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 April 2021
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.
⬜
☒
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 April 27, 2021 titled “Q1 2021 results: Strong start to the year”.
2.
Q1 2021 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
●
1
●
●
●
1
1
●
2
●
KEY FIGURES
CHANGE
($ millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Comparable
1
Orders
7,756
7,346
6%
1%
Revenues
6,901
6,216
11%
7%
Gross Profit
2,268
1,910
19%
as % of revenues
32.9%
30.7%
+2.2 pts
Income from operations
797
373
114%
Operational EBITA
1
959
636
51%
40%
as % of operational revenues
1
13.8%
10.2%
+3.6 pts
Income from continuing operations, net of tax
551
326
69%
Net income (loss) attributable to ABB
502
376
34%
Basic earnings per share ($)
0.25
0.18
41%
2
Cash flow from operating activities
4
543
(577)
n.a.
Cash flows from operating activities in continuing
operations
523
(396)
n.a.
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q1 2021 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.
—
ZURICH, SWITZERLAND, APRIL 27, 2021
Q1 2021 results
Strong start to the year
—
“After a busy year of creating the right set-up for the Group, we are now
starting to show the real potential of our underlying business es.
Through greater accountability, transparency and speed, we increasingly create
value for our stakeholders.”
Björn Rosengren
, CEO
ABB INTERIM REPORT
I
Q1 2021
Market activity continued to recover from its lowest point
during the summer 2020. Demand was especially strong in
the short-cycle business, beyond our expectations. The
increased customer activity, in combination with the impact
from previously implemented cost measures, resulted in
double-digit growth in Operational EBITA, and a very high
first quarter margin of 13.8%. I am pleased to see good
performance also in cash flow, which was high for a first
quarter at $523 million. That said, while there was no
material impact on results in the period, the progressively
tighter supply of certain components such as semiconductors
and plastics, is a concern. We anticipate prolonged delivery
lead-times to customers in parts of our businesses in the
coming quarter. On a separate note, we made the important
launch of our new collaborative robot families. Through this
expansion of our offering, we aim to unlock customer groups
with currently a low level of automation.
In total, we registered order growth of 6% (1% comp-
arable), supported by a broad recovery in most of our short-
cycle businesses. To some extent, demand is likely to have
been driven by a stock build-up related to supply chain
concerns. On the downside, growth was hampered by a
weak development in the cruising and oil & gas segments -
albeit initial signs of stabilization were noted. Overall, orders
increased slightly in Europe and AMEA, with the latter
supported by a stellar growth in China. Underlying business
momentum improved in the Americas, driven by the US,
although the region faced high comparable numbers in the
previous period, which put pressure on growth rates.
I am pleased about the progress toward our 2023 margin
target, with all business areas increasing operational EBITA
margin by more than 100 basis points. That said, we are
taking actions to further improve operational performance in
Based on the current market situation, ABB anticipates
growth rates in the
second quarter of 2021
level of business activity in Q2 2020. Comparable orders and
revenues are expected to grow >10%, with orders growing
more than revenues.
The Operational EBITA margin for the Group is
expected to significantly improve year-on-year, to
approximately 14%.
As announced in the recent trading update, ABB anticipates
comparable revenue growth of ~5% or higher for
full-year
2021
, with the process industry related part of the business
expected to recover during the second half of the year.
In 2021, ABB expects a steady pace of improvement from
2020 toward the 2023 Operational EBITA margin target of
upper half of the 13%-16% range. This excludes the
combined adverse impact related to the Kusile project and
stranded costs, which weighed on margin in 2020.
Outlook
Process Automation, which should also benefit from an
anticipated improvement in end markets during the latter part
of the year.
We made good progress with the divestment process for the
three previously announced divisions and I expect us to sign
the first deal during the second half of the year.
Furthermore, we have turned our E-mobility business into a
separate division and initiated a carve out into a separate
legal structure. These steps will allow us to prepare for
a possible public listing, creating a platform for accelerated
growth and value creation in this business.
We held the Annual General Meeting at which the proposed
dividend of CHF 0.80 was approved. Furthermore,
we
announced an additional share buyback program of up to
$4.3 billion, whereby re-confirming the intention to return
$7.8 billion of cash proceeds from the Power Grids divestment
to shareholders.
Björn Rosengren
CEO
CEO summary
ABB INTERIM REPORT
I
Q1 2021
OEM business more than offset the growth noted in the
tier-1 customer segment.
In the process related businesses, oil & gas declined,
although there were signs of improving customer activity. A
largely stable development was registered in the pulp &
paper, mining and power generation segments. However,
customer activity in the areas of chemicals as well as water
& wastewater was high.
In transport and infrastructure, there was a very strong
order development across the renewables, data centers
and e-mobility segments. Also, the buildings segment
improved with the residential segment outperforming non-
residential. In the marine segment however, orders
declined, due to weak demand in the cruising segment.
Revenues amounted to $6,901 million, increasing by 11%
(7% comparable). Three out of four business areas reported
revenue increases with only Process Automation declining.
The overall demand for ABB products and services
improved both year-on-year and sequentially, reflecting
strength in the short-cycle business supported by positive
developments in most customer segments. Demand related
to process industries was subdued. In total, orders for the
ABB Group amounted to $7,756 million, increasing by 6%
(1% comparable).
On a sequential basis, the underlying general business
environment was positive in all three regions. Compared
with the corresponding period last year, growth in the
Americas was stable as the year-earlier period did not
include any significant adverse impacts from COVID-19, and
also benefited from higher large orders received. Asia,
Middle East and Africa (AMEA) improved by 8%
(2% comparable), driven by a sharp increase of 34%
(24% comparable) in China. Orders in Europe increased
10% (3% comparable), with a resilient performance in
Germany.
Orders grew strongly in the machine builders, consumer
electronics and food & beverage segments as well as in
general industries overall. The automotive segment
declined, as the adverse development in the relatively larger
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q1 2021
Q1 2020
US$
Comparable
Europe
2,551
2,371
8%
1%
The Americas
2,043
2,092
-2%
-2%
Asia, Middle East
and Africa
2,307
1,706
35%
30%
Intersegment
1
–
47
ABB Group
6,901
6,216
11%
7%
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
1%
7%
FX
5%
5%
Portfolio changes
0%
-1%
Total
6%
11%
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q1 2021
Q1 2020
US$
Comparable
Europe
3,102
2,813
10%
3%
The Americas
2,247
2,240
0%
0%
Asia, Middle East
and Africa
2,407
2,230
8%
2%
Intersegment
1
–
63
ABB Group
7,756
7,346
6%
1%
1
Intersegment orders/revenues until June 30, 2020, include sales to the Power Grids business
which is presented as discontinued operations and thus these sales are not eliminated from
total orders/revenues.
Orders and revenues
ABB INTERIM REPORT
I
Q1 2021
Corporate and Other Operational EBITA improved by
$14 million to -$101 million, with the underlying ongoing
corporate EBITA largely stable at -$79 million.
Net finance expenses
The net finance expenses amounted to $44 million, higher
than the $4 million in 2020. While interest costs on debt
were significantly lower, 2020 included a reduction in
interest expense due to changes in tax contingencies. Net
finance expenses for 2021 is still estimated at $130 million.
Income tax
Income tax expense was $252 million with a tax rate of
31.4% compared with 19.5% in the prior year, mostly due to
that 2020 included the impact of a favourable resolution of a
tax contingency. Tax rate for 2021 is still estimated at 26%.
Net income and earnings per share
Net income attributable to ABB was $502 million and
increased by 34% year-on-year. Basic earnings per share
was $0.25 and increased by 41% year-on-year, including
the adverse impact of $0.01 from discontinued operations.
Gross profit
Gross margin increased to 32.9%, up 220 basis points
year-on-year, supported by the revenue growth and
structural improvements. Gross margin increased in three
out of four business areas. Gross profit improved by 19%
and amounted to $2,268 million.
Income from operations
Income from operations amounted to $797 million and more
than doubled from the year-earlier period driven by stronger
operational profit, lower negative impacts from hedging
timing differences and lower costs associated with the
divestment of Power Grids. Results include restructuring
activities progressing according to plan with restructuring
and restructuring related expenses of $35 million in the
period, primarily related to Electrification.
Operational EBITA
Operational EBITA showed a steep improvement of 51%
(40% constant currency) year-on-year, increasing the
margin by 360 basis points to 13.8%. The stronger
performance was driven by increased revenues in
combination with improved gross margin, the impact from
earlier implemented cost measures and general stringent
cost control, with some additional support from the impact
of exchange rate movements. Costs relating to selling,
general and administrative (SG&A) expenses remained
broadly stable, however the ratio in relation to revenues
declined to 18.3%, from 20.1% in the year-earlier period.
SG&A expenses increased by 1% (-4% constant currency),
partially held back by the abnormally low travel and sales
activities on the back of COVID-19 restrictions. R&D
expenses increased by 13% (6% constant currency).
Earnings
ABB INTERIM REPORT
I
Q1 2021
Net working capital
Net working capital amounted to $2,904 million, and
decreased 12% year-on-year, while it increased from
$2,718 million in the prior quarter primarily due to higher
contract assets and inventories as well as lower accrual for
employee bonuses. Net working capital as a percentage of
revenues was 10.8%, compared with 12.3% in the
corresponding period last year.
Capital expenditures
Purchases of property, plant and equipment and intangible
assets in the quarter amounted to $142 million.
Net debt
Net debt totalled $1,233 million, a significant reduction
compared with last year’s level of $6,221 million and a
sequential increase from $112 million. The sequential
increase reflects the impacts of the share buybacks during
the quarter as well as the initial dividend payment in the
period. The net debt to EBITDA ratio declined to 0.4 from
2.3 reported for the same period last year, while it increased
sequentially from 0.04.
Cash flows
Cash flow from operating activities in continuing operations
was $523 million, very strong for a first quarter which
normally is seasonally weak, and a significant improvement
of $919 million compared with the corresponding period last
year. All business areas contributed to the increase which
primarily related to the contribution from a higher
operational result, a lower build-up of working capital and
more favorable timing of tax payments.
Share buyback program
As
announced earlier, ABB intends to return $7.8 billion of
cash proceeds from the Power Grids divestment to
shareholders through share buybacks. After completion of
the initial program, a further share buyback program of up
to $4.3 billion was launched on April 9. It is being executed
on a second trading line on the SIX Swiss Exchange and is
planned to run until the company’s 2022 Annual General
Meeting. ABB intends to request shareholders to approve
the cancellation of the remaining shares purchased but not
approved for cancellation under the initial program as well
as those purchased under this new program at its 2022
AGM.
($ millions,
unless otherwise indicated)
Mar. 31
2021
Mar. 31
2020
Dec. 31
2020
Short term debt and current
maturities of long-term debt
1,336
5,913
1,293
Long-term debt
5,619
6,830
4,828
Total debt
6,955
12,743
6,121
Cash & equivalents
3,466
5,971
3,278
Restricted cash - current
72
–
323
Marketable securities and
short-term investments
1,884
551
2,108
Restricted cash - non-current
300
–
300
Cash and marketable securities
5,722
6,522
6,009
Net debt*
1,233
6,221
112
Net debt* to EBITDA ratio
0.4
2.3
0.04
Net debt* to Equity ratio
0.09
0.52
0.01
*
net debt excludes net pension liabilities $871 million
Balance sheet & Cash flow
ABB INTERIM REPORT
I
Q1 2021
Orders and revenues
Order intake reached a high level of $3,531 million, a solid
increase of 13% (9% comparable). Revenues at
$3,140 million grew 13% (11% comparable) with strength
noted in most segments.
●
Strong demand was further supported by customers stock-
building to manage the rising constraints of component
availability. Additionally, some accelerated orders from
customers due to expected price increases driven by rising
commodity prices also supported demand, although to a
smaller extent.
●
Demand improved in the buildings segment, with the
residential business outpacing the non-residential.
Customer activity was also high for the data centers, food &
beverage, rail and e-mobility segments. Activity in oil & gas
was muted, albeit the initial signs of a pick-up for the
service business was noted.
●
Growth in AMEA was supported by stellar growth in China.
Orders grew strongly in both Europe and the Americas.
Profit
All of the larger divisions improved both Operational EBITA
and margin, hence the business area result improved by
61% and margin increased by 480 basis points to 16.2%.
●
The strong performance reflects the impact from higher
utilization of fixed assets on increased volumes, improved
pricing, earlier implemented cost measures as well as
general stringent cost controls and constrained travel
expenses.
●
While the adverse impact from rising raw material costs
was very limited in the period, this is expected to have an
increasingly negative impact in the coming quarters as
commodities bought at higher rates are moved out of
inventories.
—
Electrification
CHANGE
($ millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Comparable
Orders
3,531
3,121
13%
9%
Order backlog
4,699
4,386
7%
3%
Revenues
3,140
2,773
13%
11%
Operational EBITA
511
318
61%
as % of operational revenues
16.2%
11.4%
+4.8 pts
Cash flow from operating activities
319
13
n.a.
No. of employees (FTE equiv.)
50,990
52,710
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
9%
11%
FX
5%
5%
Portfolio changes
-1%
-3%
Total
13%
13%
ABB INTERIM REPORT
I
Q1 2021
Orders and revenues
In total, order intake was at a high level and amounted to
$1,917 million which increased by 1%
(-4% comparable), although the high comparable from the
prior period weighed on the growth rate. Revenues
amounted to $1,667 million, representing growth of 10%
(6% comparable).
●
Customer activity was high in all segments except oil &
gas, where activity declined. Order intake was driven by
the short-cycle business, however there were initial signs
of improving demand for projects.
●
While orders declined in both AMEA and Europe due to
high comparables, it increased in the Americas.
The concept of the “Energy Efficiency Movement” was
launched, calling upon governments and industries to
accelerate the adoption of high-efficiency motors and
variable speed drives to combat climate change. This puts
the technology leadership in focus, supporting Motion’s
long-term growth opportunities.
Profit
Operational EBITA margin of 17.1% is a very high first-
quarter level, and the Operational EBITA increased by 26%,
relative to the same period last year.
●
Operational EBITA and margin improvements were
supported by higher sales volumes, improved divisional
mix, stringent cost scrutiny and input costs still covered
by favorable hedging.
●
Although a tightening supply of semiconductors was
noted in the industry, there was no material impact on
customer deliveries or results.
CHANGE
($ millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Comparable
Orders
1,917
1,901
1%
-4%
Order backlog
3,419
3,259
5%
-1%
Revenues
1,667
1,510
10%
6%
Operational EBITA
289
230
26%
as % of operational revenues
17.1%
15.3%
+1.8 pts
Cash flow from operating activities
324
152
113%
No. of employees (FTE equiv.)
20,980
20,820
—
Motion
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
-4%
6%
FX
5%
4%
Portfolio changes
0%
0%
Total
1%
10%
ABB INTERIM REPORT
I
Q1 2021
Orders and revenues
Customer activity in the process related segments was low
and orders and revenues declined year-on-year in most
divisions. Order intake amounted to $1,656 million, a
decrease of 6% (11% comparable). Revenues amounted to
$1,407 million, declining by 4% (9% comparable).
●
On the back of a lower demand for products, systems as
well as services, the marine and oil & gas segments
weighed on the total business area growth. This more
than offset the somewhat positive developments in pulp &
paper, ports, chemicals and water & waste-water.
●
Orders declined in all divisions, except for a slight growth
in the short-cycle related business of Measurement &
Analytics.
●
Revenues declined, mainly reflecting the subdued service
business, timing in execution of the order backlog and
cruise operators operating significantly below normal
levels.
Profit
Despite the decline in revenues the margin improved by
130 basis points year-on-year to 11.0% on improved
operational performance. Operational EBITA increased by
8%.
●
The negative volume development had an adverse
impact on the Operational EBITA, however this was offset
by the positive impact from earlier implemented cost
measures, stronger operational execution and positive
impact from currency movements.
●
There was no material impact from the rising constraints
of semiconductors supply.
●
To take the next step in operational performance, a
management change at the head of the
Measurement & Analytics division was made.
CHANGE
($ millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Comparable
Orders
1,656
1,757
-6%
-11%
Order backlog
5,900
5,183
14%
6%
Revenues
1,407
1,462
-4%
-9%
Operational EBITA
155
144
8%
as % of operational revenues
11.0%
9.7%
+1.3 pts
Cash flow from operating activities
233
(26)
n.a.
No. of employees (FTE equiv.)
22,000
22,980
—
Process Automation
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
-11%
-9%
FX
5%
5%
Portfolio changes
0%
0%
Total
-6%
-4%
ABB INTERIM REPORT
I
Q1 2021
Orders and revenues
In total, order intake amounted to $841 million, 4% higher (-
3% comparable) year-on-year. Revenues grew strongly,
increasing 27% (19% comparable
) and amounted to
$853 million, supported by a strong execution of deliveries
from the order backlog as well as a generally strong
development in the short-cycle business.
●
Demand from machine builders was strong, driving a
steep order increase in Machine Automation, partially due
to some inventory build-up. Robotics orders improved in
most customer segments, except in the automotive
segment where the growth rate was also pressured by
the impact from the ongoing strategic selective order
approach, aimed at improving long-term profitability.
●
Orders grew in the AMEA region, outperforming the
declines in both the Americas and Europe.
The collaborative robot portfolio was expanded with two
new cobot families offering higher payloads and speeds.
Importantly, they are intuitively designed so customers need
not rely on in-house programming specialists. The launch
CHANGE
($ millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Comparable
Orders
841
811
4%
-3%
Order backlog
1,362
1,454
-6%
-12%
Revenues
853
671
27%
19%
Operational EBITA
105
59
78%
as % of operational revenues
12.4%
8.8%
+3.6 pts
Cash flow from operating activities
111
66
68%
No. of employees (FTE equiv.)
10,290
10,340
aims to unlock customer groups who currently have low
levels of automation.
Profit
Operational EBITA increased by 78% year-on-year and the
margin increased by 360 basis points to 12.4% with similar
improvements in both the Robotics and Machine
Automation divisions.
●
The margin improvement was primarily driven by the
better cost absorption from higher volumes, a positive
divisional mix, improved performance in the service
business and impacts from previously implemented cost
measures.
—
Robotics & Discrete Automation
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
-3%
19%
FX
7%
8%
Portfolio changes
0%
0%
Total
4%
27%
ABB INTERIM REPORT
I
Q1 2021
ABB took important steps in the first quarter of 2021 to
establish the governance of its new ambitious 2030
sustainability strategy, which was launched in November
2020. There is a clear focus on areas with the biggest impact
– enabling a low-carbon society by reducing emissions,
preserving resources, and promoting social progress
underpinned by a strong commitment to integrity and
transparency.
Quarterly highlights
●
ABB recorded a 22% year-on-year reduction of CO
₂
emissions in its own operations mainly due to increased use
of renewable electricity. This was underlined by the
unveiling of a new solar power generation and renewable
energy integration system at its low-voltage products
manufacturing site in Beijing.
●
Reduction in LTIFR, defined below, of 31% year-on-year
partially due to the extra COVID-19 measures in addition to
our focus on safety overall at our sites. ABB is also
engaging in several initiatives to address mental health
issues, including rolling out business-led mental wellbeing
programs such as “Are you OK?”
●
ABB Switzerland was awarded the “Swiss LGBTI-Label” for
the next three years on the basis of criteria such as
strategy, HR policy and quality management.
Q1 2021
Q1 2020
CHANGE
12M ROLLING
CO2e own operations emissions,
kt scope 1 and 2
1
89
113
-22%
92
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.126
0.182
-31%
0.149
Share of females in senior management
positions, %
14.3
12.3
+2.0pts
13.4
1
Data is for the end of previous quarter
Furthermore, ABB has set itself the target of increasing the
share of women in senior management roles to 25% by 2030.
●
ABB published its Annual Sustainability Report 2020,
achieving most of its targets and reducing greenhouse gas
emissions by 58% since 2013.
●
ABB was named one of the world’s most sustainable
companies by Corporate Knights, an international media and
research organization. Ranked 33, ABB significantly improved
its score versus last year’s ranking.
Story of the quarter
In early March, ABB’s Motion business area called upon
governments and industry to accelerate the adoption of high-
efficiency motors and variable speed drives to combat climate
change. Motor and drive technologies have seen exceptionally
rapid advancement in the past decade. However, a significant
number of industrial electric motor-driven systems in operation
today – in the region of 300 million globally – are inefficient or
consume much more power than required, resulting in
monumental energy wastage. Independent research estimates
that if these systems were replaced with optimized, high-
efficiency equipment, the gains to be realized could reduce
global electricity consumption by up to 10 percent. Read more at
https://www.energyefficiencymovement.com
Q1 outcome
●
22% reduction of CO
₂
due to higher use of renewable electricity
●
31% reduction in LTIFR through COVID-19 related safety
measures
●
Diversity & Inclusion initiative strengthened through Swiss
LGBTI certification
—
Sustainability
ABB INTERIM REPORT
I
Q1 2021
After Q1 2021
●
On April 9, ABB launched its previously announced
follow-up share buyback program of up to $4.3 billion.
Based on the share price at launch of the program this
represented a maximum of approximately 137 million
shares. The maximum number of shares that may be
repurchased under this new program on any given
trading day is 1,543,644.
●
On April 15, ABB issued a trading update following better-
than-anticipated performance in Q1. Additionally, it raised
its revenue guidance for full year 2021 outlook to
anticipating comparable revenue growth of ~5% or higher
(previously: comparable revenue growth to be broadly in
line with its long-term target range), including an
anticipated recovery in the process industry related part
of the business during the second half of the year.
●
On April 27, ABB announced it has separated the
E-mobility business into its own division
and initiated a carve out into a separate legal
structure. These steps will allow for preparation for
a possible public listing and create a platform for
accelerated growth and value creation in this business.
During Q1 2021
●
On February 24, ABB announced it is expanding its
collaborative robot (cobot) portfolio with the new GoFa™
and SWIFTI™ cobot families. These offer higher
payloads and speeds and complement YuMi® and Single
Arm YuMi® in ABB’s cobot line-up. These stronger, faster
and more capable cobots will accelerate the company’s
expansion in high-growth segments including electronics,
healthcare, consumer goods, logistics and food and
beverage, amongst others, meeting the growing demand
for automation across multiple industries.
●
On March 25, ABB announced it had completed its initial
share buyback program that was launched in July 2020
as part of the company’s plan to return to shareholders
cash proceeds from the Power Grids divestment of $7.8
billion. Through the initial buyback program, ABB
repurchased a total of 128,620,589 shares – equivalent to
5.93% of its issued share capital at launch of the buyback
program – for a total amount of approximately $3.5 billion.
At the Annual General Meeting (AGM) shareholders
approved the cancellation of 115 million shares
purchased under the initial share buyback program.
Consistent with ABB’s capital structure optimization
program, ABB’s Board of Directors approved a further
share buyback program of up to $4.3 billion.
●
On March 25, at the 2021 AGM, Peter Voser was
confirmed as Chairman of the company’s Board of
Directors with 92.9 percent of the votes. With the
exception of Matti Alahuhta, who as announced earlier
did not stand for re-election, all other members of the
Board were re-elected for another term: Jacob
Wallenberg, Gunnar Brock, David Constable, Frederico
Fleury Curado, Lars Förberg, Jennifer Xin-Zhe Li,
Geraldine Matchett, David Meline and Satish Pai.
Significant events
ABB INTERIM REPORT
I
Q1 2021
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2020
Power Grids
Power Grids
1-Jul
9,200
36,000
Note: comparable growth calculation includes acquisitions and divestments with revenues of greater than $50 million.
1
Represents the estimated annual revenues for the period prior to the announcement of the respective acquisition/divestment.
Additional figures
ABB Group
Q1 2020
Q2 2020
Q3 2020
Q4 2020
FY 2020
Q1 2021
EBITDA, $ in million
600
799
302
807
2,508
1,024
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
10.3%
n.a.
Net debt/Equity
0.50
0.60
(0.10)
0.01
0.01
0.09
Net debt/ EBITDA 12M rolling
2.3
2.5
(0.4)
0.04
0.04
0.4
Net working capital, % of 12M rolling revenues
12.3%
12.6%
12.5%
10.5%
10.5%
10.8%
Earnings per share, basic, $
0.18
0.15
2.14
(0.04)
2.44
0.25
Earnings per share, diluted, $
0.18
0.15
2.14
(0.04)
2.43
0.25
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.80
n.a.
Share price at the end of period, CHF
17.01
21.33
23.45
24.71
24.71
28.56
Share price at the end of period, $
17.26
22.56
25.45
27.96
27.96
30.47
Number of employees (FTE equivalents)
143,320
142,310
106,420
105,520
105,520
105,330
No. of shares outstanding at end of period (in millions)
2,134
2,135
2,092
2,031
2,031
2,024
1
Excluding two main operational exposures that are ongoing in the non-core business and for which exit timing is dependent on circumstances beyond ABB’s control such as legal proceedings.
2
Excluding share of net income from JV.
($ in millions, unless otherwise stated)
FY 2021
Q2 2021
Net finance expenses
~(130)
~(30)
unchanged
Non-operational pension
(cost) / credit
~180
~45
unchanged
Effective tax rate
~26%
~26%
unchanged
Capital Expenditures
~(750)
~(185)
unchanged
($ in millions, unless otherwise stated)
FY 2021
Q2 2021
Corporate and Other Operational costs
~(425)
~(110)
unchanged
Non-operating items
Restructuring and restructuring related
~(200)
~(40)
unchanged
GEIS integration costs
~(20)
~(10)
from ~(30)
PPA-related amortization
~(255)
~(65)
unchanged
Certain other income and expenses
related to PG divestment
2
~(40)
~(15)
unchanged
Additional 2021 guidance
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2020
Robotics & Discrete Automation
Codian Robotics B.V.
1-Oct
9
16
Acquisitions and divestments, last twelve months
ABB INTERIM REPORT
I
Q1 2021
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.
The Q1 2021 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. CEST.
Q1 results presentation on April 27, 2021
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 “Outlook”, “CEO Summary”, “Share
buyback program” and “Sustainability”. 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 “intends” “anticipates”, “expects,”
“believes,” “estimates,” “plans”, “targets” or similar
expressions. However, there are many risks and
uncertainties, many of which are beyond our control, that
could cause our actual results to differ materially from the
forward-looking information and statements made in this
press release and which could affect our ability to achieve
any or all of our stated targets. The important factors that
could cause such differences include, among others,
business risks associated with the volatile global economic
environment and political conditions, costs associated with
compliance activities, market acceptance of new products
and services, changes in governmental regulations and
currency exchange rates and such other factors as may be
discussed from time to time in ABB Ltd’s filings with the
U.S. Securities and Exchange Commission, including its
Annual Reports on Form 20-F. Although ABB Ltd believes
that its expectations reflected in any such forward-looking
statement are based upon reasonable assumptions, it can
give no assurance that those expectations will be achieved.
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.
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
For additional information please contact:
2021
July 22
Q2 results
October 21
Q3 results
Financial calendar
Important notice about forward-looking information
1 Q1 2021 FINANCIAL INFORMATION
2 Q1 2021 FINANCIAL INFORMATION
—
Financial Information
Contents
03
─ 5 Key Figures
06 ─
32 Consolidated Financial Information (unaudited)
33 ─
3 Q1 2021 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Comparable
(1)
Orders
7,756
7,346
6%
1%
Order backlog (end March)
14,750
13,698
8%
2%
Revenues
6,901
6,216
11%
7%
Income from operations
797
373
114%
Operational EBITA
(1)
959
636
51%
40%
(2)
as % of operational revenues
(1)
13.8%
10.2%
+3.6 pts
Income from continuing operations, net of tax
551
326
69%
Net income attributable to ABB
502
376
34%
Basic earnings per share ($)
0.25
0.18
41%
(3)
Cash flow from operating activities
(4)
543
(577)
n.a.
(1) For a reconciliation of non- GAAP measures see
(2) Const ant currency (not adjusted for portfolio changes).
(3) EPS growth rates are computed using unrounded amounts.
(4) Cash flow from operating activities includes both continuing and discontinued operations.
4 Q1 2021 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q1 2021
Q1 2020
US$
Local
Comparable
Orders
ABB Group
7,756
7,346
6%
1%
1%
Electrification
3,531
3,121
13%
8%
9%
Motion
1,917
1,901
1%
-4%
-4%
Process Automation
1,656
1,757
-6%
-11%
-11%
Robotics & Discrete Automation
841
811
4%
-3%
-3%
Corporate and Other
(incl. intersegment eliminations)
(189)
(244)
Order backlog (end March)
ABB Group
14,750
13,698
8%
2%
2%
Electrification
4,699
4,386
7%
3%
3%
Motion
3,419
3,259
5%
-1%
-1%
Process Automation
5,900
5,183
14%
6%
6%
Robotics & Discrete Automation
1,362
1,454
-6%
-12%
-12%
Corporate and Other
(incl. intersegment eliminations)
(630)
(584)
Revenues
ABB Group
6,901
6,216
11%
6%
7%
Electrification
3,140
2,773
13%
8%
11%
Motion
1,667
1,510
10%
6%
6%
Process Automation
1,407
1,462
-4%
-9%
-9%
Robotics & Discrete Automation
853
671
27%
19%
19%
Corporate and Other
(incl. intersegment eliminations)
(166)
(200)
Income from operations
ABB Group
797
373
Electrification
440
199
Motion
265
191
Process Automation
147
124
Robotics & Discrete Automation
82
32
Corporate and Other
(incl. intersegment eliminations)
(137)
(173)
Income from operations %
ABB Group
11.5%
6.0%
Electrification
14.0%
7.2%
Motion
15.9%
12.6%
Process Automation
10.4%
8.5%
Robotics & Discrete Automation
9.6%
4.8%
Operational EBITA
ABB Group
959
636
51%
40%
Electrification
511
318
61%
47%
Motion
289
230
26%
18%
Process Automation
155
144
8%
-1%
Robotics & Discrete Automation
105
59
78%
59%
Corporate and Other
(1)
(incl. intersegment eliminations)
(101)
(115)
Operational EBITA %
ABB Group
13.8%
10.2%
Electrification
16.2%
11.4%
Motion
17.1%
15.3%
Process Automation
11.0%
9.7%
Robotics & Discrete Automation
12.4%
8.8%
Cash flow from operating activities
(2)
ABB Group
543
(577)
Electrification
319
13
Motion
324
152
Process Automation
233
(26)
Robotics & Discrete Automation
111
66
Corporate and Other
(incl. intersegment eliminations)
(464)
(601)
Discontinued operations
20
(181)
(1)
Corporate and Other includes Stranded corporate costs of $21 million for the three months ended March 31, 2020.
(2)
Commencing Q3 2020, taxes and interest previously allocated to each individual operating segment are now fully allocated to Corporate and Other, and
commencing Q1 2021, depreciation relating to certain real estate assets, previously reported in Corporate and Other, has been reallocated to the individual
operating segments utilizing these assets. Comparatives have been restated to reflect both changes.
5 Q1 2021 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q1 21
Q1 20
Q1 21
Q1 20
Q1 21
Q1 20
Q1 21
Q1 20
Q1 21
Q1 20
Revenues
6,901
6,216
3,140
2,773
1,667
1,510
1,407
1,462
853
671
Foreign exchange/commodity timing
differences in total revenues
33
25
10
10
19
(3)
5
17
(3)
(2)
Operational revenues
6,934
6,241
3,150
2,783
1,686
1,507
1,412
1,479
850
669
Income from operations
797
373
440
199
265
191
147
124
82
32
Acquisition-related amortization
65
65
29
28
13
13
1
1
20
19
Restructuring, related and
implementation costs
35
40
17
15
1
2
3
3
5
7
Changes in obligations related to
divested businesses
2
–
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
6
–
6
–
–
–
–
–
–
–
Gains and losses from sale of businesses
3
1
3
1
–
–
–
–
–
–
Fair value adjustment on assets and
liabilities held for sale
–
19
–
19
–
–
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
10
11
6
11
3
–
1
–
–
–
Other income/expense relating to the
Power Grids joint venture
17
–
–
–
–
–
–
–
–
–
Certain other non-operational items
12
47
(6)
–
–
5
–
–
–
1
Foreign exchange/commodity timing
differences in income from operations
12
80
16
45
7
19
3
16
(2)
–
Operational EBITA
959
636
511
318
289
230
155
144
105
59
Operational EBITA margin (%)
13.8%
10.2%
16.2%
11.4%
17.1%
15.3%
11.0%
9.7%
12.4%
8.8%
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q1 21
Q1 20
Q1 21
Q1 20
Q1 21
Q1 20
Q1 21
Q1 20
Q1 21
Q1 20
Depreciation
(1)
144
145
64
68
32
31
19
17
13
12
Amortization
83
82
37
34
14
14
3
2
21
20
including total acquisition-related amortization of:
65
65
29
28
13
13
1
1
20
19
(1) Commencing Q1 2021, depreciation related to certain real estate assets, previously reported in Corporate and Other , has been re allocated to the individual operating
segments utilizing these assets. Comparatives have been restated .
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q1 21
Q1 20
US$
Local
parable
Q1 21
Q1 20
US$
Local
parable
Europe
3,102
2,813
10%
2%
3%
2,551
2,371
8%
0%
1%
The Americas
2,247
2,240
0%
0%
0%
2,043
2,092
-2%
-3%
-2%
of which United States
1,679
1,710
-2%
-2%
-2%
1,532
1,615
-5%
-5%
-4%
Asia, Middle East and Africa
2,407
2,230
8%
2%
2%
2,307
1,706
35%
28%
30%
of which China
1,199
898
34%
24%
24%
1,176
667
76%
64%
69%
Intersegment orders/revenues
(1)
–
63
–
47
ABB Group
7,756
7,346
6%
1%
1%
6,901
6,216
11%
6%
7%
(1) Intersegment orders/revenues during the three months ended March 31, 2020, include sales to the Power Grids business which is presented as discontinued operations
and thus these s ales are not eliminated from Total orders/revenues.
6 Q1 2021 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Interim Consolidated Income Statements (unaudited)
Three months ended
($ in millions, except per share data in $)
Mar. 31, 2021
Mar. 31, 2020
Sales of products
5,707
4,993
Sales of services and other
1,194
1,223
Total revenues
6,901
6,216
Cost of sales of products
(3,924)
(3,575)
Cost of services and other
(709)
(731)
Total cost of sales
(4,633)
(4,306)
Gross profit
2,268
1,910
Selling, general and administrative expenses
(1,263)
(1,252)
Non-order related research and development expenses
(293)
(259)
Other income (expense), net
85
(26)
Income from operations
797
373
Interest and dividend income
11
18
Interest and other finance expense
(55)
(22)
Non-operational pension (cost) credit
50
36
Income from continuing operations before taxes
803
405
Income tax expense
(252)
(79)
Income from continuing operations, net of tax
551
326
Income (loss) from discontinued operations, net of tax
(28)
54
Net income
523
380
Net income attributable to noncontrolling interests
(21)
(4)
Net income attributable to ABB
502
376
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
530
325
Income (loss) from discontinued operations, net of tax
(28)
51
Net income
502
376
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.26
0.15
Income (loss) from discontinued operations, net of tax
(0.01)
0.02
Net income
0.25
0.18
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.26
0.15
Income (loss) from discontinued operations, net of tax
(0.01)
0.02
Net income
0.25
0.18
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
2,015
2,134
Diluted earnings per share attributable to ABB shareholders
2,034
2,138
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Interim Consolidated Financial Information
7 Q1 2021 FINANCIAL INFORMATION
—
ABB Ltd Interim Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Three months ended
($ in millions)
Mar. 31, 2021
Mar. 31, 2020
Total comprehensive income (loss), net of tax
325
(127)
Total comprehensive (income) loss attributable to noncontrolling interests, net of tax
(24)
4
Total comprehensive income (loss) attributable to ABB shareholders, net of tax
301
(123)
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Interim Consolidated Financial Information
8 Q1 2021 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Mar. 31, 2021
Dec. 31, 2020
Cash and equivalents
3,466
3,278
Restricted cash
72
323
Marketable securities and short-term investments
1,884
2,108
Receivables, net
6,663
6,820
Contract assets
1,044
985
Inventories, net
4,475
4,469
Prepaid expenses
241
201
Other current assets
637
760
Current assets held for sale and in discontinued operations
241
282
Total current assets
18,723
19,226
Restricted cash, non-current
300
300
Property, plant and equipment, net
4,034
4,174
Operating lease right-of-use assets
972
969
Investments in equity-accounted companies
1,760
1,784
Prepaid pension and other employee benefits
362
360
Intangible assets, net
1,936
2,078
Goodwill
10,744
10,850
Deferred taxes
812
843
Other non-current assets
577
504
Total assets
40,220
41,088
Accounts payable, trade
4,453
4,571
Contract liabilities
1,855
1,903
Short-term debt and current maturities of long-term debt
1,336
1,293
Current operating leases
234
270
Provisions for warranties
1,012
1,035
Dividends payable to shareholders
874
–
Other provisions
1,471
1,519
Other current liabilities
3,921
4,181
Current liabilities held for sale and in discontinued operations
601
644
Total current liabilities
15,757
15,416
Long-term debt
5,619
4,828
Non-current operating leases
769
731
Pension and other employee benefits
1,158
1,231
Deferred taxes
678
661
Other non-current liabilities
1,992
2,025
Non-current liabilities held for sale and in discontinued operations
188
197
Total liabilities
26,161
25,089
Commitments and contingencies
Stockholders’ equity:
Common stock, CHF 0.12 par value
(2,168 million shares issued at March 31, 2021, and December 31, 2020)
188
188
Additional paid-in capital
–
83
Retained earnings
21,582
22,946
Accumulated other comprehensive loss
(4,203)
(4,002)
Treasury stock, at cost
(144 million and 137 million shares at March 31, 2021, and December 31, 2020, respectively)
(3,876)
(3,530)
Total ABB stockholders’ equity
13,691
15,685
Noncontrolling interests
368
314
Total stockholders’ equity
14,059
15,999
Total liabilities and stockholders’ equity
40,220
41,088
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9 Q1 2021 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Three months ended
($ in millions)
Mar. 31, 2021
Mar. 31, 2020
Operating activities:
Net income
523
380
Loss (income) from discontinued operations, net of tax
28
(54)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
227
227
Pension and other employee benefits
(50)
(49)
Deferred taxes
59
44
Net loss from derivatives and foreign exchange
20
73
Net gain from sale of property, plant and equipment
(11)
(8)
Fair value adjustment on assets and liabilities held for sale
–
19
Share-based payment arrangements
11
7
Other
34
13
Changes in operating assets and liabilities:
Trade receivables, net
(2)
(61)
Contract assets and liabilities
(90)
(41)
Inventories, net
(168)
(301)
Accounts payable, trade
42
(67)
Accrued liabilities
(76)
(59)
Provisions, net
1
(53)
Income taxes payable and receivable
(50)
(218)
Other assets and liabilities, net
25
(248)
Net cash provided by (used in) operating activities – continuing operations
523
(396)
Net cash provided by (used in) operating activities – discontinued operations
20
(181)
Net cash provided by (used in) operating activities
543
(577)
Investing activities:
Purchases of investments
(309)
(242)
Purchases of property, plant and equipment and intangible assets
(142)
(163)
Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies
(4)
(73)
Proceeds from sales of investments
391
393
Proceeds from maturity of investments
80
–
Proceeds from sales of property, plant and equipment
20
23
Proceeds from sales of businesses (net of transaction costs and cash disposed) and cost- and
equity-accounted companies
(2)
(140)
Net cash from settlement of foreign currency derivatives
(61)
(129)
Other investing activities
(8)
(15)
Net cash used in investing activities – continuing operations
(35)
(346)
Net cash used in investing activities – discontinued operations
(44)
(37)
Net cash used in investing activities
(79)
(383)
Financing activities:
Net changes in debt with original maturities of 90 days or less
87
1,545
Increase in debt
991
2,247
Repayment of debt
(47)
(180)
Delivery of shares
760
–
Purchase of treasury stock
(1,386)
–
Dividends paid
(844)
–
Dividends paid to noncontrolling shareholders
(1)
(2)
Other financing activities
(36)
(104)
Net cash provided by (used in) financing activities – continuing operations
(476)
3,506
Net cash provided by (used in) financing activities – discontinued operations
–
(8)
Net cash provided by (used in) financing activities
(476)
3,498
Effects of exchange rate changes on cash and equivalents and restricted cash
(51)
(111)
Net change in cash and equivalents and restricted cash
(63)
2,427
Cash and equivalents and restricted cash, beginning of period
3,901
3,544
Cash and equivalents and restricted cash, end of period
3,838
5,971
Supplementary disclosure of cash flow information:
Interest paid
12
16
Income taxes paid
256
266
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10 Q1 2021 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, 2020
188
73
19,640
(5,590)
(785)
13,526
454
13,980
Adoption of accounting
standard update
(78)
(78)
(9)
(87)
Comprehensive income:
Net income
376
376
4
380
Foreign currency translation
adjustments, net of tax of $0
(589)
(589)
(8)
(597)
Effect of change in fair value of
available-for-sale securities,
net of tax of $3
9
9
9
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $25
90
90
90
Change in derivative instruments
and hedges, net of tax of $0
(9)
(9)
(9)
Total comprehensive loss
(123)
(4)
(127)
Changes in noncontrolling interests
(3)
(3)
22
19
Dividends to
noncontrolling shareholders
–
(2)
(2)
Dividends to shareholders
(1,758)
(1,758)
(1,758)
Share-based payment arrangements
8
8
8
Delivery of shares
(2)
2
–
–
Balance at March 31, 2020
188
75
18,180
(6,089)
(784)
11,570
462
12,032
Balance at January 1, 2021
188
83
22,946
(4,002)
(3,530)
15,685
314
15,999
Comprehensive income:
Net income
502
502
21
523
Foreign currency translation
adjustments, net of tax of $3
(273)
(273)
3
(270)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(3)
(12)
(12)
(12)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $(2)
81
81
81
Change in derivative instruments
and hedges, net of tax of $(1)
3
3
3
Total comprehensive income
301
24
325
Changes in noncontrolling interests
(37)
(37)
34
(3)
Dividends to
noncontrolling shareholders
–
(4)
(4)
Dividends to shareholders
(1,730)
(1,730)
(1,730)
Share-based payment arrangements
11
11
11
Purchase of treasury stock
(1,300)
(1,300)
(1,300)
Delivery of shares
(58)
(136)
954
760
760
Balance at March 31, 2021
188
–
21,582
(4,203)
(3,876)
13,691
368
14,059
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11 Q1 2021 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 financi al information should be read in conjunction with the audited consolidated
financial statements in the Company’s Annual Report for the year ended December 31, 2020.
The preparation of financial information in conformity with U.S. GAAP requires management to make assumptions and esti mates that directly affect the
amounts reported in the Consolidated Financial Information. These accounti ng 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,
●
assumptions used in the determination of corporate costs directly attributable to discontinued operations,
●
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 severance 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 fut ure 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 cla ssification 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.
Certain amounts reported in the Interim Consolidated Financial Information for prior periods have been reclassified to conform to the current year’s
presentation. These changes primarily relate to the re allocation of certain real estate assets, previously reported within Corporate and Other, into the
operating segments which utilize the assets .
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Simplifying the accounting for income taxes
In January 2021, the Company adopted a new accounting standard update , which enhances and simplifies various aspects of the income tax accounting
guidance related to intraperiod tax allocations, ownership changes in investments and certain aspects of interim period tax accounting. Depending on the
amendment, the adoption was applied on either a retrospective, modified retrospective, or prospective basis. 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 provid es temporary optional expedients and exceptions to the current guidance on
contract modifications and hedge accounting to ease the financial reporting burden s 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, 202 2, with early adoption permitted. The Company is currently evaluating
the impact of adopting this optional guidance on its Consolidated Financial Statements.
12 Q1 2021 FINANCIAL INFORMATION
─
Note 3
Discontinued operations
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 Hita chi Ltd (Hitachi) . The transaction was executed
through the sale of 80.1 percent of the shares of Hitachi ABB Power Grids Ltd (“Hitachi ABB PG”). 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).
Certain amounts relating to the sale price for the Power Grids business
are currently estimated or otherwise subject to change in value and, as a result, the Company will record additional adjustments to the gain in future
periods which are not expected to have a material impact on the consolidated financial statements.
At the date of the divestment, the Company recorded an initial liability 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 ABB PG,
costs incurred by the Company for the direct benefit of Hitachi ABB PG, 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 March 31, 2021, $77 million of these liabilities had
been paid and are reported as reductions in the cash consideration received, of which $44 million was paid during the three months ended March 31,
2021. At March 31, 2021, the remaining amount recorded was $397 million.
Certain entities of the Power Grids business for which the legal process or other regulatory delays resulted in the Company not yet having transferred
legal titles to Hitachi have been accounted for as being sold since control of the business as well as all risks and rewards of the business have been fully
transferred to Hitachi ABB PG. The proceeds for these entities are included in the cash proceeds described above and certain funds have been placed in
escrow pending completion of the transfer process. At March 31, 2021, current restricte d cash includes $53 million in respect of these funds.
Upon closing of the sale, the Company entered into various transition services agreements (TSAs). Pursuant to these TSAs, the Company and Hitachi
ABB PG provide to each other, on an interim, transitional basis, various services. The services provided by the Company primaril y 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 three months ended March 31, 202 1, the Company has recognized within its continuing operations, general and
administrative expenses incurred to perform the TSA, offset by $47 million in TSA -related income for such services that is reported in Other income and
expense, net.
Discontinued operations
As a result of the sale of the Power Grids business, substantially all Power Grids-related assets and liabilities have been sold. As this divestment
represented a strategic shift that would have a major effect on the Company’s operations and financial results, the results of operations for this business
have been presented as discontinued operations and the assets and liabilities are presented as held for sale and in discontinued operations for all periods
presented. Certain of the business contracts in the Power Grids business continue to be executed by subsidiaries of the Company for the benefit /risk of
Hitachi ABB PG. Assets and liabilities relating to, as well as the net financial results of, these contracts will continue to be included in discontinued
operations until they have been completed or otherwise transferred to Hitachi ABB PG.
Prior to the divestment, interest expense that was not directly attributable to or related to the Company’s continuing business or discontinued business
was allocated to discontinued operations based on the ratio of net assets to be sold less debt that wa s required to be paid as a result of the planned
disposal transaction to the sum of total net assets of the Company plus con solidated debt. General corporate overhead was not allocated to discontinued
operations.
Operating results of the discontinued operations, are summarized as follows:
Three months ended
($ in millions)
Mar. 31, 2021
Mar. 31, 2020
Total revenues
–
1,941
Total cost of sales
–
(1,471)
Gross profit
–
470
Expenses
(4)
(394)
Change to net gain recognized on sale of the Power Grids business
(24)
–
Income (loss) from operations
(28)
76
Net interest and other finance expense
–
(3)
Non-operational pension (cost) credit
–
3
Income (loss) from discontinued operations before taxes
(28)
76
Income tax
–
(22)
Income (loss) from discontinued operations, net of tax
(28)
54
Of the total Income (loss) from discontinued operations before taxes in the table above, $ (28) million and $72 million in the three months ended March 31,
2021 and 2020, respectively, are attributable to the Company, while the remainder is attributable to noncontrolling interests.
Until the date of the divestment, Income from discontinued operations before taxes exclude d stranded costs which were previously able to be allocated to
the Power Grids operating segment . As a result, for the three months ended March 31, 20 20, $21 million of allocated overhead and other management
costs, which were previously included in the measure of segment profit for the Power Grids operating segment are reported as part of Corporate and
Other. In the table above, N et interest and other finance expense in the three months ended March 31, 2020, include d $9 million
of interest expense which
was recorded on an allocated basis in accordance with the Company’s accounting policy election until the divestment date. In addition, as required by U.S.
GAAP, subsequent to December 17, 2018, (the date of the original agreement to sell the Power Grids business) the Company has not record ed
depreciation or amortization on the property, plant and equipment, and intangible assets reported as discontinued operations.
Included in the reported Total revenues of the Company for the three months ended March 31, 20 20, are revenues for sales from the Company’s operating
segments to the Power Grids business of $47 million, which represent intercompa ny transactions that, prior to Power Grids being classified as a
discontinued operation, were eliminated in the Company’s consolidated financial statements (see Note 17). Subsequent to the divestment, sales to Hitachi
ABB PG are reported as third -party revenues.
13 Q1 2021 FINANCIAL INFORMATION
In addition , the Company also has retained obligations (primarily for environmental and taxes) related to other businesses disposed or otherwise exited
that qualified as discontinued operations. Changes to these retained obligations are also included in Income (loss) from discontinued operations, net of
tax, above.
The major components of assets and liabilities held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets are
summarized as follows:
($ in millions)
Mar. 31, 2021
(1)
Dec. 31, 2020
(1)
Receivables, net
235
280
Inventories, net
4
1
Other current assets
2
1
Current assets held for sale and in discontinued operations
241
282
Accounts payable, trade
187
188
Other liabilities
414
456
Current liabilities held for sale and in discontinued operations
601
644
Other non-current liabilities
188
197
Non-current liabilities held for sale and in discontinued operations
188
197
(1) At March 31, 2021 and December 31, 2020, 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
Divestments and equity -accounted companies
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 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
ABB PG. As a result, the investment (including the value of the option) is accounted for using the equity method.
At the date of the divestment of the Power Grids business, the fair value of Hitachi ABB PG exceeded the book value of the underlying net assets . At
March 31, 2021 and December 31, 2020, the reported value of the investment in Hitachi ABB PG $1,577 million and $1,597 million , respectively,
��
includesfor the Company’s 19.9 percent share of this basis difference . The Company amortizes its share of these differences over the estimated remaining useful
lives of the underlying assets that gave rise to this difference, recording the amortization, net of related deferred tax benefit, as a reduction of income from
equity accounted companies. As of March 31, 202 1, the Company determined that no impairment of its equity accounted investments existed.
The carrying value of the Company’s investments in equity -accounted companies and respective percentage of ownership is as follows:
Ownership as of
Carrying value at
($ in millions, expect ownership share in %)
March 31, 2021
March 31, 2021
December 31, 2020
Hitachi ABB Power Grids Ltd
19.9%
1,678
1,710
Others
82
74
Total
1,760
1,784
In the three months ended March 31, 2021 and 2020 , 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:
Three months ended March 31,
($ in millions)
2021
2020
Loss from equity-accounted companies, net of taxes
(3)
–
Basis difference amortization (net of deferred income tax benefit)
(32)
–
Loss from equity-accounted companies
(35)
–
14 Q1 2021 FINANCIAL INFORMATION
Divestment of the solar inverters business
In February 2020, the Company completed the sale of its solar invert ers business for no consideration. Under the agreement, which was reached in July
2019, the Company was required to transfer $143 million of cash to the buy er on the closing date. In addition, payments totaling EUR 132 million
($145 million) are required to be transferred to the buyer from 2020 through 2025. In the y ear ended December 31, 2019, the Company recorded a loss of
$421 million , representing the excess of the carrying value, which includes a loss of $99 million arising from the cumulative translation adjustment , over
the estimated fair value of this business . During the three months ended March 31, 2020, a loss of $19 million was in cluded in “Other income (expense),
net” for changes in fair value of this business. The loss in 2020 includes the $99 million reclassification from other comprehensive income of the currency
translation adjustment related to the business.
The fair value wa s based on the estimated current market values using Level 3 inputs, considering the agreed -upon sale terms with the buyer. The solar
inverters business, which includes the solar inverters business acquired as part of the Power -One acquisition in 2013, was part of the Company ’s
Electrification segment.
As this divestment does not qualify as a discontinued operation, the results of operations for this business prior to its disposal are included in the
Company’s continuing operations for all periods presented.
Including the above loss of $19 million , in the three months ended March 31, 2020, Income from continuing operations before taxes includes net loss es of
$33 million from the solar inverters business prior to its sale .
─
Note 5
Cash and equivalents, marketable securities and short -term investments
Cash and equivalents, marketable securities and short -term investments consisted of the following:
March 31, 2021
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
2,056
2,056
2,056
Time deposits
1,783
1,783
1,782
1
Equity securities
1,586
13
1,599
1,599
5,425
13
–
5,438
3,838
1,600
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
194
11
(2)
203
203
European government obligations
10
10
10
Corporate
69
3
(1)
71
71
273
14
(3)
284
–
284
Total
5,698
27
(3)
5,722
3,838
1,884
Of which:
Restricted cash, current
72
Restricted cash, non-current
300
15 Q1 2021 FINANCIAL INFORMATION
December 31, 2020
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
2,388
2,388
2,388
Time deposits
1,513
1,513
1,513
Equity securities
1,704
12
1,716
1,716
5,605
12
–
5,617
3,901
1,716
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
274
19
293
293
European government obligations
24
24
24
Corporate
69
6
75
75
367
25
–
392
–
392
Total
5,972
37
–
6,009
3,901
2,108
Of which:
Restricted cash, current
323
Restricted cash, non-current
300
─
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 curr ency 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
denomin ated 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 operatio ns, 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 Com pany’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 swaps are used to manage the interest rate and foreign currency
risk associated with certain debt and generally such swap s 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.
16 Q1 2021 FINANCIAL INFORMATION
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)
March 31, 2021
December 31, 2020
March 31, 2020
Foreign exchange contracts
11,229
12,610
14,654
Embedded foreign exchange derivatives
1,313
1,134
975
Cross currency swaps
973
–
–
Interest rate contracts
3,122
3,227
4,195
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
March 31, 2021
December 31, 2020
March 31, 2020
Copper swaps
metric tonnes
42,448
39,390
45,438
Silver swaps
ounces
2,217,821
1,966,677
2,075,488
Aluminum swaps
metric tonnes
7,450
8,112
9,770
Equity derivatives
At March 31, 2021, December 31, 2020, and March 31, 2020, the Company held 18 million, 22 million and 38 million cash-settled call options indexed to
ABB Ltd shares (conversion ratio 5:1) with a total fair value of $30 million, $21 million and $7 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited
cases. In these cases, the effective portion of the changes in their fair value is recorde d in “Accumulated other comprehensive loss” and subsequently
reclassified into earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. For the three months ended
March, 31, 2021 and 2020, there were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross -currency swaps.
Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the cha nges in the fair value of
the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”.
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
Type of derivative designated
Three months ended March 31, 2021
as a fair value hedge
Gains (losses) recognized in income on
Gains (losses) recognized in income
derivatives designated as fair value hedges
on hedged item
($ in millions)
Location
Location
Interest rate contracts
Interest and other finance expense
(14)
Interest and other finance expense
15
Cross-currency swaps
Interest and other finance expense
(23)
Interest and other finance expense
22
Total
(37)
37
Type of derivative designated
Three months ended March 31, 2020
as a fair value hedge
Gains (losses) recognized in income on
Gains (losses) recognized in income
derivatives designated as fair value hedges
on hedged item
($ in millions)
Location
Location
Interest rate contracts
Interest and other finance expense
24
Interest and other finance expense
(25)
Total
24
(25)
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.
17 Q1 2021 FINANCIAL INFORMATION
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
Three months ended March 31,
($ in millions)
Location
2021
2020
Foreign exchange contracts
Total revenues
(60)
(134)
Total cost of sales
(4)
76
SG&A expenses
(1)
7
8
Non-order related research and development
(1)
(1)
Interest and other finance expense
(106)
(106)
Embedded foreign exchange contracts
Total revenues
(14)
32
Total cost of sales
(1)
(4)
Commodity contracts
Total cost of sales
36
(66)
Other
Interest and other finance expense
–
(1)
Total
(143)
(196)
(1) SG&A expenses represent “Selling, general and administrative expenses”.
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
March 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
–
2
1
2
Interest rate contracts
4
65
–
–
Cross currency swaps
–
–
–
61
Cash-settled call options
15
15
–
–
Total
19
82
1
63
Derivatives not designated as hedging instruments:
Foreign exchange contracts
105
21
111
25
Commodity contracts
67
1
10
–
Interest rate contracts
1
–
2
–
Embedded foreign exchange derivatives
11
3
18
13
Total
184
25
141
38
Total fair value
203
107
142
101
December 31, 2020
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
2
4
Interest rate contracts
6
78
–
–
Cash-settled call options
10
11
–
–
Total
16
90
2
4
Derivatives not designated as hedging instruments:
Foreign exchange contracts
221
22
106
26
Commodity contracts
59
–
7
–
Interest rate contracts
2
–
2
–
Embedded foreign exchange derivatives
10
2
28
16
Total
292
24
143
42
Total fair value
308
114
145
46
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 March 31, 2021, and December 31, 2020, have been presented on a gross basis.
18 Q1 2021 FINANCIAL INFORMATION
The Company’s netting agreements and other similar arrangements allow net settlements under certain conditions. At March 31, 2021, and December 31,
2020, information related to these offsetting arrangements was as follows:
($ in millions)
March 31, 2021
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
296
(151)
–
–
145
Total
296
(151)
–
–
145
($ in millions)
March 31, 2021
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
212
(151)
–
–
61
Total
212
(151)
–
–
61
($ in millions)
December 31, 2020
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
410
(106)
–
–
304
Total
410
(106)
–
–
304
($ in millions)
December 31, 2020
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
147
(106)
–
–
41
Total
147
(106)
–
–
41
─
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-li ved 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 liabili ties), 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 natu re 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:
valued using Level 1 inputs i nclude 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:
inactive markets and inputs other than quoted prices such as interest rate yield curves, credit spreads, or inputs derived from oth er 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:
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.
19 Q1 2021 FINANCIAL INFORMATION
Recurring fair value measures
The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows:
March 31, 2021
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
1,599
1,599
Debt securities—U.S. government obligations
203
203
Debt securities—European government obligations
10
10
Debt securities—Corporate
71
71
Securities in “Other non-current assets”:
Debt securities—U.S. government obligations
80
80
Derivative assets—current in “Other current assets”
203
203
Derivative assets—non-current in “Other non-current assets”
107
107
Total
293
1,980
–
2,273
Liabilities
Derivative liabilities—current in “Other current liabilities”
142
142
Derivative liabilities—non-current in “Other non-current liabilities”
101
101
Total
–
243
–
243
December 31, 2020
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
1,716
1,716
Debt securities—U.S. government obligations
293
293
Debt securities—European government obligations
24
24
Debt securities—Corporate
75
75
Derivative assets—current in “Other current assets”
308
308
Derivative assets—non-current in “Other non-current assets”
114
114
Total
317
2,213
–
2,530
Liabilities
Derivative liabilities—current in “Other current liabilities”
145
145
Derivative liabilities—non-current in “Other non-current liabilities”
46
46
Total
–
191
–
191
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 ob servable
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
During the three months ended March 31, 2020, the Company recorded a $19 million fair value adjustment for the solar inverters business which met the
criteria to be classified as held for sale in June 2019 and was sold in February 2020 ( see Note 4 for details ).
Apart from the transaction above, t here were no additional significant non-recurring fair value measurements during the three months ended March 31,
2021 and 2020.
20 Q1 2021 FINANCIAL INFORMATION
Disclosure about f inancial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
March 31, 2021
($ 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
1,684
1,684
1,684
Time deposits
1,782
1,782
1,782
Restricted cash
72
72
72
Restricted cash, non-current
300
300
300
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
1,311
417
894
1,311
Long-term debt (excluding finance lease obligations)
5,447
5,610
84
5,694
December 31, 2020
($ 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
1,765
1,765
1,765
Time deposits
1,513
1,513
1,513
Restricted cash
323
323
323
Restricted cash, non-current
300
300
300
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
1,266
497
769
1,266
Long-term debt (excluding finance lease obligations)
4,668
4,909
89
4,998
The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis:
●
securities 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).
21 Q1 2021 FINANCIAL INFORMATION
─
Note 8
Contract assets and liabilities
The following table provides information about Contract assets and Contract liabilities:
($ in millions)
March 31, 2021
December 31, 2020
March 31, 2020
Contract assets
1,044
985
1,038
Contract liabilities
1,855
1,903
1,665
Contract assets primarily relate to the Company’s right to receive consideration for wo rk 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 .
The significant changes in the Contract assets and Contract liabilities balances were as follows:
Three months ended March 31,
2021
2020
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2021/2020
(497)
(513)
Additions to Contract liabilities - excluding amounts recognized as revenue during the period
493
526
Receivables recognized that were included in the Contract asset balance at Jan 1, 2021/2020
(275)
(276)
At
March 31, 2021
, the Company had unsatisfied performance obligations totaling $14,750 million and, of this amount, the Company expects to fulfill
approximately 66 percent of the obligations in 2021, approximately 21 percent of the obligations in 2022 and the balance thereafter.
─
Note 9
Debt
The Company’s total debt at March 31, 2021, and December 31, 2020, amounted to $6,955 million and $6, 121 million, respectively.
Short- term debt and current maturities of long -term debt
The Company’s “Short- term debt and current maturities of long -term debt” consisted of the following:
($ in millions)
March 31, 2021
December 31, 2020
Short-term debt
239
153
Current maturities of long-term debt
1,097
1,140
Total
1,336
1,293
Short-term debt primarily represented issued commercial paper and short- term bank borrowings from various banks. At March 31, 20 21, and
December 31, 2020, $167 million and $
32
million, respectively, was outstanding under the $2 billion commercial paper progr am in the United States. No
amount was outstanding under the $2 billion Euro-commercial paper program at March 31, 2021 , or December 31, 2020.
Long-term debt
The Company’s long-term debt at March 31, 2021, and December 31, 2020, amounted to $5,619 million and $4,828 million, respectively.
22 Q1 2021 FINANCIAL INFORMATION
Outstanding bonds (including maturities within the next 12 months) were as follows:
March 31, 2021
December 31, 2020
(in millions)
Nominal outstanding
(1)
Nominal outstanding
(1)
Bonds:
4.0% USD Notes, due 2021
USD
650
$
650
USD
650
$
649
2.25% CHF Bonds, due 2021
CHF
350
$
375
CHF
350
$
403
2.875% USD Notes, due 2022
USD
1,250
$
1,274
USD
1,250
$
1,280
0.625% EUR Instruments, due 2023
EUR
700
$
835
EUR
700
$
875
0.75% EUR Instruments, due 2024
EUR
750
$
901
EUR
750
$
946
0.3% CHF Notes, due 2024
CHF
280
$
296
CHF
280
$
317
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Notes, due 2029
CHF
170
$
180
CHF
170
$
192
0% EUR Notes, due 2030
EUR
800
$
907
–
4.375% USD Notes, due 2042
(2)
USD
609
$
589
USD
609
$
589
Total
$
6,388
$
5,632
(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 USD750 million .
In January 2021, the Company issued zero percent notes having a principal amount of EUR 800 million and due in 2030. The Company recorded net
proceeds (after underwriting fees) of EUR 791 million (equivalent to $960 million on the date of issuance). In line with the Company’s policy of reducing its
currency and interest rate exposure s, cross-currency interest rate swaps have been used to modify the characteristics of the EUR 800 million Notes, due
2030. After cons idering the impact of these cross-currency interest rate swaps , the EUR Notes, due 20 30, effectively became a floating rate U.S. dollar
obligation .
─
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-reporte d 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 par ties 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 Dec ember 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 National Prosecuting Authority in South Africa as well as other authorities in their review of the Kusile project. Although the
Company believes that there could be an unfavorable outcome in one or more of these ongoing reviews , at this time it is not possible for the Company to
make an informed judgment about the possible financial impact.
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 March 31, 2021, and December 31, 2020, the Company had aggregate liabilities of $98 million and $100 million, respectively, included in “Other
provisions” and “Other non
‑
current liabilities”, for the above regulatory, compliance and legal contingencies, and none of the individual liabilities
recognized was significant. As it is not possible to make an informed judgment on, or re asonably predict, the outcome of certain matters and as it is not
possible, based on information currently available to management, to estimate the maximum potential liability on other matters, there could be adverse
outcomes beyond the amounts accrued.
23 Q1 2021 FINANCIAL INFORMATION
Guarantees
General
The following table provides quantitative data regarding the Company’s third- party guarantees. The maximum potential payments represent a “worst -case
scenario”, and do not reflect management’s expected outcomes.
Maximum potential payments
($ in millions)
March 31, 2021
December 31, 2020
Performance guarantees
5,815
6,726
Financial guarantees
344
339
Indemnification guarantees
(1)
127
177
Total
(2)
6,286
7,242
(1) Certain indemnifications provided to Hitachi in connection with the divestment of Power Grids are 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 March 31, 2021, and
December 31, 2020, amounted to $
127
135
The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various
maturities up to 20 35, 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 contra ct 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 specif ied 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, the Company has entered into various performance
guarantees with other parties with respect to certain liabilities of the divested business. At March 31, 2021, and December 31, 2020, the maximum
potential payable under these guarantees amounts to $
945
from one 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
ABB Power Grids (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 maturit y dates ranging from one to ten
years. The maximum amount payable under the guarantees at March 31, 2021, and December 31, 2020, are approximately $4.7 billion and $5.5 billion,
respectively , and the carrying amounts of liabilities (recorded in discontinued operations) at March 31,2021, and December 31, 2020 amounted to
$
127
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 March 31, 2021, and December 31, 2020, the total outstanding performance bonds aggregated to
$
4.0
significant amounts reimbursed to financial institutions under these types of arrangements in the three months ended March 31, 2021 and 2020.
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)
2021
2020
Balance at January 1,
1,035
816
Net change in warranties due to acquisitions, divestments and liabilities held for sale
(1)
1
7
Claims paid in cash or in kind
(54)
(52)
Net increase in provision for changes in estimates, warranties issued and warranties expired
63
28
Exchange rate differences
(33)
(29)
Balance at March 31,
1,012
770
(1) Includes adjustments to the initial purchase price allocation recorded during the measurement period.
─
Note 11
Income taxes
In calculating income tax expense, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstance known at each
interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as
compared to those forecasted at the beginning of the year and each interim period thereafter.
The effective tax rate of 31.4 percent in
the three months ended March 31, 2021, was
higher than the effective tax rate of 19.5 percent in thr ee months
ended March 31, 2020, primarily because 2020 included a net benefit from a favorable resolution of an uncertain tax position partially offset by increases
to the valuation allowance in certain countries .
24 Q1 2021 FINANCIAL INFORMATION
─
Note 12
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 for the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with
��
date usedthe local government and tax requirements.
The following tables include amounts relating to defined benefit pension plans and other postretirement benefits for both continuing and discontinued
operations.
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
Three months ended March 31,
2021
2020
2021
2020
2021
2020
Operational pension cost:
Service cost
15
22
10
27
–
–
Operational pension cost
15
22
10
27
–
–
Non-operational pension cost (credit):
Interest cost
(1)
–
18
32
–
1
Expected return on plan assets
(29)
(31)
(47)
(63)
–
–
Amortization of prior service cost (credit)
(2)
(4)
–
1
–
(1)
Amortization of net actuarial loss
–
2
17
25
–
(1)
Curtailments, settlements and special termination benefits
–
–
(6)
–
–
–
Non-operational pension cost (credit)
(32)
(33)
(18)
(5)
–
(1)
Net periodic benefit cost (credit)
(17)
(11)
(8)
22
–
(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. Net periodic benefit cost includes $12 million for the three months ended March 31, 2020, related to discontinued operations.
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended March 31,
2021
2020
2021
2020
2021
2020
Total contributions to defined benefit pension and
other postretirement benefit plans
15
24
(3)
21
1
1
Of which, discretionary contributions to defined benefit
pension plans
–
–
(9)
–
–
–
The Company expects to make contributions totaling approximately $165 million and $8
million to its defined pension plans and other postretirement
benefit plans, re spectively, for the full year 2021.
─
Note 13
Stockholder's equity
At the Annual General Meeting of Shareholders (AGM) on March 25, 2021, shareholders approved the proposal of the Board of Directors to distribute
0.80 Swiss francs per share to shareholders. The declared dividend amounted to $1,730 million , with the Company disburs ing a portion in March and the
remaining amounts in April.
In March 2021, the Company completed its initial share buyback program which was launched in July 2020. The share buyback program was executed on
a second trading line on the SIX Swiss Exchange . Through this buyback program, the Company purchased a total of approximately 129 million shares for
approximately $3.5 billion, of which 20 mill ion shares were purchased in the first quarter of 2021 (resulting in an increase in Treasury stock of
$628 million ). At the AGM on March 25, 2021, share holders approved the cancellation of 115 million of the shares purchased under this buyback program.
In addition to the initial share buyback program, the Company purchased 22 million of its own shares on the open market in the first quarter of 2021,
mainly for use in connection with its employee share plans, resulting in an increase in Treasury stock of $672 million.
During the first quarter of 2021, the Company delivered, out of treasury stock, 35 million shares in connection with its Management Incentive Plan.
25 Q1 2021 FINANCIAL INFORMATION
In March 2021, the Company announced a follow -up share buyback program of up to $4.3 billion . This buyback program , which was launched in
April 2021 , is being executed on a second trading line on the SIX Swiss Exchange and is planned to run until the Company’s AGM in March 202 2. At the
March 2022 AGM, the Company intends to request shareholder approval to cancel the shares purchas ed through this follow -up share buyback program as
well as those shares purchased under the initial share buyback program that were not proposed for cancellation at the Company’s AGM in March 2021 .
─
Note 14
Earnings per shar e
Basic earnings per share is calculated by dividing income by the weighted -average number of shares outstanding during the period. Diluted earnings per
share is calculated by dividing income by the weighted -average number of shares outstanding during the period, assuming that all potentially dilutive
securities were exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options , and outstanding options and shares granted
subject to certain conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Three months ended March 31,
($ in millions, except per share data in $)
2021
2020
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
530
325
Income (loss) from discontinued operations, net of tax
(28)
51
Net income
502
376
Weighted-average number of shares outstanding (in millions)
2,015
2,134
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.26
0.15
Income (loss) from discontinued operations, net of tax
(0.01)
0.02
Net income
0.25
0.18
Diluted earnings per share
Three months ended March 31,
($ in millions, except per share data in $)
2021
2020
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
530
325
Income (loss) from discontinued operations, net of tax
(28)
51
Net income
502
376
Weighted-average number of shares outstanding (in millions)
2,015
2,134
Effect of dilutive securities:
Call options and shares
19
4
Adjusted weighted-average number of shares outstanding (in millions)
2,034
2,138
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.26
0.15
Income (loss) from discontinued operations, net of tax
(0.01)
0.02
Net income
0.25
0.18
26 Q1 2021 FINANCIAL INFORMATION
─
Note 15
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2020
(3,450)
10
(2,145)
(5)
(5,590)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(696)
9
74
(19)
(632)
Amounts reclassified from OCI
99
–
16
10
125
Total other comprehensive (loss) income
(597)
9
90
(9)
(507)
Less:
Amounts attributable to
noncontrolling interests
(8)
–
–
–
(8)
Balance at March 31, 2020
(4,039)
19
(2,055)
(14)
(6,089)
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
(270)
(11)
56
12
(213)
Amounts reclassified from OCI
–
(1)
25
(9)
15
Total other comprehensive (loss) income
(270)
(12)
81
3
(198)
Less:
Amounts attributable to
noncontrolling interests
3
–
–
–
3
Balance at March 31, 2021
(2,733)
5
(1,475)
–
(4,203)
The following table reflects amounts reclassified out of OCI in respect of Foreign currency translation adjustments and Pension and other postretirement
plan adjustments:
($ in millions)
Three months ended March 31,
Details about OCI components
Location of (gains) losses reclassified from OCI
2021
2020
Foreign currency translation adjustments:
Translation loss on solar inverters business (see Note 4)
Other income (expense), net
–
99
Pension and other postretirement plan adjustments:
Amortization of prior service cost
Non-operational pension (cost) credit
(1)
(2)
(4)
Amortization of net actuarial loss
Non-operational pension (cost) credit
(1)
11
26
Total before tax
9
22
Tax
Provision for taxes
16
(6)
Amounts reclassified from OCI
25
16
(1) Amounts include total credits of $3 million for the three months ended March 31, 20 20, reclassified from OCI to Income from discontinued operations.
The amounts in respect of Unrealized gains (losses) on available -for-sale securities and Derivative instruments and hedges were not significant for the
three months ended March 31, 2021 and 2020.
27 Q1 2021 FINANCIAL INFORMATION
─
Note 16
Restructuring and related expenses
OS program
From December 2018 to December 2020, the Company executed a two-year restructuring program with the objective to simplify the Company’s business
model and structure through the implementation of a new organizational structure driven by its businesses. The program resulted in the elimination of the
country and regional structures within the previous matrix organization, including the elimination of the three regional Executive Committee roles. The
operating businesses are now responsible for both their customer -facing activities and business support functi ons, while the remaining Group-level
corporate activities primarily focus on Group strategy, portfolio and performance management and capital allocation.
As of December 31, 2020, the Company had incurred substantially all costs related to the OS program.
Liabilities associated with the OS program are included primarily in Other provisions. The following table shows the activity from the beginning of the program to
March 31, 2021, by expense type:
Employee
Contract settlement,
($ in millions)
severance costs
loss order and other costs
Total
Liability at January 1, 2018
–
–
–
Expenses
65
–
65
Liability at December 31, 2018
65
–
65
Expenses
111
1
112
Cash payments
(44)
(1)
(45)
Change in estimates
(30)
–
(30)
Exchange rate differences
(3)
–
(3)
Liability at December 31, 2019
99
–
99
Expenses
119
17
136
Cash payments
(91)
(15)
(106)
Change in estimates
(10)
–
(10)
Exchange rate differences
4
–
4
Liability at December 31, 2020
121
2
123
Expenses
8
1
9
Cash payments
(29)
(1)
(30)
Change in estimates
(3)
–
(3)
Exchange rate differences
(4)
–
(4)
Liability at March 31, 2021
93
2
95
The following table outlines the costs incurred in the three months ended March 31, 2020, and the cumulat ive net costs incurred to December 31, 2020 :
Net cost incurred
Cumulative net
Three months ended
cost incurred up to
($ in millions)
March 31, 2020
December 31, 2020
Electrification
2
85
Motion
–
25
Process Automation
(1)
–
61
Robotics & Discrete Automation
6
18
Corporate and Other
10
114
Total
18
303
(1) Formerly named the Industrial Automation operating segment .
The Company recorded the following expenses, net of changes in estimates, under this program:
Cumulative costs
Three months ended
($ in millions)
March 31, 2020
(1)
December 31, 2020
Employee severance costs
15
255
Estimated contract settlement, loss order and other costs
2
18
Inventory and long-lived asset impairments
1
30
Total
18
303
(1) Of which $3 million was recorded in Total cost of sales and $15 million in Other Income (expense ), net.
28 Q1 2021 FINANCIAL INFORMATION
Other restructuring -related activities
In addition, during 2021 and 2020, the Company executed various other restructuring-related activities and incurred the following charges, net of changes in
estimates:
Three months ended March 31,
($ in millions)
2021
2020
Employee severance costs
20
4
Estimated contract settlement, loss order and other costs
9
1
Inventory and long-lived asset impairments
–
1
Total
29
6
Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements:
Three months ended March 31,
($ in millions)
2021
2020
Total cost of sales
14
–
Selling, general and administrative expenses
2
5
Other income (expenses), net
13
1
Total
29
6
At March 31, 2021, and December 31, 2020, $222 million and $233 million, respectively, were recorded for other restructuring-related liabilities and were included
primarily in Other provisions.
─
Note 17
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.
Effective January 1, 2021, the Industrial Automation segment was renamed the Process Automation segment. In addition, the Comp any changed its
method of allocating real estate assets to its operating segments whereby these assets are now accounted for directly in the individual operating segment
which utilizes the asset rather than as a cost recharged to the operating segment from Corpora te and Other. As a result, while this change had no impact
on segment revenues or profits (Operational EBITA), certain real estate assets previously reported within Corporate and Other have been allocated to the
total segment assets of each individual operating segment . Total assets at December 31, 20 20, has been recast to reflect this allocation change.
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, switchbo ard 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 six operating Divisions: Distribution Solutions, Smart Power, Smart
Buildings, E-mobility , Installation Products and Power Conversion.
●
low-carbon future for industries, cities, 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 partners, has an
unmatched global service presence. These products and services are delivered through eight operating Divisions: Large Motors and
Generators, IEC LV Motors, NEMA Motors , Drive Products, System Drives, Service, Traction and Mechani cal Power Transmission .
●
well as digital solutions, lifecycle services and artificial intelligence applications for the process and hybrid industries. Products and solutions
include process and discrete control technologies, advanced process control software and manufacturing execution systems, sensing,
measureme nt and analytical instrumentation, electric ship propulsion systems and large 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 and cybersecurity services. The products and services are delivered through five operating Divisions: Energy
Industries, Process Industries, Marine & Ports, Turbocharging, and Measurement & Analytics.
●
Automation. Robotics includes : industrial robots, software, robotic solutions and systems, 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 D ivisions offer engineering and simulation software as well as a comprehensive range of digital solutions.
Corporate and Other:
of certain divested businesses and other non-core operating activities .
29 Q1 2021 FINANCIAL INFORMATION
The primary measure of profitability on which the operating segments are evaluated is Operational EBITA, which represents income from operations
excluding:
●
●
●
related to 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.
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 three months ended March 31, 2021 and 2020, as well as total assets at
March 31, 2021, and December 31, 2020.
Three months ended March 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,100
469
563
418
1
2,551
The Americas
1,058
588
290
106
1
2,043
of which: United States
800
494
163
75
–
1,532
Asia, Middle East and Africa
929
503
542
326
7
2,307
of which: China
488
264
175
249
–
1,176
3,087
1,560
1,395
850
9
6,901
Product type
Products
2,620
1,349
382
526
7
4,884
Systems
269
–
348
204
2
823
Services and other
198
211
665
120
–
1,194
3,087
1,560
1,395
850
9
6,901
Third-party revenues
3,087
1,560
1,395
850
9
6,901
Intersegment revenues
53
107
12
3
(175)
–
Total revenues
(2)
3,140
1,667
1,407
853
(166)
6,901
30 Q1 2021 FINANCIAL INFORMATION
Three months ended March 31, 2020
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
964
451
577
353
26
2,371
The Americas
1,031
569
390
103
–
2,092
of which: United States
801
492
247
70
–
1,610
Asia, Middle East and Africa
678
368
459
198
3
1,706
of which: China
283
154
110
119
–
666
2,673
1,388
1,426
654
28
6,169
Product type
Products
2,362
1,198
306
387
25
4,278
Systems
112
–
396
157
3
668
Services and other
199
190
724
110
–
1,223
2,673
1,388
1,426
654
28
6,169
Third-party revenues
2,673
1,388
1,426
654
28
6,169
Intersegment revenues
(1)
100
122
36
17
(228)
47
Total revenues
(2)
2,773
1,510
1,462
671
(200)
6,216
(1) Intersegment revenues during three months ended March 3 1, 2020, include sales to the Power Grids business which is presented as discontinued operations and therefore
these sales are not eliminated from total revenues .
(2) Due to rounding, numbers presented may not add to the totals provided.
Three months ended
March 31,
($ in millions)
2021
2020
Operational EBITA:
Electrification
511
318
Motion
289
230
Process Automation
155
144
Robotics & Discrete Automation
105
59
Corporate and Other
‒
Non-core business activities
(22)
(11)
‒ Stranded corporate costs
–
(21)
‒ Corporate costs and intersegment elimination
(79)
(83)
Total
959
636
Acquisition-related amortization
(65)
(65)
Restructuring, related and implementation costs
(1)
(35)
(40)
Changes in obligations related to divested businesses
(2)
–
Changes in pre-acquisition estimates
(6)
–
Gains and losses from sale of businesses
(3)
(1)
Fair value adjustment on assets and liabilities held for sale
–
(19)
Acquisition- and divestment-related expenses and integration costs
(10)
(11)
Other income/expense relating to the Power Grids joint venture
(17)
–
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives)
(48)
(74)
Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized
2
(4)
Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities)
34
(2)
Certain other non-operational items:
Costs for divestment of Power Grids
(3)
(44)
Regulatory, compliance and legal costs
(2)
–
Business transformation costs
(2)
(20)
(7)
Assets write downs/impairments & certain other fair value changes
18
–
Other non-operational items
(5)
4
Income from operations
797
373
Interest and dividend income
11
18
Interest and other finance expense
(55)
(22)
Non-operational pension (cost) credit
50
36
Income from continuing operations before taxes
803
405
(1) Amount include s implementat ion costs in relation to the OS program of $16 million for the three months ended March 31, 2020.
(2) Amount include s ABB Way process transformation costs of $15 million for the three months ended March 31 , 2021.
31 Q1 2021 FINANCIAL INFORMATION
Total assets
(1), (2)
($ in millions)
March 31, 2021
December 31, 2020
Electrification
12,775
12,800
Motion
6,481
6,495
Process Automation
4,881
5,008
Robotics & Discrete Automation
4,658
4,794
Corporate and Other
11,425
11,991
Consolidated
40,220
41,088
(1) Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At March 31, 2021, and December 31, 2020, respectively, Corporate and Other includes $241 million and $282 million of assets in the Power Grids business which is
reported as discontinued operations (see Note 3). In addition, at March 31, 2021, and December 31, 2020 , Corporate and Other includes $1,678 million and $1, 710 million ,
respectively, related to the equity investment in Hitachi ABB Power Grids Ltd (see Note 4).
32 Q1 2021 FINANCIAL INFORMATION
33 Q1 2021 FINA NCIAL 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 Commissi on (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 three months ended March 31, 2021.
On January 1, 2020, the Company adopted a new accounting update for the measurement of credit losses on financial instruments . Consistent with the
method of adoption elected, comparable information has not been restated to reflect the adoption of this new standard and accounting update and
continues to be measured and reported under the accounting standard in effect for those periods presented.
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 $50 million.
The following tables provide reconciliations of reported growth rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by Business Area
Q1 2021 compared to Q1 2020
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
13%
-5%
1%
9%
13%
-5%
3%
11%
Motion
1%
-5%
0%
-4%
10%
-4%
0%
6%
Process Automation
-6%
-5%
0%
-11%
-4%
-5%
0%
-9%
Robotics & Discrete Automation
4%
-7%
0%
-3%
27%
-8%
0%
19%
ABB Group
6%
-5%
0%
1%
11%
-5%
1%
7%
Regional comparable growth rate reconciliation
Q1 2021 compared to Q1 2020
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%
-8%
1%
3%
8%
-8%
1%
1%
The Americas
0%
0%
0%
0%
-2%
-1%
1%
-2%
Asia, Middle East and Africa
8%
-6%
0%
2%
35%
-7%
2%
30%
ABB Group
6%
-5%
0%
1%
11%
-5%
1%
7%
34 Q1 2021 FINA NCIAL INFORMATION
Order backlog growth rate reconciliation
March 31, 2021 compared to March 31, 2020
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
7%
-4%
0%
3%
Motion
5%
-6%
0%
-1%
Process Automation
14%
-8%
0%
6%
Robotics & Discrete Automation
-6%
-6%
0%
-12%
ABB Group
8%
-6%
0%
2%
Other growth rate reconciliations
Q1 2021 compared to Q1 2020
US$
Foreign
(as
exchange
Portfolio
reported)
impact
changes
Comparable
Service orders
-2%
-4%
0%
-6%
Service revenues
-2%
-5%
0%
-7%
35 Q1 2021 FINA NCIAL 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:
●
●
●
to 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 movemen ts 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 (including
impairment of goodwill) 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 ABB Power Grids Ltd. (Hitachi ABB
PG), 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) unrealize d 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
Three months ended March 31,
($ in millions)
2021
2020
Operational EBITA
959
636
Acquisition-related amortization
(65)
(65)
Restructuring, related and implementation costs
(1)
(35)
(40)
Changes in obligations related to divested businesses
(2)
–
Changes in pre-acquisition estimates
(6)
–
Gains and losses from sale of businesses
(3)
(1)
Fair value adjustment on assets and liabilities held for sale
–
(19)
Acquisition- and divestment-related expenses and integration costs
(10)
(11)
Other income/expense relating to the Power Grids joint venture
(17)
–
Certain other non-operational items
(12)
(47)
Foreign exchange/commodity timing differences in income from operations
(12)
(80)
Income from operations
797
373
Interest and dividend income
11
18
Interest and other finance expense
(55)
(22)
Non-operational pension (cost) credit
50
36
Income from continuing operations before taxes
803
405
Income tax expense
(252)
(79)
Income from continuing operations, net of tax
551
326
Income (loss) from discontinued operations, net of tax
(28)
54
Net income
523
380
(1) Amounts include implementation costs in relation to the OS program of $16 million for the three months ended March 31, 2020 .
36 Q1 2021 FINA NCIAL INFORMATION
Reconciliation of Operational EBITA margin by business
Three months ended March 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,140
1,667
1,407
853
(166)
6,901
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
29
27
12
5
4
77
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
–
(2)
(1)
–
(3)
Unrealized foreign exchange movements
on receivables (and related assets)
(19)
(8)
(5)
(7)
(2)
(41)
Operational revenues
3,150
1,686
1,412
850
(164)
6,934
Income (loss) from operations
440
265
147
82
(137)
797
Acquisition-related amortization
29
13
1
20
2
65
Restructuring, related and
implementation costs
17
1
3
5
9
35
Changes in obligations related to
divested businesses
–
–
–
–
2
2
Changes in pre-acquisition estimates
6
–
–
–
–
6
Gains and losses from sale of businesses
3
–
–
–
–
3
Acquisition- and divestment-related expenses
and integration costs
6
3
1
–
–
10
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
17
17
Certain other non-operational items
(6)
–
–
–
18
12
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
25
14
10
1
(2)
48
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
–
(1)
–
(1)
(2)
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(9)
(7)
(6)
(3)
(9)
(34)
Operational EBITA
511
289
155
105
(101)
959
Operational EBITA margin (%)
16.2%
17.1%
11.0%
12.4%
n.a.
13.8%
In the three months ended March 31, 2021, Certain other non -operational items in the table above includes the following:
Three months ended March 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Costs for divestment of Power Grids
–
–
–
–
3
3
Regulatory, compliance and legal costs
–
–
–
–
2
2
Asset write downs/impairments and
certain other fair value changes
(9)
–
–
–
(9)
(18)
Business transformation costs
(1)
3
–
–
–
17
20
Other non-operational items
(1)
–
1
–
5
5
Total
(7)
–
1
–
18
12
(1) Amount s include ABB Way process transformation costs of $15 million for the three months ended March 31, 2021.
37 Q1 2021 FINA NCIAL INFORMATION
Three months ended March 31, 2020
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
2,773
1,510
1,462
671
(200)
6,216
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
38
10
29
6
3
86
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
8
–
(2)
7
Unrealized foreign exchange movements
on receivables (and related assets)
(29)
(13)
(20)
(8)
2
(68)
Operational revenues
2,783
1,507
1,479
669
(197)
6,241
Income (loss) from operations
199
191
124
32
(173)
373
Acquisition-related amortization
28
13
1
19
4
65
Restructuring, related and
implementation costs
15
2
3
7
13
40
Gains and losses from sale of businesses
1
–
–
–
–
1
Fair value adjustment on assets and liabilities
held for sale
19
–
–
–
–
19
Acquisition- and divestment-related expenses
and integration costs
11
–
–
–
–
11
Certain other non-operational items
–
5
–
1
41
47
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
42
19
18
2
(7)
74
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
–
–
6
–
(2)
4
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
3
–
(8)
(2)
9
2
Operational EBITA
318
230
144
59
(115)
636
Operational EBITA margin (%)
11.4%
15.3%
9.7%
8.8%
n.a.
10.2%
In the three months ended March 31, 2020, Certain other non -operational items in the table above includes the following:
Three months ended March 31, 2020
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Costs for planned divestment of Power Grids
–
–
–
–
44
44
Business transformation costs
–
4
–
1
2
7
Other non-operational items
–
1
–
–
(5)
(4)
Total
–
5
–
1
41
47
38 Q1 2021 FINA NCIAL 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)
March 31, 2021
December 31, 2020
Short-term debt and current maturities of long-term debt
1,336
1,293
Long-term debt
5,619
4,828
Total debt (gross debt)
6,955
6,121
Cash and equivalents
3,466
3,278
Restricted cash - current
72
323
Marketable securities and short-term investments
1,884
2,108
Restricted cash - non-current
300
300
Cash and marketable securities
5,722
6,009
Net debt
1,233
112
Net debt/EBITDA Ratio
Definition
Net debt/EBITDA
Net debt/EBITDA 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 depreciation and amortization
for the same trai ling twelve -month period.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2021
March 31, 2020
Income from operations for the three months ended
March 31, 2021/2020
797
373
December 31, 2020/2019
578
648
September 30, 2020/2019
71
577
June 30, 2020/2019
571
123
Depreciation and Amortization for the three months ended
March 31, 2021/2020
227
227
December 31, 2020/2019
229
246
September 30, 2020/2019
231
235
June 30, 2020/2019
228
249
EBITDA
2,932
2,678
Net debt (as defined above)
1,233
6,221
Net debt / EBITDA
0.4
2.3
($ in millions, unless otherwise indicated)
June 30, 2020
Income from operations for the three months ended
June 30, 2020
571
March 31, 2020
373
December 31, 2019
648
September 30, 2019
577
Depreciation and Amortization for the three months ended
June 30, 2020
228
March 31, 2020
227
December 31, 2019
246
September 30, 2019
235
EBITDA
3,105
Net debt (as defined above)
7,615
Net debt / EBITDA
2.5
39 Q1 2021 FINA NCIAL INFORMATION
Net debt/Equity Ratio
Definition
Net debt/Equity
Net debt/ Equity is defined as Net debt divided by E quity .
Equity
Equity is defined as Total stockholders’ equity .
Reconciliation
($ in millions, unless otherwise indicated)
Q1 2021
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Total stockholders equity
14,059
12,032
12,575
17,030
15,999
Net debt (as defined above)
1,233
6,221
7,615
(935)
112
Net debt / Equity
0.09
0.52
0.61
-0.05
0.01
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, and (vii ) other current liabilities (excluding primari ly: (a) income taxes payable, (b) current derivative liabilities, (c) pens ion and other
employee benefits,
(d) payables under the share buyback program and (e) 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 ann ualizing revenues of certain acquisitions which were completed in
the same trailing twelve -month period.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2021
March 31, 2020
Net working capital:
Receivables, net
6,663
6,288
Contract assets
1,044
1,038
Inventories, net
4,475
4,358
Prepaid expenses
241
266
Accounts payable, trade
(4,453)
(4,170)
Contract liabilities
(1,855)
(1,665)
Other current liabilities
(1)
(3,211)
(2,797)
Net working capital
2,904
3,318
Total revenues for the three months ended:
March 31, 2021 / 2020
6,901
6,216
December 31, 2020 / 2019
7,182
7,068
September 30, 2020 / 2019
6,582
6,892
June 30, 2020 / 2019
6,154
7,171
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
–
(404)
Adjusted revenues for the trailing twelve months
26,819
26,943
Net working capital as a percentage of revenues (%)
10.8%
12.3%
(1) Amounts exclude $710 million and $717 million at March 31, 2021 and 2020, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities,
(c) pension and other employee benefits and (d) liabilities related to the divestment of the Power Grids business .
40 Q1 2021 FINA NCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash flow divided by Adjusted net income attributable to ABB
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from
extinguishment of debt, and (iii) gain on the sale of the Power Grids business included in discontinued operations .
Free cash flow
Free cash flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets,
and (ii) proceeds from sales of propert y, plant and equipment .
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow recorded by ABB in the twelve months preceding the relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income recorded by ABB (as adjusted) in the twelve months preceding the relevant balance sheet
date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
March 31, 2021
December 31, 2020
Net cash provided by operating activities – continuing operations
2,794
1,875
Adjusted for the effects of continuing operations:
Purchases of property, plant and equipment and intangible assets
(673)
(694)
Proceeds from sale of property, plant and equipment
111
114
Free cash flow from continuing operations
2,232
1,295
Net cash provided by (used in) operating activities – discontinued operations
19
(182)
Adjusted for the effects of discontinued operations:
Purchases of property, plant and equipment and intangible assets
(75)
(108)
Proceeds from sale of property, plant and equipment
–
1
Free cash flow
2,176
1,006
Adjusted net income attributable to ABB
(1)
628
478
Free cash flow conversion to net income
346%
210%
(1) Adjusted net income attributable to ABB for the year ended December 31, 2020, is adjusted to exclude goodwill impairment charges of $311 million, loss from
extinguishment of debt of $162 million and the gain on the sale of the Power Grids business included in discontinued operations of $5,141 million.
Reconciliation of the trailing twelve months to March 31, 2021
Continuing operations
Discontinued operations
($ 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
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)
Q2 2020
648
(140)
4
32
(60)
–
319
Q3 2020
398
(129)
41
10
–
–
(479)
Q4 2020
1,225
(262)
46
(43)
(15)
–
262
Q1 2021
523
(142)
20
20
–
–
526
Total for the trailing
twelve months to
March 31, 2021
2,794
(673)
111
19
(75)
–
628
(1) Adjusted net income attributable to ABB for Q3 2020 is adjusted to exclude goodwill impairment charges of $311 million, and the gain on the sale of the Power Grids
business included in discontinued operations of $5,320 million. Q4 2020 is adjusted to exclude the loss from extinguishment of debt of $162 million and the adjustment to
the gain on the sale of Power Grids of $179 million. Q1 2021 is adjusted to exclude the adjustment to the gain on the sale of Power Grids of $24 million.
41 Q1 2021 FINA NCIAL INFORMATION
Net f inance expenses
Definition
Net finance expenses is calculated as Interest and dividend income less Interest and other finance expense and Losses from extinguishment of debt .
Reconciliation
Three months ended March 31,
($ in millions)
2021
2020
Interest and dividend income
11
18
Interest and other finance expense
(55)
(22)
Net finance expenses
(44)
(4)
Book -to- bill ratio
Definition
Book-to -bill ratio is calculated as Orders received divided by Total revenues.
Reconciliation
Three months ended March 31,
2021
2020
($ in millions, unless otherwise indicated)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,531
3,140
1.12
3,121
2,773
1.13
Motion
1,917
1,667
1.15
1,901
1,510
1.26
Process Automation
1,656
1,407
1.18
1,757
1,462
1.20
Robotics & Discrete Automation
841
853
0.99
811
671
1.21
Corporate and Other
(189)
(166)
n.a.
(244)
(200)
n.a.
ABB Group
7,756
6,901
1.12
7,346
6,216
1.18
42 Q1 2021 FINA NCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71 11
www.abb.com
January 1 — April 6, 2021
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
Timo Ihamuotila
April 06, 2021
Share
13’886
CHF
29.25
Tarak Mehta
April 06, 2021
Share
12’980
CHF
29.25
Peter Terwiesch
April 06, 2021
Share
13’947
CHF
29.25
Morten Wierod
April 06, 2021
Share
8’778
CHF
29.25
Sami Atiya
April 06, 2021
Share
8’694
CHF
29.25
Theodor Swedjemark
March 09, 2021
Option
102’000
CHF
1.20
Peter Terwiesch
February 16, 2021
Share
10’000
CHF
26.48
Tarak Mehta
February 10, 2021
Share
75’000
CHF
26.04
Peter Terwiesch
February 10, 2021
Share
10’000
CHF
26.07
Key:
* Received instruments were delivered as part of the ABB Ltd Director’s or Executive Committee Member’s compensation as compensation for foregone
benefits
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: April 27, 2021.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: April 27, 2021.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance