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 July 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.
⬜
☒
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 July 21, 2022 titled “Q2 2022 results”.
2.
Q2 2022 Financial Information.
3.
Announcements regarding transactions in ABB Ltd’s Securities made by the directors or the members of the
Executive Committee.
The information provided by Item 2 above is hereby incorporated by reference into the Registration Statements on Form F-3 of
ABB Ltd and ABB Finance (USA) Inc. (File Nos. 333-223907 and 333-223907-01) and registration statements on Form S-8
(File Nos. 333-190180, 333-181583, 333-179472, 333-171971 and 333-129271) each of which was previously filed with the
Securities and Exchange Commission.
2
—
“I am pleased with our performance and thatwe have taken yet another step toward our
long-term margin target. I am also delighted that we are moving ahead with the spin-off of
Accelleron and its planned listing in Switzerland.”
Björn Rosengren
, CEO
—
ZURICH, SWITZERLAND, JULY 21, 2022
Q2 2022 results
Strong demand and good operational performance
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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
—
Q2 2022
First six months
Press Release
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Comparable
1
H1 2022
H1 2021
US$
Comparable
1
Orders
8,807
7,989
10%
20%
18,180
15,745
15%
24%
Revenues
7,251
7,449
-3%
6%
14,216
14,350
-1%
7%
Gross Profit
2,290
2,508
-9%
4,571
4,776
-4%
as % of revenues
31.6%
33.7%
-2.1 pts
32.2%
33.3%
-1.1 pts
Income from operations
587
1,094
-46%
1,444
1,891
-24%
Operational EBITA
1
1,136
1,113
2%
9%
2,133
2,072
3%
9%
as % of operational revenues
1
15.5%
15.0%
+0.5 pts
14.9%
14.4%
+0.5 pts
Income from continuing operations, net of tax
406
789
-49%
1,049
1,340
-22%
Net income attributable to ABB
379
752
-50%
983
1,254
-22%
Basic earnings per share ($)
0.20
0.37
-47%
2
0.51
0.62
-18%
2
Cash flow from operating activities
4
382
663
-42%
(191)
1,206
n.a.
Cash flow from operating activities in continuing
operations
385
663
-42%
(179)
1,186
-115%
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q2 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
Q2 2022
Overall, I am pleased with how the teams delivered strong order
growth as well as a margin in line with our long-term target. This
was achieved despite the pressure from a tight supply chain,
Covid-enforced lockdowns in China and the inflationary
environment. Cash flow came in higher than in the first quarter,
and I expect a good momentum in the second half of the year.
We achieved a strong order growth of 10 % (20% comparable)
and we saw a positive development in all major customer
segments. While changes in exchange rates weighed on the total,
comparable orders increased at a double-digit rate in all regions.
With all business areas in double-digit growth, order intake
amounted to $8,807 million and a record-high order backlog of
$19.5 billion.
In total, revenues declined by 3% (up 6% comparable) , year-on-
year. Negative impact from change s in exchange rates and
portfolio changes outweighed the positives of strong price
execution and increased volumes, with the latter somewhat held
back by the strained supply chain. Comparable revenues
increased in all business areas except for Robotics & Discrete
Automation which together with the Distribution Solutions division
in Electrification, are where customer deliveries were materially
slowed by component shortages. Overall, the supply chain
constraints slightly eased compared with the previous quarter,
however we saw temporary pressure on customer deliveries in
China where lockdowns slowed down logistics somewhat more
than expected. We anticipate further easing of component supply
in the coming quarters.
I am pleased that we managed to improve the Operational
EBITA margin to 15.5%. Notably, our teams successfully offset
inflationary effects such as input costs and freight through
strong pricing execution and higher volumes. Process
Automation noted a sharp 180 basis point improvement to its
margin, year-on-year . I am also pleased with the performance
levels in Electrification and Motion, although margins declined
from last year’s high levels . Robotics & Discrete Automation is
the area with operational underperformance, triggered by
customer deliveries materially hampered by lockdowns in China
and semiconductor shortages. Additionally, results were
supported by lower than anticipated costs in Corporate and
Other including a positive margin impact of approximately 60
basis points related to the exit of a legacy project and a real
estate sale which came through sooner than expected.
Looking at Income from operations, it included items impacting
comparability of approximately $250 million.
These include the earlier mentioned charge of $195 million
triggered by us exiting the largest legacy project exposure in non-
core operations, namely the full-train retrofit business. It also
includes the financial impact of our decision to exit the Russian
market, triggered by the ongoing war in Ukraine and impact of
related international sanctions. We have started the process of
winding down the remaining activities in Russia. This triggered a
charge of $57 million , of which $23 million will impact cash flow in
the third quarter.
The balance sheet is robust, although year-on-year the cash flow
from operating activities in continuing operations declined to $385
million, mainly on a higher build-up of net working capital. That
said, we have continued to execute on our share buyback
program, and just after the close of the second quarter we
successfully delivered on our promise to return to shareholders
the remaining $1.2 billion - out of the total of $7.8 billion - from the
Power Grids proceeds. We will now continue with the execution of
our ongoing buyback program of up to $3 billion.
On the back of the volatile financial markets, we decided to
postpone the planned IPO of our E-mobility business. We will
monitor the market conditions and are fully committed to proceed
with a listing on the SIX Swiss Exchange as and when market
conditions are constructive. Meanwhile, building on the earlier
seed stage investment three years ago, the E-mobility team has
agreed to acquire a controlling interest in Numocity, a leading
digital platform for EV charging in India. This deal allows E-
mobility to leverage on the regional opportunity from increasing
demand for charging solutions for two and three-wheelers, cars
and light commercial vehicles. After the close of the second
quarter, we decided to spin off the Accelleron business
(Turbocharging) with a planned listing on SIX Swiss Exchange on
October 3, subject to approval by the Extraordinary General
Meeting. I am pleased about this as it allows for shareholders to
realize the full value of Accelleron while allowing ABB to focus on
its core areas of electrification and automation.
Björn Rosengren
CEO
In the
third quarter of 2022
, we anticipate double-digit
comparable revenue growth and the Operational EBITA margin
to sequentially improve, excluding the 60 basis points positive
impact from special items in the second quarter.
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 a positive market
momentum and our strong order backlog.
CEO summary
Outlook
ABB INTERIM REPORT
I
Q2 2022
Demand was strong across all customer segments and all
business areas reported double-digit order growth in the second
quarter, supported by virtually all divisions. Demand remained
strong throughout the period. Service-related orders increased
by 4% (12% comparable). In total, high demand more than
offset the adverse impact from changes in exchange rates and
order intake improved by 10% (20% comparable) to $8,807
million.
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 accelerating
investments in the EV segment.
In transport and infrastructure, the order development was
strong in the renewables and e-mobility business es. In the
buildings segment there was a positive development in both the
non-residential and residential areas, although some softness in
residential building in China was noted. 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.
Customer activity was strong across the regions but changes in
exchange rates weighed on reported order intake. Europe was
stable at 0% (15% comparable). The Americas improved by
23% (33% comparable), supported by a stellar 21% (32%
comparable) in the United States. In Asia, Middle East and
Africa orders increased by 9% (15% comparable), including an
increase in China of 7% (10% comparable).
Revenues were adversely impacted by changes in exchange
rates which more than offset benefits from a strong price
development and slightly higher volumes. While component
constraints eased somewhat , mainly semiconductors, they still
impacted customer deliveries, above all noticeable in Robotics
& Discrete Automation and in the Distribution Solutions division
in Electrification. An added challenge to customer deliveries
stemmed from the Covid-related lockdowns in China which in
addition to forcing Robotics to close its Shanghai production for
five weeks followed by a gradual re-opening, also triggered a
general slow-down of local logistics for part of the quarter. In
total, the revenue decline in Robotics & Discrete Automation
was however more than offset by strong comparable
improvements in the other business areas. In total, ABB Group
revenues declined by -3% (up 6% comparable) and amounted
to $7,251 million.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q2 2022
Q2 2021
US$
Comparable
Europe
2,958
2,954
0%
15%
The Americas
3,050
2,473
23%
33%
Asia, Middle East
and Africa
2,799
2,562
9%
15%
ABB Group
8,807
7,989
10%
20%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
20%
6%
FX
-7%
-7%
Portfolio changes
-3%
-2%
Total
10%
-3%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q2 2022
Q2 2021
US$
Comparable
Europe
2,508
2,697
-7%
7%
The Americas
2,397
2,284
5%
14%
Asia, Middle East
and Africa
2,346
2,468
-5%
0%
ABB Group
7,251
7,449
-3%
6%
ABB INTERIM REPORT
I
Q2 2022
Gross profit
Gross profit decreased by 9% to $2,290 million, primarily due to
changes in exchange rates. Gross margin was 31.6%, a decline of
210 basis points from last year’s very high level driven primarily by
mark to market losses on commodity derivatives as well as under-
absorption of fixed costs in Robotics & Discrete Automation.
Income from operations
Income from operations amounted to $587 million, declining by
$507 million, or 46%. The decline was primarily related to charges
totaling approximately $250 million triggered by the exit of a legacy
project in non-core operations and the decision to exit Russian
operations. Additional adverse impact related to changes in
exchange rates, commodity timing differences and significantly less
support from fair value adjustments of equity investments .
Operational EBITA
Operational EBITA of $1,136 million was 2% higher (9% constant
currency) year-on-year, as contribution from operational
performance offset the adverse impact from mainly changes in
exchange rates and portfolio changes.
The Operational EBITA margin increased by 50 basis points to
15.5% despite year-on-year headwind from less support from raw
material hedges, mainly in Electrification. A positive contribution
stemmed from operations successfully offsetting inflationary effects
such as input costs and freight with impacts from strong pricing
execution and slightly higher volumes. Additional support was due
to the lower than anticipated costs in Corporate and Other which
was up by $79 million to -$13 million including a positive margin
impact of approximately 60 basis points related to the exit of a
legacy project and a real estate sale. Operational EBITA margin for
the second quarter last year was 15.0%, including 20 basis points
from the now divested Mechanical Power Transmission business.
Net finance expenses
Net finance expenses remained stable at $20 million compared with
$21 million a year ago, primarily reflecting lower interest charges on
borrowings and lower interest on tax risks offset by certain fair
value adjustments on investments.
Income tax
Income tax expense was $193 million with an effective tax rate of
32.2%, including a 7. 2% adverse tax impact from the non-
deductibility of certain non-operational charges.
Net income and earnings per share
Net income attributable to ABB was $379 million and decreased by
50% from last year, with the decline primarily related to the lower
Income from operations .
Basic earnings per share was $0.20, and declined from $0.37, year-
on-year, adversely impacted by charges mainly related to the exit of
the legacy full-train retrofit project and the decision to wind-down
operations in Russia, but also by commodity timing differences.
Earnings
ABB INTERIM REPORT
I
Q2 2022
Net working capital
Net working capital amounted to $3,663 million, increasing
both year-on-year from $3,251 million and sequentially from
$3,461 million. The sequential increase was driven primarily
by inventories to support future deliveries to help meet the
strong market dem and, 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 $151 million.
Net debt
Net debt
1
quarter, and increased from $2,259 million, year-on-year.
Sequentially, it increased from $2,772 million, mainly due to
paid dividend and share buybacks.
Cash flows
Cash flow from operating activities in continuing operations
was $385 million and declined year -on-year from
$663 million. The year -on-year decline was driven by a
higher build-up of trade net working capital, mainly related
to inventories to support future deliveries and payables.
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 completed just after the
close of the second quarter, the return to its shareholders of the
remaining $1.2 billion out of the $7.8 billion of cash proceeds
from the Power Grids divestment. During the second quarter,
33,852,000 shares were repurchased on the second trading line
for the amount of approximately $1,016 million. The total
number of ABB Ltd’s issued shares is 1,964,745,075 , after the
cancellation of 88,403,189 shares in June, as approved at
ABB's 2022 AGM.
($ millions,
unless otherwise indicated)
Jun. 30
2022
Jun. 30
2021
Dec. 31
2021
Short term debt and current
maturities of long-term debt
2,830
2,117
1,384
Long-term debt
5,086
4,375
4,177
Total debt
7,916
6,492
5,561
Cash & equivalents
2,412
2,860
4,159
Restricted cash - current
23
71
30
Marketable securities and
short-term investments
945
1,002
1,170
Restricted cash - non-current
301
300
300
Cash and marketable securities
3,681
4,233
5,659
Net debt (cash)*
4,235
2,259
(98)
Net debt (cash)* to EBITDA ratio
0.7
0.7
(0.01)
Net debt (cash)* to Equity ratio
0.34
0.16
(0.01)
*
At Jun. 30, 2022, Jun. 30, 2021 and Dec. 31, 2021, net debt(cash) excludes net pension
(assets)/liabilities of $(72) million, $633 million and $45 million, respectively.
Balance sheet & Cash flow
ABB INTERIM REPORT
I
Q2 2022
Orders and revenues
Order intake was strong with a stable trend throughout the
quarter except for some temporary weakness in China which
recovered towards the end of the second quarter. Order
intake amounted to $4,037 million, improving by 9% (16%
comparable), year-on-year. The order backlog extended to a
record level of $6.7 billion.
●
Customer activity was strong in most segments with
softness noted only in the residential construction -related
segment in China.
●
Orders in the Asia, Middle East and Africa region improved
by 1% (7% comparable), weighed down by China which
declined by 7% (5% comparable). China came off from the
high comparable last year on lower demand in the
residential construction segment, but also by a temporary
general dampening of customer activity during the Covid-
related lockdowns that started in April. A recovery was
noted during the quarter as restrictions progressively
eased. In Europe customer activity was strong across the
major countries, however changes in exchange rates
weighed on the total which was down by 4% (up 10%
comparable). The Americas improved sharply by 29% (30%
comparable).
●
Revenues improved by 4% (10% comparable) to
$3,531 million with strong pricing execution as the main
driver of comparable revenue growth. Double -digit growth
in comparable revenues was reported in the Americas and
Europe, while Asia, Middle East and Africa increased at a
mid-single digit rate. In contrast to the other divisions,
volume growth was negative in Distribution Solutions which
was held back by supply constraints mainly related to
semiconductors. Additional challenges stemmed from the
lockdowns in China which slowed down local logistics,
although it gradually improved as the quarter progressed.
Profit
Operational EBITA was $599 million, remaining stable as a
reported headline number but improving by 9% in constant
currency. Operational EBITA margin declined by 50 basis
points to 16.9%.
●
Under-absorption of fixed costs in the large Distribution
Solutions division triggered by component shortages that
hampered customer deliveries was the primary driver for
the business area’s margin decline.
—
Electrification
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
16%
10%
FX
-7%
-6%
Portfolio changes
0%
0%
Total
9%
4%
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Comparable
H1 2022
H1 2021
US$
Comparable
Orders
4,037
3,693
9%
16%
8,434
7,224
17%
22%
Order backlog
6,706
5,029
33%
42%
6,706
5,029
33%
42%
Revenues
3,531
3,406
4%
10%
6,858
6,546
5%
10%
Operational EBITA
599
592
1%
1,109
1,103
1%
as % of operational revenues
16.9%
17.4%
-0.5 pts
16.1%
16.8%
-0.7 pts
Cash flow from operating activities
393
511
-23%
432
830
-48%
No. of employees (FTE equiv.)
51,600
51,700
0%
ABB INTERIM REPORT
I
Q2 2022
Orders and revenues
The second quarter was another +$2 billion quarter with
orders up by 7% (26% comparable) to $2,079 million,
despite the adverse impacts from portfolio changes and
changes in exchange rates. Both base orders and large
orders increased year-on -year.
●
Strong demand was seen in all the customer segments
for the electrical motors, drives and service offerings and
all divisions reported double-digit order growth.
●
Demand was strong in all major regions, although
reported order growth was hampered by changes in
exchange rates and portfolio changes. Orders increased
in Europe by 1% (17% comparable) and by 17% (24%
comparable) in Asia, Middle East and Africa with no
material impact on customer order patterns from the
Covid-related lockdowns. The Americas reported orders
up by 3% (38% comparable) reflecting the divestment of
Mechanical Power Transmission (Dodge).
●
The divestment of Dodge and changes in exchange rates
weighed on reported revenue growth which decreased
by 12% (up 3% comparable). Strong price execution
drove comparable growth, but volumes were hampered
by the lockdowns in China which slowed down local
logistics. That said, a gradual easing was noted as the
quarter progressed. The order backlog expanded to
record-high $4.6 billion.
Profit
Operational EBITA amounted to $266 million and declined
from last year due to adverse impacts from low volumes,
portfolio changes and changes in exchange rates.
Operational EBITA margin was 16.4%, with about half of the
130 basis points year -on-year decline relating to the
divestment of the Dodge business.
●
Strong pricing execution offset the increased costs
related to such as commodities and freight.
●
The Covid-related lockdowns in China hampered
customer and supplier deliveries and triggered under-
absorption of fixed costs.
●
In addition, there was an adverse divisional mix in
revenues.
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Comparable
H1 2022
H1 2021
US$
Comparable
Orders
2,079
1,947
7%
26%
4,281
3,864
11%
29%
Order backlog
4,568
3,558
28%
43%
4,568
3,558
28%
43%
Revenues
1,626
1,850
-12%
3%
3,198
3,517
-9%
6%
Operational EBITA
266
325
-18%
540
614
-12%
as % of operational revenues
16.4%
17.7%
-1.3 pts
16.9%
17.4%
-0.5 pts
Cash flow from operating activities
241
223
8%
239
547
-56%
No. of employees (FTE equiv.)
20,800
21,500
-3%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
26%
3%
FX
-7%
-6%
Portfolio changes
-12%
-9%
Total
7%
-12%
ABB INTERIM REPORT
I
Q2 2022
Orders and revenues
Customer demand was strong across the segments which
resulted in an order growth of 17% (25% comparable),
although the headline number was weighed down by
changes in exchange rates. Strong demand was noted for
the product, system s and service businesses.
●
Double-digit order increases were reported for all of the
divisions, supported by base orders but also by a higher
contribution from large orders, year-on-year.
●
Demand was strong across all customer segments, with a
particularly strong development in the metals & mining
and marine segment. High customer activity in the oil &
gas segment included also the LNG business. While
hydrogen is still a small part of the business, customer
interest was high. Service orders increased by 4% (12%
comparable).
●
All regions improved, and comparable order intake
increased at a double -digit rate. Europe was up by 8%
(22% comparable) and the Americas by 53%
(55% comparable). Asia, Middle East and Africa was up
by 4% (11% comparable).
●
Revenues declined by 1% (up 7% comparable) adversely
impacted by change s in exchange rates which more than
offset the positive impact of increased volumes and
positive pricing. All divisions contributed to comparable
revenue growth.
Profit
Most divisions reported double-digit Operational EBITA
margin with both profit and profitability improvements , year-
on-year. Operational EBITA increased by 17%
(28% constant currency) , to $224 million, and the
Operational EBITA margin improved by 180 basis points to
14.3%.
●
Performance improvements were driven by higher
volumes and efficiency measures, which more than offset
cost inflation mainly in electrical components, and freight
as well as a slight negative divisional mix.
—
Process Automation
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
25%
7%
FX
-8%
-8%
Portfolio changes
0%
0%
Total
17%
-1%
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Comparable
H1 2022
H1 2021
US$
Comparable
Orders
1,819
1,555
17%
25%
3,511
3,211
9%
15%
Order backlog
6,170
5,980
3%
12%
6,170
5,980
3%
12%
Revenues
1,529
1,540
-1%
7%
3,035
2,947
3%
9%
Operational EBITA
224
192
17%
420
347
21%
as % of operational revenues
14.3%
12.5%
+1.8 pts
13.7%
11.8%
+1.9 pts
Cash flow from operating activities
193
228
-15%
253
461
-45%
No. of employees (FTE equiv.)
22,200
21,900
2%
ABB INTERIM REPORT
I
Q2 2022
Orders and revenues
On high customer demand , order intake improved by 15% (23%
comparable) to $1,109 million. However, revenues were
significantly hampered by both general supply chain constraints
as well as Covid-related lockdowns in China. Consequently, the
order backlog reached a record-high level of $2.7 billion.
Semiconductor constraints are expected to ease in the third
quarter.
●
Both divisions noted strong momentum and reported double-
digit rates in order growth. Demand was stable throughout
the quarter.
●
Customer activity increased in all segments with particularly
strong momentum in general industry as well as automotive
which was supported by a strong development in EV
investments in China.
●
Order momentum was very strong in Europe at 9%
(22% comparable) and Asia, Middle East and Africa at 30%
(36% comparable), including orders in China which improved
by 40% (43% comparable). The Americas declined by 3%
(3% comparable) from a high comparable last year due to
large orders received.
●
Revenues declined by 12% (5% comparable) adversely
impacted by change s in exchange rates. While price
increases supported comparable growth, volumes declined in
both divisions. This was triggered by customer deliveries
being adversely impacted by the shortages in the supply of
semiconductors and the production halt in the Robotics
division’s Shanghai factory due to enforced Covid-related
lockdowns. As an additional challenge, the lockdowns
triggered a general slowdown in local logistics in the
beginning of the second quarter. After approximately five
week’s shutdown, production in the Shanghai plant gradually
increased and ran at close to full capacity at the end of the
quarter.
Profit
Both profit and profitability declined year-on-year due to low
volumes and cost inflation linked to the tight supply chain.
Operational EBITA declined by 38% with a margin
deterioration of 330 basis points.
●
In total, the decline in volumes triggered under-absorption
of fixed costs, which combined with cost inflation related
to freight and input costs more than offset the contribution
from cost measures and positive price execution, year-
on-year.
—
Robotics & Discrete Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Comparable
H1 2022
H1 2021
US$
Comparable
Orders
1,109
968
15%
23%
2,417
1,809
34%
40%
Order backlog
2,728
1,501
82%
97%
2,728
1,501
82%
97%
Revenues
732
832
-12%
-5%
1,462
1,685
-13%
-9%
Operational EBITA
60
96
-38%
109
201
-46%
as % of operational revenues
8.2%
11.5%
-3.3 pts
7.4%
11.9%
-4.5 pts
Cash flow from operating activities
56
78
-28%
27
189
-86%
No. of employees (FTE equiv.)
10,800
10,300
5%
Growth
Q2
Q2
Change year-on-year
Orders
Revenues
Comparable
23%
-5%
FX
-9%
-7%
Portfolio changes
1%
0%
Total
15%
-12%
ABB INTERIM REPORT
I
Q2 2022
10
Quarterly highlights
●
Microsoft has joined ABB’s Energy Efficiency Movement.
Launched in March 2021 by ABB, the
#energyefficiencymovement is a multi-stakeholder
initiative to raise awareness and spur action to reduce
energy consumption and carbon emissions to combat
climate change. Other members include Deutsche Post
DHL Group and Alfa Laval.
●
ABB has been assigned by EPC contractor Aker Solutions,
a leader in sustainable energy solutions, to deliver the main
electrical, automation and safety systems for Norway’s
Northern Lights project. A joint venture between Equinor,
Shell and TotalEnergies, Northern Lights is the first
industrial carbon capture and storage project to develop an
open and flexible infrastructure to safely store CO2 from
industries across Europe.
●
ABB E-mobility has signed a new global framework
agreement with Shell to supply ABB’s end-to-end portfolio
of AC and DC charging stations. The portfolio ranges
from the AC wallbox for home, work or retail installations
to the Terra 360 which is ideal for refueling stations,
urban charging stations, retail parking and fleet
applications.
●
ABB celebrated this year’s Pride Month in June with a
clear focus on what can be done on an individual level to
support the LGBTQ+ community and make the workplace
more inclusive. Since last year, the number of “Allies” in
LGBTQ+ Employee Resource Groups across ABB more
than doubled, now having about 900 members.
●
From June 19-24, the Special Olympics National Summer
Games took place in Berlin. Around 4,000 athletes
competed in 20 sport disciplines, including basketball,
beach volleyball, handball, table tennis and triathlon, at
the National Games – and were supported and cheered
on by about 100 volunteers from ABB. They submitted
time-off or vacation to actively participate in the largest
inclusive sports event in Germany this year.
Story of the quarter
ABB has launched a product label called
EcoSolutions™ targeting its customers with full
transparency on the circularity value and environmental
impact of ABB products across all business areas. By
scanning the QR code on the EcoSolutions label or by
visiting the product page, customers can easily have this
information at hand. For customers, the ABB EcoSolutions
label is an assurance that, where relevant, the product they
are buying is designed to last and has been manufactured
with the maximum amount of sustainably sourced raw
materials; made with processes that are designed to avoid
waste and maximize the use of sustainable packaging
materials; designed to increase resource and process
efficiency while in use, be upgradable and optimize the
lifetime of equipment and facilities; supported by take-back
services leading to refurbishment, re-use or recycling of
products and components, and is accompanied by
instructions for responsible end-of-life treatment.
Q2 outcome
●
22% reduction of CO
₂
due to increased use of renewable energy and energy efficient
projects on sites.
●
21% year-on-year increase in LTIFR due to a slight increase in
absolute incidents as well as fewer hours booked during the
second quarter.
●
2.9%-points increase in number of women in senior
management versus the prior year continued to be supported by
targeted initiatives across all business areas.
—
Sustainability
Q2 2022
Q2 2021
CHANGE
12M ROLLING
CO2e own operations emissions,
kt scope 1 and 2
1
89
114
-22%
376
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.17
0.14
21%
0.16
Share of females in senior management
positions, %
16.8
13.9
+2.9 pts
16.3
1
CO
₂
ABB INTERIM REPORT
I
Q2 2022
During Q2 2022
●
On May 25, ABB announced that its E-mobility division
had agreed to acquire a controlling stake in Numocity, a
leading digital platform for electric vehicle charging in
India. ABB will increase its shareholding to a controlling
majority of 72 percent and has the right to become sole
owner by 2026. The transaction is part of ABB E-
mobility’s overall growth strategy and will significantly
improve its position across India, as well as South East
Asia and the Middle East – target regions for Numocity
given increasing demand for charging solutions for two
and three-wheelers, cars and light commercial vehicles.
●
On June 20, ABB announced that it had decided to
postpone its planned IPO of the E-mobility business. The
listing of the business remains an important part of ABB’s
strategy. However, recent market conditions made it
challenging to proceed with a planned share offering in
the second quarter of 2022. Consequently, ABB is
monitoring market conditions and is fully committed to
proceed with a listing of the business on the SIX Swiss
Exchange as and when market conditions are
constructive.
After the second quarter
On July 20, ABB announced that it will spin off Accelleron
and list the company on SIX Swiss Exchange, assuming
shareholders approval at the ABB Extraordinary General
Meeting planned for
September 7, 2022. ABB shareholders would receive 1
Accelleron share for every 20 ABB shares held. Planned
date for listing is October 3, 2022. Accelleron develops,
produces and services turbochargers and large
turbocharging components for engines, which enhance
propulsion and increase fuel efficiency while reducing
emissions. Its leading products support clients in sectors
such as marine, energy and rail, helping to provide
sustainable and reliable power and highest efficiencies.
Accelleron’s potential is driven by its position, built on its
very long track record, as a global market leader in
heavy-duty turbocharging for mission-critical applicati ons.
●
On July 21, ABB announced it has decided to exit the
Russian market and started the process to wind down its
remaining activities there. The financial impact of this
decision amounted to $57 million in the second quarter, of
which $23 million will impact cash flow in the third quarter.
After Q2 2022
In the first six months of 2022, demand for ABB’s
products increased strongly year-on-year, supported by
most customer segments. Orders amounted to
$18,180 million and improved by 15% (24% comparable)
and revenues amounted to $14,216 million down by -1%
(up 7% comparable), implying a book-to-bill of 1.28. In the
period demand increased in both the product and the
service business. Changes in exchange rates had a
negative impact on order intake and revenues .
Income from operations amounted to $1,444 million down
from $1,891 million in the year-earlier period. Results
included restructuring activities progressing according to
plan with restructuring and restructuring-related expenses of
$280 million. This include d a project charge amounting to
$195 million triggered by the exit of the largest legacy
project exposure in non-core operations.
Operational EBITA improved by 3% year on year to
$2,133 million and the Operational EBITA margin increased
by 50 basis points to 14.9%. Performance was driven by the
impacts from strong pricing execution and higher volumes
offsetting inflationary impacts in for example input costs
and freight, but not offsetting the adverse year-on-year
impact related to the commodity hedges which supported
last year’s period.
Selling, general and administrative (SG&A) expenses
decreased -1% in line with revenues. The ratio in relation to
revenues therefore remained stable at 18.0%. Corporate
and Other Operational EBITA improved by $148 million
to -$45 million. The net finance expenses amounted to
$29 million.
