UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October 2022
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
☒
⬜
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
⬜
Note:
attached annual report to security holders.
Indication by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
⬜
Note:
other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in
which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the
home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press
release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event,
has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
⬜
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
This Form 6-K consists of the following:
1.
Press release issued by ABB Ltd dated October 20, 2022 titled “Q3 2022 results”.
2.
Q3 2022 Financial Information.
3.
Announcements regarding transactions in ABB Ltd’s Securities made by the directors or the members of the
Executive Committee.
The information provided by Item 2 above is hereby incorporated by reference into the Registration Statements on Form F-3 of
ABB Ltd and ABB Finance (USA) Inc. (File Nos. 333-223907 and 333-223907-01) and registration statements on Form S-8
(File Nos. 333-190180, 333-181583, 333-179472, 333-171971 and 333-129271) each of which was previously filed with the
Securities and Exchange Commission.
2
—
“In the third quarter, we delivered a high order growth, a strong top-line development and a
historically high margin. We have not seen any material changes in the underlying customer
activity. It looks like we are likely to achieve our 2023 margin target one year early. We are now
starting to see the real benefits of the ABB Way operating model.”
Björn Rosengren
, CEO
—
ZURICH, SWITZERLAND, OCTOBER 20, 2022
Q3 2022 results
Strong order growth, high revenues and
historically high Operational EBITA margin
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1
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2
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Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss Exchange
—
Q3 2022
First nine months
Press Release
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
1
9M 2022
9M 2021
US$
Comparable
1
Orders
8,188
7,866
4%
16%
26,368
23,611
12%
22%
Revenues
7,406
7,028
5%
18%
21,622
21,378
1%
10%
Gross Profit
2,481
2,294
8%
7,052
7,070
0%
as % of revenues
33.5%
32.6%
+0.9 pts
32.6%
33.1%
-0.5 pts
Income from operations
708
852
-17%
2,152
2,743
-22%
Operational EBITA
1
1,231
1,062
16%
27%
3,364
3,134
7%
15%
as % of operational revenues
1
16.6%
15.1%
+1.5 pts
15.5%
14.6%
+0.9 pts
Income from continuing operations, net of tax
420
687
-39%
1,469
2,027
-28%
Net income attributable to ABB
360
652
-45%
1,343
1,906
-30%
Basic earnings per share ($)
0.19
0.33
-41%
2
0.70
0.95
-26%
2
Cash flow from operating activities
4
791
1,104
-28%
600
2,310
-74%
Cash flow from operating activities in continuing
operations
793
1,119
-29%
614
2,305
-73%
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q3 2022 Financial Information.
2
EPS growth rates are computed using unrounded amounts.
3
Constant currency (not adjusted for portfolio changes).
4
Amount represents total for both continuing and discontinued operations.
ABB INTERIM REPORT
I
Q3 2022
There were several positive takeaways from the third
quarter 2022. Strong order growth of 4% (16% comparable),
resulted in a book -to-bill ratio of above one for the seventh
consecutive quarter . Revenues were supported by the
sequential easing of component supply constraints
facilitating customer deliveries but also by a significantly
lower level of interruptions from Covid-related lockdowns in
China.
I was pleased to see the Operational EBITA increase by
16% year-on-year and the high Operational EBITA margin
of 16.6%, with improvements noted in all business areas.
An excellent achievement, driven by higher volumes and
operational improvements including good pricing execution
which offset cost inflation related to raw materials, freight
and labor. Importantly, this signals that our new way of
working, with higher accountability, transparency and
speed, is really starting to take hold. I am proud that we are
likely to achieve our target of Operational EBITA margin of
at least 15% already in 2022, one year ahead of plan.
It was good to see cash flow from operating activities of
$791 million, a higher level than in the previous quarter, and
I anticipate an additional step up in the fourth quarter.
Orders increased in all regions, led by a very strong
development in the Americas. In total, Europe improved
strongly although some normalization of inventory levels
was noted in Germany for parts of our customer base. Asia,
Middle East and Africa improved despite softness noted in
China.
Customer activity was at a high level in the quarter with
overall stable to positive development in most segments
outside of discrete industries. In the latter we noted some
customers normalizing order patterns in anticipation of
shorter delivery lead-times as supply constraints ease.
Overall, demand increased for both the short -cycle flow
business and the systems -driven offerings. Changes in
exchange rates weighed on total orders in all business
areas, however the underlying customer activity improved.
In total, our order backlog remained at a high level of
$19.4 billion.
Income from operations amounted to $708 million and
declined by 17% (7% constant currency) year-on-year. This
includes the non-operational provision of approximatel y
In the
fourth quarter of 2022
, we anticipate a low double-
digit comparable revenue growth, impacted by the high level
of revenues recorded last year. We expect the typical
pattern of a sequentially lower Operational EBITA margin.
$325 million related to the remaining matters for the legacy
Kusile project, with a similar cash flow impact expected in
subsequent quarters. We are now resolving this matter,
related to a project awarded in 2015. The new ABB Way
operating model is guided by our code of conduct and is
part of our regular and transparent business reviews.
I am pleased about the multiple portfolio management
activities in the quarter. Importantly, Motion signed two
acquisitions – in the NEMA motors and Traction divisions –
which will further cement their leading market position s. I
also want to highlight our investment into an accelerated
strategic collaboration between Process Automation and
Canada’s Hydrogen Optimized launched in 2020 . Together
we are advancing the deployment of economic large-scale
green hydrogen production systems to decarbonize hard-to-
abate industries.
We also announced the early divestment of the remaining
19.9% of the Hitachi Energy joint venture to Hitachi as they
exercised the call opti on that was agreed in 2018. We do
not foresee any significant gain or loss as a result of the
sale and anticipate net positive cash inflows of
approximately $1.4 billion upon closing, expected in the
fourth quarter 2022. This will further strengthen our balance
sheet and give us additional flexibility in our capital
allocation decisions. With regards to E-mobility, we remain
committed to our plans to list the division, although we no
longer expect it to happen this year due to the current
volatility in capital markets. Finally, just after the close of the
third quarter we distributed Accelleron to shareholders as a
dividend in kind. I was delighted to mark the first day of
trading of Accelleron by joining the management team in
ringing the bell on the Swiss stock exchange. I wish the
team great success as a separately listed company .
Björn Rosengren
CEO
In full-year
2022, we are likely to achiev e early the 2023
target of an Operational EBITA margin of at least 15%,
supported by increased efficiency as we fully incorporate
the decentralized operating model and performance culture
in all our divisions and strong top-line execution.
CEO summary
Outlook
ABB INTERIM REPORT
I
Q3 2022
The impact from changes in exchange rates weighed on total
order growth. However , the underlying customer demand was
strong, resulting in order growth of 4% (16% comparable), year-
on-year. Customer activity was robust for both the short-cycle
flow business and the systems business. The strongest
contribution to order growth was seen in Electrification and
Motion. Process Automation was hampered by a high
comparable and timing of order placements. Robotics &
Discrete Automation saw protracted lead times in customers’
decision making and normalizing order patterns in anticipation
of shorter delivery lead-times due to easing of component
constraints. Total order intake for ABB amounted to
$8,188 million, with improvement in most divisions.
The positive development was strong in the segment of food &
beverage while normalizing order patterns slowed robotics
demand in general industries and automotive .
In transport and infrastructure, the order development was
strong in renewables. The buildings segment was positively
impacted by both the non-residential and residential areas,
although some softness in residential building in China was
noted. The timing of customers placing orders impacted growth
in the marine segment , although the pipeline remains strong.
In the process-related business, gas-related demand improved.
Power generation and pulp & paper were broadly stable. Early
signs of headwind were noted in metals.
Customer activity was strong across regions. Order intake in the
Americas increased by 16% (25% comparable) driven by the
US. Orders in Europe increased by 1% (20% comparable),
supported by all the largest markets in the region. Asia, Middle
East and Africa reported a decline of 4% (up 4% comparable),
including a decline of 8% (2% comparable) in China. However,
worth noting is that excluding the impact from large orders
received last year the region increased at a double-digit pace,
on a comparable basis .
Revenues improved by 5% (18% comparable) with
improvements in virtually all divisions. Price execution was
robust. In addition to a generally high flow business demand,
volumes were supported by the sequential easing of supply
chain constraints fac ilitating deliveries from the order backlog,
not least due to better access to semi-conductors. Additional
support was derived from lower business disruption s from
Covid-related lockdowns in China compared with the previous
quarter.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2022
Q3 2021
US$
Comparable
Europe
2,682
2,663
1%
20%
The Americas
2,980
2,580
16%
25%
Asia, Middle East
and Africa
2,526
2,623
-4%
4%
ABB Group
8,188
7,866
4%
16%
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
16%
18%
FX
-9%
-10%
Portfolio changes
-3%
-3%
Total
4%
5%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q3 2022
Q3 2021
US$
Comparable
Europe
2,494
2,525
-1%
18%
The Americas
2,452
2,161
13%
23%
Asia, Middle East
and Africa
2,460
2,342
5%
13%
ABB Group
7,406
7,028
5%
18%
ABB INTERIM REPORT
I
Q3 2022
Gross profit
Gross profit increased by 8% (19% constant curren cy) to $2,481
million, supported by a gross margin improvement of 90 basis
points to 33.5%. Increas es were noted in all business areas except
for a slight decline in Robotics & Discrete Automation.
Income from operations
Income from operations amounted to $708 million, declining by
17% (7% constant currency). The main trigger was a non-
operational provision of approximately $325 million in connection
with the remaining matters related to the legacy Kusile project, with
a similar cash flow impact expected in subsequent quarters.
Additional pressures stemmed from adverse changes in exchange
rates and slightly higher acquisition- and divestment-related
expenses.
Operational EBITA
Operational EBITA of $1,231 million was 16% higher (27% constant
currency) year-on-year, as contribution from operational
performance more than offset the adverse impact from mainly
changes in exchange rates and portfolio changes.
The Operational EBITA margin increased by 150 basis points to
16.6%. Results were supported by the positive impacts from
operational leverage on significantly higher volumes, strong pricing
execution as well as selling, general & administrative expenses
(SG&A) being reduced in relation to revenues. This more than
offset the adverse impact from cost inflation on materials, freight
and labor. Operational EBITA in Corporate and Other declined by
$15 million to -$52 million.
Net finance expenses
Net finance expenses was $28 million compared with the low level
of $6 million a year ago.
Income tax
Income tax expense was $294 million with an effective tax rate of
41.2%, including approximately 15% adverse impact due mainly to
the non-deductibility of the charges related to the Kusile legacy
project as well as taxes in connection with portfolio management
activities.
Net income and earnings per share
Net income attributable to ABB was $360 million and decreased by
45% from last year, with the decline primarily related to the booked
non-operational provision which weighed on Income from operations.
This resulted in a basic earnings per share of $0. 19, a decline from
$0.33 last year.
Earnings
ABB INTERIM REPORT
I
Q3 2022
Net working capital
Net working capital amounted to $3,407 millio n, increasing
year-on-year from $2,920 million but declining sequentially
from $3,663 million. The sequential decrease was mainly
driven by changes in exchange rates. Net working capital as
a percentage of revenues
1
Capital expenditures
Purchases of property, plant and equipment and intangible
assets amounted to $165 million.
Net debt
Net debt
1
quarter, and increased from $1,898 million, year-on-year.
Sequentially, it declined slightly from $4,235 million, mainly
due to lower carrying debt values as a result of changes in
exchange rates.
Cash flows
Cash flow from operating activities in continuing operations
was $793 million and declined year -on-year from
$1,119 million. The year-on-year change was the results of
improved operational performance which however was
more than offset by higher build-up of net working capital
mainly related to a higher build-up of inventories and lower
collections of receivables. In addition, the current quarter
was adversely impacted by the cash outflow from the earlier
announced exit of a non-core business. ABB expects the
fourth quarter to be the strongest cash flow period in 2022.
Share buyback program
ABB launched a new share buyback program of up to $3 billion
on April 1. As part of this program, ABB completed in the third
quarter, the return to its shareholders of the remaining $1.2
billion out of the $7.8 billion of cash proceeds from the Power
Grids divestment. During the third quarter, 15,784,000 shares
were repurchased on the second trading line for approximately
$436 million. The total number of ABB Ltd’s issued shares is
1,964,745,075, after the cancellation of 88,403,189 shares in
June, as approved at ABB's 2022 AGM.
($ millions,
unless otherwise indicated)
Sep. 30
2022
Sep. 30
2021
Dec. 31
2021
Short term debt and current
maturities of long-term debt
3,068
2,414
1,384
Long-term debt
4,530
4,270
4,177
Total debt
7,598
6,684
5,561
Cash & equivalents
2,365
3,709
4,159
Restricted cash - current
323
31
30
Marketable securities and
short-term investments
793
746
1,170
Restricted cash - non-current
–
300
300
Cash and marketable securities
3,481
4,786
5,659
Net debt (cash)*
4,117
1,898
(98)
Net debt (cash)* to EBITDA ratio
0.6
0.5
(0.01)
Net debt (cash)* to Equity ratio
0.34
0.13
(0.01)
*
At Sep. 30, 2022, Sep. 30, 2021 and Dec. 31, 2021, net debt(cash) excludes net pension
(assets)/liabilities of $(114) million, $530 million and $45 million, respectively.
Balance sheet & Cash flow
ABB INTERIM REPORT
I
Q3 2022
Orders and revenues
Although changes in exchange rates had an adverse effect on
the total, the absolute order intake reached one of the highest
levels in recent history, amounting to $3,902 million. This
corresponds to a year -on-year increase of 11% (20%
comparable), supported by both the flow- and systems -driven
business. The strong demand and a sequential easing of
supply chain constraints supported revenues, yet order
backlog reached another all-time-high level of $6.8 billion.
●
Customer activity was strong in most segments in the
Americas and Europe, while softness was noted in China.
●
Orders in Asia, Middle East and Africa were up by 5% (13%
comparable) hampered by China which dropped by 9% (4%
comparable). Changes in exchange rates weighed on total
orders in Europe which declined by 8% (up 10%
comparable). This reflects high activity across major
countries except for a decline in Germany where a
normalization of distributors’ inventory levels was noted and
seemingly completed by quarter end. The Americas
improved sharply by 33% (34% comparable), reflecting a
steep order increase of 38% in the US (39% comparable).
●
Despite the adverse impact from changes in exchange
rates, revenue growth reached 12% (22% comparable).
This was driven by a good contribution from increased
volumes on a generally strong market and execution of the
order backlog, but also by another quarter of very strong
price execution. The sequential improvement in access to
semi-conductors supported customer deliveries in
Distribution Solutions and now all divisions contributed to
growth. Revenues amounted to $3,584 million, representing
the highest quarterly level in recent years.
Profit
Record high quarterly Operational EBITA of $647 million
was up 27% year -on-year and Operational EBITA margin
reached the high level of 18.0%. All of the large divisions
improved both earnings and margin year-on-year.
●
A very robust price management was the main driver to
the earnings improvement and more than offset the
adverse impact from cost inflation in raw materials, freight
and labor.
●
Impact from higher volumes in customer deliveries
contributed significantly to increased earnings.
●
Settlement of an insurance claim supported the margin by
50 basis points in the quarter.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
20%
22%
FX
-9%
-10%
Portfolio changes
0%
0%
Total
11%
12%
—
Electrification
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
3,902
3,519
11%
20%
12,336
10,743
15%
22%
Order backlog
6,805
5,246
30%
41%
6,805
5,246
30%
41%
Revenues
3,584
3,196
12%
22%
10,442
9,742
7%
14%
Operational EBITA
647
511
27%
1,756
1,614
9%
as % of operational revenues
18.0%
15.9%
+2.1 pts
16.8%
16.5%
+0.3 pts
Cash flow from operating activities
651
636
2%
1,083
1,466
-26%
No. of employees (FTE equiv.)
52,100
51,100
2%
ABB INTERIM REPORT
I
Q3 2022
Orders and revenues
Orders increased by 3% (24% comparable) and this was yet
another strong period with orders at the $2 billion level. The
high market activity offset headwinds from changes in
exchange rates and the lack of contribution from the divested
Mechanical Power Transmission (Dodge) division. Furthermore,
support was gained from a higher level of large orders, driven
by approximately $170 million related to sustainable transport
by enhancing Europe’s railway network.
●
Strong double-digit order growth was reported in virtually
all divisions with a steady profile to the underlying
business activity throughout the quarter.
●
Demand increased in all regions, with the strongest
development in Europe which improved by 23%
(46% comparable), supported by the large rail order
received. As a headline number, the Americas declined
by 11% (up 17% comparable), with the drop related to
portfolio changes. In Asia, Middle East and Africa the
overall growth declined by 1% (up 8% comparable) as
changes in exchange rates offset the positive impact
from a robust market activity level. China specifically
increased by 4% (11% comparable).
●
Revenues increased by 2% (23% comparable) to $1,702
million with support from strong demand, solid price
management and the sequential improvement in
customer deliveries in China due to less Covid-related
business disruptions.
Profit
Both earnings and profitability improved year-on-year with
Operational EBITA amounting to $30 5 million and
Operational EBITA margin at 17.8%.
●
Higher volumes improved operational performance and
offset negative mix stemming from robust deliveries of
electrical motors.
●
Strong pricing execution offset the increased costs
related to commodities , freight and labor.
●
The reported margin improved by 40 basis points as
improved operational performance more than
compensated for the adverse impact of 60 basis points
due to the divestment of Dodge, year-on-year.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
24%
23%
FX
-9%
-9%
Portfolio changes
-12%
-12%
Total
3%
2%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
1,966
1,909
3%
24%
6,247
5,773
8%
27%
Order backlog
4,613
3,717
24%
42%
4,613
3,717
24%
42%
Revenues
1,702
1,673
2%
23%
4,900
5,190
-6%
11%
Operational EBITA
305
291
5%
845
905
-7%
as % of operational revenues
17.8%
17.4%
+0.4 pts
17.2%
17.4%
-0.2 pts
Cash flow from operating activities
268
399
-33%
507
946
-46%
No. of employees (FTE equiv.)
20,700
21,300
-3%
ABB INTERIM REPORT
I
Q3 2022
Orders and revenues
Total order intake amounted to $1,568 million and declined by
6% (up 3% comparable) year-on-year, as adverse changes in
exchange rates more than offset a positive underlying trend in
customer activity in most divisions. A book-to-bill ratio of
108% was achieved.
●
The timing of customers placing orders somewhat
hampered order intake, particularly noticeable in Energy
Industries and Marine & Ports. The general order pipeline
remains strong.
●
Demand was particularly strong in the segments of mining
and refining, with positive developments also noted in areas
of marine and gas. In the power generation, pulp & paper
and ports segments, the customer activity remained stable,
while some initial signs of headwinds were noted in metals
due to the high energy prices. Service orders increased by
1% (12% comparable).
●
Orders in the Americas increased by 6% (9% comparable).
Changes in exchange rates weighed on Europe which declined
by 8% (up 8% comparable) and Asia, Middle East and Africa
which reported a sharp drop of 12% (4% comparable ), with the
latter also challenged by a high comparable from last year’s
order level in China.
●
Revenues declined by 3% (up 6% comparable) and amounted
to $1,458 million with a positive development in customer
deliveries in all divisions. While the supply constraints on semi-
conductors eased somewhat sequentially, some hampering
effect is still expected in the fourth quarter.
Profit
Operational EBITA amounted to $225 million and Operational
EBITA margin improved by 160 basis points year-on-year to
15.3% with contribution from all divisions.
●
The impact from increased volumes with improved gross
margin in the order backlog was the main driver for margin
improvement.
●
This marks the last quarter when reporting includes the
Turbocharging division (Accelleron), which was separately
listed on the Swiss stock exchange in early October.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
3%
6%
FX
-9%
-9%
Portfolio changes
0%
0%
Total
-6%
-3%
—
Process Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
1,568
1,670
-6%
3%
5,079
4,881
4%
11%
Order backlog
6,006
6,021
0%
11%
6,006
6,021
0%
11%
Revenues
1,458
1,507
-3%
6%
4,493
4,454
1%
8%
Operational EBITA
225
207
9%
645
554
16%
as % of operational revenues
15.3%
13.7%
+1.6 pts
14.2%
12.4%
+1.8 pts
Cash flow from operating activities
217
231
-6%
470
692
-32%
No. of employees (FTE equiv.)
22,400
22,000
2%
ABB INTERIM REPORT
I
Q3 2022
Orders and revenues
While market demand was at a high level in the quarter, we saw
customers normalizing order patterns on the back of anticipated
shorter delivery lead-times as supply chain constraints ease.
There were some signs of protracted lead times in customers’
order decisions, although the opportunity pipeline remains
robust. Total orders decreased by 4% (up 7% comparable) and
amounted to $901 million, hampered by changes in exchange
rates. On a book-to-bill ratio of 109% the order backlog
remained sequentially stable at $2.7 billion.
●
Order momentum was particularly strong in the machine
builder segment on an easy comparable from last year, but
electronics also improved . This more than offset declines in
automotive and general industry, where customers
normalized order patter ns after a very strong first half of the
year.
●
In total, orders increased in the Americas by 11% (11%
comparable), while changes in exchange rates weighed on
the total in Europe to a decline of 1% (up 17% comparable).
Asia, Middle East and Africa dropped by 13% (7%
comparable) with China declining by 9% (4% comparable ).
●
Changes in exchange rates weighed on reported revenues,
however, access to semi-conductors improved compared with
recent quarters supporting customer deliveries in both
divisions. Additional support from positive price execution
contributed to quarterly revenue growth of 2% (13%
comparable) resulting in revenues of $828 million.
●
The new Robotics manufacturing site in Shanghai was fully
operational with local production volumes transferred in the
quarter.
Profit
Despite the headwind from changes in exchange rates,
Operational EBITA increased by 18% . The Operational
EBITA margin returned to a double-digit level after three
single-digit quarters, reach ing 12.8%, with support from
both divisions.
●
Impact from a positive volume growth improved cost
absorption in production, year-on-year.
●
Solid price execution more than offset adverse impacts
from inflation in freight, input and labor costs.
Growth
Q3
Q3
Change year-on-year
Orders
Revenues
Comparable
7%
13%
FX
-12%
-11%
Portfolio changes
1%
0%
Total
-4%
2%
—
Robotics & Discrete Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
9M 2022
9M 2021
US$
Comparable
Orders
901
935
-4%
7%
3,318
2,744
21%
29%
Order backlog
2,659
1,619
64%
87%
2,659
1,619
64%
87%
Revenues
828
813
2%
13%
2,290
2,498
-8%
-2%
Operational EBITA
106
90
18%
215
291
-26%
as % of operational revenues
12.8%
11.1%
+1.7 pts
9.4%
11.7%
-2.3 pts
Cash flow from operating activities
82
56
46%
109
245
-56%
No. of employees (FTE equiv.)
10,700
10,700
1%
ABB INTERIM REPORT
I
Q3 2022
10
Quarterly highlights
●
ABB E-mobility announce d the continued expansion of its
global and US manufacturing footprint with new
manufacturing operations in Columbia, South Carolina.
The multi-million-dollar investment is planned to increase
production of electric vehicle chargers, including Buy
America Act compliant ones, and create over 100 jobs.
The new facility will be capable of producing up to 10,000
chargers per year, ranging from 20kW to 180kW in
power, which are ideally suited for public charging, school
buses, and fleets.
●
The European Union’s 2022 F-gas proposal outlines
important new regulations designed to phase out the use of
Sulfur Hexafluoride (SF6) – an established but
environmentally harmful insulating gas which is 25,200
times more potent than CO
2
. This has been made possible
with the development of SF6 alternatives paving the way for
this level of regulation, including pioneering products within
ABB’s ecoGIS™ range. Following the EU’s latest F-gas
proposal, ABB created a free-of-charge, downloadable
whitepaper – ‘Migrate to a more certain future’ – to support
engineers in making this key transition.
●
ABB and Canada’s Hydrogen Optimized Inc. (HOI) signed an
agreement to expand the companies’ existing strategic
relationship. This includes an investment by ABB into Key DH
Technologies Inc. (KEY), the parent company of HOI, as they
seek to accelerate the fast-emerging green hydrogen
production segment with unique large-scale architecture.
●
ABB has achieved carbon neutral operations at its factory
in Porvoo, Finland, reducing CO
2
its first year under the mission to Zero program. This saving
is equivalent to driving 112 times the length of the equator
or warming an electric sauna every day for 373 years. By
combining digital solutions, electrification, and renewable
technologies the Porvoo factory has taken an important
step towards a more sustainable value chain .
●
General Counsel and Company Secretary, Andrea
Antonelli, has been appointed as the Executive
Committee sponsor for Abilities. At ABB, the Abilities
dimension encompasses differences that include long-
term physical, mental, intellectual, or sensory impairments
which in interaction with various barriers may hinder the
individuals’ full and effective participation in society on an
equal basis with others.
Story of the quarter
ABB announced a new emissions target for its supply chain.
The company aims to work with its main tier -one suppliers
to achieve a 50 percent reduction in their CO
2
2030. The target is aimed at suppliers covering 70 percent
of ABB’s annual procurement expenditure. The new target
is expected to make an important contribution to ABB’s goal
of enabling a low-carbon society because, in many cases,
its suppliers have a bigger footprint than the company.
Q3 outcome
●
43% reduction of CO
₂
due to increased use of renewable energy and energy efficient
projects on sites.
●
5% year-on-year decrease in LTIFR.
●
2.4%-points increase in number of women in senior
management versus the prior year showing steady progress
towards our target.
—
Sustainability
Q3 2022
Q3 2021
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
kt scope 1 and 2
1
55
96
-43%
319
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.13
0.14
-5%
0.15
Share of females in senior management
positions, %
17.4
15.0
+2.4 pts
16.9
1
CO
₂
2
Q2 2022 emission data was restated from 88.8 to 72.6 Ktons of CO2e to reflect the application
of green energy certificates retrospectively.
ABB INTERIM REPORT
I
Q3 2022
11
During Q3 2022
●
On July 20, ABB announced that it would spin off
Accelleron and list the company on SIX Swiss Exchange.
●
On July 21, ABB announced that it had decided to exit the
Russian market.
●
On August 11, ABB announced that it had signed an
agreement to purchase Siemens’ low voltage NEMA
motor business. The business employs around
600 people and generated revenues of approximately
$63 million in 2021. The transaction is expected to close
in the second quarter 2023.
●
On September 7, ABB announced that shareholders
approved the proposed spin-off of its Accelleron
turbocharging division at the Extraordinary General
Shareholders Meeting.
●
On September 19, ABB announced that it will acquire the
PowerTech Converter (PTC) business, a leading supplier
of auxiliary power converter solutions for light rail vehicles
and metros. With around 280 employees, the business
generated revenues of approximately €60 million in 2021.
The deal is expected to close in the fourth quarter 2022.
●
On September 30, ABB announced that it has reached an
agreement to divest to Hitachi, Ltd. (Hitachi) its remaining
19.9% equity stake in the Hitachi Energy joint venture.
Hitachi has exercised its call option. ABB expects net
positive cash inflows of approximately $1.4 billion upon
closing of the sale. The transaction is subject to
regulatory approvals and closing is expected to happen in
the fourth quarter 2022.
●
On September 30, ABB announced that it is progressing
discussions with relevant authorities regarding the
remaining matters related to the legacy Kusile project in
South Africa awarded in 2015. Consequently, ABB made
a non-operational provision of approximately $325 million
in Income from operations in the third quarter 2022
results, with a similar cash flow impact expected in
subsequent quarters.
After the third quarter
●
On October 3, ABB announce d that Accelleron Industries
AG (formerly ABB Turbocharging), has been admitted to
trading on SIX Swiss Exchange in Zurich under the ticker
symbol “ACLN”, marking the completion of Accelleron’s
spin-off from ABB.
After Q3 2022
In the first nine months of 2022, demand for ABB’s offering
increased strongly year-on-year, supported by most
customer segments and across all regions. Orders
amounted to $26,368 million and improved by 12%
(22% comparable).
Revenues amounted to $21,622 million up by 1%
(10% comparable), year-on-year. Customer deliveries were
impacted by component constraints, but shortages
progressively eased throughout the year. As a result, the
book-to-bill ratio amounted to 1.22 in the first nine months of
2022.
Income from operations amounted to $2,152 million down
from $2,743 million in the year-earlier period. Results
included a business charge amounting to $195 million
triggered by the exit of the legacy full-train retrofit business
in non-core operations as well as a provision of
approximately $325 million provision related to the legacy
Kusile project in South Africa awarded in 2015 .
Operational EBITA improved by 7% year-on-year to
$3,364 million and the Operational EBITA margin increased
by 90 basis points to 15.5%. Performance was driven by the
positive impacts from strong pricing execution and higher
volumes, which more than offset
cost inflation in raw materials, freight and labor . Additionally,
Corporate and Other Operational EBITA improved by
$133 million to -$97 million, partly due to higher real estate
gains and a better non-core result.
The net finance expenses amounted to $57 million, down
from $71 million in the same period last year, while non-
operational pension credits were down $28 million year-
over-year to $102 million .
Income tax expense was $728 million with a tax rate of
33.1%, including approximately 9% adverse impact primarily
related to adverse impact from non-deductible non-
operational charges.
Net income attributable to ABB was $1,343 million and
decreased by -30%. Basic earnings per share was $0.70 and
decreased by -26%. Both measures were adversely impacted
by the charges triggered by the exit of the legacy full-train
retrofit business in non-core operations as well as the
provision related to the legacy Kusile project .
Significant events
First nine months 2022
ABB INTERIM REPORT
I
Q3 2022
12
Note: comparable growth calculation includes acquisitions and divestments with revenues of greater than $50 million.
1
Represents the estimated revenues for the last fiscal year prior to the announcement of the respective acquisition/divestment unless otherwise stated.
2
Last twelve months ending October 31, 2021.
1
Excludes one project estimated to a total of ~$100 million, that is ongoing in the non-core business. Exact exit timing is difficult to assess due to legal proceedings etc.
2
Includes restructuring-related expenses of $195 million from the exit of the full train retrofit business as well as $57 million respectively from the exit of the Russian market in Q2 2022.
3
Costs relating to the announced exits and the potential E-mobility listing.
4
Excluding impact of acquisitions or divestments or any significant non-operational items.
($ in millions, unless otherwise stated)
FY 2022
Q4 2022
Net finance expenses
~(100)
~(40)
unchanged
Non-operational pension
(cost) / credit
~90
~(10)
from ~120
Effective tax rate
~25%
~25%
unchanged
Capital Expenditures
~(700)
~(200)
from ~(750)
($ in millions, unless otherwise stated)
FY 2022
1
Q4 2022
Corporate and Other Operational costs
~(170)
~(75)
from ~(200)
Non-operating items
Acquisition-related amortization
~(230)
~(55)
unchanged
Restructuring and restructuring related
~(100)+(252)
2
~(50)
unchanged
Separation costs
3
~(180)
~(30)
unchanged
ABB Way transformation
~(150)
~(50)
unchanged
Additional 2022 guidance
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2021
Motion
Mechanical Power Transmission
1-Nov
645
2
1,500
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Electrification
Numocity (majority stake)
22-Jul
<1
20
Electrification
InCharge Energy, Inc (majority stake)
26-Jan
16
40
Additional figures
ABB Group
Q1 2021
Q2 2021
Q3 2021
Q4 2021
FY 2021
Q1 2022
Q2 2022
Q3 2022
EBITDA, $ in million
1,024
1,324
1,072
3,191
6,611
1,067
794
906
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
14.90
n.a.
n.a.
n.a.
Net debt/Equity
0.09
0.16
0.13
(0.01)
(0.01)
0.20
0.34
0.34
Net debt/ EBITDA 12M rolling
0.4
0.7
0.5
(0.01)
(0.01)
0.4
0.7
0.7
Net working capital, % of 12M rolling revenues
10.8%
11.6%
10.2%
8.1%
8.1%
12.1%
12.8%
11.7%
Earnings per share, basic, $
0.25
0.37
0.33
1.34
2.27
0.31
0.20
0.19
Earnings per share, diluted, $
0.25
0.37
0.32
1.33
2.25
0.31
0.20
0.19
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.82
n.a.
n.a.
n.a.
Share price at the end of period, CHF
1
27.56
30.30
30.30
33.68
33.68
29.12
24.57
24.90
Share price at the end of period, $
1
28.99
32.33
31.73
36.31
36.31
30.76
25.43
24.41
Number of employees (FTE equivalents)
105,330
106,370
106,080
104,420
104,420
104,720
106,380
106,830
No. of shares outstanding at end of period (in
millions)
2,024
2,006
1,993
1,958
1,958
1,929
1,892
1,875
1
Data prior to October 3, 2022, has been adjusted for the Accelleron spin-off (Source: FactSet).
Acquisitions and divestments, last twelve months
ABB INTERIM REPORT
I
Q3 2022
13
For additional information please contact:
Media Relations
Phone: +41 43 317 71 11
Email:
media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317 71 11
Email:
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Financial calendar
2023
February 2 Q4 2022 results
March 23 Annual General Meeting
April 25
Q1 2023 results
July 20 Q2 2023 results
October 18 Q3 2023 results
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 “CEO summary,” “Outlook,” “Earnings,”
“Balance sheet & cash flow,” “Robotics and Discrete
Automation” and “Significant events”. 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. These expectations, estimates and
projections are generally identifiable by statements
containing words such as “anticipates,” “expects,”
“estimates,” “plans,” “targets,” “likely” 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
The Q3 2022 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.
A conference call and webcast for analysts and investors is
scheduled to begin today at 10:00 a.m. CET.
which could affect our ability to achieve any or all of our
stated targets. Some 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.
To pre-register for the conference call or to join the
webcast, please refer to the ABB website:
www.abb.com/investorrelations.
The recorded session will be available after the event on
ABB’s website.
Important notice about forward-looking information
Q3 results presentation on October 20, 2022
ABB
achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion
portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back
more than 130 years, ABB’s success is driven by about 105,000 talented employees in over 100 countries.
1 Q3 2022 FINANCIAL INFORMATION
October 20, 2022
Q3 2022
Financial information
2 Q3 2022 FINANCIAL INFORMATION
—
Financial Information
Contents
03
─ 07 Key Figures
08 ─
34 Consolidated Financial Information (unaudited)
35 ─
47 Supplemental Reconciliations and Definitions
3 Q3 2022 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Comparable
(1)
Orders
8,188
7,866
4%
16%
Order backlog (end September)
19,393
16,012
21%
35%
Revenues
7,406
7,028
5%
18%
Gross Profit
2,481
2,294
8%
as % of revenues
33.5%
32.6%
+0.9 pts
Income from operations
708
852
-17%
Operational EBITA
(1)
1,231
1,062
16%
27%
(2)
as % of operational revenues
(1)
16.6%
15.1%
+1.5 pts
Income from continuing operations, net of tax
420
687
-39%
Net income attributable to ABB
360
652
-45%
Basic earnings per share ($)
0.19
0.33
-41%
(3)
Cash flow from operating activities
(4)
791
1,104
-28%
Cash flow from operating activities in continuing operations
793
1,119
-29%
CHANGE
($ in millions, unless otherwise indicated)
9M 2022
9M 2021
US$
Comparable
(1)
Orders
26,368
23,611
12%
22%
Revenues
21,622
21,378
1%
10%
Gross Profit
7,052
7,070
0%
as % of revenues
32.6%
33.1%
-0.5 pts
Income from operations
2,152
2,743
-22%
Operational EBITA
(1)
3,364
3,134
7%
15%
(2)
as % of operational revenues
(1)
15.5%
14.6%
+0.9 pts
Income from continuing operations, net of tax
1,469
2,027
-28%
Net income attributable to ABB
1,343
1,906
-30%
Basic earnings per share ($)
0.70
0.95
-26%
(3)
Cash flow from operating activities
(4)
600
2,310
-74%
Cash flow from operating activities in continuing operations
614
2,305
n.a.
(1) For a reconciliation of non-GAAP measures see “
” on page 35.
(2) Constant currency (not adjusted for portfolio changes).
(3) EPS growth rates are computed using unrounded amounts.
(4) Cash flow from operating activities includes both continuing and discontinued operations.
4 Q3 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q3 2022
Q3 2021
US$
Local
Comparable
Orders
ABB Group
8,188
7,866
4%
13%
16%
Electrification
3,902
3,519
11%
20%
20%
Motion
1,966
1,909
3%
12%
24%
Process Automation
1,568
1,670
-6%
3%
3%
Robotics & Discrete Automation
901
935
-4%
8%
7%
Corporate and Other
(incl. intersegment eliminations)
(149)
(167)
Order backlog (end September)
ABB Group
19,393
16,012
21%
34%
35%
Electrification
6,805
5,246
30%
41%
41%
Motion
4,613
3,717
24%
39%
42%
Process Automation
6,006
6,021
0%
11%
11%
Robotics & Discrete Automation
2,659
1,619
64%
87%
87%
Corporate and Other
(incl. intersegment eliminations)
(690)
(591)
Revenues
ABB Group
7,406
7,028
5%
15%
18%
Electrification
3,584
3,196
12%
22%
22%
Motion
1,702
1,673
2%
11%
23%
Process Automation
1,458
1,507
-3%
6%
6%
Robotics & Discrete Automation
828
813
2%
13%
13%
Corporate and Other
(incl. intersegment eliminations)
(166)
(161)
Income from operations
ABB Group
708
852
Electrification
631
434
Motion
291
244
Process Automation
154
183
Robotics & Discrete Automation
81
68
Corporate and Other
(incl. intersegment eliminations)
(449)
(77)
Income from operations %
ABB Group
9.6%
12.1%
Electrification
17.6%
13.6%
Motion
17.1%
14.6%
Process Automation
10.6%
12.1%
Robotics & Discrete Automation
9.8%
8.4%
Operational EBITA
ABB Group
1,231
1,062
16%
27%
Electrification
647
511
27%
41%
Motion
305
291
5%
15%
Process Automation
225
207
9%
20%
Robotics & Discrete Automation
106
90
18%
36%
Corporate and Other
(incl. intersegment eliminations)
(52)
(37)
Operational EBITA %
ABB Group
16.6%
15.1%
Electrification
18.0%
15.9%
Motion
17.8%
17.4%
Process Automation
15.3%
13.7%
Robotics & Discrete Automation
12.8%
11.1%
Cash flow from operating activities
ABB Group
791
1,104
Electrification
651
636
Motion
268
399
Process Automation
217
231
Robotics & Discrete Automation
82
56
Corporate and Other
(incl. intersegment eliminations)
(425)
(203)
Discontinued operations
(2)
(15)
5 Q3 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
9M 2022
9M 2021
US$
Local
Comparable
Orders
ABB Group
26,368
23,611
12%
19%
22%
Electrification
12,336
10,743
15%
22%
22%
Motion
6,247
5,773
8%
15%
27%
Process Automation
5,079
4,881
4%
11%
11%
Robotics & Discrete Automation
3,318
2,744
21%
30%
29%
Corporate and Other
(incl. intersegment eliminations)
(612)
(530)
Order backlog (end September)
ABB Group
19,393
16,012
21%
34%
35%
Electrification
6,805
5,246
30%
41%
41%
Motion
4,613
3,717
24%
39%
42%
Process Automation
6,006
6,021
0%
11%
11%
Robotics & Discrete Automation
2,659
1,619
64%
87%
87%
Corporate and Other
(incl. intersegment eliminations)
(690)
(591)
Revenues
ABB Group
21,622
21,378
1%
7%
10%
Electrification
10,442
9,742
7%
14%
14%
Motion
4,900
5,190
-6%
1%
11%
Process Automation
4,493
4,454
1%
8%
8%
Robotics & Discrete Automation
2,290
2,498
-8%
-1%
-2%
Corporate and Other
(incl. intersegment eliminations)
(503)
(506)
Income from operations
ABB Group
2,152
2,743
Electrification
1,602
1,423
Motion
776
812
Process Automation
480
520
Robotics & Discrete Automation
146
224
Corporate and Other
(incl. intersegment eliminations)
(852)
(236)
Income from operations %
ABB Group
10.0%
12.8%
Electrification
15.3%
14.6%
Motion
15.8%
15.6%
Process Automation
10.7%
11.7%
Robotics & Discrete Automation
6.4%
9.0%
Operational EBITA
ABB Group
3,364
3,134
7%
15%
Electrification
1,756
1,614
9%
18%
Motion
845
905
-7%
-1%
Process Automation
645
554
16%
26%
Robotics & Discrete Automation
215
291
-26%
-17%
Corporate and Other
(incl. intersegment eliminations)
(97)
(230)
Operational EBITA %
ABB Group
15.5%
14.6%
Electrification
16.8%
16.5%
Motion
17.2%
17.4%
Process Automation
14.2%
12.4%
Robotics & Discrete Automation
9.4%
11.7%
Cash flow from operating activities
ABB Group
600
2,310
Electrification
1,083
1,466
Motion
507
946
Process Automation
470
692
Robotics & Discrete Automation
109
245
Corporate and Other
(incl. intersegment eliminations)
(1,555)
(1,044)
Discontinued operations
(14)
5
6 Q3 2022 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Revenues
7,406
7,028
3,584
3,196
1,702
1,673
1,458
1,507
828
813
Foreign exchange/commodity timing
differences in total revenues
23
23
3
11
9
4
14
9
(1)
(1)
Operational revenues
7,429
7,051
3,587
3,207
1,711
1,677
1,472
1,516
827
812
Income from operations
708
852
631
434
291
244
154
183
81
68
Acquisition-related amortization
55
62
28
30
8
10
1
1
19
21
Restructuring, related and
implementation costs
(1)
20
28
8
11
3
13
1
2
6
1
Changes in obligations related to
divested businesses
–
10
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
1
(14)
1
(14)
–
–
–
–
–
–
Gains and losses from sale of businesses
–
–
(1)
–
1
–
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
62
44
3
18
4
12
53
13
1
1
Other income/expense relating to the
Power Grids joint venture
30
15
–
–
–
–
–
–
–
–
Certain other non-operational items
350
17
(16)
2
–
–
–
1
1
–
Foreign exchange/commodity timing
differences in income from operations
5
48
(7)
30
(2)
12
16
7
(2)
(1)
Operational EBITA
1,231
1,062
647
511
305
291
225
207
106
90
Operational EBITA margin (%)
16.6%
15.1%
18.0%
15.9%
17.8%
17.4%
15.3%
13.7%
12.8%
11.1%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
Revenues
21,622
21,378
10,442
9,742
4,900
5,190
4,493
4,454
2,290
2,498
Foreign exchange/commodity timing
differences in total revenues
90
43
15
23
8
12
45
10
5
(2)
Operational revenues
21,712
21,421
10,457
9,765
4,908
5,202
4,538
4,464
2,295
2,496
Income from operations
2,152
2,743
1,602
1,423
776
812
480
520
146
224
Acquisition-related amortization
174
191
89
88
23
36
3
3
59
62
Restructuring, related and
implementation costs
(1)
300
81
18
32
11
18
6
15
9
6
Changes in obligations related to
divested businesses
(17)
16
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
–
(6)
2
(6)
–
–
–
–
(2)
–
Gains and losses from sale of businesses
4
(9)
(1)
4
5
(1)
–
(13)
–
–
Acquisition- and divestment-related
expenses and integration costs
171
74
32
36
12
19
122
17
4
1
Other income/expense relating to the
Power Grids joint venture
67
34
–
–
–
–
–
–
–
–
Certain other non-operational items
413
(58)
(24)
(13)
–
1
–
3
2
–
Foreign exchange/commodity timing
differences in income from operations
100
68
38
50
18
20
34
9
(3)
(2)
Operational EBITA
3,364
3,134
1,756
1,614
845
905
645
554
215
291
Operational EBITA margin (%)
15.5%
14.6%
16.8%
16.5%
17.2%
17.4%
14.2%
12.4%
9.4%
11.7%
(1) Includes impairment of certain assets.
7 Q3 2022 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Q3 22
Q3 21
Depreciation
129
142
64
70
25
30
17
21
16
15
Amortization
69
78
35
37
8
11
2
3
19
22
including total acquisition-related amortization of:
55
62
28
30
8
10
1
1
19
21
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
9M 22
9M 21
Depreciation
401
434
198
202
78
94
51
59
46
43
Amortization
214
243
107
113
26
40
8
9
60
64
including total acquisition-related amortization of:
174
191
89
88
23
36
3
3
59
62
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q3 22
Q3 21
US$
Local
parable
Q3 22
Q3 21
US$
Local
parable
Europe
2,682
2,663
1%
20%
20%
2,494
2,525
-1%
18%
18%
The Americas
2,980
2,580
16%
17%
25%
2,452
2,161
13%
14%
23%
of which United States
2,294
1,934
19%
19%
29%
1,796
1,610
12%
12%
22%
Asia, Middle East and Africa
2,526
2,623
-4%
4%
4%
2,460
2,342
5%
13%
13%
of which China
1,165
1,260
-8%
-2%
-2%
1,300
1,209
7%
14%
14%
ABB Group
8,188
7,866
4%
13%
16%
7,406
7,028
5%
15%
18%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
9M 22
9M 21
US$
Local
parable
9M 22
9M 21
US$
Local
parable
Europe
9,174
8,719
5%
19%
19%
7,520
7,773
-3%
10%
10%
The Americas
8,927
7,300
22%
23%
32%
7,018
6,488
8%
8%
17%
of which United States
6,753
5,459
24%
24%
35%
5,124
4,818
6%
6%
17%
Asia, Middle East and Africa
8,267
7,592
9%
14%
14%
7,084
7,117
0%
4%
4%
of which China
4,112
3,781
9%
11%
11%
3,563
3,699
-4%
-1%
-1%
ABB Group
26,368
23,611
12%
19%
22%
21,622
21,378
1%
7%
10%
8 Q3 2022 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Nine months ended
Three months ended
($ in millions, except per share data in $)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Sales of products
17,946
17,644
6,184
5,770
Sales of services and other
3,676
3,734
1,222
1,258
Total revenues
21,622
21,378
7,406
7,028
Cost of sales of products
(12,439)
(12,089)
(4,217)
(3,981)
Cost of services and other
(2,131)
(2,219)
(708)
(753)
Total cost of sales
(14,570)
(14,308)
(4,925)
(4,734)
Gross profit
7,052
7,070
2,481
2,294
Selling, general and administrative expenses
(3,833)
(3,808)
(1,277)
(1,231)
Non-order related research and development expenses
(844)
(897)
(272)
(296)
Other income (expense), net
(223)
378
(224)
85
Income from operations
2,152
2,743
708
852
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Non-operational pension (cost) credit
102
130
34
42
Income from continuing operations before taxes
2,197
2,802
714
888
Income tax expense
(728)
(775)
(294)
(201)
Income from continuing operations, net of tax
1,469
2,027
420
687
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,433
1,982
404
678
Net income attributable to noncontrolling interests
(90)
(76)
(44)
(26)
Net income attributable to ABB
1,343
1,906
360
652
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,379
1,951
376
661
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,343
1,906
360
652
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.97
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.95
0.19
0.33
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.96
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.94
0.19
0.32
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,909
2,011
1,882
2,001
Diluted earnings per share attributable to ABB shareholders
1,920
2,028
1,889
2,019
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9 Q3 2022 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Total comprehensive income, net of tax
778
1,722
70
516
Total comprehensive income attributable to noncontrolling interests, net of tax
(61)
(81)
(35)
(26)
Total comprehensive income attributable to ABB shareholders, net of tax
717
1,641
35
490
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10 Q3 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Sep. 30, 2022
Dec. 31, 2021
Cash and equivalents
2,365
4,159
Restricted cash
323
30
Marketable securities and short-term investments
793
1,170
Receivables, net
6,695
6,551
Contract assets
955
990
Inventories, net
5,849
4,880
Prepaid expenses
261
206
Other current assets
519
573
Current assets held for sale and in discontinued operations
102
136
Total current assets
17,862
18,695
Restricted cash, non-current
–
300
Property, plant and equipment, net
3,735
4,045
Operating lease right-of-use assets
857
895
Investments in equity-accounted companies
1,557
1,670
Prepaid pension and other employee benefits
901
892
Intangible assets, net
1,386
1,561
Goodwill
10,285
10,482
Deferred taxes
1,353
1,177
Other non-current assets
497
543
Total assets
38,433
40,260
Accounts payable, trade
4,769
4,921
Contract liabilities
2,115
1,894
Short-term debt and current maturities of long-term debt
3,068
1,384
Current operating leases
215
230
Provisions for warranties
962
1,005
Other provisions
1,478
1,386
Other current liabilities
4,201
4,367
Current liabilities held for sale and in discontinued operations
286
381
Total current liabilities
17,094
15,568
Long-term debt
4,530
4,177
Non-current operating leases
666
689
Pension and other employee benefits
871
1,025
Deferred taxes
766
685
Other non-current liabilities
2,246
2,116
Non-current liabilities held for sale and in discontinued operations
17
43
Total liabilities
26,190
24,303
Commitments and contingencies
Redeemable noncontrolling interest
85
–
Stockholders’ equity:
Common stock, CHF 0.12 par value
(1,965 million and 2,053 million shares issued at September 30, 2022, and December 31, 2021, respectively)
171
178
Additional paid-in capital
9
22
Retained earnings
19,127
22,477
Accumulated other comprehensive loss
(4,715)
(4,088)
Treasury stock, at cost
(90 million and 95 million shares at September 30, 2022, and December 31, 2021, respectively)
(2,770)
(3,010)
Total ABB stockholders’ equity
11,822
15,579
Noncontrolling interests
336
378
Total stockholders’ equity
12,158
15,957
Total liabilities and stockholders’ equity
38,433
40,260
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11 Q3 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Operating activities:
Net income
1,433
1,982
404
678
Loss from discontinued operations, net of tax
36
45
16
9
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
615
677
198
220
Changes in fair values of investments
(39)
(114)
(24)
(1)
Pension and other employee benefits
(107)
(159)
(24)
(65)
Deferred taxes
(183)
82
(35)
(27)
Loss from equity-accounted companies
100
83
38
26
Net loss (gain) from derivatives and foreign exchange
44
99
(33)
55
Net loss (gain) from sale of property, plant and equipment
(64)
(22)
(9)
(7)
Other
65
61
(2)
32
Changes in operating assets and liabilities:
Trade receivables, net
(657)
(182)
(36)
232
Contract assets and liabilities
353
(73)
101
74
Inventories, net
(1,667)
(692)
(584)
(399)
Accounts payable, trade
390
361
177
52
Accrued liabilities
52
336
307
283
Provisions, net
312
(79)
186
(19)
Income taxes payable and receivable
19
(92)
71
(36)
Other assets and liabilities, net
(88)
(8)
42
12
Net cash provided by operating activities – continuing operations
614
2,305
793
1,119
Net cash provided by (used in) operating activities – discontinued operations
(14)
5
(2)
(15)
Net cash provided by operating activities
600
2,310
791
1,104
Investing activities:
Purchases of investments
(271)
(414)
(15)
(67)
Purchases of property, plant and equipment and intangible assets
(503)
(459)
(165)
(166)
Acquisition of businesses (net of cash acquired)
and increases in cost- and equity-accounted companies
(226)
(227)
(47)
(199)
Proceeds from sales of investments
654
1,639
148
318
Proceeds from maturity of investments
–
80
–
–
Proceeds from sales of property, plant and equipment
85
36
19
13
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost- and equity-accounted companies
(8)
93
5
46
Net cash from settlement of foreign currency derivatives
(154)
(75)
(210)
(3)
Other investing activities
1
(25)
9
(11)
Net cash provided by (used in) investing activities – continuing operations
(422)
648
(256)
(69)
Net cash provided by (used in) investing activities – discontinued operations
(91)
(83)
–
(13)
Net cash provided by (used in) investing activities
(513)
565
(256)
(82)
Financing activities:
Net changes in debt with original maturities of 90 days or less
1,475
213
284
(61)
Increase in debt
3,554
1,378
373
374
Repayment of debt
(2,025)
(763)
(542)
(13)
Delivery of shares
389
786
19
20
Purchase of treasury stock
(3,251)
(2,441)
(590)
(470)
Dividends paid
(1,698)
(1,726)
–
–
Dividends paid to noncontrolling shareholders
(83)
(91)
(7)
1
Other financing activities
(58)
(17)
(5)
(23)
Net cash used in financing activities – continuing operations
(1,697)
(2,661)
(468)
(172)
Net cash provided by financing activities – discontinued operations
–
–
–
–
Net cash used in financing activities
(1,697)
(2,661)
(468)
(172)
Effects of exchange rate changes on cash and equivalents and restricted cash
(191)
(75)
(115)
(41)
Net change in cash and equivalents and restricted cash
(1,801)
139
(48)
809
Cash and equivalents and restricted cash, beginning of period
4,489
3,901
2,736
3,231
Cash and equivalents and restricted cash, end of period
2,688
4,040
2,688
4,040
Supplementary disclosure of cash flow information:
Interest paid
47
75
11
17
Income taxes paid
907
793
269
250
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12 Q3 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
($ in millions)
Common
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total ABB
stockholders’
equity
Non-
controlling
interests
Total
stockholders’
equity
Balance at January 1, 2021
188
83
22,946
(4,002)
(3,530)
15,685
314
15,999
Comprehensive income:
Net income
1,906
1,906
76
1,982
Foreign currency translation
adjustments, net of tax of $2
(366)
(366)
5
(361)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(3)
(10)
(10)
(10)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $10
114
114
114
Change in derivative instruments
and hedges, net of tax of $0
(3)
(3)
(3)
Total comprehensive income
1,641
81
1,722
Changes in noncontrolling interests
(37)
(20)
(57)
55
(2)
Dividends to
noncontrolling shareholders
–
(92)
(92)
Dividends to shareholders
(1,730)
(1,730)
(1,730)
Cancellation of treasury shares
(10)
(17)
(3,130)
3,157
–
–
Share-based payment arrangements
48
48
48
Purchase of treasury stock
(2,430)
(2,430)
(2,430)
Delivery of shares
(68)
(136)
990
786
786
Other
6
6
6
Balance at September 30, 2021
178
16
19,837
(4,266)
(1,814)
13,951
358
14,309
Balance at January 1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Comprehensive income:
Net income
1,343
1,343
93
1,436
Foreign currency translation
adjustments, net of tax of $1
(774)
(774)
(32)
(806)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(6)
(24)
(24)
(24)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $57
172
172
172
Change in derivative instruments
and hedges, net of tax of $3
–
–
–
Total comprehensive income
717
61
778
Changes in noncontrolling interests
(3)
(3)
(22)
(25)
Dividends to
noncontrolling shareholders
–
(81)
(81)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
33
33
33
Purchase of treasury stock
(3,201)
(3,201)
(3,201)
Delivery of shares
(46)
(130)
565
389
389
Other
7
7
7
Balance at September 30, 2022
171
9
19,127
(4,715)
(2,770)
11,822
336
12,158
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
13 Q3 2022 FINANCIAL INFORMATION
—
Notes to the Consolidated Financial Information (unaudited)
─
Note 1
The Company and basis of presentation
ABB Ltd and its subsidiaries (collectively, the Company) together form a leading global technology company, connecting software to its electrification, robotics,
automation and motion portfolio to drive performance to new levels.
The Company’s Consolidated Financial Information is prepared in accordance with United States of America generally accepted accounting principles (U.S.
GAAP) for interim financial reporting. As such, the Consolidated Financial Information does not include all the information and notes required under U.S. GAAP for
annual consolidated financial statements. Therefore, such financial information should be read in conjunction with the audited consolidated financial statements in
the Company’s Annual Report for the year ended December 31, 2021.
The preparation of financial information in conformity with U.S. GAAP requires management to make assumptions and estimates that directly affect the amounts
reported in the Consolidated Financial Information. These accounting assumptions and estimates include:
●
growth rates, discount rates and other assumptions used to determine impairment of long-lived assets and in testing goodwill for impairment,
●
estimates to determine valuation allowances for deferred tax assets and amounts recorded for unrecognized tax benefits,
●
assumptions used in determining inventory obsolescence and net realizable value,
●
estimates and assumptions used in determining the initial fair value of retained noncontrolling interest and certain obligations in connection with
divestments,
●
estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations,
●
estimates of loss contingencies associated with litigation or threatened litigation and other claims and inquiries, environmental damages, product
warranties, self-insurance reserves, regulatory and other proceedings,
●
estimates used to record expected costs for employee sever ance in connection with restructuring programs,
●
estimates related to credit losses expected to occur over the remaining life of financial assets such as trade and other receivables, loans and other
instruments,
●
assumptions used in the calculation of pension and postretirement benefits and the fair value of pension plan assets, and
●
assumptions and projections, principally related to future material, labor and project-related overhead costs, used in determining the percentage-of-
completion on projects, as well as the amount of variable consideration the Company expects to be entitled to.
The actual results and outcomes may differ from the Company’s estimates and assumptions.
A portion of the Company’s activities (primarily long-term construction activities) has an operating cycle that exceeds one year. For classification of current assets
and liabilities related to such activities, the Company elected to use the duration of the individual contracts as its operating cycle. Accordingly, there are accounts
receivable, contract assets, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current.
Basis of presentation
In the opinion of management, the unaudited Consolidated Financial Information contains all necessary adjustments to present fairly the financial position, results
of operations and cash flows for the reported periods. Management considers all such adjustments to be of a normal recurring nature. The Consolidated Financial
Information is presented in United States dollars ($) unless otherwise stated. Due to rounding, numbers presented in the Consolidated Financial Information may
not add to the totals provided.
14 Q3 2022 FINANCIAL INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Business Combinations — Accounting for contract assets and contract liabilities from contracts with customers
In January 2022, the Company early adopted a new accounting standard update, which provides guidance on the accounting for revenue contracts acquired in a
business combination. The update requires contract assets and liabilities acquired in a business combination to be recognized and measured at the date of
acquisition in accordance with the principles for recognizing revenues from contracts with customers. The Company has applied this accounting standard update
prospectively starting with acquisitions closing after January 1, 2022.
Disclosures about government assistance
In January 2022, the Company adopted a new accounting standard update, which requires entities to disclose certain types of government assistance. Under the
update, the Company is required to annually disclose (i) the type of the assistance received, including any significant terms and conditions, (ii) its related
accounting policy, and (iii) the effect such transactions have on its financial statements. The Company has applied this accounting standard update prospe ctively.
This update does not have a significant impact on the Company’s consolidated financial statements.
Applicable for future periods
Facilitation of the effects of reference rate reform on financial reporting
In March 2020, an accounting standard update was issued 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. This update, along with clarifications outlined in a subsequent update issued in January
2021, can be adopted and applied no later than December 31, 2022, with early adoption permitted. The Company does not expect this update to have a significant
impact on its consolidated financial statements.
Disclosure about supplier finance program obligations
In September 2022, an accounting standard update was issued which requires entities to disclose information related to supplier finance programs. Under the
update, the Company is required to annually disclose (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. This update is effective for the Company retrospectively for all in-scope transactions for annual periods beginning January 1, 2023, with the exception of
the rollforward disclosures, which are effective prospectively for annual periods beginning January 1, 2024, with early adoption permitted. The Company does not
expect this update to have a significant impact on its consolidated financial statements.
─
Note 3
Discontinued operations and assets held for sale
Divestment of the Power Grids business
On July 1, 2020, the Company completed the sale of 80.1 percent of its Power Grids business to Hitachi Ltd (Hitachi). The transaction was executed through the
sale of 80.1 percent of the shares of Hitachi Energy Ltd, formerly Hitachi ABB Power Grids Ltd (“Hitachi Energy”) . Cash consideration received at the closing date
was $9,241 million net of cash disposed. Further, for accounting purposes, the 19.9 percent ownership interest retained by the Company is deemed to have been
both divested and reacquired at its fair value on July 1, 2020 (see Note 4).
At the date of the divestment, the Company recorded liabilities in discontinued operations for estimated future costs and other cash payments of $487 million for
various contractual items relating to the sale of the business including required future cost reimbursements payable to Hitachi Energy, costs to be incurred by the
Company for the direct benefit of Hitachi Energy, and an amount due to Hitachi Ltd in connection with the expected purchase price finalization of the closing debt
and working capital balances. From the date of the disposal through September 30, 2022, $455 million of these liabilities had been paid and are reported as
reductions in the cash consideration received, of which $91 million and $17 million was paid during the nine and three months ended September 30, 2022,
respectively. In the nine and three months ended September 30, 2021, total cash payments made in connection with these liabilities amounted to $83 million and
$13 million, respectively. At September 30, 2022, the remaining amount recorded was $55 million.
During the second quarter of 2022, the Company completed the legal title transfer of the remaining entities of Power Grids business to Hitachi Energy, resulting in
the release of $12 million held in escrow and included in Current Restricted Cash at December 31, 2021.
Upon closing of the sale, the Company entered into various transition services agreements (TSAs). Pursuant to these TSAs, the Company and Hitachi Energy
provide to each other, on an interim, transitional basis, various services. The services provided by the Company primarily include finance, information technology,
human resources and certain other administrative services. Under the current terms, the TSAs will continue for up to 3 years, and can only be extended on an
exceptional basis for business-critical services for an additional period which is reasonably necessary to avoid a material adverse impact on the business. In the
nine and three months ended September 30, 2022, the Company has recognized within its continuing operations, general and administrative expenses incurred to
perform the TSA, offset by $11 5 million and $39 million, respectively, in TSA-related income for such services that is reported in Other income (expense). In the
nine and three months ended September 30, 2021, Other income (expense) included $127 million and $39 million, respectively, of TSA-related income for such
services.
Discontinued operations
As a result of the sale of the Power Grids business, substantially all assets and liabilities related to Power Grids have been sold. As this divestment represented a
strategic shift that would have a major effect on the Company’s operations and financial results, the results of this business were presented as discontinued
operations and the assets and liabilities were presented as held for sale and in discontinued operations. After the date of sale, certain business contracts in the
Power Grids business continue to be executed by subsidiaries of the Company for the benefit/risk of Hitachi Energy . Assets and liabilities relating to, as well as the
net financial results of, these contracts will continue to be included in discontinued operations until they have been completed or otherwise transferred to Hitachi
Energy.
15 Q3 2022 FINANCIAL INFORMATION
Amounts recorded in discontinued operations were as follows:
Nine months ended
Three months ended
($ in millions)
Sep. 30, 2022
Sep. 30, 2021
Sep. 30, 2022
Sep. 30, 2021
Expenses
(25)
(13)
(14)
(4)
Change to net gain recognized on sale of the Power Grids business
(11)
(32)
(2)
(5)
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
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, above.
The major components of assets and liabilities held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets are summarized as
follows:
($ in millions)
Sep. 30, 2022
(1)
Dec. 31, 2021
(1)
Receivables, net
92
131
Other current assets
10
5
Current assets held for sale and in discontinued operations
102
136
Accounts payable, trade
49
71
Other liabilities
237
310
Current liabilities held for sale and in discontinued operations
286
381
Other non-current liabilities
17
43
Non-current liabilities held for sale and in discontinued operations
17
43
(1) At September 30, 2022, and December 31, 2021, the balances reported as held for sale and in discontinued operations pertain to Power Grids activities and other obligations which
will remain with the Company until such time as the obligation is settled or the activities are fully wound down.
─
Note 4
Acquisitions and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Nine months ended September 30,
Three months ended September 30,
($ in millions, except number of acquired businesses)
2022
2021
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
150
216
12
190
Aggregate excess of purchase price
over fair value of net assets acquired
(2)
205
159
14
148
Number of acquired businesses
3
2
2
1
(1) Excluding changes in cost- and equity-accounted companies.
(2) Recorded as goodwill.
In the table above, the “Purchase price for acquisitions” and “Aggregate excess of purchase price over fair value of net assets acquired” amounts for the nine
months ended September 30, 2022, relate primarily to the acquisition of InCharge Energy, Inc. (In-Charge) and in the nine months ended September 30, 2021,
relate primarily to the acquisition of ASTI Mobile Robotics Group (ASTI).
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.
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 assets and liabilities becomes available.
16 Q3 2022 FINANCIAL INFORMATION
On January 26, 2022, the Company increased its ownership in In-Charge to a 60 percent controlling interest through a stock purchase agreement. The resulting
cash outflows for the Company amounted to $134 million (net of cash acquired of $4 million). The acquisition expands the market presence of the E-mobility
Division of its Electrification operating segment, particularly in the North American market. In connection with the acquisition, the Company’s pre-existing
13.2 percent ownership of In-Charge was revalued to fair value and a gain of $32 million was recorded in Other income (expense) in the nine months ended
September 30, 2022. The Company entered into an agreement with the remaining noncontrolling shareholders allowing either party to put or call the remaining
40 percent of the shares until 2027. The amount for which either party can exercise 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 $190 million (net of cash acquired of $7 million). The acquisition expands the Company’s
robotics and automation offering in its Robotics and Discrete Automation operating segment.
Investments in equity-accounted companies
In connection with the divestment of its Power Grids business to Hitachi (see Note 3), the Company retained a 19. 9 percent interest in the business and obtained
an option, exercisable with three-months’ notice commencing April 2023, granting it the right to require Hitachi to purchase this investment at fair value, subject to
a minimum floor price equivalent to a 10 percent discount compared to the price paid for the initial 80.1 percent. The Company has concluded that based on its
continuing involvement with the Power Grids business, including membership in its governing board of directors, it has significant influence over Hitachi Energy. As
a result, the investment (including the value of the option) is accounted for using the equity method.
Hitachi also holds a call option which would require the Company 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, the Company and Hitachi agreed to sell the Company’s remaining
investment in Hitachi Energy and settle certain outstanding contractual obligations relating to the initial sale of the business, including certain indemnification
guarantees (see Note #NCCC). The Company expects to receive approximately $1.5 billion of net proceeds in connection with the sale of the remaining
investment in Hitachi Energy. The sale is planned to be completed in the fourth quarter of 2022.
At the date of the divestment of the Power Grids business, the fair value of Hitachi Energy exceeded the book value of the underlying net assets. At September 30,
2022, and December 31, 2021, the reported value of the investment in Hitachi Energy includes $1,375 million and $1,474 million, respectively, for the Company’s
19.9 percent share of this basis difference. The Company amortizes its share of these differences over the estimated remaining useful lives of the underlying
assets that gave rise to this difference, recording the amortizati on, net of related deferred tax benefit, as a reduction of income from equity-accounted companies.
As of September 30, 2022, the Company determined that no impairment of its equity-accounted investments existed.
The carrying value of the Company’s investments in equity-accounted companies and respective percentage of ownership is as follows:
Ownership as of
Carrying value at
($ in millions, except ownership share in %)
September 30, 2022
September 30, 2022
December 31, 2021
Hitachi Energy Ltd
19.9%
1,491
1,609
Others
66
61
Total
1,557
1,670
In the nine and three months ended September 30, 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:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Income (loss) from equity-accounted companies, net of taxes
(34)
11
(24)
7
Basis difference amortization (net of deferred income tax benefit)
(66)
(94)
(14)
(33)
Loss from equity-accounted companies
(100)
(83)
(38)
(26)
Subsequent events
On September 7, 2022, the shareholders approved the spinoff of the Company’s Turbocharging Division into an independent, publicly traded company, Accelleron
Industries AG, which was completed through the distribution of common stock to the stockholders of ABB on October 3, 2022.
17 Q3 2022 FINANCIAL INFORMATION
─
Note 5
Cash and equivalents, marketable securities and short-term investments
Cash and equivalents, marketable securities and short-term investments consisted of the following:
September 30, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
1,760
1,760
1,760
Time deposits
947
947
928
19
Equity securities
340
4
344
344
3,047
4
–
3,051
2,688
363
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
270
1
(17)
254
254
European government obligations
13
13
13
Other government obligations
107
107
107
Corporate
64
(8)
56
56
454
1
(25)
430
–
430
Total
3,501
5
(25)
3,481
2,688
793
Of which:
Restricted cash, current
323
December 31, 2021
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
2,752
2,752
2,752
Time deposits
2,037
2,037
1,737
300
Equity securities
569
18
587
587
5,358
18
–
5,376
4,489
887
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
203
7
(1)
209
209
Corporate
74
1
(1)
74
74
277
8
(2)
283
–
283
Total
5,635
26
(2)
5,659
4,489
1,170
Of which:
Restricted cash, current
30
Restricted cash, non-current
300
18 Q3 2022 FINANCIAL INFORMATION
─
Note 6
Derivative financial instruments
The Company is exposed to certain currency, commodity, interest rate and equity 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 100 percent of the forecasted
foreign currency denominated exposures, depending on the length of the forecasted exposures. Forecasted exposures greater than 12 months are not hedged.
Forward foreign exchange contracts are the main 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 50 percent (up to a maximum of 100 percent) of the forecasted commodity exposure over the next 12 months or longer (up to
a maximum of 18 months). Primarily swap contracts are used to manage the associated price risks of commodities.
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.
Equity risk
The Company is exposed to fluctuations in the fair value of its warrant appreciation rights (WARs) issued under its management incentive plan. A WAR gives its
holder the right to receive cash equal to the market price of an equivalent listed warrant on the date of exercise. To eliminate such risk, the Company has
purchased cash-settled call options, indexed to the shares of the Company, which entitle the Company to receive amounts equivalent to its obligations under the
outstanding WARs.
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
($ in millions)
September 30, 2022
December 31, 2021
September 30, 2021
Foreign exchange contracts
15,501
11,276
9,401
Embedded foreign exchange derivatives
864
815
881
Cross-currency interest rate swaps
781
906
926
Interest rate contracts
2,598
3,541
3,102
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 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:
Type of derivative
Unit
Total notional amounts at
September 30, 2022
December 31, 2021
September 30, 2021
Copper swaps
metric tonnes
36,264
36,017
34,615
Silver swaps
ounces
2,787,909
2,842,533
2,593,338
Aluminum swaps
metric tonnes
6,925
7,125
6,700
Equity derivatives
At September 30, 2022, December 31, 2021, and September 30, 2021, the Company held 8 million, 9 million and 11 million cash-settled call options indexed to
ABB Ltd shares (conversion ratio 5:1) with a total fair value of $11 million, $29 million and $25 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their fair value is recorded in “Accumulated other comprehensive loss” and subsequently reclassified into
earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. For the nine and three months ended September 30,
2022 and 2021, there were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”.
19 Q3 2022 FINANCIAL INFORMATION
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(83)
(40)
(28)
(13)
Hedged item
85
41
29
13
Cross-currency interest rate swaps
Designated as fair value hedges
(125)
(27)
(31)
(2)
Hedged item
119
25
29
1
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:
Type of derivative not
Gains (losses) recognized in income
designated as a hedge
Nine months ended September 30,
Three months ended September 30,
($ in millions)
Location
2022
2021
2022
2021
Foreign exchange contracts
Total revenues
(201)
(49)
(82)
(39)
Total cost of sales
57
(24)
23
–
SG&A expenses
(1)
35
6
12
7
Non-order related research
and development
2
(2)
1
(1)
Interest and other finance expense
(139)
(121)
(85)
(2)
Embedded foreign exchange
Total revenues
12
(14)
7
(1)
contracts
Total cost of sales
(12)
(3)
(10)
(1)
Commodity contracts
Total cost of sales
(72)
47
(21)
(16)
Other
Interest and other finance expense
4
–
1
(1)
Total
(314)
(160)
(154)
(54)
(1) SG&A expenses represent “Selling, general and administrative expenses”.
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
September 30, 2022
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
1
–
5
5
Interest rate contracts
1
–
7
48
Cross-currency interest rate swaps
–
–
–
349
Cash-settled call options
11
–
–
–
Total
13
–
12
402
Derivatives not designated as hedging instruments:
Foreign exchange contracts
161
26
199
21
Commodity contracts
3
–
45
–
Interest rate contracts
5
–
5
–
Embedded foreign exchange derivatives
27
4
15
11
Total
196
30
264
32
Total fair value
209
30
276
434
20 Q3 2022 FINANCIAL INFORMATION
December 31, 2021
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
3
5
Interest rate contracts
9
20
–
–
Cross currency swaps
–
–
–
109
Cash-settled call options
29
–
–
–
Total
38
20
3
114
Derivatives not designated as hedging instruments:
Foreign exchange contracts
108
14
107
7
Commodity contracts
19
–
5
–
Interest rate contracts
1
–
2
–
Embedded foreign exchange derivatives
10
7
16
10
Total
138
21
130
17
Total fair value
176
41
133
131
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 September 30, 2022, and December 31, 2021, have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements allow net settlements under certain conditions. At September 30, 2022, and December 31,
2021, information related to these offsetting arrangements was as follows:
($ in millions)
September 30, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
208
(143)
–
–
65
Total
208
(143)
–
–
65
($ in millions)
September 30, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
684
(143)
–
–
541
Total
684
(143)
–
–
541
($ in millions)
December 31, 2021
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net asset
similar arrangement
in case of default
received
received
exposure
Derivatives
200
(104)
–
–
96
Total
200
(104)
–
–
96
($ in millions)
December 31, 2021
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
Net liability
similar arrangement
liabilities
pledged
pledged
exposure
Derivatives
238
(104)
–
–
134
Total
238
(104)
–
–
134
21 Q3 2022 FINANCIAL INFORMATION
─
Note 7
Fair values
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 models) 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.
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).
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, 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.
Recurring fair value measures
The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows:
September 30, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
344
344
Debt securities—U.S. government obligations
254
254
Debt securities—European government obligations
13
13
Debt securities—Other government obligations
107
107
Debt securities—Corporate
56
56
Derivative assets—current in “Other current assets”
209
209
Derivative assets—non-current in “Other non-current assets”
30
30
Total
267
746
–
1,013
Liabilities
Derivative liabilities—current in “Other current liabilities”
276
276
Derivative liabilities—non-current in “Other non-current liabilities”
434
434
Total
–
710
–
710
22 Q3 2022 FINANCIAL INFORMATION
December 31, 2021
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
587
587
Debt securities—U.S. government obligations
209
209
Debt securities—Corporate
74
74
Derivative assets—current in “Other current assets”
176
176
Derivative assets—non-current in “Other non-current assets”
41
41
Total
209
878
–
1,087
Liabilities
Derivative liabilities—current in “Other current liabilities”
133
133
Derivative liabilities—non-current in “Other non-current liabilities”
131
131
Total
–
264
–
264
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:
●
If quoted market prices in active 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.
●
: 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. Cash -settled call options hedging the Company’s WAR liability are valued based on bid prices
of the equivalent listed warrant. 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
The Company elects to record private equity investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes.
The Company reassesses at each reporting period whether these investments continue to qualify for this treatment. During the nine months ended September 30,
2022 and 2021, the Company recognized, in Other income (expense), net fair value gains of $56 million and $106 million, respectively, related to certain of its
private equity investments based on observable market price changes for an identical or similar investment of the same issuer of which net gains of $26 million and
$3 million were recognized in the three months ended September 30, 2022 and 2021, respectively. The fair values were determined using level 2 inputs. The
carrying values of investments, carried at fair value on a non-recurring basis, at September 30, 2022, and December 31, 2021, totaled $90 million and $169 million,
respectively.
Apart from the transactions above, there were no additional significant non-recurring fair value measurements during the nine months ended September 30, 2022
and 2021.
Disclosure about financial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
September 30, 2022
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
1,437
1,437
1,437
Time deposits
928
928
928
Restricted cash
323
323
323
Marketable securities and short-term investments
(excluding securities):
Time deposits
19
19
19
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
3,038
987
2,051
3,038
Long-term debt (excluding finance lease obligations)
4,367
4,179
32
4,211
23 Q3 2022 FINANCIAL INFORMATION
December 31, 2021
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
2,422
2,422
2,422
Time deposits
1,737
1,737
1,737
Restricted cash
30
30
30
Marketable securities and short-term investments
(excluding securities):
Time deposits
300
300
300
Restricted cash, non-current
300
300
300
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
1,357
1,288
69
1,357
Long-term debt (excluding finance lease obligations)
4,043
4,234
58
4,292
The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis:
●
and short-term investments (excluding securities):
The carrying 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.
●
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.
●
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
Contract assets and liabilities
The following table provides information about Contract assets and Contract liabilities:
($ in millions)
September 30, 2022
December 31, 2021
September 30, 2021
Contract assets
955
990
1,139
Contract liabilities
2,115
1,894
1,940
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.
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, primarily for long-term projects. Contract liabilities are reduced as work is performed and as revenues are recognized. In addition to the amounts
presented as Contract liabilities in the table above, $63 million are non-current and are included in Other non-curren t liabilities in the Balance Sheet.
The significant changes in the Contract assets and Contract liabilities balances were as follows:
Nine months ended September 30,
2022
2021
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2022/2021
(923)
(939)
Additions to Contract liabilities - excluding amounts recognized as revenue during the period
1,320
1,032
Receivables recognized that were included in the Contract asset balance at Jan 1, 2022/2021
(501)
(502)
At September 30, 2022, the Company had unsatisfied performance obligations totaling $19,393 million and, of this amount, the Company expects to fulfill
approximately 34 percent of the obligations in 2022, approximately 50 percent of the obligations in 2023 and the balance thereafter.
24 Q3 2022 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s total debt at September 30, 2022, and December 31, 2021, amounted to $7,598 million and $5,561 million, respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of long-term debt” consisted of the following:
($ in millions)
September 30, 2022
December 31, 2021
Short-term debt
2,071
78
Current maturities of long-term debt
997
1,306
Total
3,068
1,384
Short-term debt primarily represented issued commercial paper and short-term bank borrowings from various banks. At September 30, 2022, $1,883 million was
outstanding under the $2 billion Euro-commercial paper program and $109 million was outstanding under the $2 billion commercial paper program in the United
States. At December 31, 2021, no amount was outstanding under either of these programs.
On May 9, 2022, the Company repaid on maturity its USD 1,250 million 2.875% Notes.
Long-term debt
The Company’s long-term debt at September 30, 2022, and December 31, 2021, amounted to $4,530 million and $4,177 million, respectively.
Outstanding bonds (including maturities within the next 12 months) were as follows:
September 30, 2022
December 31, 2021
(in millions)
Nominal outstanding
(1)
Nominal outstanding
(1)
Bonds:
2.875% USD Notes, due 2022
USD
1,250
$
1,258
0.625% EUR Instruments, due 2023
EUR
700
$
677
EUR
700
$
800
0% CHF Bonds, due 2023
CHF
275
$
280
0.625% EUR Instruments, due 2024
EUR
700
$
660
Floating Rate EUR Instruments, due 2024
EUR
500
$
490
0.75% EUR Instruments, due 2024
EUR
750
$
705
EUR
750
$
860
0.3% CHF Bonds, due 2024
CHF
280
$
285
CHF
280
$
306
0.75% CHF Bonds, due 2027
CHF
425
$
433
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
173
CHF
170
$
186
0% EUR Notes, due 2030
EUR
800
$
620
EUR
800
$
862
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
589
Total
$
5,294
$
5,242
(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 November 2020, the original principal amount outstanding, on each of the 3.8% USD Notes, due 2028, and the 4.375% USD Notes, due
2042, was USD 750 million.
In March 2022, the Company issued the following CHF bonds : (i) CHF 275 million of zero interest bonds, due 2023, and (ii) CHF 425 million of bonds, due 2027
with a coupon of 0.75 percent payable annually in arrears. The aggregate net proceeds of these CHF bond issues, after discount and fees, amounted to CHF
699 million (equivalent to approximately $751 million on the date of issuance).
Also in March 2022, the Company issued the following EUR Instruments, both due in 2024, (i) EUR 700 million, paying interest annually in arrears at a fixed rate of
0.625 percent per annum, and (ii) EUR 500 million floating rate notes, paying interest quarterly in arrears at a variable rate of 70 basis points above the 3-month
EURIBOR. In relation to these EUR Instruments, the Company recorded net proceeds (after the respective discount and premium, as well as fees) of
EUR 1,203 million (equivalent to $1,335 million on the date of issuance).
Interest rate swaps have been used to modify the characteristics of the EUR 700 million Instruments, due 2024. After considering the impact of these interest rate
swaps, these Instruments, effectively become floating rate obligations.
Subsequent events
On October 5, 2022, the Company issued the following CHF bonds: (i) CHF 150 million of 2.1 percent bonds, due 2025, and (ii) CHF 150 million of 2.375 percent
bonds, due 2030 with interest payable annually in arrears. The aggregate net proceeds of these CHF bond issues, after discount and fees, amounted to
CHF 299 million (equivalent to approximately $304 million on date of issuance).
25 Q3 2022 FINANCIAL INFORMATION
─
Note 10
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Regulatory
As a result of an internal investigation, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) in the
United States as well as to the Serious Fraud Office (SFO) in the United Kingdom concerning certain of its past dealings with Unaoil and its subsidiaries, including
alleged improper payments made by these entities to third parties. In May 2020, the SFO closed its investigation, which it originally announced in February 2017,
as the case did not meet the relevant test for prosecution. The Company continues to cooperate with the U.S. authorities as requested. At this time, it is not
possible for the Company to make an informed judgment about the outcome of this matter.
Based on findings during an internal investigation, the Company self-reported to the SEC and the 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 $104 million to Eskom in December 2020 as
part of a full and final settlement with Eskom and the Special Investigating Unit 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 continues to cooperate fully with the authorities in their
review of the Kusile project and discussions are progressing with them regarding a final settlement. Based on these discussions, the Company made a provision of
approximately $325 million which was recorded in Other income (expense), net, in the three months ended September 30, 2022. The provision is not expected to
be tax deductible. In addition, based on these discussions, the Company does not expect that it will be required to recor d any material additional provisions related
to the resolution of these matters.
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 September 30, 2022, and December 31, 2021, the Company had aggregate liabilities of $413 million and $104 million, respectively, included in “Other
provisions” and “Other non
‑
current liabilities”, for the above regulatory, compliance and legal contingencies, and none of the individual liabilities recognized was
significant. As it is not possible to make an informed judgment on, or reasonably predict, the outcome of certain matters and as it is not possible, based on
information currently available to management, to estimate the maximum potential liability on other matters, there could be adverse outcomes beyond the amounts
accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s third-party guarantees. The maximum potential payments represent a “worst-case
scenario”, and do not reflect management’s expected outcomes.
Maximum potential payments
($ in millions)
September 30, 2022
December 31, 2021
Performance guarantees
3,700
4,540
Financial guarantees
54
52
Indemnification guarantees
(1)
136
136
Total
(2)
3,890
4,728
(1) Prior to September 2022 agreement (See Note 4), certain indemnifications provided to Hitachi in connection with the divestment of Power Grids were without limit.
(2) 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 September 30, 2022, and December 31, 2021,
amounted to $148 million and $156 million, respectively, the majority of which is included in discontinued operations .
The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various
maturities up to 2035, 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 to ten years.
In conjunction with the divestment of the high-voltage cable and cables accessories businesses in 2017, the Company has entered into various performance
guarantees with other parties with respect to certain liabilities of the divested business. At September 30, 2022, and December 31, 2021, the maximum potential
payable under these guarantees amounts to $773 million and $911 million, respectively, and these guarantees have various original maturities ranging from five to
ten years.
The Company retained obligations for financial, performance and indemnification guarantees related to the Power Grids business sold on July 1, 2020 (see Note 3
for details). The performance and financial guarantees have been indemnified by Hitachi, at the same proportion of its ownership in Hitachi Energy Ltd
(80.1 percent). These guarantees, which have various maturities up to 2035, 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 to ten years. The maximum amount payable
under the guarantees at September 30, 2022, and December 31, 2021, is approximately $2.6 billion and $3.2 billion, respectively, and the carrying amounts of
liabilities (recorded in discontinued operations) at both September 30, 2022, and December 31, 2021, amounted to $136 million, relating to the indemnification
guarantees.
26 Q3 2022 FINANCIAL INFORMATION
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 both September 30, 2022, and December 31, 2021, the total outstanding performance bonds aggregated to $2.8 billion and $3.6 billion, respectively, of
each of these amounts, $0.1 billion relates to discontinued operations. There have been no significant amounts reimbursed to financial institutions under these
types of arrangements in the nine and three months ended September 30, 2022 and 2021.
Product and order-related contingencies
The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance, was as follows:
($ in millions)
2022
2021
Balance at January 1,
1,005
1,035
Claims paid in cash or in kind
(122)
(176)
Net increase in provision for changes in estimates, warranties issued and warranties expired
173
190
Exchange rate differences
(94)
(35)
Balance at September 30,
962
1,014
─
Note 11
Employee benefits
The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations
and practices. 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 measurement date used for
the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with the local government and tax
requirements.
Net periodic benefit cost of the Company’s defined benefit pension and other postretirement benefit plans consisted of the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Nine months ended September 30,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
40
45
26
31
–
–
Operational pension cost
40
45
26
31
–
–
Non-operational pension cost (credit):
Interest cost
2
(3)
61
52
1
1
Expected return on plan assets
(87)
(88)
(113)
(133)
–
–
Amortization of prior service cost (credit)
(5)
(6)
(2)
(2)
(1)
(1)
Amortization of net actuarial loss
–
–
44
53
(2)
(2)
Curtailments, settlements and special termination benefits
–
–
–
(1)
–
–
Non-operational pension cost (credit)
(90)
(97)
(10)
(31)
(2)
(2)
Net periodic benefit cost (credit)
(50)
(52)
16
–
(2)
(2)
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
13
15
9
9
–
–
Operational pension cost
13
15
9
9
–
–
Non-operational pension cost (credit):
Interest cost
1
(1)
18
15
–
–
Expected return on plan assets
(29)
(30)
(36)
(42)
–
–
Amortization of prior service cost (credit)
(1)
(1)
(1)
(1)
–
–
Amortization of net actuarial loss
–
–
14
18
–
(1)
Curtailments, settlements and special termination benefits
–
–
–
1
–
–
Non-operational pension cost (credit)
(29)
(32)
(5)
(9)
–
(1)
Net periodic benefit cost (credit)
(16)
(17)
4
–
–
(1)
The components of net periodic benefit cost other than the service cost component are included in the line “Non-operational pension (cost) credit” in the income
statement.
27 Q3 2022 FINANCIAL INFORMATION
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Nine months ended September 30,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
33
46
24
42
5
8
Of which, discretionary contributions to defined benefit
–
–
–
11
–
–
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended September 30,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
2
15
5
29
1
5
Of which, discretionary contributions to defined benefit
pension plans
–
–
–
20
–
–
The Company expects to make contributions totaling approximately $86 million and $6 million to its defined pension plans and other postretirement benefit plans,
respectively, for the full year 2022.
─
Note 12
Stockholder's equity
At the Annual General Meeting of Shareholders (AGM) on March 24, 2022, shareholders approved the proposal of the Board of Directors to distribute 0.82 Swiss
francs per share to shareholders. The declared dividend amounted to $1,700 million, with the Company disburs ing a portion in March and the remaining amounts
in April.
In March 2022, the Company completed the share buyback program that was launched in April 2021. This program was executed on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased a total of 90 million shares for approximately $3.1 billion, of which 31 million shares were
purchased in the first quarter of 2022 (resulting in an increase in Treasury stock of $1,089 million). At the 2022 AGM, shareholders approved the cancellation of
88 million shares which had been purchased under the share buyback programs launched in July 2020 and April 2021. The cancellation was completed in the
second quarter of 2022, resulting in a decrease in Treasury stock of $2,876 million and a corresponding total decrease in Capital stock, Additional paid-in capital
and Retained Earnings.
Also in March 2022, the Company announced a new share buyback program of up to $3 billion. This program, which was launched in April 2022, is being executed
on a second trading line on the SIX Swiss Exchange and is planned to run until the Company’s 2023 AGM. Through this program, the Company purchased, from
the program’s launch in April 2022 to September 30, 2022, 50 million shares, resulting in an increase in Treasury stock of $1,452 million. At the 2023 AGM, the
Company intends to request shareholder approval to cancel the shares purchased through this new program as well as those shares purchased under the
program launched in April 2021 that were not proposed for cancellation at the 2022 AGM.
In addition to the share buyback programs, the Company purchased 20 million of its own shares on the open market in the nine months ended September 30,
2022, mainly for use in connection with its employee share plans, resulting in an increase in Treasury stock of $660 million.
In the nine months ended September 30, 2022, the Company delivered, out of treasury stock, 16 million shares in connection with its Management Incentive Plan.
28 Q3 2022 FINANCIAL INFORMATION
─
Note 13
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares outstanding during the period, assuming that all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options, and outstanding options and shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Nine months ended September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,379
1,951
376
661
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,343
1,906
360
652
Weighted-average number of shares outstanding (in millions)
1,909
2,011
1,882
2,001
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.97
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.95
0.19
0.33
Diluted earnings per share
Nine months ended September 30,
Three months ended September 30,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,379
1,951
376
661
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,343
1,906
360
652
Weighted-average number of shares outstanding (in millions)
1,909
2,011
1,882
2,001
Effect of dilutive securities:
Call options and shares
11
17
7
18
Adjusted weighted-average number of shares outstanding (in millions)
1,920
2,028
1,889
2,019
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.72
0.96
0.20
0.33
Loss from discontinued operations, net of tax
(0.02)
(0.02)
(0.01)
0.00
Net income
0.70
0.94
0.19
0.32
29 Q3 2022 FINANCIAL INFORMATION
─
Note 14
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2021
(2,460)
17
(1,556)
(3)
(4,002)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(361)
(10)
64
6
(301)
Amounts reclassified from OCI
–
–
50
(9)
41
Total other comprehensive (loss) income
(361)
(10)
114
(3)
(260)
Less:
Amounts attributable to
noncontrolling interests
5
–
–
–
5
Balance at September 30, 2021
(1)
(2,825)
7
(1,442)
(6)
(4,266)
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2022
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(811)
(25)
148
(15)
(703)
Amounts reclassified from OCI
5
1
24
15
45
Total other comprehensive (loss) income
(806)
(24)
172
–
(658)
Less:
Amounts attributable to
noncontrolling interests
(32)
–
–
–
(32)
Balance at September 30, 2022
(1)
(3,767)
(22)
(917)
(8)
(4,715)
(1) Due to rounding, numbers presented may not add to the totals provided.
The following table reflects amounts reclassified out of OCI in respect of Pension and other postretirement plan adjustments:
Nine months ended
Three months ended
($ in millions)
Location of (gains) losses
September 30,
September 30,
Details about OCI components
reclassified from OCI
2022
2021
2022
2021
Foreign currency translation adjustments:
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
5
–
–
–
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(1)
(8)
(9)
(2)
(2)
Amortization of net actuarial loss
Non-operational pension (cost) credit
(1)
42
51
14
17
Net gain (loss) from settlements and curtailments
Non-operational pension (cost) credit
(1)
–
(1)
–
1
Total before tax
34
41
12
16
Tax
Income tax expense
(10)
9
(3)
(3)
Amounts reclassified from OCI
24
50
9
13
The amounts in respect of Unrealized gains (losses) on available-for-sale securities and Derivative instruments and hedges were not significant for the nine and
three months ended September 30, 2022 and 2021.
30 Q3 2022 FINANCIAL INFORMATION
─
Note 15
Restructuring and related expenses
Other restructuring-related activities
In the nine and three months ended September 30, 2022 and 2021, the Company executed various other restructuring-related activities and incurred the following
expenses:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Employee severance costs
64
44
21
11
Estimated contract settlement, loss order and other costs
205
15
3
3
Inventory and long-lived asset impairments
5
17
–
15
Total
274
76
24
29
Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements:
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Total cost of sales
13
36
5
12
Selling, general and administrative expenses
39
10
11
5
Non-order related research and development expenses
2
–
–
–
Other income (expense), net
220
30
8
12
Total
274
76
24
29
During the second quarter of 2022, the Company completed a plan to fully exit its full train retrofit business by transferring the remaining contracts to a
third party. The Company recorded $195 million of restructuring 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 September 30, 2022, and December 31, 2021, $194 million and $212 million, respectively, were recorded for other restructuring -related liabilities and
were included primarily in Other provisions.
─
Note 16
Operating segment 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.
A description of the types of products and services provided by each reportable segment is as follows:
●
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 electric vehicle charging infrastructure, renewable
power solutions, modular substation packages, distribution automation products, switchboard 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 seven operating Divisions: Distribution Solutions, Smart Power, Smart Buildings, E-Mobility, Installation Products, Power Conversion
and Electrification Service.
●
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 130 years of cumulative experience in electric
powertrains, the Business Area combines domain expertise and technology to deliver the optimum solution for a wide range of applications in all
industrial segments. In addition, the Business Area, 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.
31 Q3 2022 FINANCIAL INFORMATION
●
well as digital solutions, lifecycle services, advanced industrial analytics and artificial intelligence applications and suites for the process, marine and
hybrid industries. Products and solutions include control technologies, advanced process control software and manufacturing execution systems,
sensing, measurement and analytical instrumentation, marine propulsion systems and turbochargers. In addition, the Business Area offers a
comprehensive range of services ranging from repair to advanced services such as remote monitoring, preventive maintenance, asset performance
management, emission monitoring and cybersecurity services. The products, systems and services are delivered through five operating Divisions:
Energy Industries, Process Industries, Marine & Ports, Turbocharging, and Measurement & Analytics.
●
Robotics includes industrial robots, software, robotic solutions, field services, spare parts, and digital services. Machine Automation specializes in
solutions based on its programmable logic controllers (PLC), industrial PCs (IPC), servo motion, transport systems and machine vision . Both Divisions
offer engineering and simulation software as well as a comprehensive range of digital solutions.
Corporate and Other:
certain divested businesses and other non-core operating activities.
The primary measure of profitability on which the operating segments are evaluated is Operational EBITA, which represents income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
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 receiva bles/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, 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.
The following tables present disaggregated segment revenues from contracts with customers, Operational EBITA, and the reconciliations of consolidated
Operational EBITA to Income from continuing operations before taxes for the nine and three months ended September 30, 2022 and 2021, as well as total assets
at September 30, 2022, and December 31, 2021.
Nine months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,291
1,430
1,726
1,070
3
7,520
The Americas
3,929
1,574
1,135
377
3
7,018
of which: United States
2,870
1,307
681
267
–
5,124
Asia, Middle East and Africa
3,066
1,564
1,607
838
9
7,084
of which: China
1,530
888
498
646
1
3,563
10,286
4,568
4,468
2,285
15
21,622
Product type
Products
9,006
3,931
1,045
1,337
9
15,328
Systems
639
–
1,375
598
6
2,618
Services and other
641
637
2,048
350
–
3,676
10,286
4,568
4,468
2,285
15
21,622
Third-party revenues
10,286
4,568
4,468
2,285
15
21,622
Intersegment revenues
156
332
25
5
(518)
–
Total revenues
(1)
10,442
4,900
4,493
2,290
(503)
21,622
32 Q3 2022 FINANCIAL INFORMATION
Nine months ended September 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
3,357
1,483
1,716
1,201
16
7,773
The Americas
3,312
1,832
1,010
331
3
6,488
of which: United States
2,465
1,540
577
236
–
4,818
Asia, Middle East and Africa
2,905
1,554
1,694
957
7
7,117
of which: China
1,577
861
547
714
–
3,699
9,574
4,869
4,420
2,489
26
21,378
Product type
Products
8,106
4,202
1,097
1,639
15
15,059
Systems
824
–
1,258
492
11
2,585
Services and other
644
667
2,065
358
–
3,734
9,574
4,869
4,420
2,489
26
21,378
Third-party revenues
9,574
4,869
4,420
2,489
26
21,378
Intersegment revenues
(1)
168
321
34
9
(532)
–
Total revenues
(2)
9,742
5,190
4,454
2,498
(506)
21,378
Three months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,063
477
595
358
1
2,494
The Americas
1,398
545
368
139
2
2,452
of which: United States
1,021
454
221
101
–
1,796
Asia, Middle East and Africa
1,073
569
488
329
1
2,460
of which: China
523
323
189
264
1
1,300
3,534
1,591
1,451
826
4
7,406
Product type
Products
3,086
1,379
364
479
3
5,311
Systems
232
–
414
226
1
873
Services and other
216
212
673
121
–
1,222
3,534
1,591
1,451
826
4
7,406
Third-party revenues
3,534
1,591
1,451
826
4
7,406
Intersegment revenues
50
111
7
2
(170)
–
Total revenues
3,584
1,702
1,458
828
(166)
7,406
Three months ended September 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,091
463
574
387
10
2,525
The Americas
1,091
609
352
107
2
2,161
of which: United States
810
511
214
75
–
1,610
Asia, Middle East and Africa
955
507
569
315
(4)
2,342
of which: China
524
284
171
231
–
1,210
3,137
1,579
1,495
809
8
7,028
Product type
Products
2,549
1,357
408
581
5
4,900
Systems
374
–
387
106
3
870
Services and other
214
222
700
122
–
1,258
3,137
1,579
1,495
809
8
7,028
Third-party revenues
3,137
1,579
1,495
809
8
7,028
Intersegment revenues
59
94
12
4
(169)
–
Total revenues
3,196
1,673
1,507
813
(161)
7,028
(1) Due to rounding, numbers presented may not add to the totals provided.
33 Q3 2022 FINANCIAL INFORMATION
Nine months ended
Three months ended
September 30,
September 30,
($ in millions)
2022
2021
2022
2021
Operational EBITA:
Electrification
1,756
1,614
647
511
Motion
845
905
305
291
Process Automation
645
554
225
207
Robotics & Discrete Automation
215
291
106
90
Corporate and Other
‒
Non-core and divested businesses
8
(39)
(10)
(10)
‒ Corporate costs and Other Intersegment elimination
(105)
(191)
(42)
(27)
Total
3,364
3,134
1,231
1,062
Acquisition-related amortization
(174)
(191)
(55)
(62)
Restructuring, related and implementation costs
(1)
(300)
(81)
(20)
(28)
Changes in obligations related to divested businesses
17
(16)
–
(10)
Changes in pre-acquisition estimates
–
6
(1)
14
Gains and losses from sale of businesses
(4)
9
–
–
Acquisition- and divestment-related expenses and integration costs
(171)
(74)
(62)
(44)
Other income/expense relating to the Power Grids joint venture
(67)
(34)
(30)
(15)
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
(107)
(106)
(7)
(49)
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(48)
5
(13)
(4)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
55
33
15
5
Certain other non-operational items:
Regulatory, compliance and legal costs
(333)
(3)
(329)
(1)
Business transformation costs
(2)
(114)
(59)
(48)
(20)
Favorable resolution of an uncertain purchase price adjustment
–
5
–
5
Certain other fair value changes, including asset impairments
58
118
24
4
Other non-operational items
(24)
(3)
3
(5)
Income from operations
2,152
2,743
708
852
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Non-operational pension (cost) credit
102
130
34
42
Income from continuing operations before taxes
2,197
2,802
714
888
(1) Includes impairment of certain assets.
(2) Amount includes ABB Way process transformation costs of $98 million and $52 million for nine months ended September 30, 2022 and 2021, respectively, and $34 million and
$19 million for the three months ended September 30, 2022 and 2021, respectively.
Total assets
(1)
($ in millions)
September 30, 2022
December 31, 2021
Electrification
13,635
12,831
Motion
6,249
5,936
Process Automation
5,088
5,009
Robotics & Discrete Automation
4,626
4,860
Corporate and Other
(2)
8,835
11,624
Consolidated
38,433
40,260
(1) Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At September 30, 2022, and December 31, 2021, respectively, Corporate and Other includes $102 million and $136 million of assets in the Power Grids business which is reported as
discontinued operations (see Note 3). In addition, at September 30, 2022, and December 31, 2021, Corporate and Other includes $1,491 million and $1,609 million, respectively,
related to the equity investment in Hitachi Energy Ltd (see Note 4).
34 Q3 2022 FINANCIAL INFORMATION
35 Q3 2022 FINANCIAL INFORMATION
—
Supplemental Reconciliations and Definitions
The following reconciliations and definitions include measures which ABB uses to supplement its Consolidated Financial Information (unaudited) which is
prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). Certain of these financial measures are, or may be,
considered non-GAAP financial measures as defined in the rules of the U.S. Securities and Exchange Commission (SEC).
While ABB’s management believes that the non-GAAP financial measures herein are useful in evaluating ABB’s operating results, this information should
be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with U.S. GAAP. Therefore
these measures should not be viewed in isolation but considered together with the Consolidated Financial Information (unaudited) prepared in accordance
with U.S. GAAP as of and for the nine and three months ended September 30, 2022.
Comparable growth rates
Growth rates for certain key figures may be presented and discussed on a “comparable” basis. The comparable growth rate measures growth on a constant
currency basis. Since we are a global company, the comparability of our operating results reported in U.S. dollars is affected by foreign currency exchange rate
fluctuations. We calculate the impacts from foreign currency fluctuations by translating the current-year periods’ reported key figures into U.S. dollar amounts using
the exchange rates in effect for the comparable periods in the previous year.
Comparable growth rates are also adjusted for changes in our business portfolio. Adjustments to our business portfolio occur due to acquisitions, divestments, or
by exiting specific business activities or customer markets. The adjustment for portfolio changes is calculated as follows: where the results of any business
acquired or divested have not been consolidated and reported for the entire duration of both the current and comparable periods, the reported key figures of such
business are adjusted to exclude the relevant key figures of any corresponding quarters which are not comparable when computing the comparable growth rate.
Certain portfolio changes which do not qualify as divestments under U.S. GAAP have been treated in a similar manner to divestments. Changes in our portfolio
where we have exited certain business activities or customer markets are adjusted as if the relevant business was divested in the period when the decision to
cease business activities was taken. We do not adjust for portfolio changes where the relevant business has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by Business Area
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
11%
9%
0%
20%
12%
10%
0%
22%
Motion
3%
9%
12%
24%
2%
9%
12%
23%
Process Automation
-6%
9%
0%
3%
-3%
9%
0%
6%
Robotics & Discrete Automation
-4%
12%
-1%
7%
2%
11%
0%
13%
ABB Group
4%
9%
3%
16%
5%
10%
3%
18%
9M 2022 compared to 9M 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
15%
7%
0%
22%
7%
7%
0%
14%
Motion
8%
7%
12%
27%
-6%
7%
10%
11%
Process Automation
4%
7%
0%
11%
1%
7%
0%
8%
Robotics & Discrete Automation
21%
9%
-1%
29%
-8%
7%
-1%
-2%
ABB Group
12%
7%
3%
22%
1%
6%
3%
10%
36 Q3 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group - Quarter
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
1%
19%
0%
20%
-1%
19%
0%
18%
The Americas
16%
1%
8%
25%
13%
1%
9%
23%
of which: United States
19%
0%
10%
29%
12%
0%
10%
22%
Asia, Middle East and Africa
-4%
8%
0%
4%
5%
8%
0%
13%
of which: China
-8%
6%
0%
-2%
7%
7%
0%
14%
ABB Group
4%
9%
3%
16%
5%
10%
3%
18%
Regional comparable growth rate reconciliation by Business Area - Quarter
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-8%
18%
0%
10%
-3%
19%
0%
16%
The Americas
33%
1%
0%
34%
28%
1%
0%
29%
of which: United States
38%
1%
0%
39%
26%
0%
0%
26%
Asia, Middle East and Africa
5%
8%
0%
13%
12%
8%
0%
20%
of which: China
-9%
5%
0%
-4%
0%
6%
0%
6%
Electrification
11%
9%
0%
20%
12%
10%
0%
22%
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
23%
22%
1%
46%
1%
20%
0%
21%
The Americas
-11%
1%
27%
17%
-9%
1%
30%
22%
of which: United States
-9%
0%
31%
22%
-9%
0%
33%
24%
Asia, Middle East and Africa
-1%
8%
1%
8%
15%
8%
2%
25%
of which: China
4%
6%
1%
11%
16%
8%
1%
25%
Motion
3%
9%
12%
24%
2%
9%
12%
23%
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-8%
16%
0%
8%
3%
18%
0%
21%
The Americas
6%
3%
0%
9%
3%
3%
0%
6%
of which: United States
9%
1%
0%
10%
3%
0%
0%
3%
Asia, Middle East and Africa
-12%
8%
0%
-4%
-14%
6%
0%
-8%
of which: China
-16%
5%
0%
-11%
11%
7%
0%
18%
Process Automation
-6%
9%
0%
3%
-3%
9%
0%
6%
Q3 2022 compared to Q3 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-1%
19%
-1%
17%
-7%
17%
-1%
9%
The Americas
11%
0%
0%
11%
30%
1%
0%
31%
of which: United States
15%
1%
0%
16%
34%
0%
0%
34%
Asia, Middle East and Africa
-13%
6%
0%
-7%
4%
7%
0%
11%
of which: China
-9%
5%
0%
-4%
14%
7%
0%
21%
Robotics & Discrete Automation
-4%
12%
-1%
7%
2%
11%
0%
13%
37 Q3 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation for ABB Group – Year to date
9M 2022 compared to 9M 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
5%
14%
0%
19%
-3%
13%
0%
10%
The Americas
22%
1%
9%
32%
8%
0%
9%
17%
of which: United States
24%
0%
11%
35%
6%
1%
10%
17%
Asia, Middle East and Africa
9%
5%
0%
14%
0%
4%
0%
4%
of which: China
9%
2%
0%
11%
-4%
3%
0%
-1%
ABB Group
12%
7%
3%
22%
1%
6%
3%
10%
Regional comparable growth rate reconciliation by Business Area – Year to date
9M 2022 compared to 9M 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
4%
15%
0%
19%
-2%
14%
0%
12%
The Americas
34%
1%
0%
35%
19%
0%
0%
19%
of which: United States
39%
1%
0%
40%
16%
0%
0%
16%
Asia, Middle East and Africa
4%
5%
0%
9%
5%
5%
0%
10%
of which: China
-2%
2%
0%
0%
-3%
3%
0%
0%
Electrification
15%
7%
0%
22%
7%
7%
0%
14%
9M 2022 compared to 9M 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
14%
16%
1%
31%
-3%
15%
0%
12%
The Americas
-3%
1%
33%
31%
-13%
0%
29%
16%
of which: United States
-1%
0%
37%
36%
-14%
0%
32%
18%
Asia, Middle East and Africa
14%
5%
1%
20%
0%
5%
1%
6%
of which: China
11%
2%
1%
14%
2%
3%
1%
6%
Motion
8%
7%
12%
27%
-6%
7%
10%
11%
9M 2022 compared to 9M 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-10%
11%
0%
1%
0%
13%
0%
13%
The Americas
25%
3%
0%
28%
12%
2%
0%
14%
of which: United States
22%
0%
0%
22%
18%
0%
0%
18%
Asia, Middle East and Africa
5%
6%
0%
11%
-5%
5%
0%
0%
of which: China
6%
2%
0%
8%
-9%
3%
0%
-6%
Process Automation
4%
7%
0%
11%
1%
7%
0%
8%
9M 2022 compared to 9M 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
16%
15%
-2%
29%
-11%
12%
-1%
0%
The Americas
26%
1%
0%
27%
14%
0%
0%
14%
of which: United States
28%
0%
0%
28%
13%
0%
0%
13%
Asia, Middle East and Africa
26%
4%
0%
30%
-13%
4%
0%
-9%
of which: China
39%
2%
0%
41%
-10%
3%
0%
-7%
Robotics & Discrete Automation
21%
9%
-1%
29%
-8%
7%
-1%
-2%
38 Q3 2022 FINANCIAL INFORMATION
Order backlog growth rate reconciliation
September 30, 2022 compared to September 30, 2021
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
30%
11%
0%
41%
Motion
24%
18%
0%
42%
Process Automation
0%
11%
0%
11%
Robotics & Discrete Automation
64%
23%
0%
87%
ABB Group
21%
13%
1%
35%
Other growth rate reconciliations
Q3 2022 compared to Q3 2021
Service orders growth rate
Services revenues growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
1%
9%
0%
10%
2%
9%
0%
11%
Motion
8%
12%
0%
20%
-5%
11%
0%
6%
Process Automation
1%
11%
0%
12%
-4%
10%
0%
6%
Robotics & Discrete Automation
-2%
13%
0%
11%
-2%
12%
0%
10%
ABB Group
2%
11%
0%
13%
-3%
10%
0%
7%
9M 2022 compared to 9M 2021
Service orders growth rate
Services revenues growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
7%
7%
0%
14%
0%
6%
0%
6%
Motion
9%
9%
0%
18%
-4%
7%
0%
3%
Process Automation
4%
8%
0%
12%
-1%
8%
0%
7%
Robotics & Discrete Automation
4%
9%
0%
13%
-3%
9%
0%
6%
ABB Group
5%
8%
0%
13%
-2%
8%
0%
6%
39 Q3 2022 FINANCIAL INFORMATION
Operational EBITA as % of operational revenues (Operational EBITA margin)
Definition
Operational EBITA margin
Operational EBITA margin is Operational EBITA as a percentage of operational revenues.
Operational EBITA
Operational earnings before interest, taxes and acquisition-related amortization (Operational EBITA) represents Income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
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, as well as other items which are determined by management on a case-by-case basis.
Operational EBITA is our measure of segment profit but is also used by management to evaluate the profitability of the Company as a whole.
Acquisition-related amortization
Amortization expense on intangibles arising upon acquisitions.
Restructuring, related and implementation costs
Restructuring, related and implementation costs consists of restructuring and other related expenses, as well as internal and external costs relating to the
implementation of group-wide restructuring programs.
Other income/expense relating to the Power Grids joint venture
Other income/expense relating to the Power Grids joint venture consists of amounts recorded in Income from continuing operations before taxes relating to the
divested Power Grids business including the income/loss under the equity method for the investment in Hitachi Energy Ltd. (Hitachi Energy), amortization of
deferred brand income as well as changes in value of other obligations relating to the divestment.
Operational revenues
The Company presents operational revenues solely for the purpose of allowing the computation of Operational EBITA margin. Operational revenues are Total
revenues adjusted for foreign exchange/commodity timing differences in total revenues of: (i) unrealized gains and losses on derivatives, (ii) realized gains and
losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables (and
related assets). Operational revenues are not intended to be an alternative measure to Total revenues, which represent our revenues measured in accordance
with U.S. GAAP.
Reconciliation
The following tables provide reconciliations of consolidated Operational EBITA to Net Income and Operational EBITA Margin by business.
Reconciliation of consolidated Operational EBITA to Net Income
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Operational EBITA
3,364
3,134
1,231
1,062
Acquisition-related amortization
(174)
(191)
(55)
(62)
Restructuring, related and implementation costs
(1)
(300)
(81)
(20)
(28)
Changes in obligations related to divested businesses
17
(16)
–
(10)
Changes in pre-acquisition estimates
–
6
(1)
14
Gains and losses from sale of businesses
(4)
9
–
–
Acquisition- and divestment-related expenses and integration costs
(171)
(74)
(62)
(44)
Other income/expense relating to the Power Grids joint venture
(67)
(34)
(30)
(15)
Certain other non-operational items
(413)
58
(350)
(17)
Foreign exchange/commodity timing differences in income from operations
(100)
(68)
(5)
(48)
Income from operations
2,152
2,743
708
852
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Non-operational pension (cost) credit
102
130
34
42
Income from continuing operations before taxes
2,197
2,802
714
888
Income tax expense
(728)
(775)
(294)
(201)
Income from continuing operations, net of tax
1,469
2,027
420
687
Loss from discontinued operations, net of tax
(36)
(45)
(16)
(9)
Net income
1,433
1,982
404
678
(1) Includes impairment of certain assets.
40 Q3 2022 FINANCIAL INFORMATION
Reconciliation of Operational EBITA margin by business
Three months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,584
1,702
1,458
828
(166)
7,406
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
12
14
14
3
2
45
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
–
9
–
–
12
Unrealized foreign exchange movements
on receivables (and related assets)
(12)
(5)
(9)
(4)
(4)
(34)
Operational revenues
3,587
1,711
1,472
827
(168)
7,429
Income (loss) from operations
631
291
154
81
(449)
708
Acquisition-related amortization
28
8
1
19
(1)
55
Restructuring, related and
implementation costs
8
3
1
6
2
20
Changes in pre-acquisition estimates
1
–
–
–
–
1
Gains and losses from sale of businesses
(1)
1
–
–
–
–
Acquisition- and divestment-related expenses
and integration costs
3
4
53
1
1
62
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
30
30
Certain other non-operational items
(16)
–
–
1
365
350
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
–
–
9
(1)
(1)
7
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
–
7
1
2
13
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(10)
(2)
–
(2)
(1)
(15)
Operational EBITA
647
305
225
106
(52)
1,231
Operational EBITA margin (%)
18.0%
17.8%
15.3%
12.8%
n.a.
16.6%
In the three months ended September 30, 2022, Certain other non-operational items in the table above includes the following:
Three months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
329
329
Certain other fair values changes,
(26)
–
–
–
2
(24)
Business transformation costs
(1)
13
–
–
–
35
48
Other non-operational items
(3)
–
–
1
(1)
(3)
Total
(16)
–
–
1
365
350
(1) Amounts include ABB Way process transformation costs of $34 million for the three months ended September 30, 2022.
41 Q3 2022 FINANCIAL INFORMATION
Three months ended September 30, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,196
1,673
1,507
813
(161)
7,028
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
15
4
5
–
(1)
23
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
1
5
–
(1)
8
Unrealized foreign exchange movements
on receivables (and related assets)
(7)
(1)
(1)
(1)
2
(8)
Operational revenues
3,207
1,677
1,516
812
(161)
7,051
Income (loss) from operations
434
244
183
68
(77)
852
Acquisition-related amortization
30
10
1
21
–
62
Restructuring, related and
implementation costs
11
13
2
1
1
28
Changes in obligations related to
divested businesses
–
–
–
–
10
10
Changes in pre-acquisition estimates
(14)
–
–
–
–
(14)
Acquisition- and divestment-related expenses
and integration costs
18
12
13
1
–
44
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
15
15
Certain other non-operational items
2
–
1
–
14
17
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
34
14
5
–
(4)
49
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
(1)
2
–
2
4
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(5)
(1)
–
(1)
2
(5)
Operational EBITA
511
291
207
90
(37)
1,062
Operational EBITA margin (%)
15.9%
17.4%
13.7%
11.1%
n.a.
15.1%
In the three months ended September 30, 2021, Certain other non-operational items in the table above includes the following:
Three months ended September 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
1
1
Certain other fair values changes,
3
–
–
–
(7)
(4)
Business transformation costs
(1)
3
–
–
–
17
20
Favorable resolution of an uncertain
purchase price adjustment
(5)
–
–
–
–
(5)
Other non-operational items
1
–
1
–
3
5
Total
2
–
1
–
14
17
(1) Amounts include ABB Way process transformation costs of $19 million for the three months ended September 30, 2021.
42 Q3 2022 FINANCIAL INFORMATION
Nine months ended September 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
10,442
4,900
4,493
2,290
(503)
21,622
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
36
17
50
14
5
122
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
13
2
11
–
27
53
Unrealized foreign exchange movements
on receivables (and related assets)
(34)
(11)
(16)
(9)
(15)
(85)
Operational revenues
10,457
4,908
4,538
2,295
(486)
21,712
Income (loss) from operations
1,602
776
480
146
(852)
2,152
Acquisition-related amortization
89
23
3
59
–
174
Restructuring, related and
implementation costs
(1)
18
11
6
9
256
300
Changes in obligations related to
divested businesses
–
–
–
–
(17)
(17)
Changes in pre-acquisition estimates
2
–
–
(2)
–
–
Gains and losses from sale of businesses
(1)
5
–
–
–
4
Acquisition- and divestment-related expenses
and integration costs
32
12
122
4
1
171
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
67
67
Certain other non-operational items
(24)
–
–
2
435
413
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
54
22
27
3
1
107
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
11
1
11
–
25
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(27)
(5)
(4)
(6)
(13)
(55)
Operational EBITA
1,756
845
645
215
(97)
3,364
Operational EBITA margin (%)
16.8%
17.2%
14.2%
9.4%
n.a.
15.5%
(1) Includes impairment of certain assets.
In the nine months ended September 30, 2022, Certain other non-operational items in the table above includes the following:
Nine months ended September 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
333
333
Certain other fair values changes,
(57)
–
–
–
(1)
(58)
Business transformation costs
(1)
15
–
–
–
99
114
Other non-operational items
18
–
–
2
4
24
Total
(24)
–
–
2
435
413
(1) Amounts include ABB Way process transformation costs of $98 million for the nine months ended September 30, 2022.
43 Q3 2022 FINANCIAL INFORMATION
Nine months ended September 30, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
9,742
5,190
4,454
2,498
(506)
21,378
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
37
17
19
5
3
81
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
1
(2)
(1)
(2)
(2)
Unrealized foreign exchange movements
on receivables (and related assets)
(16)
(6)
(7)
(6)
(1)
(36)
Operational revenues
9,765
5,202
4,464
2,496
(506)
21,421
Income (loss) from operations
1,423
812
520
224
(236)
2,743
Acquisition-related amortization
88
36
3
62
2
191
Restructuring, related and
implementation costs
32
18
15
6
10
81
Changes in obligations related to
divested businesses
–
–
–
–
16
16
Changes in pre-acquisition estimates
(6)
–
–
–
–
(6)
Gains and losses from sale of businesses
4
(1)
(13)
–
1
(9)
Acquisition- and divestment-related expenses
and integration costs
36
19
17
1
1
74
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
34
34
Certain other non-operational items
(13)
1
3
–
(49)
(58)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
63
26
17
1
(1)
106
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
–
(1)
(1)
(3)
(5)
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(13)
(6)
(7)
(2)
(5)
(33)
Operational EBITA
1,614
905
554
291
(230)
3,134
Operational EBITA margin (%)
16.5%
17.4%
12.4%
11.7%
n.a.
14.6%
In the nine months ended September 30, 2021, Certain other non-operational items in the table above includes the following:
Nine months ended September 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
3
3
Certain other fair values changes,
(16)
–
–
–
(102)
(118)
Business transformation costs
7
–
–
–
52
59
Favorable resolution of an uncertain
purchase price adjustment
(5)
–
–
–
–
(5)
Other non-operational items
1
1
3
–
(2)
3
Total
(13)
1
3
–
(49)
(58)
(1) Amounts include ABB Way process transformation costs of $52 million for the nine months ended September 30, 2021.
44 Q3 2022 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents, Restricted cash (current and non-current) and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
September 30, 2022
December 31, 2021
Short-term debt and current maturities of long-term debt
3,068
1,384
Long-term debt
4,530
4,177
Total debt (gross debt)
7,598
5,561
Cash and equivalents
2,365
4,159
Restricted cash - current
323
30
Marketable securities and short-term investments
793
1,170
Restricted cash - non-current
–
300
Cash and marketable securities
3,481
5,659
Net debt (cash)
4,117
(98)
Net debt/Equity ratio
Definition
Net debt/Equity ratio
Net debt/Equity ratio is defined as Net debt divided by Equity.
Equity
Equity is defined as Total stockholders’ equity.
Reconciliation
($ in millions, unless otherwise indicated)
September 30, 2022
December 31, 2021
Total stockholders' equity
12,158
15,957
Net debt (cash) (as defined above)
4,117
(98)
Net debt (cash) / Equity ratio
0.34
-0.01
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA ratio is defined as Net debt divided by EBITDA.
EBITDA
EBITDA is defined as Income from operations for the trailing twelve months preceding the balance sheet date before depreciati on and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
September 30, 2022
September 30, 2021
Income from operations for the three months ended:
September 30, 2022 / 2021
708
852
June 30, 2022 / 2021
587
1,094
March 31, 2022 / 2021
857
797
December 31, 2021 / 2020
2,975
578
Depreciation and Amortization for the three months ended:
September 30, 2022 / 2021
198
220
June 30, 2022 / 2021
207
230
March 31, 2022 / 2021
210
227
December 31, 2021 / 2020
216
229
EBITDA
5,958
4,227
Net debt (as defined above)
4,117
1,898
Net debt / EBITDA
0.7
0.5
45 Q3 2022 FINANCIAL INFORMATION
Net working capital as a percentage of revenues
Definition
Net working capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated as Net working capital divided by Adjusted revenues for the trailing twelve months.
Net working capital
Net working capital is the sum of (i) receivables, net, (ii) contract assets, (iii) inventories, net, and (iv) prepaid expenses; less (v) accounts payable, trade, (vi)
contract liabilities (including non-current amounts) and (vii) other current liabilities (excluding primarily: (a) income taxes payable, (b) current derivative liabilities, (c)
pension and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain other restructuring -related activities and
(f) liabilities related to the divestment of the Power Grids business ); and including the amounts related to these accounts which have been presented as either
assets or liabilities held for sale but excluding any amounts included in discontinued operations.
Adjusted revenues for the trailing twelve months
Adjusted revenues for the trailing twelve months includes total revenues recorded by ABB in the twelve months preceding the relevant balance sheet date adjusted
to eliminate revenues of divested businesses and the estimated impact of annualizing revenues of certain acquisitions which were completed in the same trailing
twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
September 30, 2022
September 30, 2021
Net working capital:
Receivables, net
6,695
6,728
Contract assets
955
1,139
Inventories, net
5,849
4,864
Prepaid expenses
261
217
Accounts payable, trade
(4,769)
(4,642)
Contract liabilities
(1)
(2,178)
(1,940)
Other current liabilities
(2)
(3,406)
(3,514)
Net working capital in assets and liabilities held for sale
–
68
Net working capital
3,407
2,920
Total revenues for the three months ended:
September 30, 2022 / 2021
7,406
7,028
June 30, 2022 / 2021
7,251
7,449
March 31, 2022 / 2021
6,965
6,901
December 31, 2021 / 2020
7,567
7,182
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(55)
40
Adjusted revenues for the trailing twelve months
29,134
28,600
Net working capital as a percentage of revenues (%)
11.7%
10.2%
(1) Amount includes certain amounts relating to contract liabilities that are presented in other non-current liabilities.
(2) Amounts exclude $795 million and $719 million at September 30, 2022 and 2021, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities,
(c) pension and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain restructuring-related activities and (f) liabilities related to the
divestment of the Power Grids business.
46 Q3 2022 FINANCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash flow divided by Adjusted net income attributable to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of both the Mechanical Power Transmission Division (Dodge) and Power Grids business, the latter being included in
discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets, and (ii)
proceeds from sales of property, plant and equipment.
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow recorded by ABB in the twelve months preceding the relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income recorded by ABB (as adjusted) in the twelve months preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
September 30, 2022
December 31, 2021
Net cash provided by operating activities – continuing operations
1,647
3,338
Adjusted for the effects of continuing operations:
Purchases of property, plant and equipment and intangible assets
(864)
(820)
Proceeds from sale of property, plant and equipment
142
93
Free cash flow from continuing operations
925
2,611
Net cash used in operating activities – discontinued operations
(27)
(8)
Free cash flow
898
2,603
Adjusted net income attributable to ABB
(1)
1,832
2,416
Free cash flow conversion to net income
49%
108%
(1) Adjusted net income attributable to ABB for the year ended December 31, 2021, is adjusted to exclude the gain on the sale of Dodge of $2,195 million and reductions to the gain on
the sale of Power Grids of $65 million.
Reconciliation of the trailing twelve months to September 30, 2022
Continuing operations
Discontinued operations
($ in millions)
Net cash
provided by
continuing
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Net cash
provided by
(used in)
discontinued
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Adjusted net
income
attributable
to ABB
(1)
Q4 2021
1,033
(361)
57
(13)
–
–
478
Q1 2022
(564)
(187)
35
(9)
–
–
609
Q2 2022
385
(151)
31
(3)
–
–
383
Q3 2022
793
(165)
19
(2)
–
–
362
Total for the trailing
twelve months to
September 30, 2022
1,647
(864)
142
(27)
–
–
1,832
(1) Adjusted net income attributable to ABB for Q4 of 2021 as well as Q1, Q2 and Q3 of 2022, is adjusted to exclude reductions to the gain on the sale of Power Grids of $33 million,
$5 million, $4 million and $2 million, respectively. In addition, Q4 2021 is also adjusted to exclude the gain on the sale of Dodge of $2,195 million.
47 Q3 2022 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income less Interest and other finance expense.
Reconciliation
Nine months ended September 30,
Three months ended September 30,
($ in millions)
2022
2021
2022
2021
Interest and dividend income
50
37
17
11
Interest and other finance expense
(107)
(108)
(45)
(17)
Net finance expenses
(57)
(71)
(28)
(6)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total revenues.
Reconciliation
Nine months ended September 30,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
12,336
10,442
1.18
10,743
9,742
1.10
Motion
6,247
4,900
1.27
5,773
5,190
1.11
Process Automation
5,079
4,493
1.13
4,881
4,454
1.10
Robotics & Discrete Automation
3,318
2,290
1.45
2,744
2,498
1.10
Corporate and Other
(612)
(503)
n.a.
(530)
(506)
n.a.
ABB Group
26,368
21,622
1.22
23,611
21,378
1.10
Three months ended September 30,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,902
3,584
1.09
3,519
3,196
1.10
Motion
1,966
1,702
1.16
1,909
1,673
1.14
Process Automation
1,568
1,458
1.08
1,670
1,507
1.11
Robotics & Discrete Automation
901
828
1.09
935
813
1.15
Corporate and Other
(149)
(166)
n.a.
(167)
(161)
n.a.
ABB Group
8,188
7,406
1.11
7,866
7,028
1.12
48 Q3 2022 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71
11
www.abb.com
July 1 — September 30, 2022
ABB Ltd announces that the following members of the Executive Committee or Board of Directors of ABB have purchased,
sold or been granted ABB’s registered shares, call options and warrant appreciation rights (“WARs”), in the following amounts:
Name
Date
Description
Received *
Purchased
Sold
Price
Theodor Swedjemark
August 29, 2022
Option
148,750
CHF
1.81
Carolina Granat
September 01, 2022
Share
4,000
CHF
26.61
Key:
* Received instruments were delivered as part of the ABB Ltd Director’s or Executive Committee Member’s compensation as compensation for foregone
benefits
** In addition, Theodor Swedjemark’s spouse, who has a separate senior role in the Company, received 102,000 options from the Company on August 29, 2022
at the price of CHF 1.81 each.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ABB LTD
Date: October 20, 2022.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: October 20, 2022.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance