ABB Capital Markets Day 2021: cementing the culture of performance
Business Wire India
- Revenue growth target raised to 4-7% throughout the business cycle
- Group operational EBITA margin target refined to at least 15% from 2023
- Sustainable transport for medium-term growth
- CEO: “Demand has remained robust so far and we expect positive market momentum in 2022, but we still need to manage supply chain disruptions”
- Swiss IPO for electric mobility scheduled for the first half of 2022
- CFO: “Continued strong cash flow generation to support organic growth and mergers and acquisitions”
- Introduction of ABB Circularity Framework as part of the 2030 Sustainable Development Strategy
ABB will be holding its Capital Markets Day today, December 7, starting at 12:00 p.m. CET. At the event, CEO Björn Rosengren, CFO Timo Ihamuotila, along with other members of the executive committee, will provide an update on ABB’s ongoing transformation into a more profitable group with growth rates increased, updated financial objectives and portfolio management. efforts. In addition, they will give an overview of its technologies and offers that promote sustainable transport.
“Over the past 24 months, ABB has made solid progress in implementing its decentralized organization and improving the quality of revenues. But we are still not where we want to be, ”said CEO Rosengren. “Our technological leadership in electrification and automation, aligned with sustainability and global megatrends, is at the heart of ABB’s mission and gives us a competitive advantage. Nonetheless, we must cement a culture of high performance and integrity in everything we do. Therefore, an increased focus on accountability, transparency and speed in 2022 will help drive growth, increase profitability and create more shareholder value. “
Since the start of 2020, ABB has decentralized its organization to bring business decisions closer to the customer and has successfully rolled out its new operating model called ABB Way, including the introduction of a dashboard-based performance management system. . In addition, the Group has focused on improving revenue quality by targeting high growth segments (e.g. data centers, food and beverage, electric vehicle charging), expanding the portfolio of software, increasing revenue through distributors and expanding exposure to short-cycle products.
ABB has raised its revenue growth target to 4-7% throughout the business cycle, at constant exchange rates, which translates to a total of 3-5% organic growth and 1-2% organic growth. acquired growth. ABB has also refined its operational EBITA margin target to at least 15% from 2023. These changes take into account the immediate negative effects on margins due to the exit of the Dodge (MPT) and Turbocharger divisions. The Group had previously targeted 3-5% revenue growth throughout the cycle and an operating EBITA margin in the upper half of a 13-16% range from 2023.
CEO Rosengren added, “Orders activity has remained robust so far and we expect positive market momentum in fiscal 2022. That said, we still need to manage supply chain disruptions. , which will most likely impact customer deliveries in the fourth quarter. quarter and at least early next year.
ABB is more optimistic about its revenue growth prospects, not only because of its world-leading business and decentralized operating model, but also because it will benefit from important secular trends. For example, energy efficiency is a key driver for the decarbonization of the economy, including the industrial sector, while the declining working-age population and rising labor costs are driving demand. automation in industrial and other sectors.
Around 60% of the Group’s divisions are currently in growth mode, which means that they focus both on organic growth, as well as on M&A opportunities that can fill technology gaps, focus on high-growth segments and open up new geographic markets.
ABB plans to make at least five small and medium-sized acquisitions per year. This will be funded by the “continuous and strong generation of cash flow,” said CFO Timo Ihamuotila. He also reiterated ABB’s priorities for capital allocation of financing organic growth, paying an increasing sustainable dividend per share, making value-creating acquisitions and returning additional liquidity to shareholders through share buyback programs.
Progress in portfolio management
Last year ABB announced the exit of three divisions whose Dodge business (MPT) was already successfully sold in November. At today’s event, CEO Rosengren will provide an update on the Group’s ongoing portfolio management efforts. This includes the exit of the Turbochargement (PA) division through a spin-off to existing shareholders or a divestiture and is scheduled for summer 2022. The final decision will be based solely on the route that creates the most value. ABB also plans to divest its Power Conversion (EL) division in the second half of 2022 as it continues to improve the performance of its business.
In addition, ABB is continuing its work on an IPO of its E-mobility (EL) division. The legal separation is expected to be completed during the first quarter of 2022 and if market conditions remain favorable, a listing in Switzerland would be targeted for the first half of 2022. ABB would retain a majority stake in the future listed entity.
At today’s event, the four business line presidents will present their portfolios of products that enable sustainable transport, representing a total of ~ 10% of the Group’s order intake. ABB has outperformed this market segment over the past five years, with growth estimated at 17% per year, and plans to continue to outperform the market, which is expected to show double-digit growth over the medium term. The main drivers of the product will be electric vehicle charging for cars and buses, traction systems in railways, trucks and mines, and green hydrogen technology in the maritime sector.
A highlight is the growing demand for electric vehicles (EVs), sales of which are expected to exceed non-EV sales by 2035 *, driven by global trends in electrification, decarbonization and digitization. For example, the Robotics division is the second largest supplier of technology for powertrain and battery assembly, bodywork, and painting and sealing of electric vehicles. In addition, ABB is the leader in charging solutions (AC & DC) for electric cars, electric buses and trucks, as well as for rail infrastructure.
Sustainable development strategy: deployment of the circularity framework
At last year’s CMD, ABB unveiled its ambitious sustainability strategy for the 2030 Group, based on three pillars: enabling a low-carbon society, conserving resources and promoting social progress. Important milestones have already been achieved, notably with ABB technology which helps customers reduce their annual CO2 emissions of over 100 megatonnes, which equates to 30 million combustion cars.
In 2022, ABB will introduce a circularity framework covering every stage of the product lifecycle in order to conserve resources. It will include stages: design and sourcing; manufacturing and packaging; optimization of the use phase (efficiency and lifespan); and the end of life phase (recovery and recycling). The goal is to have 80% of ABB’s products, solutions and services covered by the circularity framework by 2030, with the company’s progress being measured against a set of key performance indicators. Already today, several initiatives are in place. For example, nearly 40% of ABB’s 400 sites around the world send no waste to landfills.
* Source: Long-Term Electric Vehicle Outlook 2021, BloombergNEF
Note to editors: The Capital Markets Day can be followed on the ABB Investor Relations website from 12:00 p.m. to 5:00 p.m. CET.
ABB (ABBN: SIX Swiss Ex) is a leading global technology company driving the transformation of society and industry to achieve a more productive and sustainable future. By connecting software to its portfolio of electrification, robotics, automation and motion, ABB is pushing the boundaries of technology to take performance to new levels. With a history of excellence stretching back over 130 years, ABB’s success is built on approximately 105,000 talented employees in more than 100 countries. www.abb.com
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