Income tax expense was $434 million with a tax rate of
29.3%.
Net income attributable to ABB was $983 million and
decreased by -22%. Basic earnings per share was $0.51 and
decreased by -18%.
Significant events
First six months 2022
ABB INTERIM REPORT
I
Q2 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
Includes restructuring-related expenses of $195 million from the exit of the full train retrofit business as well as $57 million respectively from the exit of the Russian market in Q2 2022.
3
Costs relating to the announced exits and the potential E-mobility listing.
4
Excluding share of net income from JV.
5
Excluding impact of acquisitions or divestments or any significant non-operational items.
($ in millions, unless otherwise stated)
FY 2022
Q3 2022
Net finance expenses
~(100)
~(30)
unchanged
Non-operational pension
(cost) / credit
~120
~30
from ~(140)
Effective tax rate
~25%
~25%
unchanged
Capital Expenditures
~(750)
~(200)
unchanged
($ in millions, unless otherwise stated)
FY 2022
1
Q3 2022
Corporate and Other Operational costs
~(200)
~(80)
from ~(300)
Non-operating items
Acquisition-related amortization
~(230)
~(55)
unchanged
Restructuring and restructuring related
~(100)+(252)
2
~(35)
2
from ~(130)
Separation costs
3
~(180)
~(50)
unchanged
ABB Way transformation
~(150)
~(40)
unchanged
Certain other income and expenses
related to PG divestment
4
~(25)
-
unchanged
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
Q2 2022
EBITDA, $ in million
1,024
1,324
1,072
3,191
6,611
1,067
794
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
14.90
n.a.
n.a.
Net debt/Equity
0.09
0.16
0.13
(0.01)
(0.01)
0.20
0.34
Net debt/ EBITDA 12M rolling
0.4
0.7
0.5
(0.01)
(0.01)
0.4
0.7
Net working capital, % of 12M rolling revenues
10.8%
11.6%
10.2%
8.1%
8.1%
12.1%
12.8%
Earnings per share, basic, $
0.25
0.37
0.33
1.34
2.27
0.31
0.20
Earnings per share, diluted, $
0.25
0.37
0.32
1.33
2.25
0.31
0.20
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.82
n.a.
n.a.
Share price at the end of period, CHF
28.56
31.39
31.39
34.90
34.90
30.17
25.46
Share price at the end of period, $
30.47
33.99
33.36
38.17
38.17
32.34
26.73
Number of employees (FTE equivalents)
105,330
106,370
106,080
104,420
104,420
104,720
106,380
No. of shares outstanding at end of period (in millions)
2,024
2,006
1,993
1,958
1,958
1,929
1,892
Acquisitions and divestments, last twelve months
ABB INTERIM REPORT
I
Q2 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
August 31
Accelleron Cap
ital Markets Day
September 7
Planned ABB Extraordinary General Meeting
October 3 Planned listing of Accelleron on SIX Swiss Exchange
October 20
Q3 2022 results
2023
February
2
Q4
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”, and “Robotics and Discrete
Automation”. 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 Q2 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.
Important notice about forward-looking information
Q2 results presentation on July 21, 2022
ABB
achieve a more productive, sustainable future. By connecting software to its electrification, robotics, automation and motion
portfolio, ABB pushes the boundaries of technology to drive performance to new levels. With a history of excellence stretching back
more than 130 years, ABB’s success is driven by about 105,000 talented employees in over 100 countries.
1 Q2 2022 FINANCIAL INFORMATION
July 21, 2022
Q2 2022
Financial information
2 Q2 2022 FINANCIAL INFORMATION
—
Financial Information
Contents
03
─ 07 Key Figures
08 ─
34 Consolidated Financial Information (unaudited)
35 ─
47 Supplemental Reconciliations and Definitions
3 Q2 2022 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Comparable
(1)
Orders
8,807
7,989
10%
20%
Order backlog (end June)
19,477
15,424
26%
37%
Revenues
7,251
7,449
-3%
6%
Gross Profit
2,290
2,508
-9%
as % of revenues
31.6%
33.7%
-2.1 pts
Income from operations
587
1,094
-46%
Operational EBITA
(1)
1,136
1,113
2%
9%
(2)
as % of operational revenues
(1)
15.5%
15.0%
+0.5 pts
Income from continuing operations, net of tax
406
789
-49%
Net income attributable to ABB
379
752
-50%
Basic earnings per share ($)
0.20
0.37
-47%
(3)
Cash flow from operating activities
(4)
382
663
-42%
Cash flow from operating activities in continuing operations
385
663
-42%
CHANGE
($ in millions, unless otherwise indicated)
H1 2022
H1 2021
US$
Comparable
(1)
Orders
18,180
15,745
15%
24%
Revenues
14,216
14,350
-1%
7%
Gross Profit
4,571
4,776
-4%
as % of revenues
32.2%
33.3%
-1.1 pts
Income from operations
1,444
1,891
-24%
Operational EBITA
(1)
2,133
2,072
3%
9%
(2)
as % of operational revenues
(1)
14.9%
14.4%
+0.5 pts
Income from continuing operations, net of tax
1,049
1,340
-22%
Net income attributable to ABB
983
1,254
-22%
Basic earnings per share ($)
0.51
0.62
-18%
(3)
Cash flow from operating activities
(4)
(191)
1,206
n.a.
Cash flow from operating activities in continuing operations
(179)
1,186
n.a.
(1) For a reconciliation of non-GAAP measures see “
” on page 35.
(2) Constant currency (not adjusted for portfolio changes).
(3) EPS growth rates are computed using unrounded amounts.
(4) Cash flow from operating activities includes both continuing and discontinued operations.
4 Q2 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q2 2022
Q2 2021
US$
Local
Comparable
Orders
ABB Group
8,807
7,989
10%
17%
20%
Electrification
4,037
3,693
9%
16%
16%
Motion
2,079
1,947
7%
14%
26%
Process Automation
1,819
1,555
17%
25%
25%
Robotics & Discrete Automation
1,109
968
15%
24%
23%
Corporate and Other
(incl. intersegment eliminations)
(237)
(174)
Order backlog (end June)
ABB Group
19,477
15,424
26%
36%
37%
Electrification
6,706
5,029
33%
42%
42%
Motion
4,568
3,558
28%
40%
43%
Process Automation
6,170
5,980
3%
12%
12%
Robotics & Discrete Automation
2,728
1,501
82%
98%
97%
Corporate and Other
(incl. intersegment eliminations)
(695)
(644)
Revenues
ABB Group
7,251
7,449
-3%
4%
6%
Electrification
3,531
3,406
4%
10%
10%
Motion
1,626
1,850
-12%
-6%
3%
Process Automation
1,529
1,540
-1%
7%
7%
Robotics & Discrete Automation
732
832
-12%
-5%
-5%
Corporate and Other
(incl. intersegment eliminations)
(167)
(179)
Income from operations
ABB Group
587
1,094
Electrification
465
549
Motion
231
303
Process Automation
175
190
Robotics & Discrete Automation
43
74
Corporate and Other
(incl. intersegment eliminations)
(327)
(22)
Income from operations %
ABB Group
8.1%
14.7%
Electrification
13.2%
16.1%
Motion
14.2%
16.4%
Process Automation
11.4%
12.3%
Robotics & Discrete Automation
5.9%
8.9%
Operational EBITA
ABB Group
1,136
1,113
2%
9%
Electrification
599
592
1%
9%
Motion
266
325
-18%
-13%
Process Automation
224
192
17%
28%
Robotics & Discrete Automation
60
96
-38%
-29%
Corporate and Other
(incl. intersegment eliminations)
(13)
(92)
Operational EBITA %
ABB Group
15.5%
15.0%
Electrification
16.9%
17.4%
Motion
16.4%
17.7%
Process Automation
14.3%
12.5%
Robotics & Discrete Automation
8.2%
11.5%
Cash flow from operating activities
ABB Group
382
663
Electrification
393
511
Motion
241
223
Process Automation
193
228
Robotics & Discrete Automation
56
78
Corporate and Other
(incl. intersegment eliminations)
(498)
(377)
Discontinued operations
(3)
–
5 Q2 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
H1 2022
H1 2021
US$
Local
Comparable
Orders
ABB Group
18,180
15,745
15%
21%
24%
Electrification
8,434
7,224
17%
22%
22%
Motion
4,281
3,864
11%
17%
29%
Process Automation
3,511
3,211
9%
15%
15%
Robotics & Discrete Automation
2,417
1,809
34%
42%
40%
Corporate and Other
(incl. intersegment eliminations)
(463)
(363)
Order backlog (end June)
ABB Group
19,477
15,424
26%
36%
37%
Electrification
6,706
5,029
33%
42%
42%
Motion
4,568
3,558
28%
40%
43%
Process Automation
6,170
5,980
3%
12%
12%
Robotics & Discrete Automation
2,728
1,501
82%
98%
97%
Corporate and Other
(incl. intersegment eliminations)
(695)
(644)
Revenues
ABB Group
14,216
14,350
-1%
5%
7%
Electrification
6,858
6,546
5%
10%
10%
Motion
3,198
3,517
-9%
-4%
6%
Process Automation
3,035
2,947
3%
9%
9%
Robotics & Discrete Automation
1,462
1,685
-13%
-8%
-9%
Corporate and Other
(incl. intersegment eliminations)
(337)
(345)
Income from operations
ABB Group
1,444
1,891
Electrification
971
989
Motion
485
568
Process Automation
326
337
Robotics & Discrete Automation
65
156
Corporate and Other
(incl. intersegment eliminations)
(403)
(159)
Income from operations %
ABB Group
10.2%
13.2%
Electrification
14.2%
15.1%
Motion
15.2%
16.2%
Process Automation
10.7%
11.4%
Robotics & Discrete Automation
4.4%
9.3%
Operational EBITA
ABB Group
2,133
2,072
3%
9%
Electrification
1,109
1,103
1%
7%
Motion
540
614
-12%
-8%
Process Automation
420
347
21%
29%
Robotics & Discrete Automation
109
201
-46%
-40%
Corporate and Other
(incl. intersegment eliminations)
(45)
(193)
Operational EBITA %
ABB Group
14.9%
14.4%
Electrification
16.1%
16.8%
Motion
16.9%
17.4%
Process Automation
13.7%
11.8%
Robotics & Discrete Automation
7.4%
11.9%
Cash flow from operating activities
ABB Group
(191)
1,206
Electrification
432
830
Motion
239
547
Process Automation
253
461
Robotics & Discrete Automation
27
189
Corporate and Other
(incl. intersegment eliminations)
(1,130)
(841)
Discontinued operations
(12)
20
6 Q2 2022 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q2 22
Q2 21
Q2 22
Q2 21
Q2 22
Q2 21
Q2 22
Q2 21
Q2 22
Q2 21
Revenues
7,251
7,449
3,531
3,406
1,626
1,850
1,529
1,540
732
832
Foreign exchange/commodity timing
differences in total revenues
70
(13)
22
2
(4)
(11)
32
(4)
1
2
Operational revenues
7,321
7,436
3,553
3,408
1,622
1,839
1,561
1,536
733
834
Income from operations
587
1,094
465
549
231
303
175
190
43
74
Acquisition-related amortization
59
64
30
29
7
13
1
1
19
21
Restructuring, related and
implementation costs
(1)
264
18
8
4
–
4
–
10
2
–
Changes in obligations related to
divested businesses
(3)
4
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
(2)
2
–
2
–
–
–
–
(2)
–
Gains and losses from sale of businesses
4
(12)
–
1
4
(1)
–
(13)
–
–
Acquisition- and divestment-related
expenses and integration costs
50
20
10
12
3
4
36
3
2
–
Other income/expense relating to the
Power Grids joint venture
2
2
–
–
–
–
–
–
–
–
Certain other non-operational items
65
(86)
22
(9)
–
1
–
2
1
–
Foreign exchange/commodity timing
differences in income from operations
110
7
64
4
21
1
12
(1)
(5)
1
Operational EBITA
1,136
1,113
599
592
266
325
224
192
60
96
Operational EBITA margin (%)
15.5%
15.0%
16.9%
17.4%
16.4%
17.7%
14.3%
12.5%
8.2%
11.5%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
H1 22
H1 21
H1 22
H1 21
H1 22
H1 21
H1 22
H1 21
H1 22
H1 21
Revenues
14,216
14,350
6,858
6,546
3,198
3,517
3,035
2,947
1,462
1,685
Foreign exchange/commodity timing
differences in total revenues
67
20
12
12
(1)
8
31
1
6
(1)
Operational revenues
14,283
14,370
6,870
6,558
3,197
3,525
3,066
2,948
1,468
1,684
Income from operations
1,444
1,891
971
989
485
568
326
337
65
156
Acquisition-related amortization
119
129
61
58
15
26
2
2
40
41
Restructuring, related and
implementation costs
(1)
280
53
10
21
8
5
5
13
3
5
Changes in obligations related to
divested businesses
(17)
6
–
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
(1)
8
1
8
–
–
–
–
(2)
–
Gains and losses from sale of businesses
4
(9)
–
4
4
(1)
–
(13)
–
–
Acquisition- and divestment-related
expenses and integration costs
109
30
29
18
8
7
69
4
3
–
Other income/expense relating to the
Power Grids joint venture
37
19
–
–
–
–
–
–
–
–
Certain other non-operational items
63
(74)
(8)
(15)
–
1
–
2
1
–
Foreign exchange/commodity timing
differences in income from operations
95
19
45
20
20
8
18
2
(1)
(1)
Operational EBITA
2,133
2,072
1,109
1,103
540
614
420
347
109
201
Operational EBITA margin (%)
14.9%
14.4%
16.1%
16.8%
16.9%
17.4%
13.7%
11.8%
7.4%
11.9%
(1) Includes impairment of certain assets.
7 Q2 2022 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q2 22
Q2 21
Q2 22
Q2 21
Q2 22
Q2 21
Q2 22
Q2 21
Q2 22
Q2 21
Depreciation
136
148
67
68
26
32
16
19
15
15
Amortization
71
82
35
39
9
15
3
3
20
21
including total acquisition-related amortization of:
59
64
30
29
7
13
1
1
19
21
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
H1 22
H1 21
H1 22
H1 21
H1 22
H1 21
H1 22
H1 21
H1 22
H1 21
Depreciation
272
292
134
132
53
64
34
38
30
28
Amortization
145
165
72
76
18
29
6
6
41
42
including total acquisition-related amortization of:
119
129
61
58
15
26
2
2
40
41
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q2 22
Q2 21
US$
Local
parable
Q2 22
Q2 21
US$
Local
parable
Europe
2,958
2,954
0%
15%
15%
2,508
2,697
-7%
7%
7%
The Americas
3,050
2,473
23%
24%
33%
2,397
2,284
5%
6%
14%
of which United States
2,234
1,846
21%
21%
32%
1,746
1,676
4%
4%
14%
Asia, Middle East and Africa
2,799
2,562
9%
15%
15%
2,346
2,468
-5%
0%
0%
of which China
1,409
1,322
7%
9%
10%
1,163
1,313
-11%
-9%
-9%
ABB Group
8,807
7,989
10%
17%
20%
7,251
7,449
-3%
4%
6%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
H1 22
H1 21
US$
Local
parable
H1 22
H1 21
US$
Local
parable
Europe
6,492
6,056
7%
19%
19%
5,026
5,248
-4%
7%
7%
The Americas
5,947
4,720
26%
26%
36%
4,566
4,327
6%
7%
15%
of which United States
4,459
3,525
26%
27%
39%
3,328
3,208
4%
4%
14%
Asia, Middle East and Africa
5,741
4,969
16%
19%
19%
4,624
4,775
-3%
0%
0%
of which China
2,946
2,521
17%
17%
18%
2,263
2,489
-9%
-9%
-8%
ABB Group
18,180
15,745
15%
21%
24%
14,216
14,350
-1%
5%
7%
8 Q2 2022 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Six months ended
Three months ended
($ in millions, except per share data in $)
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Sales of products
11,762
11,874
6,013
6,167
Sales of services and other
2,454
2,476
1,238
1,282
Total revenues
14,216
14,350
7,251
7,449
Cost of sales of products
(8,222)
(8,108)
(4,254)
(4,184)
Cost of services and other
(1,423)
(1,466)
(707)
(757)
Total cost of sales
(9,645)
(9,574)
(4,961)
(4,941)
Gross profit
4,571
4,776
2,290
2,508
Selling, general and administrative expenses
(2,556)
(2,577)
(1,317)
(1,314)
Non-order related research and development expenses
(572)
(601)
(295)
(308)
Other income (expense), net
1
293
(91)
208
Income from operations
1,444
1,891
587
1,094
Interest and dividend income
33
26
20
15
Interest and other finance expense
(62)
(91)
(40)
(36)
Non-operational pension (cost) credit
68
88
32
38
Income from continuing operations before taxes
1,483
1,914
599
1,111
Income tax expense
(434)
(574)
(193)
(322)
Income from continuing operations, net of tax
1,049
1,340
406
789
Loss from discontinued operations, net of tax
(20)
(36)
(9)
(8)
Net income
1,029
1,304
397
781
Net income attributable to noncontrolling interests
(46)
(50)
(18)
(29)
Net income attributable to ABB
983
1,254
379
752
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,003
1,290
388
760
Loss from discontinued operations, net of tax
(20)
(36)
(9)
(8)
Net income
983
1,254
379
752
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.52
0.64
0.20
0.38
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
0.00
Net income
0.51
0.62
0.20
0.37
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.52
0.63
0.20
0.37
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
0.00
Net income
0.51
0.62
0.20
0.37
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,922
2,015
1,909
2,016
Diluted earnings per share attributable to ABB shareholders
1,935
2,033
1,918
2,031
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9 Q2 2022 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Six months ended
Three months ended
($ in millions)
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Total comprehensive income, net of tax
708
1,206
131
881
Total comprehensive income attributable to noncontrolling interests, net of tax
(26)
(55)
(3)
(31)
Total comprehensive income attributable to ABB shareholders, net of tax
682
1,151
128
850
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10 Q2 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Jun. 30, 2022
Dec. 31, 2021
Cash and equivalents
2,412
4,159
Restricted cash
23
30
Marketable securities and short-term investments
945
1,170
Receivables, net
6,960
6,551
Contract assets
965
990
Inventories, net
5,595
4,880
Prepaid expenses
262
206
Other current assets
474
573
Current assets held for sale and in discontinued operations
122
136
Total current assets
17,758
18,695
Restricted cash, non-current
301
300
Property, plant and equipment, net
3,885
4,045
Operating lease right-of-use assets
783
895
Investments in equity-accounted companies
1,617
1,670
Prepaid pension and other employee benefits
908
892
Intangible assets, net
1,474
1,561
Goodwill
10,452
10,482
Deferred taxes
1,272
1,177
Other non-current assets
448
543
Total assets
38,898
40,260
Accounts payable, trade
4,805
4,921
Contract liabilities
2,141
1,894
Short-term debt and current maturities of long-term debt
2,830
1,384
Current operating leases
222
230
Provisions for warranties
972
1,005
Other provisions
1,144
1,386
Other current liabilities
4,277
4,367
Current liabilities held for sale and in discontinued operations
306
381
Total current liabilities
16,697
15,568
Long-term debt
5,086
4,177
Non-current operating leases
586
689
Pension and other employee benefits
925
1,025
Deferred taxes
696
685
Other non-current liabilities
2,214
2,116
Non-current liabilities held for sale and in discontinued operations
28
43
Total liabilities
26,232
24,303
Commitments and contingencies
Redeemable noncontrolling interest
80
–
Stockholders’ equity:
Common stock, CHF 0.12 par value
(1,965 million and 2,053 million shares issued at June 30, 2022, and December 31, 2021, respectively)
171
178
Additional paid-in capital
12
22
Retained earnings
18,767
22,477
Accumulated other comprehensive loss
(4,389)
(4,088)
Treasury stock, at cost
(72 million and 95 million shares at June 30, 2022, and December 31, 2021, respectively)
(2,290)
(3,010)
Total ABB stockholders’ equity
12,271
15,579
Noncontrolling interests
315
378
Total stockholders’ equity
12,586
15,957
Total liabilities and stockholders’ equity
38,898
40,260
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11 Q2 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Six months ended
Three months ended
($ in millions)
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Operating activities:
Net income
1,029
1,304
397
781
Loss from discontinued operations, net of tax
20
36
9
8
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
417
457
207
230
Changes in fair values of investments
(15)
(113)
9
(103)
Pension and other employee benefits
(83)
(94)
(37)
(44)
Deferred taxes
(148)
109
(32)
50
Loss from equity-accounted companies
62
57
14
22
Net loss (gain) from derivatives and foreign exchange
77
44
105
24
Net loss (gain) from sale of property, plant and equipment
(55)
(15)
(23)
(4)
Other
67
29
31
9
Changes in operating assets and liabilities:
Trade receivables, net
(621)
(414)
(304)
(412)
Contract assets and liabilities
252
(147)
145
(57)
Inventories, net
(1,083)
(293)
(541)
(125)
Accounts payable, trade
80
309
73
267
Accrued liabilities
(255)
53
135
129
Provisions, net
126
(60)
179
(61)
Income taxes payable and receivable
(52)
(56)
(66)
(6)
Other assets and liabilities, net
3
(20)
84
(45)
Net cash provided by (used in) operating activities – continuing operations
(179)
1,186
385
663
Net cash provided by (used in) operating activities – discontinued operations
(12)
20
(3)
–
Net cash provided by (used in) operating activities
(191)
1,206
382
663
Investing activities:
Purchases of investments
(256)
(347)
(128)
(38)
Purchases of property, plant and equipment and intangible assets
(338)
(293)
(151)
(151)
Acquisition of businesses (net of cash acquired)
and increases in cost- and equity-accounted companies
(179)
(28)
(34)
(24)
Proceeds from sales of investments
506
1,321
201
930
Proceeds from maturity of investments
–
80
–
–
Proceeds from sales of property, plant and equipment
66
23
31
3
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost- and equity-accounted companies
(13)
47
(13)
49
Net cash from settlement of foreign currency derivatives
56
(72)
(10)
(11)
Other investing activities
(8)
(14)
(18)
(6)
Net cash provided by (used in) investing activities – continuing operations
(166)
717
(122)
752
Net cash used in investing activities – discontinued operations
(91)
(70)
(70)
(26)
Net cash provided by (used in) investing activities
(257)
647
(192)
726
Financing activities:
Net changes in debt with original maturities of 90 days or less
1,191
274
(114)
187
Increase in debt
3,181
1,004
639
13
Repayment of debt
(1,483)
(750)
(1,442)
(703)
Delivery of shares
370
766
–
6
Purchase of treasury stock
(2,661)
(1,971)
(1,100)
(585)
Dividends paid
(1,698)
(1,726)
(809)
(882)
Dividends paid to noncontrolling shareholders
(76)
(92)
(75)
(91)
Other financing activities
(53)
6
(19)
42
Net cash used in financing activities – continuing operations
(1,229)
(2,489)
(2,920)
(2,013)
Net cash provided by financing activities – discontinued operations
–
–
–
–
Net cash used in financing activities
(1,229)
(2,489)
(2,920)
(2,013)
Effects of exchange rate changes on cash and equivalents and restricted cash
(76)
(34)
(80)
17
Net change in cash and equivalents and restricted cash
(1,753)
(670)
(2,810)
(607)
Cash and equivalents and restricted cash, beginning of period
4,489
3,901
5,546
3,838
Cash and equivalents and restricted cash, end of period
2,736
3,231
2,736
3,231
Supplementary disclosure of cash flow information:
Interest paid
36
58
27
46
Income taxes paid
638
543
298
287
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12 Q2 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
($ in millions)
Common
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total ABB
stockholders’
equity
Non-
controlling
interests
Total
stockholders’
equity
Balance at January 1, 2021
188
83
22,946
(4,002)
(3,530)
15,685
314
15,999
Comprehensive income:
Net income
1,254
1,254
50
1,304
Foreign currency translation
adjustments, net of tax of $2
(166)
(166)
5
(161)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(3)
(8)
(8)
(8)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $(3)
71
71
71
Change in derivative instruments
and hedges, net of tax of $0
–
–
–
Total comprehensive income
1,151
55
1,206
Changes in noncontrolling interests
(37)
(20)
(57)
57
–
Dividends to
noncontrolling shareholders
–
(92)
(92)
Dividends to shareholders
(1,730)
(1,730)
(1,730)
Cancellation of treasury shares
(10)
(17)
(3,130)
3,157
–
–
Share-based payment arrangements
37
37
37
Purchase of treasury stock
(1,924)
(1,924)
(1,924)
Delivery of shares
(58)
(136)
960
766
766
Other
2
2
2
Balance at June 30, 2021
178
10
19,185
(4,104)
(1,337)
13,932
334
14,266
Balance at January 1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Comprehensive income:
Net income
983
983
48
1,031
Foreign currency translation
adjustments, net of tax of $1
(392)
(392)
(22)
(414)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(4)
(17)
(17)
(17)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $37
106
106
106
Change in derivative instruments
and hedges, net of tax of $2
2
2
2
Total comprehensive income
682
26
708
Changes in noncontrolling interests
(2)
(2)
(13)
(15)
Dividends to
noncontrolling shareholders
–
(74)
(74)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
28
28
28
Purchase of treasury stock
(2,693)
(2,693)
(2,693)
Delivery of shares
(38)
(130)
538
370
370
Other
6
6
6
Balance at June 30, 2022
171
12
18,767
(4,389)
(2,290)
12,271
315
12,586
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
13 Q2 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.
14 Q2 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 June 30, 2022, $438 million of these liabilities had been paid and are reported as reductions in
the cash consideration received, of which $74 million and $53 million was paid during the six and three months ended June 30, 2022, respectively. In the six and
three months ended June 30, 2021, total cash payments made in connection with these liabilities amounted to $70 million and $26 million, respectively. At
June 30, 2022, the remaining amount recorded was $64 million.
During the second quarter of 2022, the Company completed the legal title transfer of the remaining entities of Power Grids business to Hitachi Energy, resulting in
the release of $12 million held in escrow and included in Current Restricted Cash at December 31, 2021.
Upon closing of the sale, the Company entered into various transition services agreements (TSAs). Pursuant to these TSAs, the Company and Hitachi Energy
provide to each other, on an interim, transitional basis, various services. The services provided by the Company primarily include finance, information technology,
human resources and certain other administrative services. Under the current terms, the TSAs will continue for up to 3 years, and can only be extended on an
exceptional basis for business-critical services for an additional period which is reasonably necessary to avoid a material adverse impact on the business. In the
six and three months ended June 30, 2022, the Company has recognized within its continuing operations, general and administrative expenses incurred to perform
the TSA, offset by $76 million and $38 million, respectively, in TSA-related income for such services that is reported in Other income (expense). In the six and
three months ended June 30, 2021, Other income (expense) included $88 million and $41 million, respectively, of TSA-related income for such services.
Discontinued operations
As a result of the sale of the Power Grids business, substantially all assets and liabilities related to Power Grids have been sold. As this divestment represented a
strategic shift that would have a major effect on the Company’s operations and financial results, the results of this business were presented as discontinued
operations and the assets and liabilities were presented as held for sale and in discontinued operations. After the date of sale, certain business contracts in the
Power Grids business continue to be executed by subsidiaries of the Company for the benefit/risk of Hitachi Energy . Assets and liabilities relating to, as well as the
net financial results of, these contracts will continue to be included in discontinued operations until they have been completed or otherwise transferred to Hitachi
Energy.
15 Q2 2022 FINANCIAL INFORMATION
Amounts recorded in discontinued operations were as follows:
Six months ended
Three months ended
($ in millions)
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Total revenues
–
–
–
–
Total cost of sales
–
–
–
–
Gross profit
–
–
–
–
Expenses
(11)
(9)
(5)
(5)
Change to net gain recognized on sale of the Power Grids business
(9)
(27)
(4)
(3)
Loss from operations
(20)
(36)
(9)
(8)
Net interest income (expense) and other finance expense
–
–
–
–
Non-operational pension (cost) credit
–
–
–
–
Loss from discontinued operations before taxes
(20)
(36)
(9)
(8)
Income tax
–
–
–
–
Loss from discontinued operations, net of tax
(20)
(36)
(9)
(8)
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)
Jun. 30, 2022
(1)
Dec. 31, 2021
(1)
Receivables, net
110
131
Other current assets
12
5
Current assets held for sale and in discontinued operations
122
136
Accounts payable, trade
52
71
Other liabilities
254
310
Current liabilities held for sale and in discontinued operations
306
381
Other non-current liabilities
28
43
Non-current liabilities held for sale and in discontinued operations
28
43
(1) At June 30, 2022, and December 31, 2021, the balances reported as held for sale and in discontinued operations pertain to Power Grids activities and other obligations which will
remain with the Company until such time as the obligation is settled or the activities are fully wound down.
─
Note 4
Acquisitions and equity-accounted companies
Acquisition of controlling interests
Acquisitions of controlling interests were as follows:
Six months ended June 30,
Three months ended June 30,
($ in millions, except number of acquired businesses)
2022
2021
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
138
26
–
26
Aggregate excess of purchase price
over fair value of net assets acquired
(2)
191
11
–
11
Number of acquired businesses
1
1
–
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 six
months ended June 30, 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.
16 Q2 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 six months ended June 30, 2022. The Company entered into an
agreement with the remaining noncontrolling shareholders allowing either party to put or call the remaining 40 percent of the shares until 2027. The amount for
which either party can exercise their option is dependent on a formula based on revenues and thus, the amount is subject to change. As a result of this agreement,
the noncontrolling interest is classified as Redeemable noncontrolling interest (i.e. mezzanine equity) in the Consolidated Balance Sheets and was initially
recognized at fair value.
There were no significant business acquisitions for the six months ended June 30, 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 June 30, 2022,
and December 31, 2021, the reported value of the investment in Hitachi Energy includes $1,428 million and $1,474 million, respectively, for the Company’s
19.9 percent share of this basis difference. The Company amortizes its share of these differences over the estimated remaining useful lives of the underlying
assets that gave rise to this difference, recording the amortizati on, net of related deferred tax benefit, as a reduction of income from equity-accounted companies.
As of June 30, 2022, the Company determined that no impairment of its equity-accounted investments existed.
The carrying value of the Company’s investments in equity-accounted companies and respective percentage of ownership is as follows:
Ownership as of
Carrying value at
($ in millions, except ownership share in %)
June 30, 2022
June 30, 2022
December 31, 2021
Hitachi Energy Ltd
19.9%
1,551
1,609
Others
66
61
Total
1,617
1,670
In the six and three months ended June 30, 2022 and 2021 , the Company recorded its share of the earnings of investees accounted for under the equity method of
accounting in Other income (expense), net, as follows:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2022
2021
2022
2021
Income (loss) from equity-accounted companies, net of taxes
(10)
4
1
8
Basis difference amortization (net of deferred income tax benefit)
(52)
(61)
(15)
(30)
Loss from equity-accounted companies
(62)
(57)
(14)
(22)
17 Q2 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:
June 30, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
1,752
–
–
1,752
1,752
–
Time deposits
1,074
–
–
1,074
984
90
Equity securities
411
5
–
416
–
416
3,237
5
–
3,242
2,736
506
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
270
2
(12)
260
–
260
Other government obligations
122
–
–
122
–
122
Corporate
63
–
(6)
57
–
57
455
2
(18)
439
–
439
Total
3,692
7
(18)
3,681
2,736
945
Of which:
Restricted cash, current
23
Restricted cash, non-current
301
December 31, 2021
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
2,752
2,752
2,752
Time deposits
2,037
2,037
1,737
300
Equity securities
569
18
587
587
5,358
18
–
5,376
4,489
887
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
203
7
(1)
209
209
Corporate
74
1
(1)
74
74
277
8
(2)
283
–
283
Total
5,635
26
(2)
5,659
4,489
1,170
Of which:
Restricted cash, current
30
Restricted cash, non-current
300
18 Q2 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)
June 30, 2022
December 31, 2021
June 30, 2021
Foreign exchange contracts
14,470
11,276
9,309
Embedded foreign exchange derivatives
850
815
893
Cross-currency interest rate swaps
833
906
951
Interest rate contracts
3,049
3,541
3,553
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
June 30, 2022
December 31, 2021
June 30, 2021
Copper swaps
metric tonnes
42,961
36,017
37,340
Silver swaps
ounces
2,844,285
2,842,533
2,306,804
Aluminum swaps
metric tonnes
7,350
7,125
7,325
Equity derivatives
At June 30, 2022, December 31, 2021, and June 30, 2021, the Company held 9 million, 9 million and 15 million cash -settled call options indexed to ABB Ltd
shares (conversion ratio 5:1) with a total fair value of $12 million, $29 million and $34 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their fair value is recorded in “Accumulated other comprehensive loss” and subsequently reclassified into
earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. For the six and three months ended June 30, 2022
and 2021, there were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”.
19 Q2 2022 FINANCIAL INFORMATION
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2022
2021
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(55)
(27)
(26)
(13)
Hedged item
56
28
27
13
Cross-currency interest rate swaps
Designated as fair value hedges
(94)
(25)
(49)
(2)
Hedged item
90
24
46
2
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
Six months ended June 30,
Three months ended June 30,
($ in millions)
Location
2022
2021
2022
2021
Foreign exchange contracts
Total revenues
(119)
(10)
(123)
50
Total cost of sales
34
(24)
40
(20)
SG&A expenses
(1)
23
(1)
15
(8)
Non-order related research
and development
1
(1)
–
–
Interest and other finance expense
(54)
(119)
(76)
(13)
Embedded foreign exchange
Total revenues
5
(13)
7
1
contracts
Total cost of sales
(2)
(2)
(3)
(1)
Commodity contracts
Total cost of sales
(51)
63
(86)
27
Other
Interest and other finance expense
3
1
2
1
Total
(160)
(106)
(224)
37
(1) SG&A expenses represent “Selling, general and administrative expenses”.
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
June 30, 2022
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
4
5
Interest rate contracts
2
–
4
24
Cross-currency interest rate swaps
–
–
–
268
Cash-settled call options
12
–
–
–
Total
14
–
8
297
Derivatives not designated as hedging instruments:
Foreign exchange contracts
82
21
251
12
Commodity contracts
3
–
56
–
Interest rate contracts
4
–
5
–
Embedded foreign exchange derivatives
19
3
14
9
Total
108
24
326
21
Total fair value
122
24
334
318
20 Q2 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 June 30, 2022, and December 31, 2021, have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements allow net settlements under certain conditions. At June 30, 2022, and December 31, 2021,
information related to these offsetting arrangements was as follows:
($ in millions)
June 30, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
124
(90)
–
–
34
Total
124
(90)
–
–
34
($ in millions)
June 30, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
629
(90)
–
–
539
Total
629
(90)
–
–
539
($ in millions)
December 31, 2021
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net asset
similar arrangement
in case of default
received
received
exposure
Derivatives
200
(104)
–
–
96
Total
200
(104)
–
–
96
($ in millions)
December 31, 2021
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
Net liability
similar arrangement
liabilities
pledged
pledged
exposure
Derivatives
238
(104)
–
–
134
Total
238
(104)
–
–
134
21 Q2 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:
June 30, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
416
416
Debt securities—U.S. government obligations
260
260
Debt securities—Other government obligations
122
122
Debt securities—Corporate
57
57
Derivative assets—current in “Other current assets”
122
122
Derivative assets—non-current in “Other non-current assets”
24
24
Total
260
741
–
1,001
Liabilities
Derivative liabilities—current in “Other current liabilities”
334
334
Derivative liabilities—non-current in “Other non-current liabilities”
318
318
Total
–
652
–
652
22 Q2 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 six months ended June 30, 2022
and 2021, the Company recognized, in Other income (expense), net fair value gains of $30 million and $109 million, respectively, related to certain of its private
equity investments based on observable market price changes for an identical or similar investment of the same issuer of which net gains of $1 million and
$99 million were recognized in the three months ended June 30, 2022 and 2021, respectively. The fair values were determined using level 2 inputs. The carrying
values of investments, carried at fair value on a non-recurring basis, at June 30, 2022, and December 31, 2021, totaled $40 million and $146 million, respectively.
Apart from the transactions above, there were no additional significant non-recurring fair value measurements during the six months ended June 30, 2022 and
2021.
Disclosure about financial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
June 30, 2022
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
1,428
1,428
1,428
Time deposits
984
984
984
Restricted cash
23
23
23
Marketable securities and short-term investments
(excluding securities):
Time deposits
90
90
90
Restricted cash, non-current
301
301
301
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
2,798
769
2,029
2,798
Long-term debt (excluding finance lease obligations)
4,913
4,797
39
4,836
23 Q2 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)
June 30, 2022
December 31, 2021
June 30, 2021
Contract assets
965
990
1,087
Contract liabilities
2,141
1,894
1,846
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:
Six months ended June 30,
2022
2021
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2022/2021
(763)
(818)
Additions to Contract liabilities - excluding amounts recognized as revenue during the period
1,102
785
Receivables recognized that were included in the Contract asset balance at Jan 1, 2022/2021
(423)
(411)
At June 30, 2022, the Company had unsatisfied performance obligations totaling $19,477 million and, of this amount, the Company expects to fulfill approximately
56 percent of the obligations in 2022, approximately 33 percent of the obligations in 2023 and the balance thereafter.
24 Q2 2022 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s total debt at June 30, 2022, and December 31, 2021, amounted to $7,916 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)
June 30, 2022
December 31, 2021
Short-term debt
2,058
78
Current maturities of long-term debt
772
1,306
Total
2,830
1,384
Short-term debt primarily represented issued commercial paper and short-term bank borrowings from various banks. At June 30, 2022, $1,755 million was
outstanding under the $2 billion Euro-commercial paper program and $210 million was outstanding under the $2 billion commercial paper program in the United
States. At December 31, 2021, no amount was outstanding under either of these programs.
On May 9, 2022, the Company repaid on maturity its USD 1,250 million 2.875% Notes.
Long-term debt
The Company’s long-term debt at June 30, 2022, and December 31, 2021, amounted to $5,086 million and $4,177 million, respectively.
Outstanding bonds (including maturities within the next 12 months) were as follows:
June 30, 2022
December 31, 2021
(in millions)
Nominal outstanding
(1)
Nominal outstanding
(1)
Bonds:
2.875% USD Notes, due 2022
USD
1,250
$
1,258
0.625% EUR Instruments, due 2023
EUR
700
$
726
EUR
700
$
800
0% CHF Bonds, due 2023
CHF
275
$
286
0.625% EUR Instruments, due 2024
EUR
700
$
717
0% EUR Instruments, due 2024
EUR
500
$
524
0.75% EUR Instruments, due 2024
EUR
750
$
765
EUR
750
$
860
0.3% CHF Bonds, due 2024
CHF
280
$
292
CHF
280
$
306
0.75% CHF Bonds, due 2027
CHF
425
$
443
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
177
CHF
170
$
186
0% EUR Notes, due 2030
EUR
800
$
700
EUR
800
$
862
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
589
Total
$
5,601
$
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.
25 Q2 2022 FINANCIAL INFORMATION
─
Note 10
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Regulatory
As a result of an internal investigation, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) in the
United States as well as to the Serious Fraud Office (SFO) in the United Kingdom concerning certain of its past dealings with Unaoil and its subsidiaries, including
alleged improper payments made by these entities to third parties. In May 2020, the SFO closed its investigation, which it originally announced in February 2017,
as the case did not meet the relevant test for prosecution. The Company continues to cooperate with the U.S. authorities as requested. At this time, it is not
possible for the Company to make an informed judgment about the outcome of this matter.
Based on findings during an internal investigation, the Company self-reported to the SEC and the DoJ, in the United States, to the Special Investigating Unit (SIU)
and the National Prosecuting Authority (NPA) in South Africa as well as to various authorities in other countries potential suspect payments and other compliance
concerns in connection with some of the Company’s dealings with Eskom and related persons. Many of those parties have expressed an interest in, or
commenced an investigation into, these matters and the Company is cooperating fully with them. The Company paid $104 million to Eskom in December 2020 as
part of a full and final settlement with Eskom and the Special Investigating Unit relating to improper payments and other compliance issues associated with the
Controls and Instrumentation Contract, and its Variation Orders for Units 1 and 2 at Kusile. The Company continues to cooperate fully with the authorities in their
review of the Kusile project and 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.
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 June 30, 2022, and December 31, 2021, the Company had aggregate liabilities of $82 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)
June 30, 2022
December 31, 2021
Performance guarantees
4,036
4,540
Financial guarantees
55
52
Indemnification guarantees
(1)
130
136
Total
(2)
4,221
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 June 30, 2022, and December 31, 2021, amounted to
$142 million and $156 million, respectively, the majority of which is included in discontinued operations.
The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various
maturities up to 2035, mainly consist of performance guarantees whereby (i) the Company guarantees the performance of a third party’s product or service
according to the terms of a contract and (ii) as member of a consortium/joint-venture that includes third parties, the Company guarantees not only its own
performance but also the work of third parties. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party
does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. The original maturity dates for the majority of these
performance guarantees range from one to ten years.
In conjunction with the divestment of the high-voltage cable and cables accessories businesses in 2017, the Company has entered into various performance
guarantees with other parties with respect to certain liabilities of the divested business. At June 30, 2022, and December 31, 2021, the maximum potential payable
under these guarantees amounts to $828 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 June 30, 2022, and December 31, 2021, is approximately $2.8 billion and $3.2 billion, respectively, and the carrying amounts of liabilities
(recorded in discontinued operations) at June 30, 2022, and December 31, 2021, amounted to $130 million and $136 million, respectively.
26 Q2 2022 FINANCIAL INFORMATION
Commercial commitments
In addition, in the normal course of bidding for and executing certain projects, the Company has entered into standby letters of credit, bid/performance bonds and
surety bonds (collectively “performance bonds”) with various financial institutions. Customers can draw on such performance bonds in the event that the Company
does not fulfill its contractual obligations. The Company would then have an obligation to reimburse the financial institution for amounts paid under the performance
bonds. At both June 30, 2022, and December 31, 2021, the total outstanding performance bonds aggregated to $3.1 billion, of each of these amounts, $0.1 billion
relates to discontinued operations. There have been no significant amounts reimbursed to financial institutions under these types of arrangements in the six and
three months ended June 30, 2022 and 2021.
Product and order-related contingencies
The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance, was as follows:
($ in millions)
2022
2021
Balance at January 1,
1,005
1,035
Net change in warranties due to acquisitions, divestments and liabilities held for sale
–
1
Claims paid in cash or in kind
(82)
(127)
Net increase in provision for changes in estimates, warranties issued and warranties expired
103
122
Exchange rate differences
(54)
(19)
Balance at June 30,
972
1,012
─
Note 11
Employee benefits
The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations
and practices. These plans cover a large portion of the Company’s employees and provide benefits to employees in the event of death, disability, retirement, or
termination of employment. Certain of these plans are multi-employer plans. The Company also operates other postretirement benefit plans including
postretirement health care benefits, and other employee-related benefits for active employees including long-service award plans. The measurement date used for
the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with the local government and tax
requirements.
Net periodic benefit cost of the Company’s defined benefit pension and other postretirement benefit plans consisted of the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Six months ended June 30,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
27
30
17
22
–
–
Operational pension cost
27
30
17
22
–
–
Non-operational pension cost (credit):
Interest cost
1
(2)
43
37
1
1
Expected return on plan assets
(58)
(58)
(77)
(91)
–
–
Amortization of prior service cost (credit)
(4)
(5)
(1)
(1)
(1)
(1)
Amortization of net actuarial loss
–
–
30
35
(2)
(1)
Curtailments, settlements and special termination benefits
–
–
–
(2)
–
–
Non-operational pension cost (credit)
(61)
(65)
(5)
(22)
(2)
(1)
Net periodic benefit cost (credit)
(34)
(35)
12
–
(2)
(1)
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended June 30,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
13
15
8
12
–
–
Operational pension cost
13
15
8
12
–
–
Non-operational pension cost (credit):
Interest cost
–
(1)
21
19
1
1
Expected return on plan assets
(28)
(29)
(36)
(44)
–
–
Amortization of prior service cost (credit)
(2)
(3)
(1)
(1)
–
(1)
Amortization of net actuarial loss
–
–
15
18
(2)
(1)
Curtailments, settlements and special termination benefits
–
–
–
4
–
–
Non-operational pension cost (credit)
(30)
(33)
(1)
(4)
(1)
(1)
Net periodic benefit cost (credit)
(17)
(18)
7
8
(1)
(1)
The components of net periodic benefit cost other than the service cost component are included in the line “Non-operational pension (cost) credit” in the income
statement.
27 Q2 2022 FINANCIAL INFORMATION
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Six months ended June 30,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
31
31
19
13
4
3
Of which, discretionary contributions to defined benefit
–
–
–
(9)
–
–
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended June 30,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
15
16
9
16
1
2
Of which, discretionary contributions to defined benefit
pension plans
–
–
–
–
–
–
The Company expects to make contributions totaling approximately $77 million and $6 million to its defined pension plans and other postretirement benefit plans,
respectively, for the full year 2022.
─
Note 12
Stockholder's equity
At the Annual General Meeting of Shareholders (AGM) on March 24, 2022, shareholders approved the proposal of the Board of Directors to distribute 0.82 Swiss
francs per share to shareholders. The declared dividend amounted to $1,700 million, with the Company disburs ing a portion in March and the remaining amounts
in April.
In March 2022, the Company completed the share buyback program that was launched in April 2021. This program was executed on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased a total of 90 million shares for approximately $3.1 billion, of which 31 million shares were
purchased in the first quarter of 2022 (resulting in an increase in Treasury stock of $1,089 million). At the 2022 AGM, shareholders approved the cancellation of
88 million shares which had been purchased under the share buyback programs launched in July 2020 and April 2021. The cancellation was completed in the
second quarter of 2022, resulting in a decrease in Treasury stock of $2,876 million and a corresponding total decrease in Capital stock, Additional paid-in capital
and Retained Earnings.
Also in March 2022, the Company announced a new share buyback program of up to $3 billion. This program, which was launched in April 2022, is being executed
on a second trading line on the SIX Swiss Exchange and is planned to run until the Company’s 2023 AGM. Through this program, the Company purchased, in the
second quarter of 2022, approximately 34 million shares, resulting in an increase in Treasury stock of $1,016 million. At the 2023 AGM, the Company intends to
request shareholder approval to cancel the shares purchased through this new program as well as those shares purchased under the program launched in April
2021 that were not proposed for cancellation at the 2022 AGM.
In addition to the share buyback programs, the Company purchased 17 million of its own shares on the open market in the first half of 2022, mainly for use in
connection with its employee share plans, resulting in an increase in Treasury stock of $588 million.
During the first six months of 2022, the Company delivered, out of treasury stock, 16 million shares in connection with its Management Incentive Plan.
28 Q2 2022 FINANCIAL INFORMATION
─
Note 13
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares outstanding during the period, assuming that all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options, and outstanding options and shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Six months ended June 30,
Three months ended June 30,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,003
1,290
388
760
Loss from discontinued operations, net of tax
(20)
(36)
(9)
(8)
Net income
983
1,254
379
752
Weighted-average number of shares outstanding (in millions)
1,922
2,015
1,909
2,016
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.52
0.64
0.20
0.38
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
0.00
Net income
0.51
0.62
0.20
0.37
Diluted earnings per share
Six months ended June 30,
Three months ended June 30,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
1,003
1,290
388
760
Loss from discontinued operations, net of tax
(20)
(36)
(9)
(8)
Net income
983
1,254
379
752
Weighted-average number of shares outstanding (in millions)
1,922
2,015
1,909
2,016
Effect of dilutive securities:
Call options and shares
13
18
9
15
Adjusted weighted-average number of shares outstanding (in millions)
1,935
2,033
1,918
2,031
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
0.52
0.63
0.20
0.37
Loss from discontinued operations, net of tax
(0.01)
(0.02)
0.00
0.00
Net income
0.51
0.62
0.20
0.37
29 Q2 2022 FINANCIAL INFORMATION
─
Note 14
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ 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
(161)
(7)
34
14
(120)
Amounts reclassified from OCI
–
(1)
37
(14)
22
Total other comprehensive (loss) income
(161)
(8)
71
–
(98)
Less:
Amounts attributable to
noncontrolling interests
5
–
–
–
5
Balance at June 30, 2021
(1)
(2,625)
9
(1,485)
(3)
(4,104)
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
(419)
(17)
91
(12)
(357)
Amounts reclassified from OCI
5
–
15
14
34
Total other comprehensive (loss) income
(414)
(17)
106
2
(323)
Less:
Amounts attributable to
noncontrolling interests
(22)
–
–
–
(22)
Balance at June 30, 2022
(3,385)
(15)
(983)
(6)
(4,389)
(1) Due to rounding, numbers presented may not add to the totals provided.
The following table reflects amounts reclassified out of OCI in respect of Pension and other postretirement plan adjustments:
Six months ended
Three months ended
($ in millions)
Location of (gains) losses
June 30,
June 30,
Details about OCI components
reclassified from OCI
2022
2021
2022
2021
Foreign currency translation adjustments:
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
5
–
–
–
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(1)
(6)
(7)
(3)
(5)
Amortization of net actuarial loss
Non-operational pension (cost) credit
(1)
28
34
13
23
Net gain (loss) from settlements and curtailments
Non-operational pension (cost) credit
(1)
–
(2)
–
(2)
Total before tax
22
25
10
16
Tax
Income tax expense
(7)
12
(3)
(4)
Amounts reclassified from OCI
15
37
7
12
The amounts in respect of Unrealized gains (losses) on available-for-sale securities and Derivative instruments and hedges were not significant for the six and
three months ended June 30, 2022 and 2021.
30 Q2 2022 FINANCIAL INFORMATION
─
Note 15
Restructuring and related expenses
Other restructuring-related activities
In the six and three months ended June 30, 2022 and 2021, the Company executed various other restructuring -related activities and incurred the following
expenses:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2022
2021
2022
2021
Employee severance costs
43
33
35
13
Estimated contract settlement, loss order and other costs
202
12
195
3
Inventory and long-lived asset impairments
5
2
1
2
Total
250
47
231
18
Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements:
Six months ended June 30,
Three months ended June 30,
($ in millions)
2022
2021
2022
2021
Total cost of sales
8
24
4
10
Selling, general and administrative expenses
28
5
24
3
Non-order related research and development expenses
2
–
2
–
Other income (expense), net
212
18
201
5
Total
250
47
231
18
During the second quarter of 2022, the Company completed a plan to fully exit its full train retrofit business by transferring the remaining contracts to a
third party. The Company recorded $195 million of restructuring expenses in connection with this business exit primarily for contract settlement costs.
Prior to exiting this business, the business was reported as part of the Company’s non-core business activities within Corporate and Other.
At June 30, 2022, $332 million was recorded for other restructuring -related liabilities primarily in Other provisions and Other current liabilities, while at
December 31, 2021, $212 million was recorded primarily in Other provisions.
─
Note 16
Operating segment data
The Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM allocates resources to and assesses the performance of each operating
segment using the information outlined below. The Company is organized into the following segments, based on products and services: Electrification, Motion,
Process Automation, and Robotics & Discrete Automation. The remaining operations of the Company are included in Corporate and Other.
A description of the types of products and services provided by each reportable segment is as follows:
●
manufactures and sells electrical products and solutions which are designed to provide safe, smart and sustainable electrical flow from
the substation to the socket. The portfolio of increasingly digital and connected solutions includes electric vehicle charging infrastructure, renewable
power solutions, modular substation packages, distribution automation products, switchboard and panelboards, switchgear, UPS solutions, circuit
breakers, measuring and sensing devices, control products, wiring accessories, enclosures and cabling systems and intelligent home and building
solutions, designed to integrate and automate lighting, heating, ventilation, security and data communication networks . The products and services are
delivered through seven operating Divisions: Distribution Solutions, Smart Power, Smart Buildings, E-Mobility, Installation Products, Power Conversion
and Electrification Service.
●
infrastructure and transportation. These products, digital technology and related services enable industrial customers to increase energy efficiency,
improve safety and reliability, and achieve precise control of their processes. Building on over 130 years of cumulative experience in electric
powertrains, the Business Area combines domain expertise and technology to deliver the optimum solution for a wide range of applications in all
industrial segments. In addition, the Business Area, along with its partners, has a leading global service presence. These products and services are
delivered through seven operating Divisions: Large Motors and Generators, IEC LV Motors, NEMA Motors, Drive Products, System Drives, Service and
Traction, as well as, prior to its sale in November 2021, the Mechanical Power Transmission Division.
31 Q2 2022 FINANCIAL INFORMATION
●
well as digital solutions, lifecycle services, advanced industrial analytics and artificial intelligence applications and suites for the process, marine and
hybrid industries. Products and solutions include control technologies, advanced process control software and manufacturing execution systems,
sensing, measurement and analytical instrumentation, marine propulsion systems and turbochargers. In addition, the Business Area offers a
comprehensive range of services ranging from repair to advanced services such as remote monitoring, preventive maintenance, asset performance
management, emission monitoring and cybersecurity services. The products, systems and services are delivered through five operating Divisions:
Energy Industries, Process Industries, Marine & Ports, Turbocharging, and Measurement & Analytics .
●
Robotics includes industrial robots, software, robotic solutions, field services, spare parts, and digital services. Machine Automation specializes in
solutions based on its programmable logic controllers (PLC), industrial PCs (IPC), servo motion, transport systems and machine vision. Both Divisions
offer engineering and simulation software as well as a comprehensive range of digital solutions.
Corporate and Other:
certain divested businesses and other non-core operating activities.
The primary measure of profitability on which the operating segments are evaluated is Operational EBITA, which represents income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been
realized, and (c) unrealized foreign exchange movements on 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 six and three months ended June 30, 2022 and 2021, as well as total assets at
June 30, 2022, and December 31, 2021.
Six months ended June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
2,228
953
1,131
712
2
5,026
The Americas
2,531
1,029
767
238
1
4,566
of which: United States
1,849
853
460
166
–
3,328
Asia, Middle East and Africa
1,993
995
1,119
509
8
4,624
of which: China
1,007
565
309
382
1
2,263
6,752
2,977
3,017
1,459
11
14,216
Product type
Products
5,920
2,552
681
858
6
10,017
Systems
407
–
961
372
5
1,745
Services and other
425
425
1,375
229
–
2,454
6,752
2,977
3,017
1,459
11
14,216
Third-party revenues
6,752
2,977
3,017
1,459
11
14,216
Intersegment revenues
106
221
18
3
(348)
–
Total revenues
(2)
6,858
3,198
3,035
1,462
(337)
14,216
32 Q2 2022 FINANCIAL INFORMATION
Six months ended June 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
2,266
1,020
1,142
814
6
5,248
The Americas
2,221
1,223
658
224
1
4,327
of which: United States
1,655
1,029
363
161
–
3,208
Asia, Middle East and Africa
1,950
1,047
1,125
642
11
4,775
of which: China
1,053
577
376
483
–
2,489
6,437
3,290
2,925
1,680
18
14,350
Product type
Products
5,557
2,845
749
1,058
10
10,219
Systems
450
–
811
386
8
1,655
Services and other
430
445
1,365
236
–
2,476
6,437
3,290
2,925
1,680
18
14,350
Third-party revenues
6,437
3,290
2,925
1,680
18
14,350
Intersegment revenues
(1)
109
227
22
5
(363)
–
Total revenues
(2)
6,546
3,517
2,947
1,685
(345)
14,350
Three months ended June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,116
487
546
358
1
2,508
The Americas
1,330
537
399
130
1
2,397
of which: United States
967
446
239
94
–
1,746
Asia, Middle East and Africa
1,029
496
573
242
6
2,346
of which: China
542
278
159
185
–
1,163
3,475
1,520
1,518
730
8
7,251
Product type
Products
3,093
1,304
335
418
2
5,152
Systems
161
–
494
200
6
861
Services and other
221
216
689
112
–
1,238
3,475
1,520
1,518
730
8
7,251
Third-party revenues
3,475
1,520
1,518
730
8
7,251
Intersegment revenues
56
106
11
2
(175)
–
Total revenues
3,531
1,626
1,529
732
(167)
7,251
Three months ended June 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,166
551
579
396
5
2,697
The Americas
1,163
635
368
118
–
2,284
of which: United States
855
535
200
86
–
1,676
Asia, Middle East and Africa
1,021
544
583
316
4
2,468
of which: China
565
313
201
234
–
1,313
3,350
1,730
1,530
830
9
7,449
Product type
Products
2,937
1,496
428
532
3
5,396
Systems
181
–
402
182
6
771
Services and other
232
234
700
116
–
1,282
3,350
1,730
1,530
830
9
7,449
Third-party revenues
3,350
1,730
1,530
830
9
7,449
Intersegment revenues
56
120
10
2
(188)
–
Total revenues
3,406
1,850
1,540
832
(179)
7,449
(1) Due to rounding, numbers presented may not add to the totals provided.
33 Q2 2022 FINANCIAL INFORMATION
Six months ended
Three months ended
June 30,
June 30,
($ in millions)
2022
2021
2022
2021
Operational EBITA:
Electrification
1,109
1,103
599
592
Motion
540
614
266
325
Process Automation
420
347
224
192
Robotics & Discrete Automation
109
201
60
96
Corporate and Other
‒
Non-core and divested businesses
18
(29)
12
(7)
‒ Corporate costs and Other Intersegment elimination
(63)
(164)
(25)
(85)
Total
2,133
2,072
1,136
1,113
Acquisition-related amortization
(119)
(129)
(59)
(64)
Restructuring, related and implementation costs
(1)
(280)
(53)
(264)
(18)
Changes in obligations related to divested businesses
17
(6)
3
(4)
Changes in pre-acquisition estimates
1
(8)
2
(2)
Gains and losses from sale of businesses
(4)
9
(4)
12
Acquisition- and divestment-related expenses and integration costs
(109)
(30)
(50)
(20)
Other income/expense relating to the Power Grids joint venture
(37)
(19)
(2)
(2)
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
(100)
(56)
(118)
(8)
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(35)
9
(33)
7
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
40
28
41
(6)
Certain other non-operational items:
Regulatory, compliance and legal costs
(4)
(2)
(5)
–
Business transformation costs
(2)
(66)
(39)
(40)
(19)
Certain other fair value changes, including asset impairments
34
114
–
96
Other non-operational items
(27)
1
(20)
9
Income from operations
1,444
1,891
587
1,094
Interest and dividend income
33
26
20
15
Interest and other finance expense
(62)
(91)
(40)
(36)
Non-operational pension (cost) credit
68
88
32
38
Income from continuing operations before taxes
1,483
1,914
599
1,111
(1) Includes impairment of certain assets.
(2) Amount includes ABB Way process transformation costs of $64 million and $33 million for six months ended June 30, 2022 and 2021, respectively, and $39 million and $18 million for
the three months ended June 30, 2022 and 2021, respectively.
Total assets
(1)
($ in millions)
June 30, 2022
December 31, 2021
Electrification
13,684
12,831
Motion
6,247
5,936
Process Automation
4,929
5,009
Robotics & Discrete Automation
4,732
4,860
Corporate and Other
(2)
9,306
11,624
Consolidated
38,898
40,260
(1) Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At June 30, 2022, and December 31, 2021, respectively, Corporate and Other includes $122 million and $136 million of assets in the Power Grids business which is reported as
discontinued operations (see Note 3). In addition, at June 30, 2022, and December 31, 2021, Corporate and Other includes $1,551 million and $1,609 million, respectively, related to
the equity investment in Hitachi Energy Ltd (see Note 4).
34 Q2 2022 FINANCIAL INFORMATION
35 Q2 2022 FINANCIAL INFORMATION
—
Supplemental Reconciliations and Definitions
The following reconciliations and definitions include measures which ABB uses to supplement its Consolidated Financial Information (unaudited) which is
prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). Certain of these financial measures are, or may be,
considered non-GAAP financial measures as defined in the rules of the U.S. Securities and Exchange Commission (SEC).
While ABB’s management believes that the non-GAAP financial measures herein are useful in evaluating ABB’s operating results, this information should
be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with U.S. GAAP. Therefore
these measures should not be viewed in isolation but considered together with the Consolidated Financial Information (unaudited) prepared in accordance
with U.S. GAAP as of and for the six and three mo nths ended June 30, 2022.
Comparable growth rates
Growth rates for certain key figures may be presented and discussed on a “comparable” basis. The comparable growth rate measures growth on a constant
currency basis. Since we are a global company, the comparability of our operating results reported in U.S. dollars is affected by foreign currency exchange rate
fluctuations. We calculate the impacts from foreign currency fluctuations by translating the current-year periods’ reported key figures into U.S. dollar amounts using
the exchange rates in effect for the comparable periods in the previous year.
Comparable growth rates are also adjusted for changes in our business portfolio. Adjustments to our business portfolio occur due to acquisitions, divestments, or
by exiting specific business activities or customer markets. The adjustment for portfolio changes is calculated as follows: where the results of any business
acquired or divested have not been consolidated and reported for the entire duration of both the current and comparable periods, the reported key figures of such
business are adjusted to exclude the relevant key figures of any corresponding quarters which are not comparable when computing the comparable growth rate.
Certain portfolio changes which do not qualify as divestments under U.S. GAAP have been treated in a similar manner to divestments. Changes in our portfolio
where we have exited certain business activities or customer markets are adjusted as if the relevant business was divested in the period when the decision to
cease business activities was taken. We do not adjust for portfolio changes where the relevant business has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by Business Area
Q2 2022 compared to Q2 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
9%
7%
0%
16%
4%
6%
0%
10%
Motion
7%
7%
12%
26%
-12%
6%
9%
3%
Process Automation
17%
8%
0%
25%
-1%
8%
0%
7%
Robotics & Discrete Automation
15%
9%
-1%
23%
-12%
7%
0%
-5%
ABB Group
10%
7%
3%
20%
-3%
7%
2%
6%
H1 2022 compared to H1 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
17%
5%
0%
22%
5%
5%
0%
10%
Motion
11%
6%
12%
29%
-9%
5%
10%
6%
Process Automation
9%
6%
0%
15%
3%
6%
0%
9%
Robotics & Discrete Automation
34%
8%
-2%
40%
-13%
5%
-1%
-9%
ABB Group
15%
6%
3%
24%
-1%
6%
2%
7%
36 Q2 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group - Quarter
Q2 2022 compared to Q2 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
0%
15%
0%
15%
-7%
14%
0%
7%
The Americas
23%
1%
9%
33%
5%
1%
8%
14%
of which: United States
21%
0%
11%
32%
4%
0%
10%
14%
Asia, Middle East and Africa
9%
6%
0%
15%
-5%
5%
0%
0%
of which: China
7%
3%
0%
10%
-11%
2%
0%
-9%
ABB Group
10%
7%
3%
20%
-3%
7%
2%
6%
Regional comparable growth rate reconciliation by Business Area - Quarter
Q2 2022 compared to Q2 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
-4%
14%
0%
10%
-4%
14%
0%
10%
The Americas
29%
1%
0%
30%
14%
1%
0%
15%
of which: United States
31%
0%
0%
31%
13%
0%
0%
13%
Asia, Middle East and Africa
1%
6%
0%
7%
1%
5%
0%
6%
of which: China
-7%
2%
0%
-5%
-4%
3%
0%
-1%
Electrification
9%
7%
0%
16%
4%
6%
0%
10%
Q2 2022 compared to Q2 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
1%
16%
0%
17%
-12%
14%
0%
2%
The Americas
3%
2%
34%
39%
-15%
1%
28%
14%
of which: United States
7%
1%
42%
50%
-16%
0%
31%
15%
Asia, Middle East and Africa
17%
5%
2%
24%
-10%
4%
1%
-5%
of which: China
5%
2%
2%
9%
-13%
2%
1%
-10%
Motion
7%
7%
12%
26%
-12%
6%
9%
3%
Q2 2022 compared to Q2 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
8%
14%
0%
22%
-6%
12%
0%
6%
The Americas
53%
2%
0%
55%
9%
3%
0%
12%
of which: United States
26%
1%
0%
27%
20%
1%
0%
21%
Asia, Middle East and Africa
4%
7%
0%
11%
-2%
7%
0%
5%
of which: China
21%
3%
0%
24%
-21%
3%
0%
-18%
Process Automation
17%
8%
0%
25%
-1%
8%
0%
7%
Q2 2022 compared to Q2 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
9%
15%
-2%
22%
-10%
13%
-1%
2%
The Americas
-3%
0%
0%
-3%
9%
1%
0%
10%
of which: United States
-3%
0%
0%
-3%
10%
0%
0%
10%
Asia, Middle East and Africa
30%
6%
0%
36%
-23%
4%
0%
-19%
of which: China
40%
3%
0%
43%
-21%
2%
0%
-19%
Robotics & Discrete Automation
15%
9%
-1%
23%
-12%
7%
0%
-5%
37 Q2 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation for ABB Group – Year to date
H1 2022 compared to H1 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
7%
12%
0%
19%
-4%
11%
0%
7%
The Americas
26%
0%
10%
36%
6%
1%
8%
15%
of which: United States
26%
1%
12%
39%
4%
0%
10%
14%
Asia, Middle East and Africa
16%
3%
0%
19%
-3%
3%
0%
0%
of which: China
17%
1%
0%
18%
-9%
1%
0%
-8%
ABB Group
15%
6%
3%
24%
-1%
6%
2%
7%
Regional comparable growth rate reconciliation by Business Area – Year to date
H1 2022 compared to H1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
10%
13%
0%
23%
-2%
12%
0%
10%
The Americas
35%
1%
0%
36%
14%
0%
0%
14%
of which: United States
40%
0%
0%
40%
12%
0%
0%
12%
Asia, Middle East and Africa
4%
3%
0%
7%
2%
3%
0%
5%
of which: China
1%
1%
0%
2%
-4%
0%
0%
-4%
Electrification
17%
5%
0%
22%
5%
5%
0%
10%
H1 2022 compared to H1 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Region
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Europe
10%
14%
0%
24%
-4%
11%
1%
8%
The Americas
2%
1%
35%
38%
-16%
1%
29%
14%
of which: United States
3%
0%
40%
43%
-17%
1%
31%
15%
Asia, Middle East and Africa
22%
3%
1%
26%
-6%
2%
1%
-3%
of which: China
13%
1%
1%
15%
-5%
0%
1%
-4%
Motion
11%
6%
12%
29%
-9%
5%
10%
6%
H1 2022 compared to H1 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
-11%
9%
0%
-2%
-1%
10%
0%
9%
The Americas
38%
1%
0%
39%
16%
2%
0%
18%
of which: United States
30%
0%
0%
30%
26%
1%
0%
27%
Asia, Middle East and Africa
15%
5%
0%
20%
-1%
5%
0%
4%
of which: China
17%
1%
0%
18%
-18%
1%
0%
-17%
Process Automation
9%
6%
0%
15%
3%
6%
0%
9%
H1 2022 compared to H1 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%
13%
-2%
35%
-13%
10%
-2%
-5%
The Americas
35%
0%
0%
35%
6%
0%
0%
6%
of which: United States
35%
0%
0%
35%
3%
0%
0%
3%
Asia, Middle East and Africa
48%
2%
0%
50%
-21%
2%
0%
-19%
of which: China
66%
0%
0%
66%
-21%
0%
0%
-21%
Robotics & Discrete Automation
34%
8%
-2%
40%
-13%
5%
-1%
-9%
38 Q2 2022 FINANCIAL INFORMATION
Order backlog growth rate reconciliation
June 30, 2022 compared to June 30, 2021
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
33%
9%
0%
42%
Motion
28%
15%
0%
43%
Process Automation
3%
9%
0%
12%
Robotics & Discrete Automation
82%
15%
0%
97%
ABB Group
26%
10%
1%
37%
Other growth rate reconciliations
Q2 2022 compared to Q2 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
5%
7%
0%
12%
-5%
7%
0%
2%
Motion
6%
8%
0%
14%
-7%
8%
0%
1%
Process Automation
4%
8%
0%
12%
-2%
8%
0%
6%
Robotics & Discrete Automation
1%
9%
0%
10%
-5%
9%
0%
4%
ABB Group
4%
8%
0%
12%
-3%
7%
0%
4%
H1 2022 compared to H1 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
10%
6%
0%
16%
-1%
5%
0%
4%
Motion
10%
7%
0%
17%
-4%
6%
0%
2%
Process Automation
5%
7%
0%
12%
1%
6%
0%
7%
Robotics & Discrete Automation
6%
8%
0%
14%
-3%
7%
0%
4%
ABB Group
7%
7%
0%
14%
-1%
6%
0%
5%
39 Q2 2022 FINANCIAL INFORMATION
Operational EBITA as % of operational revenues (Operational EBITA margin)
Definition
Operational EBITA margin
Operational EBITA margin is Operational EBITA as a percentage of operational revenues.
Operational EBITA
Operational earnings before interest, taxes and acquisition-related amortization (Operational EBITA) represents Income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory, compliance and legal costs, certain asset 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
Six months ended June 30,
Three months ended June 30,
($ in millions)
2022
2021
2022
2021
Operational EBITA
2,133
2,072
1,136
1,113
Acquisition-related amortization
(119)
(129)
(59)
(64)
Restructuring, related and implementation costs
(1)
(280)
(53)
(264)
(18)
Changes in obligations related to divested businesses
17
(6)
3
(4)
Changes in pre-acquisition estimates
1
(8)
2
(2)
Gains and losses from sale of businesses
(4)
9
(4)
12
Acquisition- and divestment-related expenses and integration costs
(109)
(30)
(50)
(20)
Other income/expense relating to the Power Grids joint venture
(37)
(19)
(2)
(2)
Certain other non-operational items
(63)
74
(65)
86
Foreign exchange/commodity timing differences in income from operations
(95)
(19)
(110)
(7)
Income from operations
1,444
1,891
587
1,094
Interest and dividend income
33
26
20
15
Interest and other finance expense
(62)
(91)
(40)
(36)
Non-operational pension (cost) credit
68
88
32
38
Income from continuing operations before taxes
1,483
1,914
599
1,111
Income tax expense
(434)
(574)
(193)
(322)
Income from continuing operations, net of tax
1,049
1,340
406
789
Loss from discontinued operations, net of tax
(20)
(36)
(9)
(8)
Net income
1,029
1,304
397
781
(1) Includes impairment of certain assets.
40 Q2 2022 FINANCIAL INFORMATION
Reconciliation of Operational EBITA margin by business
Three months ended June 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,531
1,626
1,529
732
(167)
7,251
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
36
(1)
37
9
4
85
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
8
1
5
–
24
38
Unrealized foreign exchange movements
on receivables (and related assets)
(22)
(4)
(10)
(8)
(9)
(53)
Operational revenues
3,553
1,622
1,561
733
(148)
7,321
Income (loss) from operations
465
231
175
43
(327)
587
Acquisition-related amortization
30
7
1
19
2
59
Restructuring, related and
implementation costs
(1)
8
–
–
2
254
264
Changes in obligations related to
divested businesses
–
–
–
–
(3)
(3)
Changes in pre-acquisition estimates
–
–
–
(2)
–
(2)
Gains and losses from sale of businesses
–
4
–
–
–
4
Acquisition- and divestment-related expenses
and integration costs
10
3
36
2
(1)
50
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
2
2
Certain other non-operational items
22
–
–
1
42
65
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
75
23
12
1
7
118
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
6
1
7
(1)
20
33
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(17)
(3)
(7)
(5)
(9)
(41)
Operational EBITA
599
266
224
60
(13)
1,136
Operational EBITA margin (%)
16.9%
16.4%
14.3%
8.2%
n.a.
15.5%
(1) Includes impairment of certain assets.
In the three months ended June 30, 2022, Certain other non-operational items in the table above includes the following:
Three months ended June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
5
5
Business transformation costs
(1)
1
–
–
–
39
40
Other non-operational items
21
–
–
1
(2)
20
Total
22
–
–
1
42
65
(1) Amounts include ABB Way process transformation costs of $39 million for the three months ended June 30, 2022.
41 Q2 2022 FINANCIAL INFORMATION
Three months ended June 30, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,406
1,850
1,540
832
(179)
7,449
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(7)
(14)
2
–
–
(19)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(1)
–
(5)
–
(1)
(7)
Unrealized foreign exchange movements
on receivables (and related assets)
10
3
(1)
2
(1)
13
Operational revenues
3,408
1,839
1,536
834
(181)
7,436
Income (loss) from operations
549
303
190
74
(22)
1,094
Acquisition-related amortization
29
13
1
21
–
64
Restructuring, related and
implementation costs
4
4
10
–
–
18
Changes in obligations related to
divested businesses
–
–
–
–
4
4
Changes in pre-acquisition estimates
2
–
–
–
–
2
Gains and losses from sale of businesses
1
(1)
(13)
–
1
(12)
Acquisition- and divestment-related expenses
and integration costs
12
4
3
–
1
20
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
2
2
Certain other non-operational items
(9)
1
2
–
(80)
(86)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
4
(2)
2
–
4
8
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(1)
1
(2)
(1)
(4)
(7)
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
1
2
(1)
2
2
6
Operational EBITA
592
325
192
96
(92)
1,113
Operational EBITA margin (%)
17.4%
17.7%
12.5%
11.5%
n.a.
15.0%
In the three months ended June 30, 2021, Certain other non-operational items in the table above includes the following:
Three months ended June 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Certain other fair values changes,
(10)
–
–
–
(86)
(96)
Business transformation costs
(1)
1
–
–
–
18
19
Other non-operational items
–
1
2
–
(12)
(9)
Total
(9)
1
2
–
(80)
(86)
(1) Amounts include ABB Way process transformation costs of $18 million for the three months ended June 30, 2021.
42 Q2 2022 FINANCIAL INFORMATION
Six months ended June 30, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
6,858
3,198
3,035
1,462
(337)
14,216
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
24
3
36
11
3
77
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
10
2
2
–
27
41
Unrealized foreign exchange movements
on receivables (and related assets)
(22)
(6)
(7)
(5)
(11)
(51)
Operational revenues
6,870
3,197
3,066
1,468
(318)
14,283
Income (loss) from operations
971
485
326
65
(403)
1,444
Acquisition-related amortization
61
15
2
40
1
119
Restructuring, related and
implementation costs
(1)
10
8
5
3
254
280
Changes in obligations related to
divested businesses
–
–
–
–
(17)
(17)
Changes in pre-acquisition estimates
1
–
–
(2)
–
(1)
Gains and losses from sale of businesses
–
4
–
–
–
4
Acquisition- and divestment-related expenses
and integration costs
29
8
69
3
–
109
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
37
37
Certain other non-operational items
(8)
–
–
1
70
63
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
54
22
18
4
2
100
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
8
1
4
(1)
23
35
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(17)
(3)
(4)
(4)
(12)
(40)
Operational EBITA
1,109
540
420
109
(45)
2,133
Operational EBITA margin (%)
16.1%
16.9%
13.7%
7.4%
n.a.
14.9%
(1) Includes impairment of certain assets.
In the six months ended June 30, 2022, Certain other non-operational items in the table above includes the following:
Six months ended June 30, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
4
4
Certain other fair values changes,
(31)
–
–
–
(3)
(34)
Business transformation costs
(1)
2
–
–
–
64
66
Other non-operational items
21
–
–
1
5
27
Total
(8)
–
–
1
70
63
(1) Amounts include ABB Way process transformation costs of $64 million for the six months ended June 30, 2022.
43 Q2 2022 FINANCIAL INFORMATION
Six months ended June 30, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
6,546
3,517
2,947
1,685
(345)
14,350
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
22
13
14
5
4
58
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(1)
–
(7)
(1)
(1)
(10)
Unrealized foreign exchange movements
on receivables (and related assets)
(9)
(5)
(6)
(5)
(3)
(28)
Operational revenues
6,558
3,525
2,948
1,684
(345)
14,370
Income (loss) from operations
989
568
337
156
(159)
1,891
Acquisition-related amortization
58
26
2
41
2
129
Restructuring, related and
implementation costs
21
5
13
5
9
53
Changes in obligations related to
divested businesses
–
–
–
–
6
6
Changes in pre-acquisition estimates
8
–
–
–
–
8
Gains and losses from sale of businesses
4
(1)
(13)
–
1
(9)
Acquisition- and divestment-related expenses
and integration costs
18
7
4
–
1
30
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
19
19
Certain other non-operational items
(15)
1
2
–
(62)
(74)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
29
12
12
1
2
56
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
(1)
1
(3)
(1)
(5)
(9)
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(8)
(5)
(7)
(1)
(7)
(28)
Operational EBITA
1,103
614
347
201
(193)
2,072
Operational EBITA margin (%)
16.8%
17.4%
11.8%
11.9%
n.a.
14.4%
In the six months ended June 30, 2021, Certain other non-operational items in the table above includes the following:
Six months ended June 30, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
2
2
Certain other fair values changes,
(19)
–
–
–
(95)
(114)
Business transformation costs
4
–
–
–
35
39
Other non-operational items
–
1
2
–
(4)
(1)
Total
(15)
1
2
–
(62)
(74)
(1) Amounts include ABB Way process transformation costs of $33 million for the six months ended June 30, 2021.
44 Q2 2022 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents, Restricted cash (current and non-current) and Marketable securities and short-term
investments.
Reconciliation
($ in millions)
June 30, 2022
December 31, 2021
Short-term debt and current maturities of long-term debt
2,830
1,384
Long-term debt
5,086
4,177
Total debt (gross debt)
7,916
5,561
Cash and equivalents
2,412
4,159
Restricted cash - current
23
30
Marketable securities and short-term investments
945
1,170
Restricted cash - non-current
301
300
Cash and marketable securities
3,681
5,659
Net debt (cash)
4,235
(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)
June 30, 2022
December 31, 2021
Total stockholders' equity
12,586
15,957
Net debt (cash) (as defined above)
4,235
(98)
Net debt (cash) / Equity ratio
0.34
-0.01
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA ratio is defined as Net debt divided by EBITDA.
EBITDA
EBITDA is defined as Income from operations for the trailing twelve months preceding the balance sheet date before depreciation and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
June 30, 2022
June 30, 2021
Income from operations for the three months ended:
June 30, 2022 / 2021
587
1,094
March 31, 2022 / 2021
857
797
December 31, 2021 / 2020
2,975
578
September 30, 2021 / 2020
852
71
Depreciation and Amortization for the three months ended:
June 30, 2022 / 2021
207
230
March 31, 2022 / 2021
210
227
December 31, 2021 / 2020
216
229
September 30, 2021 / 2020
220
231
EBITDA
6,124
3,457
Net debt (as defined above)
4,235
2,259
Net debt / EBITDA
0.7
0.7
45 Q2 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, (e) liabilities related to certain other restructuring-related activities and (f) liabilities related to the
divestment of the Power Grids business); and including the amounts related to these accounts which have been presented as either assets or liabilities held for
sale but excluding any amounts included in discontinued operations .
Adjusted revenues for the trailing twelve months
Adjusted revenues for the trailing twelve months includes total revenues recorded by ABB in the twelve months preceding the relevant balance sheet date adjusted
to eliminate revenues of divested businesses and the estimated impact of annualizing revenues of certain acquisitions which were completed in the same trailing
twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
June 30, 2022
June 30, 2021
Net working capital:
Receivables, net
(1)
6,960
7,113
Contract assets
965
1,087
Inventories, net
5,595
4,700
Prepaid expenses
262
229
Accounts payable, trade
(4,805)
(4,708)
Contract liabilities
(2,141)
(1,846)
Other current liabilities
(2)
(3,173)
(3,324)
Net working capital
3,663
3,251
Total revenues for the three months ended:
June 30, 2022 / 2021
7,251
7,449
March 31, 2022 / 2021
6,965
6,901
December 31, 2021 / 2020
7,567
7,182
September 30, 2021 / 2020
7,028
6,582
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(213)
–
Adjusted revenues for the trailing twelve months
28,598
28,114
Net working capital as a percentage of revenues (%)
12.8%
11.6%
(1) Amount excludes receivables related to sales of investments outstanding at June 30, 2021.
(2) Amounts exclude $1,104 million and $705 million at June 30, 2022 and 2021, respectively, related primarily to (a) income taxes payable, (b) current derivative liabilities, (c) pension
and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain restructuring-related activities and (f) liabilities related to the divestment of
the Power Grids business.
46 Q2 2022 FINANCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash flow divided by Adjusted net income attributable to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of both the Mechanical Power Transmission Division (Dodge) and Power Grids business, the latter being included in
discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets, and (ii)
proceeds from sales of property, plant and equipment.
Free cash flow for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash flow recorded by ABB in the twelve months preceding the relevant balance sheet date.
Net income for the trailing twelve months
Net income for the trailing twelve months includes net income recorded by ABB (as adjusted) in the twelve months preceding the relevant balance sheet date.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
June 30, 2022
December 31, 2021
Net cash provided by operating activities – continuing operations
1,973
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
136
93
Free cash flow from continuing operations
1,244
2,611
Net cash provided by (used in) operating activities – discontinued operations
(40)
(8)
Free cash flow
1,204
2,603
Adjusted net income attributable to ABB
(1)
2,132
2,416
Free cash flow conversion to net income
56%
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 $65 million.
Reconciliation of the trailing twelve months to June 30, 2022
Continuing operations
Discontinued operations
($ in millions)
Net cash
provided by
continuing
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Net cash
provided by
(used in)
discontinued
operating
activities
Purchases of
property, plant
and equipment
and intangible
assets
Proceeds
from sale of
property, plant
and equipment
Adjusted net
income
attributable
to ABB
(1)
Q3 2021
1,119
(166)
13
(15)
–
–
657
Q4 2021
1,033
(361)
57
(13)
–
–
478
Q1 2022
(564)
(187)
35
(9)
–
–
609
Q2 2022
385
(151)
31
(3)
–
–
388
Total for the trailing
twelve months to
June 30, 2022
1,973
(865)
136
(40)
–
–
2,132
(1) Adjusted net income attributable to ABB for Q3 and Q4 of 2021 as well as Q1 and Q2 of 2022, is adjusted to exclude reductions to the gain on the sale of Power Grids of $5 million,
$33 million, $5 million and $9 million, respectively. In addition, Q4 2021 is also adjusted to exclude the gain on the sale of Dodge of $2,195 million.
47 Q2 2022 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income less Interest and other finance expense.
Reconciliation
Six months ended June 30,
Three months ended June 30,
($ in millions)
2022
2021
2022
2021
Interest and dividend income
33
26
20
15
Interest and other finance expense
(62)
(91)
(40)
(36)
Net finance expenses
(29)
(65)
(20)
(21)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total revenues.
Reconciliation
Six months ended June 30,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
8,434
6,858
1.23
7,224
6,546
1.10
Motion
4,281
3,198
1.34
3,864
3,517
1.10
Process Automation
3,511
3,035
1.16
3,211
2,947
1.09
Robotics & Discrete Automation
2,417
1,462
1.65
1,809
1,685
1.07
Corporate and Other
(463)
(337)
n.a.
(363)
(345)
n.a.
ABB Group
18,180
14,216
1.28
15,745
14,350
1.10
Three months ended June 30,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
4,037
3,531
1.14
3,693
3,406
1.08
Motion
2,079
1,626
1.28
1,947
1,850
1.05
Process Automation
1,819
1,529
1.19
1,555
1,540
1.01
Robotics & Discrete Automation
1,109
732
1.52
968
832
1.16
Corporate and Other
(237)
(167)
n.a.
(174)
(179)
n.a.
ABB Group
8,807
7,251
1.21
7,989
7,449
1.07
48 Q2 2022 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71
11
www.abb.com
April 1 — June 30, 2022
ABB Ltd announces that the following members of the Executive Committee or Board of Directors of ABB have purchased,
sold or been granted ABB’s registered shares, call options and warrant appreciation rights (“WARs”), in the following amounts:
Name
Date
Description
Received *
Purchased
Sold
Price
Timo Ihamuotila
May 16, 2022
Share
38,594
CHF
28.31
Tarak Mehta
May 16, 2022
Share
34,937
CHF
28.31
Peter Terwiesch
May 16, 2022
Share
32,500
CHF
28.31
Morten Wierod
May 16, 2022
Share
43,752
CHF
28.31
Sami Atiya
May 16, 2022
Share
39,001
CHF
28.31
Peter Voser
May 02, 2022
Share
18,296
CHF
31.16
Gunnar Brock
May 02, 2022
Share
2,026
CHF
31.16
David Constable
May 02, 2022
Share
1,964
CHF
31.16
Frederico Curado
May 02, 2022
Share
4,075
CHF
31.16
Lars Förberg
May 02, 2022
Share
4,870
CHF
31.16
Jennifer Xin-Zhe Li
May 02, 2022
Share
1,986
CHF
31.16
Geraldine Matchett
May 02, 2022
Share
2,647
CHF
31.16
David Meline
May 02, 2022
Share
2,456
CHF
31.16
Satish Pai
May 02, 2022
Share
1,872
CHF
31.16
Jacob Wallenberg
May 02, 2022
Share
2,763
CHF
31.16
Key:
* Received instruments were delivered as part of the ABB Ltd Director’s or Executive Committee Member’s compensation as compensation for foregone
benefits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ABB LTD
Date: July 21, 2022.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: July 21, 2022.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance