usually due and payable no earlier than 2 trading days after the shareholders’ resolution and
the ex
‑
date for dividends is normally 2 trading days after the shareholders’ resolution approving the dividend.
Dividends are paid out to the holders that are registered on the record date. Euroclear administers the
payment of those shares registered with it. Under Swiss law, dividends not collected within 5 years after the
due date accrue to ABB Ltd and are allocated to its profit reserves. As ABB Ltd pays cash dividends, if any, in
Swiss francs (subject to the exception for certain shareholders in Sweden described below), exchange rate
fluctuations will affect the US dollar amounts received by holders of ADSs upon conversion of those cash
dividends from Swiss francs.
For shareholders who are residents of Sweden, ABB has established a dividend access facility (for up to
600,004,716 shares). With respect to any annual dividend payment for which this facility is made available,
shareholders who register with Euroclear may elect to receive the dividend from ABB Norden Holding AB in
Swedish krona (in an amount equivalent to the dividend paid in Swiss francs) without deduction of Swiss
withholding tax. For further information on the dividend access facility, see ABB’s Articles of Incorporation.
Limitations on transferability of shares and nominee registration
ABB may decline a registration with voting rights if a shareholder does not declare that it has acquired the
shares in its own name and for its own account, that there is no agreement on the redemption of the relevant
shares and that it bears the economic risk associated with the shares. If the shareholder refuses to make
such declarations, it will be registered as a shareholder without voting rights. A person failing to expressly
declare in its registration application that it holds the shares for its own account (a nominee) will be entered in
the share register with voting rights, provided that such nominee has entered into an agreement with ABB
concerning its status, and further provided that the nominee is subject to recognized bank or financial market
supervision. In special cases, the Board may grant exemptions. There were no exemptions granted in 2023.
The limitation on the transferability of shares may be removed by an amendment of ABB’s Articles of
Incorporation by a shareholders’ resolution requiring two-thirds of the votes represented at the general
meeting of shareholders.
No restriction on trading of shares
No restrictions are imposed on the transferability of ABB shares. The registration of shareholders in the ABB
share register, Euroclear and the ADS register kept by Citibank does not affect transferability of ABB shares
or ADSs. Registered ABB shareholders or ADR holders may therefore purchase or sell their ABB shares or
ADRs at any time, including before a general meeting of shareholders regardless of the record date. The
record date serves only to determine the right to vote at a general meeting of shareholders.
Duty to make a public tender offer
ABB’s Articles of Incorporation do not contain any provisions raising the threshold (opting up) or waiving the
duty (opting out) to make a public tender offer pursuant to Article 135 of the Swiss Act on Financial Market
Infrastructures and Market Conduct in Securities and Derivatives Trading.
96
—
Other governance information
ABB Group organizational structure
ABB Ltd, Switzerland, is the ultimate parent company of the ABB Group. It is the sole shareholder of ABB
Asea Brown Boveri Ltd, which directly or indirectly owns the other companies in the ABB Group. "Item 4.
Information on the Company—Organizational structure" sets forth, as of December 31, 2023, the name, place
of incorporationand ownership interest of the significant direct and indirect subsidiaries of ABB Ltd. ABB’s
operational group structure is described in ABB’s Financial Report 2023.
Management contracts
There are no management contracts between ABB and companies or natural persons not belonging to the
ABB Group.
Change of control clauses
Board members, Executive Committee members, and other members of senior management do not receive
any special benefits in the event of a change of control. From 2021, the rules for the Long-Term Incentive
Plan (LTIP) have been amended to no longer provide for accelerated vesting upon a change of control.
Employee participation programs
In order to align its employees’ interests with the business goals and financial results of the Company, ABB
operates a number of incentive plans, linked to ABB’s shares, such as the Employee Share Acquisition Plan
and the LTIP. For a more detailed description of these incentive plans, please refer to “Note 18 –
Share-based payment arrangements” to ABB’s Consolidated Financial Statements.
General blackout periods for trading ABB securities
During the 30 days prior to the day of publication of the ABB Group’s quarterly financial results, as well as on
such day, the members of the Board of Directors and the Executive Committee as well as certain employees
of ABB, as specified in ABB’s internal policies, are prohibited from trading in ABB Ltd securities and any
related financial instruments. No exceptions were granted to this rule in 2023.
97
—
Compensation
Compensation at a glance
─
Board compensation
Compensation for the 2023–2024 term of office
The aggregate Board compensation for the 2023–2024 term of office
(CHF 4,380,000) was within the maximum amount (CHF 4,400,000)
approved at the 2023 Annual General Meeting (AGM).
Compensation Exhibit 1: Board compensation (in CHF) for the 2023–2024 term of office
Aggregate compensation
4,380,000
Approved compensation amount
4,400,000
Share ownership of Board members
Except for one member, who joined the Board in 2023, all other Board
members held ABB shares at December 31, 2023, worth at least 300 percent
of their 2023 Board compensation.
Compensation Exhibit 2: Board members shareholding (at December 31, 2023) in % of 2023 total compensation
*
*
Based on share price of CHF 31.24, the 2023 Long-Term Incentive Plan (LTIP ) reference price, and shares held at December 31, 2023.
98
─
Executive Committee
(EC) compensation
Compensation structure as from 2023
Compensation Exhibit 3: EC compensation structure as from 2023
Fixed compensation –
base salary and benefits
Variable compensation –
short-term incentive (AIP)
Variable compensation –
long-term incentive (LTIP)
Wealth at risk/
Share ownership
Purpose and
link to
strategy
Facilitates attraction and
retention of talented EC
members; base salary
compensates for the role and
relevant experience; benefits
protect against risk
Rewards annual Company,
business area, functional and
individual performance.
Aligned with the Company’s
Annual Performance Plan
Rewards Company
performance over a three-
year period and encourages
creation of long-term,
sustainable value for
shareholders. Aligned with
the Company’s Long-Term
Performance Plan
Aligns individual’s personal
wealth at risk directly to the
ABB share price, and EC
members’ interests with those
of shareholders to maintain
focus on ABB's long-term
success
Operation
Salary in cash, benefits in
kind, and pension
contributions
Annual awards, payable in
cash after a one-year
performance period; malus
and clawback provisions to
be implemented from 2024
Annual grants in shares
which may vest after three
years, and are subject to
performance conditions;
malus and clawback
provisions in place
Individuals are required to
hold ABB shares
Opportunity
level
(as % of
base salary)
Based on scope of
responsibilities, personal
experience, and skillset
CEO
500% of annual salary (net of
taxes)
* EC members with legacy employment
contracts have a Target LTIP grant of
100%, and Max LTIP opportunity of
200%. The higher LTIP opportunity for
the newer EC members is largely offset
by lower pension and other benefit
costs.
Other EC members
400% of annual salary (net of
taxes)
Performance
indicators
Changes to base salary
consider individual
performance, future
potential, broadening of
responsibilities, and
external benchmarking
Exposure to ABB share price
99
Total EC compensation for 2023
The aggregate EC compensation for 2023 (CHF 40,642,468) was within the maximum amount approved at
the 2022 AGM (CHF 45,900,000).
Compensation Exhibit 4: EC compensation (in CHF) for 2023
Effective aggregate compensation
40,642,468
Approved aggregate compensation
45,900,000
The largest portion of the CEO’s 2023 total compensation was delivered via performance driven variable
compensation (55 percent), represented by short-term and long-term incentives. For the other EC members,
on an aggregate level, variable compensation represented 52 percent of their 2023 compensation. The
following chart shows the composition of the 2023 total compensation for the EC members at December 31,
2023.
Compensation Exhibit 5: 2023 total compensation mix (in CHF) for the CEO and other EC members on aggregate level*
* Composed of actual base salary, 2023 AIP, 2023 LTIP grant, pension, and other benefits. 2023 AIP represents accrued short-term incentive for the
year 2023, which will be paid in 2024, after the publication of ABB's financial results. The sum of percentage figures may differ from 100 percent due to
rounding with one decimal.
Realized variable compensation in 2023
Realized variable compensation considers the AIP award and the LTIP award at the end of their respective
performance cycles, reflecting actual AIP payment and LTIP vesting, based on achievement of the respective
plan performance measures.
The outcome of the 2023 AIP was above the target for all current EC members (143.3 percent on average),
and the LTIP that vested in 2023 (2020 LTIP) exceeded the target level, with a final vesting level of
189.5 percent of target.
100
Compensation Exhibit 6: 2023 AIP outcome compared to target
Compensation Exhibit 7: 2020 LTIP outcome compared to target
Realized total compensation in 2023
Considering the stated variable components above, the realized total compensation in 2023 was above the
target total compensation for all EC members, driven by strong performance in 2023 and the high level of
achievement against the targets for the 2020 LTIP, which vested in 2023.
Compensation Exhibit 8: Realized total compensation in 2023 compared to target total compensation
Further details related to the realized compensation of each EC member and each compensation component
are specified in Compensation Exhibit 48.
101
Share ownership of EC members
EC members may not sell their shares (except to meet tax and social security costs related to share vesting)
until they achieve the required share ownership level.
Six out of eight EC members exceeded their share ownership requirements. The other two members have
been appointed to the EC in the last three years.
When considering the number of granted, but unvested, ABB shares of EC members at December 31, 2023,
it is expected that the remaining two most recently appointed EC members who do not currently meet their
share ownership requirement are projected to do so in 2026, after vesting of the 2023 LTIP grant, and in
2027, after vesting of the 2024 LTIP grant, respectively.
Compensation Exhibit 9: EC shareholding compared to share ownership guideline*
*
Based on share price of CHF 31.24, the 2023 LTIP reference price, and shares held at December 31, 2023. Future allocation of granted,
but unvested, shares is based on target achievement level and relevant plan specific settlement: default settlement of the final 2021 LTIP,
2022 LTIP and 2023 LTIP awards is 100 percent in shares. The value of shares is compared against the annual base salary net of taxes, at
December 31, 2023.
Compensation governance
The Compensation Report is prepared in accordance with the Swiss Code of Obligations, the Directive on
Information relating to Corporate Governance of the SIX Exchange Regulation, the rules of the stock markets
of Sweden and the United States, where ABB shares were listed until May 2023, and the principles of the
Swiss Code of Best Practice for Corporate Governance of economiesuisse.
102
ABB’s Articles of Incorporation
ABB’s Articles of Incorporation, approved by its shareholders, contain provisions on compensation which
govern and outline the principles of compensation relating to our Board of Directors and Executive
Committee. They can be found on ABB’s Corporate Governance website new.abb.com/about/corporate-
governance and are summarized below:
•
Compensation Committee
(Articles 28 to 31): The Compensation Committee (CC) is composed
of a minimum of three members of the Board and are elected individually by the shareholders at
the Annual General Meeting for a period of one year. It supports the Board in establishing and
reviewing the compensation strategy and policy, determining the compensation of the Board and
the EC, and in preparing the proposals to the AGM on compensation matters. The
responsibilities of the CC are defined in more detail in the Board Regulations and Corporate
Governance guidelines, which are also available on ABB’s Corporate Governance website.
•
Compensation principles
(Article 33): Compensation of the members of the Board consists of
fixed compensation only, which is delivered in cash and shares (with an option to elect for shares
only). Compensation of the members of the EC consists of fixed and variable compensation.
Variable compensation may comprise short-term and long-term elements. Compensation may be
paid in cash, shares, or other benefits.
•
“Say-on-pay” vote
compensation of the Board for the following Board term and of the EC for the following financial
year.
•
Supplementary amount for new EC members
aggregate compensation amount is not sufficient to also cover the compensation of newly
appointed EC members, up to 30 percent of the last maximum approved aggregate amount shall
be available as a supplementary amount to cover the compensation of such new EC members.
•
Loans
Authority levels in compensation matters
The authority levels of the different bodies on compensation matters are detailed in Compensation Exhibit 10.
Compensation Exhibit 10: Authority levels in compensation matters
CEO
CC
Board
AGM
Maximum aggregate compensation amount for the EC
●
●
●
CEO compensation
●
●
Individual compensation of other EC members
●
●
Maximum aggregate compensation amount for the Board
●
●
●
Individual compensation of Board members
●
●
Compensation Policy
●
●
Compensation Report
●
●
Consultative vote
●
●
Proposal
●
Approval
103
Activities of the CC in 2023
The CC meets as often as business requires but at least four times a year. In 2023, the CC held seven
meetings and performed the activities described in Compensation Exhibit 11. The CEO, the Chief Human
Resources Officer (CHRO) and the Head of Performance and Reward also attend all or part of the CC
meetings in an advisory capacity. The Chairman of the CC may decide to invite other executives upon
consultation with the CEO, as appropriate. Executives do not attend the meetings or the parts of the meetings
in which their own compensation and/or performance are being discussed. Further details are provided in the
section “Board of Directors – Meetings and attendance” of "Item 6. Directors, Senior Management and
Employees".
Compensation Exhibit 11: CC activities during 2023
Strategy
Review of EC compensation structure
Continued monitoring of link between sustainability and compensation
Board compensation
Review of compensation benchmarking for Board members (bi-annual activity)
EC compensation
Review of recommendations on individual compensation for EC members
Review of the share ownership of EC members
Review and approval of compensation for new and departing EC members
Performance – relating to past performance cycle
Assessment of AIP awards for 2023
Assessment of achievement of performance targets for LTIP awards vesting in 2023
Performance – relating to forthcoming performance cycle
Setting of AIP design, measures and targets for 2023
Consideration of forecast AIP outcomes for 2023
Consideration of preliminary AIP measures and targets for 2024
Setting of performance targets for LTIP grants in 2023
Consideration of forecast achievement against performance targets for unvested LTIP grants
Compliance
Review of CC annual plan
Review of feedback from Stakeholder Engagement meetings
Regulatory and market updates
Review of the Compensation Report for publication
Preparation of maximum aggregate compensation for the Board to be submitted for AGM vote
Preparation of maximum aggregate compensation for the EC to be submitted for AGM vote
The Chairman of the CC reports to the full Board regularly, usually after each CC meeting. The minutes of the
CC meetings are available to the members of the Board.
The CC retains independent, external advisors for compensation matters. In 2023 PricewaterhouseCoopers
(PwC) was mandated to provide these services. In addition to its CC advisory role, PwC also provides human
resources, tax, and advisory services to ABB. Other external advisors may be employed by the CC and
management on a case-by-case basis.
Sustainability-related considerations in ABB’s compensation
There are a range of sustainability-related considerations which play an important role in our compensation
philosophy, including the desire to foster a strong link between ABB’s Sustainability Agenda and the variable
compensation for the EC and senior management, as well as the general ambition to reinforce its social
contract with its employees.
104
Impact of sustainability performance on variable compensation
Given sustainability is an integral part of ABB’s strategy and plans, there is a strong, direct link between the
Sustainability Agenda and executive incentives through ABB’s key variable compensation programs such as
AIP and LTIP.
Regarding the AIP, all EC members have two or three sustainability goals (out of a maximum of three) in the
individual component of their respective plans.
In 2023, all EC members had an environmental goal (scope 1 and 2 greenhouse gas (GHG) emissions
reduction). Most of the EC members had a social goal, which for the CEO and business area presidents was
safety, and for most corporate officers was an increase in the proportion of women in senior management
roles (female leaders), while the CFO had a governance goal (related to internal controls).
In addition, all EC members had an integrity goal designed to help deliver ABB’s obligations under the
Deferred Prosecution Agreement (DPA) in line with our commitments to the US Department of Justice.
Regarding the LTIP granted to ABB’s senior management in 2023, including the EC, a Company-wide
sustainability performance measure with a weighting of 20 percent forms part of the performance measures.
•
reduction at the end of the three-year performance period (2023–2025), compared to the 2019
baseline.
•
measure for the 2024 LTIP will again be GHG emissions reduction at the end of the three-year
performance period (2024–2026), compared to the 2019 baseline. See “2024 LTIP grants” below
for the target and award points.
Details of the long-term GHG emissions reduction targets can be found in ABB’s Item 4. Information on the
Company—Sustainability activities.
Programs for ABB employees
In addition to the offer of fair and competitive compensation to our employees, ABB also strives to offer
additional programs to reinforce its social contract with its employees. Selected key programs and their links
to our Sustainability Agenda are summarized in the Compensation Exhibit 12 below.
Compensation Exhibit 12: Selected programs for employees
Program
Operation and purpose
Link to ABB’s Sustainability Agenda
Employee Share
Acquisition Plan
(ESAP)
Offered to ca. 100,000 employees in over 60 countries, providing the opportunity
to purchase shares in ABB one year after the start of a plan, at a price which will
be fixed at the beginning of each annual plan cycle, and become ABB
shareholders. The opportunity for share ownership is the same for permanent full-
time and permanent part-time employees at ABB. This is the case in all ABB
locations where ESAP is offered.
Supports social goals by aligning
employees’ interests with the interests of
shareholders and maintaining focus on
the long-term success of the Company.
Parental Leave
A global and gender-neutral program, offered to all employees, which sets out a
minimum standard on paid parental leave that supports all family types. The
primary caregivers receive 12 weeks of paid leave and the secondary caregivers
four weeks following the birth of a child or when becoming a new parent by
adoption or surrogacy
Supports social goals, promotes
wellbeing and the ABB value of “Care”.
Employee
Assistance
A global program, offered to all employees. The program supports the employee’s
wellbeing by offering paid counseling on emotional health, family concerns and
workplace concerns.
Supports social goals, promotes
wellbeing and the ABB value of “Care”.
Car or
Transportation
Allowance
Offered to selected employees based on business need or market practice, with
any car provision being progressively migrated to e-vehicles or transportation
allowances which can be used to contribute to public transport, cycle, or other
transport needs.
Supports environmental goals by
addressing changed needs related to
mobility and providing greater flexibility
to opt for more environmentally friendly
solutions.
105
Board compensation policy
The compensation policy for the members of the Board is designed to attract and retain experienced people
to the Board. Compensation considers the responsibilities, time and effort required to fulfill their roles on the
Board and its committees and is generally positioned at levels similar to other Swiss listed companies of
comparable size and complexity.
Compensation structure
A fixed fee is payable to the Chairman, Vice-Chairman and members of the Board, and additional fees are
payable for chairing or membership of a Board committee, except for the Chairman and Vice-Chairman.
Board members are paid for their service over an annual Board term that starts with their election at the
AGM. Payment of fees is made in semi-annual installments in arrears.
Board members are required to take 50 percent of their compensation in shares, but they may elect to
receive all their fees in shares. The number of shares delivered is calculated prior to each semi-annual
payment by dividing the monetary amount to which the Board members are entitled by the average closing
price of the ABB share over a predefined 30-day period. The shares are subject to a three-year restriction
period during which they cannot be sold, transferred, or pledged. Any restricted shares are unblocked when a
Board member leaves the Board.
Implementation of Board compensation policy
Board fees by role
As mentioned above, the levels and mix of Board members’ compensation are regularly compared against
the compensation of non-executive Board members from a cross-selection of publicly traded companies in
Switzerland, excluding financial services, including Alcon, Geberit, Givaudan, Holcim, Kuehne + Nagel,
Logitech, Lonza, Nestle, Novartis, Richemont, Roche, Sika, Sonova and Swisscom. Such a review was last
undertaken in 2023, and there was no adjustment made to Board fees for the term of office from the 2023
AGM to the 2024 AGM, as set out in Compensation Exhibit 13. There has been no change to the individual
Board fees since 2015.
Compensation Exhibit 13: Board fees (in CHF) for the current term of office
Chairman of the Board
(1)
1,200,000
Vice-Chairman of the Board
(1)
450,000
Member of the Board
290,000
Additional committee fees:
Chairman of FACC
(2)
110,000
Chairman of CC or GNC
(2)
60,000
Member of FACC
(2)
40,000
Member of CC or GNC
(2)
30,000
(1)
The Chairman and the Vice-Chairman do not receive any additional committee fees.
(2)
CC: Compensation Committee,
FACC: Finance, Audit and Compliance Committee,
GNC: Governance and Nomination Committee.
106
Total Board compensation
The compensation paid to the Board members for the calendar year 2023 and for the term of office from the
2023 AGM to the 2024 AGM are disclosed in Compensation Exhibit 14 below and in Compensation
Exhibits 37 and 38, respectively, in the section “Compensation tables and share ownership tables”.
At the 2023 AGM, the shareholders approved a maximum aggregate compensation amount of
CHF 4.4 million for the 2023–2024 Board term. This amount equals the approved amount for the previous
Board term, as both the compensation per Board member and the number of Board members remained
unchanged. The Board compensation to be paid for the 2023–2024 Board term is CHF 4.38 million and is
therefore within the amount approved by the shareholders.
Compensation Exhibit 14: Board compensation (in CHF)
Board term
Board of Directors
2023–2024
2022–2023
Number of members
10
10
Total compensation
4,380,000
4,380,000
Maximum aggregate compensation amount approved at previous AGM
4,400,000
4,400,000
Compensation of former Board members
In 2023, no payment was made to any former Board member.
Compensation for services rendered
In 2023, ABB did not pay any fees or compensation to the members of the Board for services rendered to
ABB other than those disclosed in this report.
Share ownership of Board members
The members of the Board collectively owned less than one percent of ABB’s total shares outstanding at
December 31, 2023.
Compensation Exhibit 39 in the section “Compensation tables and share ownership tables” shows the
number of ABB shares held by each Board member at December 31, 2023 and 2022. Except as described in
this Compensation Exhibit, no member of the Board and no person closely linked to a member of the Board
held any shares of ABB or options in ABB shares.
Shares delivered to Board members as part of their compensation are blocked for a period of three years.
Compensation Exhibit 2 in the section “Compensation at a glance” shows the wealth at risk for each Board
member, comparing the value of shares held at December 31, 2023, with the total compensation for the
2023–2024 term of office. Except for one member, who joined the Board in 2023, all other Board members
held ABB shares at December 31, 2023, worth at least 300 percent of their 2023 Board compensation.
External mandates held by ABB Board members
Nine out of ten ABB Board members held at least one external mandate in other companies. Detailed
information can be found in Compensation Exhibit 40 in the section “Compensation tables and share
ownership tables”.
107
Executive Committee compensation policy
The EC compensation policy reflects ABB’s commitment to attract, motivate and retain people with the talent
necessary to strengthen its position as a leading global technology company.
Compensation structure
The compensation structure is designed to be competitive, based on performance, and to encourage
executives to deliver outstanding results and create sustainable shareholder value without taking excessive
risks. The EC compensation framework therefore balances fixed and variable compensation. Variable
compensation is provided through short-term and long-term incentives based on strategic, financial and
sustainability related targets, recognizing Group, business area and corporate function performance as well
as individual performance.
This structure is linked to our strategy and is illustrated in Compensation Exhibit 3 in the section
“Compensation at a glance”.
A significant portion of total compensation depends on variable pay components, which require the
achievement of challenging performance targets, in alignment with ABB’s Annual and Long-Term
Performance Plans.
The target AIP award is defined as a percentage of base salary, currently 100 percent for all EC members.
There is no award under the AIP if performance is below threshold on all financial and individual performance
measures. When performance exceeds targets, the maximum award is capped at 150 percent of the targeted
amount.
The target LTIP grant size is defined as a percentage of base salary, currently 150 percent for the CEO and
100 to 150 percent for all other EC members. There will be no award under the LTIP if performance is below
threshold for all applicable measures. When performance exceeds targets, the maximum award is capped at
200 percent of the conditional grant.
The Compensation Exhibit below shows the impact of the application of the compensation policy introduced
in 2022, on the target compensation mix for EC members, compared to the compensation mix applicable
prior to 2022. The new policy provides a greater emphasis on variable pay, which is especially reflected in the
long-term compensation component. Compensation Exhibit 15 illustrates the policy change for new EC
entrants (excluding the CEO), applying an entry level salary of CHF 700,000 and an incumbent age of 50
years to reflect the pension benefits.
Compensation Exhibit 15: Policy for target compensation mix of EC members (excluding CEO) appointed prior to and
after 2022*
*
Note that, by exception, the new mix of target compensation was not applied to the newly appointed Chief Communications and
Sustainability Officer, where a target LTIP of 100 percent of base salary is applied.
108
Competitive positioning of compensation
The Board considers competitive market data when setting the compensation policy for the EC. It is also one
of several factors in positioning the target compensation for individual EC members which include:
•
•
•
Comprehensive EC compensation benchmark reviews are performed every other year. The CC last
conducted such a review in 2022.
While each of these peer groups used in the benchmarking exercise, matched the size, scope and complexity
of ABB, and excluded companies from the financial services sector, the application of a specific peer group
depends on the nature of the role and the source of relevance. For example, a stronger emphasis is placed
on the Global Industry peer group for operational roles and in compensation design, and on the
Pan-European Market peer group for functional roles. In all cases, the other two peer groups are used to
stress test the findings of the primary peer group (see the summary in Compensation Exhibit 16 below).
Compensation Exhibit 16: Peer groups for EC compensation benchmarking
Peer group
Composition
Companies
Rationale
Global
Industry
A tailored group of 16 global
industry peer companies,
matching the scale and
complexity of ABB
AB SKF, Alstom, Airbus, Atlas Copco, Denso, Eaton,
Emerson Electric, Honeywell, Mitsubishi Electric,
Mitsubishi Heavy Industries, Schneider Electric,
Schindler, Siemens, Thermo Fisher Scientific,
Toshiba, Traton
Focus for business
area roles and
benchmarking
compensation design
Pan-
European
Market
A panel of 50 cross-industry
European companies,
matching the scale and
complexity of ABB
See footnote (1)
Focus for Corporate
roles; continuity and
stability of data points
Swiss Market
A panel of 16 Swiss
headquartered companies,
matching the scale and
complexity of ABB
Adecco, Geberit, Givaudan, Glencore, Kuehne &
Nagel, Holcim, Nestle, Novartis, Richemont, Roche,
Schindler, SGS, Sika, STMicroelectronics, Swatch,
Swisscom
Swiss location of
headquarters
(1)
AB InBev, Adidas, Air Liquide, Associated British Foods, AstraZeneca, BAE Systems, Bayer, Bouygues, British American Tobacco, Compass
Group, Continental, CRH, Danone, Endesa, EssilorLuxottica, Fresenius, Fresenius Medical Care, GlaxoSmithKline, Heidelberg Materials,
Heineken, Henkel, Hennes & Mauritz, Holcim, Iberdrola, Imperial Brands, Industria de Diseno Textil, Jeronimo Martins SGPS, Kuehne +
Nagel, Linde, L’Oreal, Michelin, National Grid, Naturgy Energy Group, Nokia, Novartis, Novo Nordisk, OMV, Philips, Rio Tinto, Safran, Saint
Gobain, Sanofi, SAP, Schneider Electric, Telefonaktiebolaget LM Ericsson, Thales, Umicore, Veolia Environment, Vinci and Vodafone.
It is the intention to position target compensation for individual EC members between the median and upper
quartile of the relevant peer group(s) considering the other factors referenced above (e.g., the EC member’s
skills, experience, performance and potential).
The comparison of ABB to its compensation benchmarking peer groups is shown in Compensation Exhibit 17
below. This data shows that ABB is typically positioned at the median of key comparator indicators (market
capitalization, revenues, and number of employees) against the Global Industry and Pan-European Market
peer groups, and at the upper quartile of the Swiss Market peer group. The next compensation benchmarking
review will take place in 2024.
109
Compensation Exhibit 17: Comparison of ABB to compensation benchmarking peer groups
(1)
Market
capitalization
(2)(3)(4)
Revenues
(2)(4)(5)
Number of
employees
(5)(6)
ABB
58.8
27.5
104,400
Global Industry
Upper Quartile
78.5
36.3
133,924
Median
49.0
31.1
98,118
Lower Quartile
16.6
77,017
Pan-European Market
Upper Quartile
75.4
40.0
124,435
Median
32.6
27.9
89,012
Lower Quartile
20.2
22.7
62,660
Swiss Market
Upper Quartile
65.1
38.2
85,017
Median
32.0
16.4
58,635
Lower Quartile
20.1
9.1
30,348
(1) Data for market capitalization, revenues and number of employees are sourced from Thomson Reuters.
(2) Market capitalization and revenues are in CHF millions.
(3) Market capitalization is averaged over a period of three months (June 20, 2022, until September 20, 2022).
(4) All currencies have been converted to CHF, where needed, applying full-year average currency exchange rates based on the period from
July 1, 2021, to June 30, 2022 .
(5) Revenues and number of employees as per last financial year prior to October 2022.
(6) Number of employees in full -time equivalent (FTE) unless FTE information was not available, then in total number of employees.
Compensation elements
Compensation Exhibit 3 in the section “Compensation at a glance” sets out the purpose and link to strategy,
the operation, the opportunity level and the performance measures. This section provides further details for
each compensation element.
Fixed compensation – base salary and benefits
Purpose and link to strategy
Facilitate the attraction and retention of talented EC members; base salary compensates for the role and
relevant experience; benefits protect against risks.
Base salary is paid in cash. Benefits consist primarily of retirement, insurance and healthcare plans that are
designed to provide a reasonable level of support for the employees and their dependents in case of
retirement, disability or death.
Opportunity levels
Base salary is set with reference to the scope of responsibilities, personal experience and skills, and
competitive market data.
Benefit plans are set in line with the local competitive and legal environment and are, at a minimum, in
accordance with the legal requirements of the respective country.
Performance measures and weighting
Base salary is adjusted considering the factors set out under opportunity levels above, the executive’s
performance as well as their future potential.
110
Variable compensation – Annual Incentive Plan (AIP)
Purpose and link to strategy
The AIP is designed to reward EC members for the Group’s results, the results of their business area or
corporate function and their individual performance over a time horizon of one year and is aligned with the
Annual Performance Plan approved by the Board.
Opportunity levels
The AIP opportunity levels for the EC are 100 percent of base salary at target with a maximum opportunity of
150 percent.
Performance measures and weighting
The AIP structure is designed to incentivize operational delivery and underpin our performance culture. As
such, it is focused on key priorities, with a maximum of five measures.
•
•
•
to three goals which may include a combination of quantitative and qualitative goals.
o
o
combined performance against all individual goals.
A summary of the composition and total weighting of the measures for all EC members is set out in
Compensation Exhibit 18.
Compensation Exhibit 18: Composition and weighting of AIP measures for EC members
CEO and corporate officers
(1)
Business area presidents
Common Group financial measure
40%
20%
Other Group financial measures
Up to three measures
n.a.
40%
Business area financial measures
n.a.
Up to three measures
60%
Individual measure
Includes up to three goals (minimum two
must relate to sustainability)
Includes up to three goals (minimum two
relate to sustainability)
20%
20%
Total
100%
100%
(1)
Corporate officers include Chief Financial Officer, Chief Human Resources Officer, General Counsel and Chief Communications and Sustainability Officer.
Other design features
A target will be set for each performance measure, corresponding to the expected level of performance that
will generate a target (100 percent) award. For each measure except the individual measure, a minimum
level of performance, below which there is no award (threshold) and a maximum level of performance, above
which the award is capped at 150 percent of the target (maximum), will also be defined.
111
The payment conditions for financial AIP measures are summarized in Compensation Exhibit 19. For Group
and business area financial measures, the award percentage achievements between threshold and target
level, as well as between target and maximum level are determined by linear interpolations between these
award points.
Compensation Exhibit 19: Pay ment conditions for the AIP of EC members
Level of performance
Below threshold
Threshold
Target
Maximum
Award achievement
per financial measure
0%
>0%
100%
150%
The outcomes of the financial AIP measures are subject to appropriate discretionary upward or downward
adjustments by the CC for non-operational items and other adjustment principles agreed with the Board, if
and to the extent the CC considers this appropriate.
In addition, the CC/Board have discretionary authority to adjust the results and/or the AIP award. This
specifically includes a downwards adjustment based on safety performance, including fatalities.
From 2024, AIP awards of EC members are subject to malus and clawback rules, which include illegal
activities, any financial misstatement and reputational damage that have a material impact on ABB Ltd or one
of its subsidiaries. This means that the Board may decide not to award any unpaid short-term incentive
compensation (malus) to EC members or may seek to recover short-term incentive compensation that has
been settled in the past (clawback) to EC members. Clawback applies for a period of up to three years
following the date that any AIP award was paid.
Variable compensation – Long-Term Incentive Plan (LTIP)
Purpose and link to strategy
Rewards the achievement of predefined performance targets over a three-year period. Encourages the
creation of long-term, sustainable shareholder value creation and is aligned with the Company’s Long-Term
Performance Plan approved by the Board.
Opportunity levels
The LTIP is offered in the form of Performance Share Unit (PSU) grants to approximately 100 executives at
ABB. The LTIP described in this report represents the PSU plan and as such is applicable to EC members. In
addition, ABB offers another LTIP in the form of Restricted Share Unit (RSU) grants to approximately 700
employees below the executive level.
For the CEO, the annual LTIP opportunity level is 150 percent of base salary at target, with a maximum
opportunity of 300 percent of base salary.
As per the policy change announced in our 2021 report, the annual target and maximum opportunity levels
for EC members appointed from 2023 are 150 percent and 300 percent of annual base salary, respectively.
The annual LTIP opportunity levels for EC members appointed prior to 2022 are 100 percent of base salary
at target, with a maximum opportunity of 200 percent of base salary.
The Board has the discretionary option to make no grants in certain circumstances.
The relative opportunity level offered under ABB’s LTIP is the same for permanent full-time and permanent
part-time employees.
Performance measures and weighting
The LTIP has, since 2022, three performance measures with the following relative weighting:
112
Earnings Per Share (EPS) – 50 percent weighting
•
period. The average EPS result is calculated from the sum of the EPS for each of the three
relevant years, divided by three.
•
Income from continuing operations, net of tax, unless the Board elects to calculate using Net
income for a particular year.
•
reviewed by the CC on an annual basis.
•
and are calibrated with an independent “outside-in” view, considering the growth expectations,
risk profile, investment levels and profitability levels that are typical for the industry.
•
Adjustments to the outcome of the EPS achievement level may be considered for items which
are not part of, or the result of, the normal course of business operations and/or which were not
considered, either by way of inclusion or exclusion, for the target-setting of a specific LTIP
launch. Only the net impact of such adjustments over the vesting period of the respective LTIP
grant will be considered. The impact of share buybacks will not be considered as an adjustment.
The same number of outstanding shares applicable at the time of the EPS target setting will also
be applied at the time of vesting.
Total Shareholder Return (TSR) – 30 percent weighting
•
grant of the shares and ending three years later. The evaluation is performed by an independent
third party.
•
three-year vesting period against a defined peer group, which currently includes 3M, Danaher,
Eaton, Emerson Electric, General Electric, Holcim, Honeywell Intl., Legrand, Mitsubishi Electric,
Raytheon Technologies, Rockwell, Rolls-Royce, Schneider Electric, Siemens, and Yokogawa.
•
(P50) of the TSR peer group, i.e., there is no vesting for performance below P50.
•
(P75) achievement level remains at 200 percent of target (maximum). There is a linear vesting
for an achievement between P50 and P75 (100 to 200 percent of target).
•
points are reviewed by the CC on an annual basis.
Sustainability – 20 percent weighting
•
related target(s) and award points, to incentivize material progress towards our 2030
sustainability strategy commitments.
•
reviewed and approved by the CC on an annual basis.
•
are not part of, or the result of the normal course of business operations and/or which were not
considered, either by way of inclusion or exclusion, for the target-setting of a specific LTIP
launch. Only the net impact of such adjustments over the vesting period of the respective LTIP
grant will be considered.
113
Other design features
The number of shares to be granted is determined by dividing the grant value by the average share price on
the SIX Swiss Exchange over the period of 20 trading days prior, and 20 trading days after, the date of
publication of ABB’s full year financial results. Settlement of the LTIP shares is three years after grant,
subject to achievement of performance conditions, defined prior to grant.
The vesting schedule for the LTIP is shown in the following Compensation Exhibit 20. The award percentage
achievements between threshold and target, as well as between target and maximum, are determined by
linear interpolations between these award points.
Compensation Exhibit 20: Vesting schedule for the LTIP of EC members
Level of performance
Below threshold
Threshold*
Target
Maximum
Award achievement
per measure
0%
>0%
100%
200%
*
For the TSR measure, the threshold point equals the target point.
As of the 2023 LTIP offering, the CC has the discretion to adjust the formulaic LTIP vesting outcome to reflect
the overall performance of ABB, over the performance period.
Default settlement of the final LTIP award is 100 percent in shares, and beginning with grants made
conditionally in 2020, an automatic sell-to-cover is in place for employees who are subject to withholding
taxes.
LTIP shares are subject to malus and clawback rules, which include illegal activities, any financial
misstatement and reputational damage that have a material impact on ABB Ltd or one of its subsidiaries. This
means that the Board may decide not to award any unsettled or unvested incentive compensation (malus), or
may seek to recover long-term incentive compensation that has been settled in the past (clawback).
Clawback applies for a period of up to five years following the originally scheduled plan specific vesting date.
The CC also has the ability to suspend the delivery of awards if it is likely that the Board will determine that
the malus or clawback provisions may potentially apply (e.g., if the employee is subject to an external
investigation).
For LTIP grants from 2021, there is no automatic accelerated vesting of awards in the event of a change of
control.
For LTIP grants from 2022, participants are entitled to receive a cash amount (a “dividend equivalent
payment”) on each vested award share that is equal to the total dividends per share paid by the Company on
the ABB Ltd share between the grant date and the delivery date of the vested award.
Wealth at risk / Share ownership
Purpose and link to strategy
To align EC members’ personal wealth directly with the interests of shareholders to maintain focus on the
long-term success of the Company.
Share ownership program
EC members are normally required to retain all shares vested from the Company’s LTIP and any other share-
based compensation until their share ownership requirement is met. In circumstances where there is a
withholding tax obligation, the number of shares received will be considered to be the number of shares
vested minus the shares sold under the default sell-to-cover facility.
114
The share ownership requirement is equivalent to a multiple of the EC member’s annual base salary, net of
taxes (see Compensation Exhibit 3 in the section “Compensation at a glance”). These share ownership
requirements are aligned with market practice and result in a wealth at risk for each EC member which is
aligned with shareholder interests.
Only vested shares owned by an EC member and their spouse count for the comparison of the actual share
ownership against the share ownership requirement.
The CC reviews the status of EC share ownership on an annual basis.
Notice period, severance provisions and non-competition clauses
Employment contracts for EC members include a notice period of 12 months, during which they are entitled
to their annual base salary, short-term incentive, and benefits. In accordance with Swiss law and ABB’s
Articles of Incorporation, the contracts for the EC members do not allow for any severance payment.
Non-compete agreements may be entered into with the CEO and all other EC members for a period of
12 months after their employment. Compensation for such agreements, if any, may not exceed the EC
member’s last total annual cash remuneration (comprising of base salary, short-term incentive and benefits).
Implementation of EC compensation policy
Overview
EC members received aggregate total compensation of CHF 40.6 million in 2023, compared with
CHF 36.0 million in 2022, as summarized in Compensation Exhibit 21 below and presented in detail in
Compensation Exhibits 41 and 42.
At the 2022 AGM, the shareholders approved a maximum aggregate compensation amount of
CHF 45.9 million for the EC for 2023. The 2023 EC total compensation of CHF 40.6 million is therefore within
the approved amount (see Compensation Exhibit 21).
Compensation Exhibit 21: Total compensation of EC members (monetary values
in CHF)
(1)
Calendar year
2023
2022
Base salaries
8,430,879
8,341,720
Pension benefits
4,341,781
4,334,281
Other benefits
(2)
6,041,342
4,894,480
Total fixed compensation
18,814,002
17,570,481
Short-term incentives
(3)
12,088,564
9,879,882
Long-term incentives (fair value at grant)
(4)
9,739,902
8,557,683
Total variable compensation
21,828,466
18,437,565
Total compensation
40,642,468
36,008,046
Maximum aggregate compensation approved at previous AGM
45,900,000
40,000,000
(1)
“Compensation tables and share ownership tables” below. An overview of 2023 realized compensation by individual is provided in
Compensation Exhibit 48 in the same section.
certain other items.
results. Short-term variable compensation is linked to the targets and goals defined in each EC member’s Annual Incentive Plan.
disclosed in "Item 6. Directors, Senior Management and Employees" of the 2022 Annual Report. As a result, the grant fair value has been
reduced accordingly.
115
The total compensation for the EC in 2023 increased by 12.9 percent compared to 2022. This mainly reflects
the impact of the strong performance achieved in the year and the consequent higher variable incentives
from both the 2023 AIP awards and the 2023 LTIP grant fair value, as well as the higher costs relating to the
2020 LTIP, which vested in 2023.
Compensation mix
The ratio of fixed to variable compensation in any given year depends on the performance of the Company
and individual EC members against predefined performance targets.
Compensation Exhibit 5 in the section “Compensation at a glance” shows the composition of the total annual
compensation in 2023 for the CEO and for the other current EC members on an aggregate level, specifying
the split of its five compensation components.
The variable portion of the total compensation in 2023 remains broadly the same as in the prior year. In 2023,
the variable compensation of the CEO was 55 percent of his total annual compensation (previous year: 56
percent). For the other EC members, the variable compensation was 52 percent on average (previous year:
51 percent).
Note that compensation paid in 2023 for former EC members is not included in Compensation Exhibit 5. This
can be found in Compensation Exhibit 41.
Compensation elements – 2023 highlights
Base salary
As a result of the regular compensation review for the EC, the Board and the CC decided to increase the
salaries of two of the nine EC members in place in March 2023. The base salary of Peter Terwiesch was
increased by 3.6 percent to CHF 860,000 and of Morten Wierod by 8.3 percent to CHF 975,000. These salary
changes were made to reward exceptional performance of these EC members and, in the case of Morten
Wierod, to also reflect a broadening of responsibilities.
Considering that the other seven EC members in place in March 2023 had no salary adjustments, this
corresponded to a 1.3 percent increase on annual base salaries for the EC members post March 2023.
Annual Incentive Plan (AIP) – design
Under the 2023 AIP, all EC members had two Group measures, Group Operational EBITA margin with a 20
to 40 percent weighting and Group Operational revenue gross profit productivity growth with a weighting of 10
percent.
In addition to these two Group measures, the CEO and the corporate officers shared other Group measures,
including Revenues and Free Cash Flow, with a total weighting of 30 percent.
All business area presidents had, in addition to the two Group measures, two measures which were tailored
to business imperatives, with a total weighting of 50 percent. These tailored measures were Operational
EBITA margin, Operational Free Cash Flow and Net working capital (13 months % avg).
Compensation Exhibit 22 below shows the composition and weighting of the financial measures applied in
2023 for all EC members under their AIP, specified by their roles. Definitions of the financial measures
applied for all EC members are set out in Compensation Exhibit 23.
116
Compensation Exhibit 22: Composition and weighting of 2023 AIP measures for EC members
Focus of measure
CEO and
corporate
officers
(1)
President
Electrification
President
Motion
President
Process
Automation
President
Robotics &
Discrete
Automation
Group
financial
measures
Bottom line earnings
Op EBITA margin
40%
Op EBITA margin
20%
Op EBITA margin
20%
Op EBITA margin
20%
Op EBITA margin
20%
Bottom line output
Operational
revenues gross
profit productivity
growth
10%
Operational
revenues gross profit
productivity growth
10%
Operational
revenues gross profit
productivity growth
10%
Operational
revenues gross profit
productivity growth
10%
Operational
revenues gross profit
productivity growth
10%
Other Group
financial
measures
Cash generation
Free Cash Flow
20%
Top line output
Revenues
10%
Business
area financial
measures
Bottom line earnings
Op EBITA margin
30%
Op EBITA margin
30%
Op EBITA margin
30%
Cash generation
Op Free Cash Flow
20%
Op Free Cash Flow
25%
Op Free Cash Flow
20%
Top line input
Revenues
25%
Liquidity and financial health
Net working capital
(13 months % avg)
20%
Individual
measure
GHG emissions, Integrity, Female
leaders, Safety, Internal controls
Function-specific
20%
GHG emissions, Safety, Integrity
Business-specific
20%
Business-specific
20%
Business-specific
20%
Business-specific
20%
Total
100%
100%
100%
100%
100%
(1)
Corporate officers include Chief Financial Officer, Chief Human Resources Officer, General Counsel and Chief Communications and
Sustainability Officer.
Compensation Exhibit 23: Definition of quantitative measures, applied in 2023
Measure
Description
Operational EBITA margin
(%)
Operational EBITA, which is Operational earnings before interest, tax, and acquisition-related
amortization, as a percentage of Operational revenues, which is total revenues adjusted for foreign
exchange/commodity timing differences in total revenues.
Revenues
Amount of consolidated revenues recognized during the year in accordance with USGAAP .
Free Cash Flow (FCF)
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.
Operational revenue gross
profit productivity growth
(%)
Operational revenue gross profit productivity is calculated as the 12-month rolling operational
revenue gross profit divided by the average number of total workforce in the last three months.
Where operational revenue gross profit is calculated as gross profit (as defined under USGAAP)
adjusted for the following non -operational items to the extent that they are included within the
USGAAP gross profit amount: (i) foreign exchange/commodity timing differences, (ii) acquisition-
related amortization, (iii) restructuring, related and implementation costs, (iv) changes in obligations
related to divested businesses, (v) changes in pre-acquisition estimates, (vi) acquisition - and
divestment-related expenses and integration costs, (vii) other income/expense relating to the Power
Grids joint venture and (viii) certain other non-operational items. Growth is the change in productivity
over the same period a year earlier, represented as a percentage change.
Operational Free Cash
Flow (OFCF)
Cash flows from operating activities excluding cash paid for interest and taxes and including
(i) purchases of property, plant and equipment and intangible assets, and (ii) proceeds from sales of
property, plant and equipment.
Net working capital
(13 months % avg)
Average Net working capital over 13 consecutive month -ends (December 2022 through December
2023), expressed as a percentage of Operational revenues
(1)
. Calculated using constant exchange
rates.
117
All EC members also had an individual measure with a 20 percent weighting. This individual component was
informed by a combination of up to three quantitative and qualitative goals. In 2023, all three goals related to
sustainability. All EC members had an environmental goal (GHG emissions reduction) and an integrity goal
designed to help deliver the Deferred Prosecution Agreement in line with our commitments to the US
Department of Justice. In addition, most of the EC members had a social goal, which for the CEO and
business area presidents was related to safety, and for most of the corporate officers was related to an
increase in the proportion of women in senior management roles (female leaders), while the CFO had a
governance goal related to internal controls.
The outcome against the individual measure was based on a discretionary judgment of the combined
performance against all three goals. Outcomes may be subject to appropriate adjustments for some non-
operational items and other adjustment principles agreed with the Board. No adjustments were applied in
2023.
2023 Annual Incentive Plan (AIP) – achievements
The 2023 AIP achievements are summarized in Compensation Exhibit 24 for the CEO and the corporate
officers, and business area presidents, respectively. Individual AIP outcomes per EC member in comparison
to their target 2023 AIP are set out in Compensation Exhibit 25.
118
Compensation Exhibit 24: 2023 AIP outcomes for the CEO and the corporate officers (rounded)
2023 AIP outcomes for the business area presidents (rounded)
119
Compensation Exhibit 25: Overview of targeted and realized 2023 AIP values
Group measures
Other Group
measures
Business area
measures
Individual
measure
(1)
Total AIP outcome
percentage
(in % of
target)
Target AIP award
(in CHF)
Actual AIP award
(in CHF)
(2)
Achievement
Weighting
Outcome
Achievement
Weighting
Outcome
Achievement
Weighting
Outcome
Achievement
Weighting
Outcome
Björn Rosengren
150.0%
50%
75.0%
150.0%
30.0%
45.0%
n.a.
n.a.
n.a.
145.0%
20%
29.0%
149.0%
1,785,000
2,659,650
Timo Ihamuotila
150.0%
50%
75.0%
150.0%
30.0%
45.0%
n.a.
n.a.
n.a.
100.0%
20%
20.0%
140.0%
990,000
1,386,000
Carolina Granat
150.0%
50%
75.0%
150.0%
30.0%
45.0%
n.a.
n.a.
n.a.
150.0%
20%
30.0%
150.0%
725,000
1,087,500
Karin Lepasoon
150.0%
50%
75.0%
150.0%
30.0%
45.0%
n.a.
n.a.
n.a.
150.0%
20%
30.0%
150.0%
600,000
900,000
Sami Atiya
150.0%
30%
45.0%
n.a.
n.a.
n.a.
90.0%
50%
45.0%
150.0%
20%
30.0%
120.0%
800,000
960,000
Tarak Mehta
150.0%
30%
45.0%
n.a.
n.a.
n.a.
150.0%
50%
75.0%
150.0%
20%
30.0%
150.0%
930,000
1,395,000
Peter Terwiesch
150.0%
30%
45.0%
n.a.
n.a.
n.a.
130.2%
50%
65.1%
135.0%
20%
27.0%
137.1%
860,000
1,179,060
Morten Wierod
150.0%
30%
45.0%
n.a.
n.a.
n.a.
150.0%
50%
75.0%
150.0%
20%
30.0%
150.0%
975,000
1,462,500
Total
7,665,000
11,029,710
(1)
Includes, where appropriate, a reduction for a recorded fatality.
(2)
Represents accrued AIP award for the year 2023, which will be paid in 2024, after the publication of ABB's financial results.
CEO retrospective AIP target disclosure
The following Compensation Exhibit 26 sets out target and award points for each measure under the CEO’s
2023 AIP and its related composition of the final award level. This new exhibit is in response to shareholder
feedback and represents a relevant additional level of transparency on the alignment between pay and
performance.
Compensation Exhibit 26: 2023 AIP outcomes for the CEO (rounded)
(1)
Category
Performance measure
W
eight
Target
(100% award)
Actual
Award
(% of target)
Weighted
award
Group measures
Op EBITA margin (%)
40%
15.2
16.7
150.0%
60.0%
Op revenues gross profit productivity growth (%)
10%
6.4
17.9
150.0%
15.0%
Other Group
measures
Free Cash Flow ($ in millions)
20%
2,353.0
3,569.7
150.0%
30.0%
Revenues ($ in millions)
10%
29,939.1
31,533.9
150.0%
15.0%
Individual
measure
GHG emissions, Safety, Integrity
20%
See
(2)
See
(2)
145.0%
29.0%
Total
149.0%
(1)
The computation of targets as well as the measurement of actual performance against those targets are based on exchange rates set prior to the start of
the performance period. Therefore, targets and actuals under the AIP do not agree with the equivalent measure calculated based on the actual results as
presented in the Consolidated Financial Statements
(2)
The achievement of the individual measure is discretionary assessed by the Compensation Committee and approved by the Board, based on an overall
outcome of all three performance goals under the individual measure. For 2023 these included a reduction of GHG emissions compared to the 2022
baseline, a reduction of the Lost Time Injury Frequency Rate (LTIFR) compared to the 2019 baseline, and the delivery of the Deferred Prosecution
Agreement in line with our commitments to the US Department of Justice. See Compensation Exhibit 27 for the achievement of goals against the individual
measure. Includes a discretionary reduction for a recorded fatality.
Compensation Exhibit 27 sets out the target, actual and assessed outcome of the individual goals for the
CEO which inform the individual measure. The overall outcome of the individual measure is a discretionary
judgement based on performance against all three goals.
120
Compensation Exhibit 27: Achievement against the 2023 performance goals under the individual measure for the CEO
Goal
Performance measure
Target
Actual
Assessment
GHG emissions
Emissions reduction vs 2022 baseline
(1)
11.9%
29.0%
Exceeded target
Safety
Lost Time Injury Frequency Rate
(2)
0.17
0.13
Lower (better) than
target
Integrity
Deliver DPA in line with our commitments
to the DOJ
(3)
Discretionary assessment
by the Board
Discretionary assessment
by the Board
Exceeded goal
Total
145.0%
(1)
ABB’s GHG emissions include direct emissions (scope 1) from burning of fuels (oil, diesel, gas) at our sites; SF6 emissions in own operations; fleet
emissions and indirect emissions (scope 2) from our use of electricity and district heating/cooling.
(2)
Lost Time Injury Frequency Rate (LTIFR) covers workplace incidents (ABB facility, project site, customer site) to ABB employees and contractors; LTIFR
formula = number of lost time incidents and serious injury incidents with time lost * 200,000 / work hours (employees + contractors). Rate per 200,000
work hours (equivalent to 100 persons working one calendar year). Managers with direct reports are required to complete a minimum of two Safety
Observation Tours (SOT) before an award is made under LTIFR. The baseline is represented by the 2019 LTIFR. Includes, where appropriate, a
discretionary reduction for a recorded fatality,
(3)
Contribution to the delivery of our commitments under the Deferred Prosecution Agreement with the US Department of Justice related to the Kusile
project.
CEO AIP outcomes in the last four years
The historical AIP award outcomes since Björn Rosengren has been ABB’s CEO are shown in Compensation
Exhibit 28. Over the last four years vesting has averaged at 119.8 percent of target and 79.8 percent of the
maximum award.
Compensation Exhibit 28: CEO AIP historical award percentages
Long-Term Incentive (LTIP)
2023 LTIP grants
The estimated value at grant of the share-based grants to EC members under the 2023 LTIP was
CHF 8.7 million, compared with CHF 8.6 million in 2022.
The reference price for the 2023 LTIP grant used to determine the number of shares granted to participants
was CHF 31.24.
The 2023 LTIP is based on three performance measures: ABB’s EPS, ABB’s TSR and a sustainability
measure.
Targets and award points under the EPS measure are considered as commercially sensitive information and
will only be disclosed retrospectively after the end of the relevant LTIP performance period.
121
As in the previous year, ABB kept the achievement of the EPS threshold point challenging for the 2023 LTIP
by applying a range between the EPS target and award points of plus/minus 11.5 percent of target, to reflect
the perceived EPS volatility during the performance period.
The peer companies approved by the Board to determine ABB’s relative TSR performance for the 2023 LTIP
were as set out in the previous section “Executive Committee compensation policy”.
The sustainability measure applied to the 2022 LTIP was also applied in the 2023 LTIP, namely the scope 1
and 2 GHG emissions reduction at the end of the three-year performance period (2023–2025), compared to
the 2019 baseline, which was defined without the divested Power Grids business. The targets and award
points under the 2023 LTIP have been structured to reflect ABB’s progress to date, its long-term ambitions,
and that as the targets get higher, the overall stretch to achieve them is even more challenging. Details of the
long-term GHG emissions reduction targets can be found in ABB’s Item 4. Information on the Company—
Sustainability activities.
The approved target and award points for all three performance measures under the 2023 LTIP are illustrated
in Compensation Exhibit 29 below.
Compensation Exhibit 29: 2023 LTIP target and award points
Measure
Weighting
Threshold
Target
Maximum
Average EPS
50%
Target point
-11.5%
Disclosed after
performance period
Target point
+11.5%
Relative TSR
30%
50th percentile
75th percentile
Reduction of scope 1 and 2 CO
2
emissions compared to 2019 baseline
20%
75.0%
77.5%
80.0%
Below threshold point: no award;
At target point: 100 percent award;
At or above maximum point: capped at 200 percent award;
Linear interpolations between award points;
The average EPS target is not prospectively disclosed for reasons of commercial sensitivity.
2024 LTIP grants
The sustainability measure applied to the 2022 LTIP and 2023 LTIP will also be applied in the 2024 LTIP,
namely the scope 1 and 2 GHG emissions reduction at the end of the three-year performance period (2024-
2026), compared to the 2019 baseline. Details of the long-term GHG emissions reduction targets can be
found in ABB’s Item 4. Information on the Company—Sustainability activities.
The target and award points, as described in Compensation Exhibit 30, have been structured to reflect ABB’s
progress to date, its long-term ambitions, and that as the targets get higher, the overall stretch to achieve
them becomes more challenging.
•
above the mid-term target of 70 percent.
•
•
achieved in 2025, it would mean we have delivered our target five years ahead of our
commitment.
122
Compensation Exhibit 30: Sustainability target and award points for the 2024 LTIP
Measure
Weighting
Threshold
Target
Maximum
Reduction of scope 1 and 2 CO2 equivalent
emissions compared to 2019 baseline
20%
77.0%
81.0%
85.0%
Below threshold point: no award;
At target point: 100 percent award;
At or above maximum point: capped at 200 percent award;
Linear interpolations between award points.
2020 LTIP – achievements
The final number of shares vesting under the 2020 LTIP grant in 2023 was determined based on the
achievement level against the predefined TSR and EPS targets.
The relative ranking of ABB’s TSR measure against the predefined peer group of companies for the 2020
LTIP sat on the 83
rd
out of a potential of 200 percent.
The three-year average EPS amounted to $1.14, which led to a vesting level of 179.0 percent (previous year:
42.0 percent) out of a potential 200 percent, net of adjustments for items considered outside the normal
course of business operation and/or which were not considered in the target setting of the 2020 LTIP.
Adjustments were made to the EPS for each of the relevant financial years to reflect significant unplanned
developments after the LTIP grant, including for the impact of divestments, M&A related integration costs and
restructuring costs.
In line with our commitment to retrospectively disclose the EPS performance targets for vested LTIP awards,
the three target and award points (threshold, target and maximum) and the actual achievement for the
adjusted 2020 EPS performance measure are shown in Compensation Exhibit 31 below.
The average weighted achievement level of the two performance measures under the 2020 LTIP was 189.5
percent (out of a maximum 200 percent), as specified in Compensation Exhibit 31.
Compensation Exhibit 31: Target and award points and achievement levels of 2020 LTIP performance measures
Measure
Weighting
Threshold
Target
Maximum
Actual
Relative TSR
50%
25
th
50
th
75
th
83
rd
Achievement level
0%
100%
200%
200.0%
Average EPS ($)
50%
0.84
1.01
1.18
1.14
Achievement level
0%
100%
200%
179.0%
Award as percentage of target (maximum at 200%)
189.5%
Overview of disclosed and realized 2020 LTIP value
The following table compares the previously disclosed “fair value” of the grant to each EC member and the
actual value of the grant at the time of vesting. The following Compensation Exhibit 32 shows such
comparison for the 2020 LTIP, that vested in 2023.
123
Compensation Exhibit 32: Realized value of 2020 LTIP grant for current EC members
Grant date
Number of
shares
granted
related to
the TSR
measure
(1)
Shares
granted
related to
the EPS
measure
(2)
Total
number
of shares
granted
(3)
Disclosed
grant fair
value
(CHF)
(3)
Vesting date
Vesting
percentage
Number
of vested
shares
(4)
Realized
value
(CHF)
(5)
Björn Rosengren
April 27, 2020
65,858
65,857
131,715
1,970,457
April 27, 2023
189.5%
258,837
8,347,494
Timo Ihamuotila
April 27, 2020
24,536
24,535
49,071
734,103
April 27, 2023
189.5%
96,431
3,109,900
Carolina Granat
n.a.
n.a.
Karin Lepasoon
n.a.
n.a.
Sami Atiya
April 27, 2020
20,662
20,661
41,323
618,193
April 27, 2023
189.5%
81,205
2,618,862
Tarak Mehta
April 27, 2020
23,244
23,244
46,488
695,462
April 27, 2023
189.5%
91,357
2,946,264
Peter Terwiesch
April 27, 2020
20,662
20,661
41,323
618,193
April 27, 2023
189.5%
81,205
2,618,862
Morten Wierod
April 27, 2020
19,370
19,370
38,740
579,552
April 27, 2023
189.5%
76,130
2,455,193
Total
5,215,960
22,096,575
(1)
Actual achievement level of the TSR measure was 200.0 percent.
(2)
Actual achievement level of the EPS measure was 179.0 percent.
(3)
Valued at CHF 14.96, the grant fair value of the ABB share on the grant date adjusted for expected foregone dividends during the vesting period.
(4)
The initial granted number of shares has been increased by 3.7 percent to reflect the impact of the Accelleron spin-off in 2022.
(5)
Valued at CHF 32.25, the closing price of the ABB share on the day of vesting.
The values presented are gross and before payment of any applicable taxes owing by the recipient. This
indicates the average gross realized LTIP value was 423.6 percent of the disclosed grant fair value.
LTIP vesting outcomes in the last five years
The historical LTIP vesting outcomes for the prior five years are shown in Compensation Exhibit 33 below.
Over the last five years vesting has averaged at 106.7 percent of target and 57.5 percent of the maximum
award.
Compensation Exhibit 33: LTIP historical actual vesting percentages
(1)
(1)
According to plan-specific relative weighting of relevant performance measures.
124
Realized total compensation – 2023
We disclose the realized total compensation for each EC member. Such transparency on realized
compensation is designed to aid stakeholders’ understanding of ABB's link between pay and performance.
Realized compensation relates to the AIP award and the LTIP award at the end of their respective
performance cycles, reflecting actual payment and settlement, based on achievements of the plan specific
performance measures.
The following Compensation Exhibit 34 sets out a high-level comparison of realized and target total
compensation for each EC member. A detailed summary table is given in Compensation Exhibit 48 in the
section “Compensation tables and share ownership tables“.
Compensation Exhibit 34: Realized 2023 total compensation (in CHF) compared to target total compensation
Annual total compensation ratio
This new section is in response to shareholder feedback and represents a relevant additional level of pay
transparency in the Report. It provides details of the ratio of the annual total compensation for the
organization’s highest-paid individual (our CEO) to the median annual total compensation for all permanent
ABB employees in Switzerland (excluding the highest-paid individual).
We consider Switzerland to be the most relevant location for analyzing the annual total compensation ratio
since our CEO is also located in Switzerland. This approach also mitigates employee footprint and currency
volatility. In any event, ABB’s data access does not currently allow for the inclusion of all relevant
compensation elements of all ABB employees in all countries in which we operate.
At the time of publication of the Report, the allocation of annual short-term incentive awards to eligible
employees in Switzerland for 2023 has not been concluded. We therefore report the ratio for the year 2022,
for which we know relevant short-term incentive awards.
125
The calculated ratio comprises paid base salary, paid short-term incentive, paid pension benefits, paid other
benefits and granted long-term incentive as compensation elements. The short-term incentive represents the
bonus paid in 2023 (for the year 2022), and the long-term incentive represents the grant fair value, in line with
the disclosure for the 2022 CEO compensation in this report.
The analysis excludes non-permanent employees (i.e., interns, apprentices, trainees, temporary workers) or
international assignees, but includes part-time employees if they were employed at December 31, 2022.
Compensation elements of part-time employees and new hires during the year 2022 are extrapolated to
represent full-time equivalent and full year equivalent figures.
Values of granted long-term incentive, pension benefits and other benefits are considered for the employee
with the median total cash compensation, comprising of annual base salary and 2022 short-term incentive
award.
As disclosed in our Annual Report 2022, the CEO’s total compensation for 2022 was CHF 8,074,656. Based
on the same compensation elements as stated above for the CEO, the median 2022 total compensation for
employees in Switzerland was CHF 161,280. The resulting
median
If the ratio would consider the CEO’s annual total compensation to the average annual total compensation for
all permanent ABB employees in Switzerland (excluding the CEO), rather than the median, the resulting
average ratio
Other compensation – 2023
Members of the EC are eligible to participate in the Employee Share Acquisition Plan (ESAP), a savings plan
based on stock options, which is open to employees around the world. Five members of the EC participated
in the 20th annual ESAP launch of the plan in 2023. EC members who participated will, upon vesting, each
be entitled to acquire up to 330 ABB shares at CHF 30.49 per share, the market share price at the start of the
2023 launch.
For a more detailed description of the ESAP, please refer to “Note 18 – Share
‑
based payment arrangements”
in our Consolidated Financial Statements.
In 2023, ABB did not pay any fees or compensation to the members of the EC for services rendered to ABB
other than those disclosed in this report. Except as disclosed in the section “Executive Committee – Business
relationships between ABB and its EC members” in "Item 6. Directors, Senior Management and Employees",
the Company did not pay any additional fees or compensation in 2023 to persons closely linked to a member
of the EC for services rendered to ABB.
Share ownership of EC members
Six out of eight EC members have met and exceeded their share ownership requirement. The other two
members have been appointed to the EC in the last three years. The individual shareholding in comparison to
the relevant share ownership requirement is shown in Compensation Exhibit 9 in the section “Compensation
at a glance”.
The EC members collectively owned less than one percent of ABB’s total shares outstanding at
December 31, 2023.
At December 31, 2023, EC members held ABB shares and conditional rights to receive shares, as shown in
Compensation Exhibit 46 in the section “Compensation tables and share ownership tables” below. Their
holdings at December 31, 2022, are shown in Compensation Exhibit 47 in the same section.
Except as described in Compensation Exhibits 46 and 47, no member of the EC and no person closely linked
to a member of the EC held any shares of ABB or options on ABB shares at December 31, 2023 and 2022.
126
External Board mandates held by EC members
Four out of eight EC members held at least one external mandate in other companies. Detailed information
can be found in Compensation Exhibit 43 in the section “Compensation tables and share ownership tables”.
Changes applicable to EC members
Terms of appointment for new EC members
The new General Counsel and Company Secretary, Mathias Gärtner, will be appointed in 2024, with an
annual base salary of CHF 800,000, a target short-term incentive of 100 percent of annual base salary and a
target long-term incentive of 150 percent of annual base salary. Mathias Gärtner is eligible for standard EC
benefits.
He will receive a replacement share grant to compensate for his forgone equity grants with his previous
employer. The value of forfeited performance share units and options grants will be replaced with an ABB
performance share unit grant and the value of forfeited restricted share unit grants will be replaced with an
ABB restricted share unit grant.
Terms of departure for EC members
The previous General Counsel and Company Secretary, Andrea Antonelli, stepped down from the EC as per
May 31, 2023, and will depart from ABB on June 30, 2024, reflecting his contractual notice period of 12
months plus extension of such period by one month due to illness. He is entitled to receive compensation and
benefits up to the point of his departure. This includes a contractually agreed pro-rata short-term incentive
payment of CHF 283,300 for the period January 1 to June 30, 2024. His unvested shares granted under the
2022 and 2023 LTIP will be treated according to contractual terms.
Compensation of former EC members
In 2023, certain former EC members received contractual compensation for the period after leaving the EC,
as shown in Compensation Exhibit 41, footnote (5).
Votes on compensation at the 2024 AGM
As illustrated in Compensation Exhibit 35, the Board’s proposals to shareholders at the 2024 AGM will relate
to Board compensation for the 2024–2025 term of office and EC compensation for the calendar year 2025.
There will also be a non-binding consultative vote on the Compensation Report 2023.
127
Compensation Exhibit 35: Shareholders will have three separate votes on compensation at the 2024 AGM
The voting results at ABB’s AGM in 2023 were as follows:
●
●
●
In determining the proposed maximum aggregate EC compensation for 2025, the Board intends to take into
consideration the criteria set forth in Compensation Exhibit 36. Given the variable nature of a major portion of
the compensation components, the proposed maximum aggregate EC compensation will accordingly be
higher than the actual compensation paid or awarded, as it must cover the potential maximum value of each
component of compensation.
The increase in maximum aggregate EC compensation for 2025 compared to 2024 is mainly influenced by
the application of the adjusted, more performance-oriented compensation mix for EC entrants and the
anticipated costs related to the vesting of 2022 LTIP awards.
128
Compensation Exhibit 36: Overview of key factors affecting the determination of maximum aggregate EC compensation
129
Compensation tables and share ownership tables
Compensation Exhibit 37: Board compensation in 2023 and 2022
Paid in 2023
Paid in 2022
November
Board term
2023–2024
May
Board term
2022–2023
Total compensation
paid in 2023
(3)
November
Board term
2022–2023
May
Board term
2021–2022
Total compensation
paid in 2022
(3)
Name
Settled in cash
(1)
Settled in shares
–
number of shares
received
(2)
Settled in cash
(1)
Settled in shares
–
number of shares
received
(2)
Settled in cash
(1)
Settled in shares
–
number of shares
received
(2)
Settled in cash
(1)
Settled in shares
–
number of shares
received
(2)
CHF
CHF
CHF
CHF
CHF
CHF
Peter Voser, Chairman
(4)
—
17,462
—
18,607
1,200,000
—
21,565
—
18,296
1,200,000
Jacob Wallenberg
(5)
112,500
2,624
112,500
2,796
450,000
112,500
3,257
112,500
2,763
450,000
Gunnar Brock
(6)
82,500
1,924
82,500
2,048
330,000
82,500
2,388
82,500
2,026
330,000
David Constable
(7)
80,000
1,866
80,000
1,988
320,000
80,000
2,316
80,000
1,964
320,000
Frederico Curado
(8)
—
3,876
—
4,130
350,000
—
4,799
—
4,075
350,000
Lars Förberg
(9)
—
4,628
—
4,945
320,000
—
5,736
—
4,870
320,000
Denise Johnson
(10)
—
3,929
—
—
165,000
—
—
—
—
—
Jennifer Xin-Zhe Li
(11)
87,500
1,890
87,500
2,018
350,000
87,500
2,338
87,500
1,986
350,000
Geraldine Matchett
(12)
82,500
2,376
82,500
2,683
330,000
82,500
3,121
82,500
2,647
330,000
David Meline
(13)
100,000
2,332
100,000
2,485
400,000
100,000
2,895
100,000
2,456
400,000
Satish Pai
(14)
—
—
—
3,341
165,000
—
4,523
82,500
1,872
330,000
Total
545,000
42,907
545,000
45,041
4,380,000
545,000
52,938
627,500
42,955
4,380,000
(1)
Represents gross amounts paid, prior to deductions for social security, withholding tax, etc.
(2)
Number of shares per Board member is calculated based on net amount due after deductions for social security, withholding tax, etc.
(3)
In addition to the Board remuneration stated in the above table, in 2023 and 2022 the Company paid CHF 235,498 and CHF 248,489, respectively, in related
mandatory social security payments.
(4)
Chairman of the ABB Ltd Board and of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving
100 percent of his compensation in the form of ABB shares.
(5)
Vice-Chairman of the ABB Ltd Board and member of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is
receiving 50 percent of his compensation in the form of ABB shares.
(6)
Member of the Finance, Audit and Compliance Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in
the form of ABB shares.
(7)
Member of the Compensation Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in the form of ABB
shares.
(8)
Chairman of the Compensation Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 100 percent of his compensation in the form of
ABB shares.
(9)
Member of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 100 percent of his compensation in
the form of ABB shares.
(10)
Member of the Finance, Audit and Compliance Committee for the 2023–2024 Board term; is receiving 100 percent of her compensation in the form of ABB shares.
(11)
Member of the Compensation Committee and of the Governance and Nomination Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving
50 percent of her compensation in the form of ABB shares.
(12)
Member of the Finance, Audit and Compliance Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of her compensation in
the form of ABB shares.
(13)
Chairman of the Finance, Audit and Compliance Committee for the 2021–2022, 2022–2023 and 2023–2024 Board terms; is receiving 50 percent of his compensation in
the form of ABB shares.
(14)
Member of the Finance, Audit and Compliance Committee for the 2021–2022 and 2022–2023 Board terms; received 50 percent of his compensation in the form of ABB
shares for the 2021–2022 Board term and 100 percent of his compensation in the form of ABB shares for the 2022–2023 Board term. Did not stand for election in 2023.
130
Compensation Exhibit 38: Board compensation for the Board terms 2023–2024 and 2022–2023
Board term
2023–2024
Board term
2022–2023
Name
Specific Board roles
CHF
CHF
Peter Voser
Chairman of the Board and Chairman GNC for 2023–2024 and 2022–2023 terms
1,200,000
1,200,000
Jacob Wallenberg
Vice-Chairman of the Board and Member GNC for 2023 –2024 and 2022–2023 terms
450,000
450,000
Gunnar Brock
Member FACC for 2023–2024 and 2022–2023 terms
330,000
330,000
David Constable
Member CC for 2023–2024 and 2022–2023 terms
320,000
320,000
Frederico Curado
Chairman CC for 2023–2024 and 2022–2023 terms
350,000
350,000
Lars Förberg
Member GNC for 2023–2024 and 2022–2023 terms
320,000
320,000
Denise Johnson
Member FACC for 2023–2024 term
330,000
—
Jennifer Xin-Zhe Li
Member CC and Member GNC for 2023–2024 and 2022–2023 terms
350,000
350,000
Geraldine Matchett
Member FACC for 2023–2024 and 2022–2023 terms
330,000
330,000
David Meline
Chairman FACC for 2023–2024 and 2022 –2023 terms
400,000
400,000
Satish Pai
Member FACC for 2022–2023 term
—
330,000
Total
4,380,000
4,380,000
Key:
CC: Compensation Committee
FACC: Finance, Audit and Compliance Committee
GNC: Governance and Nomination Committee
Compensation Exhibit 39: Board ownership of ABB shares
Total number of shares held
Name
December 31, 2023
December 31, 2022
Peter Voser
215,876
231,807
Jacob Wallenberg
251,318
245,898
Gunnar Brock
41,785
37,813
David Constable
46,319
42,465
Frederico Curado
57,181
49,175
Lars Förberg
80,095
70,522
Denise Johnson
3,929
—
Jennifer Xin-Zhe Li
45,812
41,904
Geraldine Matchett
36,023
30,964
David Meline
(1)
47,948
43,131
Satish Pai
—
34,827
Total
826,286
828,506
(1) Includes 3,150 shares held by the spouse.
131
Compensation Exhibit 40: Board members with external mandates at December 31, 2023
Name
Company
Listed company
Chair of the Board
Member of the
Board
Chair of a
Committee
Member of a
Committee
CEO
Member of the EC
Peter Voser
IBM Corporation, Armonk, United States
●
●
●
●
Temasek Holdings (Private) Limited, Singapore, Singapore
●
●
●
PSA International Pte Ltd, Singapore, Singapore
●
Jacob Wallenberg
Investor AB, Stockholm, Sweden
●
●
●
●
Telefonaktiebolaget L.M. Ericsson AB, Stockholm, Sweden
●
●
●
SAS AB, Stockholm, Sweden
(1)
●
●
FAM AB (Foundation Asset Management), Stockholm,
Sweden
●
Wallenberg Investments AB, Stockholm, Sweden
●
Patricia Industries AB, Stockholm, Sweden
●
Gunnar Brock
Investor AB, Stockholm, Sweden
●
●
●
Neptunia Invest AB, Stockholm, Sweden
●
Stena AB, Stockholm, Sweden
●
●
Patricia Industries AB, Stockholm, Sweden
●
David Constable
Fluor Corporation, Irving, United States
●
●
●
Frederico Curado
Transocean Ltd., Zug, Switzerland
●
●
●
●
LATAM Airlines Group, Santiago, Chile
●
●
●
●
Lars Förberg
Cevian Capital AB, Stockholm, Sweden
●
Denise Johnson
Caterpillar Inc., Deerfield, United States
●
●
The Mosaic Company, Tampa, United States
●
●
●
Jennifer Xin-Zhe Li
Changcheng Investment Partners, Beijing, China
●
SAP SE, Walldorf, Germany
●
●
●
●
Full Truck Alliance Co. Ltd., Guizhou / Nanjing, China
●
●
●
David Meline
HP Inc., Palo Alto, United States
●
●
●
Pacific Biosciences of California Inc., Menlo Park, United
States
●
●
●
(1)
Jacob Wallenberg is not a member of the Board of Directors of SAS AB. He is a member of their Nomination Committee, which is not a committee of the Board.
132
Compensation Exhibit 41: EC compensation in 2023
Cash Compensation
Estimated value of share
-
based grants under the
LTIP in 2023
(4)
2023 Total compensation
(incl. conditional share
-
based grants)
(5)
Name
Base salary
Short
-
term incentive
(1)
Pension benefits
Other benefits
(2)
2023 Total
cash
-
based
compensation
(3)
CHF
CHF
CHF
CHF
CHF
CHF
CHF
Björn Rosengren
1,785,006
2,659,650
775,090
1,759,098
6,978,844
2,714,375
9,693,219
Timo Ihamuotila
990,004
1,386,000
541,130
786,869
3,704,003
1,003,656
4,707,659
Carolina Granat
725,012
1,087,500
440,166
369,285
2,621,963
734,999
3,356,962
Karin Lepasoon
600,000
900,000
254,677
162,089
1,916,766
608,288
2,525,054
Sami Atiya
800,009
960,000
499,122
654,700
2,913,831
811,038
3,724,869
Tarak Mehta
930,009
1,395,000
526,130
746,993
3,598,132
942,817
4,540,949
Peter Terwiesch
855,003
1,179,060
505,595
657,565
3,197,223
871,844
4,069,067
Morten Wierod
962,502
1,462,500
505,842
685,145
3,615,989
988,423
4,604,412
Total Executive Committee members
at December 31, 2023
7,647,545
11,029,710
4,047,752
5,821,744
28,546,751
8,675,440
37,222,191
Andrea Antonelli (EC member until
May 31, 2023)
700,000
980,000
248,685
140,430
2,069,115
1,064,462
3,133,577
Theodor Swedjemark (EC member until
September 30, 2022)
83,334
78,854
45,344
79,168
286,700
—
286,700
Total departing Executive Committee
members
783,334
1,058,854
294,029
219,598
2,355,815
1,064,462
3,420,277
Total
8,430,879
12,088,564
4,341,781
6,041,342
30,902,566
9,739,902
40,642,468
(1)
Represents accrued short-term variable compensation for the year 2023, which will be paid in 2024, after the publication of ABB's financial results. Short-term
variable compensation is linked to the targets and goals defined in each EC member's Annual Incentive Plan. Upon full achievement of these targets and goals, the
short-term variable compensation of the EC members represents 100 percent of their respective base salary. Theodor Swedjemark received a short-term variable
compensation payment in February 2023
related to his termination period, in accordance with the contractual obligations of ABB.
(2)
Other benefits mainly comprise payments related to social security, health insurance, children's education, transportation, tax advice and compensation for foregone
dividends on replacement share grants and certain other items.
(3)
Prepared on an accrual basis.
(4)
The estimated value of the share-based LTIP grants is based on the price of ABB shares on the grant date. On the day of vesting (April 24, 2026), the value of the
share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of the performance factors.
(5)
Payments totaling CHF 308,592 were made in 2023 on behalf of certain other former EC members, representing social security premium payments due on the 2020
LTIP vesting and tax advisory services for the period when they have been active EC members.
133
Compensation Exhibit 42: EC compensation in 2022
Cash Compensation
Estimated value of share
-
based grants under the
LTIP in 2022
(4)
2022 Total compensation
(incl. conditional share
-
based grants)
(5)
Name
Base salary
Short
-
term incentive
(1)
Pension benefits
Other benefits
(2)
2022 Total
cash
-
based
compensation
(3)
CHF
CHF
CHF
CHF
CHF
CHF
CHF
Björn Rosengren
1,770,840
2,142,000
762,478
988,084
5,663,402
2,411,254
8,074,656
Timo Ihamuotila
986,672
1,188,000
527,648
720,953
3,423,273
891,570
4,314,843
Carolina Granat
720,843
870,000
427,903
352,848
2,371,594
652,920
3,024,514
Andrea Antonelli (EC member as of
March 1, 2022)
583,334
670,833
198,164
245,754
1,698,085
945,595
2,643,680
Karin Lepasoon (EC member as of
October 1, 2022)
150,000
165,000
62,360
38,987
416,347
540,336
956,683
Sami Atiya
(6)
800,009
539,200
487,247
599,994
2,426,450
720,458
3,146,908
Tarak Mehta
930,009
1,337,340
513,481
604,563
3,385,393
837,546
4,222,939
Peter Terwiesch
825,001
1,245,000
485,152
536,952
3,092,105
747,485
3,839,590
Morten Wierod
875,006
1,067,400
471,432
523,912
2,937,750
810,519
3,748,269
Total Executive Committee members
at December 31, 2022
7,641,714
9,224,773
3,935,865
4,612,047
25,414,399
8,557,683
33,972,082
Maria Varsellona (EC member until
March 31, 2022)
200,002
181,985
114,896
79,223
576,106
—
576,106
Theodor Swedjemark (EC member until
September 30, 2022)
500,004
473,124
283,520
203,210
1,459,858
—
1,459,858
Total departing Executive Committee
members
700,006
655,109
398,416
282,433
2,035,964
—
2,035,964
Total
8,341,720
9,879,882
4,334,281
4,894,480
27,450,363
8,557,683
36,008,046
(1)
Represents accrued short-term variable compensation for the year 2022, which was paid in 2023, after the publication of ABB's financial results. Short-term
variable compensation is linked to the targets and goals defined in each EC member's Annual Incentive Plan. Upon full achievement of these targets and goals,
the short-term variable compensation of the EC members represents 100 percent of their respective base salary. Maria Varsellona received a short-term variable
compensation payment in March 2022 related to her termination period, in accordance with the contractual obligations of ABB.
(2)
Other benefits mainly comprise payments related to social security, health insurance, children's education, transportation, tax advice and compensation for
foregone dividends on replacement share grants and certain other items.
(3)
Prepared on an accrual basis.
(4)
The estimated value of the share-based LTIP grants is based on the price of ABB shares on the grant date. On the day of vesting (April 25, 2025), the value of
the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of the performance
factors.
(5)
Payments totaling CHF 1,324,301 were made in 2022 on behalf of certain other former EC members, representing social security premium payments due on the
2019 LTIP vesting and tax advisory services for the period when they have been active EC members.
(6)
The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in the 2022
Compensation Report. As a result, the grant fair value has been reduced accordingly.
Compensation Exhibit 43: EC members with external mandates at December 31, 2023
Name
Company
Listed company
Chair of the Board
Member of the
Board
Chair of a
Committee
Member of a
Committee
Timo Ihamuotila
SoftwareOne Holding AG, Stans, Switzerland
●
●
●
Oras Invest Oy, Helsinki, Finland
●
Sami Atiya
SGS SA, Geneva, Switzerland
●
●
●
●
Tarak Mehta
Prysmian S.p.A., Milan, Italy
●
●
●
Peter Terwiesch
Hilti AG, Schaan, Liechtenstein
●
134
Compensation Exhibit 44: LTIP grants in 2023
Name
Reference number of shares under
the EPS performance factor of the
2023 launch of the LTIP
(1)
Total estimated value of share
-
based
grants under the EPS performance
factor of the
2023 launch of the
LTIP
(2)(3)
Reference number of shares under
the TSR performance factor of the
2023 launch of the LTIP
(1)
Total estimated value of share
-
based
grants under the TSR performance
factor of the 2023 launch of the
LTIP
(2)(3)
Reference number of shares under
the sustainability performance factor
of the 2023 launch of the LTIP
(1)
Total estimated value of share
-
based
grants under the sustainability
performance factor of the 2023
launch of the LTIP
(2)(3)
Total number of shares granted under
the 2023 launch of the LTIP
(1)(2)
Total estimated value of share
-
based
grants under the LTIP in 2023
(2)(3)
CHF
CHF
CHF
CHF
Björn Rosengren
(4)
42,854
1,357,187
25,712
814,300
17,142
542,888
85,708
2,714,375
Timo Ihamuotila
15,845
501,812
9,507
301,087
6,339
200,757
31,691
1,003,656
Carolina Granat
11,604
367,499
6,962
220,487
4,642
147,013
23,208
734,999
Karin Lepasoon
(4)
9,603
304,128
5,762
182,483
3,842
121,677
19,207
608,288
Sami Atiya
12,804
405,503
7,682
243,289
5,123
162,246
25,609
811,038
Tarak Mehta
(4)
14,885
471,408
8,931
282,845
5,954
188,564
29,770
942,817
Peter Terwiesch
(4)
13,764
435,906
8,258
261,531
5,507
174,407
27,529
871,844
Morten Wierod
(4)
15,605
494,211
9,363
296,527
6,242
197,685
31,210
988,423
Total Executive Committee
members at December 31, 2023
136,964
4,337,654
82,177
2,602,549
54,791
1,735,237
273,932
8,675,440
(1)
Vesting date April 24, 2026.
(2)
The reference number of shares of the EPS, TSR and sustainability performance factors are valued using the fair value of the ABB shares on the grant
date.
(3)
Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding
taxes. The plan foresees a maximum award of 200 percent of the number of reference shares granted based on the achievement against the predefined
average EPS, relative TSR and sustainability performance targets. Participants are also entitled to receive a dividend equivalent payment at the time of
vesting for each awarded share.
(4)
In addition to the above awards, five members of the EC participated in the 20th launch of the ESAP in 2023, which will allow them to save over a 12-
month period and, in November 2024, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP will, upon
vesting, be entitled to acquire up to 330 ABB shares at an exercise price of CHF 30.49 per share.
135
Compensation Exhibit 45: LTIP grants in 2022
Name
Reference number of shares under
the EPS performance factor of the
2022 launch of the LTIP
(1)(4)
Total estimated value of share
-
based
grants under the EPS performance
factor of the 2022 launch of the
LTIP
(2)(3)
Reference number of shares under
the TSR performance factor of the
2022 launch of the LTIP
(1)(4)
Total estimated value of share
-
based
grants under the TSR performance
factor of the 2022 launch of the
LTIP
(2)(3)
Reference number of shares under
the sustainability performance factor
of the 2022 launch of the LTIP
(1)(4)
Total estimated value of share
-
based
grants under the sustainability
performance factor of the 2022 launch
of the LTIP
(2)(3)
Total number of shares granted under
the 2022 launch of the LTIP
(1)(2)(4)
Total estimated value of share
-
based
grants under the LTIP in 2022
(2)(3)
CHF
CHF
CHF
CHF
Björn Rosengren
42,743
1,205,627
25,646
723,353
17,098
482,274
85,487
2,411,254
Timo Ihamuotila
(5)
15,804
445,770
9,482
267,462
6,323
178,338
31,609
891,570
Carolina Granat
11,574
326,460
6,944
195,858
4,630
130,602
23,148
652,920
Andrea Antonelli (EC member as
of March 1, 2022)
16,762
472,797
10,057
283,667
6,706
189,131
33,525
945,595
Karin Lepasoon (EC member as of
October 1, 2022)
(5)
9,578
270,153
5,747
162,075
3,832
108,108
19,157
540,336
Sami Atiya
(6)
12,771
360,215
7,662
216,112
5,110
144,131
25,543
720,458
Tarak Mehta
(5)
14,847
418,773
8,908
251,258
5,939
167,515
29,694
837,546
Peter Terwiesch
(5)
13,250
373,728
7,950
224,231
5,301
149,526
26,501
747,485
Morten Wierod
(5)
14,368
405,259
8,620
243,156
5,748
162,104
28,736
810,519
Total Executive Committee
members at December 31, 2022
151,697
4,278,782
91,016
2,567,172
60,687
1,711,729
303,400
8,557,683
(1)
Vesting date April 25, 2025.
(2)
The reference number of shares of the EPS, TSR and sustainability performance factors are valued using the fair value of the ABB shares on the grant
date.
(3)
Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding
taxes. The plan foresees a maximum award of 200 percent of the number of reference shares granted based on the achievement against the predefined
average EPS, relative TSR and sustainability performance targets. Participants are also entitled to receive a dividend equivalent payment at the time of
vesting for each awarded share.
(4)
The initial granted number of shares has been increased by 3.7 percent to reflect the impact of the Accelleron spin-off.
(5)
In addition to the above awards, five members of the EC participated in the 19th launch of the ESAP in 2022, which allowed them to save over a 12-
month period and, in November 2023, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP was entitled
to acquire up to 360 ABB shares at an exercise price of CHF 27.99 per share.
(6)
The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in "Item
6. Directors, Senior Management and Employees" of the 2022 Annual Report, reducing the number by 958.
136
Compensation Exhibit 46: EC shareholding overview at December 31, 2023
Unvested at December 31, 2023
Name
Total number of
shares held at
December 31,
2023
Reference number of shares
deliverable under the 2021
performance factors (EPS and
TSR) of the LTIP
(1)
Reference number of shares
deliverable under the 2022
performance factors (EPS, TSR
and sustainability) of the LTIP
(1)
Reference number of shares
deliverable under the 2023
performance factors (EPS, TSR
and sustainability) of the LTIP
(1)
(vesting 2024)
(vesting 2025)
(vesting 2026)
Björn Rosengren
262,334
99,450
85,487
85,708
Timo Ihamuotila
202,000
37,830
31,609
31,691
Carolina Granat
(2)
5,200
27,301
23,148
23,208
Karin Lepasoon
360
—
19,157
19,207
Sami Atiya
100,000
31,201
25,543
25,609
Tarak Mehta
134,710
36,271
29,694
29,770
Peter Terwiesch
100,000
31,201
26,501
27,529
Morten Wierod
141,267
31,201
28,736
31,210
Total Executive Committee members at
December 31, 2023
945,871
294,455
269,875
273,932
(1)
The final 2020 LTIP, 2021 LTIP and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who
are subject to withholding taxes.
(2)
This includes 1,200 shares held by the spouse.
137
Compensation Exhibit 47: EC shareholding overview at December 31, 2022
Unvested at December 31, 2022
Name
Total number of
shares held at
December 31,
2022
Reference number of shares
deliverable under the 2020
performance factors (EPS and
TSR) of the LTIP
(1)(2)
Reference number of shares
deliverable under the 2021
performance factors (EPS and
TSR) of the LTIP
(1)(2)
Reference number of shares
deliverable under the 2022
performance factors (EPS, TSR
and sustainability) of the LTIP
(1)(2)
Replacement share grant for
foregone benefits from former
employer
(2)(3)
(vesting 2023)
(vesting 2024)
(vesting 2025)
(vesting 2023)
Björn Rosengren
94,597
136,589
99,450
85,487
19,604
Timo Ihamuotila
189,034
50,887
37,830
31,609
—
Carolina Granat
(4)
5,200
—
27,301
23,148
—
Andrea Antonelli (EC member as of
March 1, 2022)
—
—
7,021
33,525
—
Karin Lepasoon (EC member as of
October 1, 2022)
—
—
—
19,157
—
Sami Atiya
(5)
90,473
42,852
31,201
25,543
—
Tarak Mehta
152,993
48,209
36,271
29,694
—
Peter Terwiesch
132,940
42,852
31,201
26,501
—
Morten Wierod
64,777
40,174
31,201
28,736
—
Total Executive Committee members at
December 31, 2022
730,014
361,563
301,476
303,400
19,604
(1)
The final 2020 LTIP, 2021 LTIP and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who
are subject to withholding taxes.
(2)
Initial number of shares granted have been increased by 3.7 percent to reflect the impact of the spin-off of the Accelleron business.
(3)
The replacement share grant was settled 65 percent in shares and 35 percent in cash.
(4)
This includes 1,200 shares held by the spouse.
(5)
The disclosure of the number of shares granted under the LTIP in 2022 for Sami Atiya has been corrected from the amount previously disclosed in "Item
6. Directors, Senior Management and Employees" of the 2022 Annual Report, reducing the number by 958.
138
Compensation Exhibit 48: Targeted and realized EC total compensation in 2023
Target
compensation
(in CHF)
Base salary
Pension
benefits
Other
benefits
(1)
Target
short-term
incentive
(2)
Grant fair
value of
2020 LTIP
(3)
Grant fair
value of 2020
replacement
share grant
(4)
Target total
variable
compensation
Target total
compensation
Björn Rosengren
1,785,006
775,090
1,703,295
1,785,000
1,970,457
406,436
4,161,893
8,425,284
Timo Ihamuotila
990,004
541,130
761,604
990,000
734,103
n.a.
1,724,103
4,016,841
Carolina Granat
725,012
440,166
346,158
725,000
n.a.
n.a.
725,000
2,236,336
Karin Lepasoon
600,000
254,677
142,949
600,000
n.a.
n.a.
600,000
1,597,626
Sami Atiya
800,009
499,122
644,492
800,000
618,193
n.a.
1,418,193
3,361,816
Tarak Mehta
930,009
526,130
717,326
930,000
695,462
n.a.
1,625,462
3,798,927
Peter Terwiesch
855,003
505,595
637,209
860,000
618,193
n.a.
1,478,193
3,476,000
Morten Wierod
962,502
505,842
654,043
975,000
579,552
n.a.
1,554,552
3,676,939
Total
7,647,545
4,047,752
5,607,076
7,665,000
5,215,960
406,436
13,287,396
30,589,769
Realized
compensation
(in CHF)
Base salary
Pension
benefits
Other
benefits
(1)(5)
Short-term
incentive
2023
(6)
Realized
value of
2020 LTIP
(7)
Realized
value of 2020
replacement
share grant
(8)
Total variable
compensation
Total
compensation
Björn Rosengren
1,785,006
775,090
1,759,098
2,659,650
8,347,494
626,740
11,633,884
15,953,078
Timo Ihamuotila
990,004
541,130
786,869
1,386,000
3,109,900
n.a.
4,495,900
6,813,903
Carolina Granat
725,012
440,166
369,285
1,087,500
n.a.
n.a.
1,087,500
2,621,963
Karin Lepasoon
600,000
254,677
162,089
900,000
n.a.
n.a.
900,000
1,916,766
Sami Atiya
800,009
499,122
654,700
960,000
2,618,862
n.a.
3,578,862
5,532,693
Tarak Mehta
930,009
526,130
746,993
1,395,000
2,946,264
n.a.
4,341,264
6,544,396
Peter Terwiesch
855,003
505,595
657,565
1,179,060
2,618,862
n.a.
3,797,922
5,816,085
Morten Wierod
962,502
505,842
685,145
1,462,500
2,455,193
n.a.
3,917,693
6,071,182
Total
7,647,545
4,047,752
5,821,744
11,029,710
22,096,575
626,740
33,753,025
51,270,066
Realized
achievement level
Base salary
Pension
benefits
Other
benefits
(1)
Short-term
incentive
2023
(6)
Realized
value of
2020 LTIP
in %
(7)
Realized
value of 2020
replacement
share grant in
%
(8)
Total variable
compensation
Total
compensation
Björn Rosengren
100.0%
100.0%
103.3%
149.0%
423.6%
154.2%
279.5%
189.3%
Timo Ihamuotila
100.0%
100.0%
103.3%
140.0%
423.6%
n.a.
260.8%
169.6%
Carolina Granat
100.0%
100.0%
106.7%
150.0%
n.a.
n.a.
150.0%
117.2%
Karin Lepasoon
100.0%
100.0%
113.4%
150.0%
n.a.
n.a.
150.0%
120.0%
Sami Atiya
100.0%
100.0%
101.6%
120.0%
423.6%
n.a.
252.4%
164.6%
Tarak Mehta
100.0%
100.0%
104.1%
150.0%
423.6%
n.a.
267.1%
172.3%
Peter Terwiesch
100.0%
100.0%
103.2%
137.1%
423.6%
n.a.
256.9%
167.3%
Morten Wierod
100.0%
100.0%
104.8%
150.0%
423.6%
n.a.
252.0%
165.1%
Average
100.0%
100.0%
105.0%
143.3%
423.6%
154.2%
233.6%
158.2%
(1)
Other benefits comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items.
(2)
Target short-term incentive corresponds to 100 percent of the latest applicable annual base salary.
(3)
Represents the 2020 LTIP grant date fair value as per April 27, 2020, as disclosed in our Annual Report 2020.
(4)
Represents the 2020 grant fair value related to the second tranche (out of two tranches) of the replacement grant, as disclosed in our Annual Report 2020.
(5)
Differences between realized and target values due to higher social security payments related to AIP awards above target values.
(6)
Represents accrued short-term incentive for the year 2023, which will be paid in 2024, after the publication of ABB's financial results. STI is linked to the targets and
goals defined in each EC member's Annual Incentive Plan.
(7)
Valued at CHF 32.25, the closing price of the ABB share on the day of vesting.
(8)
Valued at CHF 31.97, the closing price of the ABB share on the day of vesting.
139
—
Employees
A
breakdown of our employees by geographic region is as follows:
December 31,
2023
2022
2021
Europe
51,400
49,700
50,000
The Americas
26,400
26,400
25,600
Asia, Middle East and Africa
30,100
29,000
28,800
Total
107,900
105,100
104,400
The proportion of our employees that are represented by labor unions or are subject to collective bargaining
agreements varies based on the labor practices of each country in which we operate.
Item 7. Major Shareholders and Related Party Transactions
—
Major shareholders
At December 31, 2023, we had approximately 638,000 shareholders. Approximately 401,000 were
U.S. holders, of which approximately 420 were record holders. Based on the share register, U.S. holders
(including holders of ADSs) held approximately 11 percent of the total share capital and voting rights as
registered in the Commercial Register on that date.
For information on major shareholders see “Item 6. Directors, Senior Management and Employees—
Shareholders—Significant shareholders”.
—
Related party transactions
Affiliates and associates
In the normal course of our business, we purchase products from, sell products to and engage in other
transactions with entities in which we hold an equity interest. The amounts involved in these transactions are
not material to ABB Ltd. Prior to its sale in December 2022, our most significant equity method investment
was in Hitachi Energy Ltd (see “Note 4 - Acquisitions, divestments and equity-accounted companies” for
details). Also, in the normal course of our business, we engage in transactions with businesses that we have
divested. We believe that the terms of the transactions we conduct with these companies are negotiated on
an arm’s length basis.
Key management personnel
For information on important business relationships between ABB and its Board and EC members, or
companies and organizations represented by them, see “Item 6. Directors, Senior Management and
Employees” sections entitled “Board of Directors—Business Relationships between ABB and its Board
members” and “Executive Committee—Business Relationships between ABB and its EC members”.
140
Item 8. Financial Information
—
Consolidated Statements and other financial information
See “Item 18. Financial Statements”.
—
Legal proceedings
Regulatory
Based on findings during an internal investigation, ABB self-reported to the Securities and Exchange
Commission (SEC) and the Department of Justice (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 our
dealings with Eskom and related persons. Many of those parties have expressed an interest in, or
commenced an investigation into, these matters and we are cooperating fully with them. ABB paid
$104 million to Eskom in December 2020 as part of a full and final settlement with Eskom and the SIU
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. We made a provision of approximately
$325 million, which was recorded in Other income (expense), net, during the third quarter of 2022. In
December 2022, ABB 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 we do not believe that we will
need to record any additional provisions for this matter.
General
In addition, we are aware of proceedings, or the threat of proceedings, against us and others in respect of
private claims by customers and other third parties with regard to certain actual or alleged anticompetitive
practices. Also, we are 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, we will bear the related costs including costs necessary to resolve them.
Liabilities recognized
At December 31, 2023 and 2022, we had aggregate liabilities of $101 million and $86 million, respectively,
included in “Other provisions” and “Other non-current liabilities”, for the above regulatory, compliance and
legal contingencies, and none of the individual liabilities recognized was significant. As it is not possible to
make an informed judgment on, or reasonably predict, the outcome of certain matters and as it is not
possible, based on information currently available to management, to estimate the maximum potential liability
on other matters, there could be adverse outcomes beyond the amounts accrued.
—
Dividends and dividend policy
Payment of dividends is subject to general business conditions, ABB’s current and expected financial
condition and performance and other relevant factors including growth opportunities. ABB’s current dividend
policy is to pay a rising, sustainable annual dividend per share over time.
The unconsolidated statutory financial statements of ABB Ltd are prepared in accordance with Swiss law.
Based on these financial statements, dividends may be paid only if ABB Ltd has sufficient distributable profits
from previous years or sufficient free reserves to allow the distribution of a dividend. As a holding company,
ABB Ltd’s main sources of income are dividend and interest payments from its subsidiaries.
141
At December 31, 2023, the total unconsolidated stockholders’ equity of ABB Ltd was CHF 3,917 million,
including CHF 226 million representing share capital, CHF 4,982 million representing reserves and
CHF 1,291 million representing a reduction of equity for treasury shares. Of the reserves, CHF 1,291 million
relating to treasury shares and CHF 45 million representing 20 percent of share capital, at December 31,
2023, are restricted by law and not available for distribution.
With respect to the years ended December 31, 2019, 2020, 2021 and 2022, ABB Ltd paid a dividend of
CHF 0.80 (USD 0.82) per share, CHF 0.80 (USD 0.86) per share, CHF 0.82 (USD 0.88) per share and
CHF 0.84 (USD 0.91) per share, respectively. The USD amounts for each of the foregoing dividend payments
made in CHF have been translated using the average rates of the months in which the dividends were paid.
With respect to the year ended December 31, 2023, ABB Ltd’s Board of Directors has proposed to pay a
dividend of CHF 0.87 per share to shareholders. The distribution is subject to approval by shareholders at
ABB Ltd’s 2024 Annual General Meeting (AGM).
For further information on dividends and dividend policy see “Item 6. Directors, Senior Management and
Employees—Shareholders—Shareholders’ rights—Shareholders’ dividend rights”.
—
Significant changes
Except as otherwise described in this Annual Report, there has been no significant change in our financial
position since December 31, 2023.
Item 9. The Offer and Listing
—
Markets
The shares of ABB Ltd. are principally traded on the SIX Swiss Exchange (under the symbol “ABBN”) and on
the NASDAQ OMX Stockholm Exchange (under the symbol “ABB”). ADSs of ABB Ltd. were traded on the
New York Stock Exchange (NYSE) under the symbol “ABB” until May 23, 2023. On May 12, 2023, we filed
the required Form 25 with the SEC to delist ABB’s ADSs from trading on the NYSE. In connection with the
delisting of our ADSs from the NYSE which became effective May 23, 2023, we converted our ADS program
from a sponsored Level II program into a sponsored Level I program. The new Level I ADSs were assigned a
new stock ticker (ABBNY) upon delisting and are now traded on the over-the-counter (OTC) markets.
ABB Ltd.’s ADSs are issued under the Amended and Restated Deposit Agreement, dated May 7, 2001, as
amended from time to time, with Citibank, N.A. as depositary. Each ADS represents one share.
There were no suspensions in the trading of our shares in 2023, 2022 and 2021.
142
Item 10. Additional Information
—
Description of share capital and articles of incorporation
This section summarizes the material provisions of ABB Ltd’s Articles of Incorporation and the Swiss Code of
Obligations relating to the shares of ABB Ltd. The description is only a summary and is qualified in its entirety
by ABB Ltd’s Articles of Incorporation, a copy of which has been filed as Exhibit 1.1 to this Annual Report,
ABB Ltd’s filings with the commercial register of the Canton of Zurich (Switzerland) and Swiss statutory law.
Other than as disclosed below, the information called for by this Item is set forth in Exhibit 2.4 to this Annual
Report and is incorporated by reference into this Annual Report.
Registration and Business Purpose
ABB Ltd was registered as a corporation (
Aktiengesellschaft
) in the commercial register of the Canton of
Zurich (Switzerland) on March 5, 1999, under the name of “New ABB Ltd” and its name was subsequently
changed to “ABB Ltd”. Its commercial register number is CHE-101.049.653.
ABB Ltd’s purpose, as set forth in Article 2 of its Articles of Incorporation, is to hold interests in business
enterprises, particularly in enterprises active in the areas of industry, trade and services. It may acquire,
encumber, exploit or sell real estate and intellectual property rights in Switzerland and abroad and may also
finance other companies. It may engage in all types of transactions and may take all measures that appear
appropriate to promote, or that are related to, its purpose. Finally, in pursuing its purpose, ABB Ltd shall strive
for long-term sustainable value creation.
Capital Structure
For a description of ABB Ltd’s capital structure (including issued shares, contingent share capital and capital
band) and its dividend policy, see “Item 6. Directors, Senior Management and Employees—Shares” and
“Item 8. Financial Information—Dividends and Dividend Policy”.
Shareholders’ Meetings
Under Swiss law, the annual general meeting of shareholders must be held within 6 months after the end of
ABB Ltd’s fiscal year. Annual general meetings of shareholders are convened by the board of directors,
liquidators or representatives of bondholders or, if necessary, by the statutory auditors. The board of directors
is further required to convene an extraordinary general meeting of shareholders if so resolved by the
shareholders in a general meeting of shareholders or if so requested by one or more shareholders holding in
aggregate at least 5 percent of ABB Ltd’s share capital or votes. A general meeting of shareholders is
convened by publishing a notice in the Swiss Official Gazette of Commerce (
Schweizerisches
Handelsamtsblatt
) at least 20 days prior to the meeting date. In addition, ABB usually publishes notices for its
general meetings in certain newspapers as well as on its website. Such notices contain information as to
procedures to be followed by shareholders in order to participate and exercise voting rights at the
shareholders’ meetings.
One or more shareholders who, alone or together, hold at least 0.02 percent of the share capital or votes of
ABB Ltd may demand that an item be included on the agenda or that a proposal relating to an agenda item
be included in the notice convening the general meeting of shareholders. Such a request must be received by
ABB Ltd in writing at least 40 days prior to the meeting and shall specify the agenda items and the proposal
or proposals together with a brief statement of the reasons.
143
The following powers are vested exclusively in the general meeting of shareholders:
•
•
Compensation Committee, the auditors and the independent proxy,
•
•
balance sheet, in particular with regard to dividends,
•
required for this purpose,
•
•
to Article 34 of ABB Ltd’s Articles of Incorporation,
•
management,
•
•
•
shareholders by law or under ABB Ltd’s Articles of Incorporation or that are submitted to the
general meeting of shareholders by the Board of Directors, subject to Art. 716a of the Swiss
Code of Obligations.
There is no provision in ABB Ltd’s Articles of Incorporation requiring a quorum for the holding of
shareholders’ meetings.
Unless otherwise required by law or ABB Ltd’s Articles of Incorporation, general meetings of shareholders
shall pass resolutions and decide elections upon a majority of the votes represented. If the first ballot fails to
result in an election and more than one candidate is standing for election, the presiding officer shall order a
second ballot in which a relative majority shall be decisive.
A resolution passed with a qualified majority of at least two-thirds of the votes represented and of a majority
of the par value of shares represented shall be required for resolutions of a general meeting of shareholders,
in particular, for:
•
•
•
•
•
•
contribution or by set-off against a claim, and the grant of special benefits,
•
144
•
•
•
•
•
•
•
In addition, the introduction of any provision in ABB Ltd’s Articles of Incorporation providing for a qualified
majority must be resolved in accordance with such qualified majority voting requirements.
Pursuant to the Swiss Federal Merger Act, special quorum rules apply by law to a merger (
Fusion
) (including
a possible squeeze-out merger), de-merger (
Spaltung
), or conversion (
Umwandlung
) of ABB Ltd.
At general meetings of shareholders, shareholders can be represented by the independent proxy elected by
the shareholders (
unabhängiger Stimmrechtsvertreter
), by their legal representative or, by means of a written
proxy, any other proxy who need not be a shareholder. All shares held by one shareholder may be
represented by only one representative. The presiding officer of the general meeting of shareholders shall
determine whether resolutions and elections are to be decided by open ballot, in writing or electronically. The
presiding officer may at any time order that an election or resolution be repeated if, in his view, the results of
the vote are in doubt. In this case, the preceding election or resolution shall be deemed to have not occurred.
Only shareholders registered in ABB Ltd’s share register with the right to vote are entitled to participate at
shareholders’ meetings. For practical reasons, shareholders must be registered in the share register with the
right to vote no later than 6 business days prior to a shareholders’ meeting in order to be entitled to
participate and vote at such shareholders’ meeting.
Holders of Euroclear Sweden AB-registered shares are provided with financial and other information on
ABB Ltd in the Swedish language in accordance with regulatory requirements and market practice. For
shares that are registered in the system of Euroclear Sweden AB in the name of a nominee, such information
is to be provided by the nominee.
Borrowing Power
Neither Swiss law nor ABB Ltd’s Articles of Incorporation restrict in any way ABB Ltd’s power to borrow and
raise funds. The decision to borrow funds is taken by or under the direction of the Board of Directors or the
Executive Committee, and no shareholders’ resolution is required.
Directors and Officers
For further information regarding the material provisions of ABB Ltd’s Articles of Incorporation and the Swiss
Code of Obligations regarding directors and officers, see “Item 6. Directors, Senior Management and
Employees—Board of Directors—Board governance”.
Auditors
The auditors are elected by the shareholders at the general meeting of shareholders. Pursuant to ABB Ltd’s
Articles of Incorporation, their term of office is one year.
145
KPMG AG, Zurich, Switzerland, assumed the sole auditing mandate of the consolidated financial statements
of the ABB Group beginning in the year ended December 31, 2018. The auditor in charge and responsible for
the mandate, Achim Wolper, began serving in this capacity in respect of the financial year ended
December 31, 2023.
See “Item 16C. Principal Accountant Fees and Services” for information regarding the fees paid to
KPMG AG.
Revision of Swiss Corporate Law
Swiss corporate law has been revised, effective as of January 1, 2023. The main objectives of the revision
were to strengthen shareholder rights, improve corporate governance and modernize corporate law in
general. Swiss corporations are required to amend their articles of incorporation and other organizational
regulations, as applicable, for compliance with the new law by the end of 2024 at the latest. The shareholders
of ABB approved the necessary changes to ABB’s Articles of Incorporation as proposed by the Board of
Directors at ABB’s Annual General Meeting in March 2023.
—
Material contracts
The following descriptions of the material provisions of the referenced agreements do not purport to be
complete and are subject to, and qualified in their entirety by reference to, the agreements which have been
filed as exhibits to this Annual Report.
Revolving Credit Facilities
On December 16, 2019, ABB entered into a syndicated $2 billion five-year revolving credit facility with the
right to extend for up to two additional years in accordance with its terms. ABB amended and restated its
facility on February 16, 2023, for the purpose of addressing the discontinuation of LIBOR. For a description of
the facility, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—
Credit Facility” and “Note 12 - Debt” to our Consolidated Financial Statements. See Exhibits 4.1 and 4.6 to
this Annual Report.
2012 Notes Indenture
On May 8, 2012, ABB’s subsidiary, ABB Finance (USA) Inc., issued $500,000,000 aggregate principal
amount of 1.625% notes due 2017, $1,250,000,000 aggregate principal amount of 2.875% notes due 2022
and $750,000,000 aggregate principal amount of 4.375% notes due 2042 under an Indenture and a First
Supplemental Indenture, dated as of May 8, 2012, among ABB Finance (USA) Inc., ABB and Deutsche Bank
Trust Company Americas (the “2012 Indenture”). The notes due in 2017 and 2022 were repaid at maturity. In
2020, the notes due 2042 were subject to a cash tender offer by the issuer and redeemed in part. Pursuant to
the terms of the 2012 Indenture, ABB has fully and unconditionally guaranteed payment of principal,
premium, if any, and interest in respect of the outstanding notes. See Exhibits 4.2 and 4.3 to this Annual
Report.
146
2018 Notes Indenture
On April 3, 2018, ABB’s subsidiary, ABB Finance (USA) Inc., issued (i) $300,000,000 aggregate principal
amount of 2.8% notes due 2020 (ii) $450,000,000 aggregate principal amount of 3.375% notes, due 2023,
and (iii) $750,000,000 aggregate principal amount of 3.8% notes due 2028 under an Indenture and a First
Supplemental Indenture dated, dated as of April 3, 2018, among ABB Finance (USA) Inc., ABB and Deutsche
Bank Trust Company Americas (the “2018 Indenture”). The notes due in 2020 were repaid at maturity. The
notes due 2023 were redeemed in full in 2020 following the exercise of ABB’s early redemption option. The
notes due 2028 were subject to a cash tender offer in 2020 by the issuer and redeemed in part. Pursuant to
the terms of the 2018 Indenture, ABB has fully and unconditionally guaranteed payment of principal,
premium, if any, and interest in respect of the outstanding notes. See Exhibits 4.4 and 4.5 to this Annual
Report.
—
Exchange controls
Other than in connection with Swiss government sanctions imposed on Belarus, Burundi, the Central African
Republic, the Democratic Republic of the Congo, Guinea, the Republic of Guinea-Bissau, Haiti, the Islamic
Republic of Iran, the Republic of Iraq, Lebanon, Libya, the Republic of Mali, Moldova, Myanmar (Burma),
Nicaragua, the Democratic People's Republic of Korea (North Korea), Somalia, the Republic of South Sudan,
Sudan, Syria, Venezuela, Yemen, Zimbabwe, persons and organizations with connection to the late
Osama bin Laden, the “al Qaeda” group or the Taliban, certain persons connected with the assassination of
Rafik Hariri and sanctions in connection with the situation in the Ukraine, there are currently no laws, decrees
or regulations in Switzerland that restrict the export or import of capital, including, but not limited to, Swiss
foreign exchange controls on payment of dividends, interest or liquidation proceeds, if any, to non-Swiss
resident holders of shares. In addition, there are no limitations imposed by Swiss law or ABB Ltd’s Articles of
Incorporation on the rights of non-Swiss residents or non-Swiss citizens as shareholders to hold shares or to
vote.
—
Taxation
Swiss Taxation
Withholding Tax on Dividends and Other Distributions
Dividends paid and similar cash or in-kind distributions that we make to a holder of shares or ADSs (including
dividends on liquidation proceeds and stock dividends and taxable income resulting from partial liquidation)
are subject to a Swiss federal withholding tax at a rate of 35 percent unless such distribution qualifies as a
tax-free reorganization under applicable Swiss legislation. A repurchase of shares by us for the purpose of a
capital reduction is defined as a partial liquidation of the Company. In this case, the difference between the
nominal value of the shares and their repurchase price is qualified as taxable income. The same would be
true upon a repurchase of shares if we were not to dispose of the repurchased shares within six years after
the repurchase, or if 10 percent of outstanding shares were exceeded. We must withhold the tax from the
gross distribution and pay it to the Swiss Federal Tax Administration.
147
Obtaining a Refund of Swiss Withholding Tax for U.S. Residents
The Convention between the Swiss Confederation and the United States of America for the Avoidance of
Double Taxation with Respect to Taxes on Income, which was signed on October 2, 1996 (including any
amendments thereto) and which we will refer to in the following discussion as the Treaty, allows U.S. resident
individuals or U.S. corporations to seek a refund of the Swiss withholding tax paid in respect of our shares or
ADSs if they qualify for benefits under the Treaty. U.S. resident individuals and U.S. corporations holding less
than 10 percent of the voting rights in respect of our shares or ADSs are entitled to seek a refund of
withholding tax to the extent the tax withheld exceeds 15 percent of the gross dividend or other distribution.
U.S. corporations holding 10 percent or more of the voting rights of our shares or ADSs are entitled to seek a
refund of withholding tax to the extent the tax withheld exceeds 5 percent of the gross dividend or other
distribution. Qualifying U.S. pension or other retirement arrangements and – as from January 1, 2020 – also
individual retirement saving plans that do not control the Company are entitled to seek a full refund of
withholding tax.
Claims for refunds must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, 3003 Bern,
Switzerland, no later than December 31 of the third year following the calendar year in which the dividend or
similar distribution became payable. The form used for obtaining a refund is Swiss Tax Form 82 (82C for
companies; 82E for other entities; 82I for individuals; 82R for regulated investment companies (RICs)). This
form may be obtained from any Swiss Consulate General in the United States, from the Swiss Federal Tax
Administration at the address above or under
www.estv.admin.ch
. The form must be filled out in triplicate with
each copy duly completed and signed before a notary public in the United States. The form must be
accompanied by evidence of the deduction of withholding tax withheld at the source (including tax voucher
issued by the custodian bank).
Stamp Duties upon Transfer of Securities
The sale of shares or ADSs, whether by Swiss resident or non-resident holders, may be subject to a Swiss
securities transfer stamp duty of up to 0.15 percent calculated on the sale proceeds if it occurs through or
with a Swiss bank or other Swiss securities dealer as defined in the Swiss Federal Stamp Tax Act. In addition
to the stamp duty, the sale of shares or ADSs by or through a member of the SIX Swiss Exchange may be
subject to a stock exchange levy.
United States Taxes
The following is a summary of the material U.S. federal income tax consequences of the ownership by U.S.
holders (defined below) of shares or ADSs. This summary does not purport to address all of the tax
considerations that may be relevant to a decision to purchase, own or dispose of shares or ADSs. This
summary assumes that U.S. holders hold shares or ADSs as capital assets for U.S. federal income tax
purposes. This summary does not address tax considerations applicable to holders that may be subject to
special tax rules, such as U.S. expatriates, dealers or traders in securities or currencies, partnerships owning
shares or ADSs, tax-exempt entities, banks and other financial institutions, regulated investment companies,
traders in securities that elect to apply a mark-to-market method of accounting, insurance companies, holders
that own (or are deemed to own) at least 10 percent or more (by voting power or value) of the stock of ABB,
investors whose functional currency is not the U.S. dollar, persons subject to the alternative minimum tax,
persons subject to special tax accounting rules as a result of any item of gross income with respect to the
shares or ADSs being taken into account in an applicable financial statement, persons that will hold shares or
ADSs as part of a position in a straddle or as part of a hedging or conversion transaction for U.S. tax
purposes and persons who are not U.S. holders. This discussion does not address aspects of U.S. taxation
other than U.S. federal income taxation, nor does it address state, local or foreign tax consequences of an
investment in shares or ADSs.
This summary is based (i) on the Internal Revenue Code of 1986, as amended, U.S. Treasury Regulations
and judicial and administrative interpretations thereof, in each case as in effect and available on the date of
this registration statement and (ii) in part, on representations of the depositary and the assumption that each
obligation in the deposit agreement and any related agreement will be performed in accordance with its
terms. The U.S. tax laws and regulations and the interpretation thereof are subject to change, which change
could apply retroactively and could affect the tax consequences described below.
148
For purposes of this summary, a U.S. holder is a beneficial owner of shares or ADSs that, for U.S. federal
income tax purposes, is:
•
•
created or organized in or under the laws of the United States or any state, including the District
of Columbia,
•
•
purposes or if (i) a U.S. court can exercise primary supervision over its administration and (ii) one
or more U.S. persons have the authority to control all of its substantial decisions.
If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax
purposes) is a beneficial owner of shares or ADSs, the treatment of a partner in the partnership will generally
depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership
that holds shares or ADSs you should consult your tax advisor.
Each prospective purchaser should consult the purchaser’s tax advisor with respect to the U.S. federal, state,
local and foreign tax consequences of acquiring, owning or disposing of shares or ADSs.
Ownership of ADSs in General, and Exchange of ADSs for Shares
For U.S. federal income tax purposes, a holder of ADSs generally will be treated as the owner of the shares
represented by the ADSs, and the following discussion assumes that such treatment will be respected. If so,
no gain or loss will be recognized upon an exchange of shares for ADSs or an exchange of ADSs for shares.
The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder
of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with
the beneficial ownership of the underlying shares. Accordingly, the creditability of foreign taxes and the
availability of the reduced tax rate for dividends received by certain non-corporate U.S. holders, if any, as
described below, could be affected by actions taken by intermediaries in the chain of ownership between the
holder of an ADS and ABB.
Distributions
In general, for U.S. federal income tax purposes, the gross amount of distributions (other than certain
distributions, if any, of shares distributed to all shareholders of ABB, including holders of ADSs) made to you
with respect to shares or ADSs, including the amount of any Swiss taxes withheld from the distribution, will
constitute dividends and be includible in gross income in the year received to the extent of ABB’s current and
accumulated earnings and profits (as determined under U.S. federal income tax principles).
149
Non-corporate U.S. holders generally will be taxed on such distributions at the lower rates applicable to
long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) with respect to
distributions during 2022, provided that the U.S. holder meets certain holding period and other requirements
and provided that such distributions constitute “qualified dividends” for U.S. federal income tax purposes.
Distributions treated as dividends will not be treated as “qualified dividends” if we were to be treated as a
“passive foreign investment company” (PFIC) for U.S. federal income tax purposes in the year that the
dividend is paid or in the year prior to the year that the dividend is paid. Based on certain estimates of its
gross income and gross assets and the nature of its business, ABB believes that it will not be classified as a
PFIC for the taxable year ended December 31, 2022, and does not expect to be classified as a PFIC for the
taxable year ending December 31, 2023. ABB’s status in the current year and in future years will depend on
its assets and activities in those years. ABB has no reason to believe that its assets or activities will change in
a manner that would cause it to be classified as a PFIC. However, as PFIC status is a factual matter that
depends on, among other things, the composition of the income and assets, and the market value of the
assets as reflected in market capitalization, of ABB and its subsidiaries that must be determined annually at
the close of each taxable year, there can be no certainty regarding ABB’s PFIC status in any particular year
until the end of that year. Furthermore, because the value of our gross assets is likely to be determined in
large part by reference to our market capitalization, a decline in the value of our shares or ADSs may result in
our becoming a PFIC. Accordingly, there can be no assurance with respect to our status as a PFIC for our
current taxable year or any future taxable year. The remainder of this discussion assumes that ABB will not
be classified as a PFIC. U.S. holders are urged to consult their own tax advisors regarding the availability to
them of the reduced dividend rate in light of their own particular circumstances and the consequences to
them if ABB were to be treated as a PFIC with respect to any taxable year.
Dividends paid to U.S. corporate holders will not be eligible for the dividends received deduction generally
allowed to corporate U.S. holders.
If you are a U.S. holder and distributions with respect to shares or ADSs exceed ABB’s current and
accumulated earnings and profits as determined under U.S. federal income tax principles, then the excess
generally would be treated first as a tax-free return of capital to the extent of your adjusted tax basis in the
shares or ADSs. Any amount in excess of the amount of the dividend and the return of capital generally
would be treated as capital gain. ABB does not maintain calculations of its earnings and profits under U.S.
federal income tax principles, so a U.S. holder should expect all cash distributions to be reported as
dividends for U.S. federal income tax purposes.
If you are a U.S. holder, then dividends paid in Swiss francs, including the amount of any Swiss taxes
withheld from the dividends, will be included in your gross income in an amount equal to the U.S. dollar value
of the Swiss francs calculated by reference to the spot exchange rate in effect on the day the dividends are
includible in income. In the case of ADSs, dividends generally are includible in income on the date they are
received by the depositary, regardless of whether the payment is in fact converted into U.S. dollars at that
time. If dividends paid in Swiss francs are converted into U.S. dollars on the day they are includible in
income, then you generally should not be required to recognize foreign currency gain or loss with respect to
the conversion. However, any gains or losses resulting from the conversion of Swiss francs between the time
of the receipt of dividends paid in Swiss francs and the time the Swiss francs are converted into U.S. dollars
will be treated as ordinary income or loss to you. The amount of any distribution of property other than cash
will be the fair market value of the property on the date of distribution.
150
If you are a U.S. holder, then dividends received by you with respect to shares or ADSs will be treated as
foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to
certain conditions and limitations, Swiss tax withheld on dividends may be deducted from your taxable
income or credited against your U.S. federal income tax liability. However, to the extent that you would be
entitled to a refund of Swiss withholding taxes pursuant to the U.S.-Switzerland tax treaty, you may not be
eligible for a U.S. foreign tax credit with respect to the amount of such withholding taxes which may be
refunded, even if you fail to claim the refund. See “—Swiss Taxation—Obtaining a Refund of Swiss
Withholding Tax for U.S. Residents”. The limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of income. For this purpose, dividends distributed by ABB generally will
constitute passive income. The rules relating to the determination of the U.S. foreign tax credit are complex,
and you should consult your tax advisor to determine whether and to what extent you would be entitled to this
credit.
Sale, Exchange or other Taxable Disposition of Shares or ADSs
If you are a U.S. holder that holds shares or ADSs as capital assets, then you generally will recognize capital
gain or loss for U.S. federal income tax purposes upon a sale, exchange or other taxable disposition of your
shares or ADSs in an amount equal to the difference between your adjusted tax basis in the shares or ADSs
and the amount realized on their disposition. If you are a non-corporate U.S. holder, the maximum marginal
U.S. federal income tax rate applicable to the gain is generally lower than the maximum marginal U.S. federal
income tax rate applicable to ordinary income (other than certain dividends) if your holding period for the
shares or ADSs exceeds one year (i.e., long term capital gains). If you are a U.S. holder, then the gain or
loss, if any, recognized by you generally will be treated as U.S. source income or loss, for U.S. foreign tax
credit purposes.
If you are a U.S. holder and you receive any foreign currency on the disposition of shares or ADSs, the
amount realized will be the U.S. dollar value of the payment received, translated at the spot rate of exchange
on the date of taxable disposition. If the shares are treated as traded on an established securities market, a
cash basis U.S. holder and an accrual basis U.S. holder who has made a special election (which must be
applied consistently from year to year and cannot be changed without the consent of the U.S. Internal
Revenue Service) will determine the U.S. dollar value of the amount realized in foreign currency by
translating the amount received at the spot rate of exchange on the settlement date of the disposition. An
accrual basis U.S. holder that does not make the special election will recognize U.S. source ordinary income
or loss as a result of currency fluctuations between the trade date and the settlement date of the disposition
of the shares or ADSs.
Medicare Tax
For taxable years beginning after December 31, 2012, certain U.S. holders who are individuals, estates or
trusts must pay a 3.8 percent tax on the lesser of (i) the U.S. holder’s “net investment income” for the relevant
taxable year and (ii) the excess of the U.S. holder’s modified adjusted gross income for the taxable year over
a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on
the individual’s circumstances). A U.S. holder’s net investment income will generally include its dividend
income and its net gains from the disposition of shares or ADSs, unless such income or net gains are derived
in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of
certain passive or trading activities). If you are a U.S. holder that is an individual, estate or trust, you are
urged to consult your tax advisor regarding the applicability of the Medicare tax to your income and gains in
respect of your investment in shares or ADSs.
Information with Respect to Foreign Financial Assets
Certain U.S. holders who are individuals (and certain entities) that hold an interest in “specified foreign
financial assets” (which may include the shares) are required to report information relating to such assets,
subject to certain exceptions (including an exception for shares held in accounts maintained by certain
financial institutions). Penalties can apply if U.S. holders fail to satisfy such reporting requirements. U.S.
holders should consult their tax advisors regarding the effect, if any, of this requirement on their ownership
and disposition of the shares.
151
Backup Withholding and Information Reporting
U.S. backup withholding tax and information reporting requirements generally apply to certain payments to
certain non-corporate holders of stock. Information reporting generally will apply to payments of dividends on,
and to proceeds from the sale or redemption of, shares or ADSs made within the United States to a holder of
shares or ADSs (other than an exempt recipient, including a corporation, a payee that is not a U.S. holder
that provides an appropriate certification, and certain other persons).
A payor will be required to withhold backup withholding tax from any payments of dividends on, or the
proceeds from the sale or redemption of, shares or ADSs within the United States to you, unless you are an
exempt recipient, if you fail to furnish your correct taxpayer identification number or otherwise fail to establish
an exception from backup withholding tax requirements. U.S. holders who are required to establish their
exempt status may be required to provide such certification on U.S. Internal Revenue Service Form W-9.
Backup withholding is not an additional tax. The amount of any backup withholding from a payment to you
may be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund,
provided that the required information is furnished timely to the U.S. Internal Revenue Service.
THE ABOVE SUMMARIES ARE NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF SHARES OR ADSs. PROSPECTIVE
PURCHASERS OF SHARES OR ADSs SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE
TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.
—
Documents on display
We are subject to the informational requirements of the Exchange Act. In accordance with these
requirements, we file reports and other information with the SEC. The SEC maintains a website at
www.sec.gov
information regarding registrants that file electronically with the SEC. Our Annual Reports on Form 20-F,
reports on Form 6-K and other information we submit to the SEC may be accessed through this website.
—
Annual Report to Security Holders
The Company intends to submit any annual report provided to security holders in electronic format as an
exhibit to a current report on Form 6-K.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
Market Risk Disclosure
The continuously evolving financial markets and the dynamic business environment expose us to changes in
foreign exchange, interest rate and other market price risks. We have developed and implemented
comprehensive policies, procedures, and controls to identify, mitigate, and monitor financial risk on a
company-wide basis. To efficiently aggregate and manage financial risks that could impact our financial
performance, we operate a Corporate Treasury function. Corporate Treasury provides an efficient source of
liquidity, financing, risk management and other global financial services to the ABB Group companies. Our
policies do not allow Corporate Treasury or ABB Group companies to perform speculative trading. Market risk
management activities are focused on mitigating material financial risks resulting from our global operating
and financing activities.
152
Corporate Treasury maintains risk management control systems to monitor foreign exchange and interest
rate risks and exposures arising from our underlying business, as well as the associated hedge positions. Our
written policies govern how such exposures are managed. Financial risks are monitored using a number of
analytical techniques including market value and sensitivity analysis. The following quantitative analyses are
based on sensitivity analysis tests, which assume parallel shifts of interest rate yield curves and foreign
exchange rates.
Currency Fluctuations and Foreign Exchange Risk
It is our policy to identify and manage all transactional foreign exchange exposures to minimize risk. With the
exception of certain financing subsidiaries and to the extent certain operating subsidiaries are domiciled in
high inflation environments, the functional currency of each of our companies is considered to be its local
currency. Our policies require our subsidiaries to hedge all contracted foreign exchange exposures, as well
as a portion of their forecast exposures, against their local currency. These transactions are undertaken
mainly with Corporate Treasury.
We have foreign exchange transaction exposures related to our global operating and financing activities in
currencies other than the functional currency in which our entities operate. Specifically, we are exposed to
foreign exchange risk related to future earnings, assets or liabilities denominated in foreign currencies. The
most significant currency exposures relate to operations in the Eurozone area, Sweden and Switzerland. In
addition, we are exposed to currency risk associated with translating our functional currency financial
statements into our reporting currency, which is the U.S. dollar.
Our operating companies are responsible for identifying their foreign currency exposures and entering into
intercompany derivative contracts with Corporate Treasury, where legally possible, to hedge their exposures.
Where local laws restrict our operating companies from entering into intercompany derivatives with Corporate
Treasury, derivative contracts are entered into locally with third-party financial institutions. The intercompany
transactions have the effect of transferring the operating companies’ currency risk to Corporate Treasury, but
create no additional market risks on a consolidated basis. Corporate Treasury then manages this risk by
entering into offsetting transactions with third-party financial institutions. According to our policy, material net
currency exposures are required to be hedged and are primarily hedged with forward foreign exchange
contracts. The majority of the foreign exchange hedge instruments have, on average, a maturity of less than
twelve months. Corporate Treasury also hedges currency risks arising from monetary intercompany
balances, primarily loans receivable from other ABB companies.
At December 31, 2023 and 2022, the net fair value of financial instruments with exposure to foreign currency
rate movements was an asset of $1,053 million and $1,355 million, respectively. The potential loss in fair
value of such financial instruments from a hypothetical 10 percent move in foreign exchange rates against
our position would be approximately $542 million and $511 million for December 31, 2023 and 2022,
respectively. The analysis reflects the aggregate adverse foreign exchange impact associated with
transaction exposures, as well as translation exposures where appropriate. Our sensitivity analysis assumes
a simultaneous shift in exchange rates against our positions exposed to foreign exchange risk and as such
assumes an unlikely adverse case scenario. Exchange rates rarely move in the same direction. Therefore,
the assumption of a simultaneous shift may overstate the impact of changing rates on assets and liabilities
denominated in foreign currencies. The underlying trade-related transaction exposures of the industrial
companies are not included in the quantitative analysis. If these underlying transaction exposures were
included, they would tend to have an offsetting effect on the potential loss in fair value detailed above.
Interest Rate Risk
We are exposed to interest rate risk due to our financing, investing, and liquidity management activities. Our
operating companies primarily invest excess cash with, and receive funding from, Corporate Treasury on an
arm’s length basis. It is our policy that the primary third-party funding and investing activities, as well as the
monitoring and management of the resulting interest rate risk, are the responsibility of Corporate Treasury.
Corporate Treasury adjusts the duration of the overall funding portfolio through derivative instruments in order
to better match underlying assets and liabilities, as well as minimize the cost of capital.
153
At December 31, 2023 and 2022, the net fair value of instruments subject to Interest Rate Risk was an asset
of $1,111 million and $1,617 million, respectively. The potential loss in fair value for such instruments from a
hypothetical 100 basis points parallel shift in interest rates against our position (or a multiple of 100 basis
points where 100 basis points is less than 10 percent of the interest rate) would be approximately
$321 million and $163 million, for December 31, 2023 and 2022, respectively.
Commodity Risk
We enter into commodity derivatives to hedge certain of our raw material exposures. At December 31, 2023
and 2022, the net fair value of commodity derivatives was an asset of $1 million and $1 million, respectively.
The potential loss in fair value for such commodity hedging derivatives from a hypothetical adverse
10 percent move against our position in the underlying commodity prices would be approximately $13 million
and $10 million for December 31, 2023 and 2022, respectively. A portion of our commodity derivatives are
denominated in euro. The foreign exchange risk arising on such contracts has been excluded from the
calculation of the potential loss in fair value from a hypothetical 10 percent move in the underlying commodity
prices as discussed above.
Item 12. Description of Securities Other Than Equity Securities
American Depositary Shares
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank
by the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary bank and by
the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The
brokers in turn may charge these transaction fees to their clients.
Depositary fees payable in connection with distributions of cash or securities to ADS holders and the
depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the
applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from
the cash being distributed. In the case of distributions other than cash (i.e., stock dividends, rights offerings),
the depositary bank charges the applicable fee to the ADS record date holders concurrent with the
distribution. In the case of ADSs registered in the name of the investor (whether certificated or un-certificated
in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the
case of ADSs held in brokerage and custodian accounts via the central clearing and settlement system, The
Depository Trust Company (DTC), the depositary bank, generally collects its fees through the systems
provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and
custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in
DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit
agreement, refuse the requested service until payment is received or may set-off the amount of the
depositary fees from any distribution to be made to the ADS holder.
154
Depositary fees are as follows:
Depositary Service
Fee
Issuance of ADSs
Up to $5.00 per 100 ADSs (or fraction thereof) issued.
Cancellation of ADSs
Up to $5.00 per 100 ADSs (or fraction thereof) cancelled.
Distribution of cash dividends or other cash
distribution
Up to $5.00 per 100 ADSs (or fraction thereof) held.
Distribution of ADSs pursuant to (i) stock
dividends or other free stock distributions, or
(ii) an exercise of rights to purchase
additional ADSs
Up to $5.00 per 100 ADSs (or fraction thereof) held.
Distribution of securities other than ADSs or
rights to purchase additional ADSs
Up to $5.00 per 100 ADSs (or fraction thereof) held.
Depositary service fee
Up to $5.00 per 100 ADSs (or fraction thereof) held on the
applicable record date(s) established by the Depositary.
Registration of ADS transfers
Up to $5.00 per 100 ADSs (or fraction thereof) transferred.
Conversion of ADSs of one series for ADSs of
another series
Up to $5.00 per 100 ADSs (or fraction thereof) converted.
Depositary Payments
In 2023, we received reimbursements from Citibank N.A., the Depositary Bank of our ADS program, of
approximately $2 million to help cover costs related to our ADS program. Those costs, in addition to costs
associated with compliance with U.S. securities laws, include expenses such as listing fees, proxy expenses,
printing and distribution of reports, and other investor relations-related activities.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None
Item 15. Controls and Procedures
Disclosure controls and procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls
and procedures must reflect the fact that there are resource constraints and that management is required to
apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Our Chief Executive Officer, Björn Rosengren, and Chief Financial Officer, Timo Ihamuotila, with the
participation of key corporate senior management and management of key corporate functions, performed an
evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of
December 31, 2023. Based on that evaluation, management, including the Chief Executive Officer and Chief
Financial Officer, has concluded that, as of December 31, 2023, our disclosure controls and procedures were
effective.
155
Management’s annual report on internal control over financial reporting
The Board of Directors and management of the ABB Group are responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.
Management conducted an assessment of the effectiveness of internal control over financial reporting as of
December 31, 2023. In making this assessment, management used the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on this assessment, management has concluded that internal control
over financial reporting was effective as of December 31, 2023.
Report of the independent registered public accounting firm
KPMG’s opinion on the effectiveness of the ABB Group’s internal control over financial reporting as of
December 31, 2023, is included in “Item 18. Financial Statements”.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting that occurred during the period
covered by this annual report that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that David Meline, Gunnar Brock, Denise C. Johnson and
Geraldine Matchett, who serve on our Finance, Audit and Compliance Committee (FACC), are independent
for purposes of serving on the audit committee under Rule 10A-3 of the Exchange Act and the listing
standards promulgated by the New York Stock Exchange. The Board has determined that David Meline,
chairman of the FACC, is an audit committee financial expert, in accordance with the rules of the New York
Stock Exchange.
Item 16B. Code of Ethics
Our Board of Directors as well as our Chief Executive Officer, Chief Financial Officer, principal accounting
officer and persons performing similar functions are bound to adhere to our Code of Conduct, which applies
to all employees of all companies in the ABB Group. Our Code of Conduct is available on our website in the
section “Corporate governance” at
https://global.abb/group/en/about
. ABB intends to satisfy any applicable
disclosure requirement regarding amendment to, or waiver from, a provision of our Code of Conduct by
posting such information on our website at the address and location specified above.
156
Item 16C. Principal Accountant Fees and Services
The aggregate fees for services rendered by
,
), along with
their respective affiliates for professional services were as follows:
KPMG
($ in millions)
2023
2022
Audit Fees
42.0
36.6
Audit-Related Fees
4.4
8.6
Tax Fees
0.3
0.4
Other Fees
—
0.1
Total
46.7
45.7
Audit Fees
Audit fees include the standard audit work performed each fiscal year necessary to allow the auditor to issue
an opinion on our Consolidated Financial Statements (including the integrated audit of internal controls over
financial reporting) and to issue an opinion on the local statutory financial statements of ABB Ltd and its
subsidiaries. Audit fees also include services that can be provided only by the ABB Group auditor such as
pre-issuance reviews of quarterly financial results (no such reviews have been performed) and comfort letters
delivered to underwriters in connection with debt and equity offerings. Included in the 2023 audit fees were
approximately $2.3 million related to audits from 2022 and earlier, which were not agreed until after we had
filed our annual report on Form 20-F with the SEC on February 24, 2023. Included in the 2022 audit fees
were approximately $2.8 million related to audits from 2021 and earlier, which were not agreed until after we
had filed our annual report on Form 20-F with the SEC on February 25, 2022.
Audit-Related Fees
These services consisting primarily of service organization attestation procedures, carve-out financial
statement audits in relation to transactional activities, agreed-upon procedure reports, accounting
consultations, audits of pension and benefit plans, accounting advisory services and other attest services
related to financial reporting that are not required by statute or regulation.
Tax Fees
Fees for tax services represent primarily income tax and indirect tax compliance services as well as tax
advisory services.
All Other Fees
Fees for other services not included in the above three categories.
Pre-Approval Procedures and Policies
In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the SEC,
we utilize a procedure for the review and pre-approval of any services performed by KPMG. The procedure
requires that all proposed engagements of KPMG for audit and permitted non-audit services are submitted to
the FACC for approval prior to the beginning of any such services. In accordance with this policy, all services
performed by and fees paid to KPMG in 2023 and 2022 were approved by the FACC.
Item 16D. Exemptions from the Listing Standards for Audit Committees
None
Item 16E. Purchase of Equity Securities by Issuer and Affiliated Purchasers
The following table sets out certain information about purchases of our own shares made by us or on our
behalf or by affiliated purchasers:
157
Maximum approximate
Total number
value of shares that
Total number
Average price
of shares purchased
may yet be purchased
of shares
paid per share
as part of publicly
under the programs
2023
purchased
(1)
(in $)
announced programs
(2)(3)
($ in millions)
January 1-31
3,070,000
33.55
3,070,000
1,145
February 1-28
2,826,000
33.96
2,826,000
1,049
March 1-31
1,607,000
33.31
1,607,000
—
April 1-30
2,155,000
35.00
2,155,000
925
May 1-31
1,828,783
36.70
1,828,783
857
June 1-30
1,794,908
38.51
1,794,908
788
July 1-31
5,565,835
40.09
1,715,835
721
August 1-31
2,925,000
38.24
1,825,000
651
September 1-30
2,703,974
36.53
1,703,974
589
October 1-31
3,540,500
34.65
2,440,500
504
November 1-30
3,312,000
36.73
2,212,000
423
December 1-31
2,441,000
42.42
1,491,000
360
Total
33,770,000
24,670,000
(1) In 2023, 9 million shares were bought outside of the publicly announced programs. These share purchases were made through open-market
transactions.
(2) In March 2022, ABB announced a share buyback program of up to $3 billion. This program, which was launched in April 202 2, was executed
on a second trading line on the SIX Swiss Exchange and ran until ABB’s Annual General Meeting (AGM) in March 2023.
(3) In March 2023, ABB announced a share buyback program of up to $1 billion. This program, which was launched in April 2023, is being
executed on a second trading line on the SIX Swiss Exchange and is planned to run until the March 2024 AGM.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
Not applicable.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J. Insider trading policies
Not applicable.
158
Item 16K. Cybersecurity.
Information technology (IT) is critical to many of our operating activities and is subject to security threats and
increasingly sophisticated cyber-attacks. As a result, we have policies and processes in place to assess,
identify, and manage the strategic and operational IT-related risks as a component of our enterprise risk
management program (ERM). These risks include the risk of cyber-attacks on IT, infrastructure and
intellectual property, as well as on cybersecurity for our offerings and factories. Through roundtables, risk
workshops, and consideration of significant business transactions which could affect our IT risk profile,
material risks from cybersecurity threats are assessed and identified. A description of each material risk and
its potential consequences, along with the likelihood, impact and velocity of the risk are documented. A
response to the risk, indicating a project or specific action that is in place or planned to address and mitigate
the identified risk, is assigned to the identified risk.
Our IT security policies include consideration of cybersecurity risks related to third-party service providers
utilizing a risk-based approach, completing certain due diligence procedures prior to the commencement of
the business relationship. These procedures include a business impact analysis and questionnaire related to
the overall IT security posture of the third-party organization, as well as internal responses and controls to
address the identified risks.
The FACC is ultimately responsible for the oversight of risks from cybersecurity threats. Information security
and cybersecurity updates from management are provided as part of scheduled FACC meetings, with an
open line of communication in the event of a potential material cybersecurity incident. Briefings include
discussion of identified cybersecurity risks and new cybersecurity threats, management response, as well as
the status of previously communicated incidents, as applicable. The FACC Chairman determines if
components of the briefing need to be disseminated to the entire Board. Additionally, ERM results, including
cybersecurity risks, are reported to the Board annually.
Management, led by the Company’s Chief Information Security Officer (CISO), is responsible for the day-to-
day assessment and management of our material risks from cybersecurity threats. Weekly internal updates
are made by his IT security team to discuss specific cybersecurity incidents, planned or in progress
responses, ongoing mitigation processes, and remediation efforts, as applicable. The CISO has more than
20 years of experience in the field of cybersecurity, including more than 13 years working in the IT services
industry building and delivering cybersecurity services across various geographies.
We have experienced occasional cybersecurity incidents, none of which has had a material effect on our
business operations. We have observed a continued increase in attacks generally against our industrial
control systems as well as against our customers and the systems we supply to them, which has posed and
may in the future pose a risk to the security of those systems and networks. Future attacks could potentially
have significant adverse impact including the compromise of confidential information, disruption of our
business, improper use or downtime of our systems and networks or those we supplied to our customers, the
manipulation, corruption, inaccessibility and destruction of data, defective products or services, production
downtimes, supply shortages and reputational harm.
159
PART III
Item 17. Financial Statements
We have elected to provide financial statements and the related information pursuant to Item 18.
Item 18. Financial Statements
See pages F-1 to F-76, which are incorporated herein by reference. All schedules are omitted as the required
information is inapplicable or the information is presented in the Consolidated Financial Statements or notes
thereto.
160
Item 19. Exhibits
1.1
(1)
2.1
2.2
2.3
2.4
(1)
4.1
, entered
into between ABB Ltd, certain subsidiaries of ABB Ltd as borrowers, 19 banks as mandated lead
arrangers, Citibank Europe PLC, UK Branch, as facility agent and euro swingline agent and
Citibank N.A. as dollar swingline agent. Incorporated by reference to Exhibit 4.1 to the Annual
Report on Form 20-F filed by ABB Ltd on February 26, 2020.
4.2
4.3
4.4
4.5
4.6
, between ABB Ltd, certain
subsidiaries of ABB Ltd as original borrowers, the mandated lead arrangers, the original lenders,
Citibank Europe PLC, UK Branch, as facility agent and euro swingline agent and Citibank, N.A. as
dollar swingline agent, relating to the $2,000,000,000 Multicurrency Revolving Credit agreement
dated December 16, 2019 (incorporated by reference to Exhibit 4.1 above).
(1)
8.1
(1)
12.1
(1)
12.2
(1)
13.1
161
13.2
15.1
(1)
17.1
(1)
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
(1)
* This document is being furnished in accordance with SEC Release Nos. 33-8212 and 34-74551.
(1) Filed herewith
162
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it
has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
ABB LTD
By:
/s/ T
IMO
I
HAMUOTILA
Date: February 22, 2024
Name:
Timo Ihamuotila
Title:
Executive Vice President and
Chief Financial Officer
By:
/s/ R
ICHARD
A.
B
ROWN
Date: February 22, 2024
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance
F-1
—
Index to Consolidated Financial Statements and Schedules
Consolidated Financial Statements:
Report of management on internal control over financial reporting
F-2
Reports of Independent Registered Public Accounting Firm
F-3
Consolidated Income Statements for the years ended December 31, 2023, 2022 and 2021
F-6
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023,
2022 and 2021
F-7
Consolidated Balance Sheets as of December 31, 2023 and 2022
F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021
F-9
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,
2023, 2022 and 2021
F-10
Notes to the Consolidated Financial Statements
F-11
F-2
Report of management on internal control over financial reporting
The Board of Directors and Management of ABB Ltd and its consolidated subsidiaries (“ABB”) are
responsible for establishing and maintaining adequate internal control over financial reporting. ABB’s internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation and fair presentation of the published Consolidated Financial
Statements in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with ABB’s policies and procedures may deteriorate.
Management conducted an assessment of the effectiveness of internal control over financial reporting based
on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework). Based on this assessment, management has
concluded that ABB’s internal control over financial reporting was effective as of December 31, 2023.
KPMG AG, the independent registered public accounting firm who audited the Company’s consolidated
financial statements included in this Form 20-F, has issued an opinion on the effectiveness of ABB’s internal
control over financial reporting as of December 31, 2023, which is included on page F-5 of this Annual
Report.
/s/ B
JÖRN
R
OSENGREN
Chief Executive Officer
/s/ T
IMO
I
HAMUOTILA
Chief Financial Officer
Zurich, February 22, 2024
F-3
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of ABB Ltd
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of ABB Ltd and subsidiaries (the Company)
as of December 31, 2023 and 2022, the related consolidated income statements, statements of
comprehensive income, cash flows, and changes in stockholders’ equity for each of the years in the
three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2024, expressed
an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s Board of Directors and
management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of a critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition for certain long-term fixed price contracts using the percentage-of-completion
method
As discussed in Note 2 to the consolidated financial statements, revenues from the sale of customized
products, including long-term fixed price contracts for integrated automation and electrification systems and
solutions are generally recognized on an over time basis using the percentage-of-completion method of
accounting. For the year ended December 31, 2023, the Company reported $27,010 million of revenue from
sales of products, a portion of which related to long-term fixed price contracts.
F-4
We identified the evaluation of estimated costs to complete related to revenue recognition of certain long-
term fixed price contracts using the percentage of-completion method of accounting as a critical audit matter.
In particular, a high degree of subjective auditor judgment was required to evaluate the Company’s estimates
regarding the amount of future direct materials, labor and subcontract costs, and indirect costs to complete
the contracts.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the Company’s revenue
process including controls over the development of estimates regarding the amount of future direct materials,
labor and subcontract costs, and indirect costs. We assessed the Company’s historical ability to accurately
estimate costs to complete by comparing historical estimates to actual results for a selection of contracts. We
evaluated the estimate of remaining costs to be incurred for a selection of contracts by assessing progress to
date and the nature and complexity of work to be performed through interviewing project managers and
inspecting correspondence, if any, between the Company and the customer and/or subcontractors.
/s/ KPMG AG
We have served as the Company’s auditor since 2018.
Zurich, Switzerland
February 22, 2024
F-5
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of ABB Ltd
Opinion on Internal Control Over Financial Reporting
We have audited ABB Ltd and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued
by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and
2022, the related consolidated income statements, statements of comprehensive income, cash flows and
changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2023, and
the related notes (collectively, the consolidated financial statements), and our report dated February 22,
2024, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s Board of Directors and management are responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying report of management on internal control over financial reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ KPMG AG
Zurich, Switzerland
February 22, 2024
F-6
―
ABB Ltd Consolidated Income Statements
Year ended December 31 ($ in millions, except per share data in $)
2023
2022
2021
Sales of products
Sales of services and other
Total revenues
Cost of sales of products
(17,938 )
(16,804 )
(16,364 )
Cost of services and other
(3,083 )
(2,932 )
(3,114 )
Total cost of sales
(21,021 )
(19,736 )
(19,478 )
Gross profit
Selling, general and administrative expenses
(5,543 )
(5,132 )
(5,162 )
Non-order related research and development expenses
(1,317 )
(1,166 )
(1,219 )
Other income (expense), net
(75 )
Income from operations
Interest and dividend income
Interest and other finance expense
(275 )
(130 )
(148 )
Non-operational pension (cost) credit
Income from continuing operations before taxes
Income tax expense
(930 )
(757 )
(1,057 )
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(24 )
(43 )
(80 )
Net income
Net income attributable to noncontrolling
interests and redeemable noncontrolling interests
(79 )
(119 )
(104 )
Net income attributable to ABB
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(24 )
(42 )
(79 )
Net income
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(0.01 )
(0.02 )
(0.04 )
Net income
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(0.01 )
(0.02 )
(0.04 )
Net income
Weighted-average number of shares outstanding (in millions) used to
compute:
Basic earnings per share attributable to ABB shareholders
Diluted earnings per share attributable to ABB shareholders
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
F-7
―
ABB Ltd Consolidated Statements of Comprehensive Income
Year ended December 31 ($ in millions)
2023
2022
2021
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Foreign currency translation adjustments
(290 )
(685 )
(521 )
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Changes attributable to divestments
(9 )
Foreign currency translation adjustments
(281 )
(639 )
(530 )
Available-for-sale securities:
Net unrealized gains (losses) arising during the year
(23 )
(10 )
Reclassification adjustments for net (gains) losses included in net income
(5 )
Unrealized gains (losses) on available-for-sale securities
(21 )
(15 )
Pension and other postretirement plans:
Prior service (costs) credits arising during the year
(1 )
Net actuarial gains (losses) arising during the year
(282 )
Amortization of prior service credit included in net income
(9 )
(16 )
(14 )
Amortization of net actuarial loss included in net income
Net losses from settlements and curtailments included in net income
Changes attributable to divestments
(8 )
(6 )
Pension and other postretirement plan adjustments
(237 )
Derivative instruments and hedges:
Net unrealized gains (losses) arising during the year
(10 )
(12 )
Reclassification adjustments for net (gains) losses included in net income
(13 )
Changes in derivative instruments and hedges
(2 )
(5 )
Total other comprehensive income (loss), net of tax
(509 )
(405 )
(83 )
Total comprehensive income, net of tax
Total comprehensive (income) loss attributable to noncontrolling interests and
redeemable noncontrolling interests, net of tax
(84 )
(87 )
(108 )
Total comprehensive income attributable to ABB, net of tax
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
F-8
―
ABB Ltd Consolidated Balance Sheets
December 31 ($ in millions, except share data)
2023
2022
Cash and equivalents
Restricted cash
Marketable securities and short-term investments
Receivables, net
Contract assets
Inventories, net
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Investments in equity-accounted companies
Prepaid pension and other employee benefits
Intangible assets, net
Goodwill
Deferred taxes
Other non-current assets
Total assets
Accounts payable, trade
Contract liabilities
Short-term debt and current maturities of long-term debt
Current operating leases
Provisions for warranties
Other provisions
Other current liabilities
Total current liabilities
Long-term debt
Non-current operating leases
Pension and other employee benefits
Deferred taxes
Other non-current liabilities
Total liabilities
Commitments and contingencies
nil
nil
Redeemable noncontrolling interest
Stockholders’ equity:
Common stock, CHF
(
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
(5,070 )
(4,556 )
Treasury stock, at cost
(
(1,414 )
(3,061 )
Total ABB stockholders’ equity
Noncontrolling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
F-9
―
ABB Ltd Consolidated Statements of Cash Flows
Year ended December 31 ($ in millions)
2023
2022
2021
Operating activities:
Net income
Loss from discontinued operations, net of tax
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Changes in fair values of investments
(29 )
(33 )
(123 )
Pension and other employee benefits
(48 )
(125 )
(216 )
Deferred taxes
(25 )
(344 )
(289 )
Loss from equity-accounted companies
Net loss (gain) from derivatives and foreign exchange
(55 )
(23 )
Net gain from sale of property, plant and equipment
(116 )
(84 )
(38 )
Net loss (gain) from sale of businesses
(101 )
(2,193 )
Other
Changes in operating assets and liabilities:
Trade receivables, net
(661 )
(831 )
(142 )
Contract assets and liabilities
Inventories, net
(3 )
(1,599 )
(771 )
Accounts payable, trade
(106 )
Accrued liabilities
Provisions, net
(70 )
(48 )
Income taxes payable and receivable
(190 )
(94 )
Other assets and liabilities, net
(44 )
(36 )
Net cash provided by operating activities — continuing operations
Net cash used in operating activities — discontinued operations
(11 )
(47 )
(8 )
Net cash provided by operating activities
Investing activities:
Purchases of investments
(1,957 )
(321 )
(1,528 )
Purchases of property, plant and equipment and intangible assets
(770 )
(762 )
(820 )
Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies
(225 )
(288 )
(241 )
Proceeds from sales of investments
Proceeds from maturity of investments
Proceeds from sales of property, plant and equipment
Proceeds from sales of businesses (net of transaction costs and cash disposed) and
cost- and equity-accounted companies
Net cash from settlement of foreign currency derivatives
(109 )
(166 )
(121 )
Changes in loans receivable, net
(19 )
Other investing activities
(14 )
(4 )
Net cash provided by (used in) investing activities — continuing operations
(1,592 )
Net cash used in investing activities — discontinued operations
(23 )
(226 )
(364 )
Net cash provided by (used in) investing activities
(1,615 )
Financing activities:
Net changes in debt with maturities of 90 days or less
(1,365 )
(83 )
Increase in debt
Repayment of debt
(1,567 )
(2,703 )
(1,538 )
Delivery of shares
Purchase of treasury stock
(1,258 )
(3,553 )
(3,708 )
Dividends paid
(1,713 )
(1,698 )
(1,726 )
Cash associated with the spin-off of the Turbocharging Division
(172 )
Dividends paid to noncontrolling shareholders
(93 )
(99 )
(98 )
Proceeds from issuance of subsidiary shares
Other financing activities
(41 )
Net cash used in financing activities — continuing operations
(2,897 )
(2,394 )
(4,968 )
Net cash provided by financing activities — discontinued operations
Net cash used in financing activities
(2,897 )
(2,394 )
(4,968 )
Effects of exchange rate changes on cash and equivalents and restricted cash
(43 )
(189 )
(81 )
Net change in cash and equivalents and restricted cash
(265 )
(315 )
Cash and equivalents and restricted cash, beginning of period
Cash and equivalents and restricted cash, end of period
Supplementary disclosure of cash flow information:
Interest paid
Income taxes paid
Due to rounding, numbers presented may not add to the totals provided.
See accompanying Notes to the Consolidated Financial Statements
F-10
―
ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity
Accumulated
Additional
other
Total ABB
Non-
Total
Years ended December 31, 2023, 2022 and 2021
Common
paid-in
Retained
comprehensive
Treasury
stockholders’
controlling
stockholders’
($ in millions)
stock
capital
earnings
loss
stock
equity
interests
equity
Balance at January 1, 2021
(4,002 )
(3,530 )
Net income
Foreign currency translation
adjustments, net of tax
(534 )
(534 )
(530 )
Effect of change in fair value of
available-for-sale securities, net of tax
(15 )
(15 )
(15 )
Unrecognized income (expense)
related to pensions and other
postretirement plans, net of tax
Change in derivative instruments
and hedges, net of tax
(5 )
(5 )
(5 )
Changes in noncontrolling interests
(37 )
(20 )
(57 )
(2 )
Dividends to noncontrolling shareholders
(98 )
(98 )
Dividends to shareholders
(1,730 )
(1,730 )
(1,730 )
Cancellation of treasury shares
(10 )
(17 )
(3,130 )
Share-based payment arrangements
Purchase of treasury stock
(3,682 )
(3,682 )
(3,682 )
Delivery of shares
(84 )
(136 )
Other
Balance at December 31, 2021
(4,088 )
(3,010 )
Net income
(1)
Foreign currency translation
adjustments, net of tax
(608 )
(608 )
(31 )
(639 )
Effect of change in fair value of
available-for-sale securities, net of tax
(21 )
(21 )
(21 )
Unrecognized income (expense)
related to pensions and other
postretirement plans, net of tax
(1 )
Change in derivative instruments
and hedges, net of tax
Issuance of subsidiary shares
Other changes in noncontrolling interests
(34 )
(24 )
Dividends to noncontrolling shareholders
(100 )
(100 )
Dividends to shareholders
(1,700 )
(1,700 )
(1,700 )
Spin-off of the Turbocharging Division
(177 )
(95 )
(272 )
(12 )
(284 )
Cancellation of treasury shares
(8 )
(4 )
(2,864 )
Share-based payment arrangements
Purchase of treasury stock
(3,502 )
(3,502 )
(3,502 )
Delivery of shares
(51 )
(130 )
Other
Balance at December 31, 2022
(4,556 )
(3,061 )
Net income
(1)
Foreign currency translation
adjustments, net of tax
(286 )
(286 )
(281 )
Effect of change in fair value of
available-for-sale securities, net of tax
Unrecognized income (expense)
related to pensions and other
postretirement plans, net of tax
(237 )
(237 )
(237 )
Change in derivative instruments
and hedges, net of tax
(2 )
(2 )
(2 )
Issuance of subsidiary shares
Other changes in noncontrolling interests
(31 )
(37 )
(68 )
(1 )
Dividends to noncontrolling shareholders
(93 )
(93 )
Dividends to shareholders
(1,706 )
(1,706 )
(1,706 )
Cancellation of treasury shares
(7 )
(201 )
(2,359 )
Share-based payment arrangements
Purchase of treasury stock
(1,247 )
(1,247 )
(1,247 )
Delivery of shares
(173 )
Other
(2 )
(2 )
Balance at December 31, 2023
(5,070 )
(1,414 )
(1) Amounts attributable to noncontrolling interests in 2023 and 2022 exclude net losses of $
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 accompanying Notes to the Consolidated Financial Statements
F-11
—
Note 1
The Company
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.
—
Note 2
Significant accounting policies
The following is a summary of significant accounting policies followed in the preparation of these
Consolidated Financial Statements.
Basis of presentation
The Consolidated Financial Statements are prepared in accordance with United States of America (United
States or U.S.) generally accepted accounting principles (U.S. GAAP) and are presented in United States
dollars ($ or USD) unless otherwise stated. Due to rounding, numbers presented may not add to the totals
provided. The par value of capital stock is denominated in Swiss francs
.
Reclassifications
Certain amounts reported for prior years in the Consolidated Financial Statements and the accompanying
Notes 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 23 for details).
Scope of consolidation
The Consolidated Financial Statements include the accounts of ABB Ltd and companies which are directly or
indirectly controlled by ABB Ltd. Additionally, the Company consolidates variable interest entities if it has
determined that it is the primary beneficiary. Intercompany accounts and transactions are eliminated.
Investments in joint ventures and affiliated companies in which the Company has the ability to exercise
significant influence over operating and financial policies (generally through direct or indirect ownership of
20 percent to 50 percent of the voting rights and/or board of director representation), are recorded in the
Consolidated Financial Statements using the equity method of accounting.
Translation of foreign currencies and foreign exchange transactions
The functional currency for most of the Company’s subsidiaries is the applicable local currency. The
translation from the applicable functional currencies into the Company’s reporting currency is performed for
balance sheet accounts using exchange rates in effect at the balance sheet date and for income statement
accounts using average exchange rates prevailing during the year. The resulting translation adjustments are
excluded from the determination of earnings and are recognized in Accumulated other comprehensive loss
until the subsidiary is sold, substantially liquidated or evaluated for impairment in anticipation of disposal.
Foreign currency exchange gains and losses, such as those resulting from foreign currency denominated
receivables or payables, are included in the determination of earnings, except as they relate to intercompany
loans that are equity
‑
like in nature with no reasonable expectation of repayment, which are recognized in
Accumulated other comprehensive loss. Exchange gains and losses are recognized in earnings and
classified in the line item consistent with the underlying transaction or item.
F-12
Discontinued operations
The Company reports a disposal, or planned disposal, of a component or a group of components as a
discontinued operation if the disposal represents a strategic shift that has or will have a major effect on the
Company’s operations and financial results. A strategic shift could include a disposal of a major geographical
area, a major line of business or other major parts of the Company. A component may be a reportable
segment or an operating segment, a reporting unit, a subsidiary, or an asset group.
The assets and liabilities of a component reported as a discontinued operation are presented separately as
held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets.
Interest expense that is not directly attributable to or related to the Company’s continuing business or
discontinued business is allocated to discontinued operations based on the ratio of net assets to be sold less
debt that is required to be paid as a result of the planned disposal transaction to the sum of total net assets of
the Company plus consolidated debt. General corporate overhead is not allocated to discontinued operations.
Operating cycle
For classification of certain current assets and liabilities, the Company has elected to use the duration of
individual contracts as its operating cycle. Accordingly, there are contract assets and liabilities, accounts
receivable, inventories and provisions related to these contracts which will not be realized within
that have been classified as current. Long-term system integration activities comprise the majority of the
Company’s activities which have an operating cycle in excess of
current.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
assumptions and estimates that directly affect the amounts reported in the Consolidated Financial
Statements and the accompanying Notes. These accounting assumptions and estimates include:
•
unrecognized tax benefits,
•
such as trade and other receivables, loans and other instruments,
•
and inquiries, environmental damages, product warranties, self
‑
insurance reserves, regulatory
and other proceedings,
•
‑
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,
•
pension plan assets,
•
programs,
•
•
‑
lived
assets and in testing goodwill for impairment,
F-13
•
in business combinations, and
•
interests and certain obligations in connection with divestments.
The actual results and outcomes may differ from the Company’s estimates and assumptions.
Cash and equivalents
Cash and equivalents include highly liquid investments with maturities of three months or less at the date of
acquisition.
Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries
where the Company operates. Funds, other than regular dividends, fees or loan repayments, cannot be
readily transferred abroad from these countries and are therefore deposited and used for working capital
needs locally. These funds are included in cash and equivalents as they are not considered restricted.
Cash and equivalents that are subject to contractual restrictions or other legal obligations and are not readily
available are classified as “Restricted cash”.
Marketable securities and short
‑
term investments
Management determines the appropriate classification of held
‑
to
‑
maturity and available
‑
for
‑
sale debt
securities at the time of purchase. Debt securities are classified as held
‑
to
‑
maturity when the Company has
the positive intent and ability to hold the securities to maturity. Held
‑
to
‑
maturity debt securities are carried at
amortized cost, adjusted for accretion of discounts or amortization of premiums to maturity computed under
the effective interest method. Such accretion or amortization is included in Interest and dividend income.
Marketable debt securities not classified as held
‑
to
‑
maturity are classified as available
‑
for
‑
sale and reported
at fair value.
Unrealized gains and losses on available
‑
for
‑
sale debt securities are excluded from the determination of
earnings and are instead recognized in the Accumulated other comprehensive loss component of
stockholders’ equity, net of tax, until realized. Realized gains and losses on available
‑
for
‑
sale debt securities
are computed based upon the historical cost of these securities, using the specific identification method.
Marketable debt securities are classified as either “Cash and equivalents” or “Marketable securities and
short
‑
term investments” according to their maturity at the time of acquisition.
Marketable equity securities are generally classified as “Marketable securities and short
‑
term investments”,
however, any marketable securities held as a long
‑
term investment rather than as an investment of excess
liquidity are classified as “Other non
‑
current assets”. Marketable equity securities are measured at fair value
with fair value changes reported in net income. Fair value changes for marketable equity securities are
generally reported in Interest and other finance expense, however, fair value changes for certain marketable
equity securities classified as long-term investments are reported in Other income (expense), net.
For debt securities classified as available-for-sale where fair value has declined below amortized cost due to
credit losses, the Company records an allowance for expected credit losses and adjusts the allowance in
subsequent periods in Interest and other finance expense. All fair value changes other than those related to
credit risk are reported in Accumulated other comprehensive loss until the security is sold.
In addition, equity securities without readily determinable fair values are remeasured if there is an observable
price change in an orderly transaction for the same investment, or if a qualitative assessment indicates that
the investment is impaired and the fair value of the investment is less than its carrying amount. Similar to
other fair value changes as described above, depending on the nature of the investment, this fair value
change is either recorded in Other income (expense), net or Interest and other finance expense.
F-14
Accounts receivable and allowance for expected credit losses
Accounts receivable are recorded at the invoiced amount. The Company has a group
‑
wide policy on the
management of credit risk. The policy includes a credit assessment methodology to assess the
creditworthiness of customers and assign to those customers a risk category. Third
‑
party agencies’ ratings
are considered, if available. For customers where agency ratings are not available, the customer’s most
recent financial statements, payment history and other relevant information are considered in the assignment
to a risk category. Customers are assessed at least annually or more frequently when information on
significant changes in the customer’s financial position becomes known. In addition to the assignment to a
risk category, a credit limit per customer is set.
The Company recognizes an allowance for credit losses to present the net amount of receivables expected to
be collected at the balance sheet date. The allowance is based on the credit losses expected to arise over
the asset’s contractual term taking into account historical loss experience, customer-specific data as well as
forward looking estimates. The Company’s accounts receivable are first grouped by the individual legal entity
which generally has a geographic concentration of receivables, resulting in different risk levels for different
entities. Receivables are then further subdivided within the entity into pools based on similar risk
characteristics to estimate expected credit losses. Expected credit losses are estimated individually when the
related assets do not share similar risk characteristics.
Accounts receivable are written off when deemed uncollectible and are recognized as a deduction from the
allowance for credit losses. Expected recoveries, which are not to exceed the amount previously written off,
are considered in determining the allowance balance at the balance sheet date.
The Company, in its normal course of business, transfers receivables to third parties, generally without
recourse. The transfer is accounted for as a sale when the Company has surrendered control over the
receivables. Control is deemed to have been surrendered when (i) the transferred receivables have been put
presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership,
(ii) the third
‑
party transferees have the right to pledge or exchange the transferred receivables, and (iii) the
Company has relinquished effective control over the transferred receivables and does not retain the ability or
obligation to repurchase or redeem the transferred receivables. At the time of sale, the sold receivables are
removed from the Consolidated Balance Sheets and the related cash inflows are classified as operating
activities in the Consolidated Statements of Cash Flows. Transfers of receivables that do not meet the
requirements for treatment as sales are accounted for as secured borrowings and the related cash flows are
classified as financing activities in the Consolidated Statements of Cash Flows.
Concentrations of credit risk
The Company sells a broad range of products, systems, services and software to a wide range of industrial,
commercial and utility customers as well as various government agencies and quasi
‑
governmental agencies
throughout the world. Concentrations of credit risk with respect to accounts receivable are limited, as the
Company’s customer base is comprised of a large number of individual customers. Ongoing credit
evaluations of customers’ financial positions are performed to determine whether the use of credit support
instruments such as guarantees, letters of credit or credit insurance are necessary; collateral is not generally
required. The Company maintains an allowance for credit losses as discussed above in “Accounts receivable
and allowance for expected credit losses”. Such losses, in the aggregate, are in line with the Company’s
expectations.
It is the Company’s policy to invest cash in deposits with banks throughout the world with certain minimum
credit ratings and in high quality, low risk, liquid investments. The Company actively manages its credit risk
by routinely reviewing the creditworthiness of the banks and the investments held. The Company has not
incurred significant credit losses related to such investments.
F-15
The Company’s exposure to credit risk on derivative financial instruments is the risk that the counterparty will
fail to meet its obligations. To reduce this risk, the Company has credit policies that require the establishment
and periodic review of credit limits for individual counterparties. In addition, the Company has entered into
close
‑
out netting agreements with most derivative counterparties. 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. Derivative instruments are
presented on a gross basis in the Consolidated Financial Statements.
Revenue recognition
A customer contract exists if collectability under the contract is considered probable, the contract has
commercial substance, contains payment terms, as well as the rights and commitments of both parties, and
has been approved.
The Company offers arrangements with multiple performance obligations to meet its customers’ needs.
These arrangements may involve the delivery of multiple products and/or performance of services (such as
installation and training) and the delivery and/or performance may occur at different points in time or over
different periods of time. Goods and services under such arrangements are evaluated to determine whether
they form distinct performance obligations and should be accounted for as separate revenue transactions.
The Company allocates the sales price to each distinct performance obligation based on the price of each
item sold in separate transactions at the inception of the arrangement.
The Company generally recognizes revenues for the sale of non
‑
customized products including circuit
breakers, modular substation packages, control products, motors, generators, drives, robots, measurement
and analytical instrumentation, and other goods which are manufactured on a standardized basis at a point in
time. Revenues are recognized at the point in time that the customer obtains control of the goods, which is
when it has taken title to the products and assumed the risks and rewards of ownership of the products
specified in the purchase order or sales agreement. Generally, the transfer of title and risks and rewards of
ownership are governed by the contractually defined shipping terms. The Company uses various
International Commercial Terms (as promulgated by the International Chamber of Commerce) in its sales of
products to third party customers, such as Ex Works (EXW), Free Carrier (FCA) and Delivered Duty Paid
(DDP).
Billing terms for these point in time contracts vary but generally coincide with delivery to the customer.
Payment is generally due upon receipt of the invoice, payable within 90 days or less.
The Company generally recognizes revenues for the sale of customized products, including integrated
automation and electrification systems and solutions, on an over time basis using the
percentage
‑
of
‑
completion method of accounting. These systems are generally accounted for as a single
performance obligation as the Company is required to integrate equipment and services into one deliverable
for the customer. Revenues are recognized as the systems are customized during the manufacturing or
integration process and as control is transferred to the customer as evidenced by the Company’s right to
payment for work performed or by the customer’s ownership of the work in process. The Company principally
uses the cost
‑
to
‑
cost method to measure progress towards completion on contracts. Under this method,
progress of contracts is measured by actual costs incurred in relation to the Company’s best estimate of total
costs based on the Company’s history of manufacturing or constructing similar assets for customers.
Estimated costs are reviewed and updated routinely for contracts in progress to reflect changes in quantity or
pricing of the inputs. The cumulative effect of any change in estimate is recorded in the period when the
change in estimate is determined. Contract costs include all direct materials, labor and subcontract costs and
indirect costs related to contract performance, such as indirect labor, supplies, tools and depreciation costs.
F-16
The nature of the Company’s contracts for the sale of customized products gives rise to several types of
variable consideration, including claims, unpriced change orders, liquidated damages and penalties. These
amounts are estimated based upon the most likely amount of consideration to which the customer or the
Company will be entitled. The estimated amounts are included in the sales price to the extent it is probable
that a significant reversal of cumulative revenues recognized will not occur when the uncertainty associated
with the variable consideration is resolved. All estimates of variable consideration are reassessed
periodically. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is
determined that recovery of such cost is probable and the amounts can be reliably estimated.
Billing terms for these over
‑
time contracts vary but are generally based on achieving specified milestones.
The differences between the timing of revenues recognized and customer billings result in changes to
contract assets and contract liabilities. Payment is generally due upon receipt of the invoice, payable within
90 days or less. Contractual retention amounts billed to customers are generally due upon expiration of the
contractual warranty period.
Service revenues reflect revenues earned from the Company’s activities in providing services to customers
primarily subsequent to the sale and delivery of a product or complete system. Such revenues consist of
maintenance type contracts, repair services, equipment upgrades, field service activities that include
personnel and accompanying spare parts, training, and installation and commissioning of products as a
stand-alone service or as part of a service contract. The Company generally recognizes revenues from
service transactions as services are performed or at the point in time that the customer obtains control of the
spare parts. For long-term service contracts including monitoring and maintenance services, revenues are
recognized on a straight-line basis over the term of the contract consistent with the nature, timing and extent
of the services or, if the performance pattern is other than straight line, as the services are provided based on
costs incurred relative to total expected costs.
In limited circumstances the Company sells extended warranties that extend the warranty coverage beyond
the standard coverage offered on specific products. Revenues for these warranties are recorded over the
length of the warranty period based on their stand
‑
alone selling price.
Billing terms for service contracts vary but are generally based on the occurrence of a service event.
Payment is generally due upon receipt of the invoice, payable within 90 days or less.
Revenues are reported net of customer rebates, early settlement discounts, and similar incentives. Rebates
are estimated based on sales terms, historical experience and trend analysis. The most common incentives
relate to amounts paid or credited to customers for achieving defined volume levels.
Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions
between the Company and its customers, such as sales, use, value added and some excise taxes, are
excluded from revenues.
The Company does not adjust the contract price for the effects of a financing component if the Company
expects, at contract inception, that the time between control transfer and cash receipt is less than 12 months.
Sales commissions are expensed immediately when the amortization period for the costs to obtain the
contract is less than a year.
Contract loss provisions
Losses on contracts are recognized in the period when they are identified and are based upon the anticipated
excess of contract costs over the related contract revenues.
Shipping and handling costs
Shipping and handling costs are recorded as a component of cost of sales.
F-17
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first
‑
in,
first
‑
out method, the weighted
‑
average cost method, or the specific identification method. Inventoried costs
are stated at acquisition cost or actual production cost, including direct material and labor and applicable
manufacturing overheads. Adjustments to reduce the cost of inventory to its net realizable value are made, if
required, for decreases in sales prices, obsolescence or similar reductions in value.
Impairment of long
‑
lived assets
Long
‑
lived assets that are held and used are evaluated for impairment for each of the Company’s asset
groups when events or circumstances indicate that the carrying amount of the long-lived asset or asset group
may not be recoverable. If the asset group’s net carrying value exceeds the asset group’s net undiscounted
cash flows expected to be generated over its remaining useful life including net proceeds expected from
disposition of the asset group, if any, the carrying amount of the asset group is reduced to its estimated fair
value. The estimated fair value is determined using a market, income and/or cost approach.
Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and is depreciated using the
straight
‑
line method. The estimated useful lives of the assets are generally as follows:
•
•
•
•
•
over the lease term, if shorter.
Goodwill and intangible assets
Goodwill is reviewed for impairment annually as of October 1, or more frequently if events or circumstances
indicate that the carrying value may not be recoverable.
Goodwill is evaluated for impairment at the reporting unit level. A reporting unit is an operating segment or
one level below an operating segment. For the annual impairment reviews performed in 2023 the reporting
units were determined to be one level below the operating segments.
When evaluating goodwill for impairment, the Company uses either a qualitative or quantitative assessment
method for each reporting unit. The qualitative assessment involves determining, based on an evaluation of
qualitative factors, if it is more likely than not that the fair value of a reporting unit is less than its carrying
value. If, based on this qualitative assessment, it is determined to be more likely than not that the reporting
unit’s fair value is less than its carrying value, a quantitative impairment test is performed, otherwise no
further analysis is required. If the Company elects not to perform the qualitative assessment for a reporting
unit, then a quantitative impairment test is performed.
When performing a quantitative impairment test, the Company generally calculates the fair value of a
reporting unit using an income approach based on the present value of future cash flows, applying a discount
rate that represents the reporting unit’s weighted-average cost of capital, and compares it to the reporting
unit’s carrying value. If the carrying value of the net assets of a reporting unit exceeds the fair value of the
reporting unit then the Company records an impairment charge equal to the difference, provided that the loss
recognized does not exceed the total amount of goodwill allocated to that reporting unit.
F-18
The cost of acquired intangible assets with a finite life is amortized using a method of amortization that
reflects the pattern of intangible assets’ expected contributions to future cash flows. If that pattern cannot be
reliably determined, the straight
‑
line method is used. The amortization periods range from
software and from
‑
, technology
‑
‑
related intangibles. Intangible
assets with a finite life are tested for impairment upon the occurrence of certain triggering events.
Derivative financial instruments and hedging activities
The Company uses derivative financial instruments to manage currency, commodity, interest rate and equity
exposures, arising from its global operating, financing and investing activities (see Note 6).
The Company recognizes all derivatives, other than certain derivatives indexed to the Company’s own stock,
at fair value in the Consolidated Balance Sheets. Derivatives that are not designated as hedging instruments
are reported at fair value with derivative gains and losses reported through earnings and classified consistent
with the nature of the underlying transaction.
If the derivatives are designated as a hedge, depending on the nature of the hedge, changes in the fair value
of the derivatives will either be offset against the change in fair value of the hedged item attributable to the
risk being hedged through earnings (in the case of a fair value hedge) or recognized in Accumulated other
comprehensive loss until the hedged item is recognized in earnings (in the case of a cash flow hedge).
Where derivative financial instruments have been designated as cash flow hedges of forecasted transactions
and such forecasted transactions are no longer probable of occurring, hedge accounting is discontinued and
any derivative gain or loss previously included in Accumulated other comprehensive loss is reclassified into
earnings consistent with the nature of the original forecasted transaction. Gains or losses from derivatives
designated as hedging instruments in a fair value hedge are reported through earnings and classified
consistent with the nature of the underlying hedged transaction.
Certain commercial contracts may grant rights to the Company or the counterparties, or contain other
provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the
contract and depending on their characteristics, accounted for as separate derivative instruments and shown
at their fair value in the Consolidated Balance Sheets with changes in their fair value reported in earnings
consistent with the nature of the commercial contract to which they relate.
Derivatives are classified in the Consolidated Statements of Cash Flows in the same section as the
underlying item. Cash flows from the settlement of undesignated derivatives used to manage the risks of
different underlying items on a net basis are classified within “Net cash provided by operating activities”, as
the underlying items are primarily operational in nature. Other cash flows on the settlement of derivatives are
recorded within “Net cash provided by (used in) investing activities”.
Leases
The Company leases primarily real estate, vehicles, machinery and equipment.
The Company evaluates if a contract contains a lease at inception of the contract. A contract is or contains a
lease if it conveys the right to control the use of identified property, plant, or equipment (an identified asset)
for a period of time in exchange for consideration. To determine this, the Company assesses whether,
throughout the period of use, it has both the right to obtain substantially all of the economic benefits from the
use of the identified asset and the right to direct the use of the identified asset. Leases are classified as either
finance or operating, with the classification determining the pattern of expense recognition in the
Consolidated Income Statements. Lease expense for operating leases is recorded on a straight-line basis
over the lease term. Lease expense for finance leases is separated between amortization of right-of-use
assets and lease interest expense.
F-19
In many cases, the Company’s leases include one or more options to renew, with renewal terms that can
extend up to
. The exercise of lease renewal options is at the Company’s discretion. Renewal periods
are included in the expected lease term if they are reasonably certain of being exercised by the Company.
Certain leases also include options to purchase the leased property. None of the Company’s lease
agreements contain material residual value guarantees or material restrictions or covenants.
Long-term leases (leases with terms greater than
) are recorded in the Consolidated Balance
Sheets at the commencement date of the lease based on the present value of the minimum lease payments.
The present value of the lease payments is determined by using the interest rate implicit in the lease if
available. As most of the Company’s leases do not provide an implicit rate, the Company’s incremental
borrowing rate is used for most leases and is determined for portfolios of leases based on the remaining
lease term, currency of the lease, and the internal credit rating of the subsidiary which entered into the lease.
Short-term leases (leases with an initial lease term of
that the identified asset will not be leased for a term greater than
) are not recorded in the
Consolidated Balance Sheets and are expensed on a straight-line basis over the lease term. The majority of
short-term leases relate to real estate and machinery.
Assets under operating lease are included in Operating lease right-of-use assets. Operating lease liabilities
are reported both as current and non-current operating lease liabilities. Right-of-use assets represent the
Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to
make lease payments arising from the lease.
Assets under finance lease are included in Property, plant and equipment, net while finance lease liabilities
are included in Long-term debt (including Current maturities of long-term debt as applicable).
Lease and non-lease components for leases other than real estate are not accounted for separately.
Income taxes
The Company uses the asset and liability method to account for deferred taxes. Under this method, deferred
tax assets and liabilities are determined based on temporary differences between the financial reporting and
the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax
rates and laws that are expected to be in effect when the differences are expected to reverse. The Company
records a deferred tax asset when it determines that it is more likely than not that the deduction will be
sustained based upon the deduction’s technical merit. Deferred tax assets and liabilities that can be offset
against each other are reported on a net basis. A valuation allowance is recorded to reduce deferred tax
assets to the amount that is more likely than not to be realized.
Deferred taxes are provided on unredeemed retained earnings of the Company’s subsidiaries. However,
deferred taxes are not provided on such unredeemed retained earnings to the extent it is expected that the
earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of
these subsidiaries or upon the remittance of dividends.
The Company operates in numerous tax jurisdictions and, as a result, is regularly subject to audit by tax
authorities. The Company provides for tax contingencies whenever it is deemed more likely than not that a
tax asset has been impaired or a tax liability has been incurred. Contingency provisions are recorded based
on the technical merits of the Company’s filing position, considering the applicable tax laws and Organisation
for Economic Co
‑
operation and Development (OECD) guidelines and are based on its evaluations of the
facts and circumstances as of the end of each reporting period.
The Company applies a two
‑
step approach to recognize and measure uncertainty in income taxes. The first
step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount
which is more than
could be settled against existing loss carryforwards or income tax credits are reported net.
F-20
Expenses related to tax penalties are classified in the Consolidated Income Statements as “Income tax
expense” while interest thereon is classified as “Interest and other finance expense”. Current income tax
relating to certain items is recognized directly in Accumulated other comprehensive loss and not in earnings.
In general, the Company applies the individual items approach when releasing income tax effects from
Accumulated other comprehensive loss.
Research and development
Research and development costs not related to specific customer orders are generally expensed as incurred.
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted
‑
average number of shares
outstanding during the year. Diluted earnings per share is calculated by dividing income by the
weighted
‑
average number of shares outstanding during the year, assuming that all potentially dilutive
securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options,
outstanding options and shares granted subject to certain conditions under the Company’s share
‑
based
payment arrangements. See further discussion related to earnings per share in Note 20 and of potentially
dilutive securities in Note 18.
Share
‑
based payment arrangements
The Company has various share
‑
based payment arrangements for its employees, which are described more
fully in Note 18. Such arrangements are accounted for under the fair value method. For awards that are
equity
‑
settled, total compensation is measured at grant date, based on the fair value of the award at that
date, and recorded in earnings over the period the employees are required to render service. For awards that
are cash
‑
settled, compensation is initially measured at grant date and subsequently remeasured at each
reporting period, based on the fair value and vesting percentage of the award at each of those dates, with
changes in the liability recorded in earnings.
Fair value measures
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 method) 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 financial assets and liabilities and non
‑
financial assets measured at
fair value within this hierarchy based on whether the inputs to the valuation technique are observable or
unobservable. An observable input is based on market data obtained from independent sources, while an
unobservable input reflects the Company’s assumptions about market data.
F-21
The levels of the fair value hierarchy are as follows:
Level 1: Valuation inputs consist of quoted prices in an active market for identical assets or
liabilities (observable quoted prices). Assets and liabilities valued using Level 1 inputs
include exchange
‑
traded equity securities, listed derivatives which are actively traded
such as commodity futures, interest rate futures and certain actively traded debt
securities.
Level 2: Valuation inputs consist of observable inputs (other than Level 1 inputs) such as actively
quoted prices for similar assets, quoted prices in inactive markets and inputs other than
quoted prices such as interest rate yield curves, credit spreads, or inputs derived from
other observable data by interpolation, correlation, regression or other means. The
adjustments applied to quoted prices or the inputs used in valuation models may be both
observable and unobservable. In these cases, the fair value measurement is classified as
Level 2 unless the unobservable portion of the adjustment or the unobservable input to
the valuation model is significant, in which case the fair value measurement would be
classified as Level 3. Assets and liabilities valued or disclosed using Level 2 inputs include
investments in certain funds, certain debt securities that are not actively traded, interest
rate swaps, cross-currency interest rate swaps, commodity swaps, cash
‑
settled call
options, forward foreign exchange contracts, foreign exchange swaps and forward rate
agreements, time deposits, as well as financing receivables and debt.
Level 3: Valuation inputs are based on the Company’s assumptions of relevant market data
(unobservable input). Assets valued or disclosed using Level 3 inputs include insurance
contracts and certain private equity investments.
Investments in private equity, real estate and collective funds held within the Company’s pension plans are
generally valued using the net asset value (NAV) per share as a practical expedient for fair value provided
certain criteria are met. The NAVs are determined based on the fair values of the underlying investments in
the funds. These assets are not classified in the fair value hierarchy but are separately disclosed.
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 (MIP), 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.
Disclosures about the Company’s fair value measurements of assets and liabilities are included in Note 7.
Contingencies
The Company is subject to proceedings, litigation or threatened litigation and other claims and inquiries,
related to environmental, labor, product, regulatory, tax (other than income tax) and other matters, and is
required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential
ranges of probable losses. A determination of the provision required, if any, for these contingencies is made
after analysis of each individual issue, often with assistance from both internal and external legal counsel and
technical experts. The required amount of a provision for a contingency of any type may change in the future
due to new developments in the particular matter, including changes in the approach to its resolution.
F-22
The Company records a provision for its contingent obligations when it is probable that a loss will be incurred
and the amount can be reasonably estimated. Any such provision is generally recognized on an
undiscounted basis using the Company’s best estimate of the amount of loss incurred or at the lower end of
an estimated range when a single best estimate is not determinable. In some cases, the Company may be
able to recover a portion of the costs relating to these obligations from insurers or other third parties;
however, the Company records such amounts only when it is probable that they will be collected.
The Company generally provides for anticipated costs for warranties when it delivers the related products.
Warranty costs include calculated costs arising from imperfections in design, material and workmanship in
the Company’s products. The Company makes individual assessments on contracts with risks resulting from
order
‑
specific conditions or guarantees and assessments on an overall, statistical basis for similar products
sold in larger quantities.
The Company may have legal obligations to perform environmental clean
‑
up activities related to land and
buildings as a result of the normal operations of its business. In some cases, the timing or the method of
settlement, or both, are conditional upon a future event that may or may not be within the control of the
Company, but the underlying obligation itself is unconditional and certain. The Company recognizes a
provision for these obligations when it is probable that a liability for the clean
‑
up activity has been incurred
and a reasonable estimate of its fair value can be made. In some cases, a portion of the costs expected to be
incurred to settle these matters may be recoverable. An asset is recorded when it is probable that such
amounts are recoverable. Provisions for environmental obligations are not discounted to their present value
when the timing of payments cannot be reasonably estimated.
Pensions and other postretirement benefits
The Company has a number of defined benefit pension plans, defined contribution pension plans and
termination indemnity plans. For plans accounted for as a defined benefit pension plan, the Company
recognizes an asset for such a plan’s overfunded status or a liability for such a plan’s underfunded status in
its Consolidated Balance Sheets. Additionally, the Company measures such a plan’s assets and obligations
that determine its funded status as of the end of the year and recognizes the changes in the funded status in
the year in which the changes occur. Those changes are reported in Accumulated other comprehensive loss.
The Company uses actuarial valuations to determine its pension and postretirement benefit costs and credits.
The amounts calculated depend on a variety of key assumptions, including discount rates and expected
return on plan assets. Current market conditions are considered in selecting these assumptions.
The Company’s various pension plan assets are assigned to their respective levels in the fair value hierarchy
in accordance with the valuation principles described in the “Fair value measures” section above.
See Note 17 for further discussion of the Company’s employee benefit plans.
Business combinations
The Company accounts for assets acquired and liabilities assumed in business combinations using the
acquisition method and records these at their respective fair values. Contingent consideration is recorded at
fair value as an element of purchase price with subsequent adjustments recognized in income. Acquired
contract assets and liabilities are valued and recorded in accordance with the principles for recognizing
revenues from contracts with customers as outlined in the section entitled Revenue recognition above.
Identifiable intangibles consist of intellectual property such as trademarks and trade names, customer
relationships, patented and unpatented technology, in
‑
process research and development, order backlog and
capitalized software; these are amortized over their estimated useful lives. Such intangibles are subsequently
subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not
be recoverable. See “Goodwill and intangible assets” above. Acquisition
‑
related costs are recognized
separately from the acquisition and expensed as incurred. Upon gaining control of an entity in which an
equity method or cost basis investment was held by the Company, the carrying value of that investment is
adjusted to fair value with the related gain or loss recorded in income.
F-23
Deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax
base of assets and liabilities, as well as uncertain tax positions and valuation allowances on acquired
deferred tax assets assumed in connection with a business combination, are initially estimated as of the
acquisition date based on facts and circumstances that existed at the acquisition date. Changes in deferred
taxes, uncertain tax positions and valuation allowances on acquired deferred tax assets that occur after the
measurement period are recognized in income.
Estimated fair values of acquired assets and liabilities are subject to change within the measurement period
(a period of up to 12 months after the acquisition date during which the acquirer may adjust the provisional
acquisition amounts) with any adjustments to the preliminary estimates being recorded to goodwill.
New accounting pronouncements
Applicable for current period
Disclosure about supplier finance program obligations
In January 2023, the Company adopted an accounting standard update which requires entities to disclose
information related to supplier finance programs. Under the update, the Company is required to disclose
annually (i) the key terms of the program, (ii) the amount of the supplier finance obligations outstanding and
where those obligations are presented in the balance sheet at the reporting date, and (iii) a rollforward of the
supplier finance obligation program within the reporting period. The Company adopted this update
retrospectively for all in-scope transactions, with the exception of the rollforward disclosures, which will be
adopted prospectively for annual periods beginning January 1, 2024. Apart from the additional disclosure
requirements, this update does not have a significant impact on the Company’s Consolidated Financial
Statements.
The total outstanding supplier finance obligation included in Accounts payable, trade in the Consolidated
Balance Sheets at December 31, 2023 and 2022, amounted to $
The Company’s payment terms related to suppliers’ finance programs are not impacted by the suppliers’
decisions to sell amounts under the arrangements and are typically consistent with local market practices.
Facilitation of the effects of reference rate reform on financial reporting
In January 2023, the Company adopted an accounting standard update which provides temporary optional
expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease
the financial reporting burdens related to the expected market transition from the London Interbank Offered
Rate (LIBOR) and other interbank offered rates to alternative reference rates. The Company is applying this
standard update as relevant contract and hedge accounting relationship modifications are made during the
course of the transition period ending December 31, 2024. This update does not have a significant impact on
the Company’s Consolidated Financial Statements.
Applicable for future periods
Improvements to reportable segment disclosures
In November 2023, an accounting standard update was issued which requires the Company to disclose
additional reportable segment information primarily through enhanced disclosures about significant segment
expenses and extending certain annual disclosure requirements to quarterly. This update is effective for the
Company for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, and
is to be applied retrospectively to each prior reporting period presented. The Company is currently evaluating
the impact of adopting this update on its Consolidated Financial Statements.
Improvements to income tax disclosures
In December 2023, an accounting standard update was issued which requires the Company to disclose
additional information related to income taxes. Under the update, the Company is required to annually
disclose by jurisdiction (i) additional disaggregated information within the tax rate reconciliation and
(ii) income taxes paid. This update is effective for the Company prospectively, with retrospective adoption
permitted, for annual periods beginning January 1, 2025. The Company is currently evaluating the impact of
adopting this update on its Consolidated Financial Statements.
F-24
—
Note 3
Discontinued operations
In 2020, the Company completed the divestment of its Power Grids business to Hitachi Ltd (Hitachi). 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 were presented as 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 Ltd (Hitachi Energy). The remaining business activities of the
Power Grids business being executed by the Company are not significant.
In connection with the divestment, the Company recorded liabilities in discontinued operations for the initial
estimated future costs and other cash payments of $
sale of the business. In 2021, the Company and Hitachi concluded an agreement to settle the various
amounts owed by the Company. During 2023, 2022 and 2021, total cash payments of $
$
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
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 2023,
2022 and 2021, the Company recognized, within its continuing operations, general and administrative
expenses incurred to perform the TSAs, offset by $
TSA-related income for such services that is reported in Other income (expense), net.
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. Changes to these retained
obligations are also included in Loss from discontinued operations, net of tax.
—
Note 4
Acquisitions, divestments and equity-accounted companies
Acquisitions of controlling interests
Acquisitions of controlling interests were as follows:
($ in millions, except number of acquired businesses)
2023
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
Aggregate excess of purchase price over fair value of net assets acquired
(2)
Number of acquired businesses
(1) Excluding changes in cost- and equity-accounted companies.
(2) Recorded as goodwill (see Note 11).
In the table above, the “Purchase price for acquisitions” and “Aggregate excess of purchase price over fair
value of net assets acquired” amounts for 2022, relate primarily to the acquisition of InCharge Energy, Inc.
(In-Charge) and in 2021, relate primarily to the acquisition of ASTI Mobile Robotics Group SL (ASTI). In 2023,
there were no significant acquisitions.
F-25
Acquisitions of controlling interests have been accounted for under the acquisition method and have been
included in the Company’s Consolidated Financial Statements since the date of acquisition.
On January 26, 2022, the Company increased its ownership in In-Charge to a
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 $
market presence of the E-mobility operating segment, particularly in the North American market. In
connection with the acquisition, the Company’s pre-existing
revalued to fair value and a gain of $
Company entered into an agreement with the remaining noncontrolling shareholders allowing either party to
put or call the remaining
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.
On August 2, 2021, the Company acquired the shares of ASTI. ASTI is headquartered in Burgos, Spain, and
is a global autonomous mobile robot (AMR) manufacturer. The resulting cash outflows for the Company
amounted to $
automation offering in its Robotics & Discrete Automation operating segment.
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 acquired assets and
liabilities becomes available.
Business divestments and spin-offs
In 2023, the Company received proceeds (net of transaction costs and cash disposed) of $
relating to divestments of consolidated businesses and recorded gains of $
(expense), net on the sale of such businesses. These are primarily due to 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 the 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.
On September 7, 2022, the shareholders approved the spin-off of the Company’s Turbocharging Division into
an independent, publicly traded company, Accelleron Industries AG (Accelleron), which was completed
through the distribution of common stock of Accelleron to the stockholders of ABB on October 3, 2022. As a
result of the spin-off of this Division, the Company distributed net assets of $
attributable to noncontrolling interests of $
In addition, total accumulated comprehensive income of $
adjustment, was reclassified to Retained earnings. Cash and cash equivalents distributed with Accelleron
was $
operations of the Process Automation operating segment for all periods presented through to the spin-off
date. In 2022 and 2021, Income from continuing operations before taxes, included income of $
$
subsidiary of Accelleron access to funds in the form of a short-term intercompany loan. At the spin-off date,
this loan, having a principal amount of
to the Company and subsequently collected in October 2022.
F-26
In 2021, the Company received proceeds (net of transaction costs and cash disposed) of $
relating to divestments of consolidated businesses and recorded gains of $
(expense), net on the sales of such businesses. These are primarily due to the divestment of the Company’s
Mechanical Power Transmission Division (Dodge) to RBC Bearings Inc. In 2021 Income from continuing
operations before taxes, included net income of $
was part of the Company’s Motion operating segment.
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
was sold to Hitachi. During the Company’s period of ownership of the retained
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 September 2022, the Company and Hitachi agreed terms to sell the Company’s remaining investment in
Hitachi Energy to Hitachi and simultaneously settle certain outstanding contractual obligations relating to the
initial sale of the Power Grids business, including certain indemnification guarantees (see Note 15). The sale
of the remaining investment was completed in December 2022, resulting in cash proceeds of $
and a gain of $
In 2023, 2022 and 2021, 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:
($ in millions)
2023
2022
2021
Income (loss) from equity-accounted companies, net of taxes
(16 )
(22 )
Basis difference amortization (net of deferred income tax benefit)
(80 )
(138 )
Loss from equity-accounted companies
(16 )
(102 )
(100 )
F-27
—
Note 5
Cash and equivalents, marketable securities and short-term investments
Cash and equivalents and marketable securities and short
‑
term investments consisted of the following:
Cash and
Marketable
equivalents
securities
Gross
Gross
and
and
unrealized
unrealized
restricted
short-term
December 31, 2023 ($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
Time deposits
Equity securities
Changes in fair value recorded in
other comprehensive income
Debt securities available-for-sale:
—U.S. government obligations
(8 )
(8 )
Total
(8 )
Of which:
—Restricted cash, current
Cash and
Marketable
equivalents
securities
Gross
Gross
and
and
unrealized
unrealized
restricted
short-term
December 31, 2022 ($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
Time deposits
Equity securities
Changes in fair value recorded in
other comprehensive income
Debt securities available-for-sale:
—U.S. government obligations
(15 )
—Other government obligations
—Corporate
(7 )
(22 )
Total
(22 )
Of which:
—Restricted cash, current
F-28
Contractual maturities
Contractual maturities of debt securities consisted of the following:
Available-for-sale
December 31, 2023 ($ in millions)
Cost basis
Fair value
One to five years
Six to ten years
Due after ten years
Total
At December 31, 2023 and 2022, the Company pledged $
available
‑
for
‑
sale marketable securities as collateral for issued letters of credit and other security
arrangements.
—
Note 6
Derivative financial instruments
The Company is exposed to certain currency, commodity, and interest rate 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
foreign currency denominated exposures, depending on the length of the forecasted exposures. Forecasted
exposures greater than
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
commodity exposure over the next
contracts are used to manage the associated price risks of commodities.
F-29
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.
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 December 31,
($ in millions)
2023
2022
2021
Foreign exchange contracts
Embedded foreign exchange derivatives
Cross-currency interest rate swaps
Interest rate contracts
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:
Total notional amounts at December 31,
Type of derivative
Unit
2023
2022
2021
Copper swaps
metric tonnes
Silver swaps
ounces
Steel swaps
metric tonnes
Aluminum swaps
metric tonnes
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign
exchange risk of its operations and commodity swaps to manage its commodity risks. 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. In 2023,
2022 and 2021, there were
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.
F-30
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated
Income Statements was as follows:
($ in millions)
2023
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(91 )
(55 )
Hedged item
(45 )
Cross-currency
Designated as fair value hedges
(134 )
(37 )
interest rate swaps
Hedged item
(40 )
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:
($ in millions)
Gains (losses) recognized in income
Type of derivative not designated as a hedge
Location
2023
2022
2021
Foreign exchange contracts
Total revenues
(56 )
Total cost of sales
(71 )
(53 )
SG&A expenses
(1)
Non-order related research and
development
(7 )
(2 )
Interest and other finance
expense
(240 )
(128 )
(173 )
Embedded foreign exchange contracts
Total revenues
(3 )
(7 )
Total cost of sales
(11 )
(2 )
Commodity contracts
Total cost of sales
(3 )
(47 )
Other
Interest and other finance
expense
Total
(129 )
(193 )
(145 )
(1) SG&A expenses represent “Selling, general and administrative expenses”.
F-31
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
Derivative assets
Derivative liabilities
Current in
Non-current
Current in
Non-current
“Other
in “Other
“Other
in “Other
current
non-current
current
non-current
December 31, 2023 ($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
Interest rate contracts
Cross-currency interest rate swaps
Other
Total
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Commodity contracts
Interest rate contracts
Other equity contracts
Embedded foreign exchange derivatives
Total
Total fair value
Derivative assets
Derivative liabilities
Current in
Non-current
Current in
Non-current
“Other
in “Other
“Other
in “Other
current
non-current
current
non-current
December 31, 2022 ($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
Interest rate contracts
Cross-currency interest rate swaps
Other
Total
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Commodity contracts
Interest rate contracts
Embedded foreign exchange derivatives
Total
Total fair value
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 December 31, 2023 and 2022, have
been presented on a gross basis.
F-32
The Company’s netting agreements and other similar arrangements allow net settlements under certain
conditions. At December 31, 2023 and 2022, information related to these offsetting arrangements was as
follows:
December 31, 2023 ($ in millions)
Gross amount of
Derivative liabilities
Cash
Non-cash
Type of agreement or
recognized
eligible for set-off in
collateral
collateral
Net asset
similar arrangement
assets
case of default
received
received
exposure
Derivatives
(111 )
Total
(111 )
December 31, 2023 ($ in millions)
Gross amount of
Derivative liabilities
Cash
Non-cash
Type of agreement or
recognized
eligible for set-off in
collateral
collateral
Net liability
similar arrangement
liabilities
case of default
pledged
pledged
exposure
Derivatives
(111 )
Total
(111 )
December 31, 2022 ($ in millions)
Gross amount of
Derivative liabilities
Cash
Non-cash
Type of agreement or
recognized
eligible for set-off in
collateral
Net asset
similar arrangement
assets
case of default
received
received
exposure
Derivatives
(96 )
Total
(96 )
December 31, 2022 ($ in millions)
Gross amount of
Derivative liabilities
Cash
Non-cash
Type of agreement or
recognized
eligible for set-off in
collateral
Net liability
similar arrangement
liabilities
case of default
pledged
pledged
exposure
Derivatives
(96 )
Total
(96 )
F-33
—
Note 7
Fair values
Recurring fair value measures
The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows:
Total
December 31, 2023 ($ in millions)
Level 1
Level 2
Level 3
fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
Debt securities—U.S. government obligations
Derivative assets—current in “Other current assets”
Derivative assets—non-current in “Other non-current assets”
Total
Liabilities
Derivative liabilities—current in “Other current liabilities”
Derivative liabilities—non-current in “Other non-current liabilities”
Total
Total
December 31, 2022 ($ in millions)
Level 1
Level 2
Level 3
fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
Debt securities—U.S. government obligations
Debt securities—Other government obligations
Debt securities—Corporate
Derivative assets—current in “Other current assets”
Derivative assets—non-current in “Other non-current assets”
Total
Liabilities
Derivative liabilities—current in “Other current liabilities”
Derivative liabilities—non-current in “Other non-current liabilities”
Total
During 2023, 2022 and 2021, there have been
between Level 1 and Level 2.
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:
•
Securities in “Marketable securities and short
‑
term investments”:
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.
F-34
•
Derivatives:
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. 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
‑
recurring fair value measurements during the years ended 2023, 2022 and
2021.
Disclosure about financial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
Carrying
Total
December 31, 2023 ($ in millions)
value
Level 1
Level 2
Level 3
fair value
Assets
Cash and equivalents (excluding securities
with original maturities up to 3 months):
Cash
Time deposits
Restricted cash
Marketable securities and short-term investments (excluding
securities):
Time deposits
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
Long-term debt (excluding finance lease obligations)
Carrying
Total
December 31, 2022 ($ in millions)
value
Level 1
Level 2
Level 3
fair value
Assets
Cash and equivalents (excluding securities
with original maturities up to 3 months):
Cash
Time deposits
Restricted cash
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
Long-term debt (excluding finance lease obligations)
The Company uses the following methods and assumptions in estimating fair values of financial instruments
carried on a cost basis:
•
Cash and equivalents (excluding securities with original maturities up to 3 months), Restricted
cash and Marketable securities and short
‑
term investments (excluding securities):
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.
F-35
•
Short
‑
term debt and current maturities of long
‑
term debt (excluding finance lease obligations):
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.
•
Long
‑
term debt (excluding finance lease obligations):
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
Receivables, net and Contract assets and liabilities
Receivables, net consisted of the following:
December 31, ($ in millions)
2023
2022
Trade receivables
Other receivables
Allowance
(307 )
(308 )
Total
“Trade receivables” in the table above includes contractual retention amounts billed to customers of
$
substantial majority of related contracts will be completed and the substantial majority of the billed amounts
retained by the customer will be collected. Of the retention amounts outstanding at December 31, 2023,
“Other receivables” in the table above consists of value added tax, claims, rental deposits and other
non
‑
trade receivables.
The reconciliation of changes in the allowance for doubtful accounts is as follows:
($ in millions)
2023
2022
2021
Balance at January 1,
Current-period provision for expected credit losses
Write-offs charged against the allowance
(48 )
(48 )
(37 )
Exchange rate differences
(20 )
(14 )
Balance at December 31,
The following table provides information about Contract assets and Contract liabilities:
December 31, ($ in millions)
2023
2022
2021
Contract assets
Contract liabilities
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
F-36
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:
2023
2022
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities
balance at January 1, 2023/2022
(1,311 )
(1,043 )
Additions to Contract liabilities - excluding amounts recognized as
revenue during the period
Receivables recognized that were included in the Contract assets
balance at January 1, 2023/2022
(622 )
(591 )
The Company considers its order backlog to represent its unsatisfied performance obligations. At
December 31, 2023, the Company had unsatisfied performance obligations totaling $
this amount, the Company expects to fulfill approximately
2024
,
approximately
2025
—
Note 9
Inventories, net
Inventories, net consisted of the following:
December 31, ($ in millions)
2023
2022
Raw materials
Work in process
Finished goods
Advances to suppliers
Total
—
Note 10
Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
December 31, ($ in millions)
2023
2022
Land and buildings
Machinery and equipment
Construction in progress
Accumulated depreciation
(6,236 )
(5,792 )
Total
F-37
Assets under finance leases included in
Property, plant and equipment, net
December 31, ($ in millions)
2023
2022
Land and buildings
Machinery and equipment
Accumulated depreciation
(137 )
(135 )
Total
In 2023, 2022 and 2021, depreciation, including depreciation of assets under finance leases, was
$
impairments of property, plant or equipment.
—
Note 11
Goodwill and intangible assets
The changes in “Goodwill” were as follows:
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
(3)
Total
Balance at January 1, 2022
(1)
Goodwill acquired during the year
(2)
Goodwill allocated to disposals
(2 )
(6 )
(8 )
Exchange rate differences and
other
(85 )
(8 )
(20 )
(72 )
(7 )
(192 )
Balance at December 31, 2022
(1)
Goodwill acquired during the year
(2)
Goodwill allocated to disposals
(181 )
(12 )
(193 )
Exchange rate differences and
other
Balance at December 31, 2023
(1)
(1) At December 31, 2023 and 2022, and at January 1, 2022, the gross goodwill amounted to $
$
and related to the Robotics & Discrete Automation segment.
(2) Amount includes adjustments arising during the twelve -month measurement period subsequent to the respective acquisition date.
(3) Corporate and Other has been recast to include the E-mobility Division which, effective January 1, 2023, became a separate non-reportable
operating segment. See Note 23 for details.
F-38
In 2023, goodwill allocated to disposals primarily relates to the divestment of the Power Conversion Division
in July 2023, which prior to its divestment was reported in the Electrification operating segment.
Intangible assets, net consisted of the following:
2023
2022
Gross
Accumu-
Net
Gross
Accumu-
Net
carrying
lated amort-
carrying
carrying
lated amort-
carrying
December 31, ($ in millions)
amount
ization
amount
amount
ization
amount
Capitalized software for internal use
(775 )
(720 )
Capitalized software for sale
(26 )
(26 )
Intangibles other than software:
Customer-related
(894 )
(808 )
Technology-related
(832 )
(812 )
Marketing-related
(400 )
(347 )
Other
(33 )
(30 )
Total
(2,960 )
(2,743 )
Additions to intangible assets other than goodwill consisted of the following:
($ in millions)
2023
2022
Capitalized software for internal use
Capitalized software for sale
Intangibles other than software:
Customer-related
Technology-related
Marketing-related
Other
Total
There were no significant intangible assets acquired in business combinations in 2023 and 2022.
Amortization expense of intangible assets consisted of the following:
($ in millions)
2023
2022
2021
Capitalized software for internal use
Intangibles other than software
Total
In 2023, 2022 and 2021, impairment charges on intangible assets were not significant.
At December 31, 2023, future amortization expense of intangible assets is estimated to be:
($ in millions)
2024
2025
2026
2027
2028
Thereafter
Total
F-39
—
Note 12
Debt
The Company’s total debt at December 31, 2023 and 2022, amounted to $
respectively.
Short
‑
term debt and current maturities of long-term debt
Short
‑
term debt and current maturities of long
‑
term debt consisted of the following:
December 31, ($ in millions)
2023
2022
Short-term debt (weighted-average interest rate of
% and
%, respectively)
Current maturities of long-term debt
(weighted-average nominal interest rate of
% and
%, respectively)
Total
Short
‑
term debt primarily represents short
‑
term loans from various banks and issued commercial paper.
At December 31, 2023, the Company had
Euro
‑
commercial paper program for the issuance of commercial paper in a variety of currencies, and a
$
in the United States. At December 31, 2022, $
Euro-commercial paper program.
at both December 31, 2023 and 2022,
States.
In December 2019, the Company replaced its previous multicurrency revolving credit facility with a new
$
extend the maturity of this facility to 2026.
The facility is for general corporate purposes. In 2023, the
Company amended and restated its facility for the purpose of addressing the discontinuation of LIBOR.
Under the amended and restated credit facility, interest costs on drawings under the facility (i) in USD are
referenced to CME Term SOFR; (ii) in CHF and GBP are referenced to overnight SARON and SONIA,
respectively; and (iii) in Euro are referenced to EURIBOR, subject to applicable credit adjustment spreads (for
only (i) and (ii) above), plus a margin of
portion of the facility) amount to
drawings up to one
‑
third of the facility,
‑
third but less
than or equal to two
‑
thirds of the facility, and
‑
thirds of the
facility. The facility contains cross
‑
default clauses whereby an event of default would occur if the Company
were to default on indebtedness as defined in the facility, at or above a specified threshold.
drawn at December 31, 2023 and 2022, under this facility.
In November 2023, the Company signed a financing agreement of up to EUR
Investment Bank (EIB), the lending arm of the European Union, for financing research and development
within the Electrification operating segment. The availability period under the agreement ends in May 2025.
The applicable interest rate and other relevant borrowing terms are determined on a case-by-case basis at
the time of drawdown. At December 31, 2023,
F-40
Long
‑
term debt
The Company raises long-term debt in various currencies, maturities and on various interest rate terms. For
certain of its debt obligations, the Company utilizes derivative instruments to modify its interest rate exposure.
In particular, the Company uses interest rate swaps to effectively convert certain fixed
‑
rate long
‑
term debt
into floating rate obligations. For certain non-U.S. dollar denominated debt, the Company utilizes
cross-currency interest rate swaps to effectively convert the debt into a U.S. dollar obligation. The carrying
value of debt, designated as being hedged by fair value hedges, is adjusted for changes in the fair value of
the risk component of the debt being hedged.
The following table summarizes the Company’s long
‑
term debt considering the effect of interest rate and
cross-currency interest rate swaps. Consequently, a fixed
‑
rate debt subject to a fixed
‑
to
‑
floating interest rate
swap is included as a floating rate debt in the table below:
2023
2022
December 31,
Nominal
Effective
Nominal
Effective
($ in millions, except % data)
Balance
rate
rate
Balance
rate
rate
Floating rate
%
%
%
%
Fixed rate
%
%
%
%
Current portion of long-term debt
(2,520 )
%
%
(1,087 )
%
%
Total
At December 31, 2023, the principal amounts of long
‑
term debt repayable (excluding finance lease
obligations) at maturity were as follows:
($ in millions)
2024
2025
2026
2027
2028
Thereafter
Total
F-41
Details of outstanding bonds were as follows:
2023
2022
December 31, (in millions)
Nominal
Carrying
Nominal
Carrying
outstanding
value
(1)
outstanding
value
(1)
Bonds:
% EUR Instruments, due 2023
EUR
$
% CHF Bonds, due 2023
CHF
$
% EUR Instruments, due 2024
EUR
$
EUR
$
Floating Rate EUR Instruments, due 2024
EUR
$
EUR
$
% EUR Instruments, due 2024
EUR
$
EUR
$
% CHF Bonds, due 2024
CHF
$
CHF
$
% CHF Bonds, due 2025
CHF
$
CHF
$
% CHF Bonds, due 2026
CHF
$
% EUR Instruments, due 2027
EUR
$
% CHF Bonds, due 2027
CHF
$
CHF
$
% USD Notes, due 2028
(2)
USD
$
USD
$
% CHF Bonds, due 2028
CHF
$
% CHF Bonds, due 2029
CHF
$
CHF
$
% EUR Instruments, due 2030
EUR
$
EUR
$
% CHF Bonds, due 2030
CHF
$
CHF
$
% EUR Instruments, due 2031
EUR
$
% CHF Bonds, due 2033
CHF
$
% USD Notes, due 2042
(2)
USD
$
USD
$
Total
$
$
(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 2020, the original principal amount outstanding, on each of the
% USD Notes, due 2028, and
the
% USD Notes, due 2042, was $
During 2023, the Company repaid at maturity its
% EUR
annually in arrears at a fixed rate of
The following EUR Instruments are both due in 2024: (i) EUR
at a fixed rate of
quarterly in arrears at a variable rate of
minimum rate of interest of
maturity at the greater of (i)
of the present values of remaining scheduled payments of principal and interest (excluding interest accrued
to the redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest
accrued at the redemption date. Interest rate swaps have been used to modify the characteristics of the
EUR
EUR
The
% EUR Instruments, due 2024, pay interest annually in arrears at a fixed rate of
annum. The Company may redeem these notes up to three months prior to maturity (Par call date), at the
greater of (i)
values of remaining scheduled payments of principal and interest (excluding interest accrued to the
redemption date) discounted to the redemption date at a rate defined in the note terms, plus interest accrued
at the redemption date. The Company may redeem these instruments, after the Par call date at
of the principal amount of the notes to be redeemed. The Company entered into interest rate swaps to modify
the characteristics of these bonds. After considering the impact of such swaps, these notes effectively
become floating rate euro obligations and consequently have been shown as floating rate debt, in the table of
long
‑
term debt above.
F-42
The
% CHF Bonds, due 2024, and
% CHF Bonds, due 2029, each pay interest annually in arrears.
The Company may redeem these bonds,
three
months prior to maturity in the case of the 2029 Bonds, in whole but not in part, at par plus accrued interest.
Further, the Company has the option to redeem these instruments prior to maturity, in whole but not in part,
at par plus accrued interest, if
issue have been redeemed or purchased and cancelled at the time of the option exercise notice.
The CHF
% Bonds, due 2025, and the CHF
% Bonds, due 2030, both pay
interest annually in arrears. The Company may redeem these bonds, three months prior to maturity, in whole
but not in part, at par plus accrued interest. Further, the Company has the option to redeem these
instruments prior to maturity, in whole but not in part, at par plus accrued interest, if
aggregate principal amount of the relevant bond issue has been redeemed or purchased and cancelled at the
time of the option exercise notice.
The CHF
% Bonds, due 2027, pay interest annually in arrears. The Company may redeem
the Bonds,
Company has the option to redeem these instruments prior to maturity, in whole but not in part, at par plus
accrued interest, if
and cancelled at the time of the option exercise notice.
The
% USD Notes, due 2028, were issued in April 2018 and pay interest semi
‑
annually in arrears. During
2020 by way of a cash tender offer, the Company redeemed $
%
USD Notes, due 2028, issued. The Company may redeem the remaining principal outstanding of the
2028 Notes up to
of the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining
scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted
to the redemption date at a rate defined in the Notes terms, plus interest accrued at the redemption date. On
or after January 3, 2028 (
2028 Notes, in whole or in part, at any time at a redemption price equal to
amount of the notes to be redeemed plus unpaid accrued interest to, but excluding, the redemption date.
These notes, registered with the U.S. Securities and Exchange Commission, were issued by ABB Finance
(USA) Inc., a
ABB Ltd. There are no significant restrictions on the ability of the parent company to obtain funds from its
subsidiaries by dividend or loan. In reliance on Rule 13-01 of Regulation S
‑
X, the separate financial
statements of ABB Finance (USA) Inc. are not provided.
The
% EUR Instruments, due 2030, do not pay interest and have the same early redemption terms as the
% EUR Instruments above. Cross-currency interest rate swaps have been used to modify the
characteristics of these instruments. After considering the impact of these cross-currency interest rate swaps,
the Company effectively has a floating rate U.S. dollar obligation.
The
% USD Notes, due 2042, pay interest semi
‑
annually in arrears at a fixed annual rate of
original $
% USD Notes, due 2042, issued. The Company may redeem these notes prior to
maturity, in whole or in part, at the greater of (i)
redeemed and (ii) the sum of the present values of remaining scheduled payments of principal and interest
(excluding interest accrued to the redemption date) discounted to the redemption date at a rate defined in the
note terms, plus interest accrued at the redemption date. These notes, registered with the U.S. Securities and
Exchange Commission, were issued by ABB Finance (USA) Inc., a
and are fully and unconditionally guaranteed by ABB Ltd. There are no significant restrictions on the ability of
the parent company to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13
‑
01 of
Regulation S
‑
X, the separate financial statements of ABB Finance (USA) Inc. are not provided.
F-43
In 2023, the Company issued the following EUR Instruments: (i) EUR
% Instruments, due
2027, and (ii) EUR
% Instruments, due 2031, both paying interest annually in arrears. The
Company may redeem the EUR
EUR
the principal amount of the notes to be redeemed and (ii) the sum of the present values of remaining
scheduled payments of principal and interest (excluding interest accrued to the redemption date) discounted
to the redemption date at a rate defined in the note terms, plus interest accrued at the redemption date. The
Company may redeem these instruments, after the Par call date, at
the notes to be redeemed. The aggregate net proceeds of these EUR Instruments, after discount and fees,
amounted to EUR
Also in 2023, the Company issued the following CHF bonds: (i) CHF
% Bonds, due 2026,
(ii) CHF
% Bonds, due 2028, and (iii) CHF
% Bonds, due 2033, all
paying interest annually in arrears and have the same early redemption terms as the CHF
%
Bonds above. The aggregate net proceeds of these CHF Bonds, after fees, amounted to CHF
(equivalent to approximately $
The Company’s various debt instruments contain cross
‑
default clauses which would allow the bondholders to
demand repayment if the Company were to default on any borrowing at or above a specified threshold.
Furthermore, all such bonds constitute unsecured obligations of the Company and rank pari passu with other
debt obligations.
In addition to the bonds described above, included in long
‑
term debt at December 31, 2023 and 2022, are
finance lease obligations, bank borrowings of subsidiaries and other long
‑
term debt, none of which is
individually significant.
—
Note 13
Other provisions, other current liabilities and other non-current liabilities
Other provisions consisted of the following:
December 31, ($ in millions)
2023
2022
Contract-related provisions
Restructuring and restructuring-related provisions
Provision for insurance-related reserves
Provisions for contractual penalties and compliance and litigation matters
Other
Total
F-44
Other current liabilities consisted of the following:
December 31, ($ in millions)
2023
2022
Employee-related liabilities
Accrued expenses
Income taxes payable and other income tax related liabilities
Non-trade payables
Accrued customer rebates
Other tax liabilities
Derivative liabilities (see Note 6)
Accrued interest
Other
Total
Other non
‑
current liabilities consisted of the following:
December 31, ($ in millions)
2023
2022
Income tax related liabilities
Derivative liabilities (see Note 6)
Provisions for contractual penalties and compliance and litigation matters
Other
Total
—
Note 14
Leases
The Company’s lease obligations primarily relate to real estate, machinery and equipment. The components
of lease expense were as follows:
Machinery
Land and buildings
and equipment
Total
($ in millions)
2023
2022
2021
2023
2022
2021
2023
2022
2021
Operating lease cost
Finance lease cost
Short-term lease cost
Sub-lease income
(20 )
(18 )
(24 )
(1 )
(1 )
(20 )
(19 )
(25 )
Total lease expense
The following table presents supplemental cash flow information related to leases:
Machinery
Land and buildings
and equipment
Total
($ in millions)
2023
2022
2021
2023
2022
2021
2023
2022
2021
Operating leases:
Cash paid under operating cash flows
Right-of-use assets obtained
in exchange for new liabilities
F-45
In 2023, 2022 and 2021 the cash flow amounts under finance leases were not significant.
At December 31, 2023, the future net minimum lease payments for operating and finance leases and the
related present value of the net minimum lease payments consisted of the following:
Operating Leases
Finance Leases
Land and
Machinery
Land and
Machinery
($ in millions)
buildings
and equipment
buildings
and equipment
2024
2025
2026
2027
2028
Thereafter
Total minimum lease payments
Difference between undiscounted cash flows
and discounted cash flows
(89 )
(8 )
(34 )
(2 )
Present value of minimum lease payments
The following table presents certain information related to lease terms and discount rates:
Land and buildings
Machinery and equipment
2023
2022
2021
2023
2022
2021
Operating leases:
Weighted-average remaining term (months)
Weighted-average discount rate
Finance leases:
Weighted-average remaining term (months)
Weighted-average discount rate
The present value of minimum finance lease payments included in
Short‑term debt
long
‑
term debt and
Long‑term debt
$
$
F-46
—
Note 15
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Regulatory
Based on findings during an internal investigation, the Company self-reported to the Securities and Exchange
Commission (SEC) and the Department of Justice (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 $
the SIU 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 $
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 December 31, 2023 and 2022, the Company had aggregate liabilities of $
respectively, included in Other provisions and Other non
‑
current liabilities, for the above regulatory,
compliance and legal contingencies, and none of the individual liabilities recognized was significant. As it is
not possible to make an informed judgment on, or reasonably predict, the outcome of certain matters and as
it is not possible, based on information currently available to management, to estimate the maximum potential
liability on other matters, there could be adverse outcomes beyond the amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s third
‑
party guarantees. The maximum
potential payments represent a “worst
‑
case scenario”, and do not reflect management’s expected outcomes.
Maximum potential payments
(1)
December 31, ($ in millions)
2023
2022
Performance guarantees
Financial guarantees
Total
(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 December 31, 2023 and 2022, were not significant.
F-47
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
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 December 31, 2023 and 2022, the maximum potential payable under these
guarantees amounts to $
maturities ranging from
five
.
The Company retained obligations for financial and performance guarantees related to the sale of the Power
Grids business (see Note 3 for details). At both December 31, 2023 and 2022, the performance and financial
guarantees have been fully indemnified by Hitachi. 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
ten
years. The maximum amount payable under these guarantees at December 31, 2023 and 2022, is
approximately $
indemnification guarantees that were due to be settled concurrent with such transaction. As a result, in 2022,
the Company recorded $
discontinued operations).
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 December 31, 2023 and 2022, the total
outstanding performance bonds aggregated to $
significant amounts reimbursed to financial institutions under these types of arrangements in 2023 and 2022.
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
2021
Balance at January 1,
Net change in warranties due to acquisitions, divestments and spin-offs
(24 )
Claims paid in cash or in kind
(171 )
(157 )
(222 )
Net increase in provision for changes in
estimates, warranties issued and warranties expired
Exchange rate differences
(48 )
(35 )
Balance at December 31,
F-48
Related party transactions
The Company conducts business with certain companies where members of the Company’s Board of
Directors or Executive Committee act, or in recent years have acted, as directors or senior executives. The
Company’s Board of Directors has determined that the Company’s business relationships with those
companies do not constitute material business relationships. This determination was made in accordance
with the Company’s related party transaction policy which was prepared based on the Swiss Code of Best
Practice and the independence criteria set forth in the corporate governance rules of the New York Stock
Exchange.
—
Note 16
Income taxes
Income tax expense consisted of the following:
($ in millions)
2023
2022
2021
Current taxes
Deferred taxes
(25 )
(344 )
(289 )
Income tax expense allocated to continuing operations
Income tax benefit allocated to discontinued operations
(6 )
(5 )
(1 )
Income tax expense from continuing operations is reconciled below from the Company’s weighted
‑
average
global tax rate (rather than from the Swiss domestic statutory tax rate) as the parent company of the ABB
Group, ABB Ltd, is domiciled in Switzerland and income generated in jurisdictions outside of Switzerland
(hereafter “foreign jurisdictions”) which has already been subject to corporate income tax in those foreign
jurisdictions is, to a large extent, tax exempt in Switzerland. There is no requirement in Switzerland for any
parent company of a group to file a tax return of the consolidated group determining domestic and foreign
pre
‑
tax income. As the Company’s consolidated income from continuing operations is predominantly earned
outside of Switzerland, the weighted
‑
average global tax rate of the Company results from enacted corporate
income tax rates in foreign jurisdictions.
The reconciliation of Income tax expense from continuing operations at the weighted
‑
average tax rate to the
effective tax rate is as follows:
($ in millions, except % data)
2023
2022
2021
Income from continuing operations before income taxes
Weighted-average global tax rate
Income taxes at weighted-average tax rate
Items taxed at rates other than the weighted-average tax rate
Unrecognized tax benefits
(207 )
(83 )
Changes in valuation allowance, net
(195 )
(95 )
Effects of changes in tax laws and enacted tax rates
(3 )
(19 )
Non-deductible / non-taxable items
(542 )
Other, net
(10 )
(5 )
Income tax expense from continuing operations
Effective tax rate for the year
The allocation of consolidated income from continuing operations, which is predominantly earned outside of
Switzerland, impacts the “Weighted-average global tax rate”.
F-49
In 2023 and 2022, “Items taxed at rates other than the weighted-average tax rate” included $
$
participation exemption, while in 2021, this included $
divestment of the Dodge business.
In 2023, “Changes in valuation allowance, net” included $
performance in Europe, partially offset with positive impacts from changes in certain outlooks related to
business performance in the Americas of $
positive impacts from changes in certain outlooks in Asia of $
Americas of $
$
$
In 2023 and 2021, “Effects of changes in tax laws and enacted tax rates” were not significant while in 2022,
this amount primarily reflects the impact of changes in certain tax rates in Europe for $
In 2023, “Non-deductible / non-taxable items” reflects an additional tax impact of $
sale of the Power Conversion Division. In 2022, this amount includes a net tax impact of $
non-deductible regulatory penalties in connection with the Kusile project offset partially by the impact of the
non-taxable gain from the sale of the remaining investment in Hitachi Energy. In 2021, this includes
$
reorganizations where the reported net gain from sale of businesses exceeded the related taxable gain as
well as the impact of a recognition of previously unrecognized outside basis differences. In all periods, the
amounts reported also include other items that were deducted for financial accounting purposes but are
typically not tax deductible, such as certain interest expense costs, local taxes on productive activities,
disallowed amounts for meals and entertainment expenses and other similar items.
In 2023, “Unrecognized tax benefits” included a benefit of $
uncertain tax matter in Asia relating to the divestment in 2020 of the Power Grids business. In 2022 and
2021, “Unrecognized tax benefits” in the table above included a net benefit of $
$
competent tax authorities.
F-50
Deferred tax assets and liabilities consisted of the following:
December 31, ($ in millions)
2023
2022
Deferred tax assets:
Unused tax losses and credits
Provisions and other accrued liabilities
Other current assets including receivables
Pension
Inventories
Intangible assets
Other
Total gross deferred tax asset
Valuation allowance
(1,070 )
(1,000 )
Total gross deferred tax asset, net of valuation allowance
Deferred tax liabilities:
Property, plant and equipment
(243 )
(232 )
Intangible assets
(241 )
(237 )
Other assets
(142 )
(91 )
Pension
(317 )
(318 )
Other liabilities
(154 )
(200 )
Inventories
(66 )
(44 )
Unremitted earnings of subsidiaries
(335 )
(336 )
Total gross deferred tax liability
(1,498 )
(1,458 )
Net deferred tax asset (liability
)
Included in:
“Deferred taxes”—non-current assets
“Deferred taxes”—non-current liabilities
(669 )
(729 )
Net deferred tax asset (liability)
Certain entities have deferred tax assets related to net operating loss carry
‑
forwards and other items. As
recognition of these assets in certain entities did not meet the more likely than not criterion, valuation
allowances have been recorded. “Unused tax losses and credits” at December 31, 2023 and 2022, in the
table above, included $
valuation allowance as, due to limitations imposed by the relevant tax law, the Company determined that,
more likely than not, such deferred tax assets would not be realized.
The valuation allowance at December 31, 2023, 2022 and 2021, was $
$
foreign exchange rates.
Certain amounts included in deferred tax assets for intangible assets result from intercompany transactions
occurring at fair market value for which no corresponding accounting basis exists.
At December 31, 2023 and 2022, deferred tax liabilities totaling $
have been provided for withholding taxes, dividend distribution taxes or additional corporate income taxes
(hereafter “withholding taxes”) on unremitted earnings which will be payable in foreign jurisdictions in the
event of repatriation of the foreign earnings to Switzerland. Income which has been generated outside of
Switzerland and has already been subject to corporate income tax in such foreign jurisdictions is, to a large
extent, tax exempt in Switzerland and therefore, generally no or only limited Swiss income tax has to be
provided for on the repatriated earnings of foreign subsidiaries.
F-51
Certain countries levy withholding taxes on dividend distributions and these taxes cannot always be fully
reclaimed by the Company’s relevant subsidiary receiving the dividend, although the taxes have to be
withheld and paid by the relevant subsidiary distributing such dividend. In 2023 and 2022, certain taxes arose
in certain foreign jurisdictions for which the technical merits do not allow utilization of benefits. At
December 31, 2023 and 2022, foreign subsidiary retained earnings which would be subject to withholding
taxes upon distribution were approximately $
considered as indefinitely reinvested, as these funds are used for financing current operations as well as
business growth through working capital and capital expenditure in those countries and, consequently, no
deferred tax liability was recorded.
At December 31, 2023, net operating loss carry
‑
forwards of $
available to reduce future income taxes of certain subsidiaries. Of these amounts, $
loss carry-forwards and $
remainder are available for carryforward indefinitely. The largest amount of these carry
‑
forwards related to
the Company’s Europe operations.
Unrecognized tax benefits consisted of the following:
Penalties and
interest
related to
Unrecognized
unrecognized
($ in millions)
tax benefits
tax benefits
Total
Classification as unrecognized tax items on January 1, 2021
Net change due to acquisitions and divestments
(6 )
Increase relating to prior year tax positions
Decrease relating to prior year tax positions
(42 )
(3 )
(45 )
Increase relating to current year tax positions
Decrease due to settlements with tax authorities
(175 )
(20 )
(195 )
Decrease as a result of the applicable statute of limitations
(72 )
(22 )
(94 )
Exchange rate differences
(41 )
(7 )
(48 )
Balance at December 31, 2021, which would, if recognized, affect
the effective tax rate
Increase relating to prior year tax positions
Decrease relating to prior year tax positions
(98 )
(12 )
(110 )
Increase relating to current year tax positions
Decrease due to settlements with tax authorities
(31 )
(14 )
(45 )
Decrease as a result of the applicable statute of limitations
(71 )
(23 )
(94 )
Exchange rate differences
(58 )
(10 )
(68 )
Balance at December 31, 2022, which would, if recognized, affect
the effective tax rate
Net change due to acquisitions and divestments
(9 )
(1 )
(10 )
Increase relating to prior year tax positions
Decrease relating to prior year tax positions
(233 )
(6 )
(239 )
Increase relating to current year tax positions
Decrease due to settlements with tax authorities
(82 )
(13 )
(95 )
Decrease as a result of the applicable statute of limitations
(80 )
(19 )
(99 )
Exchange rate differences
Balance at December 31, 2023, which would, if recognized, affect
the effective tax rate
In 2023, 2022 and 2021, “Increase relating to current year tax positions” included a total of $
$
agreements by competent tax authorities.
F-52
In 2023, “Increase relating to prior year tax positions” included $
In 2022, “Increase relating to prior year tax positions” included $
Europe.
In 2021, “Increase relating to prior year tax positions” included a total of $
interpretation of tax law and double tax treaty agreements by competent tax authorities in Europe.
In 2023, “Decrease relating to prior year tax positions” included $
related to the divestment in 2020 of the Power Grids business.
In 2022, “Decrease relating to prior year tax positions” included $
assessments in Europe.
In 2021, “Decrease relating to prior year tax positions” of $
assessments in Europe.
In 2023, “Decrease due to settlements with tax authorities” of $
Europe.
In 2021, “Decrease due to settlements with tax authorities” is predominantly related to tax assessments
received in Europe, while in 2022, this amount is predominantly related to tax assessments received in Asia
and Europe.
At December 31, 2023, the Company expected the resolution, within the next twelve months, of unrecognized
tax benefits related to pending court cases amounting to $
Otherwise, the Company had not identified any other significant changes which were considered reasonably
possible to occur within the next twelve months.
At December 31, 2023, the earliest significant open tax years that remained subject to examination were the
following:
Region
Year
Europe
United States
Rest of Americas
China
Rest of Asia, Middle East and Africa
—
Note 17
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 December 31, 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 postretirement benefit plans are not significant. 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 local government and tax requirements.
F-53
The Company recognizes in its Consolidated Balance Sheets the funded status of its defined benefit pension
plans, postretirement plans and other employee
‑
related benefits measured as the difference between the fair
value of the plan assets and the benefit obligation.
Unless otherwise indicated, the following tables include amounts relating to both continuing and discontinued
operations.
Obligations and funded status of the plans
The change in benefit obligation, change in fair value of plan assets, and funded status recognized in the
Consolidated Balance Sheets were as follows:
Defined pension benefits
Switzerland
International
($ in millions)
2023
2022
2023
2022
Benefit obligation at January 1,
Service cost
Interest cost
Contributions by plan participants
Benefit payments
(134 )
(96 )
(236 )
(234 )
Settlements
(97 )
(92 )
(69 )
(36 )
Benefit obligations of businesses acquired (divested)
(328 )
(2 )
Actuarial (gain) loss
(478 )
(1,075 )
Plan amendments and other
(3 )
Exchange rate differences
(80 )
(328 )
Benefit obligation at December 31,
Fair value of plan assets at January 1,
Actual return on plan assets
(310 )
(789 )
Contributions by employer
Contributions by plan participants
Benefit payments
(134 )
(96 )
(236 )
(234 )
Settlements
(97 )
(92 )
(69 )
(36 )
Plan assets of businesses acquired (divested)
(414 )
(1 )
Exchange rate differences
(89 )
(299 )
Fair value of plan assets at December 31,
Funded status — overfunded (underfunded)
(430 )
(400 )
The amounts recognized in Accumulated other comprehensive loss and Noncontrolling interests were:
Defined pension benefits
December 31, ($ in millions)
2023
2022
2021
Net actuarial (loss) gain
(1,439 )
(1,183 )
(1,540 )
Prior service credit
Amount recognized in OCI
(1)
(2)
(1,400 )
(1,127 )
(1,468 )
Taxes associated with amount recognized
in OCI and NCI
Amount recognized in OCI
(1)
(3)
(1,089 )
(861 )
(1,116 )
(1) OCI represents Accumulated other comprehensive loss and, in addition, includes $
2023, 2022 and 2021, recognized for Other postretirement benefits.
(2) NCI represents Noncontrolling interests.
(3) NCI, net of tax, amounted to $
(1 )
F-54
In addition, the following amounts were recognized in the Company's Consolidated Balance Sheets:
Defined pension benefits
Switzerland
International
December 31, ($ in millions)
2023
2022
2023
2022
Overfunded plans
Underfunded plans — current
(16 )
(22 )
Underfunded plans — non-current
(551 )
(567 )
Funded status — overfunded (underfunded)
(430 )
(400 )
December 31, ($ in millions)
2023
2022
Non-current assets
Overfunded pension plans
Other employee-related benefits
Pension and other employee benefits
December 31, ($ in millions)
2023
2022
Current liabilities
Underfunded pension plans
(16 )
(22 )
Underfunded other postretirement benefit plans
(3 )
(6 )
Other employee-related benefits
(14 )
(10 )
Pension and other employee benefits
(33 )
(38 )
December 31, ($ in millions)
2023
2022
Non-current liabilities
Underfunded pension plans
(551 )
(567 )
Underfunded other postretirement benefit plans
(18 )
(44 )
Other employee-related benefits
(117 )
(108 )
Pension and other employee benefits
(686 )
(719 )
The accumulated benefit obligation (ABO) for all defined benefit pension plans was $
$
and fair value of plan assets, for pension plans with a PBO in excess of fair value of plan assets or ABO in
excess of fair value of plan assets, was:
PBO exceeds fair value of plan assets
ABO exceeds fair value of plan assets
December 31,
Switzerland
International
Switzerland
International
($ in millions)
2023
2022
2023
2022
2023
2022
2023
2022
PBO
ABO
Fair value of plan assets
F-55
Components of net periodic benefit cost
Net periodic benefit cost mainly consisted of the following:
Defined pension benefits
Switzerland
International
($ in millions)
2023
2022
2021
2023
2022
2021
Operational pension cost:
Service cost
Operational pension cost
Non-operational pension cost (credit):
Interest cost (credit)
(5 )
Expected return on plan assets
(129 )
(117 )
(116 )
(157 )
(153 )
(178 )
Amortization of prior service cost (credit)
(8 )
(9 )
(9 )
(2 )
(2 )
(2 )
Amortization of net actuarial loss
Curtailments, settlements and special
termination benefits
Non-operational pension cost (credit)
(1)
(76 )
(109 )
(129 )
(3 )
(34 )
Net periodic benefit cost (credit)
(36 )
(59 )
(68 )
(1) Total Non-operational pension cost (credit) includes additional credits of $(
) million, $(
) million and $(
) million at December 31, 2023,
2022 and 2021, related to Other postretirement benefits.
The components of net periodic benefit cost other than the service cost component are included in
Non-operational pension cost (credit) in the Consolidated Income Statements.
Assumptions
The following weighted-average assumptions were used to determine projected benefit obligations:
Defined pension benefits
Switzerland
International
December 31, (in %)
2023
2022
2023
2022
Discount rate
Rate of compensation increase
Rate of pension increase
Cash balance interest credit rate
For the Company’s significant benefit plans, the discount rate used at each measurement date is set based
on a high-quality corporate bond yield curve (derived based on bond universe information sourced from
reputable third-party index and data providers and rating agencies) reflecting the timing, amount and currency
of the future expected benefit payments for the respective plan. Consistent discount rates are used across all
plans in each currency zone, based on the duration of the applicable plan(s) in that zone. For plans in the
other countries, the discount rate is based on high quality corporate or government bond yields applicable in
the respective currency, as appropriate at each measurement date with a duration broadly consistent with the
respective plan’s obligations.
F-56
The following weighted-average assumptions were used to determine the “Net periodic benefit cost”:
Defined pension benefits
Switzerland
International
(in %)
2023
2022
2021
2023
2022
2021
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
Cash balance interest credit rate
The “Expected long-term rate of return on plan assets” is derived for each benefit plan by considering the
expected future long-term return assumption for each individual asset class. A single long-term return
assumption is then derived for each plan based upon the plan’s target asset allocation.
Plan assets
The Company has pension plans in various countries with the majority of the Company’s pension liabilities
deriving from a limited number of these countries.
The pension plans are typically funded by regular contributions from employees and the Company. These
plans are typically administered by boards of trustees (which include Company representatives) whose
primary responsibilities include ensuring that the plans meet their liabilities through contributions and
investment returns. The boards of trustees have the responsibility for making key investment strategy
decisions within a risk-controlled framework.
The pension plan assets are invested in diversified portfolios that are managed by third-party asset
managers, in accordance with local statutory regulations, pension plan rules and the respective plans’
investment guidelines, as approved by the boards of trustees.
Plan assets are generally segregated from those of the Company and invested with the aim of meeting the
respective plans’ projected future pension liabilities. Plan assets are measured at fair value at the balance
sheet date.
The boards of trustees manage the assets of the pension plans in a risk-controlled manner and assess the
risks embedded in the pension plans through asset/liability management studies. Asset/liability management
studies typically take place every
. However, the risks of the plans are monitored on an ongoing
basis.
The boards of trustees’ investment goal is to maximize the long-term returns of plan assets within specified
risk parameters, while considering the future liabilities and liquidity needs of the individual plans. Risk
measures taken into account include the funding ratio of the plan, the likelihood of extraordinary cash
contributions being required, the risk embedded in each individual asset class, and the plan asset portfolio as
a whole.
F-57
The Company’s global pension asset allocation is the result of the asset allocations of the individual plans,
which are set by the respective boards of trustees. The target asset allocation of the Company’s plans on a
weighted-average basis is as follows:
Target
(in %)
Switzerland
International
Asset class
Equity
Fixed income
Real estate
Other
Total
The actual asset allocations of the plans are in line with the target asset allocations.
Equity securities primarily include investments in large-cap and mid-cap publicly traded companies. Fixed
income assets primarily include corporate bonds of companies from diverse industries and government
bonds. Both fixed income and equity assets are invested either via funds or directly in segregated investment
mandates, and include an allocation to emerging markets. Real estate consists primarily of investments in
real estate in Switzerland held in the Swiss plans. The “Other” asset class includes investments in private
equity, insurance contracts, cash, and reflects a variety of investment strategies.
Based on the above global asset allocation and the fair values of the plan assets, the expected long-term
return on assets at December 31, 2023, is
regularly review the investment performance of the asset classes and individual asset managers. Due to the
diversified nature of the investments, the Company is of the opinion that no significant concentration of risks
exists in its pension fund assets.
At December 31, 2023 and 2022, plan assets include ABB Ltd’s shares (as well as an insignificant amount of
the Company’s debt instruments) with a total value of $
The fair values of the Company’s pension plan assets by asset class are presented below. For further
information on the fair value hierarchy and an overview of the Company’s valuation techniques applied, see
the “Fair value measures” section of Note 2.
Not
subject to
Total
December 31, 2023 ($ in millions)
Level 1
Level 2
Level 3
leveling
(1)
fair value
Asset class
Equity
Equity securities
Mutual funds/commingled funds
Emerging market mutual funds/commingled funds
Fixed income
Government and corporate securities
Government and corporate—mutual funds/commingled funds
Emerging market bonds—mutual funds/commingled funds
Real estate
Insurance contracts
Cash and short-term investments
Private equity
Total
F-58
Not
subject to
Total
December 31, 2022 ($ in millions)
Level 1
Level 2
Level 3
leveling
(1)
fair value
Asset class
Equity
Equity securities
Mutual funds/commingled funds
Emerging market mutual funds/commingled funds
Fixed income
Government and corporate securities
Government and corporate—mutual funds/commingled funds
Emerging market bonds—mutual funds/commingled funds
Real estate
Insurance contracts
Cash and short-term investments
Private equity
Total
(1)
Amounts relate to assets measured using the NAV practical expedient which are not subject to leveling
.
The Company applies accounting guidance related to the presentation of certain investments using the net
asset value (NAV) practical expedient. This accounting guidance exempts investments using this practical
expedient from categorization within the fair value hierarchy. Investments measured at NAV are primarily
non exchange-traded commingled or collective funds in private equity and real estate where the fair value of
the underlying assets is determined by the investment manager. Investments in private equity can never be
redeemed, but instead the funds will make distributions through liquidation of the underlying assets. Total
unfunded commitments for the private equity funds were approximately $
December 31, 2023 and 2022, respectively. The real estate funds are typically subject to a lock-in period of
up to
of three to twelve months.
Contributions
Employer contributions were as follows:
Defined pension benefits
Switzerland
International
($ in millions)
2023
2022
2023
2022
Total contributions to defined benefit
pension plans
Of which, discretionary contributions to
defined benefit pension plans
The Company expects to contribute approximately $
these contributions, $
The Company also contributes to a number of defined contribution plans. The aggregate expense for these
plans in continuing operations was $
respectively. Contributions to multi-employer plans were not significant in 2023, 2022 and 2021.
F-59
Estimated future benefit payments
The expected future cash flows to be paid by the Company’s plans in respect of pension at December 31,
2023, are as follows:
Defined pension benefits
($ in millions)
Switzerland
International
2024
2025
2026
2027
2028
Years 2029 - 2033
—
Note 18
Share-based payment arrangements
The Company has granted share-based instruments to its employees under
‑
based
payment plans, as more fully described in the respective sections below. Compensation cost for
equity
‑
settled awards is recorded in Total cost of sales and in Selling, general and administrative expenses
and totaled $
compensation cost for cash
‑
settled awards, recorded in Selling, general and administrative expenses, was
not significant, as mentioned in the WARs, LTIP and Other share
‑
based payments sections of this note. The
total tax benefit recognized in 2023, 2022 and 2021 was not significant.
At December 31, 2023, the Company had the ability to issue up to
capital in connection with share
‑
based payment arrangements. In addition,
held by the Company as treasury stock at December 31, 2023, could be used to settle share
‑
based payment
arrangements.
As the primary trading market for the shares of ABB Ltd is the SIX Swiss Exchange (on which the shares are
traded in Swiss francs) and substantially all the share
‑
based payment arrangements with employees are
based on the Swiss franc share or have strike prices set in Swiss francs, certain data disclosed below related
to the instruments granted under share
‑
based payment arrangements are presented in Swiss francs.
Management Incentive Plan
Up to 2019, the Company offered, under the MIP, options and cash
‑
settled warrant appreciation rights
(WARs) to key employees for
grant. Participants may exercise or sell options and exercise WARs after the vesting period, which is
the MIP were granted shares under the LTIP (see LTIP section below) and consequently no grants were
made in 2023, 2022 and 2021 under the MIP.
The options granted under the MIP allow participants to purchase shares of ABB Ltd at predetermined prices.
Participants may sell the options rather than exercise the right to purchase shares. Equivalent warrants are
listed by a third
‑
party bank on the SIX Swiss Exchange, which facilitates pricing and transferability of options
granted under this plan. The options entitle the holder to request that the third
‑
party bank purchase such
options at the market price of equivalent listed warrants related to that MIP launch. If the participant elects to
sell the options, the options will thereafter be held by a third party and, consequently, the Company’s
obligation to deliver shares will be toward this third party.
F-60
Each WAR gives the participant the right to receive, in cash, the market price of an equivalent listed warrant
on the date of exercise of the WAR.
Options
The fair value of each option was estimated on the date of grant using a lattice model. As mentioned
previously,
representing
amounted to approximately $
of exercise) of options exercised was approximately $
At December 31, 2023, all options granted under the MIP were vested and exercisable. The aggregate
intrinsic value at December 31, 2023, of options outstanding was approximately $
Presented below is a summary, by launch, related to options outstanding at December 31, 2023:
Weighted-
average
Number of
Number of
remaining
options
shares
contractual
Exercise price (in Swiss francs)
(1)
(in millions)
(in millions)
(2)
term (in years)
Total number of options and shares
(1)
Information presented reflects the exercise price per share of ABB Ltd.
(2)
Information presented reflects the number of shares of ABB Ltd that can be received upon exercise.
WARs
As each WAR gives the holder the right to receive cash equal to the market price of the equivalent listed
warrant on date of exercise, the Company records a liability based upon the fair value of outstanding WARs
at each period end. In Selling, general and administrative expenses, the Company records the changes in fair
value of the outstanding WARs. To hedge its exposure to fluctuations in the fair value of outstanding WARs,
the Company had purchased cash-settled call options, which entitle the Company to receive amounts
equivalent to its obligations under the outstanding WARs. The cash-settled call options are recorded as
derivatives measured at fair value, with subsequent changes in fair value recorded in Selling, general and
administrative expenses. The total impact in Selling, general and administrative expenses in 2023, 2022 and
2021 was not significant.
At December 31, 2023, the number of WARs outstanding and their aggregate fair value was not significant.
The aggregate fair value of outstanding WARs was $
WARs was determined based upon the trading price of equivalent warrants listed on the SIX Swiss
Exchange.
As mentioned previously,
liabilities of $
2022 was not significant.
Employee Share Acquisition Plan
The employee share acquisition plan (ESAP) is an employee stock
‑
option plan with a savings feature.
Employees save over a
twelve‑month
period, employees choose whether to exercise their stock options using their savings plus interest, if any, to
buy ABB Ltd shares at the exercise price set at the grant date, or have their savings returned with any
interest. The savings are accumulated in bank accounts held by a third
‑
party trustee on behalf of the
participants and earn interest, where applicable. Employees can withdraw from the ESAP at any time during
the savings period and will be entitled to a refund of their accumulated savings.
F-61
The fair value of each option is estimated on the date of grant using the same option valuation model as
described under the MIP, using the assumptions noted in the table below. The expected term of the option
granted has been determined to be the contractual
one‑year
options vest and the participants are required to decide whether to exercise their options or have their
savings returned with interest. The risk
‑
free rate is based on
one‑year
the
one‑year
previous ESAP launches.
2023
2022
2021
Expected volatility
Dividend yield
Expected term
Risk-free interest rate
-0.6 %
Presented below is a summary of activity under the ESAP:
Weighted-
Weighted-
Aggregate
average
average
intrinsic
exercise
remaining
value
Number of
price
contractual
(in millions
shares
(in Swiss
term
of Swiss
(in millions)
(1)
francs)
(2)
(in years)
francs)
(2)(3)
Outstanding at January 1, 2023
Granted
Forfeited
(0.1 )
Exercised
(4)
(1.3 )
Not exercised (savings returned plus interest)
(0.4 )
Outstanding at December 31, 2023
Vested and expected to vest at December 31, 2023
Exercisable at December 31, 2023
—
(1)
Includes shares represented by ADS.
(2)
Information presented for ADS is based on equivalent Swiss franc denominated awards.
(3)
Computed using the closing price, in Swiss francs, of ABB Ltd shares on the SIX Swiss Exchange and the exercise price of each option in
Swiss francs.
(4)
The cash received in 2023 from exercises was approximately $
The exercise price per ABB Ltd share of
closing price of the ABB Ltd share on the SIX Swiss Exchange on the grant date. The exercise prices per
ABB Ltd share and per ADS of
, respectively, for the 2022 grant, and
, respectively, for the 2021 grant were determined using the closing price of
the ABB Ltd share on the SIX Swiss Exchange and ADS on the New York Stock Exchange on the respective
grant dates. In connection with the spin-off of the Turbocharging Division in October 2022, the strike prices of
the ESAP options outstanding at the time of spin-off were reduced, as per the terms and conditions of the
original grant, to neutralize the effect of the spin-off on the Company’s share price, resulting in an equivalent
fair value before and after the spin-off. Consequently, the exercise prices per ABB Ltd share and per ADS for
the 2021 grant, were adjusted to
, respectively.
At December 31, 2023, the total unrecognized compensation cost related to non
‑
vested options granted
under the ESAP was not significant. The weighted
‑
average grant
‑
date fair value (per option) of options
granted during 2023, 2022 and 2021 was
respectively. The total intrinsic value (on the date of exercise) of options exercised in 2023, 2022 and 2021
was not significant.
F-62
Long-Term Incentive Plan
The long
‑
term incentive plan (LTIP) involves annual grants of the Company’s stock subject to certain
conditions (Performance Shares) to members of the Company’s Executive Committee and selected other
senior executives, as defined in the terms of the LTIP. The ultimate amount delivered under the LTIP’s
Performance Shares grant is based on achieving certain results against targets, as set out below, over a
three-year
addition, for certain awards to vest, the participant has to fulfill a
three-year
terms and conditions of the LTIP.
The Performance Shares under the 2023 and 2022 LTIP launches include a component based on the
Company’s earnings per share performance (weighted
relative total shareholder return (weighted
Company’s CO
2
2021 LTIP launch comprise of a component based on the Company’s earnings per share performance and a
component based on the Company’s relative total shareholder return, both with equal weighting.
For the relative total shareholder return component of the Performance Shares, the actual number of shares
that will be delivered at a future date is based on the Company’s total shareholder return performance relative
to a peer group of companies over a
three-year
shares that will ultimately be delivered will vary depending on the relative total shareholder return outcome
achieved between a lower threshold (no shares delivered) and an upper threshold (the number of shares
delivered is capped at
For the earnings per share performance component of the Performance Shares, the actual number of shares
that will be delivered at a future date is based on the Company’s average earnings per share over
three
financial years, beginning with the year of launch. The actual number of shares that will ultimately be
delivered will vary depending on the earnings per share outcome as computed under each LTIP launch,
interpolated between a lower threshold (no shares delivered) and an upper threshold (the number of shares
delivered is capped at
For the sustainability component of the Performance Shares, the actual number of shares that will be
delivered at a future date is based on the Company’s scope 1 and 2 CO
2
three
number of shares that will ultimately be delivered will vary depending on the sustainability outcome as
computed under the LTIP launch, interpolated between a lower threshold (no shares delivered) and an upper
threshold (the number of shares delivered is capped at
Starting in 2020, key employees which were previously eligible to participate in the MIP and which were not
included in the employee group granted the Performance Shares described above, were granted Restricted
Shares of the Company under the LTIP. The Restricted Shares do not have performance conditions and vest
over a
three-year
Under the 2023, 2022 and 2021 LTIP launches, participants generally do not have the ability to receive any of
the award in cash, subject to legal restrictions in certain jurisdictions.
F-63
Presented below is a summary of activity under the Performance Shares of the LTIP:
Weighted-average
Number of
grant-date
Performance Shares
fair value per share
(in millions)
(Swiss francs)
Nonvested at January 1, 2023
Granted
Vested
(0.9 )
Forfeited
(0.1 )
Nonvested at December 31, 2023
The aggregate fair value, at the dates of grant, of Performance Shares granted in 2023, 2022 and 2021 was
$
during 2023 was $
fair value (per share) of shares granted during 2023, 2022 and 2021 was
francs and
(including shares vested in prior years and delivered in the year) was approximately $
and 2021 it was not significant.
Presented below is a summary of activity under the Restricted Shares of the LTIP:
Weighted-average
Number of
grant-date
Restricted Shares
fair value per share
(in millions)
(Swiss francs)
Nonvested at January 1, 2023
Granted
Vested
(1.1 )
Forfeited
(0.1 )
Nonvested at December 31, 2023
The aggregate fair value, at the dates of grant, of Restricted Shares granted in 2023, 2022 and 2021 was
$
during 2023 was $
fair value (per share) of shares granted during 2023, 2022 and 2021 was
francs and
approximately $
Equity-settled awards are recorded in the Additional paid-in capital component of Stockholders’ equity, with
compensation cost recorded in Selling, general and administrative expenses over the vesting period (which is
from grant date to the end of the vesting period) based on the grant-date fair value of the shares.
Cash-settled awards are recorded as a liability, remeasured at fair value at each reporting date for the
percentage vested, with changes in the liability recorded in Selling, general and administrative expenses.
At December 31, 2023, total unrecognized compensation cost related to equity-settled awards under the LTIP
was $
compensation cost recorded in 2023, 2022 and 2021 for cash-settled awards was not significant.
F-64
For the relative total shareholder return component of the LTIP launches, the fair value of granted shares at
grant date, for equity-settled awards, and at each reporting date, for cash-settled awards, is determined using
a Monte Carlo simulation model. The main inputs to this model are the Company’s share price and dividend
yield, the volatility of the Company’s and the peer group’s share price as well as the correlation between the
peer companies. For the earnings per share component of the LTIP launches, the fair value of granted
shares is based on the market price of the ABB Ltd share at grant date for equity-settled awards and at each
reporting date for cash-settled awards, as well as the probable outcome of the earnings per share
achievement, as computed using a Monte Carlo simulation model. The main inputs to this model are the
Company’s and external financial analysts’ revenue growth rates and Operational EBITA margin
expectations. For the sustainability component of the LTIP launches, the fair value of granted shares is based
on the market price of the ABB Ltd share at grant date for equity-settled awards and at each reporting date
for cash-settled awards, as well as the probable outcome of the sustainability component achievement, as
determined by internal modelling based on the Company’s CO
2
Other share-based payments
The Company has other minor share-based payment arrangements with certain employees. The
compensation cost related to these arrangements in 2023, 2022 and 2021 was not significant.
—
Note 19
Stockholders' equity
Capital
ABB Ltd is a corporation organized under the laws of Switzerland and the rights of its shareholders are
governed by Swiss law and its Articles of Incorporation.
At December 31, 2023 and 2022, the Company had
respectively, that were registered and issued.
In line with the revised provisions of Swiss corporate law effective January 1, 2023, shareholders approved,
at ABB’s Annual General Meeting of Shareholders (AGM) in March 2023, the introduction of a capital band
ranging from
time. The capital band replaced
longer exist under the revised law. Within this capital band, the Board of Directors is authorized to increase or
reduce the share capital once or several times until March 23, 2028, or until an earlier expiry of the capital
band. The contingent share capital of the Company, which forms a component of the total authorized shares,
as specified in the ABB Ltd Articles of Incorporation, remains unchanged. At December 31, 2023 and 2022,
the Company had a total of
Dividends
At the AGM in March 2023, the shareholders approved the proposal of the Board of Directors to distribute a
total of
Company disbursing a portion in March 2023 and the remaining amounts in April 2023. At the AGM in March
2022, the shareholders approved the proposal of the Board of Directors to distribute a total of
francs per share. The approved dividend distribution amounted to $
disbursing a portion in March 2022 and the remaining amounts in April 2022. At the AGM in March 2021, the
shareholders approved the proposal of the Board of Directors to distribute a total of
share. The approved dividend distribution amounted to $
in March 2021 and the remaining amounts in April 2021.
F-65
Amounts available to be distributed as dividends to the stockholders of ABB Ltd are based on the
requirements of Swiss law and ABB Ltd’s Articles of Incorporation, and are determined based on amounts
presented in the unconsolidated financial statements of ABB Ltd, prepared in accordance with Swiss law. At
December 31, 2023, the total unconsolidated stockholders’ equity of ABB Ltd was
($
Swiss francs ($
representing a reduction of equity for treasury shares. Of the reserves,
($
of share capital, at December 31, 2023, are restricted by law and not available for distribution.
Treasury stock transactions
In July 2020, the Company announced it intended to initially buy
time represented a maximum of
share buyback program that started in July 2020. The initial share buyback program was executed on a
second trading line on the SIX Swiss Exchange and was completed in March 2021. Through this buyback
program, the Company purchased a total of
2021 AGM, shareholders approved the cancellation of
buyback program and the cancellation was completed in the second quarter of 2021, resulting in a decrease
in Treasury stock of $
capital and Retained earnings.
In March 2021, the Company announced a follow-up share buyback program of up to $
buyback program, which was launched in April 2021, was executed on a second trading line on the SIX
Swiss Exchange and was completed in March 2022. Through this follow-up buyback program, the Company
purchased a total of
approved the cancellation of
programs. The cancellation was completed in the second quarter of 2022, resulting in a decrease in Treasury
stock of $
Retained earnings.
In March 2022, the Company announced a share buyback program of up to $
was launched in April 2022, was executed on a second trading line on the SIX Swiss Exchange and was
completed in March 2023. Through this buyback program, the Company purchased a total of
shares for approximately $
which had been purchased under its share buyback programs. This resulted in a decrease in Treasury stock
of $
earnings.
In March 2023, the Company announced a share buyback program of up to $
was launched in April 2023, is being executed on a second trading line on the SIX Swiss Exchange and is
planned to run until the Company’s 2024 AGM.
Under these buyback programs, in 2023, 2022 and 2021, the Company purchased
$
In addition to the share buyback programs, in 2023, 2022 and 2021, the Company purchased a combined
total of
in connection with its employee share plans, resulting in an increase in Treasury stock of $
$
F-66
Obligations to issue shares relating to employee incentive programs
At December 31, 2023, the Company had outstanding obligations to deliver:
•
strike price of
•
strike price of
•
•
LTIP, vesting and expiring in April 2026, April 2025 and April 2024, respectively, and
•
with employees.
In addition to the above obligations, the Company had sold, upon and in connection with each launch of the
MIP, call options to a bank at fair value, giving the bank the right to acquire shares equivalent to the number
of shares represented by the MIP WAR awards to participants. Under the terms of the agreement with the
bank, the call options can only be exercised by the bank to the extent that MIP participants have exercised
their WARs. At December 31, 2023, such call options representing
ranging from
the bank. The call options expire in periods ranging from August 2024 to August 2025.
See Note 18 for a description of the above share
‑
based payment arrangements.
In 2023, 2022 and 2021, the Company delivered
of treasury stock, for options exercised in relation to the MIP. In addition, in 2023 and 2021, the Company
delivered
to the ESAP. The number of shares delivered in 2022 under the ESAP was not significant.
Issuance of subsidiary shares
In November 2022, the Company received gross proceeds of
a private placement of shares in its ABB E-Mobility subsidiary, ABB E-mobility Holding Ltd (ABB E-Mobility),
reducing the Company's beneficial ownership in the subsidiary from
in an increase in Additional paid-in capital of $
additional amount of funding raised through the private placement of new shares of ABB E-Mobility,
increasing the total gross proceeds by an additional
and further reducing the Company’s ownership in ABB E-Mobility to
in Additional paid-in capital of $
ownership percentage of the investors participating in these private placements to
additional consideration.
F-67
—
Note 20
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted
‑
average number of shares
outstanding during the year. Diluted earnings per share is calculated by dividing income by the
weighted
‑
average number of shares outstanding during the year, 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. In 2022, outstanding securities representing a maximum of
excluded from the calculation of diluted earnings per share as their inclusion would have been antidilutive.
ne were excluded in 2023 and 2021.
Basic earnings per share:
($ in millions, except per share data in $)
2023
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(24 )
(42 )
(79 )
Net income
Weighted-average number of shares outstanding (in millions)
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(0.01 )
(0.02 )
(0.04 )
Net income
Diluted earnings per share:
($ in millions, except per share data in $)
2023
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(24 )
(42 )
(79 )
Net income
Weighted-average number of shares outstanding (in millions)
Effect of dilutive securities:
Call options and shares
Adjusted weighted-average number of shares outstanding (in millions)
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
(0.01 )
(0.02 )
(0.04 )
Net income
F-68
—
Note 21
Other comprehensive income
The following table includes amounts recorded within “Total other comprehensive income (loss)” including the
related income tax effects:
2023
2022
2021
Before
Tax
Net of
Before
Tax
Net of
Before
Tax
Net of
($ in millions)
tax
effect
tax
tax
effect
tax
tax
effect
tax
Foreign currency translation adjustments:
Foreign currency translation adjustments
(292 )
(290 )
(685 )
(685 )
(521 )
(521 )
Net loss on complete or substantially
complete liquidations of foreign
subsidiaries
Changes attributable to divestments
(9 )
(9 )
Net change during the year
(283 )
(281 )
(639 )
(639 )
(530 )
(530 )
Available-for-sale securities:
Net unrealized gains (losses) arising
during the year
(1 )
(28 )
(23 )
(13 )
(10 )
Reclassification adjustments for net
(gains) losses included in net income
(2 )
(6 )
(5 )
Net change during the year
(3 )
(26 )
(21 )
(19 )
(15 )
Pension and other postretirement plans:
Prior service (costs) credits arising
during the year
(2 )
(1 )
(2 )
(2 )
Net actuarial gains (losses) arising
during the year
(339 )
(282 )
(72 )
(26 )
Amortization of prior service cost (credit)
included in net income
(11 )
(9 )
(13 )
(3 )
(16 )
(14 )
(14 )
Amortization of net actuarial loss included
in net income
(10 )
(11 )
Net losses from settlements and curtailments
included in net income
(2 )
(2 )
Changes attributable to divestments
(8 )
(8 )
(8 )
(6 )
Net change during the year
(282 )
(237 )
(86 )
(22 )
Derivative instruments and hedges:
Net gains (losses) arising during the year
(11 )
(10 )
(10 )
(2 )
(12 )
Reclassification adjustments for net (gains)
losses included in net income
(13 )
(13 )
Net change during the year
(3 )
(2 )
(2 )
(6 )
(5 )
Total other comprehensive income (loss)
(554 )
(509 )
(322 )
(83 )
(405 )
(66 )
(17 )
(83 )
F-69
The following table shows changes in Accumulated other comprehensive loss (OCI) attributable to ABB, by
component, net of tax:
Unrealized
Pension and
Foreign
gains (losses)
other post-
Accumulated
currency
on available-
retirement
other
translation
for-sale
plan
comprehensive
($ in millions)
adjustments
securities
adjustments
loss
Balance at January 1, 2021
(2,460 )
(1,556 )
(3 )
(4,002 )
Other comprehensive (loss) income
before reclassifications
(521 )
(10 )
(112 )
Amounts reclassified from OCI
(9 )
(5 )
(13 )
Total other comprehensive (loss) income
(530 )
(15 )
(5 )
(83 )
Less:
Amounts attributable to noncontrolling
interests
Balance at December 31, 2021
(1)
(2,993 )
(1,089 )
(8 )
(4,088 )
Other comprehensive (loss) income
before reclassifications
(685 )
(23 )
(12 )
(494 )
Amounts reclassified from OCI
Total other comprehensive (loss) income
(639 )
(21 )
(405 )
Spin-off of the Turbocharging Division
(93 )
(5 )
(98 )
Less:
Amounts attributable to noncontrolling
interests
(34 )
(1 )
(35 )
Balance at December 31, 2022
(3,691 )
(19 )
(838 )
(8 )
(4,556 )
Other comprehensive (loss) income
before reclassifications
(290 )
(283 )
(10 )
(578 )
Amounts reclassified from OCI
Total other comprehensive (loss) income
(281 )
(237 )
(2 )
(509 )
Less:
Amounts attributable to noncontrolling
interests and redeemable
noncontrolling interests
Balance at December 31, 2023
(3,977 )
(8 )
(1,075 )
(10 )
(5,070 )
(1) Due to rounding, numbers presented may not add to the totals provided.
F-70
The following table reflects amounts reclassified out of OCI in respect of Foreign currency translation
adjustments and Pension and other postretirement plan adjustments:
($ in millions)
Location of (gains) losses
Details about OCI components
reclassified from OCI
2023
2022
2021
Foreign currency translation adjustments:
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
Changes attributable to divestments
Other income (expense), net
(9 )
Amounts reclassified from OCI
(9 )
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(11 )
(13 )
(14 )
Amortization of net actuarial loss
Non-operational pension (cost) credit
Net losses from settlements and curtailments
Non-operational pension (cost) credit
Changes attributable to divestments
Other income (expense), net
(8 )
(8 )
Total before tax
Tax
Income tax expense
(10 )
(16 )
Changes in tax attributable to divestments
Other income (expense), net
Amounts reclassified from OCI
The amounts reclassified out of “OCI in respect of Unrealized gains (losses) on available
‑
for
‑
sale securities”
and “Derivative instruments and hedges” were not significant in 2023, 2022 and 2021.
—
Note 22
Restructuring and related expenses
Restructuring-related activities
In 2023, 2022 and 2021, the Company executed various restructuring
‑
related activities and incurred the
following charges, net of changes in estimates:
($ in millions)
2023
2022
2021
Employee severance costs
Estimated contract settlement, loss order and other costs
Inventory and long-lived asset impairments
Total
Expenses associated with these activities are recorded in the following line items in the Consolidated Income
Statements:
($ in millions)
2023
2022
2021
Total cost of sales
Selling, general and administrative expenses
Non-order related research and development expenses
Other income (expense), net
Total
F-71
In 2022, the Company completed a plan (initiated in 2021) to fully exit its full train retrofit business by
transferring the remaining contracts to a third party. The Company recorded $
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 December 31, 2023 and 2022, $
restructuring-related liabilities and is primarily included in Other provisions.
—
Note 23
Operating segment and geographic 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 2022 and 2021, and at December 31, 2022 and 2021, has been recast to reflect this
change.
A description of the types of products and services provided by each reportable segment is as follows:
•
Electrification:
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, switchboards 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.
•
Motion:
designs, manufactures and sells drives, motors, generators and traction converters that
are driving the low-carbon future for industries, cities, 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 140 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, as well as, prior to its sale in November 2021, the Mechanical Power Transmission
Division.
F-72
•
Process Automation:
offers a broad range of industry-specific, integrated automation,
electrification and digital solutions, as well as lifecycle services for 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.
•
Robotics & Discrete Automation:
operating Divisions: Robotics provides industrial and collaborative robots, autonomous mobile
robotics, mapping and navigation solutions, robotic solutions, field services, spare parts and
digital services. Machine Automation specializes in automation solutions based on its
programmable logic controllers (PLC), industrial PCs (IPC), servo motion, transport systems and
machine vision. Both divisions offer software across the entire life cycle, including engineering
and simulation software as well as a comprehensive range of digital solutions.
Corporate and Other:
and Corporate Treasury while Other includes the E-mobility operating segment, other non-core operating
activities as well as the operating activities of certain divested businesses.
The primary measure of profitability on which the operating segments are evaluated is Operational EBITA,
which represents income from operations excluding:
•
•
•
divestment date (changes in obligations related to divested businesses),
•
held for sale, if any),
•
•
•
(a) unrealized gains and losses on derivatives (foreign 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, 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.
F-73
The following tables present disaggregated segment revenues from contracts with customers for 2023, 2022
and 2021:
2023
($ in millions)
Electrification
Motion
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
(1)
Total
Geographical markets
of which: United States
of which: China
Product type
(775 )
Total revenues
(73 )
2022
($ in millions)
Electrification
Motion
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
(1)
Total
Geographical markets
of which: United States
of which: China
Product type
(731 )
Total revenues
(143 )
F-74
2021
($ in millions)
Electrification
Motion
Process
Automation
Robotics &
Discrete
Automation
Corporate
and Other
(1)
Total
Geographical markets
Europe
The Americas
of which: United States
Asia, Middle East and Africa
of which: China
Product type
(745 )
Total revenues
(430 )
(1) The amounts shown for “Intersegment revenues” within Corporate and Other primarily represents the consolidated intersegment revenue
elimination. These amounts include intersegment revenues of $
Revenues by geography reflect the location of the customer. In 2023, 2022 and 2021 the United States and
China are the only countries where revenue exceeded
and 2021 more than
Switzerland.
F-75
The following tables present Operational EBITA, the reconciliations of consolidated Operational EBITA to
Income from continuing operations before taxes, as well as Depreciation and amortization, and Capital
expenditures for 2023, 2022 and 2021, and Total assets at December 31, 2023, 2022 and 2021:
($ in millions)
2023
2022
2021
Operational EBITA:
Electrification
Motion
Process Automation
Robotics & Discrete Automation
Corporate and Other:
— E-mobility
(167 )
(15 )
— Corporate costs, intersegment elimination and other
(263 )
(169 )
(338 )
Total
Acquisition-related amortization
(220 )
(229 )
(250 )
Restructuring, related and implementation costs
(1)
(219 )
(347 )
(160 )
Changes in obligations related to divested businesses
(9 )
Gains and losses from sale of businesses
(7 )
Acquisition- and divestment-related expenses and integration costs
(74 )
(195 )
(132 )
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
(54 )
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(48 )
(2 )
Unrealized foreign exchange movements on receivables/payables (and
(13 )
(15 )
Certain other non-operational items:
Other income/expenses relating to the Power Grids joint venture
(57 )
(34 )
Regulatory, compliance and legal costs
(317 )
Business transformation costs
(2)
(205 )
(152 )
(92 )
Changes in pre-acquisition estimates
(4 )
(10 )
Gains and losses from sale of investments in equity-accounted companies
Certain other fair value changes, including asset impairments
(10 )
Other non-operational items
(4 )
(9 )
Income from operations
Interest and dividend income
Interest and other finance expense
(275 )
(130 )
(148 )
Non-operational pension (cost) credit
Income from continuing operations before taxes
(1) Amounts in 2023 and 2022 include impairment of certain assets.
(2) Amounts in 2023, 2022 and 2021 include ABB Way process transformation costs of $
F-76
Depreciation and
Total assets
(1),(2)
amortization
Capital expenditures
(1)
at December 31,
($ in millions)
2023
2022
2021
2023
2022
2021
2023
2022
2021
Electrification
Motion
Process Automation
Robotics & Discrete
Automation
Corporate and Other
Consolidated
(1) Capital expenditures and Total assets are after intersegment eliminations and therefore reflect third-party activities only.
(2) At December 31, 2021, Corporate and Other included $
subsequently sold in December 2022 (see Note 4).
Other geographic information
Geographic information for long-lived assets was as follows:
Long-lived assets at
December 31,
($ in millions)
2023
2022
Europe
The Americas
Asia, Middle East and Africa
Total
Long
‑
lived assets represent Property, plant and equipment, net and Operating lease right-of-use assets and
are shown by location of the assets. At December 31, 2023, approximately
‑
lived assets were located in the United States, China and Switzerland,
respectively. At December 31, 2022, approximately
long
‑
lived assets were located in the United States, China and Switzerland, respectively.
—
Note 24
Subsequent events
Debt
On January 15, 2024, the Company issued the following EUR Instruments: (i) EUR
Notes, due 2029, and (ii) EUR
arrears. The aggregate net proceeds of these EUR Instruments, after discount and fees, amounted to
EUR
Stockholders’ equity
In February 2024, the Company announced that a proposal will be put to the 2024 AGM for approval by the
shareholders to distribute