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 2022
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
☒
⬜
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
⬜
Note:
attached annual report to security holders.
Indication by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
⬜
Note:
other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in
which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the
home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press
release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event,
has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
⬜
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
This Form 6-K consists of the following:
1.
Press release issued by ABB Ltd dated April 21, 2022 titled “Q1 2022 results”.
2.
Q1 2022 Financial Information.
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
—
ABB has started the year with a promising performance in the face of multiple external
uncertainties. I expect this year to result in improving profitability, solid cash flow and
execution of our planned portfolio activities
Björn Rosengren
, CEO
—
ZURICH, SWITZERLAND, APRIL 21, 2022
Q1 2022 results
Solid performance in an uncertain environment
●
1
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1
1
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2
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Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss Exchange
—
Q1 2022
First three months
Press Release
KEY FIGURES
CHANGE
($ millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Comparable
1
Orders
9,373
7,756
21%
28%
Revenues
6,965
6,901
1%
7%
Gross Profit
2,281
2,268
1%
as % of revenues
32.7%
32.9%
-0.2 pts
Income from operations
857
797
8%
Operational EBITA
1
997
959
4%
8%
as % of operational revenues
1
14.3%
13.8%
+0.5 pts
Income from continuing operations, net of tax
643
551
17%
Net income attributable to ABB
604
502
20%
Basic earnings per share ($)
0.31
0.25
25%
2
Cash flow from operating activities
4
(573)
543
n.a.
Cash flow from operating activities in continuing
operations
(564)
523
n.a.
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q1 2022 Financial Information.
2
EPS growth rates are computed using unrounded amounts.
3
Constant currency (not adjusted for portfolio changes).
4
Amount represents total for both continuing and discontinued operations.
ABB INTERIM REPORT
I
Q1 2022
In the first quarter , we witnessed the start of the war in Ukraine
– a human tragedy – and consequently one of our key priorities
was to ensure the safety and wellbeing of our people. In an
effort to support the people of Ukraine, we have made a
significant donation to the International Committee of the Red
Cross. Prior to suspending the intake of any new orders in
Russia it represented only 1-2% of ABB revenues.
Customer activity was strong throughout the quarter, resulting
in the very high order growth of 21% year -on-year
(28% comparable). Most major customer segments and regions
developed favorably and three out of four business areas
reported high double -digit growth. Notably, the high order intake
was driven by high general customer activity and not by large
orders, and includes a de-booking of approximately $190 million
in Process Automation.
We saw an increase in revenues which improved by 1%
(7% comparable), supported by a positive development in all
business areas except for Robotics & Discrete Automation, which
was hampered by component shortages. The order backlog
increased to $18.9 billion at the end of the period, up by 28%
year-on-year (32% comparable). The zero-Covid strategy in
China had no material impact on our ability to fulfill customer
deliveries in the first quarter. That said, we are monitoring the
situation and although difficult to quantify, we do not rule out
somewhat of an adverse near-term impact on operations due to
the local lock-downs.
In total, we achieved an Operational EBITA margin of 14.3%.
Due to the support from higher volumes and successful pricing
activities we managed to offset the adverse impacts from cost
inflation, primarily related to raw materials, certain components,
logistics and tight labor markets. In addition, the result was
supported by low costs in Corporate & Other. As a reminder,
last year’s Operational EBITA margin of 13.8%, was positively
impacted by 30 basis points from the recently divested
Mechanical Power Transmission business. Looking at the
underlying operations, I am pleased that we were able to
slightly improve the Operational EBITA margin in the current
environment of inflation and strained value chain. This reflects
that our hard work towards increased accountability,
transparency and speed is yielding results.
Cash flow from operating activities, amounted to
-$573 million. As expected, it declined compared with last year,
but the drop was sharper than anticipated due primarily to a
higher-than-expected build-up of net working capital , to support
deliveries from the order backlog. Cash delivery will clearly be
in focus going forward and I expect a solid full -year cash flow.
We made overall good progress towards our 2030 sustainability
goals in 2021, as publicized in our Sustainability Report in March.
As an example, we reduced our own CO2e emissions by 39%, from
the 2019 baseline. Additionally, our products, services and
solutions sold last year will enable our customers to reduce their
CO2e emissions by 11.5 megatons after the first year, which is a
good start towards our target of more than 100 megatons by 2030.
We made progress with the portfolio activities. We plan for an
exit of the Turbocharging business, although the geo-political
uncertainties caused us to delay the final decision on a spin-off
or sale to the second quarter. Prepar ing for the separation, we
launched the new company name and brand – Accelleron. For
the E-mobility business , our plan for a separate listing during
the second quarter remains intact, assuming constructive
market conditions.
I look forward to the impacts of the leadership exchange in
Electrification and Motion. I have great confidence in both Tarak
and Morten and expect them to continue to improve operational
performance for both growth and profitability. The change was
effective as of April 1.
Finally, I am pleased we announced a continuation of share
buybacks of up to $3 billion, including the fulfillment of the
promise to return the remaining $1.2 billion of proceeds related
to the divestment of Power Grids. This new buyback program
was launched on April 1.
Björn Rosengren
CEO
In the
second quarter of 2022
, ABB anticipates the underlying
market activity to remain broadly similar compared with the prior
quarter. Revenues in the second quarter tend to be sequentially
stronger in absolute terms, supporting a slight sequential
margin increase, assuming no escalation of lock-downs in
China.
In full-year 2022
, we expect a steady margin improvement
towards the 2023 target of at least 15%, supported by
increased efficiency as we fully incorporate the decentralized
operating model and performance culture in all our divisions.
Furthermore, we expect support from an anticipated positive
market momentum and our strong order backlog.
CEO summary
Outlook
ABB INTERIM REPORT
I
Q1 2022
Business momentum in the first quarter was very strong,
supported by most major customer segments. This generated a
strong positive order development in all business areas, despite
a smaller contribution from large orders compared with the prior
year and the order de-booking to the amount of $190 million in
the European region. There were no unusual order
cancellations. Service-related orders increased by
10% (15% comparable). In total, order intake improved by
21% (28% comparable) to $9,373 million, the highest quarterly
level in recent years.
The positive development was very strong in the segments of
machine building, food & beverage and in general industries as
well as in the automotive segment due to broadly accelerating
investments in the EV segment.
In transport and infrastructure, there was a very strong order
development across the renewables and e-mobility business.
The buildings segment improved in both the residential and
non-residential segments. In the marine segment a positive
development was noted for cruising as well as general marine &
port demand. The process -related business improved across
the customer segments, except for a stable development in
power generation.
From a geographical perspective, orders increased by more
than 20% in all three regions, on a comparable basis. Orders in
Europe increased by 14% (24% comparable). Americas
improved by 29% (40% comparable), supported by a stellar
33% (46% comparable) growth in the United States. In Asia,
Middle East and Africa orders increased by
22% (24% comparable), with China outperforming the region as
whole as it improved by 28% (26% comparable).
Compared with the fourth quarter, the level of component
constraints remained broadly similar and as expected, except
for a somewhat worse than anticipated development in
Robotics & Discrete Automation where customer deliveries
were delayed due to semiconductor shortages. The sharp
revenue decline in Robotics & Discrete Automation was
however more than offset by strong comparable improvements
in the other business areas. ABB Group revenues increased by
1% (7% comparable) to
$6,965 million, supported by both volume growth and good
pricing execution, but adversely impacted by changed
exchange rates.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q1 2022
Q1 2021
US$
Comparable
Europe
3,534
3,102
14%
24%
The Americas
2,897
2,247
29%
40%
Asia, Middle East
and Africa
2,942
2,407
22%
24%
ABB Group
9,373
7,756
21%
28%
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
28%
7%
FX
-4%
-3%
Portfolio changes
-3%
-3%
Total
21%
1%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q1 2022
Q1 2021
US$
Comparable
Europe
2,518
2,551
-1%
7%
The Americas
2,169
2,043
6%
15%
Asia, Middle East
and Africa
2,278
2,307
-1%
0%
ABB Group
6,965
6,901
1%
7%
ABB INTERIM REPORT
I
Q1 2022
Gross profit
Gross margin decreased to 32.7%, a slight decline of
20 basis points year -on-year, primarily due to the divestment of
Mechanical Power Transmission, but to some extent also to a
decline in Robotics & Discrete Automation. Gross profit improved
slightly by 1% to $2, 281 million.
Income from operations
Income from operations amounted to $857 million, improving by
$60 million, or 8%. The improvement was mainly driven by
operational performance, lower restructuring charges and changes
in obligations related to divested businesses, which more than
offset increased acquisition- and divestment-related costs.
Operational EBITA
Operational EBITA of $997 million was 4% higher (8% constant
currency) year-on-year, with the increased profit in Process
Automation as the main driver. Profitability in both Motion and
Process Automation improved, while it declined in Electrification
and Robotics & Discrete Automation.
The Operational EBITA margin increased by 50 basis points to
14.3%, supported by higher profitability in operations and improved
Operational EBITA in Corporate and Other, which was up by $69
million to -$32 million . Last year’s Operational EBITA margin for the
first quarter was 13.8%, positively impacted by 30 basis points from
the divested Mechanical Power Transmission business.
Earnings were positively impacted by higher volumes and
successful pricing activities, which combined more than offset the
adverse effects from cost inflation primarily related to raw materials,
certain components, logistics and tight labor market. Selling,
general and administrative (SG&A) expenses decreased slightly by
2% (up 2% in constant currency), the combined impact from
increased sales cost s to support the high demand environment and
a decrease in General & Administrative expenses.
Net finance expenses
Net finance expenses declined to $9 million from $44 million,
primarily reflecting lower foreign exchange losses and lower
interest charges on borrowings as well as a reduction in certain
income tax-related risks.
Income tax
Income tax expense was $241 million with an effective tax rate of
27.3%, including $61 million in negative tax impacts related to the
separation of E-mobility and Turbocharging businesses.
Net income and earnings per share
Net income attributable to ABB was $604 million and increased 20%
from last year, mainly due to increased earnings in continuing
operations and lower net finance expenses. Consequently, basic
earnings per share was $0.31, and increased from $0.25, year-on-
year.
Earnings
ABB INTERIM REPORT
I
Q1 2022
Net working capital
Net working capital amounted to $3,461 million, increasing
both year-on-year from $2,904 million and sequentially from
$2,303 million. The sequential increase was driven primarily
by inventories to support future deliveries to the strong
market demand, as well as receivables. Net working capital
as a percentage of revenues
1
Capital expenditures
Purchases of property, plant and equipment and intangible
assets amounted to $187 million, somewhat higher than
expected driven mainly by Electrification and Motion.
Net debt
Net debt
1
quarter, and increased from $1,233 million, year-on-year.
Sequentially, the net cash position of $98 million changed to a
net debt position, as increased debt more than offset
increased Cash & equivalents , including paid dividend.
Cash flows
Cash flow from operating activities in continuing operations
was -$564 million and declined year-on-year from
$523 million. The quarterly year-on-year decline was driven
by a higher build-up of trade net working capital, mainly
related to inventories to support future deliveries on the high
order intake as well as receivables, but also by higher pay-
out of incentives due to the strong financial performance in
2021. It also reflects approximately $170 million of cash
paid for income taxes relating to the E-mobility and
Turbocharging separations . ABB expects a solid cash flow
delivery in 2022.
Share buyback program
ABB launched a new share buyback program of up to $3 billion
on April 1. As part of this program, ABB intends to return to its
shareholders the remaining $1.2 billion of the $7.8 billion of
cash proceeds from the Power Grids divestment. Shares are
being repurchased on the second trading line. To conclude the
previous buyback program, 31,438,500 shares were
repurchased in the first quarter for the amount of approximately
$1 billion. The total number of ABB Ltd’s issued shares is
2,053,148,264, including those approved for cancellation at
ABB's 2022 AGM.
($ millions,
unless otherwise indicated)
Mar. 31
2022
Mar. 31
2021
Dec. 31
2021
Short term debt and current
maturities of long-term debt
3,114
1,336
1,384
Long-term debt
6,171
5,619
4,177
Total debt
9,285
6,955
5,561
Cash & equivalents
5,216
3,466
4,159
Restricted cash - current
30
72
30
Marketable securities and
short-term investments
967
1,884
1,170
Restricted cash - non-current
300
300
300
Cash and marketable securities
6,513
5,722
5,659
Net debt (cash)*
2,772
1,233
(98)
Net debt (cash)* to EBITDA ratio
0.42
0.4
(0.01)
Net debt (cash)* to Equity ratio
0.20
0.09
(0.01)
*
At Mar. 31, 2022, Mar. 31, 2021 and Dec. 31, 2021, net debt(cash) excludes net pension
(assets)/liabilities of $(13) million, $684 million and $45 million, respectively.
Balance sheet & Cash flow
ABB INTERIM REPORT
I
Q1 2022
Orders and revenues
Demand was very strong across all customer segments in the
first quarter, resulting in an order growth of
25% (29% comparable) to $4,397 million, the highest level in
recent history. Book-to-bill was 1.3 and the order backlog
extended to a record level of $6.5 billion.
●
All divisions reported double-digit order growth, including
the newly established Service division. Momentum was
clearly strongest in E-mobility, which more than doubled its
orders.
●
All customer segments contributed strongly to the high
order intake.
●
Orders increased at a steep double-digit growth rate of 24%
(35% comparable) in Europe, and by
42% (42% comparable) in the Americas, including a 50%
improvement in the United States. Asia, Middle East and
Africa increased by 6% (7% comparable) supported by an
11% (9% comparable) increase in China.
●
Revenues improved by 6% (10% comparable) to
$3,327 million, with strong contribution from pricing actions,
although hampered by low volumes in the largest division,
Distribution Solutions , where customer deliveries were
adversely impacted by a tight supply chain. Double-digit
growth rates were reported in both the Americas and
Europe, while Asia, Middle East and Africa improved at a
mid-single digit rate.
During the quarter, a new service division was formed
through internal reorganization . Transparency will improve
by moving the service business mainly out of Distribution
Solutions, with the aim to increase focus on its operational
performance.
Profit
The Operational EBITA was $510 million, remaining stable,
while it improved by 5% in constant currency , which on
higher revenues resulted in a margin decline of 80 basis
points to 15.4%.
●
The strained supply chain impacted the largest division,
Distribution Solutions, due to its large systems sales. This
and the impacts from cost inflation - mainly driven by higher
raw material costs as the previous year period benefited
from raw material hedges at lower price point - more than
offset the benefits from higher volumes, pricing and
operational efficiencies, year-on-year.
—
Electrification
CHANGE
($ millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Comparable
Orders
4,397
3,531
25%
29%
Order backlog
6,504
4,699
38%
42%
Revenues
3,327
3,140
6%
10%
Operational EBITA
510
511
0%
as % of operational revenues
15.4%
16.2%
-0.8 pts
Cash flow from operating activities
39
319
-88%
No. of employees (FTE equiv.)
50,860
50,990
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
29%
10%
FX
-4%
-4%
Portfolio changes
0%
0%
Total
25%
6%
ABB INTERIM REPORT
I
Q1 2022
Orders and revenues
Order intake increased by 15% (32% comparable) to
$2,202 million, the highest level for several years, despite
the full impact from the divestment of Mechanical Power
Transmission (Dodge) as well as a smaller contribution from
large orders, year-on-year.
●
Customer activity was high in all segments and all
divisions contributed strongly to order growth, except for
Traction which faced a high comparable from last year.
●
Demand was strong in all major regions. Orders
increased by 18% (31% comparable) in Europe and by
27% (29% comparable) in Asia, Middle East and Africa.
The Americas reported largely stable orders (up
34% comparable) mainly due to the divestment of Dodge.
●
The divestment of Dodge weighed on reported revenue
growth which decreased by 6% (up 9% comparable).
Supply chain constraints eased somewhat sequentially,
not least due to the implemented redesigns and validating
of alternative suppliers. Most of the divisions contributed
to the comparable revenue growth.
Profit
Despite the divestment of the high margin Dodge business,
the Operational EBITA margin increased by 30 basis points
to 17.4%. Operational EBITA amounted to $274 million
.
●
The impacts from higher volumes and strong pricing
execution more than offset the adverse impacts from cost
inflation, mainly related to raw materials and freight.
●
The divestment of the Dodge business had an adverse
impact of 90 basis points on the Operational EBITA
margin, year-on-year.
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
32%
8%
FX
-5%
-4%
Portfolio changes
-12%
-10%
Total
15%
-6%
—
Motion
CHANGE
($ millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Comparable
Orders
2,202
1,917
15%
32%
Order backlog
4,317
3,419
26%
32%
Revenues
1,572
1,667
-6%
9%
Operational EBITA
274
289
-5%
as % of operational revenues
17.4%
17.1%
+0.3 pts
Cash flow from operating activities
(2)
324
n.a.
No. of employees (FTE equiv.)
20,330
20,980
ABB INTERIM REPORT
I
Q1 2022
Orders and revenues
On generally strong markets, the order intake increased by
2% (6% comparable) and amounted to $1,692 million,
despite the order de -booking valued at approximately $190
million booked in Europe.
●
Demand was strong across most customer segments,
with a particularly strong development in the marine and
mining & metals segment . Only the power generation
segment remained stable . Service orders increased by
7% (12% comparable ).
●
The order de-booking triggered a decline of 25% (20%
comparable) in total order growth in Europe. However,
steep order growth was reported in both the Americas,
22% (23% comparable) and in Asia, Middle East and
Africa, 28% (31% comparable).
●
Revenues increased by 7% (11% comparable), supported
by a positive development in most divisions and with
higher-than-expected deliveries towards the end of the
quarter as the adverse impact of semi-conductor
shortages were somewhat lower than anticipated.
Profit
All divisions reported double-digit Operational EBITA margin
with both earnings and profitability improvements noted in
most divisions, year-on-year. In total, the business area’s
Operational EBITA increased by 26 %, to $196 million, and
the Operational EBITA margin improved to 13.0% from
11.0%.
●
The earnings and margin increases were driven by higher
volumes and efficiency measures, which more than offset
cost inflation mainly in freight and a slight negative
divisional mix.
●
Impacts on profitability from component shortages were
limited in the period, although may increase as the year
progresses.
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
6%
11%
FX
-4%
-4%
Portfolio changes
0%
0%
Total
2%
7%
—
Process Automation
CHANGE
($ millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Comparable
Orders
1,692
1,656
2%
6%
Order backlog
6,190
5,900
5%
7%
Revenues
1,506
1,407
7%
11%
Operational EBITA
196
155
26%
as % of operational revenues
13.0%
11.0%
+2 pts
Cash flow from operating activities
60
233
-74%
No. of employees (FTE equiv.)
21,920
22,000
ABB INTERIM REPORT
I
Q1 2022
Orders and revenues
Order intake reached the highest quarterly level for several
years and amounted to $1,308 million, up by 56% (60%
comparable), year-on-year. Revenues on the other hand
declined by 14% (12% comparable) to $730 million, materially
hampered by component shortages. Consequently, order
backlog increased to the high level of $2.5 billion, and although
the supply chain is expected to remain strained, the first quarter
should have marked the low point for Robotics & Discrete
Automation.
●
The steep order growth was driven by very strong momentum
in both Robotics and Machine Automation with contribution
from a strong base business as well as from large orders in
Robotics. All customer segments increased at a double-digit
growth rate, with particularly strong momentum in automotive
– driven by EV investments in China, general industry and
machine builders.
●
All major regions benefited from a very strong order
momentum. Europe increased by 40% (49% comparable)
and the Americas close to doubled at 89% (89%
comparable). Asia, Middle East and Africa improved by 67%
(66% comparable) with China growth reported at 96% (93%
comparable).
●
Revenues in both divisions were adversely impacted by
delayed customer deliveries due to component shortages,
primarily related to semi-conductors. The supply situation
deteriorated somewhat sequentially. Despite the protracted
delivery times, there were no cancellations. The COVID-
related lock-downs in China had no significant impact in the
first quarter, but some effects on the business area’s
operations are anticipated in the second quarter on the
Shanghai manufacturing site.
Profit
Both profit and profitability declined year-on-year due to the
low volumes and cost inflation linked to the tight supply
chain. Operational EBITA declined by 53% with a margin
deterioration of 570 basis points.
●
In total, the decline in volumes triggered underabsorption
of fixed costs, which combined with cost inflation related
to freight and input costs more than offset the contribution
from cost measures and positive price execution, year-
on-year.
—
Robotics & Discrete Automation
Growth
Q1
Q1
Change year-on-year
Orders
Revenues
Comparable
60%
-12%
FX
-6%
-3%
Portfolio changes
2%
1%
Total
56%
-14%
CHANGE
($ millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Comparable
Orders
1,308
841
56%
60%
Order backlog
2,495
1,362
83%
86%
Revenues
730
853
-14%
-12%
Operational EBITA
49
105
-53%
as % of operational revenues
6.7%
12.4%
-5.7 pts
Cash flow from operating activities
(29)
111
n.a.
No. of employees (FTE equiv.)
10,690
10,290
ABB INTERIM REPORT
I
Q1 2022
10
Quarterly highlights
●
ABB adopted the United Nations (UN) Women’s
Empowerment Principles to promote gender equality and
women’s empowerment in the workplace, marketplace and
community. As part of further promoting an inclusive
culture, more than 7,500 senior managers at ABB have
taken part in unconscious bias training.
●
ABB released its Sustainability Report 2021, outlining the
achievements of the company under the four pillars of its
ambitious 2030 sustainability strategy. Notably, ABB made
strong progress on its way towards reaching carbon
neutrality in its own operations by 2030 as it reduced its
CO2 emissions by 39 percent in 2021 vs. 2019.
●
ABB has entered into an agreement with leading global
transport solutions provider, Scania, to provide a
comprehensive range of robotic solutions for Scania’s new
highly automated battery assembly plant in Sweden. The
new facility will be a key milestone on Scania’s journey
towards the electrification of heavy vehicles.
●
ABB and Ballard Power Systems (Ballard) have joined
forces in an industry -first partnership to develop high-
power fuel cell concept capable of generating
3 megawatts (4,000 HP) of electrical power. The aim is to
make zero-emission hydrogen fuel cell technology
commercially available for larger ships.
Story of the quarter
ABB published the findings of a new global study of
international business and technology leaders on industrial
transformation, looking at the intersection of digitalization
and sustainability. The study, “Billions of better decisions:
industrial transformation’s new imperative,” examines the
current take-up of the Industrial Internet of Things (IoT) and
its potential for improving energy efficiency, lowering
greenhouse gas emissions and driving change. With more
than 70 percent of ABB’s R&D resources dedicated to
digital and software innovations, and a robust ecosystem of
digital partners, including Microsoft, IBM and Ericsson, the
company has established a leading presence in Industrial
IoT.
Q1 outcome
●
27% reduction of CO
₂
year
●
21% year-on-year increase in LTIFR due to a slight increase
in absolute lost time incidents as COVID-related restrictions
loosened and less contractor hours booked for March
●
3%-points increase in number of women in senior
management supported by targeted initiatives across all
business areas
—
Sustainability
Q1 2022
Q1 2021
CHANGE
12M ROLLING
CO2e own operations emissions,
kt scope 1 and 2
1
96
131
-27%
401
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.17
0.14
21%
0.15
Share of females in senior management
positions, %
16.9
14.3
+2.6 pts
15.5
1
CO
₂
ABB INTERIM REPORT
I
Q1 2022
During Q1 2022
●
On January 27, ABB announced that it had increased its
shareholdings to approximately 60% in start-up company
InCharge Energy to strengthen its E-mobility division in
the North American market and expand its software and
digital services offering. InCharge Energy tailors end-to-
end EV charging infrastructure solutions, including the
procurement, installation, operation, and maintenance of
charging systems, and provides cloud-based software
services for the optimization of energy management.
●
On February 2, ABB announced that Andrea Antonelli
was appointed General Counsel and Member of the
Executive Committee, as of March 1, 2022. Furthermore,
Andrea became ABB’s Company Secretary on March 24,
2022, following the Annual General Meeting.
●
On February 25, ABB announced changes to Business
Area leadership in Executive Committee. As of April 1,
2022, Morten Wierod, who was President of Motion,
became President of Electrification, while Tarak Mehta,
who was President of Electrification, has become
President of Motion.
●
On March 24, ABB announced its plans to launch a new
share buyback program of up to $3 billion. The program
was launched on April 1.
●
On March 24, ABB announced that shareholders
approved all proposals at the 2022 Annual General
Meeting.
●
On March 28, ABB announced that Karin Lepasoon had
been appointed Chief Communications & Sustainability
Officer and Member of the Executive Committee.
Lepasoon will assume her position latest on October 1,
2022.
After Q1 2022
.
Significant events
ABB INTERIM REPORT
I
Q1 2022
12
1
Excludes one project estimated to a total of ~$100 million, that is ongoing in the non-core business. Exact exit timing is difficult to assess due to legal proceedings etc.
2
Excludes restructuring-related expenses of ~$200 million from the full exit of a product group within our non-core businesses expected in Q2 2022.
3
Costs relating to the announced exits and the potential E-mobility listing.
4
Excluding share of net income from JV.
5
Excluding impact of acquisitions or divestments or any significant non-operational items.
($ in millions, unless otherwise stated)
FY 2022
Q2 2022
Net finance expenses
~(100)
~(30)
unchanged
Non-operational pension
(cost) / credit
~140
~35
unchanged
Effective tax rate
~25%
~27%
unchanged
Capital Expenditures
~(750)
~(200)
unchanged
($ in millions, unless otherwise stated)
FY 2022
1
Q2 2022
Corporate and Other Operational costs
~(300)
~(90)
from ~(330)
Non-operating items
Acquisition-related amortization
~(230)
~(60)
unchanged
Restructuring and restructuring related
~(130)
2
~(40)
from ~(150)
Separation costs
3
~(180)
~(70)
unchanged
ABB Way transformation
~(150)
~(40)
unchanged
Certain other income and expenses
related to PG divestment
4
~(25)
~(5)
from ~(20)
Additional 2022 guidance
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.
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2021
Motion
Mechanical Power Transmission
1-Nov
645
1,500
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Electrification
InCharge Energy, Inc (majority stake)
26-Jan
16
40
2021
Electrification
Enervalis (majority stake)
26-Apr
1
22
Robotics & Discrete Automation
ASTI Mobile Robotics Group
2-Aug
36
300
Additional figures
ABB Group
Q1 2021
Q2 2021
Q3 2021
Q4 2021
FY 2021
Q1 2022
EBITDA, $ in million
1,024
1,324
1,072
3,191
6,611
1,067
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
14.90
n.a.
Net debt/Equity
0.09
0.16
0.13
(0.01)
(0.01)
0.20
Net debt/ EBITDA 12M rolling
0.4
0.7
0.5
(0.01)
(0.01)
0.42
Net working capital, % of 12M rolling revenues
10.8%
11.6%
10.2%
8.1%
8.1%
12.1%
Earnings per share, basic, $
0.25
0.37
0.33
1.34
2.27
0.31
Earnings per share, diluted, $
0.25
0.37
0.32
1.33
2.25
0.31
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.82
n.a.
Share price at the end of period, CHF
28.56
31.39
31.39
34.90
34.90
30.17
Share price at the end of period, $
30.47
33.99
33.36
38.17
38.17
32.34
Number of employees (FTE equivalents)
105,330
106,370
106,080
104,420
104,420
104,720
No. of shares outstanding at end of period (in millions)
2,024
2,006
1,993
1,958
1,958
1,929
Acquisitions and divestments, last twelve months
ABB INTERIM REPORT
I
Q1 2022
13
For additional information please contact:
Media Relations
Phone: +41 43 317 71 11
Email:
media.relations@ch.abb.com
Investor Relations
Phone: +41 43 317 71 11
Email:
investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Financial calendar
2022
Mid-May Proposed timing to receive dividend for shares on US-NYSE
May 17 ABB Motion CMD in Helsinki
May 18 ABB Process Automation CMD in Helsinki
July 21
Q2 2022 results
October 20
Q3 2022 results
This press release includes forward-looking information and
statements as well as other statements concerning the
outlook for our business, including those in the sections of
this release titled “CEO summary,” “Outlook,” “Balance
sheet & cash flow”, “Robotics and Discrete Automation,”
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,” “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.
Some important factors that could cause such differences
include, among others, business risks associated with the
volatile global economic environment and political
conditions, costs associated with compliance activities,
market acceptance of new products and services, changes
in governmental regulations and currency exchange rates
and such other factors as may be discussed from time to
time in ABB Ltd’s filings with the U.S. Securities and
Exchange Commission, including its Annual Reports on
Form 20-F. Although ABB Ltd believes that its expectations
reflected in any such forward looking statement are based
upon reasonable assumptions, it can give no assurance that
those expectations will be achieved.
The Q1 2022 results press release and presentation slides
are available on the ABB News Center at
www.abb.com/news and on the Investor Relations
homepage at www.abb.com/investorrelations.
A conference call and webcast for analysts and investors is
scheduled to begin today at 10:00 a.m. CET.
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.
Q1 results presentation on April 21, 2022
Important notice about forward-looking information
ABB
achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion
portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back
more than 130 years, ABB’s success is driven by about 105,000 talented employees in over 100 countries.
1 Q1 2022 FINANCIAL INFORMATION
April 21, 2022
Q1 2022
Financial information
2 Q1 2022 FINANCIAL INFORMATION
—
Financial Information
Contents
03
─ 05 Key Figures
06 ─
30 Consolidated Financial Information (unaudited)
31 ─
40 Supplemental Reconciliations and Definitions
3 Q1 2022 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Comparable
(1)
Orders
9,373
7,756
21%
28%
Order backlog (end March)
18,901
14,750
28%
32%
Revenues
6,965
6,901
1%
7%
Gross Profit
2,281
2,268
1%
as % of revenues
32.7%
32.9%
-0.2 pts
Income from operations
857
797
8%
Operational EBITA
(1)
997
959
4%
8%
(2)
as % of operational revenues
(1)
14.3%
13.8%
+0.5 pts
Income from continuing operations, net of tax
643
551
17%
Net income attributable to ABB
604
502
20%
Basic earnings per share ($)
0.31
0.25
25%
(3)
Cash flow from operating activities
(4)
(573)
543
n.a.
Cash flow from operating activities in continuing operations
(564)
523
n.a.
(1) For a reconciliation of non-GAAP measures see “
” on page 31.
(2) Constant currency (not adjusted for portfolio changes).
(3) EPS growth rates are computed using unrounded amounts.
(4) Cash flow from operating activities includes both continuing and discontinued operations.
4 Q1 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q1 2022
Q1 2021
US$
Local
Comparable
Orders
ABB Group
9,373
7,756
21%
25%
28%
Electrification
4,397
3,531
25%
29%
29%
Motion
2,202
1,917
15%
20%
32%
Process Automation
1,692
1,656
2%
6%
6%
Robotics & Discrete Automation
1,308
841
56%
62%
60%
Corporate and Other
(incl. intersegment eliminations)
(226)
(189)
Order backlog (end March)
ABB Group
18,901
14,750
28%
32%
32%
Electrification
6,504
4,699
38%
42%
42%
Motion
4,317
3,419
26%
30%
32%
Process Automation
6,190
5,900
5%
7%
7%
Robotics & Discrete Automation
2,495
1,362
83%
87%
86%
Corporate and Other
(incl. intersegment eliminations)
(605)
(630)
Revenues
ABB Group
6,965
6,901
1%
4%
7%
Electrification
3,327
3,140
6%
10%
10%
Motion
1,572
1,667
-6%
-2%
9%
Process Automation
1,506
1,407
7%
11%
11%
Robotics & Discrete Automation
730
853
-14%
-11%
-12%
Corporate and Other
(incl. intersegment eliminations)
(170)
(166)
Income from operations
ABB Group
857
797
Electrification
506
440
Motion
254
265
Process Automation
151
147
Robotics & Discrete Automation
22
82
Corporate and Other
(incl. intersegment eliminations)
(76)
(137)
Income from operations %
ABB Group
12.3%
11.5%
Electrification
15.2%
14.0%
Motion
16.2%
15.9%
Process Automation
10.0%
10.4%
Robotics & Discrete Automation
3.0%
9.6%
Operational EBITA
ABB Group
997
959
4%
8%
Electrification
510
511
0%
5%
Motion
274
289
-5%
-3%
Process Automation
196
155
26%
31%
Robotics & Discrete Automation
49
105
-53%
-50%
Corporate and Other
(incl. intersegment eliminations)
(32)
(101)
Operational EBITA %
ABB Group
14.3%
13.8%
Electrification
15.4%
16.2%
Motion
17.4%
17.1%
Process Automation
13.0%
11.0%
Robotics & Discrete Automation
6.7%
12.4%
Cash flow from operating activities
ABB Group
(573)
543
Electrification
39
319
Motion
(2)
324
Process Automation
60
233
Robotics & Discrete Automation
(29)
111
Corporate and Other
(incl. intersegment eliminations)
(632)
(464)
Discontinued operations
(9)
20
5 Q1 2022 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q1 22
Q1 21
Q1 22
Q1 21
Q1 22
Q1 21
Q1 22
Q1 21
Q1 22
Q1 21
Revenues
6,965
6,901
3,327
3,140
1,572
1,667
1,506
1,407
730
853
Foreign exchange/commodity timing
differences in total revenues
(3)
33
(10)
10
3
19
(1)
5
5
(3)
Operational revenues
6,962
6,934
3,317
3,150
1,575
1,686
1,505
1,412
735
850
Income from operations
857
797
506
440
254
265
151
147
22
82
Acquisition-related amortization
60
65
31
29
8
13
1
1
21
20
Restructuring, related and
implementation costs
16
35
2
17
8
1
5
3
1
5
Changes in obligations related to
divested businesses
(14)
2
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
1
6
1
6
–
–
–
–
–
–
Gains and losses from sale of businesses
–
3
–
3
–
–
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
59
10
19
6
5
3
33
1
1
–
Other income/expense relating to the
Power Grids joint venture
35
17
–
–
–
–
–
–
–
–
Certain other non-operational items
(2)
12
(30)
(6)
–
–
–
–
–
–
Foreign exchange/commodity timing
differences in income from operations
(15)
12
(19)
16
(1)
7
6
3
4
(2)
Operational EBITA
997
959
510
511
274
289
196
155
49
105
Operational EBITA margin (%)
14.3%
13.8%
15.4%
16.2%
17.4%
17.1%
13.0%
11.0%
6.7%
12.4%
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q1 22
Q1 21
Q1 22
Q1 21
Q1 22
Q1 21
Q1 22
Q1 21
Q1 22
Q1 21
Depreciation
136
144
67
64
27
32
18
19
15
13
Amortization
74
83
37
37
9
14
3
3
21
21
including total acquisition-related amortization of:
60
65
31
29
8
13
1
1
21
20
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q1 22
Q1 21
US$
Local
parable
Q1 22
Q1 21
US$
Local
parable
Europe
3,534
3,102
14%
24%
24%
2,518
2,551
-1%
7%
7%
The Americas
2,897
2,247
29%
29%
40%
2,169
2,043
6%
6%
15%
of which United States
2,225
1,679
33%
33%
46%
1,582
1,532
3%
3%
14%
Asia, Middle East and Africa
2,942
2,407
22%
24%
24%
2,278
2,307
-1%
0%
0%
of which China
1,537
1,199
28%
26%
26%
1,100
1,176
-6%
-8%
-8%
ABB Group
9,373
7,756
21%
25%
28%
6,965
6,901
1%
4%
7%
6 Q1 2022 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Interim Consolidated Income Statements (unaudited)
Three months ended
($ in millions, except per share data in $)
Mar. 31, 2022
Mar. 31, 2021
Sales of products
5,749
5,707
Sales of services and other
1,216
1,194
Total revenues
6,965
6,901
Cost of sales of products
(3,968)
(3,924)
Cost of services and other
(716)
(709)
Total cost of sales
(4,684)
(4,633)
Gross profit
2,281
2,268
Selling, general and administrative expenses
(1,239)
(1,263)
Non-order related research and development expenses
(277)
(293)
Other income (expense), net
92
85
Income from operations
857
797
Interest and dividend income
13
11
Interest and other finance expense
(22)
(55)
Non-operational pension (cost) credit
36
50
Income from continuing operations before taxes
884
803
Income tax expense
(241)
(252)
Income from continuing operations, net of tax
643
551
Loss from discontinued operations, net of tax
(11)
(28)
Net income
632
523
Net income attributable to noncontrolling interests
(28)
(21)
Net income attributable to ABB
604
502
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
615
530
Loss from discontinued operations, net of tax
(11)
(28)
Net income
604
502
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.32
0.26
Loss from discontinued operations, net of tax
(0.01)
(0.01)
Net income
0.31
0.25
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.31
0.26
Loss from discontinued operations, net of tax
(0.01)
(0.01)
Net income
0.31
0.25
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,936
2,015
Diluted earnings per share attributable to ABB shareholders
1,953
2,034
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Interim Consolidated Financial Information
7 Q1 2022 FINANCIAL INFORMATION
—
ABB Ltd Interim Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Three months ended
($ in millions)
Mar. 31, 2022
Mar. 31, 2021
Total comprehensive income, net of tax
577
325
Total comprehensive income attributable to noncontrolling interests, net of tax
(23)
(24)
Total comprehensive income attributable to ABB shareholders, net of tax
554
301
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Interim Consolidated Financial Information
8 Q1 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Mar. 31, 2022
Dec. 31, 2021
Cash and equivalents
5,216
4,159
Restricted cash
30
30
Marketable securities and short-term investments
967
1,170
Receivables, net
6,851
6,551
Contract assets
1,072
990
Inventories, net
5,372
4,880
Prepaid expenses
289
206
Other current assets
537
573
Current assets held for sale and in discontinued operations
140
136
Total current assets
20,474
18,695
Restricted cash, non-current
300
300
Property, plant and equipment, net
4,044
4,045
Operating lease right-of-use assets
867
895
Investments in equity-accounted companies
1,626
1,670
Prepaid pension and other employee benefits
915
892
Intangible assets, net
1,572
1,561
Goodwill
10,637
10,482
Deferred taxes
1,319
1,177
Other non-current assets
517
543
Total assets
42,271
40,260
Accounts payable, trade
4,830
4,921
Contract liabilities
2,080
1,894
Short-term debt and current maturities of long-term debt
3,114
1,384
Current operating leases
218
230
Provisions for warranties
999
1,005
Dividends payable to shareholders
824
–
Other provisions
1,311
1,386
Other current liabilities
4,114
4,367
Current liabilities held for sale and in discontinued operations
365
381
Total current liabilities
17,855
15,568
Long-term debt
6,171
4,177
Non-current operating leases
671
689
Pension and other employee benefits
990
1,025
Deferred taxes
745
685
Other non-current liabilities
2,091
2,116
Non-current liabilities held for sale and in discontinued operations
30
43
Total liabilities
28,553
24,303
Commitments and contingencies
Redeemable noncontrolling interest
80
–
Stockholders’ equity:
Common stock, CHF 0.12 par value
(2,053 million shares issued at March 31, 2022, and December 31, 2021)
178
178
Additional paid-in capital
–
22
Retained earnings
21,278
22,477
Accumulated other comprehensive loss
(4,138)
(4,088)
Treasury stock, at cost
(124 million and 95 million shares at March 31, 2022, and December 31, 2021, respectively)
(4,071)
(3,010)
Total ABB stockholders’ equity
13,247
15,579
Noncontrolling interests
391
378
Total stockholders’ equity
13,638
15,957
Total liabilities and stockholders’ equity
42,271
40,260
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9 Q1 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Three months ended
($ in millions)
Mar. 31, 2022
Mar. 31, 2021
Operating activities:
Net income
632
523
Loss from discontinued operations, net of tax
11
28
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
210
227
Changes in fair values of investments
(24)
(10)
Pension and other employee benefits
(46)
(50)
Deferred taxes
(116)
59
Loss from equity-accounted companies
48
35
Net loss (gain) from derivatives and foreign exchange
(28)
20
Net gain from sale of property, plant and equipment
(32)
(11)
Other
36
20
Changes in operating assets and liabilities:
Trade receivables, net
(317)
(2)
Contract assets and liabilities
107
(90)
Inventories, net
(542)
(168)
Accounts payable, trade
7
42
Accrued liabilities
(390)
(76)
Provisions, net
(53)
1
Income taxes payable and receivable
14
(50)
Other assets and liabilities, net
(81)
25
Net cash provided by (used in) operating activities – continuing operations
(564)
523
Net cash provided by (used in) operating activities – discontinued operations
(9)
20
Net cash provided by (used in) operating activities
(573)
543
Investing activities:
Purchases of investments
(128)
(309)
Purchases of property, plant and equipment and intangible assets
(187)
(142)
Acquisition of businesses (net of cash acquired) and increases in cost- and equity-accounted companies
(145)
(4)
Proceeds from sales of investments
305
391
Proceeds from maturity of investments
–
80
Proceeds from sales of property, plant and equipment
35
20
Proceeds from sales of businesses (net of transaction costs and cash disposed) and cost- and
equity-accounted companies
–
(2)
Net cash from settlement of foreign currency derivatives
66
(61)
Other investing activities
10
(8)
Net cash used in investing activities – continuing operations
(44)
(35)
Net cash used in investing activities – discontinued operations
(21)
(44)
Net cash used in investing activities
(65)
(79)
Financing activities:
Net changes in debt with original maturities of 90 days or less
1,305
87
Increase in debt
2,542
991
Repayment of debt
(41)
(47)
Delivery of shares
370
760
Purchase of treasury stock
(1,561)
(1,386)
Dividends paid
(889)
(844)
Dividends paid to noncontrolling shareholders
(1)
(1)
Other financing activities
(34)
(36)
Net cash provided by (used in) financing activities – continuing operations
1,691
(476)
Net cash provided by financing activities – discontinued operations
–
–
Net cash provided by (used in) financing activities
1,691
(476)
Effects of exchange rate changes on cash and equivalents and restricted cash
4
(51)
Net change in cash and equivalents and restricted cash
1,057
(63)
Cash and equivalents and restricted cash, beginning of period
4,489
3,901
Cash and equivalents and restricted cash, end of period
5,546
3,838
Supplementary disclosure of cash flow information:
Interest paid
9
12
Income taxes paid
340
256
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10 Q1 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
($ in millions)
Common
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total ABB
stockholders’
equity
Non-
controlling
interests
Total
stockholders’
equity
Balance at January 1, 2021
188
83
22,946
(4,002)
(3,530)
15,685
314
15,999
Comprehensive income:
Net income
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
Balance at January 1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Comprehensive income:
Net income
604
604
28
632
Foreign currency translation
adjustments, net of tax of $0
(70)
(70)
(5)
(75)
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 $10
28
28
28
Change in derivative instruments
and hedges, net of tax of $2
4
4
4
Total comprehensive income
554
23
577
Changes in noncontrolling interests
(10)
(10)
(7)
(17)
Dividends to
noncontrolling shareholders
–
(3)
(3)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Share-based payment arrangements
12
12
12
Purchase of treasury stock
(1,561)
(1,561)
(1,561)
Delivery of shares
(26)
(104)
500
370
370
Other
2
2
2
Balance at March 31, 2022
178
–
21,278
(4,138)
(4,071)
13,247
391
13,638
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11 Q1 2022 FINANCIAL INFORMATION
—
Notes to the Consolidated Financial Information (unaudited)
─
Note 1
The Company and basis of presentation
ABB Ltd and its subsidiaries (collectively, the Company) together form a leading global technology company, connecting software to its electrification, robotics,
automation and motion portfolio to drive performance to new levels.
The Company’s Consolidated Financial Information is prepared in accordance with United States of America generally accepted accounting principles (U.S.
GAAP) for interim financial reporting. As such, the Consolidated Financial Information does not include all the information and notes required under U.S. GAAP for
annual consolidated financial statements. Therefore, such financial information should be read in conjunction with the audited consolidated financial statements in
the Company’s Annual Report for the year ended December 31, 2021.
The preparation of financial information in conformity with U.S. GAAP requires management to make assumptions and estimates that directly affect the amounts
reported in the Consolidated Financial Information. These accounting assumptions and estimates include:
●
growth rates, discount rates and other assumptions used to determine impairment of long-lived assets and in testing goodwill for impairment,
●
estimates to determine valuation allowances for deferred tax assets and amounts recorded for unrecognized tax benefits,
●
assumptions used in determining inventory obsolescence and net realizable value,
●
estimates and assumptions used in determining the initial fair value of retained noncontrolling interest and certain obligations in connection with
divestments,
●
estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations,
●
estimates of loss contingencies associated with litigation or threatened litigation and other claims and inquiries, environmental damages, product
warranties, self-insurance reserves, regulatory and other proceedings,
●
estimates used to record expected costs for employee 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 future material, labor and project-related overhead costs, used in determining the percentage-of-
completion on projects, as well as the amount of variable consideration the Company expects to be entitled to.
The actual results and outcomes may differ from the Company’s estimates and assumptions.
A portion of the Company’s activities (primarily long-term construction activities) has an operating cycle that exceeds one year. For classification of current assets
and liabilities related to such activities, the Company elected to use the duration of the individual contracts as its operating cycle. Accordingly, there are accounts
receivable, contract assets, inventories and provisions related to these contracts which will not be realized within one year that have been classified as current.
Basis of presentation
In the opinion of management, the unaudited Consolidated Financial Information contains all necessary adjustments to present fairly the financial position, results
of operations and cash flows for the reported periods. Management considers all such adjustments to be of a normal recurring nature. The Consolidated Financial
Information is presented in United States dollars ($) unless otherwise stated. Due to rounding, numbers presented in the Consolidated Financial Information may
not add to the totals provided.
12 Q1 2022 FINANCIAL INFORMATION
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Business Combinations — Accounting for contract assets and contract liabilities from contracts with customers
In January 2022, the Company early adopted a new accounting standard update, which provides guidance on the accounting for revenue contracts acquired in a
business combination. The update requires contract assets and liabilities acquired in a business combination to be recognized and measured at the date of
acquisition in accordance with the principles for recognizing revenues from contracts with customers. The Company has applied this accounting standard update
prospectively starting with acquisitions closing after January 1, 2022.
Disclosures about government assistance
In January 2022, the Company adopted a new accounting standard update, which requires entities to disclose certain types of government assistance. Under the
update, the Company is required to annually disclose (i) the type of the assistance received, including any significant terms and conditions, (ii) its related
accounting policy, and (iii) the effect such transactions have on its financial statements. The Company has applied this accounting standard update prospe ctively.
This update does not have a significant impact on the Company’s consolidated financial statements.
Applicable for future periods
Facilitation of the effects of reference rate reform on financial reporting
In March 2020, an accounting standard update was issued which provides temporary optional expedients and exceptions to the current guidance on contract
modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate
(LIBOR) and other interbank offered rates to alternative reference rates. This update, along with clarifications outlined in a subsequent update issued in January
2021, can be adopted and applied no later than December 31, 2022, with early adoption permitted. The Company does not expect this update to have a significant
impact on its consolidated financial statements.
─
Note 3
Discontinued operations and assets held for sale
Divestment of the Power Grids business
On July 1, 2020, the Company completed the sale of 80.1 percent of its Power Grids business to Hitachi Ltd (Hitachi). The transaction was executed through the
sale of 80.1 percent of the shares of Hitachi Energy Ltd, formerly Hitachi ABB Power Grids Ltd (“Hitachi Energy”). Cash consideration received at the closing date
was $9,241 million net of cash disposed. Further, for accounting purposes, the 19.9 percent ownership interest retained by the Company is deemed to have been
both divested and reacquired at its fair value on July 1, 2020 (see Note 4).
At the date of the divestment, the Company recorded liabilities in discontinued operations for estimated future costs and other cash payments of $487 million for
various contractual items relating to the sale of the business including required future cost reimbursements payable to Hitachi Energy, costs to be incurred by the
Company for the direct benefit of Hitachi Energy, and an amount due to Hitachi Ltd in connection with the expected purchase price finalization of the closing debt
and working capital balances. From the date of the disposal through March 31, 2022, $385 million of these liabilities had been paid and are reported as reductions
in the cash consideration received, of which $21 million and $44 million was paid during the three months ended March 31, 2022 and 2021, respectively. At
March 31, 2022, the remaining amount recorded was $111 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 were 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
Energy. The proceeds for these entities are included in the cash proceeds described above and certain funds were placed in escrow pending completion of the
transfer process. At both March 31, 2022, and December 31, 2021, current restricted cash includes $12 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 Energy
provide to each other, on an interim, transitional basis, various services. The services provided by the Company primarily include finance, information technology,
human resources and certain other administrative services. Under the current terms, the TSAs will continue for up to 3 years, and can only be extended on an
exceptional basis for business-critical services for an additional period which is reasonably necessary to avoid a material adverse impact on the business. In the
three months ended March 31, 2022 and 2021, the Company has recognized within its continuing operations, general and administrative expenses incurred to
perform the TSA, offset by $38 million and $47 million, respectively, in TSA-related income for such services that is reported in Other income (expense).
Discontinued operations
As a result of the sale of the Power Grids business, substantially all assets and liabilities related to Power Grids have been sold. As this divestment represented a
strategic shift that would have a major effect on the Company’s operations and financial results, the results of this business were presented as discontinued
operations and the assets and liabilities were presented as held for sale and in discontinued operations. After the date of sale, certain business contracts in the
Power Grids business continue to be executed by subsidiaries of the Company for the benefit/risk of Hitachi Energy . Assets and liabilities relating to, as well as the
net financial results of, these contracts will continue to be included in discontinued operations until they have been completed or otherwise transferred to Hitachi
Energy.
13 Q1 2022 FINANCIAL INFORMATION
Amounts recorded in discontinued operations were as follows:
Three months ended
($ in millions)
Mar. 31, 2022
Mar. 31, 2021
Total revenues
–
–
Total cost of sales
–
–
Gross profit
–
–
Expenses
(6)
(4)
Change to net gain recognized on sale of the Power Grids business
(5)
(24)
Loss from operations
(11)
(28)
Net interest income (expense) and other finance expense
–
–
Non-operational pension (cost) credit
–
–
Loss from discontinued operations before taxes
(11)
(28)
Income tax
–
–
Loss from discontinued operations, net of tax
(11)
(28)
Of the total Loss from discontinued operations before taxes in the table above, $11 million and $28 million in the three months ended March 31, 2022 and 2021,
respectively, are attributable to the Company.
In addition, the Company also has retained obligations (primarily for environmental and taxes) related to other businesses disposed or otherwise exited that
qualified as discontinued operations. Changes to these retained obligations are also included in Loss from discontinued operations, net of tax, above.
The major components of assets and liabilities held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets are summarized as
follows:
($ in millions)
Mar. 31, 2022
(1)
Dec. 31, 2021
(1)
Receivables, net
130
131
Other current assets
10
5
Current assets held for sale and in discontinued operations
140
136
Accounts payable, trade
58
71
Other liabilities
307
310
Current liabilities held for sale and in discontinued operations
365
381
Other non-current liabilities
30
43
Non-current liabilities held for sale and in discontinued operations
30
43
(1) At March 31, 2022, and December 31, 2021, the balances reported as held for sale and in discontinued operations pertain to Power Grids activities and other obligations which will
remain with the Company until such time as the obligation is settled or the activities are fully wound down.
─
Note 4
Acquisitions and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Three months ended March 31,
($ in millions, except number of acquired businesses)
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
138
-
Aggregate excess of purchase price
over fair value of net assets acquired
(2)
191
-
Number of acquired businesses
1
-
(1) Excluding changes in cost- and equity-accounted companies.
(2) Recorded as goodwill.
In the table above, the “Purchase price for acquisitions” and “Aggregate excess of purchase price over fair value of net assets acquired” amounts for the three
months ended March 31, 2022, relate primarily to the acquisition of InCharge Energy, Inc. (In-Charge).
Acquisitions of controlling interests have been accounted for under the acquisition method and have been included in the Company’s Consolidated Financial
Statements since the date of acquisition.
While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at
the acquisition date, the purchase price allocation for acquisitions is preliminary for up to 12 months after the acquisition date and is subject to refinement as more
detailed analyses are completed and additional information about the fair values of the assets and liabilities becomes available.
14 Q1 2022 FINANCIAL INFORMATION
On January 26, 2022, the Company increased its ownership in In-Charge to a 60 percent controlling interest through a stock purchase agreement. The resulting
cash outflows for the Company amounted to $135 million (net of cash acquired of $4 million). The acquisition expands the market presence of the E-mobility
Division, particularly in the North American market. In connection with the acquisition, the Company’s pre-existing 13.2 percent ownership of In-Charge was
revalued to fair value and a gain of $32 million was recorded in Other income (expense) in the three months ended March 31, 2022. The Company entered into an
agreement with the remaining noncontrolling shareholders allowing ei ther party to put or call the remaining 40 percent of the shares until 2027. The amount for
which either party can exercise their option is dependent on a formula based on revenues and thus, the amount is subject to change. As a result of this agreement,
the noncontrolling interest is classified as Redeemable noncontrolling interest (i.e. mezzanine equity) in the Consolidated Balance Sheets and was initially
recognized at fair value.
There were no significant business acquisitions for the three months ended March 31, 2021.
Investments in equity-accounted companies
In connection with the divestment of its Power Grids business to Hitachi (see Note 3), the Company retained a 19. 9 percent interest in the business and obtained
an option, exercisable with three-months’ notice commencing April 2023, granting it the right to require Hitachi to purchase this investment at fair value, subject to
a minimum floor price equivalent to a 10 percent discount compared to the price paid for the initial 80.1 percent. The Company has concluded that based on its
continuing involvement with the Power Grids business, including membership in its governing board of directors, it has significant influence over Hitachi Energy. As
a result, the investment (including the value of the option) is accounted for using the equity method.
At the date of the divestment of the Power Grids business, the fair value of Hitachi Energy exceeded the book value of the underlying net assets. At March 31,
2022, and December 31, 2021, the reported value of the investment in Hitachi Energy includes $1,442 million and $1,474 million, respectively, for the Company’s
19.9 percent share of this basis difference. The Company amortizes its share of these differences over the estimated remaining useful lives of the underlying
assets that gave rise to this difference, recording the amortization, net of related deferred tax benefit, as a reduction of income from equity-accounted companies.
As of March 31, 2022, the Company determined that no impairment of its equity-accounted investments existed.
The carrying value of the Company’s investments in equity-accounted companies and respective percentage of ownership is as follows:
Ownership as of
Carrying value at
($ in millions, except ownership share in %)
March 31, 2022
March 31, 2022
December 31, 2021
Hitachi Energy Ltd
19.9%
1,555
1,609
Others
71
61
Total
1,626
1,670
In the three months ended March 31, 2022 and 2021, the Company recorded its share of the earnings of investees accounted for under the equity method of
accounting in Other income (expense), net, as follows:
Three months ended March 31,
($ in millions)
2022
2021
Loss from equity-accounted companies, net of taxes
(11)
(3)
Basis difference amortization (net of deferred income tax benefit)
(37)
(32)
Loss from equity-accounted companies
(48)
(35)
15 Q1 2022 FINANCIAL INFORMATION
─
Note 5
Cash and equivalents, marketable securities and short-term investments
Cash and equivalents, marketable securities and short-term investments consisted of the following:
March 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
2,648
2,648
2,648
Time deposits
3,100
3,100
2,898
202
Equity securities
468
13
481
481
6,216
13
–
6,229
5,546
683
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
203
4
(7)
200
200
Other government obligations
12
12
12
Corporate
75
(3)
72
72
290
4
(10)
284
–
284
Total
6,506
17
(10)
6,513
5,546
967
Of which:
Restricted cash, current
30
Restricted cash, non-current
300
December 31, 2021
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
2,752
2,752
2,752
Time deposits
2,037
2,037
1,737
300
Equity securities
569
18
587
587
5,358
18
–
5,376
4,489
887
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
203
7
(1)
209
209
Corporate
74
1
(1)
74
74
277
8
(2)
283
–
283
Total
5,635
26
(2)
5,659
4,489
1,170
Of which:
Restricted cash, current
30
Restricted cash, non-current
300
16 Q1 2022 FINANCIAL INFORMATION
─
Note 6
Derivative financial instruments
The Company is exposed to certain currency, commodity, interest rate and equity risks arising from its global operating, financing and investing activities. The
Company uses derivative instruments to reduce and manage the economic impact of these exposures.
Currency risk
Due to the global nature of the Company’s operations, many of its subsidiaries are exposed to currency risk in their operating activities from entering into
transactions in currencies other than their functional currency. To manage such currency risks, the Company’s policies require its subsidiaries to hedge their
foreign currency exposures from binding sales and purchase contracts denominated in foreign currencies. For forecasted foreign currency denominated sales of
standard products and the related foreign currency denominated purchases, the Company’s policy is to hedge up to a maximum of 100 percent of the forecasted
foreign currency denominated exposures, depending on the length of the forecasted exposures. Forecasted exposures greater than 12 months are not hedged.
Forward foreign exchange contracts are the main instrument used to protect the Company against the volatility of future cash flows (caused by changes in
exchange rates) of contracted and forecasted sales and purchases denominated in foreign currencies. In addition, within its treasury operations, the Company
primarily uses foreign exchange swaps and forward foreign exchange contracts to manage the currency and timing mismatches arising in its liquidity management
activities.
Commodity risk
Various commodity products are used in the Company’s manufacturing activities. Consequently it is exposed to volatility in future cash flows arising from changes
in commodity prices. To manage the price risk of commodities, the Company’s policies require that its subsidiaries hedge the commodity price risk exposures from
binding contracts, as well as at least 50 percent (up to a maximum of 100 percent) of the forecasted commodity exposure over the next 12 months or longer (up to
a maximum of 18 months). Primarily swap contracts are used to manage the associated price risks of commodities.
Interest rate risk
The Company has issued bonds at fixed rates. Interest rate swaps and cross-currency interest rate swaps are used to manage the interest rate and foreign
currency risk associated with certain debt and generally such swaps are designated as fair value hedges. In addition, from time to time, the Company uses
instruments such as interest rate swaps, interest rate futures, bond futures or forward rate agreements to manage interest rate risk arising from the Company’s
balance sheet structure but does not designate such instruments as hedges.
Equity risk
The Company is exposed to fluctuations in the fair value of its warrant appreciation rights (WARs) issued under its management incentive plan. A WAR gives its
holder the right to receive cash equal to the market price of an equivalent listed warrant on the date of exercise. To eliminate such risk, the Company has
purchased cash-settled call options, indexed to the shares of the Company, which entitle the Company to receive amounts equivalent to its obligations under the
outstanding WARs.
Volume of derivative activity
In general, while the Company’s primary objective in its use of derivatives is to minimize exposures arising from its business, certain derivatives are designated
and qualify for hedge accounting treatment while others either are not designated or do not qualify for hedge accounting.
Foreign exchange and interest rate derivatives
The gross notional amounts of outstanding foreign exchange and interest rate derivatives (whether designated as hedges or not) were as follows:
Type of derivative
Total notional amounts at
($ in millions)
March 31, 2022
December 31, 2021
March 31, 2021
Foreign exchange contracts
13,255
11,276
11,229
Embedded foreign exchange derivatives
863
815
1,313
Cross-currency interest rate swaps
888
906
973
Interest rate contracts
4,421
3,541
3,122
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, 2022
December 31, 2021
March 31, 2021
Copper swaps
metric tonnes
39,223
36,017
42,448
Silver swaps
ounces
2,634,550
2,842,533
2,217,821
Aluminum swaps
metric tonnes
6,950
7,125
7,450
Equity derivatives
At March 31, 2022, December 31, 2021, and March 31, 2021, the Company held 9 million, 9 million and 18 million cash-settled call options indexed to ABB Ltd
shares (conversion ratio 5:1) with a total fair value of $20 million, $29 million and $30 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their fair value is recorded in “Accumulated other comprehensive loss” and subsequently reclassified into
earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. For the three months ended March 31, 2022 and
2021, there were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”.
17 Q1 2022 FINANCIAL INFORMATION
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
Three months ended March 31,
($ in millions)
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(29)
(14)
Hedged item
29
15
Cross-currency interest rate swaps
Designated as fair value hedges
(45)
(23)
Hedged item
44
22
Derivatives not designated in hedge relationships
Derivative instruments that are not designated as hedges or do not qualify as either cash flow or fair value hedges are economic hedges used for risk management
purposes. Gains and losses from changes in the fair values of such derivatives are recognized in the same line in the income statement as the economically
hedged transaction.
Furthermore, under certain circumstances, the Company is required to split and account separately for foreign currency derivatives that are embedded within
certain binding sales or purchase contracts denominated in a currency other than the functional currency of the subsidiary and the counterparty.
The gains (losses) recognized in the Consolidated Income Statements on derivatives not designated in hedging relationships were as follows:
Type of derivative not
Gains (losses) recognized in income
designated as a hedge
Three months ended March 31,
($ in millions)
Location
2022
2021
Foreign exchange contracts
Total revenues
4
(60)
Total cost of sales
(6)
(4)
SG&A expenses
(1)
8
7
Non-order related research and development
1
(1)
Interest and other finance expense
22
(106)
Embedded foreign exchange contracts
Total revenues
(2)
(14)
Total cost of sales
1
(1)
Commodity contracts
Total cost of sales
35
36
Other
Interest and other finance expense
1
–
Total
64
(143)
(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, 2022
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
4
4
Interest rate contracts
9
3
6
5
Cross-currency interest rate swaps
–
–
–
164
Cash-settled call options
20
–
–
–
Total
29
3
10
173
Derivatives not designated as hedging instruments:
Foreign exchange contracts
88
16
134
7
Commodity contracts
38
–
2
–
Interest rate contracts
1
–
–
–
Embedded foreign exchange derivatives
13
8
17
12
Total
140
24
153
19
Total fair value
169
27
163
192
18 Q1 2022 FINANCIAL INFORMATION
December 31, 2021
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
3
5
Interest rate contracts
9
20
–
–
Cross currency swaps
–
–
–
109
Cash-settled call options
29
–
–
–
Total
38
20
3
114
Derivatives not designated as hedging instruments:
Foreign exchange contracts
108
14
107
7
Commodity contracts
19
–
5
–
Interest rate contracts
1
–
2
–
Embedded foreign exchange derivatives
10
7
16
10
Total
138
21
130
17
Total fair value
176
41
133
131
Close-out netting agreements provide for the termination, valuation and net settlement of some or all outstanding transactions between two counterparties on the
occurrence of one or more pre-defined trigger events.
Although the Company is party to close-out netting agreements with most derivative counterparties, the fair values in the tables above and in the Consolidated
Balance Sheets at March 31, 2022, and December 31, 2021, have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements allow net settlements under certain conditions. At March 31, 2022, and December 31, 2021,
information related to these offsetting arrangements was as follows:
($ in millions)
March 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
175
(90)
–
–
85
Total
175
(90)
–
–
85
($ in millions)
March 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
326
(90)
–
–
236
Total
326
(90)
–
–
236
($ in millions)
December 31, 2021
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net asset
similar arrangement
in case of default
received
received
exposure
Derivatives
200
(104)
–
–
96
Total
200
(104)
–
–
96
($ in millions)
December 31, 2021
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
Net liability
similar arrangement
liabilities
pledged
pledged
exposure
Derivatives
238
(104)
–
–
134
Total
238
(104)
–
–
134
19 Q1 2022 FINANCIAL INFORMATION
─
Note 7
Fair values
The Company uses fair value measurement principles to record certain financial assets and liabilities on a recurring basis and, when necessary, to record certain
non-financial assets at fair value on a non-recurring basis, as well as to determine fair value disclosures for certain financial instruments carried at amortized cost
in the financial statements. Financial assets and liabilities recorded at fair value on a recurring basis include foreign currency, commodity and interest rate
derivatives, as well as cash-settled call options and available-for-sale securities. Non-financial assets recorded at fair value on a non-recurring basis include
long-lived assets that are reduced to their estimated fair value due to impairments.
Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. In determining fair value, the Company uses various valuation techniques including the market approach (using observable market data for
identical or similar assets and liabilities), the income approach (discounted cash flow models) and the cost approach (using costs a market participant would incur
to develop a comparable asset). Inputs used to determine the fair value of assets and liabilities are defined by a three-level hierarchy, depending on the nature of
those inputs. The Company has categorized its financial assets and liabilities and non-financial assets measured at fair value within this hierarchy based on
whether the inputs to the valuation technique are observable or unobservable. An observable input is based on market data obtained from independent sources,
while an unobservable input reflects the Company’s assumptions about market data.
The levels of the fair value hierarchy are as follows:
Level 1:
Valuation inputs consist of quoted prices in an active market for identical assets or liabilities (observable quoted prices). Assets and liabilities valued
using Level 1 inputs include exchange
‑
traded equity securities, listed derivatives which are actively traded such as commodity futures, interest rate
futures and certain actively traded debt securities.
Level 2:
Valuation inputs consist of observable inputs (other than Level 1 inputs) such as actively quoted prices for similar assets, quoted prices in inactive
markets and inputs other than quoted prices such as interest rate yield curves, credit spreads, or inputs derived from other observable data by
interpolation, correlation, regression or other means. The adjustments applied to quoted prices or the inputs used in valuation models may be both
observable and unobservable. In these cases, the fair value measurement is classified as Level 2 unless the unobservable portion of the adjustment or
the unobservable input to the valuation model is significant, in which case the fair value measurement would be classified as Level 3. Assets and
liabilities valued or disclosed using Level 2 inputs include investments in certain funds, certain debt securities that are not actively traded, interest rate
swaps, cross-currency interest rate swaps, commodity swaps, cash-settled call options, forward foreign exchange contracts, foreign exchange swaps and
forward rate agreements, time deposits, as well as financing receivables and debt.
Level 3:
Valuation inputs are based on the Company’s assumptions of relevant market data (unobservable input).
Whenever quoted prices involve bid-ask spreads, the Company ordinarily determines fair values based on mid-market quotes. However, for the purpose of
determining the fair value of cash-settled call options serving as hedges of the Company’s management incentive plan, bid prices are used.
When determining fair values based on quoted prices in an active market, the Company considers if the level of transaction activity for the financial instrument has
significantly decreased or would not be considered orderly. In such cases, the resulting changes in valuation techniques would be disclosed. If the market is
considered disorderly or if quoted prices are not available, the Company is required to use another valuation technique, such as an income approach.
Recurring fair value measures
The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows:
March 31, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
–
481
–
481
Debt securities—U.S. government obligations
200
–
–
200
Debt securities—Other government obligations
–
12
–
12
Debt securities—Corporate
–
72
–
72
Derivative assets—current in “Other current assets”
–
169
–
169
Derivative assets—non-current in “Other non-current assets”
–
27
–
27
Total
200
761
–
961
Liabilities
Derivative liabilities—current in “Other current liabilities”
–
163
–
163
Derivative liabilities—non-current in “Other non-current liabilities”
–
192
–
192
Total
–
355
–
355
20 Q1 2022 FINANCIAL INFORMATION
December 31, 2021
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
587
587
Debt securities—U.S. government obligations
209
209
Debt securities—Corporate
74
74
Derivative assets—current in “Other current assets”
176
176
Derivative assets—non-current in “Other non-current assets”
41
41
Total
209
878
–
1,087
Liabilities
Derivative liabilities—current in “Other current liabilities”
133
133
Derivative liabilities—non-current in “Other non-current liabilities”
131
131
Total
–
264
–
264
The Company uses the following methods and assumptions in estimating fair values of financial assets and liabilities measured at fair value on a recurring basis:
●
If quoted market prices in active markets for identical
assets are available, these are considered Level 1 inputs; however, when markets are not active, these inputs are considered Level 2. If such quoted
market prices are not available, fair value is determined using market prices for similar assets or present value techniques, applying an appropriate risk-
free interest rate adjusted for non-performance risk. The inputs used in present value techniques are observable and fall into the Level 2 category.
●
: The fair values of derivative instruments are determined using quoted prices of identical instruments from an active market, if available
(Level 1 inputs). If quoted prices are not available, price quotes for similar instruments, appropriately adjusted, or present value techniques, based on
available market data, or option pricing models are used. Cash -settled call options hedging the Company’s WAR liability are valued based on bid prices
of the equivalent listed warrant. The fair values obtained using price quotes for similar instruments or valuation techniques represent a Level 2 input
unless significant unobservable inputs are used.
Non-recurring fair value measures
The Company elects to record private equity investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes.
The Company reassesses at each reporting period whether these investments continue to qualify for this treatment. During the three months ended March 31,
2022 and 2021, the Company recognized, in Other income (expense), net fair value gains of $29 million and $10 million, respectively, related to certain of its
private equity investments based on observable market price changes for an identical or similar investment of the same issuer. The fair values were determined
using level 2 inputs. The carrying values of investments, carried at fair value on a non-recurring basis, at March 31, 2022, and December 31, 2021, totaled
$226 million and $228 million, respectively.
Apart from the transactions above, there were no additional significant non-recurring fair value measurements during the three months ended March 31, 2022 and
2021.
Disclosure about financial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
March 31, 2022
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
2,318
2,318
–
–
2,318
Time deposits
2,898
–
2,898
–
2,898
Restricted cash
30
30
–
–
30
Marketable securities and short-term investments
(excluding securities):
Time deposits
202
–
202
–
202
Restricted cash, non-current
300
300
–
–
300
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
3,084
1,488
1,596
–
3,084
Long-term debt (excluding finance lease obligations)
6,000
6,028
49
–
6,077
21 Q1 2022 FINANCIAL INFORMATION
December 31, 2021
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
2,422
2,422
2,422
Time deposits
1,737
1,737
1,737
Restricted cash
30
30
30
Marketable securities and short-term investments
(excluding securities):
Time deposits
300
300
300
Restricted cash, non-current
300
300
300
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
1,357
1,288
69
1,357
Long-term debt (excluding finance lease obligations)
4,043
4,234
58
4,292
The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis:
●
and short-term investments (excluding securities):
The carrying amounts approximate the fair values as the items are short-term in nature or, for cash
held in banks, are equal to the deposit amount.
●
Short-term debt includes commercial paper, bank
borrowings and overdrafts. The carrying amounts of short-term debt and current maturities of long-term debt, excluding finance lease obligations,
approximate their fair values.
●
Fair values of bonds are determined using quoted market prices (Level 1 inputs), if available. For
bonds without available quoted market prices and other long-term debt, the fair values are determined using a discounted cash flow methodology
based upon borrowing rates of similar debt instruments and reflecting appropriate adjustments for non-performance risk (Level 2 inputs).
─
Note 8
Contract assets and liabilities
The following table provides information about Contract assets and Contract liabilities:
($ in millions)
March 31, 2022
December 31, 2021
March 31, 2021
Contract assets
1,072
990
1,044
Contract liabilities
2,080
1,894
1,855
Contract assets primarily relate to the Company’s right to receive consideration for work completed but for which no invoice has been issued at the reporting date.
Contract assets are transferred to receivables when rights to receive payment become unconditional.
Contract liabilities primarily relate to up-front advances received on orders from customers as well as amounts invoiced to customers in excess of revenues
recognized, primarily for long-term projects. Contract liabilities are reduced as work is performed and as revenues are recognized.
The significant changes in the Contract assets and Contract liabilities balances were as follows:
Three months ended March 31,
2022
2021
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2022/2021
(518)
(497)
Additions to Contract liabilities - excluding amounts recognized as revenue during the period
701
493
Receivables recognized that were included in the Contract asset balance at Jan 1, 2022/2021
(318)
(275)
At March 31, 2022, the Company had unsatisfied performance obligations totaling $18,901 million and, of this amount, the Company expects to fulfill approximately
67 percent of the obligations in 2022, approximately 23 percent of the obligations in 2023 and the balance thereafter.
22 Q1 2022 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s total debt at March 31, 2022, and December 31, 2021, amounted to $9,285 million and $5,561 million, respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of long-term debt” consisted of the following:
($ in millions)
March 31, 2022
December 31, 2021
Short-term debt
1,812
78
Current maturities of long-term debt
1,302
1,306
Total
3,114
1,384
Short-term debt primarily represented issued commercial paper and short-term bank borrowings from various banks. At March 31, 2022, $1,530 million was
outstanding under the $2 billion Euro- commercial paper program in the United States, whereas at December 31, 2021, no amount was outstanding under this
program.
Long-term debt
The Company’s long-term debt at March 31, 2022, and December 31, 2021, amounted to $6,171 million and $4,177 million, respectively.
Outstanding bonds (including maturities within the next 12 months) were as follows:
March 31, 2022
December 31, 2021
(in millions)
Nominal outstanding
(1)
Nominal outstanding
(1)
Bonds:
2.875% USD Notes, due 2022
USD
1,250
$
1,252
USD
1,250
$
1,258
0.625% EUR Instruments, due 2023
EUR
700
$
779
EUR
700
$
800
0% CHF Bonds, due 2023
CHF
275
$
297
0.625% EUR Instruments, due 2024
EUR
700
$
774
0% EUR Instruments, due 2024
EUR
500
$
559
0.75% EUR Instruments, due 2024
EUR
750
$
828
EUR
750
$
860
0.3% CHF Bonds, due 2024
CHF
280
$
302
CHF
280
$
306
0.75% CHF Bonds, due 2027
CHF
425
$
459
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
183
CHF
170
$
186
0% EUR Notes, due 2030
EUR
800
$
801
EUR
800
$
862
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
589
Total
$
7,205
$
5,242
(1) USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting, where appropriate.
(2) Prior to completing a cash tender offer in November 2020, the original principal amount outstanding, on each of the 3.8% USD Notes, due 2028, and the 4.375% USD Notes, due
2042, was USD 750 million.
In March 2022, the Company issued the following CHF bonds : (i) CHF 275 million of zero interest bonds, due 2023, and (ii) CHF 425 million of 0.75 percent bonds,
due 2027 with interest payable annually in arrears. The aggregate net proceeds of these CHF bond issues, after discount and fees, amounted to CHF 699 million
(equivalent to approximately $751 million on date of issuance).
Also in March 2022, the Company issued the following EUR notes, both due in 2024, (i) EUR 700 million, paying interest annually in arrears at a fixed rate of
0.625 percent per annum, and (ii) EUR 500 million floating rate notes, paying interest quarterly in arrears at a variable rate of 70 basis points above the 3-month
EURIBOR. In relation to these EUR Notes, the Company recorded net proceeds (after the respective discount and premium, as well as fees) of EUR 1,203 million
(equivalent to $1,335 million on the date of issuance).
In line with the Company’s policy of reducing its currency and interest rate exposures, interest rate swaps have been used to modify the characteristics of the
CHF 425 million Bonds, due 2027, and the EUR 700 million Notes, due 2024. After considering the impact of these interest rate swaps, the CHF 425 million Bonds
and EUR 700 million Notes, effectively become floating rate obligations.
─
Note 10
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Regulatory
As a result of an internal investigation, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) in the
United States as well as to the Serious Fraud Office (SFO) in the United Kingdom concerning certain of its past dealings with Unaoil and its subsidiaries, including
alleged improper payments made by these entities to third parties. In May 2020, the SFO closed its investigation, which it originally announced in February 2017,
as the case did not meet the relevant test for prosecution. The Company continues to cooperate with the U.S. authorities as requested. At this time, it is not
possible for the Company to make an informed judgment about the outcome of this matter.
Based on findings during an internal investigation, the Company self-reported to the SEC and the DoJ, in the United States, to the Special Investigating Unit (SIU)
and the National Prosecuting Authority (NPA) in South Africa as well as to various authorities in other countries potential suspect payments and other compliance
concerns in connection with some of the Company’s dealings with Eskom and related persons. Many of those parties have expressed an interest in, or
commenced an investigation into, these matters and the Company is cooperating fully with them. The Company paid $104 million to Eskom in December 2020 as
part of a full and final settlement with Eskom and the Special Investigating Unit relating to improper payments and other compliance issues associated with the
Controls and Instrumentation Contract, and its Variation Orders for Units 1 and 2 at Kusile. The Company continues to cooperate fully with the authorities in their
review of the Kusile project and is in discussions with them regarding a coordinated resolution. 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.
23 Q1 2022 FINANCIAL INFORMATION
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, 2022, and December 31, 2021, the Company had aggregate liabilities of $106 million and $104 million, respectively, included in “Other provisions”
and “Other non
‑
current liabilities”, for the above regulatory, compliance and legal contingencies, and none of the individual liabilities recognized was significant. As
it is not possible to make an informed judgment on, or reasonably predict, the outcome of certain matters and as it is not possible, based on information currently
available to management, to estimate the maximum potential liability on other matters, there could be adverse outcomes beyond the amounts accrued.
Guarantees
General
The following table provides quantitative data regarding the Company’s third-party guarantees. The maximum potential payments represent a “worst-case
scenario”, and do not reflect management’s expected outcomes.
Maximum potential payments
($ in millions)
March 31, 2022
December 31, 2021
Performance guarantees
4,320
4,540
Financial guarantees
54
52
Indemnification guarantees
(1)
134
136
Total
(2)
4,508
4,728
(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, 2022, and December 31, 2021, amounted
to $148 million and $156 million, respectively, the majority of which is included in discontinued operations .
The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various
maturities up to 2035, mainly consist of performance guarantees whereby (i) the Company guarantees the performance of a third party’s product or service
according to the terms of a contract and (ii) as member of a consortium/joint-venture that includes third parties, the Company guarantees not only its own
performance but also the work of third parties. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party
does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. The original maturity dates for the majority of these
performance guarantees range from one to ten years.
In conjunction with the divestment of the high-voltage cable and cables accessories businesses, the Company has entered into various performance guarantees
with other parties with respect to certain liabilities of the divested business. At March 31, 2022, and December 31, 2021, the maximum potential payable under
these guarantees amounts to $891 million and $911 million, respectively, and these guarantees have various original maturities ranging from five to ten years.
The Company retained obligations for financial, performance and indemnification guarantees related to the Power Grids business sold on July 1, 2020 (see Note 3
for details). The performance and financial guarantees have been indemnified by Hitachi, at the same proportion of its ownership in Hitachi Energy Ltd
(80.1 percent). These guarantees, which have various maturities up to 2035, primarily consist of bank guarantees, standby letters of credit, business performance
guarantees and other trade-related guarantees, the majority of which have original maturity dates ranging from one to ten years. The maximum amount payable
under the guarantees at March 31, 2022, and December 31, 2021, is approximately $3.1 billion and $3.2 billion, respectively, and the carrying amounts of liabilities
(recorded in discontinued operations) at March 31, 2022, and December 31, 2021, amounted to $134 million and $136 million, respectively.
Commercial commitments
In addition, in the normal course of bidding for and executing certain projects, the Company has entered into standby letters of credit, bid/performance bonds and
surety bonds (collectively “performance bonds”) with various financial institutions. Customers can draw on such performance bonds in the event that the Company
does not fulfill its contractual obligations. The Company would then have an obligation to reimburse the financial institution for amounts paid under the performance
bonds. At both March 31, 2022, and December 31, 2021, the total outstanding performance bonds aggregated to $3.6 billion, of each of these amounts, $0.1 billion
relates to discontinued operations. There have been no significant amounts reimbursed to financial institutions under these types of arrangements in the three
months ended March 31, 2022 and 2021.
Product and order-related contingencies
The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance, was as follows:
($ in millions)
2022
2021
Balance at January 1,
1,005
1,035
Net change in warranties due to acquisitions, divestments and liabilities held for sale
–
1
Claims paid in cash or in kind
(36)
(54)
Net increase in provision for changes in estimates, warranties issued and warranties expired
38
63
Exchange rate differences
(8)
(33)
Balance at March 31,
999
1,012
24 Q1 2022 FINANCIAL INFORMATION
─
Note 11
Employee benefits
The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations
and practices. These plans cover a large portion of the Company’s employees and provide benefits to employees in the event of death, disability, retirement, or
termination of employment. Certain of these plans are multi-employer plans. The Company also operates other postretirement benefit plans including
postretirement health care benefits, and other employee-related benefits for active employees including long-service award plans. The measurement date used for
the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with the local government and tax
requirements.
The following tables include amounts relating to defined benefit pension plans and other postretirement benefits for continui ng 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,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
14
15
9
10
–
–
Operational pension cost
14
15
9
10
–
–
Non-operational pension cost (credit):
Interest cost
1
(1)
22
18
–
–
Expected return on plan assets
(30)
(29)
(41)
(47)
–
–
Amortization of prior service cost (credit)
(2)
(2)
–
–
(1)
–
Amortization of net actuarial loss
–
–
15
17
–
–
Curtailments, settlements and special termination benefits
–
–
–
(6)
–
–
Non-operational pension cost (credit)
(31)
(32)
(4)
(18)
(1)
–
Net periodic benefit cost (credit)
(17)
(17)
5
(8)
(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.
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended March 31,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
16
15
10
(3)
3
1
Of which, discretionary contributions to defined benefit
pension plans
–
–
–
(9)
–
–
The Company expects to make contributions totaling approximately $104 million and $6 million to its defined pension plans and other postretirement benefit plans,
respectively, for the full year 2022.
25 Q1 2022 FINANCIAL INFORMATION
─
Note 12
Stockholder's equity
At the Annual General Meeting of Shareholders (AGM) on March 24, 2022, shareholders approved the proposal of the Board of Directors to distribute 0.82 Swiss
francs per share to shareholders. The declared dividend amounted to $1,700 million, with the Company disburs ing a portion in March and the remaining amounts
scheduled to be paid in the second quarter of 2022.
In March 2022, the Company completed the share buyback program that was launched in April 2021. This program was executed on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased a total of 90 million shares for approximately $3.1 billion, of which 31 million shares were
purchased in the first quarter of 2022 (resulting in an increase in Treasury stock of $1,089 million). At the 2022 AGM, shareholders approved the cancellation of
88 million shares which had been purchased under the share buyback programs launched in July 2020 and April 2021. The cancellation is expected to be
completed in the second quarter of 2022.
In addition to the share buyback programs, the Company purchased 14 million of its own shares on the open market in the three months ended March 31, 2022,
mainly for use in connection with its employee share plans, resulting in an increase in Treasury stock of $472 million.
During the first quarter of 2022, the Company delivered, out of treasury stock, 15 million shares in connection with its Management Incentive Plan.
In March 2022, the Company announced a new share buyback program of up to $3 billion. This program, which was launched in April 2022, is being executed on a
second trading line on the SIX Swiss Exchange and is planned to run until the Company’s 2023 AGM. At the 202 3 AGM, the Company intends to request
shareholder approval to cancel the shares purchased through this new program as well as those shares purchased under the program launched in April 2021 that
were not proposed for cancellation at the 2022 AGM.
─
Note 13
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares outstanding during the period, assuming that all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options, and outstanding options and shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Three months ended March 31,
($ in millions, except per share data in $)
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
615
530
Loss from discontinued operations, net of tax
(11)
(28)
Net income
604
502
Weighted-average number of shares outstanding (in millions)
1,936
2,015
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.32
0.26
Loss from discontinued operations, net of tax
(0.01)
(0.01)
Net income
0.31
0.25
Diluted earnings per share
Three months ended March 31,
($ in millions, except per share data in $)
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
615
530
Loss from discontinued operations, net of tax
(11)
(28)
Net income
604
502
Weighted-average number of shares outstanding (in millions)
1,936
2,015
Effect of dilutive securities:
Call options and shares
17
19
Adjusted weighted-average number of shares outstanding (in millions)
1,953
2,034
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.31
0.26
Loss from discontinued operations, net of tax
(0.01)
(0.01)
Net income
0.31
0.25
26 Q1 2022 FINANCIAL INFORMATION
─
Note 14
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2021
(2,460)
17
(1,556)
(3)
(4,002)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(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)
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2022
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(80)
(12)
20
(4)
(76)
Amounts reclassified from OCI
5
–
8
8
21
Total other comprehensive (loss) income
(75)
(12)
28
4
(55)
Less:
Amounts attributable to
noncontrolling interests
(5)
–
–
–
(5)
Balance at March 31, 2022
(3,063)
(10)
(1,061)
(4)
(4,138)
The following table reflects amounts reclassified out of OCI in respect of Pension and other postretirement plan adjustments:
($ in millions)
Three months ended March 31,
Details about OCI components
Location of (gains) losses reclassified from OCI
2022
2021
Foreign currency translation adjustments:
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
5
–
Pension and other postretirement plan adjustments:
Amortization of prior service cost
Non-operational pension (cost) credit
(3)
(2)
Amortization of net actuarial loss
Non-operational pension (cost) credit
15
11
Total before tax
12
9
Tax
Provision for taxes
(4)
16
Amounts reclassified from OCI
8
25
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, 2022 and 2021.
27 Q1 2022 FINANCIAL INFORMATION
─
Note 15
Operating segment data
The Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM allocates resources to and assesses the performance of each operating
segment using the information outlined below. The Company is organized into the following segments, based on products and services: Electrification, Motion,
Process Automation, and Robotics & Discrete Automation. The remaining operations of the Company are included in Corporate and Other.
A description of the types of products and services provided by each reportable segment is as follows:
●
manufactures and sells electrical products and solutions which are designed to provide safe, smart and sustainable electrical flow from
the substation to the socket. The portfolio of increasingly digital and connected solutions includes electric vehicle charging infrastructure, renewable
power solutions, modular substation packages, distribution automation products, switchboard and panelboards, switchgear, UPS solutions, circuit
breakers, measuring and sensing devices, control products, wiring accessories, enclosures and cabling systems and intelligent home and building
solutions, designed to integrate and automate lighting, heating, ventilation, security and data communication network s. The products and services are
delivered through seven operating Divisions: Distribution Solutions, Smart Power, Smart Buildings, E-Mobility, Installation Products, Power Conversion
and Electrification Service.
●
infrastructure and transportation. These products, digital technology and related services enable industrial customers to increase energy efficiency,
improve safety and reliability, and achieve precise control of their processes. Building on over 130 years of cumulative experience in electric
powertrains, the Business Area combines domain expertise and technology to deliver the optimum solution for a wide range of applications in all
industrial segments. In addition, the Business Area, along with its partners, has a leading global service presence. These products and services are
delivered through seven operating Divisions: Large Motors and Generators, IEC LV Motors, NEMA Motors, Drive Products, System Drives, Service and
Traction, as well as, prior to its sale in November 2021, the Mechanical Power Transmission Division.
●
well as digital solutions, lifecycle services, advanced industrial analytics and artificial intelligence applications and suites for the process, marine and
hybrid industries. Products and solutions include control technologies, advanced process control software and manufacturing execution systems,
sensing, measurement and analytical instrumentation, marine propulsion systems and turbochargers. In addition, the Business Area offers a
comprehensive range of services ranging from repair to advanced services such as remote monitoring, preventive maintenance, asset performance
management, emission monitoring and cybersecurity services. The products, systems and services are delivered through five operating Divisions:
Energy Industries, Process Industries, Marine & Ports, Turbocharging, and Measurement & Analytics .
●
Robotics includes industrial robots, software, robotic solutions 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 Divisions offer engineering and simulation software as well as a comprehensive range of digital solutions.
Corporate and Other:
certain divested businesses and other non-core operating activities.
The primary measure of profitability on which the operating segments are evaluated is Operational EBITA, which represents income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been
realized, and (c) unrealized foreign exchange movements on 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, 2022 and 2021, as well as total assets at March 31,
2022, and December 31, 2021.
28 Q1 2022 FINANCIAL INFORMATION
Three months ended March 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,112
466
585
354
1
2,518
The Americas
1,201
492
368
108
–
2,169
of which: United States
882
407
221
72
–
1,582
Asia, Middle East and Africa
964
499
546
267
2
2,278
of which: China
465
287
150
197
1
1,100
3,277
1,457
1,499
729
3
6,965
Product type
Products
2,827
1,248
346
440
4
4,865
Systems
246
–
467
172
(1)
884
Services and other
204
209
686
117
–
1,216
3,277
1,457
1,499
729
3
6,965
Third-party revenues
3,277
1,457
1,499
729
3
6,965
Intersegment revenues
50
115
7
1
(173)
–
Total revenues
3,327
1,572
1,506
730
(170)
6,965
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
321
526
7
4,823
Systems
269
–
409
204
2
884
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
3,140
1,667
1,407
853
(166)
6,901
29 Q1 2022 FINANCIAL INFORMATION
Three months ended
March 31,
($ in millions)
2022
2021
Operational EBITA:
Electrification
510
511
Motion
274
289
Process Automation
196
155
Robotics & Discrete Automation
49
105
Corporate and Other
‒
Non-core business activities
6
(22)
‒ Corporate costs and intersegment elimination
(38)
(79)
Total
997
959
Acquisition-related amortization
(60)
(65)
Restructuring, related and implementation costs
(16)
(35)
Changes in obligations related to divested businesses
14
(2)
Changes in pre-acquisition estimates
(1)
(6)
Gains and losses from sale of businesses
–
(3)
Acquisition- and divestment-related expenses and integration costs
(59)
(10)
Other income/expense relating to the Power Grids joint venture
(35)
(17)
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange, commodities, embedded derivatives)
18
(48)
Realized gains and losses on derivatives where the underlying hedged transaction has not yet been realized
(2)
2
Unrealized foreign exchange movements on receivables/payables (and related assets/liabilities)
(1)
34
Certain other non-operational items:
Regulatory, compliance and legal costs
1
(2)
Business transformation costs
(1)
(26)
(20)
Assets write downs/impairments & certain other fair value changes
34
18
Other non-operational items
(7)
(8)
Income from operations
857
797
Interest and dividend income
13
11
Interest and other finance expense
(22)
(55)
Non-operational pension (cost) credit
36
50
Income from continuing operations before taxes
884
803
(1) Amount includes ABB Way process transformation costs of $25 million and $15 million for three months ended March 31, 2022 and 2021, respectively.
Total assets
(1)
($ in millions)
March 31, 2022
December 31, 2021
Electrification
13,642
12,831
Motion
6,176
5,936
Process Automation
5,062
5,009
Robotics & Discrete Automation
4,902
4,860
Corporate and Other
(2)
12,489
11,624
Consolidated
42,271
40,260
(1) Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At March 31, 2022 and December 31, 2021, respectively, Corporate and Other includes $140 million and $136 million of assets in the Power Grids business which is reported as
discontinued operations (see Note 3). In addition, at March 31, 2022, and December 31, 2021, Corporate and Other includes $1,555 million and $1,609 million, respectively, related to
the equity investment in Hitachi Energy Ltd (see Note 4).
30 Q1 2022 FINANCIAL INFORMATION
31 Q1 2022 FINANCIAL INFORMATION
—
Supplemental Reconciliations and Definitions
The following reconciliations and definitions include measures which ABB uses to supplement its Consolidated Financial Information (unaudited) which is
prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). Certain of these financial measures are, or may be,
considered non-GAAP financial measures as defined in the rules of the U.S. Securities and Exchange Commission (SEC).
While ABB’s management believes that the non-GAAP financial measures herein are useful in evaluating ABB’s operating results, this information should
be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with U.S. GAAP. Therefore
these measures should not be viewed in isolation but considered together with the Consolidated Financial Information (unaudited) prepared in accordance
with U.S. GAA P as of and for the three months ended March 31, 2022.
Comparable growth rates
Growth rates for certain key figures may be presented and discussed on a “comparable” basis. The comparable growth rate measures growth on a constant
currency basis. Since we are a global company, the comparability of our operating results reported in U.S. dollars is affected by foreign currency exchange rate
fluctuations. We calculate the impacts from foreign currency fluctuations by translating the current-year periods’ reported key figures into U.S. dollar amounts using
the exchange rates in effect for the comparable periods in the previous year.
Comparable growth rates are also adjusted for changes in our business portfolio. Adjustments to our business portfolio occur due to acquisitions, divestments, or
by exiting specific business activities or customer markets. The adjustment for portfolio changes is calculated as follows: where the results of any business
acquired or divested have not been consolidated and reported for the entire duration of both the current and comparable periods, the reported key figures of such
business are adjusted to exclude the relevant key figures of any corresponding quarters which are not comparable when computing the comparable growth rate.
Certain portfolio changes which do not qualify as divestments under U.S. GAAP have been treated in a similar manner to divestments. Changes in our portfolio
where we have exited certain business activities or customer markets are adjusted as if the relevant business was divested in the period when the decision to
cease business activities was taken. We do not adjust for portfolio changes where the relevant business has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by Business Area
Q1 2022 compared to Q1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
25%
4%
0%
29%
6%
4%
0%
10%
Motion
15%
5%
12%
32%
-6%
4%
10%
8%
Process Automation
2%
4%
0%
6%
7%
4%
0%
11%
Robotics & Discrete Automation
56%
6%
-2%
60%
-14%
3%
-1%
-12%
ABB Group
21%
4%
3%
28%
1%
3%
3%
7%
32 Q1 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group - Quarter
Q1 2022 compared to Q1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
14%
10%
0%
24%
-1%
8%
0%
7%
The Americas
29%
0%
11%
40%
6%
0%
9%
15%
of which: United States
33%
0%
13%
46%
3%
0%
11%
14%
Asia, Middle East and Africa
22%
2%
0%
24%
-1%
1%
0%
0%
of which: China
28%
-2%
0%
26%
-6%
-2%
0%
-8%
ABB Group
21%
4%
3%
28%
1%
3%
3%
7%
Regional comparable growth rate reconciliation by Business Area - Quarter
Q1 2022 compared to Q1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
24%
11%
0%
35%
1%
10%
0%
11%
The Americas
42%
0%
0%
42%
13%
1%
0%
14%
of which: United States
50%
0%
0%
50%
11%
0%
0%
11%
Asia, Middle East and Africa
6%
1%
0%
7%
3%
1%
0%
4%
of which: China
11%
-2%
0%
9%
-5%
-2%
0%
-7%
Electrification
25%
4%
0%
29%
6%
4%
0%
10%
Q1 2022 compared to Q1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
18%
13%
0%
31%
4%
10%
1%
15%
The Americas
0%
1%
35%
36%
-17%
1%
30%
14%
of which: United States
-2%
0%
36%
34%
-17%
0%
33%
16%
Asia, Middle East and Africa
27%
1%
1%
29%
-3%
1%
1%
-1%
of which: China
23%
-2%
-2%
19%
4%
-2%
6%
8%
Motion
15%
5%
12%
32%
-6%
4%
10%
8%
Q1 2022 compared to Q1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-25%
5%
0%
-20%
4%
8%
0%
12%
The Americas
22%
1%
0%
23%
26%
0%
0%
26%
of which: United States
34%
0%
0%
34%
34%
1%
0%
35%
Asia, Middle East and Africa
28%
3%
0%
31%
0%
3%
0%
3%
of which: China
13%
-1%
0%
12%
-14%
-1%
0%
-15%
Process Automation
2%
4%
0%
6%
7%
4%
0%
11%
Q1 2022 compared to Q1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
40%
12%
-3%
49%
-15%
6%
-2%
-11%
The Americas
89%
0%
0%
89%
2%
-1%
0%
1%
of which: United States
87%
0%
0%
87%
-4%
0%
0%
-4%
Asia, Middle East and Africa
67%
-1%
0%
66%
-18%
0%
0%
-18%
of which: China
96%
-3%
0%
93%
-21%
-1%
0%
-22%
Robotics & Discrete Automation
56%
6%
-2%
60%
-14%
3%
-1%
-12%
33 Q1 2022 FINANCIAL INFORMATION
Order backlog growth rate reconciliation
March 31, 2022 compared to March 31, 2021
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
38%
4%
0%
42%
Motion
26%
6%
0%
32%
Process Automation
5%
2%
0%
7%
Robotics & Discrete Automation
83%
3%
0%
86%
ABB Group
28%
4%
0%
32%
Other growth rate reconciliations
Q1 2022 compared to Q1 2021
Service orders growth rate
Services revenues growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
14%
5%
0%
19%
3%
3%
0%
6%
Motion
14%
6%
0%
20%
-1%
5%
0%
4%
Process Automation
7%
5%
0%
12%
3%
5%
0%
8%
Robotics & Discrete Automation
11%
6%
0%
17%
-2%
6%
0%
4%
ABB Group
10%
5%
0%
15%
2%
4%
0%
6%
34 Q1 2022 FINANCIAL INFORMATION
Operational EBITA as % of operational revenues (Operational EBITA margin)
Definition
Operational EBITA margin
Operational EBITA margin is Operational EBITA as a percentage of operational revenues.
Operational EBITA
Operational earnings before interest, taxes and acquisition-related amortization (Operational EBITA) represents Income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/p ayables (and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory, compliance and legal costs, certain asset impairments and certain other fair value
changes, as well as other items which are determined by management on a case-by-case basis.
Operational EBITA is our measure of segment profit but is also used by management to evaluate the profitability of the Company as a whole.
Acquisition-related amortization
Amortization expense on intangibles arising upon acquisitions.
Restructuring, related and implementation costs
Restructuring, related and implementation costs consists of restructuring and other related expenses, as well as internal and external costs relating to the
implementation of group-wide restructuring programs.
Other income/expense relating to the Power Grids joint venture
Other income/expense relating to the Power Grids joint venture consists of amounts recorded in Income from continuing operations before taxes relating to the
divested Power Grids business including the income/loss under the equity method for the investment in Hitachi Energy Ltd. (Hitachi Energy), amortization of
deferred brand income as well as changes in value of other obligations relating to the divestment.
Operational revenues
The Company presents operational revenues solely for the purpose of allowing the computation of Operational EBITA margin. Operational revenues are Total
revenues adjusted for foreign exchange/commodity timing differences in total revenues of: (i) unrealized gains and losses on derivatives, (ii) realized gains and
losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables (and
related assets). Operational revenues are not intended to be an alternative measure to Total revenues, which represent our revenues measured in accordance
with U.S. GAAP.
Reconciliation
The following tables provide reconciliations of consolidated Operational EBITA to Net Income and Operational EBITA Margin by business.
Reconciliation of consolidated Operational EBITA to Net Income
Three months ended March 31,
($ in millions)
2022
2021
Operational EBITA
997
959
Acquisition-related amortization
(60)
(65)
Restructuring, related and implementation costs
(16)
(35)
Changes in obligations related to divested businesses
14
(2)
Changes in pre-acquisition estimates
(1)
(6)
Gains and losses from sale of businesses
–
(3)
Acquisition- and divestment-related expenses and integration costs
(59)
(10)
Other income/expense relating to the Power Grids joint venture
(35)
(17)
Certain other non-operational items
2
(12)
Foreign exchange/commodity timing differences in income from operations
15
(12)
Income from operations
857
797
Interest and dividend income
13
11
Interest and other finance expense
(22)
(55)
Non-operational pension (cost) credit
36
50
Income from continuing operations before taxes
884
803
Income tax expense
(241)
(252)
Income from continuing operations, net of tax
643
551
Loss from discontinued operations, net of tax
(11)
(28)
Net income
632
523
35 Q1 2022 FINANCIAL INFORMATION
Reconciliation of Operational EBITA margin by business
Three months ended March 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,327
1,572
1,506
730
(170)
6,965
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(12)
4
(1)
2
(1)
(8)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
1
(3)
–
3
3
Unrealized foreign exchange movements
on receivables (and related assets)
–
(2)
3
3
(2)
2
Operational revenues
3,317
1,575
1,505
735
(170)
6,962
Income (loss) from operations
506
254
151
22
(76)
857
Acquisition-related amortization
31
8
1
21
(1)
60
Restructuring, related and
implementation costs
2
8
5
1
–
16
Changes in obligations related to
divested businesses
–
–
–
–
(14)
(14)
Changes in pre-acquisition estimates
1
–
–
–
–
1
Gains and losses from sale of businesses
–
–
–
–
–
–
Acquisition- and divestment-related expenses
and integration costs
19
5
33
1
1
59
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
35
35
Certain other non-operational items
(30)
–
–
–
28
(2)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(21)
(1)
6
3
(5)
(18)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
–
(3)
–
3
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
–
–
3
1
(3)
1
Operational EBITA
510
274
196
49
(32)
997
Operational EBITA margin (%)
15.4%
17.4%
13.0%
6.7%
n.a.
14.3%
In the three months ended March 31, 2022, Certain other non -operational items in the table above includes the following:
Three months ended March 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
(1)
(1)
Certain other fair values changes,
(31)
–
–
–
(3)
(34)
Business transformation costs
(1)
1
–
–
–
25
26
Other non-operational items
–
–
–
–
7
7
Total
(30)
–
–
–
28
(2)
(1) Amounts include ABB Way process transformation costs of $25 million for the three months ended March 31, 2022.
36 Q1 2022 FINANCIAL INFORMATION
Three months ended March 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ 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:
Regulatory, compliance and legal costs
–
–
–
–
2
2
Certain other fair values changes,
(9)
–
–
–
(9)
(18)
Business transformation costs
3
–
–
–
17
20
Other non-operational items
–
–
–
–
8
8
Total
(6)
–
–
–
18
12
(1) Amounts include ABB Way process transformation costs of $15 million for the three months ended March 31, 2021.
37 Q1 2022 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents, Restricted cash (current and non-current) and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
March 31, 2022
December 31, 2021
Short-term debt and current maturities of long-term debt
3,114
1,384
Long-term debt
6,171
4,177
Total debt (gross debt)
9,285
5,561
Cash and equivalents
5,216
4,159
Restricted cash - current
30
30
Marketable securities and short-term investments
967
1,170
Restricted cash - non-current
300
300
Cash and marketable securities
6,513
5,659
Net debt (cash)
2,772
(98)
Net debt/Equity ratio
Definition
Net debt/Equity ratio
Net debt/Equity ratio is defined as Net debt divided by Equity.
Equity
Equity is defined as Total stockholders’ equity.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2022
December 31, 2021
Total stockholders' equity
13,638
15,957
Net debt (cash) (as defined above)
2,772
(98)
Net debt (cash) / Equity ratio
0.20
-0.01
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA ratio is defined as Net debt divided by EBITDA.
EBITDA
EBITDA is defined as Income from operations for the trailing twelve months preceding the balance sheet date before depreciation and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2022
March 31, 2021
Income from operations for the three months ended:
March 31, 2022 / 2021
857
797
December 31, 2021 / 2020
2,975
578
September 30, 2021 / 2020
852
71
June 30, 2021 / 2020
1,094
571
Depreciation and Amortization for the three months ended:
March 31, 2022 / 2021
210
227
December 31, 2021 / 2020
216
229
September 30, 2021 / 2020
220
231
June 30, 2021 / 2020
230
228
EBITDA
6,654
2,932
Net debt (as defined above)
2,772
1,233
Net debt / EBITDA
0.4
0.4
38 Q1 2022 FINANCIAL INFORMATION
Net working capital as a percentage of revenues
Definition
Net working capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated as Net working capital divided by Adjusted revenues for the trailing twelve months.
Net working capital
Net working capital is the sum of (i) receivables, net, (ii) contract assets, (iii) inventories, net, and (iv) prepaid expenses; less (v) accounts payable, trade, (vi)
contract liabilities, and (vii) other current liabilities (excluding primarily: (a) income taxes payable, (b) current derivative liabilities, (c) pension and other employee
benefits, (d) payables under the share buyback program 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 annualizing revenues of certain acquisitions which were completed in the same trailing
twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
March 31, 2022
March 31, 2021
Net working capital:
Receivables, net
6,851
6,663
Contract assets
1,072
1,044
Inventories, net
5,372
4,475
Prepaid expenses
289
241
Accounts payable, trade
(4,830)
(4,453)
Contract liabilities
(2,080)
(1,855)
Other current liabilities
(1)
(3,213)
(3,211)
Net working capital
3,461
2,904
Total revenues for the three months ended:
March 31, 2022 / 2021
6,965
6,901
December 31, 2021 / 2020
7,567
7,182
September 30, 2021 / 2020
7,028
6,582
June 30, 2021 / 2020
7,449
6,154
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(363)
–
Adjusted revenues for the trailing twelve months
28,646
26,819
Net working capital as a percentage of revenues (%)
12.1%
10.8%
(1) Amounts exclude $901 million and $710 million at March 31, 2022 and 2021, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities, (c) pension
and other employee benefits (d) payables under the share buyback program and (e) liabilities related to the divestment of the Power Grids business.
39 Q1 2022 FINANCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash flow divided by Adjusted net income attributable to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of both the Mechanical Power Transmission Division (Dodge) and Power Grids business, the latter being included in
discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets, and (ii)
proceeds from sales of property, plant and equipment.
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow recorded by ABB in the twelve months preceding the relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income recorded by ABB (as adjusted) in the twelve months preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
March 31, 2022
December 31, 2021
Net cash provided by operating activities – continuing operations
2,251
3,338
Adjusted for the effects of continuing operations:
Purchases of property, plant and equipment and intangible assets
(865)
(820)
Proceeds from sale of property, plant and equipment
108
93
Free cash flow from continuing operations
1,494
2,611
Net cash provided by (used in) operating activities – discontinued operations
(37)
(8)
Free cash flow
1,457
2,603
Adjusted net income attributable to ABB
(1)
2,499
2,416
Free cash flow conversion to net income
58%
108%
(1) Adjusted net income attributable to ABB for the year ended December 31, 2021, is adjusted to exclude the gain on the sale of Dodge of $2,195 million and reductions to the gain on
the sale of Power Grids of $65 million.
Reconciliation of the trailing twelve months to March 31, 2022
Continuing operations
Discontinued operations
($ in millions)
Net cash
provided by
continuing
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Net cash
provided by
(used in)
discontinued
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Adjusted net
income
attributable
to ABB
(1)
Q2 2021
663
(151)
3
–
–
–
755
Q3 2021
1,119
(166)
13
(15)
–
–
657
Q4 2021
1,033
(361)
57
(13)
–
–
478
Q1 2022
(564)
(187)
35
(9)
–
–
609
Total for the trailing
twelve months to
March 31, 2022
2,251
(865)
108
(37)
–
–
2,499
(1) Adjusted net income attributable to ABB for Q2, Q3 and Q4 of 2021 as well as Q1 2022, is adjusted to exclude reductions to the gain on the sale of Power Grids of $3 million,
$5 million, $33 million and $5 million, respectively. In addition, Q4 2021 is also adjusted to exclude the gain on the sale of Dodge of $2,195 million.
40 Q1 2022 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income less Interest and other finance expense and Losses from extinguishment of debt.
Reconciliation
Three months ended March 31,
($ in millions)
2022
2021
Interest and dividend income
13
11
Interest and other finance expense
(22)
(55)
Net finance expenses
(9)
(44)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total revenues.
Reconciliation
Three months ended March 31,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
4,397
3,327
1.32
3,531
3,140
1.12
Motion
2,202
1,572
1.40
1,917
1,667
1.15
Process Automation
1,692
1,506
1.12
1,656
1,407
1.18
Robotics & Discrete Automation
1,308
730
1.79
841
853
0.99
Corporate and Other
(226)
(170)
n.a.
(189)
(166)
n.a.
ABB Group
9,373
6,965
1.35
7,756
6,901
1.12
41 Q1 2022 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71
11
www.abb.com
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 21, 2022.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: April 21, 2022.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance