Discrete Automation and Motion
Total orders grew 4 percent and revenues were steady as continued strong demand patterns in robotics and the light industry more than offset the impacts from capex declines in process industries such as oil and gas. Operational EBITA margin declined 100 basis points compared with the same quarter a year ago mainly impacted by lower margins in solar, unfavorable mix and low capacity utilization. Effective January 1, 2017, electric vehicle charging, solar and power quality businesses are transferred to the Electrification Products Division due to the synergistic opportunities they have with that portfolio. This transfer of business is expected to have a supportive effect on the division’s margin.
Total orders were 14 percent lower as a result of continued capital expenditure reduction in the process industries. Revenues declined 8 percent as higher service revenues could not offset declines in mining and oil and gas. Operational EBITA margin increased 130 basis points to 13.4 percent due to positive mix and successfully implemented cost reduction and productivity measures.
Total orders were 15 percent higher compared with the same quarter a year ago due to significant large contract awards. Such orders included a $640 million ultra-high-voltage direct current order for Raigarh-Pugalur in India and a $100 million order for the upgrade of Sylmar converter station of the Pacific Intertie high-voltage direct current power link in the USA. Revenues increased 4 percent due to steady execution of a healthy order backlog. Operational EBITA margin increased by 90 basis points to 10.4 percent, mainly driven by higher revenues, improved productivity, solid project execution and continued cost savings. These results reflect the success of the “step change” transformation to date. Going forward, the division will continue to drive further transformation and value creation through its “Power Up” program.
Full-year 2016 Group Results
Orders were 5 percent lower (8 percent in US dollars) compared with 2015. Base order development was 2 percent lower (5 percent in US dollars) while large orders were down 24 percent (27 percent in US dollars) reflecting the high order intake in 2015. Total service and software orders grew 3 percent (0 percent in US dollars) to 18.4 percent of total group orders. The book-to-bill2 ratio was 0.99x for 2016.
Revenues were steady (down 5 percent in US dollars) as revenue growth in Power Grids and Electrification Products offset declines in Discrete Automation and Motion and Process Automation. Total services and software revenues grew 3 percent (0 percent in US dollars) to 17.8 percent of total group revenues.
ABB continued to execute its Next Level strategy in 2016 which resulted in a 50 basis points improvement of the operational EBITA margin to 12.4 percent. The main drivers for the group’s enhanced profitability were continued cost savings and productivity measures.
Net income for the year amounted to $1.96 billion, an increase of 2 percent compared to the previous year. Basic earnings per share in the period improved 5 percent to $0.91 and operational earnings per share was $1.29, an increase of 4 percent on a constant currency basis.
Cash flow from operating activities improved 3 percent to $3.9 billion, free cash flow improved 5 percent to $3.2 billion and cash return on invested capital (CROI) increased 70 basis points to 14.1%. Net working capital as a percentage of revenues reduced by 150 basis points to 11.5 percent compared to 2015.
During 2016, ABB returned $2.9 billion in cash to shareholders through the dividend (in the form of a nominal value reduction) and share repurchases.
For 2016, the Board has proposed a dividend increase of 0.02 Swiss francs to 0.76 Swiss francs per share. The proposal is in line with the company’s dividend policy to pay a steadily rising, sustainable dividend over time. If approved by shareholders at the company’s annual general meeting on April 13, 2017, the Board proposes that the dividend be paid as an ordinary dividend. The ex-dividend and payout dates in Switzerland are expected in April 2017. Further information will be made available on ABB’s website in due course.
Share buyback program
On September 30, 2016, ABB announced the completion of the share buyback program that was introduced in September 2014. During the buyback program, ABB repurchased approximately 171 million registered shares (equivalent to 7.4 percent of its issued share capital at the launch of the buyback program) for a total amount of approximately $3.5 billion. In October 2016, ABB announced its plans for a new share buyback program of up to $3 billion from 2017 through 2019. This reflects the company’s confidence in the continued strength of ABB’s cash generation and financial position.
Next Level strategy – Stage 3
On October 4, 2016, ABB launched Stage 3 of its Next Level strategy to unlock value for customers and shareholders. The core elements of this included: shaping ABB’s divisions into four market-leading, entrepreneurial units; realizing ABB’s full digital potential; accelerating momentum in operational excellence; and strengthening ABB’s brand.
Driving growth in four market-leading, entrepreneurial units
ABB is driving growth in four market leading entrepreneurial divisions, Electrification Products, Robotics and Motion, Industrial Automation and Power Grids. These divisions were effective January 1, 2017 and are fully operational.
A quantum leap in digital with ABB AbilityTM
The ABB AbilityTM offering combines ABB’s portfolio of digital solutions and services across all customer segments, cementing the group’s leading position in the Fourth Industrial Revolution and supporting the competitiveness of ABB’s four entrepreneurial divisions. With ABB Ability, the company sees an annual addressable market of up to $20 billion.
Accelerating momentum in operational excellence
The White-Collar Productivity savings program is on track to deliver the increased cost reduction target of $1.3 billion, run rate end of 2017. ABB will achieve these additional savings within the initially announced timeframe and for $200 million lower of total combined restructuring program and implementation costs than initially announced. ABB is continuing its regular cost-savings programs to achieve savings equivalent to 3-5 percent of cost of sales each year.
ABB is on track to deliver its Net Working Capital program to free up $2 billion by the end of 2017. As of December 2016, it has freed up approximately $900 million. Net working capital as a percentage of revenues reduced 150 bps to 11.5% compared to 2015.
Strengthening ABB’s brand
ABB is adopting a single corporate brand, consolidating all its brands around the world under one umbrella. ABB’s portfolio of companies is being unified, showcasing the full breadth and depth of the company’s global offering under one master brand. The unified brand plays a key part in realizing the value potential of ABB’s digital offering, as it increased brand loyalty, price premiums and purchase probability.
The brand features design elements intended to clearly articulate ABB’s vision, direction and unique market position to customers, shareholders, employees and all other stakeholders. ABB’s heritage as a pioneering technology leader and the three focus areas of its Next Level strategy are reflected in its new brand promise: “Let’s write the future.”TM
Macroeconomic and geopolitical developments are signaling a mixed picture with continued uncertainty. Some macroeconomic signs remain positive in the United States and growth in China is expected to continue. The overall global market remains impacted by modest growth and increased uncertainties, e.g., Brexit in Europe and geopolitical tensions in various parts of the world. Oil prices and foreign exchange translation effects are expected to continue to influence the company’s results. With this and the ongoing transformation of ABB, we expect 2017 to be a transitional year.
The attractive long-term demand outlook in ABB’s three major customer sectors — utilities, industry and transport & infrastructure — is driven by the Energy and Fourth Industrial Revolutions.
ABB is well-positioned to tap into these opportunities for long-term profitable growth with its strong market presence, broad geographic and business scope, technology leadership and financial strength.
The Q4 and full-year 2016 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.
ABB will host a press conference today starting at 10:00 a.m. Central European Time (CET) (9:00 a.m. BST, 4:00 a.m. EDT). The event will be accessible by webcast on http://new.abb.com/media/annual-press-conference-2017.
A conference call for analysts and investors is scheduled to begin today at 2:00 p.m. CET (1:00 p.m. BST, 8:00 a.m. EDT). Callers from the UK should dial +44 203 059 58 62. From Sweden, the number to dial. is +46 85 051 00 31, and from the rest of Europe, +41 58 310 50 00. Callers from the US and Canada should dial +1 866 291 41 66 (toll free) or +1 631 570 56 13 (long-distance charges apply). Callers are requested to phone in 10 minutes before the start of the call. The call will also be accessible on the ABB website and a recorded session will be available as a podcast one hour after the end of the conference call and can be downloaded from our website www.abb.com.
ABB (ABBN: SIX Swiss Ex) is a pioneering technology leader in electrification products, robotics and motion, industrial automation and power grids, serving customers in utilities, industry and transport & infrastructure globally. Continuing more than a 125-year history of innovation, ABB today is writing the future of industrial digitalization and driving the Energy and Fourth Industrial Revolutions. ABB operates in more than 100 countries with about 132,000 employees. www.abb.com
INVESTOR CALENDAR 2017
Annual General Meeting (Zurich) April 13, 2017
First quarter 2017 results April 20, 2017
Second quarter 2017 results July 20, 2017
Third quarter 2017 results October 26, 2017
Important notice about forward-looking information
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 “Short-term outlook”, “Outlook”, “Dividend”, “Share buy back program”, “Q4 divisional performance” and “Next Level strategy – Stage 3”. 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 Ltd. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects,” “believes,” “estimates,” “targets,” “plans,” “is likely”, “intends” or similar expressions. However, there are many risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking information and statements made in this press release and which could affect our ability to achieve any or all of our stated targets. The important factors that could cause such differences include, among others, business risks associated with the volatile global economic environment and political conditions, costs associated with compliance activities, market acceptance of new products and services, changes in governmental regulations and currency exchange rates and such other factors as may be discussed from time to time in ABB Ltd’s filings with the U.S. Securities and Exchange Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes that its expectations reflected in any such forward-looking statement are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved.
Zurich, February 8, 2017
Ulrich Spiesshofer, CEO
1 Growth rates for orders, revenues and order backlog are on a comparable basis (local currency adjusted for acquisitions and divestitures), previously referred to as ‘like-for-like’. US$ growth rates are presented in Key Figures table
2 For a reconciliation of non-GAAP measures, see “Supplemental Reconciliations and Definitions” in the attached Q4 2016 Financial Information
3 Constant currency (not adjusted for portfolio changes)
4 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates and not adjusted for changes in the business portfolio)
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