Slide 1: Increased profitability in challenging markets
Ulrich Spiesshofer, CEO; Eric Elzvik, CFO, February 3rd, 2016 Increased profitability in challenging markets ABB 2015 Q4 and full-year results © ABB 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: Q4 2015 – Next Level Strategy delivering positive results
Q4 2015 – Next Level Strategy delivering positive results Progress in all three focus areas Orders and revenues stable1; base orders -6% Profitable PIE2 showing positive results mitigating market headwinds; order backlog +5% Growth Market oriented divisional realignment complete Strategic portfolio
Slide 4: Q4 and full-year 2015 key figures
Q4 and full-year 2015 Key figures Op. EBITA Cash flow from Orders Revenues margin operating activities Q4 2015 $8.3 bn $9.2 bn 11.7% $2.0 bn -2%1 -1%1 +60 bps. +18%2 Op. EBITA Operational Free Cash Orders Revenues margin EPS Flow Full-year 2015 $36.4 bn $35.5 bn 11.8% $1.35 $3.0 bn -1%1 0%1 +60 bps.
Slide 5: Full-year 2015 versus targets 2020
Full-year 2015 versus targets 2020 Steady revenues, solid execution, margin accretion, strong cash Target Result 2015 Comments Growth momentum in key Revenue growth1 3-6% 0% segments tainted by market headwinds 60 bps. accretion; Operational EBITA %2 11-16% 11.8% solid execution Operational EPS Exec
Slide 6: Orders in key markets – a mixed picture
Orders in key markets – a mixed picture Success in target segments mitigates market headwinds 2015 Q4 base order 2015 Q4 total order growth by region growth2 Change on a comparable basis Change on a comparable basis Europe Canada -5% Automation +6% China -21% Power +11% Germany -1% Total +7% India -
Slide 7: Q4 2015 performance by division
Q4 2015 performance by division Key figures quarter on quarter $ bn Discrete Low Voltage Process Power Power unless otherwise Automation Products Automation Products Systems ABB Group stated and Motion Orders 2.0 1.5 1.6 2.4 1.3 8.3 Comparable -9% -2% -1% +3% +3% -2% Revenues 2.3 1.6 1.7 2.5 1.8 9
Slide 8: Op. EBITA margin: 60 basis points of margin accretion
Op. EBITA margin: 60 basis points of margin accretion Driving Relentless Execution 11.1% op. 11.7% op. EBITA margin EBITA margin Operational EBITA bridge Q4 2015 vs Q4 2014 $ mn +130 -14 -61 +25 -65 1,168 -80 1,153 -7 1,081 Op. EBITA Net Net Project Mix Other Forex Divest- Op. EBITA Q4 2014 savings
Slide 9: Strong cash development in 2015
Strong cash development in 2015 On track to release $2 bn of cash by end of 2017 Working Capital 1’000 day program on track Strong cash generation Net Working Capital Cash flow from operating activities, full-year +92% 14.11% 13.01% $5.5 bn 2014 2015 $4.6 bn CROI3 improving 13.4% 12.7% 12.1% 11.6% 2
Slide 10: Solid financial foundation supports strategy execution
Solid financial foundation supports strategy execution Efficient balance sheet and financing flexibility Consistently driving cash generation Targeting efficient balance sheet Free Cash Flow Net cash / debt US$ billions US$ billions 2.9 3.0 1.8 2.6 2.6 2.6 -1.6 -1.5 -0.9 -1.2 Rating agency- adjusted
Slide 11: Capital allocation priorities unchanged
Capital allocation priorities unchanged Returned $3.2 bn of cash to shareholders 2015 Dividend per share Fund organic growth, R&D, capex at CHF attractive CROI 0.74 0.72 0.70 0.68 0.65 0.6 Steadily rising sustainable dividend 2010 2011 2012 2013 2014 2015 Dividend yield1 2.9% 3.7% 3.6% 3.0% 3.4% 4.1
Slide 12: Full-year 2015: Next Level delivering positive results
Full-year 2015: Next Level delivering positive results Progress in all three focus areas Orders & revenues stable1; PIE initiatives offsetting market headwinds Profitable NPS increased 4 percentage units to 48% Growth Market oriented divisional structure in place Power Grids portfolio review on trac
Slide 13: Full-year 2015: Profitable Growth
Full-year 2015: Profitable Growth Market oriented divisional realignment completed Power & Automation Profitable Utilities Industry Transport & Infrastructure Growth Electrification Products (new) A leading player for LV and MV electrification Power Grids (new) Relentless #1 T&D offering Execution D
Slide 14: Shifting the Center of Gravity
Full-year 2015: Profitable Growth Shifting the Center of Gravity Presented September 9th, 2014 Strengthening competitiveness Profitable Growth Solution offering Software-led Services differentiation Future Customer value Technological proposition leadership Relentless Execution Economic cycle High-g
Slide 15: Shifting the Center of Gravity – service
Full-year 2015: Profitable Growth Shifting the Center of Gravity – strengthening competitiveness Examples Service Profitable Growth +1pts1 to 17% Service revenues as a % of Group revenues Relentless Execution +6% Revenues Business- 34% Installed base (penetration) led Collabo- ~90% Service offerings
Slide 16: Technology leadership
Full-year 2015: Profitable Growth Shifting the Center of Gravity – strengthening competitiveness Examples Technology leadership Key innovations Profitable Utilities Growth Sustainable grid infrastructure Eco-efficient switchgear Industry Relentless Execution Industry 4.0, IoTSP1 YuMi® Infrastructure
Slide 17: Software-led differentiation
Full-year 2015: Profitable Growth Shifting the Center of Gravity – strengthening competitiveness Examples Software-led differentiation Key software launches Profitable Utilities Growth Ellipse Select Enterprise Software Asset Health Suite Industry Relentless Execution Digital mine Boliden, Sweden In
Slide 18: Market oriented and collaborative approach showing results
Full-year 2015: Profitable Growth Market oriented and collaborative approach showing results Key wins NPS1 (%) Profitable Utilities Growth 48 44 35 Industry Relentless 29 Execution 22 16 Infrastructure Transport & Business- led 2010 2011 2012 2013 2014 2015 Collabo- ration © ABB February 5, 2016 Sli
Slide 19: Power Systems entered target margin corridor in Q4
Full-year 2015: Relentless Execution Power Systems entered target margin corridor in Q4 Illustrative Op. EBITA % Profitable 11% $ 274 Target Growth mn 7% - $ 96 Relentless mn Execution -97 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY 2014 2014 2015 FY 2015 Actions completed in 2015 Business- Status offshore wind conn
Slide 20: 7th consecutive year more than $1 billion in cost savings
Full-year 2015: Relentless Execution 7th consecutive year more than $1 billion in cost savings Regular cost savings (3-5% of cost of sales p.a. ) Profitable Growth 1.2 1.2 1.1 1.1 1.1 Relentless Execution 2011 2012 2013 2014 2015 Operational excellence Supply chain Business- led Accelerated cost sav
Slide 21: Managing capacity and market headwinds
Full-year 2015: Relentless Execution Managing capacity and market headwinds Illustrative Driving productivity Profitable ~148,000 45 150000 Growth employees 40 35 140000 ~135,500 30 employees 25 130000 Relentless 2013 2014 2015 Execution Revenues Total employees Example: actions completed in DM divi
Slide 22: White Collar Productivity – well on track
Full-year 2015: Relentless Execution White Collar Productivity – well on track for $1 bn1 cost savings From To Profitable Lean Centers of Decentralized, Growth business subscale excellence with functions critical mass Global 2 global (India, 68 country based shares Poland) Relentless shared services
Slide 23: Leadership appointments
Full-year 2015: Business-led Collaboration Leadership appointments Executive Committee Profitable Growth Relentless Execution members of the Board Proposed new Business- led Collabo- Frederico Fleury Robyn Denholm David Meline Satish Pai ration Curado © ABB February 5, 2016 Slide 23
Slide 24: 2016 market outlook
2016 market outlook Challenging environment Power & Automation Utilities Industry Transport & Infrastructure Globally Asia, Middle East, Africa Americas Europe Continued growth in T&D, Discrete industries1 grow Transportation mixed with positive fundamental drivers moderately after several high- gro
Slide 25: 2016 geographical outlook
2016 geographical outlook Challenging environment Power & Automation Utilities Industry Transport & Infrastructure Globally Asia, Middle East, Africa Americas Europe China: Slowdown in industrials US: Slowing momentum in Northern Europe: Mixed continues, healthy growth in industrial space, moderate
Slide 26: 2016 Priorities
2016 Priorities Next Level Strategy in action Drive organic growth through PIE, expand technology leadership Profitable Realize benefits from divisional realignment; conclude Power Grids strategic portfolio review Growth Deliver value from partnerships Ready for disciplined inorganic moves Continue
Slide 27: ABB Next Level
ABB Next Level Pioneering technology leader with strong positions in attractive markets Clear transformation agenda driving EPS and CROI Strong balance sheet; committed to attractive returns to shareholders Next Level Strategy: accelerating sustainable value creation © ABB February 5, 2016 Slide 27
Slide 28: Power and productivity for a better world
Power and productivity for a better world™ YEARS SERVING THE WORLD FROM SWITZERLAND www.abb.com
Slide 29: Key figures full-year 2015
Key figures full-year 2015 FY 15 FY 14 Change $ mn unless $ Local currency Comparable otherwise indicated Orders 36,429 41,515 -12% -2% -1% Revenues 35,481 39,830 -11% -1% +0% Operational EBITA 4,169 4,475 -7% +2% +3% as % of operational revenues 11.8% 11.2% +0.6pts Income from operations 3,049 4,17
Slide 30: Key figures Q4 2015
Key figures Q4 2015 Q4 15 Q4 14 Change $ mn unless $ Local currency Comparable otherwise indicated Orders 8,262 9,365 -12% -3% -2% Order backlog (end December) 24,121 24,900 -3% +5% Revenues 9,242 10,346 -11% -2% -1% Operational EBITA 1,081 1,153 -6% +1% +1% as % of operational revenues 11.7% 11.1%
Slide 31: Order backlog by division
Order backlog by division Q4 2015 Q4 2014 Change % Order backlog (end December) $ Comparable $ mn Discrete Automation and Motion 4,232 4,385 -3% +3% Low Voltage Products 857 891 -4% +6% Process Automation 5,203 5,661 -8% +3% Power Products 7,717 7,791 -1% +7% Power Systems 8,218 8,246 -0% +8% Consol
Slide 32: Cash flow from operating activities by division
Cash flow from operating activities by division Q4 2015 Change % FY 2015 Change % Cash flow from operating activities Constant currency Constant currency $ mn Discrete Automation and Motion 328 -25% 1,232 -13% Low Voltage Products 399 -1% 981 -9% Process Automation 267 -25% 607 -29% Power Products 6
Slide 33: Operational EPS analysis
Operational EPS analysis Q4 2015 Q4 2014 mn $ except per share data in $ EPS1 EPS1 2 Net income 204 0.09 680 0.30 -69% (attributable to ABB) Restructuring and restructuring- 389 0.18 69 0.03 related expenses3 (including WCP implementation costs) Gains and losses on sale of businesses, acquisition-
Slide 34: Operational EPS analysis
Operational EPS analysis FY 2015 FY2014 mn $ except per share data in $ EPS1 EPS1 2 Net income 1,933 0.87 2,594 1.13 -23% (attributable to ABB) Restructuring and restructuring- 492 0.22 171 0.07 related expenses3 (including WCP implementation costs) Gains and losses on sale of businesses, acquisiti
Slide 35: Q4 2015 Net Income development
Q4 2015 Net Income development Significant impact from restructuring and one off charges Net Income reconciliation $ mn -72 -320 Op. EBITA 680 -142 42 25 Restructuring -14 and 13 restructuring- -8 Taxes Income from Finance related Gains and FX/commodity Acquisition- net discontinued expenses losses
Slide 36: Regional share of orders and revenues by division
Regional share of total orders and revenues by division Q4 2015 Discrete Low Voltage Process Power Power Automation Products Automation Products Systems and Motion 29% 31% 31% Orders 34% 40% 46% 31% 36% 42% 35% 37% 29% 23% 27% 29% Revenues 38% 32% 27% 38% 41% 31% 34% 47% 43% 35% 34% 28% 21% 30% 21%
Slide 37: Discrete Automation & Motion
Discrete Automation & Motion Q4 2015 -9% Total orders declined due to lower demand for standard products such as motors and drives. Orders 2,379 1,984 Weaker demand from process industries in key markets such as the U.S. and China. Q4 14 Q4 15 -4% Service revenues increased, offset by weak short Rev
Slide 38: Low Voltage Products
Low Voltage Products Q4 2015 -2% Stable order development in Europe partially offset declines in AMEA and the Americas Orders 1,722 1,530 Product orders were softer in China, the US and Canada Q4 14 Q4 15 0% Revenues were steady in the quarter. Revenues 1,793 1,624 Q4 14 Q4 15 Margin impacted by mix
Slide 39: Process Automation
Process Automation Q4 2015 -1% Total orders were flat as an increase in large orders offset a base order decline Orders 1,907 1,591 Lower spending in oil and gas and related sectors. Q4 14 Q4 15 -8% Revenues were lower reflecting the decline in Revenues short cycle volumes for the full year specific
Slide 40: Power Products
Power Products Q4 2015 +3% Orders increased with selective transmission utility investments compensating the decline in Orders industrial orders. 2,548 2,398 Q4 14 Q4 15 -2% Revenues were lower mainly reflecting project Revenues milestones 2,825 2,544 Slower short cycle demand in key industrial mark
Slide 41: Power Systems
Power Systems Q4 2015 +3% Orders were higher primarily due to a double digit growth in large orders. Orders 1,437 1,340 Q4 14 Q4 15 -1% Revenues were maintained, reflecting steady Revenues execution of the order backlog. 1,965 1,755 Q4 14 Q4 15 Margin higher as a result of ongoing ‘step Op. EBITA &
Slide 42: 2014 key figures for the new divisions
2014 key figures for the new divisions Discrete Electrification Process Automation Power Grids Products Automation and Motion Orders 10,861 10,559 9,213 12,768 ($ mn) Revenues 10,572 10,142 8,618 12,518 ($ mn) Operational EBITA 1,741 1,589 1,028 595 ($ mn) Operational EBITA 16.4 15.7 11.9 4.7 margin
Slide 43: Q1 2015 key figures for the new divisions
Q1 2015 key figures for the new divisions Discrete Electrification Process Automation Power Grids Products Automation and Motion Orders 2,555 2,569 2,272 3,741 ($ mn) Revenues 2,229 2,271 1,764 2,772 ($ mn) Operational EBITA 340 318 216 164 ($ mn) Operational EBITA 15.2 14.2 12.3 5.9 margin (%) © AB
Slide 44: 2015 key figures for the new divisions
2015 key figures for the new divisions Pro-forma Discrete Electrification Process Automation Power Grids Products Automation and Motion Orders 9.8 9.2 7.3 12.2 ($ bn) Revenues 9.5 9.1 7.2 11.6 ($ bn) Operational EBITA 1.6 1.3 0.9 0.9 ($ bn) Operational EBITA 16.4 13.9 11.8 7.5 margin (%) © ABB Septe
Slide 45: 2015-2020 targets
2015-2020 targets Group targets and divisional Operational EBITA margin targets effective January 2016 Presented September 9th, 2014 Group Divisions Electrification Products 15-19% Revenue growth1 3-6% Discrete Automation and Motion 14-19% Operational EBITA %2 11-16% Process Automation 11-15% Operat
Slide 46: 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 Binit Sanghvi +41 43 317 3832 binit.sanghvi@ch.abb.com Beat Fueglistaller +41 43 317 4144 beat.fueglistaller@ch.abb.com Annatina Tunkel