Slide 1: Strong foundation, solid momentum
Ulrich Spiesshofer, CEO; Eric Elzvik, CFO, ABB Ltd, February 5th, 2015 Strong foundation, solid momentum Full-year and Q4 2014 © ABB February 5, 2015 | Slide 1
Slide 2: Important notices
Important notices This presentation includes forward-looking information and statements including statements concerning the outlook for our businesses. These statements are based on current expectations, estimates and projections about the factors that may affect our future performance, including gl
Slide 3: Agenda
Agenda Financial results Full-year 2014 Q4 Next Level implementation Outlook Q&A © ABB February 5, 2015 | Slide 3
Slide 4: Agenda
Agenda Financial results Full-year 2014 Q4 Next Level implementation Outlook Q&A © ABB February 5, 2015 | Slide 4
Slide 5: 2014 – strong foundation, solid momentum
2014 – strong foundation, solid momentum Robust order growth, PS1 break-even, increased dividend Delivering along our three focus areas +10% orders growth2, up in all regions and divisions Profitable Base orders +5%2, large orders +50%2, book-to-bill 1.04x growth Improved customer satisfaction, NPS3
Slide 6: Full-year 2014 results
Full-year 2014 results Strengthening the order backlog for 2015 and beyond FY 14 FY 13 Change $ mn unless otherwise indicated Orders 41’515 38’896 +10%1 Order backlog (end December) 24’900 26’046 +5%2 Revenues 39’830 41’848 -2%1 Operational EBITDA 5’400 6’075 -11% Op. EBITDA as % of operational reve
Slide 7: Focused growth initiatives result in 10% order increase
Focused growth initiatives result in 10% order increase All divisions and regions grew 2014 total orders Change on a like-for-like basis $ mn Orders Europe Discrete Automation Automation +5% 10’559 +8% Power +20% and Motion Low Voltage Products 7’550 +3% Total +10% Americas Asia Process Automation
Slide 8: Strong foundation for 2015
Strong foundation for 2015 6 quarters of base order growth, regained large orders momentum Quarterly base orders Order backlog strengthened Like-for-like change vs year-earlier period 8% 6% 4% +5%1 2% 0% -2% -4% -6% 2012 2013 2014 1 2010 2 2011 3 2012 4 2013 5 2014 Growth large Book-to- -7% -31% +50
Slide 9: Customer satisfaction increasing
Customer satisfaction increasing Net Promoter Score development Improved coverage and results 44 9 point increase of customer satisfaction 35 29 > 30,000 customer feedbacks 22 +14% increase of number of responses 16 Improvement highlights On time delivery Technical support Project management a
Slide 10: Full-year performance by division
Full-year performance by division Key figures $ mn Operational Cash flow from unless otherwise stated Orders Like-for-like Revenues Like-for-like EBITDA% operations Discrete Automation 10’559 +8% 10’142 +2% 17.4% -0.6 pts 1’564 +74 and Motion Low Voltage 7’550 +3% 7’532 +3% 18.9% -0.1 pts 99
Slide 11: Divisional highlights
Divisional highlights Next Level in action across business portfolio DM LP PA PP PS Penetration of US YuMi® robot market channels through Record orders in Key HVDC wins in Profitable introduction T&B marine Strong growth in Canada and UK growth industry sector and Double digit Philips partnership En
Slide 12: PS: “step change” on track, full-year break-even
PS: “step change” on track, full-year break-even Delivered on commitment and ambition What we said What we did Aim for full-year profitability Full-year break-even achieved after H1 losses Strengthen leadership team Changes on four leadership layers Complete off-shore wind projects Strong progress,
Slide 13: 6th consecutive year of > $1 bn cost savings
6th consecutive year of > $1 bn cost savings Contributing to margin resilience and continued momentum Strong foundation Continued momentum Steady cost savings of > $1 bn p.a. since 2009 Confirm ambition of 3-5% of COS for 2015 Consistently in target range of 3-5% of COS1 Priorities for SCM (examples
Slide 14: Portfolio pruning
Portfolio pruning 2014 divestments in line with continuous portfolio optimization Power-One T&B steel T&B HVAC Full-service power solutions structures Entity divested Closed May 2014 Jun. 2014 Aug. 2014 Dec. 2014 Estimated annual ~$160 mn ~$250 mn ~$325 mn1 ~$300 mn 2014 revenues Approx. proceeds $2
Slide 15: Agenda
Agenda Financial results Full-year 2014 Q4 Next Level implementation Outlook Q&A © ABB February 5, 2015 | Slide 15
Slide 16: Q4 2014 key takeaways
Q4 2014 key takeaways Higher base orders in all regions despite volatile market Delivering along our three focus areas 6th consecutive quarter of base order growth, steady1 total orders Profitable Base orders up in all regions, steady to higher in all divisions growth Lower large orders reflect timi
Slide 17: Q4 2014 Key figures
Q4 2014 Key figures Q4 14 Q4 13 Change $ mn unless otherwise indicated Orders 9’365 10’003 +1%1 Order backlog (end Dec.) 24’900 26’046 +5%2 Revenues 10’346 11’373 -1%1 Operational EBITDA 1’380 1’418 -3% as % of operational revenues 13.3% 12.5% Net income 680 525 +30% Basic earnings per share ($) 0.3
Slide 18: Continued base orders growth
Continued base orders growth Regional order pattern reflects timing of large orders 2014 Q4 base 2014 Q4 total order growth by region order growth2 Change on a like-for-like basis Change on a like-for-like basis Europe Brazil +22% Automation +8% Power 0% Canada +14% Americas Total +5% Asia China +4%
Slide 19: Operational EBITDA bridge
Operational EBITDA bridge Savings continue to support, FX translation visible in Q4 Factors affecting operational EBITDA Q4 2014 vs Q4 2013 $ mn +99 -38 +39 +40 -40 -138 1’418 1’380 Divestitures Net Net Mix/ Other Power delta in savings volume project Forex Systems income from Cost savings Revenue m
Slide 20: ABB well positioned to manage forex volatility
ABB well positioned to manage forex volatility Foreign exchange exposures – overview Power & Automation 15% appreciation of USD Example: 15% appreciation of CHF vs EUR Timing Estimated impact Actions / Drivers Structural effect Inc. from op. ~$200-400 mn Net exporter from EUR- Medium-term USD appr
Slide 21: Improved cash flow
Improved cash flow Cash metrics reflect solid execution A solid, more balanced, cash generator Strong cash conversion Cash from operations, $ mn, quarterly build-up Free cash flow and conversion rate, $ bn and % 110% 94% 94% 3’845 3’653 2.6 2.6 2.9 YTD YTD 1’833 1 2012 2 2013 2014 3 Q4 2’092 CROI1 n
Slide 22: Q4 performance by division
Q4 performance by division Key figures $ mn Operational Cash flow from unless otherwise stated Orders Like-for-like Revenues Like-for-like EBITDA% operations Discrete Automation 2’379 +1% 2’583 +1% 17.2% 0 pts 487 +28 and Motion Low Voltage 1’722 +5% 1’793 +2% 19.8% +0.7 pts 443 -15 Products
Slide 23: Priorities for capital allocation
Priorities for capital allocation Balance between investing in growth and returns to shareholders Fund organic growth, R&D, capex at attractive Investments in PIE and leading operating model CROI Steadily rising sustainable dividend Proposed dividend increase in 2015 Value-creating acquisitions Prun
Slide 24: Board proposes 6th consecutive dividend increase
Board proposes 6th consecutive dividend increase Attractive cash returns to shareholders 6th consecutive dividend increase Share buyback Dividend per share 2006-2014 (CHF) and yield1 ~$4 bn 2-yr program announced in Sept. 2014 4.0% ~$730 mn cash deployed 3.0% 3.7% 3.6% 2.9% ~18% of the total program
Slide 25: Agenda
Agenda Financial results Full-year 2014 Q4 Next Level implementation Outlook Q&A © ABB February 5, 2015 | Slide 25
Slide 26: ABB – our Next Level strategy
ABB – our Next Level strategy Shaping a global leader in power & automation Presented September 9th, 2014 Shifting the center of gravity Strengthening competitiveness Profitable Driving organic growth momentum growth Lowering risk Well positioned Incremental acquisitions and partnerships Leadi
Slide 27: Profitable growth
Profitable growth Driving organic growth momentum Example Profitable growth Established +20 service Penetration Well centers in China positioned Relentless Compact and dual-arm robots Innovation execution for small parts assembly Attractive markets Continued expansion in Africa Business-led Expansio
Slide 28: Profitable growth
Profitable growth Partnerships and lowering risks Example Profitable growth 49% 51% Well positioned ABB – Hitachi (Customer) JV Utility HVDC design & Engineering Core components engineering Civil design Customization Relentless competence Testing and EPC execution Core HVDC commissioning components
Slide 29: Relentless execution
Relentless execution Leading operating model Example Example: DM Profitable growth 50 +7pp Well Net 40 positioned promoter score1 30 1 2013 2 2014 Relentless 1600 +74 mn Cash flow execution 1500 from operations 1400 1 2013 2 2014 Attractive 20 -1.7%-points markets Net 18 Business-led working 16 coll
Slide 30: Relentless execution
Relentless execution Performance-oriented compensation model Example Institutional Group scorecard Organization hierarchy Profitable CEO Result growth Div.Mgr. Well A xx xx xx Measure positioned BU Mgr. B xx xx xx C xx xx xx D xx xx xx Relentless Individual execution Individual, line of sight scorec
Slide 31: Business-led collaboration
Business-led collaboration Simplifying how we work together Example Profitable growth Well positioned Relentless execution Undiluted business line Top 1,000 appointments responsibility finalized Simplified market oriented Faster, more cost-efficient Attractive organization fully implemented organiza
Slide 32: 2014 – delivered on our commitments
2014 – delivered on our commitments A solid foundation for the future Next Level and 2020 targets in place Organic growth momentum: +10% orders Profitable Changes in center of gravity growth Partnerships for growth Delivered on cash and cost Relentless PS break-even achieved execution Portfolio prun
Slide 33: Agenda
Agenda Financial results Full-year 2014 Q4 Next Level implementation Outlook Q&A © ABB February 5, 2015 | Slide 33
Slide 34: 2015 – continued volatility and uncertainty
2015 – continued volatility and uncertainty Economic outlook Title Positives Sustain organic growth momentum China remains world’s biggest growth engine North America continues strong Proven PIE approach Good momentum in India and South East Asia Agility and speed to address new market opportunities
Slide 35: Key topic: oil price
Key topic: oil price Low oil price impacts global spending in different ways Low oil price Oil & Gas Industries1 Governments Upstream Mid- / Downstream Several industries Reallocation of oil Mainly capex Mainly on greenfield benefit, e.g., subsidies to reductions projects automotive, marine infrastr
Slide 36: Key topic: oil price
Key topic: oil price ABB in oil, gas, and chemicals Share of revenues Split of sales Type of customer spend % of 2014 total sales from OGC1 Approximate Approximate 2 2% Power 40 ~10% 45 8% Automation 55 60 1Upstream x 2 xDownstream/ Opex midstream Capex ~5% of ABB’s sales are exposed to oil and gas
Slide 37: Priorities for 2015
Priorities for 2015 Summary Maintain / accelerate organic growth momentum Profitable More value from combined $6 bn R&D and sales investment p.a. through PIE growth Drive shift in center of gravity Realize benefits from new partnerships Deliver 3-5% of COS cost reduction, expand focus on white colla
Slide 38: Agenda
Agenda Financial results Full-year 2014 Q4 Next Level implementation Outlook Q&A © ABB February 5, 2015 | Slide 38
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Slide 40: Key figures Q4 and FY 2014
Key figures Q4 and FY 2014 Q4 14 Q4 13 Change FY 14 FY 13 Change $ mn unless Local Like- Local Like- $ $ otherwise indicated currency for-like currency for-like Orders 9’365 10’003 -6% -1% +1% 41’515 38’896 +7% +9% +10% Order backlog (end 24’900 26’046 -4% +5% 24’900 26’046 -4% +5% December) Revenue
Slide 41: Order backlog by division
Order backlog by division 2014 2013 Change % Order backlog (end December) $ Local currency $ mn Discrete Automation and Motion 4’385 4’351 +1% +9% Low Voltage Products 891 1’057 -16% -9% Process Automation 5’661 5’772 -2% +9% Power Products 7’791 7’946 -2% +6% Power Systems 8’246 9’435 -13% -4% Cons
Slide 42: Operational EPS analysis
Operational EPS analysis Q4 2014 Q4 2013 FY 14 FY13 mn $ except per share data in $ EPS1 EPS 2 EPS1 EPS 2 Net income 680 0.30 525 0.23 31% 2’594 1.13 2’787 1.21 -7% (attributable to ABB) Restructuring and restructuring- 69 0.03 121 0.05 171 0.07 182 0.08 related expenses3 Acquisition-related expen
Slide 43: Overview of 2015-2020 targets
Overview of 2015-2020 targets Group targets and divisional operational EBITA margin targets Group Divisions Revenue growth1 4-7% Discrete Automation and Motion 14-19% Low Voltage Products 15-19% Operational EBITA %2 11-16% Process Automation 11-15% Operational EPS growth 10-15% Power Products 12-16%
Slide 44: Revenues
Regional share of total orders and revenues by division Q4 2014 Discrete Low Voltage Process Power Power Automation and Motion Products Automation Products Systems 3% 8% 12% 14% 19% 25% 28% Orders 39% 31% 33% 22% 41% 33% 30% 26% 33% 28% 29% 24% 22% 4% 8% 9% 10% 21% Revenues 28% 36% 32% 32% 37% 25% 3
Slide 45: Discrete Automation & Motion
Discrete Automation & Motion Q4 2014 summary Orders received Revenues Operational EBITDA $ mn, y-o-y change like-for-like $ mn, y-o-y change like-for-like $ mn, operational EBITDA margin +1% +1% 2,687 2,583 2,489 2,484 2,379 2,253 17.2% 463 444 435 Q4112 Q4213 Q4314 Q4112 Q42 13 Q43 14 Q4112 Q42 13
Slide 46: Low Voltage Products
Low Voltage Products Q4 2014 summary Orders received Revenues Operational EBITDA $ mn, y-o-y change like-for-like $ mn, y-o-y change like-for-like $ mn, operational EBITDA margin +5% +2% 19.8% 1,867 1,844 1,722 2,022 1,970 386 370 1,793 355 Q4 112 Q4 213 Q4 314 Q4112 Q42 13 Q4314 Q4112 Q4213 Q4314 L
Slide 47: Process Automation
Process Automation Q4 2014 summary Orders received Revenues Operational EBITDA $ mn, y-o-y change like-for-like $ mn, y-o-y change like-for-like $ mn, operational EBITDA margin +1% +1% 13.2% 2,261 2,230 296 2,211 2,094 278 2,024 259 1,907 Q4112 Q4213 Q4314 Q4112 Q42 13 Q43 14 Q4112 Q4213 Q4314 Both
Slide 48: Power Products
Power Products Q4 2014 summary Orders received Revenues Operational EBITDA $ mn, y-o-y change like-for-like $ mn, y-o-y change like-for-like $ mn, operational EBITDA margin +5% -2% 2,731 2,554 2,548 3,070 3,068 14.5% 2,825 467 461 410 Q4112 Q4213 Q4314 Q4112 Q42 13 Q4314 Q4112 Q4213 Q4314 Both large
Slide 49: Power Systems
Power Systems Q4 2014 summary Orders received Revenues Operational EBITDA $ mn, y-o-y change like-for-like $ mn, y-o-y change like-for-like $ mn, operational EBITDA margin 2.4% 49 -9% -14% 2,360 2,300 2,272 1,965 1,789 1,437 -50 -55 Q4112 Q4213 Q4314 Q4112 Q42 13 Q4314 Q4112 Q4213 Q4314 Higher base
Slide 50: More information available at ABB Investor Relations
More information available at ABB Investor Relations Name Telephone E-Mail Alanna Abrahamson +41 43 317 3804 alanna.abrahamson@ch.abb.com Head of Investor Relations John Fox +41 43 317 3812 john.fox@ch.abb.com Binit Sanghvi +41 43 317 3832 binit.sanghvi@ch.abb.com Beat Fueglistaller +41 43 317 4144