Delivers
higher revenues1, base orders and net income
ZURICH-Thursday, April 20th 2017 [ ME NewsWire ]
(BUSINESS WIRE) -- FIRST-QUARTER
HIGHLIGHTS
- Revenues up 3 percent1
- Base order growth of 2 percent
- Total orders reflects lower large contract awards; book to bill ratio2 1.07x
- Operational EBITA margin2 12.1%; solid operating leverage considering 60 bps positive insurance reserve adjustment in 2016
- Net income $724 million versus $500 million; operational EPS +1%3
- Cash flow from operating activities $509 million reflects delay of incentive payments caused by the South Korea case
- Active portfolio management: high-voltage cables divestment closed, B&R acquisition announced April 4
- Commercial launch of ABB AbilityTM
“ABB delivered its second
consecutive quarter of revenue growth. Underlying operational performance
improved considering last year’s communicated correction of insurance
reserves,” said ABB CEO Ulrich Spiesshofer. “We are seeing the first signals of
market stabilization in some process industries, as well as some growth signals
in early-cycle businesses. Power Grids’ order pattern for the quarter reflects
a Chinese HVDC project, which was awarded in Q1 2016. Overall, underlying
demand in China remains positive.”
“We commercially launched ABB
Ability, our industry-leading digital offering and are really pleased with the
very positive customer response,” he said. “With the completed sale of the
cables business and the recently announced acquisition of B&R, an
innovation leader in machine and factory automation, we continue our active
portfolio management, as we further de-risk the portfolio and continue to shift
ABB’s center of gravity to higher growth segments and strengthened
competitiveness.”
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Key figures
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CHANGE
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$ in millions, unless otherwise
indicated
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Q1 2017
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Q1 2016
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US $
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Comparable1
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Orders
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8,403
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9,253
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-9
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%
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-3
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%
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Revenues
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7,854
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7,903
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-1
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%
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+3
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%
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Operational EBITA2
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943
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951
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-1
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%
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+2
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%4
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as % of operational revenues
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12.1
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%
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12.1
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%
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0
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%
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Net Income
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724
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500
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+45
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%
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Basic EPS ($)
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0.34
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0.23
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+48
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%3
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Operational EPS2 ($)
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0.28
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0.28
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0
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%3
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+1
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%3
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Cash flow from operating
activities
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509
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252
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+102
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%
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Short-term outlook
Macroeconomic and geopolitical
developments are signaling a mixed picture with continued uncertainty. Some
macroeconomic signs in the US remain positive and growth in China is expected
to continue. The overall global market remains impacted by modest growth and
increased uncertainties, e.g., Brexit in Europe and geopolitical tensions in
various parts of the world. Oil prices and foreign exchange translation effects
are expected to continue to influence the company’s results. With this and the
ongoing transformation of ABB, 2017 is expected to be a transitional year.
Q1 2017 Group results
Orders
Orders decreased 3 percent (9
percent in US dollars) compared with the first quarter a year ago, driven
primarily by lower large order awards. Large orders ($15 million and above)
were 34 percent lower (50 percent in US dollars) due to fewer large order
awards in Industrial Automation and Power Grids. Large orders represented 10
percent of total orders compared with 17 percent in the same quarter a year
ago. Large orders in the quarter included a $280 million high-voltage direct
current systems order to link the power networks of France and the UK. Base
orders (below $15 million) were 2 percent higher (1 percent lower in US
dollars), improving in Electrification Products, Robotics and Motion and
Industrial Automation. Total service and software orders increased 7 percent (5
percent in US dollars) compared with the first quarter of 2016 and represented
24 percent of total orders compared to 21 percent for the same period a year
ago.
The order backlog at the end of
March 2017 amounted to $23 billion, 2 percent lower (11 percent in US dollars)
compared with the end of the first quarter of 2016. The book-to-bill2
ratio in the first quarter was 1.07x compared with 1.17x in the first quarter
of 2016.
Market overview
Demand patterns in ABB’s three
regions:
- Demand in Europe was positive on moderate overall growth and timing of large capital investments. Total orders improved 2 percent (12 percent lower in US dollars) while base orders improved 7 percent (3 percent in US dollars). Base order demand was positive in Germany, Sweden, Spain and Finland while weak in Norway and Switzerland.
- Demand in the Americas was positive, driven by increased demand for automation and energy efficiency. Total orders increased 4 percent in the quarter (5 percent in US dollars) on large order awards. The United States grew 5 percent in total orders (5 percent in US dollars) and 3 percent in base orders (3 percent in US dollars). Base orders improved 1 percent (2 percent US dollars) as increases in the United States and Mexico were almost offset by declines in Canada and Brazil.
- Demand in Asia, Middle East and Africa (AMEA) was mixed. Total orders for the region decreased 12 percent (16 percent in US dollars). Orders in China reflect a strong first quarter 2016 comparable, as large and smaller HVDC orders were not repeated. Underlying demand in China for industrial automation, energy efficiency and reliable and efficient power solutions remains positive. India orders reflect continued investment in industrial automation and reliable power solutions. Base orders for the region decreased 2 percent (6 percent in US dollars) as positive order development in India, South Korea and the UAE, could not offset declines in China and Saudi Arabia.
Demand patterns in ABB’s three major
customer sectors:
- Utilities continued their investment activities to upgrade the aging power infrastructure and to integrate renewable energy in the grid.
- In industry, investments in robotics solutions and light industries such as automotive, food and beverage remained positive while demand from the process industries, specifically oil and gas remain subdued.
- Transport & infrastructure demand has been mixed. Demand for building automation solutions as well as solutions involving energy efficiency for rail transport remained strong while the marine sector, except for cruise ships, suffered from a sharp decline due to the subdued oil and gas sector.
Revenues
Revenues increased 3 percent (1
percent lower in US dollars) in the first quarter with revenues higher in
Electrification Products, Robotics and Motion and Power Grids. Total services
and software revenues was 1 percent higher (1 percent lower in US dollars) and
represented 18 percent of total revenues unchanged compared with a year ago.
Operational EBITA
Operational EBITA was $943 million,
2 percent higher in constant currencies (1 percent lower in US dollars).
Operational EBITA margin was 12.1 percent, unchanged compared with the same
quarter a year ago. Operational EBITA included margin improvements in
Electrification Products, Industrial Automation and Power Grids and a margin
decrease in Robotics and Motion. In addition, the comparable operational EBITA
in 2016 was 60 bps higher due to the cumulative elimination of certain
intercompany insurance reserves of $50 million in 2016.
Net income, Basic and Operational
earnings per share
Net income increased to $724 million
from $500 million and basic earnings per share was $0.34 compared with $0.23
for the same quarter of 2016. This increase includes the impacts of the capital
gain from divestment of the high voltage cable business and other charges
recorded to adjust liabilities for retained obligations of this business. In
addition, acquisition-related expenses and certain non-operational items
negatively impacted net income while foreign exchange and commodity timing
differences had a positive impact. The lower effective tax rate reflects the
impacts from the cable divestment.
Operational EPS was $0.28 compared
to $0.28 for the same quarter of 2016, an increase of 1 percent in constant
currency2.
Cash flow from operating activities
Cash flow from operating activities
was $509 million compared to $252 million in 2016 due to the change in timing
of incentive payments in 2017 to the second quarter in 2017 due to impacts of
the South Korea case.
South Korea
ABB announced on February 22, 2017
that it had uncovered a sophisticated criminal scheme involving significant
embezzlement and misappropriation of funds in its South Korean subsidiary. The
company immediately launched a thorough investigation, involving internal and
external parties, which is progressing well. ABB is working with the local
police on the investigation as well as with Interpol. The company has checked
and reconfirmed the balances of its global bank accounts and can confirm that
this situation is limited to South Korea. ABB has a zero-tolerance approach to
unethical behavior and maintains the highest standards regarding integrity and
ethical business practices. ABB has started implementing disciplinary
consequences and will continue to do so as appropriate.
Q1 divisional performance
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($ in millions, unless otherwise
indicated) |
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Orders
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CHANGE
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Revenues
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CHANGE
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Operational
EBITA % |
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CHANGE
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US$
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Comparable1
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US$
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Comparable1
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Electrification Products
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2,528
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+1
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%
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+4
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%
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2,293
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0
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%
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+3
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%
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14.1
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%
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+0.6pts
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Robotics and Motion
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2,177
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+4
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%
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+7
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%
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1,926
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+3
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%
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+5
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%
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14.3
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%
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-1.0pts
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Industrial Automation
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1,682
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-8
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%
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-6
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%
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1,549
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-7
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%
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-5
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%
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13.3
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%
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+1.3pts
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Power Grids
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2,379
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-20
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%
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-17
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%
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2,405
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-2
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%
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+4
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%
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10.3
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%
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+2.8pts
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Corporate & other (incl.
inter-division elimination) |
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-363
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-319
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ABB Group
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8,403
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-9
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%
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-3
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%
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7,854
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-1
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%
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+3
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%
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12.1
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%
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0 pts
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Electrification Products
Total orders increased reflecting
improved market demand in the United States, China and Germany. Revenues grew 3
percent in the quarter (steady in US dollars), and operational EBITA margin
improved due to volume, mix, productivity and cost savings.
Robotics and Motion
Total orders grew 7 percent (4
percent in US dollars), with third-party base orders increasing 13 percent (10
percent in US dollars) on continued strong demand patterns in robotics and
light industry. Revenues improved 5 percent (3 percent in US dollars).
Operational EBITA margin was impacted by unfavorable mix and low capacity
utilization in the quarter. Demand pattern and increasing backlog will ease
this situation over time.
Industrial Automation
Total orders reflect lower large
orders related to specialty vessels. The improvement in the underlying demand
for products, services and software was seen in the positive base order
development in the quarter. Revenues declined 5 percent (7 percent in US
dollars) on lower revenue coming from the order backlog. Operational EBITA
margin increased 130 basis points to 13.3 percent due to positive mix and successfully
implemented cost reduction and productivity measures.
Power Grids
Total orders were lower than the
same quarter a year ago, primarily due to the timing of large contract awards.
The positive base order development in many markets could not offset soft
demand in the Middle East and a tough comparable in China last year. Revenues
were 4 percent higher (2 percent lower in US dollars) due to steady execution
of a healthy order backlog. Operational EBITA margin was 10.3 percent, driven
by higher revenues, improved productivity, solid project execution and
continued cost savings.
Next Level strategy – Stage 3
ABB continued implementation of its
Next Level strategy during the quarter by further shifting its center of
gravity to higher growth segments, strengthening its competitiveness and
de-risking the portfolio.
ABB announced the acquisition of
B&R, an innovation leader in machine and factory automation on April 4,
2017. This acquisition will close ABB’s historic gap in machine and factory
automation and will create a uniquely comprehensive automation portfolio for
customers globally. B&R is a proven innovation leader in Programmable Logic
Controllers (PLC), Industrial PCs (IPC) and servo motion-based machine and
factory automation and will strengthen ABB’s number 2 position in industrial
automation. The transaction is expected to close in summer 2017.
ABB commercially launched ABB
Ability offering more than 180 solutions across all customer segments which
combines ABB’s portfolio of digital solutions and services, cementing the
group’s leading position in the Fourth Industrial Revolution and supporting the
competitiveness of ABB’s four entrepreneurial divisions.
In addition, ABB successfully
completed the divestment of its high-voltage cables and cable accessories
businesses to NKT Cables.
Outlook
Macroeconomic and geopolitical
developments are signaling a mixed picture with continued uncertainty. Some
macroeconomic signs remain positive in the United States and growth in China is
expected to continue. The overall global market remains impacted by modest
growth and increased uncertainties, e.g., Brexit in Europe and geopolitical
tensions in various parts of the world. Oil prices and foreign exchange
translation effects are expected to continue to influence the company’s
results. With this and the ongoing transformation of ABB, 2017 is expected to
be a transitional year.
The attractive long-term demand
outlook in ABB’s three major customer sectors – utilities, industry and
transport & infrastructure – is driven by the Energy and Fourth Industrial
Revolutions.
ABB is well-positioned to tap into
these opportunities for long-term profitable growth with its strong market
presence, broad geographic and business scope, technology leadership and
financial strength.
More information
The Q1 2017 results press release
and presentation slides are available on the ABB News Center at www.abb.com/news
and on the Investor Relations homepage at www.abb.com/investorrelations.
ABB will host a press conference
today starting at 10:00 a.m. Central European Time (CET) (9:00 a.m. BST, 4:00
a.m. EDT). The event will be accessible by conference call. Callers from the UK
should dial +44 203 059 58 62. From Sweden, the number to dial is +46 85 051 00
31, and from the rest of Europe, +41 58 310 50 00. Callers from the US and
Canada should dial +1 866 291 41 66 (toll free) or +1 631 570 56 13
(long-distance charges apply). Lines will be open 10-15 minutes before the
start of the call.
A conference call and webcast for
analysts and investors is scheduled to begin today at 2:00 p.m. CET (1:00 p.m.
BST, 8:00 a.m. EDT). Callers from the UK should dial +44 203 059 58 62. From
Sweden, the number to dial is +46 85 051 00 31, and from the rest of Europe,
+41 58 310 50 00. Callers from the US and Canada should dial +1 866 291 41 66
(toll free) or +1 631 570 56 13 (long-distance charges apply). Callers are
requested to phone in 10 minutes before the start of the call. The call will
also be accessible on the ABB website and a recorded session will be available
as a podcast one hour after the end of the conference call and can be
downloaded from our website www.abb.com/investorrelations.
ABB (ABBN: SIX Swiss Ex) is a pioneering technology leader in
electrification products, robotics and motion, industrial automation and power
grids, serving customers in utilities, industry and transport &
infrastructure globally. Continuing more than a 125-year history of innovation,
ABB today is writing the future of industrial digitalization and driving the
Energy and Fourth Industrial Revolutions. ABB operates in more than 100
countries with about 132,000 employees. www.abb.com
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INVESTOR CALENDAR 2017
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Second quarter 2017 results
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July 20, 2017
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Third quarter 2017 results
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October 26, 2017
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Fourth quarter 2017 results
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February 8, 2018
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Important notice about
forward-looking information
This press release includes
forward-looking information and statements as well as other statements
concerning the outlook for our business, including those in the sections of
this release titled “Short-term outlook”, “Outlook”, and “Next Level strategy –
Stage 3”. These statements are based on current expectations, estimates and
projections about the factors that may affect our future performance, including
global economic conditions, the economic conditions of the regions and
industries that are major markets for ABB Ltd. These expectations, estimates
and projections are generally identifiable by statements containing words such
as “expects,” “believes,” “estimates,” “targets,” “plans,” “is likely”, “intends”
or similar expressions. However, there are many risks and uncertainties, many
of which are beyond our control, that could cause our actual results to differ
materially from the forward-looking information and statements made in this
press release and which could affect our ability to achieve any or all of our
stated targets. The important factors that could cause such differences
include, among others, business risks associated with the volatile global
economic environment and political conditions, costs associated with compliance
activities, market acceptance of new products and services, changes in
governmental regulations and currency exchange rates and such other factors as
may be discussed from time to time in ABB Ltd’s filings with the U.S. Securities
and Exchange Commission, including its Annual Reports on Form 20-F. Although
ABB Ltd believes that its expectations reflected in any such forward-looking
statement are based upon reasonable assumptions, it can give no assurance that
those expectations will be achieved.
Zurich, April 20, 2017
Ulrich Spiesshofer, CEO
Ulrich Spiesshofer, CEO
1 Growth rates for orders, base orders, revenues and order
backlog are on a comparable basis (local currency adjusted for acquisitions and
divestitures). US$ growth rates are presented in Key Figures table
2 For a reconciliation of non-GAAP measures, see “Supplemental Reconciliations and Definitions” in the attached Q1 2017 Financial Information
3 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates and not adjusted for changes in the business portfolio)
4 Constant currency (not adjusted for portfolio changes)
2 For a reconciliation of non-GAAP measures, see “Supplemental Reconciliations and Definitions” in the attached Q1 2017 Financial Information
3 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates and not adjusted for changes in the business portfolio)
4 Constant currency (not adjusted for portfolio changes)
Contacts
Media Relations
+41 43 317 65 68
media.relations@ch.abb.comEmai
or
Investor Relations
+41 43 317 71 11
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
+41 43 317 65 68
media.relations@ch.abb.comEmai
or
Investor Relations
+41 43 317 71 11
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland