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 February 2023
Commission File Number 001-16429
ABB Ltd
(Translation of registrant’s name into English)
Affolternstrasse 44, CH-8050, Zurich, Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
☒
⬜
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
⬜
Note:
attached annual report to security holders.
Indication by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
⬜
Note:
other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in
which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the
home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press
release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event,
has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
⬜
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
This Form 6-K consists of the following:
1.
Press release issued by ABB Ltd dated February 2, 2023 titled “Q4 2022 results”.
2.
Q4 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
—
ZURICH, SWITZERLAND, FEBRUARY 2, 2023
Q4 2022 results
Strong performance improvements in Q4 and
long-term margin target achieved early
Q4 2022
●
1
●
●
●
1
1
●
●
operating activities in continuing operations it was
$720 million, including adverse impact of approximately $315
million due to earlier announced settlements for Kusile
project.
FY 2022
●
1
●
●
●
1
1
●
●
from operating activities in continuing operations it was
$1,334 million
—
“2022 was another successful year for ABB, including a further streamlining of our business
portfolio and achieving our margin target earlier than expected. We have made ABB more
resilient. In 2023, regardless of current market uncertainty, we want to show that we can
continuously deliver an Operational EBITA margin of at least 15%.”
Björn Rosengren
, CEO
Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss Exchange
—
Q4 2022
Full year
Press Release
KEY FIGURES
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
1
FY 2022
FY 2021
US$
Comparable
1
Orders
7,620
8,257
-8%
2%
33,988
31,868
7%
16%
Revenues
7,824
7,567
3%
16%
29,446
28,945
2%
12%
Gross Profit
2,658
2,397
11%
9,710
9,467
3%
as % of revenues
34.0%
31.7%
+2.3 pts
33.0%
32.7%
+0.3 pts
Income from operations
1,185
2,975
-60%
3,337
5,718
-42%
Operational EBITA
1
1,146
988
16%
28%
4,510
4,122
9%
18%
as % of operational revenues
1
14.8%
13.1%
+1.7 pts
15.3%
14.2%
+1.1 pts
Income from continuing operations, net of tax
1,168
2,703
-57%
2,637
4,730
-44%
Net income attributable to ABB
1,132
2,640
-57%
2,475
4,546
-46%
Basic earnings per share ($)
0.61
1.34
-55%
2
1.30
2.27
-43%
2
Cash flow from operating activities
4
687
1,020
-33%
1,287
3,330
-61%
Cash flow from operating activities in continuing
operations
720
1,033
-30%
1,334
3,338
-60%
1
For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q4 2022 Financial Information.
2
EPS growth rates are computed using unrounded amounts. 2021 numbers include the impact related to the divestment of Mechanical Power Transmission.
3
Constant currency (not adjusted for portfolio changes).
4
Amount represents total for both continuing and discontinued operations.
ABB INTERIM REPORT
I
Q4 2022
In the fourth quarter of 2022, we improved comparable orders
and revenues, we increased our Operational EBITA by 16%,
raised our Operational EBITA margin by 170 basis points and
lifted ROCE to 16.5% for 2022, to within our target range. All in
all, this was a good achievement in my view.
Customer activity improved slightly or remained stable in most
customer segments, except for declines related to residential
construction and discrete manufacturing. The market outlook for
discrete manufacturing remains solid, although the fourth
quarter was adversely impacted by customers normalizing order
patterns following a period of pre-ordering triggered by the long
delivery lead times in a strained value chain. This weighed on
order intake in Robotics & Discrete Automation, while the other
three business areas remained stable or increased comparable
orders. Revenues were strong and increased by 3% (16%
comparable). The Americas region was the growth engine for
orders, while Europe reversed and Asia, Middle East and Africa
remained overall largely stable despite a decline in China. The
escalating Covid-related situation in China somewhat slowed
down local business activity towards the end of the period. Our
priority is to keep our people safe.
Our strong price execution combined with increased volumes
supported the higher gross margin and drove the improvement
of 170 basis points in the Operational EBITA margin to 14.8%,
the strongest fourth quarter margin in several years. This
resulted in 2022 being a record year for ABB, in recent history,
with an Operational EBITA margin of 15.3%. We achieved good
price management, executed well on increased volumes with
some additional support from unusually low corporate costs. I
am pleased how the divisions managed challenges like supply
chain constraints, a tight labor market, Covid -related lock downs
in China and a high inflationary environment.
Cash flow of $687 million in the quarter is the one area which
did not quite meet our expectations as the depletion of net
working capital was slower than anticipated. This will be an
important focus area for us near term as we deliver against our
high order backlog. As earlier announced, the finalization of the
Kusile-related issues weighed on cash flow by approximately
$315 million, while the closing of the divestment of Power Grids
generated a net cash contribution in investing activities of $1.4
billion.
We remain committed to our plans to separately list our E-mobility
business, subject to constructive market conditions. Meanwhile,
we have closed by the end of January the pre -IPO private
placement of approx imately CHF525 million for newly issued
shares to new minority investors representing approximately 20%
ownership of the E-mobility business. The proceeds will be used
to capture E-mobility’s growth
potential through organic and M&A investments in hardware and
software.
Just after the close of the fourth quarter, we progressed with the
final part of our announced divisional exits by signing an
agreement to divest the Power Conversion division in the
Electrification business area. From here on, we will continue to
review our business portfolio on a product group level within our
current divisions. One example is our decision to initiate the exit
of the emergency lighting business within the Smart Buildings
division in the Electrification business area during 2023.
By partnering with the Swedish mining and smelting company
Boliden to build a strategic co-operation to use low carbon
footprint copper in our electromagnetic stirring (EMS) equipment
and high-efficiency electric motors, we took another step towards
our 2030 target of having a circular approach in at least 80
percent of our products and solutions. The aim is to reduce
greenhouse gas (GHG) emissions while driving the transition to a
more circular economy.
Looking into 2023, we currently do not ant icipate a major set-back
in demand, although the high inflationary environment adds
uncertainty. Comparable order growth, at least in the first half of
the year, should be somewhat hampered by last year’s very high
order level coupled with a normalization of customers’ order
pattern after a period of pre-ordering in times of a strained value
chain. I expect comparable revenue growth to be above 5%,
supported by backlog execution. Cash flow should benefit from us
working down the net working capital, and we should also have
less adverse items impacting comparability. I view 2023 as a
good opportunity for ABB to prove that we can continuously
deliver an annual Operational EBITA margin of at least 15%.
Considering improving performance, robust cash flow and a solid
balance sheet, the Board of Directors proposes an ordinary
dividend of CHF0.84 per share. Up from CHF0.82 in the previous
year and in line with the long-term ambition of a rising sustainable
dividend per share over time, while still prioritizing a solid balance
sheet to support our growth ambitions. We plan to continue with
share buybacks for full year of 2023.
Björn Rosengren
CEO
In the
first quarter of 2023
, we anticipate double-digit
comparable revenue growth to support some improvement in
the Operational EBITA margin, year-on-year.
In full-year
2023, despite current market uncertainty, we
anticipate comparable revenue growth to be above 5% and we
expect to again achieve our long-term target of Operational
EBITA margin of at least 15%.
CEO summary
Outlook
ABB INTERIM REPORT
I
Q4 2022
In the fourth quarter , order intake declined by 8% (up 2%
comparable) year -on-year to $7,620 million with a favorable
development in most of the process-related segments, while
certain parts of the short-cycle business declined as customers
normalize order patterns.
When looking through the adverse impact from changes in
exchange rate, orders remained stable or increased in three out
of four business areas. Robotics & Discrete Automation
declined due to a normalization of customers’ order patterns
following a period of pre -buying due to a strained supply chain
which extended delivery lead times. This was predominantly
related to the machine builder segment, while robotics demand
remained broadly stable year-on-year.
The automotive segment improved on EV-related investments,
while softening demand was noted in the robotics consumer
related segments.
In transport & infrastructure, there was a positive development
in marine & ports and renewables. In buildings there was
weakness in residential -related demand, while commercial
construction was robust.
Demand in the process -related business was robust in refining,
and held up well also for oil & gas, water & wastewater, power
generation and pulp & paper.
Slightly softer momentum was noted in metals, where
customers seemingly are concerned about elevated energy
prices.
The strongest order momentum was reported in the Americas
on an increase of 10% (15% comparable), supported by a
strong development in the US in all business areas. Orders in
Europe decreased by 17% (5% comparable), including a
double-digit decline noted in the large German market. Asia,
Middle East and Africa reported a decline of 15% (2%
comparable), including a decline of 22% (12% comparable) in
China. Some softening of demand in China was noted towards
the end of the quarter, coinciding with the local intensifying of
the Covid situation.
A strong momentum in deliveries, including a good release from
the order backlog, resulted in revenues increasing by 3% (16%
comparable) to $7,824 million. Impacts from strong increases in
both volume and price more than offset adverse effects from
changes in exchange rates and portfolio changes, with
contribution from all business areas. So far, the ABB operations
in China have maintained production at close to normal level
without any major impact from the intensified Covid-related
situation.
Orders and revenues
Orders by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q4 2022
Q4 2021
US$
Comparable
Europe
2,604
3,138
-17%
-5%
The Americas
2,898
2,640
10%
15%
Asia, Middle East
and Africa
2,118
2,479
-15%
-2%
ABB Group
7,620
8,257
-8%
2%
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
2%
16%
FX
-8%
-10%
Portfolio changes
-2%
-3%
Total
-8%
3%
Revenues by region
($ in millions,
unless otherwise
indicated)
CHANGE
Q4 2022
Q4 2021
US$
Comparable
Europe
2,766
2,756
0%
16%
The Americas
2,554
2,198
16%
22%
Asia, Middle East
and Africa
2,504
2,613
-4%
10%
ABB Group
7,824
7,567
3%
16%
ABB INTERIM REPORT
I
Q4 2022
Gross profit
Gross profit increased strongly by 11 % (22% constant currency) to
$2,658 million, supported by a significant gross margin
improvement of 230 basis points to 34.0 %. Gross margin improved
materially in all business areas.
Income from operations
Income from operations amounted to $1,185 million, declining by
60% (56% constant currency). Compared with last year, earnings
were significantly supported by the improved operational
performance, with some additional tailwind from a net positive
impact related to the non -core business. This was however more
than offset by the impact of streamlining the business portfolio, as
last year’s period included the $2.2 billion book gain related to the
completion of the divestment of the Mechanical Power
Transmission division.
Operational EBITA
Significant contribution from successful price management and
good operational execution of increased volumes were key drivers
to the improvement in Operational EBITA. The strong price
execution more than offset inflationary impacts in commodities,
freight and labor. Selling, general and administrative expenses
declined in relation to revenues. The operational improvements
more than offset the adverse impact from changes in exchange
rates, resulting in an Operational EBITA of $1,146 million, an
increase of 16% (28% local currency) year-on-year. Operational
EBITA in Corporate and Other improved by $36 million
to -$72 million.
Net finance expenses
Net finance expense was $1 million compared with $26 million a
year ago. The primary driver for the unusually low quarterly amount
was a reversal of interest charges related to income tax risks.
Income tax
Income tax expense was $29 million with an effective tax rate of
2.4%, including approximately 20% impact from a release of
valuation allowances on deferred tax assets due mainly to an
improved business performance in the US, as well as
approximately 3% impact from a favorable resolution of certain prior
year tax matters.
Net income and earnings per share
Net income attributable to ABB was $1,132 million and decreased by
57%, as the last year period included the book gain on the
divestment of the Mechanical Power Transmission division. This
resulted in basic earnings per share of $0.61, a decline from $1.34
last year.
Earnings
ABB INTERIM REPORT
I
Q4 2022
Net working capital
Net working capital amounted to $3,216 million, increasing
year-on-year from $2,303 million but declining sequentially
from $3,407 million. The sequential decrease reflects the
total impact from higher trade payables and other current
liabilities offset by the increase in receivables triggered by
high revenue growth and higher inventories. That said,
inventory volumes declined sequentially, however changes
in exchange rates inflated the total. Net working capital as a
percentage of revenues
1
Capital expenditures
Purchases of property, plant and equipment and intangible
assets amounted to $259 million.
Net debt
Net debt
1
quarter, and increased from a net cash position of $98 million,
year-on-year. Sequentially, it declined from $4,117 million,
mainly due to the $1.4 billion net proceeds received from the
sale of our remaining 19.9% equity stake in the Hitachi
Energy joint venture in December.
Cash flows
Cash flow from operating activities was $687 million and
declined year-on-year from $1,020 million. An improvement in
underlying operational performance was more than offset by a
lower reduction in net working capital, mainly due to the
increase in trade receivables and a less favorable timing of
payments of trade payables, despite stronger inventory
management. In addition, the current quarter was adversely
impacted by the cash outflow from the earlier announced Kusile
settlement of approximately $315 million, while the prior year
included approximately $300 million cash paid for income taxes
related to the sale of the Mechanical Power Transmission
business.
Share buyback program
ABB launched a new share buyback program of up to $3 billion
on April 1, 2022. As of December 31, 2022, we have returned
approximately $0.5 billion (approximately 18 million shares) in
excess of the planned return of the Power Grids proceeds,
which were fully returned during the third quarter. During the
fourth quarter, 10,320,000 shares were repurchased on the
second trading line for approximately $300 million. The total
number of ABB Ltd’s issued shares is 1,964,745,075 , after the
cancellation of 88,403,189 shares in June, as approved at
ABB's 2022 AGM.
($ millions,
unless otherwise indicated)
Dec. 31
2022
Dec. 31
2021
Short term debt and current
maturities of long-term debt
2,535
1,384
Long-term debt
5,143
4,177
Total debt
7,678
5,561
Cash & equivalents
4,156
4,159
Restricted cash - current
18
30
Marketable securities and
short-term investments
725
1,170
Restricted cash - non-current
–
300
Cash and marketable securities
4,899
5,659
Net debt (cash)*
2,779
(98)
Net debt (cash)* to EBITDA ratio
0.67
(0.01)
Net debt (cash)* to Equity ratio
0.21
(0.01)
*
At Dec. 31, 2022 and Dec. 31, 2021, net debt(cash) excludes net pension (assets)/liabilities of
$(114) million and $45 million, respectively.
Balance sheet & Cash flow
ABB INTERIM REPORT
I
Q4 2022
Orders and revenues
Demand was stable or improved in most customer segments
year-on-year, except for in residential building. Order intake
amounted to $3,565 million and including the adverse impact
from changes in exchange rates it declined by 2% (up 6%
comparable).
●
Customer activity in the Americas was very strong driven by
the US order increase of 25%, year-on-year. Order intake in
Europe and Asia, Middle East and Africa declined by 17%
and 14% respectively, but the comparable drop of 4% in both
regions was materially softer. As the quarter progressed,
business activity in China was increasingly hampered by the
intensifying Covid-related situation.
●
A smooth supply chain supported order backlog deliveries, a
solid current demand in the flow-business and strong price
execution all contributed to the high revenue growth of 6%
(16% comparable) to $3,663 million. The positive
development was broad across the divisions.
●
Division Smart Building s has decided to exit its emergency
lighting business as the strategic fit with energy distribution
and home & building automation is limited. This business
generates revenues of approximately $160 million, and the
divestment process will be initiated in the coming months.
●
Just after the close of the fourth quarter, an agreement was
signed to divest the Power Conversion division for $505 million in
cash. The deal is expected to close in the second half of 2023.
●
As from the first quarter 2023 and in preparation of a planned
separate listing, the E-mobility division will no longer be reported
as part of Electrification, but as a sub-segment in Corporate and
other.
Profit
By leveraging on high comparable growth, the Operational EBITA
increased by 13%, significantly offsetting the adverse impacts from
changes in exchange rates. Operational EBITA margin improved by
90 basis points to 15.7%, despite a slightly negative divisional and
geographical mix in revenues.
●
Benefits from a strong price execution were a key driver to the
earnings improvement and more than offset year-on-year cost
increases related to raw materials, freight and labor.
●
Strong execution of increased volumes improved cost absorption
in production overall.
●
The higher volumes and pricing more than offset a somewhat
adverse divisional mix triggered by higher system -related
deliveries as Distribution Solutions executed the order backlog,
as well as some margin pressure related to lower volumes in
parts of the high margin residential building busin ess.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
6%
16%
FX
-8%
-10%
Portfolio changes
0%
0%
Total
-2%
6%
—
Electrification
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
3,565
3,638
-2%
6%
15,901
14,381
11%
17%
Order backlog
6,933
5,458
27%
33%
6,933
5,458
27%
33%
Revenues
3,663
3,445
6%
16%
14,105
13,187
7%
14%
Operational EBITA
572
507
13%
2,328
2,121
10%
as % of operational revenues
15.7%
14.8%
+0.9 pts
16.5%
16.1%
+0.4 pts
Cash flow from operating activities
804
715
12%
1,887
2,181
-13%
No. of employees (FTE equiv.)
52,300
50,800
3%
ABB INTERIM REPORT
I
Q4 2022
Orders and revenues
Order intake amounted to $1,649 million and declined by 11%
(0% comparable). The development was hampered by fewer
project orders received , although the product business
improved at a mid-single digit rate.
●
Orders in Europe declined by 26% (15% comparable)
from a high comparable last year when a large Traction
order was booked. The Americas declined by 7% (up 5%
comparable) supported primarily by the drives business,
which more than offset a somewhat weaker momentum in
the US motor business. Asia, Middle East and Africa had
the strongest momentum at 5% (16% comparable)
including China at a low single-digit growth rate.
Momentum in China was somewhat impacted by the
intensified Covid-related situation.
●
Solid execution of the order backlog contributed to the
strong volume growth in revenues which in total improved
by 6% (20% comparable). Comparable growth was the
strongest in the syste ms-related business.
Profit
Strong operational execution of increased volume s and
pricing triggered a 130 basis point improvement in the
Operational EBITA margin to 17.4%. Business performance
strongly outweighed the adverse changes in exchange
rates, resulting in earnings increase of 14% (26% in local
currency).
●
Strong pricing contributed materially to comparable
growth, and more than offset the adverse impacts from
cost inflation in commodities and labor.
●
An improved supply chain facilitated volumes being
released from the order backlog which triggered improved
cost absorption in production, year-on-year.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
0%
20%
FX
-8%
-11%
Portfolio changes
-3%
-3%
Total
-11%
6%
—
Motion
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
1,649
1,843
-11%
0%
7,896
7,616
4%
20%
Order backlog
4,726
3,749
26%
34%
4,726
3,749
26%
34%
Revenues
1,845
1,735
6%
20%
6,745
6,925
-3%
14%
Operational EBITA
318
278
14%
1,163
1,183
-2%
as % of operational revenues
17.4%
16.1%
+1.3 pts
17.3%
17.1%
+0.2 pts
Cash flow from operating activities
346
416
-17%
853
1,362
-37%
No. of employees (FTE equiv.)
21,100
20,100
5%
ABB INTERIM REPORT
I
Q4 2022
Orders and revenues
Robust customer activity supported a solid order momentum in
all divisions on a comparable basis, although this was more
than offset by changes in exchange rates and business portfolio
which resulted in a total order decline of 8% (up 11%
comparable).
●
Customer activity was particularly strong in marine & ports,
mining and refining and renewables, but held up well also for
oil & gas, pulp & paper, water & wastewater and power
generation. Slightly softer momentum was noted in metals,
where customers seemingly are concerned about elevated
energy prices. Service orders decreased by 21% (up 4
comparable) with the total order decline weighed down
primarily by portfolio changes on the back of the spin -off of
Accelleron.
●
The growth engine for orders was the Americas which
improved by 11% (22% comparable). Europe declined by 9%
(up 15% comparable). Asia, Middle East and Africa dropped
by 21% (2% comparable), impacted by a high comparable
due to a larger order booked last year. In China, only a slight
slow-down in business activity due to the escalating Covid-
related situation was noted towards the end of the quarter.
●
There was a good flow of customer deliveries in virtually all
divisions, although revenue growth declined in total by 14%
(up 6% comparable) hampered by the very high base level in
last year’s quarter, changes in exchange rates as well as the
absence of the exited Accelleron business in the fourth
quarter 2022.
Profit
Through improved operational performance in virtually all
divisions the business area managed to almost fully offset the
adverse margin impact stemming from the exit of the high-
margin Accelleron business, resulting in an Operational EBITA
margin of 13.2%.
●
Gross margin improvement was the main contributor to strong
operational performance supported by growth in the digital
businesses and better project execution.
●
The now exited Accelleron business supported last year’s
margin by 160 basis points.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
11%
5%
FX
-8%
-8%
Portfolio changes
-11%
-11%
Total
-8%
-14%
—
Process Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
1,746
1,898
-8%
11%
6,825
6,779
1%
11%
Order backlog
6,229
6,079
2%
16%
6,229
6,079
2%
16%
Revenues
1,551
1,805
-14%
6%
6,044
6,259
-3%
7%
Operational EBITA
203
247
-18%
848
801
6%
as % of operational revenues
13.2%
13.7%
-0.5 pts
14.0%
12.8%
+1.2 pts
Cash flow from operating activities
205
370
-45%
675
1,062
-36%
No. of employees (FTE equiv.)
20,100
22,000
-8%
ABB INTERIM REPORT
I
Q4 2022
Orders and revenues
Following a period of elevated order levels when customers
pre-ordered in response to a strained supply chain, growth in
the fourth quarter was impacted by a normalization of order
patterns in anticipation of shorter delivery lead times. Order
intake declined by 27% (19% comparable).
●
The order decline from a very high comparable last year was
significant in the Machine Automation division, while Robotics
reported a virtually stable development for comparable
orders.
●
There were positive developments in the automotive and
electronics segments. The adverse impact from the order
normalization pattern was predominantly noted in the
machine builder segment but also to some extent in general
industry and areas of food and beverage, pharmaceuticals as
well as consumer packaged goods.
●
Order intake declined in all regions at a double-digit rate,
hampered by the broad adverse development in Machine
Automation.
●
Improved access to components supported a release of
volumes from the order backlog resulting in the high revenue
growth of 12% (23% comparable), with strong contribution
from both divisions. The order backlog of $2.7 billion
facilitates near-term revenue generation.
Profit
Operational EBITA doubled year -on-year and amounted to
$125 million, supported by higher production output which
triggered a 590 basis point margin improvement to 14.0%.
●
Significantly higher volumes in production improved cost
absorption and were the main driver in the strong
earnings increase.
●
Contribution from strong price development more than
offset cost inflation in commodities and labor.
●
Earnings benefitted from a slight positive product mix
impact stemming from higher share of revenues from the
high margin product business.
Growth
Q4
Q4
Change year-on-year
Orders
Revenues
Comparable
-19%
23%
FX
-8%
-11%
Portfolio changes
0%
0%
Total
-27%
12%
—
Robotics & Discrete Automation
CHANGE
CHANGE
($ millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
FY 2022
FY 2021
US$
Comparable
Orders
798
1,100
-27%
-19%
4,116
3,844
7%
15%
Order backlog
2,679
1,919
40%
48%
2,679
1,919
40%
48%
Revenues
891
799
12%
23%
3,181
3,297
-4%
4%
Operational EBITA
125
64
95%
340
355
-4%
as % of operational revenues
14.0%
8.1%
+5.9 pts
10.7%
10.8%
-0.1 pts
Cash flow from operating activities
105
129
-19%
214
374
-43%
No. of employees (FTE equiv.)
10,700
10,600
0%
ABB INTERIM REPORT
I
Q4 2022
10
Quarterly highlights
●
ABB is working with Boliden, the Swedish mining and
smelting company, to build a strategic co-operation to use
low carbon footprint copper in its electromagnetic stirring
(EMS) equipment and high-efficiency electric motors. The
aim is to reduce greenhouse gas (GHG) emissions while
driving the transition to a more circular economy .
●
ABB has been selected to deliver the shaft generator
system with permanent magnet technology for the first
dedicated CO
2
-storage vessels ever to be built. Due for
delivery in 2024, the two vessels will support the Northern
Lights carbon capture and storage (CCS) project by
transporting greenhouse gas from industrial emitters to an
onshore terminal in Øygarden, Norway. From there, the
CO
2
2,600 meters under the seabed in the North Sea for
permanent storage.
●
ABB launched in December its new Abilities campaign
internally, with a focus on supporting employees with
physical, mental or cognitive and emotional challenges so
that they have equal access to resources that can empower
them in their professional and personal lives.
●
Every year, the Society of Women Engineers (SWE)
organizes the world’s largest conference for women in
engineering and technology. The conference took place in
Houston, Texas, at the end of October and brought
together over 16,000 attendees from around the world.
ABB is proud to be a part of SWE’s Corporate Partnership
Council, which annually sponsors over 120 employees with
global SWE memberships, and subsequently supports
SWE’s mission towards gender parity in the workplace, a
goal that aligns closely with ABB’s own strategy for diversity
& inclusion.
Story of the quarter
●
The Energy Efficiency Movement, which counts ABB as a
member, published the “Industrial energy efficiency
playbook” including 10 actions that a business can take to
improve its energy efficiency, reduce energy costs and
lower emissions. Industry is the world’s largest consumer
of electricity, natural gas and coal, according to the IEA,
accounting for 42% of total electricity demand. This
energy consumption carries high costs in the current
inflationary environment. The Movement’s
recommendations range from carrying out energy audits
to right-sizing industrial machines that are often too big
for the job at hand, which wastes energy. Moving data
from on-site servers and into the cloud could help save
around 90% of the energy consumed by IT systems.
Speeding up the transition from fossil fuels, by electrifying
industrial fleets switching gas boilers to heat pumps or
using well-maintained heat exchangers will also offer
efficiencies.
Q4 outcome
●
54% reduction of CO
₂
e emissions in own operations mainly by
shifting to green electricity and a reduction of sulfur hexafluoride
gas (SF6) emissions in our operations .
●
29% year-on-year decrease in LTIFR due to a decrease in
incidents in absolute numbers.
●
1.5%-points increase in share of women in senior management,
demonstrating progress towards our target.
—
Sustainability
Q4 2022
Q4 2021
CHANGE
12M ROLLING
CO
₂
e own operations emissions,
kt scope 1 and 2
1
44
95
-54%
268
Lost Time Injury Frequency Rate (LTIFR),
frequency / 200,000 working hours
0.10
0.14
-29%
0.14
Share of females in senior management
positions, %
17.8
16.3
+1.5 pts
17.2
1
CO
₂
2
Q2 2022 emission data was restated from 88.8 to 72.6 Ktons of CO
₂
e to reflect the application
of green energy certificates retrospectively.
ABB INTERIM REPORT
I
Q4 2022
11
During Q4 2022
●
On December 28, ABB announced it had completed the
previously announced divestment to Hitachi, Ltd. (Hitachi) of
its remaining 19.9 % equity stake in the Hitachi Energy joint
venture that was formed from ABB’s Power Grids business in
2020, with Hitachi holding a stake of 80.1%. Through the
divestment, ABB has realized a net positive cash inflow of
approximately $1.4 billion in the fourth quarter 2022.
●
On December 2, ABB announced that it had reached a full
and final settlement with the National Director of Public
Prosecution in South Africa, the U.S. Department of
Justice, the U.S. Securities and Exchange Commission,
and the Office of the Attorney General of Switzerland
related to the legacy Kusile project in South Africa, awarded
in 2015. The settlements total approximately $32 5 million
primarily accounted for in ABB’s third quarter 2022 financial
results and include the expected exposure to the German
case.
●
On October 3, ABB announce d that Accelleron Industries
AG (formerly ABB Turbocharging) had started trading on
SIX Swiss Exchange in Zurich, marking the completion of
Accelleron’s spin -off from ABB.
After Q4 2022
●
On January 20, ABB announced it had reached an agreement
to sell its Power Conversion division to AcBel Polytech Inc. for
$505 million in cash. The transaction is subject to regulatory
approvals and is expected to be completed in the second half
of 2023. Upon closing, ABB expects to record a small non-
operational book gain in Income from operations on the sale.
●
On February 1, ABB announced its E-mobility business had
signed an agreement with four minority investors to raise an
additional CHF325 million in funds in exchange for
approximately 12% shareholding in the company. The
transaction represents the final part of ABB E-mobility ’s pre-
IPO funding tranche through newly issued shares . Through the
private placement, a total of approximately CHF525 million has
been raised for approximately 20% shareholding in ABB’s E-
mobility, which will be used to continue the execution of its
growth strategy, driven by both organic and M&A investments
in hardware and software.
●
On February 2, ABB announced the nomination of Denise C.
Johnson, group president of Caterpillar Inc, as a new member
for election at the company’s upcoming Annual General
Meeting (AGM) on March 23, 2023. At the same time, current
member Satish Pai will step down from the Board.
In 2022, demand for ABB’s offering increased strongly year-
on-year, supported by most customer segments and across
all regions. Orders amounted to $33,988 million and improved
by 7% (16% comparable).
Revenues amounted to $29,446 million up by 2% (12%
comparable), year-on-year. Customer deliveries were
impacted by component constraints in the first half, but
shortages progressively eased throughout the year. As a
result, the book-to-bill ratio amounted to 1.15 in 2022.
Income from operations amounted to $3,337 million down
from $5,718 million in the year-earlier period. Results in 2022
included a charge triggered by the exit of the legacy full-train
retrofit business in non-core operations as well as a provision
related to the legacy Kusile project in South Africa awarded in
2015. Results in 2021 included a book gain of $2.2 billion
related to the divestment of the Mechanical Power
Transmission business.
Operational EBITA improved by 9% year-on-year to
$4,510 million and the Operational EBITA margin increased by
110 basis points to 15.3%, achieving the margin target of at
least 15% already one year earlier than expected. Performance
was driven by the positive impacts from strong pricing execution
and higher volumes, which more than offset cost inflation in raw
materials, freight and labor. Additionally, Corporate and Other
Operational EBITA improved by $169 million to -$169 million,
partly due to higher real estate gains and a better non-core
result.
The net finance expenses declined $39 million to $58 million,
roughly offsetting the decline in non-operational pension credits
of $51 million to $115 million compared to the same period last
year.
Income tax expense was $757 million with a tax rate of
22.3%, including approximately 3% net adverse impact
primarily related to adverse impacts from non-deductible
non-operational charges as well as a positive impact related
to a release of a valuation allowance on deferred tax assets
due to the improved business performance mainly related
to the US.
Net income attributable to ABB was $2,475 million and
decreased by 46%. Basic earnings per share was $1.30
and decreased by 43%. Both measures were adversely
impacted by the charges triggered by the exit of the legacy
full-train retrofit business in non-core operations as well as
the provision related to the legacy Kusile project and include
a book gain related to the divestment of the Mechanical
Power Transmission business in 2021.
Significant events
Full year 2022
ABB INTERIM REPORT
I
Q4 2022
12
Divestments
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Hitachi Energy JV (Power Grids, 19.9% stake)
28-Dec
Note: comparable growth calculation includes acquisitions and divestments with revenues of greater than $50 million.
1
Represents the estimated revenues for the last fiscal year prior to the announcement of the respective acquisition/divestment unless otherwise stated.
1
Excludes one project estimated to a total of ~$100 million, that is ongoing in the non-core business. Exact exit timing is difficult to assess due to legal proceedings etc.
2
Excludes Operational EBITA from E-mobility business.
3
Includes restructuring and restructuring-related as well as separation costs.
4
Excluding impact of acquisitions or divestments or any significant non-operational items.
($ in millions, unless otherwise stated)
FY 2023
Net finance expenses
~(150)
Effective tax rate
~25%
Capital Expenditures
~(800)
($ in millions, unless otherwise stated)
FY 2023
1
Q1 2023
Corporate and Other Operational EBITA
~(300)
~(75)
Non-operating items
Acquisition-related amortization
~(220)
~(55)
Restructuring and related
3
~(150)
~(40)
ABB Way transformation
~(180)
~(40)
Additional 2023 guidance
Acquisitions
Company/unit
Closing date
Revenues, $ million
1
No. of employees
2022
Motion
PowerTech Converter business
1-Dec
~60
300
Electrification
ASKI Industrie Elektronik GmbH
3-Oct
~2
16
Electrification
Numocity Technologies Private Ltd. (majority stake)
22-Jul
<1
20
Electrification
InCharge Energy, Inc (majority stake)
26-Jan
~16
40
Additional figures
ABB Group
Q1 2021
Q2 2021
Q3 2021
Q4 2021
FY 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
FY 2022
EBITDA, $ in million
1,024
1,324
1,072
3,191
6,611
1,067
794
906
1,384
4,151
Return on Capital Employed, %
n.a.
n.a.
n.a.
n.a.
14.90
n.a.
n.a.
n.a.
n.a.
16.50
Net debt/Equity
0.09
0.16
0.13
(0.01)
(0.01)
0.20
0.34
0.34
0.21
0.21
Net debt/ EBITDA 12M rolling
0.4
0.7
0.5
(0.01)
(0.01)
0.4
0.7
0.7
0.7
0.7
Net working capital, % of 12M rolling
revenues
10.8%
11.6%
10.2%
8.1%
8.1%
12.1%
12.8%
11.7%
11.1%
11.1%
Earnings per share, basic, $
0.25
0.37
0.33
1.34
2.27
0.31
0.20
0.19
0.61
1.30
Earnings per share, diluted, $
0.25
0.37
0.32
1.33
2.25
0.31
0.20
0.19
0.60
1.30
Dividend per share, CHF
n.a.
n.a.
n.a.
n.a.
0.82
n.a.
n.a.
n.a.
n.a.
*
Share price at the end of period, CHF
1
27.56
30.30
30.30
33.68
33.68
29.12
24.57
24.90
28.06
28.06
Share price at the end of period, $
1
28.99
32.33
31.73
36.31
36.31
30.76
25.43
24.41
30.46
30.46
Number of employees (FTE equivalents)
105,330
106,370
106,080
104,420
104,420
104,720
106,380
106,830
105,130
105,130
No. of shares outstanding at end of period
(in millions)
2,024
2,006
1,993
1,958
1,958
1,929
1,892
1,875
1,865
1,865
1
Data prior to October 3, 2022, has been adjusted for the Accelleron spin-off (Source: FactSet).
*
Dividend proposal subject to shareholder approval at the 2023 AGM
Acquisitions and divestments, last twelve months
ABB INTERIM REPORT
I
Q4 2022
13
For additional information please contact:
Media Relations
Phone: +41 43 317 71 11
Email: media.relations@c h.abb.com
Investor Relations
Phone: +41 43 317 71 11
Email: investor.relations@ch.abb.com
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
Financial calendar
2023
March 23 Annual General Meeting
April 25
Q1 2023 results
July 20 Q2 2023 results
October 18 Q3 2023 results
November 30 Capital Markets Day in Frosinone, Italy
This press release includes forward-looking information and
statements as well as other statements concerning the
outlook for our business, including those in the sections of
this release titled “CEO summary,” “Outlook,” “Earnings,”
“Balance sheet & cash flow,” “Robotics and Discrete
Automation” and “Significant events”. These statements are
based on current expectations, estimates and projections
about the factors that may affect our future performance,
including global economic conditions, the economic
conditions of the regions and industries that are major
markets for ABB. These expectations, estimates and
projections are generally identifiable by statements
containing words such as “anticipates,” “expects,”
“estimates,” “plans,” “targets,” “likely” or similar expressions.
However, there are many risks and uncertainties, many of
which are beyond our control, that could cause our actual
results to differ materially from the forward -looking
information and statements made in this press release and
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 Q4 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.
Q4 results presentation on February 2, 2023
Important notice about forward-looking information
ABB
efficient future. The company’s solutions connect engineering know -how and software to optimize how
things are manufactured, moved, powered and operated. Building on more than 130 years of excellence,
ABB’s ~105,000 employees are committed to driving innovations that accelerate industrial transformation.
1 Q4 2022 FINANCIAL INFORMATION
February 2, 2023
Q4 2022
Financial information
2 Q4 2022 FINANCIAL INFORMATION
—
Financial Information
Contents
03
─ 07 Key Figures
08 ─
34 Consolidated Financial Information (unaudited)
35 ─
50 Supplemental Reconciliations and Definitions
3 Q4 2022 FINANCIAL INFORMATION
—
Key Figures
CHANGE
($ in millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Comparable
(1)
Orders
7,620
8,257
-8%
2%
Order backlog (end December)
19,867
16,607
20%
29%
Revenues
7,824
7,567
3%
16%
Gross Profit
2,658
2,397
11%
as % of revenues
34.0%
31.7%
+2.3 pts
Income from operations
1,185
2,975
-60%
Operational EBITA
(1)
1,146
988
16%
28%
(2)
as % of operational revenues
(1)
14.8%
13.1%
+1.7 pts
Income from continuing operations, net of tax
1,168
2,703
-57%
Net income attributable to ABB
1,132
2,640
-57%
Basic earnings per share ($)
0.61
1.34
-55%
(3)
Cash flow from operating activities
(4)
687
1,020
-33%
Cash flow from operating activities in continuing operations
720
1,033
-30%
CHANGE
($ in millions, unless otherwise indicated)
FY 2022
FY 2021
US$
Comparable
(1)
Orders
33,988
31,868
7%
16%
Revenues
29,446
28,945
2%
12%
Gross Profit
9,710
9,467
3%
as % of revenues
33.0%
32.7%
+0.3 pts
Income from operations
3,337
5,718
-42%
Operational EBITA
(1)
4,510
4,122
9%
18%
(2)
as % of operational revenues
(1)
15.3%
14.2%
+1.1 pts
Income from continuing operations, net of tax
2,637
4,730
-44%
Net income attributable to ABB
2,475
4,546
-46%
Basic earnings per share ($)
1.30
2.27
-43%
(3)
Cash flow from operating activities
(4)
1,287
3,330
-61%
Cash flow from operating activities in continuing operations
1,334
3,338
-60%
(1) For a reconciliation of non-GAAP measures see “
” on page 35.
(2) Constant currency (not adjusted for portfolio changes).
(3) EPS growth rates are computed using unrounded amounts.
(4) Cash flow from operating activities includes both continuing and discontinued operations.
4 Q4 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
Q4 2022
Q4 2021
US$
Local
Comparable
Orders
ABB Group
7,620
8,257
-8%
0%
2%
Electrification
3,565
3,638
-2%
6%
6%
Motion
1,649
1,843
-11%
-3%
0%
Process Automation
1,746
1,898
-8%
0%
11%
Robotics & Discrete Automation
798
1,100
-27%
-19%
-19%
Corporate and Other
(incl. intersegment eliminations)
(138)
(222)
Order backlog (end December)
ABB Group
19,867
16,607
20%
26%
29%
Electrification
6,933
5,458
27%
33%
33%
Motion
4,726
3,749
26%
33%
34%
Process Automation
6,229
6,079
2%
8%
16%
Robotics & Discrete Automation
2,679
1,919
40%
49%
48%
Corporate and Other
(incl. intersegment eliminations)
(700)
(598)
Revenues
ABB Group
7,824
7,567
3%
13%
16%
Electrification
3,663
3,445
6%
16%
16%
Motion
1,845
1,735
6%
17%
20%
Process Automation
1,551
1,805
-14%
-6%
6%
Robotics & Discrete Automation
891
799
12%
23%
23%
Corporate and Other
(incl. intersegment eliminations)
(126)
(217)
Income from operations
ABB Group
1,185
2,975
Electrification
557
418
Motion
316
2,464
Process Automation
183
193
Robotics & Discrete Automation
101
45
Corporate and Other
(incl. intersegment eliminations)
28
(145)
Income from operations %
ABB Group
15.1%
39.3%
Electrification
15.2%
12.1%
Motion
17.1%
142.0%
Process Automation
11.8%
10.7%
Robotics & Discrete Automation
11.3%
5.6%
Operational EBITA
ABB Group
1,146
988
16%
28%
Electrification
572
507
13%
26%
Motion
318
278
14%
26%
Process Automation
203
247
-18%
-8%
Robotics & Discrete Automation
125
64
95%
117%
Corporate and Other
(incl. intersegment eliminations)
(72)
(108)
Operational EBITA %
ABB Group
14.8%
13.1%
Electrification
15.7%
14.8%
Motion
17.4%
16.1%
Process Automation
13.2%
13.7%
Robotics & Discrete Automation
14.0%
8.1%
Cash flow from operating activities
ABB Group
687
1,020
Electrification
804
715
Motion
346
416
Process Automation
205
370
Robotics & Discrete Automation
105
129
Corporate and Other
(incl. intersegment eliminations)
(740)
(597)
Discontinued operations
(33)
(13)
5 Q4 2022 FINANCIAL INFORMATION
CHANGE
($ in millions, unless otherwise indicated)
FY 2022
FY 2021
US$
Local
Comparable
Orders
ABB Group
33,988
31,868
7%
13%
16%
Electrification
15,901
14,381
11%
17%
17%
Motion
7,896
7,616
4%
11%
20%
Process Automation
6,825
6,779
1%
8%
11%
Robotics & Discrete Automation
4,116
3,844
7%
16%
15%
Corporate and Other
(incl. intersegment eliminations)
(750)
(752)
Order backlog (end December)
ABB Group
19,867
16,607
20%
26%
29%
Electrification
6,933
5,458
27%
33%
33%
Motion
4,726
3,749
26%
33%
34%
Process Automation
6,229
6,079
2%
8%
16%
Robotics & Discrete Automation
2,679
1,919
40%
49%
48%
Corporate and Other
(incl. intersegment eliminations)
(700)
(598)
Revenues
ABB Group
29,446
28,945
2%
9%
12%
Electrification
14,105
13,187
7%
14%
14%
Motion
6,745
6,925
-3%
5%
14%
Process Automation
6,044
6,259
-3%
4%
7%
Robotics & Discrete Automation
3,181
3,297
-4%
5%
4%
Corporate and Other
(incl. intersegment eliminations)
(629)
(723)
Income from operations
ABB Group
3,337
5,718
Electrification
2,159
1,841
Motion
1,092
3,276
Process Automation
663
713
Robotics & Discrete Automation
247
269
Corporate and Other
(incl. intersegment eliminations)
(824)
(381)
Income from operations %
ABB Group
11.3%
19.8%
Electrification
15.3%
14.0%
Motion
16.2%
47.3%
Process Automation
11.0%
11.4%
Robotics & Discrete Automation
7.8%
8.2%
Operational EBITA
ABB Group
4,510
4,122
9%
18%
Electrification
2,328
2,121
10%
20%
Motion
1,163
1,183
-2%
6%
Process Automation
848
801
6%
15%
Robotics & Discrete Automation
340
355
-4%
8%
Corporate and Other
(incl. intersegment eliminations)
(169)
(338)
Operational EBITA %
ABB Group
15.3%
14.2%
Electrification
16.5%
16.1%
Motion
17.3%
17.1%
Process Automation
14.0%
12.8%
Robotics & Discrete Automation
10.7%
10.8%
Cash flow from operating activities
ABB Group
1,287
3,330
Electrification
1,887
2,181
Motion
853
1,362
Process Automation
675
1,062
Robotics & Discrete Automation
214
374
Corporate and Other
(incl. intersegment eliminations)
(2,295)
(1,641)
Discontinued operations
(47)
(8)
6 Q4 2022 FINANCIAL INFORMATION
Operational EBITA
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Revenues
7,824
7,567
3,663
3,445
1,845
1,735
1,551
1,805
891
799
Foreign exchange/commodity timing
differences in total revenues
(62)
(44)
(29)
(22)
(22)
(10)
(12)
(5)
1
(5)
Operational revenues
7,762
7,523
3,634
3,423
1,823
1,725
1,539
1,800
892
794
Income from operations
1,185
2,975
557
418
316
2,464
183
193
101
45
Acquisition-related amortization
55
59
27
29
8
7
1
2
19
21
Restructuring, related and
implementation costs
(1)
47
79
10
34
5
4
23
33
2
1
Changes in obligations related to
divested businesses
(71)
(7)
1
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
10
–
9
–
–
–
–
–
1
–
Gains and losses from sale of businesses
3
(2,184)
–
9
3
(2,195)
–
–
–
–
Acquisition- and divestment-related
expenses and integration costs
24
58
8
34
3
7
12
18
2
–
Other income/expense relating to the
Power Grids joint venture
(10)
–
–
–
–
–
–
–
–
–
Certain other non-operational items
(28)
40
–
8
–
–
–
(2)
(9)
–
Foreign exchange/commodity timing
differences in income from operations
(69)
(32)
(40)
(25)
(17)
(9)
(16)
3
9
(3)
Operational EBITA
1,146
988
572
507
318
278
203
247
125
64
Operational EBITA margin (%)
14.8%
13.1%
15.7%
14.8%
17.4%
16.1%
13.2%
13.7%
14.0%
8.1%
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions, unless otherwise indicated)
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
Revenues
29,446
28,945
14,105
13,187
6,745
6,925
6,044
6,259
3,181
3,297
Foreign exchange/commodity timing
differences in total revenues
28
(1)
(14)
1
(14)
2
33
5
6
(7)
Operational revenues
29,474
28,944
14,091
13,188
6,731
6,927
6,077
6,264
3,187
3,290
Income from operations
3,337
5,718
2,159
1,841
1,092
3,276
663
713
247
269
Acquisition-related amortization
229
250
116
117
31
43
4
5
78
83
Restructuring, related and
implementation costs
(1)
347
160
28
66
16
22
29
48
11
7
Changes in obligations related to
divested businesses
(88)
9
1
–
–
–
–
–
–
–
Changes in pre-acquisition estimates
10
(6)
11
(6)
–
–
–
–
(1)
–
Gains and losses from sale of businesses
7
(2,193)
(1)
13
8
(2,196)
–
(13)
–
–
Acquisition- and divestment-related
expenses and integration costs
195
132
40
70
15
26
134
35
6
1
Other income/expense relating to the
Power Grids joint venture
57
34
–
–
–
–
–
–
–
–
Certain other non-operational items
385
(18)
(24)
(5)
–
1
–
1
(7)
–
Foreign exchange/commodity timing
differences in income from operations
31
36
(2)
25
1
11
18
12
6
(5)
Operational EBITA
4,510
4,122
2,328
2,121
1,163
1,183
848
801
340
355
Operational EBITA margin (%)
15.3%
14.2%
16.5%
16.1%
17.3%
17.1%
14.0%
12.8%
10.7%
10.8%
(1) Includes impairment of certain assets.
7 Q4 2022 FINANCIAL INFORMATION
Depreciation and Amortization
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Q4 22
Q4 21
Depreciation
130
141
67
74
27
29
13
13
16
16
Amortization
69
75
34
36
10
9
3
2
19
21
including total acquisition-related amortization of:
55
59
27
29
8
7
1
2
19
21
Process
Robotics & Discrete
ABB
Electrification
Motion
Automation
Automation
($ in millions)
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
FY 22
FY 21
Depreciation
531
575
265
276
105
123
64
72
62
59
Amortization
283
318
141
149
36
49
11
11
79
85
including total acquisition-related amortization of:
229
250
116
117
31
43
4
5
78
83
Orders received and revenues by region
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
Q4 22
Q4 21
US$
Local
parable
Q4 22
Q4 21
US$
Local
parable
Europe
2,604
3,138
-17%
-5%
-5%
2,766
2,756
0%
15%
16%
The Americas
2,898
2,640
10%
11%
15%
2,554
2,198
16%
17%
22%
of which United States
2,167
1,995
9%
9%
13%
1,898
1,579
20%
20%
26%
Asia, Middle East and Africa
2,118
2,479
-15%
-5%
-2%
2,504
2,613
-4%
7%
10%
of which China
976
1,255
-22%
-13%
-12%
1,133
1,234
-8%
2%
5%
ABB Group
7,620
8,257
-8%
0%
2%
7,824
7,567
3%
13%
16%
($ in millions, unless otherwise indicated)
Orders received
CHANGE
Revenues
CHANGE
Com-
Com-
FY 22
FY 21
US$
Local
parable
FY 22
FY 21
US$
Local
parable
Europe
11,778
11,857
-1%
13%
13%
10,286
10,529
-2%
12%
12%
The Americas
11,825
9,940
19%
20%
28%
9,572
8,686
10%
11%
19%
of which United States
8,920
7,453
20%
20%
29%
7,021
6,397
10%
10%
19%
Asia, Middle East and Africa
10,385
10,071
3%
9%
10%
9,588
9,730
-1%
5%
6%
of which China
5,087
5,036
1%
5%
5%
4,696
4,932
-5%
0%
0%
ABB Group
33,988
31,868
7%
13%
16%
29,446
28,945
2%
9%
12%
8 Q4 2022 FINANCIAL INFORMATION
—
Consolidated Financial Information
ABB Ltd Consolidated Income Statements (unaudited)
Year ended
Three months ended
($ in millions, except per share data in $)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Sales of products
24,471
23,745
6,525
6,101
Sales of services and other
4,975
5,200
1,299
1,466
Total revenues
29,446
28,945
7,824
7,567
Cost of sales of products
(16,804)
(16,364)
(4,365)
(4,275)
Cost of services and other
(2,932)
(3,114)
(801)
(895)
Total cost of sales
(19,736)
(19,478)
(5,166)
(5,170)
Gross profit
9,710
9,467
2,658
2,397
Selling, general and administrative expenses
(5,132)
(5,162)
(1,299)
(1,354)
Non-order related research and development expenses
(1,166)
(1,219)
(322)
(322)
Other income (expense), net
(75)
2,632
148
2,254
Income from operations
3,337
5,718
1,185
2,975
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Non-operational pension (cost) credit
115
166
13
36
Income from continuing operations before taxes
3,394
5,787
1,197
2,985
Income tax expense
(757)
(1,057)
(29)
(282)
Income from continuing operations, net of tax
2,637
4,730
1,168
2,703
Loss from discontinued operations, net of tax
(43)
(80)
(7)
(35)
Net income
2,594
4,650
1,161
2,668
Net income attributable to noncontrolling interests and
redeemable noncontrolling interests
(119)
(104)
(29)
(28)
Net income attributable to ABB
2,475
4,546
1,132
2,640
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,517
4,625
1,138
2,674
Loss from discontinued operations, net of tax
(42)
(79)
(6)
(34)
Net income
2,475
4,546
1,132
2,640
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.33
2.31
0.61
1.35
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.27
0.61
1.34
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.32
2.29
0.60
1.34
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.25
0.60
1.33
Weighted-average number of shares outstanding (in millions) used to compute:
Basic earnings per share attributable to ABB shareholders
1,899
2,001
1,870
1,974
Diluted earnings per share attributable to ABB shareholders
1,910
2,019
1,881
1,991
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
9 Q4 2022 FINANCIAL INFORMATION
—
ABB Ltd Condensed Consolidated Statements of Comprehensive
Income (unaudited)
Year ended
Three months ended
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Total comprehensive income, net of tax
2,189
4,567
1,414
2,845
Total comprehensive income attributable to noncontrolling interests and
redeemable noncontrolling interests, net of tax
(87)
(108)
(29)
(27)
Total comprehensive income attributable to ABB shareholders, net of tax
2,102
4,459
1,385
2,818
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
10 Q4 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Balance Sheets (unaudited)
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Cash and equivalents
4,156
4,159
Restricted cash
18
30
Marketable securities and short-term investments
725
1,170
Receivables, net
6,858
6,551
Contract assets
954
990
Inventories, net
6,028
4,880
Prepaid expenses
230
206
Other current assets
505
573
Current assets held for sale and in discontinued operations
96
136
Total current assets
19,570
18,695
Restricted cash, non-current
–
300
Property, plant and equipment, net
3,911
4,045
Operating lease right-of-use assets
841
895
Investments in equity-accounted companies
130
1,670
Prepaid pension and other employee benefits
916
892
Intangible assets, net
1,406
1,561
Goodwill
10,511
10,482
Deferred taxes
1,396
1,177
Other non-current assets
467
543
Total assets
39,148
40,260
Accounts payable, trade
4,904
4,921
Contract liabilities
2,216
1,894
Short-term debt and current maturities of long-term debt
2,535
1,384
Current operating leases
220
230
Provisions for warranties
1,028
1,005
Other provisions
1,171
1,386
Other current liabilities
4,323
4,367
Current liabilities held for sale and in discontinued operations
132
381
Total current liabilities
16,529
15,568
Long-term debt
5,143
4,177
Non-current operating leases
651
689
Pension and other employee benefits
719
1,025
Deferred taxes
729
685
Other non-current liabilities
2,085
2,116
Non-current liabilities held for sale and in discontinued operations
20
43
Total liabilities
25,876
24,303
Commitments and contingencies
Redeemable noncontrolling interest
85
–
Stockholders’ equity:
Common stock, CHF 0.12 par value
(1,965 million and 2,053 million shares issued at December 31, 2022 and 2021, respectively)
171
178
Additional paid-in capital
141
22
Retained earnings
20,082
22,477
Accumulated other comprehensive loss
(4,556)
(4,088)
Treasury stock, at cost
(100 million and 95 million shares at December 31, 2022 and 2021, respectively)
(3,061)
(3,010)
Total ABB stockholders’ equity
12,777
15,579
Noncontrolling interests
410
378
Total stockholders’ equity
13,187
15,957
Total liabilities and stockholders’ equity
39,148
40,260
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
11 Q4 2022 FINANCIAL INFORMATION
—
ABB Ltd Consolidated Statements of Cash Flows (unaudited)
Year ended
Three months ended
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Operating activities:
Net income
2,594
4,650
1,161
2,668
Loss from discontinued operations, net of tax
43
80
7
35
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
814
893
199
216
Changes in fair values of investments
(33)
(123)
6
(9)
Pension and other employee benefits
(125)
(216)
(18)
(57)
Deferred taxes
(348)
(289)
(165)
(371)
Loss from equity-accounted companies
102
100
2
17
Net loss (gain) from derivatives and foreign exchange
(23)
49
(67)
(50)
Net loss (gain) from sale of property, plant and equipment
(84)
(38)
(20)
(16)
Net loss (gain) from sale of businesses
7
(2,193)
3
(2,184)
Other
70
117
9
47
Changes in operating assets and liabilities:
Trade receivables, net
(831)
(142)
(174)
40
Contract assets and liabilities
416
29
63
102
Inventories, net
(1,599)
(771)
68
(79)
Accounts payable, trade
395
659
5
298
Accrued liabilities
136
454
84
118
Provisions, net
(70)
(48)
(382)
31
Income taxes payable and receivable
(94)
117
(113)
209
Other assets and liabilities, net
(36)
10
52
18
Net cash provided by operating activities – continuing operations
1,334
3,338
720
1,033
Net cash used in operating activities – discontinued operations
(47)
(8)
(33)
(13)
Net cash provided by operating activities
1,287
3,330
687
1,020
Investing activities:
Purchases of investments
(321)
(1,528)
(50)
(1,114)
Purchases of property, plant and equipment and intangible assets
(762)
(820)
(259)
(361)
Acquisition of businesses (net of cash acquired)
and increases in cost- and equity-accounted companies
(288)
(241)
(62)
(14)
Proceeds from sales of investments
697
2,272
43
633
Proceeds from maturity of investments
73
81
73
1
Proceeds from sales of property, plant and equipment
127
93
42
57
Proceeds from sales of businesses (net of transaction costs
and cash disposed) and cost- and equity-accounted companies
1,541
2,958
1,549
2,865
Net cash from settlement of foreign currency derivatives
(166)
(121)
(12)
(46)
Changes in loans receivable, net
320
(19)
309
6
Other investing activities
(14)
(4)
(4)
(4)
Net cash provided by investing activities – continuing operations
1,207
2,671
1,629
2,023
Net cash used in investing activities – discontinued operations
(226)
(364)
(135)
(281)
Net cash provided by investing activities
981
2,307
1,494
1,742
Financing activities:
Net changes in debt with original maturities of 90 days or less
1,366
(83)
(109)
(296)
Increase in debt
3,849
1,400
295
22
Repayment of debt
(2,703)
(1,538)
(678)
(775)
Delivery of shares
394
826
5
40
Purchase of treasury stock
(3,553)
(3,708)
(302)
(1,267)
Dividends paid
(1,698)
(1,726)
–
–
Cash associated with the spin-off of the Turbocharging Division
(172)
–
(172)
–
Dividends paid to noncontrolling shareholders
(99)
(98)
(16)
(7)
Proceeds from issuance of subsidiary shares
216
–
216
–
Other financing activities
6
(41)
64
(24)
Net cash used in financing activities – continuing operations
(2,394)
(4,968)
(697)
(2,307)
Net cash provided by financing activities – discontinued operations
–
–
–
–
Net cash used in financing activities
(2,394)
(4,968)
(697)
(2,307)
Effects of exchange rate changes on cash and equivalents and restricted cash
(189)
(81)
2
(6)
Net change in cash and equivalents and restricted cash
(315)
588
1,486
449
Cash and equivalents and restricted cash, beginning of period
4,489
3,901
2,688
4,040
Cash and equivalents and restricted cash, end of period
4,174
4,489
4,174
4,489
Supplementary disclosure of cash flow information:
Interest paid
90
132
43
57
Income taxes paid
1,188
1,292
281
499
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
12 Q4 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
Net income
4,546
4,546
104
4,650
Foreign currency translation
adjustments, net of tax of $0
(534)
(534)
4
(530)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(4)
(15)
(15)
(15)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $22
467
467
467
Change in derivative instruments
and hedges, net of tax of $(1)
(5)
(5)
(5)
Changes in noncontrolling interests
(37)
(20)
(57)
55
(2)
Dividends to
noncontrolling shareholders
–
(98)
(98)
Dividends to shareholders
(1,730)
(1,730)
(1,730)
Cancellation of treasury shares
(10)
(17)
(3,130)
3,157
–
–
Share-based payment arrangements
60
60
60
Purchase of treasury stock
(3,682)
(3,682)
(3,682)
Delivery of shares
(84)
(136)
1,046
826
826
Other
16
16
16
Balance at December 31, 2021
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Balance at January 1, 2022
178
22
22,477
(4,088)
(3,010)
15,579
378
15,957
Net income
(1)
2,475
2,475
124
2,599
Foreign currency translation
adjustments, net of tax of $0
(608)
(608)
(31)
(639)
Effect of change in fair value of
available-for-sale securities,
net of tax of $(5)
(21)
(21)
(21)
Unrecognized income (expense)
related to pensions and other
postretirement plans,
net of tax of $86
256
256
(1)
255
Change in derivative instruments
and hedges, net of tax of $2
–
–
–
Issuance of subsidiary shares
120
120
86
206
Other changes in
noncontrolling interests
10
10
(34)
(24)
Dividends to
noncontrolling shareholders
–
(100)
(100)
Dividends to shareholders
(1,700)
(1,700)
(1,700)
Spin-off of the Turbocharging Division
(177)
(95)
(272)
(12)
(284)
Cancellation of treasury shares
(8)
(4)
(2,864)
2,876
–
–
Share-based payment arrangements
42
42
42
Purchase of treasury stock
(3,502)
(3,502)
(3,502)
Delivery of shares
(51)
(130)
575
394
394
Other
2
2
2
Balance at December 31, 2022
171
141
20,082
(4,556)
(3,061)
12,777
410
13,187
(1)
Amounts attributable to noncontrolling interests for the year ended December 31, 2022, exclude net losses of $5 million related to redeemable noncontrolling interests, which are
reported in the mezzanine equity section on the Consolidated Balance Sheets. See Note 4 for details.
Due to rounding, numbers presented may not add to the totals provided.
See Notes to the Consolidated Financial Information
13 Q4 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 technology leader in electrification and automation, enabling a more sustainable and
resource-efficient future. The Company’s solutions connect engineering know-how and software to optimize how things are manufactured, moved, powered and
operated.
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:
●
estimates to determine valuation allowances for deferred tax assets and amounts recorded for unrecognized tax benefits,
●
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,
●
estimates used to record expected costs for employee severance in connection with restructuring programs,
●
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,
●
assumptions and projections, principally related to future material, labor and project-related overhead costs, used in determining the percentage-of-
completion on projects where revenue is recognized over time, as well as the amount of variable consideration the Company expects to be entitled to,
●
assumptions used in the calculation of pension and postretirement benefits and the fair value of pension plan assets,
●
assumptions used in determining inventory obsolescence and net realizable value,
●
growth rates, discount rates and other assumptions used to determine impairment of long-lived assets and in testing goodwill for impairment,
●
estimates and assumptions used in determining the fair values of assets and liabilities assumed in business combinations, and
●
estimates and assumptions used in determining the initial fair value of retained noncontrolling interests and certain obligations in connection with
divestments.
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 Q4 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 prospectively.
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 subsequent updates issued during
January 2021 and December 2022, can be adopted and applied no later than December 31, 2024, with early adoption permitted. The Company expects to adopt
this update during the second half of 2023 and does not expect this update to have a significant impact on its consolidated financial statements.
Disclosure about supplier finance program obligations
In September 2022, an accounting standard update was issued which requires entities to disclose information related to supplier finance programs. Under the
update, the Company is required to annually disclose (i) the key terms of the program, (ii) the amount of the supplier finance obligations outstanding and where
those obligations are presented in the balance sheet at the reporting date, and (iii) a rollforward of the supplier finance obligation program within the reporting
period. This update is effective for the Company retrospectively for all in-scope transactions for annual periods beginning January 1, 2023, with the exception of
the rollforward disclosures, which are effective prospectively for annual periods beginning January 1, 2024, with early adoption permitted. The Company does not
expect this update to have a significant impact on its consolidated financial statements. The total outstanding supplier finance obligation included in “Accounts
payable, trade” in the Consolidated Balance Sheet at December 31, 2022, amounted to $477 million.
─
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 was deemed to have
been both divested and reacquired at its fair value on July 1, 2020. The Company also obtained a put option, exercisable with three-months’ notice commencing in
April 2023. The combined fair value of the retained investment and the related put option amounted to $1,779 million and was recorded as both an equity-method
investment and as part of the proceeds for the sale of the entire Power Grids business (see Note 4).
In connection with 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. In October 2021, the Company and Hitachi concluded an agreement to settle the various amounts owing by the Company. The
net difference between the agreed amounts and the amounts initially estimated by the Company was recorded in 2021 in discontinued operations as an
adjustment to “Change to net gain recognized on sale of the Power Grids business” in the table below. During the year and three months ended December 31,
2022, total cash payments of $102 million (excluding payments related to the guarantees, see Note 10), and $11 million, respectively, were made in connection
with these liabilities. During the year and three months ended December 31, 2021, total cash payments (including the amounts paid under the settlement
agreement) of $364 million and $281 million, respectively, were made in connection with these liabilities. At December 31, 2022, the remaining amount recorded
was $53 million.
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
year and three months ended December 31, 2022, the Company has recognized within its continuing operations, general and administrative expenses incurred to
perform the TSAs, offset by $162 million and $47 million, respectively, in TSA-related income for such services that is reported in Other income (expense), net. In
the year and three months ended December 31, 2021, Other income (expense) included $173 million and $46 million, respectively, of TSA-related income for such
services.
Discontinued operations
As a result of the sale of the Power Grids business, substantially all Power Grids-related assets and liabilities have been sold. As this divestment represented a
strategic shift that would have a major effect on the Company’s operations and financial results, the results of operations for this business have been presented as
discontinued operations and the assets and liabilities are presented as held for sale and in discontinued operations for all periods presented. Certain of the
business contracts in the Power Grids business continue to be executed by subsidiaries of the Company for the benefit/risk of Hitachi Energy. Assets and liabilities
relating to, as well as the net financial results of, these contracts will continue to be included in discontinued operations until they have been completed or
otherwise transferred to Hitachi Energy.
15 Q4 2022 FINANCIAL INFORMATION
Amounts recorded in discontinued operations were as follows:
Year ended
Three months ended
($ in millions)
Dec. 31, 2022
Dec. 31, 2021
Dec. 31, 2022
Dec. 31, 2021
Expenses
(38)
(18)
(13)
(5)
Change to net gain recognized on sale of the Power Grids business
(10)
(65)
1
(33)
Loss from operations
(48)
(83)
(12)
(38)
Net interest income and other finance expense
–
2
–
2
Loss from discontinued operations before taxes
(48)
(81)
(12)
(36)
Income tax
5
1
5
1
Loss from discontinued operations, net of tax
(43)
(80)
(7)
(35)
Of the total Loss from discontinued operations before taxes in the table above, $(47) million and $(80) million in the year ended December 31, 2022 and 2021,
respectively, and $(11 ) million and $(35) million in the three months ended December 31, 2022 and 2021, respectively, are attributable to the Company, while the
remainder is attributable to noncontrolling interests.
In addition, the Company also has retained obligations (primarily for environmental and taxes) related to other businesses disposed or otherwise exited that
qualified as discontinued operations. Changes to these retained obligations are also included in Loss from discontinued operations, net of tax, above.
The major components of assets and liabilities held for sale and in discontinued operations in the Company’s Consolidated Balance Sheets are summarized as
follows:
($ in millions)
Dec. 31, 2022
(1)
Dec. 31, 2021
(1)
Receivables, net
92
131
Other current assets
4
5
Current assets held for sale and in discontinued operations
96
136
Accounts payable, trade
44
71
Other liabilities
88
310
Current liabilities held for sale and in discontinued operations
132
381
Other non-current liabilities
20
43
Non-current liabilities held for sale and in discontinued operations
20
43
(1) At December 31, 2022 and 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:
Year ended December 31,
Three months ended December 31,
($ in millions, except number of acquired businesses)
2022
2021
2022
2021
Purchase price for acquisitions (net of cash acquired)
(1)
195
212
46
(3)
Aggregate excess of purchase price
over fair value of net assets acquired
(2)
229
161
24
2
Number of acquired businesses
5
2
2
-
(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 year
ended December 31, 2022, relate primarily to the acquisition of InCharge Energy, Inc. (In-Charge) and in the year ended December 31, 2021, relate primarily to
the acquisition of ASTI Mobile Robotics Group (ASTI).
Acquisitions of controlling interests have been accounted for under the acquisition method and have been included in the Company’s consolidated financial
statements since the date of acquisition.
On January 26, 2022, the Company increased its ownership in In-Charge to a 60 percent controlling interest through a stock purchase agreement. In-Charge is
headquartered in Santa Monica, USA, and is a provider of turn-key commercial electric vehicle charging hardware and software solutions. The resulting cash
outflows for the Company amounted to $134 million (net of cash acquired of $4 million). The acquisition expands the market presence of the E-mobility Division of
its Electrification operating segment, particularly in the North American market. In connection with the acquisition, the Company’s pre-existing 13.2 percent
ownership of In-Charge was revalued to fair value and a gain of $32 million was recorded in “Other income (expense), net” in the year ended December 31, 2022.
The Company entered into an agreement with the remaining noncontrolling shareholders allowing either party to put or call the remaining 40 percent of the shares
until 2027. The amount for which either party can exercise their option is dependent on a formula based on revenues and thus, the amount is subject to change. As
a result of this agreement, the noncontrolling interest is classified as Redeemable noncontrolling interest (i.e. mezzanine equity) in the Consolidated Balance
Sheets and was initially recognized at fair value.
On August 2, 2021, the Company acquired the shares of ASTI. ASTI is headquartered in Burgos, Spain, and is a global autonomous mobile robot (AMR)
manufacturer. The resulting cash outflows for the Company amounted to $186 million (net of cash acquired). The acquisition expands the Company’s robotics and
automation offering in its Robotics & Discrete Automation operating segment.
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 Q4 2022 FINANCIAL INFORMATION
Business divestments and spin-offs
On September 7, 2022, the shareholders approved the spin-off of the Company’s Turbocharging Division into an independent, publicly traded company, Accelleron
Industries AG (Accelleron), which was completed through the distribution of common stock of Accelleron to the stockholders of ABB on October 3, 2022. As a
result of the spin-off of this Division, the Company distributed net assets of $272 million, net of amounts attributable to noncontrolling interests of $12 million, which
was reflected as a reduction in Retained earnings. In addition, total accumulated comprehensive income of $95 million, including the cumulative translation
adjustment, was reclassified to Retained earnings. Cash and cash equivalents distributed with Accelleron was $172 million.
The results of operations of the Turbocharging Division, are included in the continuing operations of the Process Automation operating segment for all periods
presented through to the spin-off date. In the year and three months ended December 31, 2022, “Income continuing operations before taxes”, included income of
$134 million and $1 million, respectively, from this Division. In the year and three months ended December 31, 2021, “Income continuing operations before taxes”,
included income of $186 million and $53 million, respectively, from this Division. In anticipation of the spin-off, the Company granted to a subsidiary of Accelleron
access to funds in the form of a short-term intercompany loan. At the spin-off date, this loan, having a principal amount of 300 million Swiss francs ($306 million at
the date of spin-off), was due to ABB and subsequently collected in October 2022.
In the year and three months ended December 31, 2021, the Company received proceeds (net of transactions costs and cash disposed) of $2,958 million and
$2,865 million, respectively, relating to divestments of consolidated businesses and recorded gains of $2,193 million and $2,184 million, respectively in “Other
income (expense), net” on the sales of such businesses. These are primarily due to the divestment of the Company’s Mechanical Power Transmission Division
(Dodge) to RBC Bearings Inc. Certain amounts included in the net gain for the sale of the Dodge business are estimated or otherwise subject to change in value
and, as a result, the Company may record additional adjustments to the gain in future periods which are not expected to have a material impact on the
consolidated financial statements. In the year and three months ended December 31, 2021, “Income from continuing operations before taxes”, included net income
of $115 million and $9 million, respectively, from the Dodge business which, prior to its sale was part of the Company’s Motion operating segment.
Investments in equity-accounted companies
In connection with the divestment of its Power Grids business to Hitachi in 2020 (see Note 3), the Company retained a 19.9 percent interest in the business. For
accounting purposes the 19.9 percent interest was deemed to have been both divested and reacquired, with a fair value at the transaction date of $1,661 million.
The fair value was based on a discounted cash flow model considering the expected results of the future business operations of Hitachi Energy and using relevant
market inputs including a risk-adjusted weighted-average cost of capital.
The Company also 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. This option was
initially valued at $118 million using a standard option pricing model with inputs considering the nature of the investment and the expected period until option
exercise. As this option is not separable from the investment the value has been combined with the value of the underlying investment and is accounted for
together. Hitachi also received a call option requiring the Company to sell the remaining 19.9 percent interest in Hitachi Energy at any time at a price consistent
with what was paid by Hitachi to acquire the initial 80.1 percent or at fair value, if higher.
In September 2022, the Company and Hitachi agreed terms to sell the Company’s remaining investment in Hitachi Energy to Hitachi and simultaneously settle
certain outstanding contractual obligations relating to the initial sale of the Power Grids business, including certain indemnification guarantees (see Note 10). The
sale of the remaining investment was completed in December 2022, resulting in net cash proceeds of $1,552 million and a gain of $43 million which was recorded
in “Other income (expense), net”.
In July 2020, the Company concluded that based on its continuing involvement with the Power Grids business, including the membership in its governing board of
directors, it had significant influence over Hitachi Energy. As a result, the investment (including the value of the option) was accounted for using the equity method
through the date of its sale in December 2022.
The carrying value of the Company’s investments in equity-accounted companies and respective percentage of ownership is as follows:
Ownership as of
Carrying value at
($ in millions, except ownership share in %)
December 31, 2021
December 31, 2022
December 31, 2021
Hitachi Energy Ltd
19.9%
–
1,609
Others
130
61
Total
130
1,670
In the year and three months ended December 31, 2022 and 2021, the Company recorded its share of the earnings of investees accounted for under the equity
method of accounting in Other income (expense), net, as follows:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Income (loss) from equity-accounted companies, net of taxes
(22)
38
12
27
Basis difference amortization (net of deferred income tax benefit)
(80)
(138)
(14)
(44)
Loss from equity-accounted companies
(102)
(100)
(2)
(17)
Subsequent event
On January 19, 2023, the Company reached an agreement to sell its Power Conversion Division to AcBel Polytech Inc. for $505 million in cash. The transaction is
subject to regulatory approvals and is expected to be completed in the second half of 2023.
17 Q4 2022 FINANCIAL INFORMATION
─
Note 5
Cash and equivalents, marketable securities and short-term investments
Cash and equivalents, marketable securities and short-term investments consisted of the following:
December 31, 2022
Cash and
Marketable
Gross
Gross
equivalents
securities
unrealized
unrealized
and restricted
and short-term
($ in millions)
Cost basis
gains
losses
Fair value
cash
investments
Changes in fair value
recorded in net income
Cash
1,715
1,715
1,715
Time deposits
2,459
2,459
2,459
Equity securities
345
10
355
355
4,519
10
4,529
4,174
355
Changes in fair value recorded
in other comprehensive income
Debt securities available-for-sale:
U.S. government obligations
269
1
(15)
255
255
Other government obligations
58
58
58
Corporate
64
(7)
57
57
391
1
(22)
370
370
Total
4,910
11
(22)
4,899
4,174
725
Of which:
Restricted cash, current
18
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 Q4 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)
December 31, 2022
December 31, 2021
Foreign exchange contracts
13,509
11,276
Embedded foreign exchange derivatives
933
815
Cross-currency interest rate swaps
855
906
Interest rate contracts
2,830
3,541
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
December 31, 2022
December 31, 2021
Copper swaps
metric tonnes
29,281
36,017
Silver swaps
ounces
2,012,213
2,842,533
Aluminum swaps
metric tonnes
6,825
7,125
Equity derivatives
At December 31, 2022 and 2021, the Company held 8 million and 9 million cash-settled call options indexed to ABB Ltd shares (conversion ratio 5:1) with a total
fair value of $15 million and $29 million, respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange contracts to manage the foreign exchange risk of its operations, commodity swaps to
manage its commodity risks and cash-settled call options to hedge its WAR liabilities. The Company applies cash flow hedge accounting in only limited cases. In
these cases, the effective portion of the changes in their fair value is recorded in “Accumulated other comprehensive loss” and subsequently reclassified into
earnings in the same line item and in the same period as the underlying hedged transaction affects earnings. For the year and three months ended December 31,
2022 and 2021, there were no significant amounts recorded for cash flow hedge accounting activities.
Fair value hedges
To reduce its interest rate exposure arising primarily from its debt issuance activities, the Company uses interest rate swaps and cross-currency interest rate
swaps. Where such instruments are designated as fair value hedges, the changes in the fair value of these instruments, as well as the changes in the fair value of
the risk component of the underlying debt being hedged, are recorded as offsetting gains and losses in “Interest and other finance expense”.
19 Q4 2022 FINANCIAL INFORMATION
The effect of derivative instruments, designated and qualifying as fair value hedges, on the Consolidated Income Statements was as follows:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Gains (losses) recognized in Interest and other finance expense:
Interest rate contracts
Designated as fair value hedges
(91)
(55)
(8)
(15)
Hedged item
93
56
8
15
Cross-currency interest rate swaps
Designated as fair value hedges
(134)
(37)
(9)
(10)
Hedged item
135
34
16
9
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
Year ended December 31,
Three months ended December 31,
($ in millions)
Location
2022
2021
2022
2021
Foreign exchange contracts
Total revenues
(56)
3
145
52
Total cost of sales
21
(53)
(36)
(29)
SG&A expenses
(1)
27
11
(8)
5
Non-order related research
and development
–
(2)
(2)
–
Interest and other finance expense
(128)
(173)
11
(52)
Embedded foreign exchange
Total revenues
(3)
(7)
(15)
7
contracts
Total cost of sales
(11)
(2)
1
1
Commodity contracts
Total cost of sales
(47)
78
25
31
Other
Interest and other finance expense
4
–
–
–
Total
(193)
(145)
121
15
(1) SG&A expenses represent “Selling, general and administrative expenses”.
The fair values of derivatives included in the Consolidated Balance Sheets were as follows:
December 31, 2022
Derivative assets
Derivative liabilities
Current in
Non-current in
Current in
Non-current in
“Other current
“Other non-current
“Other current
“Other non-current
($ in millions)
assets”
assets”
liabilities”
liabilities”
Derivatives designated as hedging instruments:
Foreign exchange contracts
–
–
4
4
Interest rate contracts
–
–
5
57
Cross-currency interest rate swaps
–
–
–
288
Cash-settled call options
15
–
–
–
Total
15
–
9
349
Derivatives not designated as hedging instruments:
Foreign exchange contracts
140
21
80
5
Commodity contracts
13
–
12
–
Interest rate contracts
5
–
3
–
Embedded foreign exchange derivatives
11
6
17
13
Total
169
27
112
18
Total fair value
184
27
121
367
20 Q4 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 interest rate 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 December 31, 2022 and 2021, have been presented on a gross basis.
The Company’s netting agreements and other similar arrangements allow net settlements under certain conditions. At December 31, 2022 and 2021, information
related to these offsetting arrangements was as follows:
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
of recognized
eligible for set-off
collateral
collateral
Net asset
similar arrangement
assets
in case of default
received
received
exposure
Derivatives
194
(96)
–
–
98
Total
194
(96)
–
–
98
($ in millions)
December 31, 2022
Gross amount
Derivative liabilities
Cash
Non-cash
Type of agreement or
eligible for set-off
collateral
collateral
Net liability
similar arrangement
liabilities
in case of default
pledged
pledged
exposure
Derivatives
458
(96)
–
–
362
Total
458
(96)
–
–
362
($ 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 Q4 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 valuati on 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:
December 31, 2022
($ in millions)
Level 1
Level 2
Level 3
Total fair value
Assets
Securities in “Marketable securities and short-term investments”:
Equity securities
355
355
Debt securities—U.S. government obligations
255
255
Debt securities—Other government obligations
58
58
Debt securities—Corporate
57
57
Derivative assets—current in “Other current assets”
184
184
Derivative assets—non-current in “Other non-current assets”
27
27
Total
255
681
–
936
Liabilities
Derivative liabilities—current in “Other current liabilities”
121
121
Derivative liabilities—non-current in “Other non-current liabilities”
367
367
Total
–
488
–
488
22 Q4 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 for observable price changes.
The Company reassesses at each reporting period whether these investments continue to qualify for this treatment. Durin g the year ended December 31, 2022
and 2021, the Company recognized, in “Other income (expense), net”, net fair value gains of $52 million and $108 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 loss of $4 million and
net gain of $2 million were recognized in the three months ended December 31, 2022 and 2021, respectively. The fair values were determined using Level 2
inputs. The carrying values of these investments, carried at fair value on a non-recurring basis, at December 31, 2022 and 2021, totaled $106 million and
$169 million, respectively.
Apart from the transactions above, there were no additional significant non-recurring fair value measurements during the year ended December 31, 2022 and
2021.
Disclosure about financial instruments carried on a cost basis
The fair values of financial instruments carried on a cost basis were as follows:
December 31, 2022
($ in millions)
Carrying value
Level 1
Level 2
Level 3
Total fair value
Assets
Cash and equivalents (excluding securities with original
maturities up to 3 months):
Cash
1,697
1,697
1,697
Time deposits
2,459
2,459
2,459
Restricted cash
18
18
18
Liabilities
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations)
2,500
1,068
1,432
2,500
Long-term debt (excluding finance lease obligations)
4,976
4,813
30
4,843
23 Q4 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)
December 31, 2022
December 31, 2021
December 31, 2020
Contract assets
954
990
985
Contract liabilities
2,216
1,894
1,903
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. Management expects that the majority of the amounts will be
collected within one year of the respective balance sheet date.
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 predominantly on long-term projects. Contract liabilities are reduced as work is performed and as revenues are recognized . In addition to the amounts
presented as Contract liabilities in the table above, $59 million are non-current and are included in Other non-current liabilities in the Balance Sheet.
The significant changes in the Contract assets and Contract liabi lities balances were as follows:
Year ended December 31,
2022
2021
Contract
Contract
Contract
Contract
($ in millions)
assets
liabilities
assets
liabilities
Revenue recognized, which was included in the Contract liabilities balance at Jan 1, 2022/2021
(1,043)
(1,086)
Additions to Contract liabilities - excluding amounts recognized as revenue during the period
1,481
1,136
Receivables recognized that were included in the Contract assets balance at Jan 1, 2022/2021
(591)
(566)
The Company considers its order backlog to represent its unsatisfied performance obligations. At December 31, 2022, the Company had unsatisfied performance
obligations totaling $19,867 million and, of this amount, the Company expects to fulfill approximately 77 percent of the obligations in 2023, approximately
13 percent of the obligations in 2024 and the balance thereafter.
24 Q4 2022 FINANCIAL INFORMATION
─
Note 9
Debt
The Company’s total debt at December 31, 2022 and 2021, amounted to $7,678 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)
December 31, 2022
December 31, 2021
Short-term debt
1,448
78
Current maturities of long-term debt
1,087
1,306
Total
2,535
1,384
Short-term debt primarily represented issued commercial paper and short-term bank borrowings from various banks. At December 31, 2022, $1,383 million was
outstanding under the $2 billion Euro-commercial paper program. At December 31, 2021, no amount was outstanding under this program.
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 December 31, 2022 and 2021, amounted to $5,143 million and $4,177 million, respectively.
Outstanding bonds (including maturities within the next 12 months) were as follows:
December 31, 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
$
742
EUR
700
$
800
0% CHF Bonds, due 2023
CHF
275
$
298
–
0.625% EUR Instruments, due 2024
EUR
700
$
720
–
Floating Rate EUR Instruments, due 2024
EUR
500
$
536
–
0.75% EUR Instruments, due 2024
EUR
750
$
769
EUR
750
$
860
0.3% CHF Bonds, due 2024
CHF
280
$
303
CHF
280
$
306
2.1% CHF Bonds, due 2025
CHF
150
$
162
–
0.75% CHF Bonds, due 2027
CHF
425
$
460
–
3.8% USD Notes, due 2028
(2)
USD
383
$
381
USD
383
$
381
1.0% CHF Bonds, due 2029
CHF
170
$
184
CHF
170
$
186
0% EUR Notes, due 2030
EUR
800
$
677
EUR
800
$
862
2.375% CHF Bonds, due 2030
CHF
150
$
162
–
4.375% USD Notes, due 2042
(2)
USD
609
$
590
USD
609
$
589
Total
$
5,984
$
5,242
(1) USD carrying values include unamortized debt issuance costs, bond discounts or premiums, as well as adjustments for fair value hedge accounting, where appropriate.
(2) Prior to completing a cash tender offer in November 2020, the original principal amount outstanding, on each of the 3.8% USD Notes, due 2028, and the 4.375% USD Notes, due
2042, was USD 750 million.
In March 2022, the Company issued the following CHF bonds : (i) CHF 275 million of zero interest bonds, due 2023, and (ii) CHF 425 million of bonds, due 2027
with a coupon of 0.75 percent payable annually in arrears. The aggregate net proceeds of these CHF bond issues, after discount and fees, amounted to CHF
699 million (equivalent to approximately $751 million on the date of issuance).
Also in March 2022, the Company issued the following EUR Instruments, both due in 2024, (i) EUR 700 million, paying interest annually in arrears at a fixed rate of
0.625 percent per annum, and (ii) EUR 500 million floating rate notes, paying interest quarterly in arrears at a variable rate of 70 basis points above the 3-month
EURIBOR. In relation to these EUR Instruments, the Company recorded net proceeds (after the respective discount and premium, as well as fees) of
EUR 1,203 million (equivalent to $1,335 million on the date of issuance). Interest rate swaps have been used to modify the characteristics of the EUR 700 million
Instruments, due 2024. After considering the impact of these interest rate swaps, these Instruments effectively become floati ng rate obligations.
In October 2022, the Company issued the following CHF bonds: (i) CHF 150 million of 2.1 percent bonds, due 2025, and (ii) CHF 150 million of 2.375 percent
bonds, due 2030 with interest payable annually in arrears. The aggregate net proceeds of these CHF bond issues, after discount and fees, amounted to
CHF 299 million (equivalent to approximately $304 million on date of issuance).
Subsequent events
On January 16, 2023, the Company issued the following EUR Instruments: (i) EUR 500 million of 3.25 percent notes, due 2027, and (ii) EUR 750 million of
3.375 percent notes, due 2031, both paying interest annually in arrears. The aggregate net proceeds of these EUR Instruments, after discount and fees, amounted
to EUR 1,235 million (equivalent to approximately $1,338 million on date of issuance).
As of February 1, 2023, the Company has repaid substantially all amounts previously outstanding at December 31, 2022, under the $2 billion Euro-commercial
paper program.
25 Q4 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 and in December 2022 this matter was closed without action by the DOJ as part of the Kusile settlement.
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 made a provision of approximately $325 million which
was recorded in Other income (expense), net, during the third quarter of 2022. In December 2022, the Company settled with the SEC and DOJ as well as the
authorities in South Africa and Switzerland. The matter is still pending with the authorities in Germany, but the Company does not believe that it will need to record
any additional provisions for this matter.
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 December 31, 2022 and 2021, the Company had aggregate liabilities of $86 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)
December 31, 2022
December 31, 2021
Performance guarantees
4,300
4,540
Financial guarantees
96
52
Indemnification guarantees
(1)
–
136
Total
(2)
4,396
4,728
(1) Certain indemnifications provided to Hitachi in connection with the divestment of Power Grids were without limit.
(2) Maximum potential payments include amounts in both continuing and discontinued operations.
The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects the Company’s best estimate of future payments, which it may incur as part
of fulfilling its guarantee obligations. In respect of the above guarantees, the carrying amounts of liabilities at December 31, 2022 and 2021, amounted to $1 million
and $156 million, respectively, the majority of which is included in discontinued operations.
The Company is party to various guarantees providing financial or performance assurances to certain third parties. These guarantees, which have various
maturities up to 2035, mainly consist of performance guarantees whereby (i) the Company guarantees the performance of a third party’s product or service
according to the terms of a contract and (ii) as member of a consortium/joint-venture that includes third parties, the Company guarantees not only its own
performance but also the work of third parties. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party
does not fulfill the obligation, the Company will compensate the guaranteed party in cash or in kind. The original maturity dates for the majority of these
performance guarantees range from one to ten years.
In conjunction with the divestment of the high-voltage cable and cables accessories businesses, the Company has entered into various performance guarantees
with other parties with respect to certain liabilities of the divested business. At December 31, 2022 and 2021, the maximum potential payable under these
guarantees amounts to $843 million and $911 million, respectively, and these guarantees have various maturities ranging from five to ten years.
The Company retained obligations for financial, performance and indemnification guarantees related to the sale of the Power Grids business (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, (increasing
from 80.1 percent at December 31, 2021, to 100 percent at December 31, 2022). 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 these guarantees at December 31, 2022 and 2021, is approximately $3.0 billion and
$3.2 billion, respectively. On completing the sale of the Company’s remaining 19.9 percent interest in Hitachi Energy to Hitachi, the Company also settled certain
existing indemnification guarantees that were due to be settled concurrent with such transaction. As a result, in the year and three months ended December 31,
2022, the Company recorded $136 million of cash outflows for the settlement of these liabilities (recorded in discontinued operations).
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 December 31, 2022 and 2021, the total outstanding performance bonds aggregated to $2.9 billion and $3.6 billion, respectively , of each of these
amounts $0.1 billion relates to discontinued operations. There have been no significant amounts reimbursed to financial institutions under these types of
arrangements in the year and three months ended December 31, 2022 and 2021.
26 Q4 2022 FINANCIAL INFORMATION
Product and order-related contingencies
The Company calculates its provision for product warranties based on historical claims experience and specific review of certain contracts. The reconciliation of the
“Provisions for warranties”, including guarantees of product performance, was as follows:
($ in millions)
2022
2021
Balance at January 1,
1,005
1,035
Net change in warranties due to acquisitions, divestments, spin -offs and liabilities held for sale
(24)
1
Claims paid in cash or in kind
(157)
(222)
Net increase in provision for changes in estimates, warranties issued and warranties expired
252
226
Exchange rate differences
(48)
(35)
Balance at December 31,
1,028
1,005
Provisions for contractual penalties
During the three months ended December 31, 2022, the Company reversed a provision of $61 million it had previously recorded relating to one of its divested
businesses based on a settlement proposal issued by the ruling court . As the provision related to a customer contractual obligation, the adjustment was reported
as an increase in Sales of products and resulted in an increase in earnings per share (basic and diluted) of $0.03 for both the year and three months ended
December 31, 2022. In addition, as this amount relates to a divested business, it has been excluded from the Company’s primary measure of segment
performance, Operational EBITA (See Note 17).
─
Note 11
Income taxes
The effective tax rate of 22.3 percent in year ended December 31, 2022, was higher than the effective tax rate of 18.3 percent in the same period in 2021, primarily
because 2021 includes a non-taxable gain in connection with the sale of the Dodge business while 2022 included impacts of changes in valuation allowances
primarily a positive impact from a reversal of a valuation allowance in the Americas for $208 million (recorded in the fourth quarter) offset partially by the negative
impact of non-deductible regulatory penalties in connection with the Kusile project.
─
Note 12
Employee benefits
The Company operates defined benefit pension plans, defined contribution pension plans, and termination indemnity plans, in accordance with local regulations
and practices. At December 31, 2022, the Company’s most significant defined benefit pension plans are in Switzerland as well as in Germany, the United
Kingdom, and the United States. These plans cover a large portion of the Company’s employees and provide benefits to employees in the event of death,
disability, retirement, or termination of employment. Certain of these plans are multi-employer plans. The Company also operates other postretirement benefit
plans including postretirement health care benefits and other employee-related benefits for active employees including long-service award plans. The
measurement date used for the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are consistent with the local
government and tax requirements.
Net periodic benefit cost of the Company’s defined benefit pension and other postretirement benefit plans consisted of the following:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Year ended December 31,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
50
61
38
47
–
1
Operational pension cost
50
61
38
47
–
1
Non-operational pension cost (credit):
Interest cost
13
(5)
87
72
1
2
Expected return on plan assets
(116)
(116)
(153)
(178)
–
–
Amortization of prior service cost (credit)
(9)
(9)
(2)
(2)
(2)
(3)
Amortization of net actuarial loss
–
–
58
67
(3)
(2)
Curtailments, settlements and special termination benefits
4
1
7
7
–
–
Non-operational pension cost (credit)
(108)
(129)
(3)
(34)
(4)
(3)
Net periodic benefit cost (credit)
(58)
(68)
35
13
(4)
(2)
27 Q4 2022 FINANCIAL INFORMATION
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended December 31,
2022
2021
2022
2021
2022
2021
Operational pension cost:
Service cost
10
16
12
16
–
1
Operational pension cost
10
16
12
16
–
1
Non-operational pension cost (credit):
Interest cost
11
(2)
26
20
–
1
Expected return on plan assets
(29)
(28)
(40)
(45)
–
–
Amortization of prior service cost (credit)
(4)
(3)
–
–
(1)
(2)
Amortization of net actuarial loss
–
–
14
14
(1)
–
Curtailments, settlements and special termination benefits
4
1
7
8
–
–
Non-operational pension cost (credit)
(18)
(32)
7
(3)
(2)
(1)
Net periodic benefit cost (credit)
(8)
(16)
19
13
(2)
–
The components of net periodic benefit cost other than the service cost component are included in the line “Non-operational pension (cost) credit” in the income
statement.
Employer contributions were as follows:
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Year ended December 31,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
37
63
58
124
7
9
Of which, discretionary contributions to defined benefit
–
–
18
61
–
–
($ in millions)
Defined pension benefits
Other postretirement
Switzerland
International
benefits
Three months ended December 31,
2022
2021
2022
2021
2022
2021
Total contributions to defined benefit pension and
other postretirement benefit plans
4
17
34
82
2
1
Of which, discretionary contributions to defined benefit
pension plans
–
–
18
50
–
–
During the year and three months ended December 31, 202 2, total contributions included non-cash contributions of marketable debt securities having a fair value
at the contribution date of $12 million. These non-cash contributions were made to certain of the Company’s pension plans in Germany during the three months
ended December 31, 2022. During the year and three months ended December 31, 2021, total contributions included non-cash contributions of marketable debt
securities having a fair value at the contribution date of $53 million. These non-cash contributions were made to certain of the Company’s pension plans in
Germany and the United Kingdom during the three months ended December 31, 2021.
─
Note 13
Stockholder's equity
At the Annual General Meeting of Shareholders (AGM) on March 24, 2022, shareholders approved the proposal of the Board of Directors to distribute 0.82 Swiss
francs per share to shareholders. The declared dividend amounted to $1,700 million, with the Company disburs ing a portion in March and the remaining amounts
in April.
In March 2022, the Company completed the share buyback program that was launched in April 2021. This program was executed on a second trading line on the
SIX Swiss Exchange. Through this program, the Company purchased a total of 90 million shares for approximately $3.1 billion, of which 31 million shares were
purchased in the first quarter of 2022 (resulting in an increase in Treasury stock of $1,089 million). At the 2022 AGM, shareholders approved the cancellation of
88 million shares which had been purchased under the share buyback programs launched in July 2020 and April 2021. The cancellation was completed in the
second quarter of 2022, resulting in a decrease in Treasury stock of $2,876 million and a corresponding total decrease in Capital stock, Additional paid-in capital
and Retained Earnings.
Also in March 2022, the Company announced a new share buyback program of up to $3 billion. This program, which was launched in April 2022, is being executed
on a second trading line on the SIX Swiss Exchange and is planned to run until the Company’s 2023 AGM. Through this program, the Company purchased, from
the program’s launch in April 2022 to December 31, 2022, 60 million shares, resulting in an increase in Treasury stock of $1,753 million.
In addition to the share buyback programs, the Company purchased 20 million of its own shares on the open market in 2022, mainly for use in connection with its
employee share plans, resulting in an increase in Treasury stock of $660 million.
In 2022, the Company delivered, out of treasury stock, 16 million shares in connection with its Management Incentive Plan.
In November 2022, the Company received gross proceeds of 203 million Swiss francs ($216 million) through a private placement of shares in its ABB E-Mobility
subsidiary, ABB E-mobility Holding Ltd (ABB E-Mobility), reducing the Company's beneficial ownership in the subsidiary from 100 percent to 92 percent. This
resulted in an increase in Additional paid-in capital of $120 million.
Subsequent event
In January 2023, the Company signed an agreement to increase the amount of funding raised through the private placement of shares in ABB E-mobility,
increasing the total funding by an additional 325 million Swiss francs. The transaction is scheduled to be closed in the beginning of February 2023 and, after
completion of this transaction, the Company will have a beneficial ownership in ABB E-Mobility of 81 percent.
28 Q4 2022 FINANCIAL INFORMATION
─
Note 14
Earnings per share
Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is
calculated by dividing income by the weighted-average number of shares outstanding during the period, assuming that all potentially dilutive securities were
exercised, if dilutive. Potentially dilutive securities comprise outstanding written call options, and outstanding options and shares granted subject to certain
conditions under the Company’s share-based payment arrangements.
Basic earnings per share
Year ended December 31,
Three months ended December 31,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,517
4,625
1,138
2,674
Loss from discontinued operations, net of tax
(42)
(79)
(6)
(34)
Net income
2,475
4,546
1,132
2,640
Weighted-average number of shares outstanding (in millions)
1,899
2,001
1,870
1,974
Basic earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.33
2.31
0.61
1.35
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.27
0.61
1.34
Diluted earnings per share
Year ended December 31,
Three months ended December 31,
($ in millions, except per share data in $)
2022
2021
2022
2021
Amounts attributable to ABB shareholders:
Income from continuing operations, net of tax
2,517
4,625
1,138
2,674
Loss from discontinued operations, net of tax
(42)
(79)
(6)
(34)
Net income
2,475
4,546
1,132
2,640
Weighted-average number of shares outstanding (in millions)
1,899
2,001
1,870
1,974
Effect of dilutive securities:
Call options and shares
11
18
11
17
Adjusted weighted-average number of shares outstanding (in millions)
1,910
2,019
1,881
1,991
Diluted earnings per share attributable to ABB shareholders:
Income from continuing operations, net of tax
1.32
2.29
0.60
1.34
Loss from discontinued operations, net of tax
(0.02)
(0.04)
0.00
(0.02)
Net income
1.30
2.25
0.60
1.33
29 Q4 2022 FINANCIAL INFORMATION
─
Note 15
Reclassifications out of accumulated other comprehensive loss
The following table shows changes in “Accumulated other comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
Unrealized gains
Pension and
Foreign currency
(losses) on
other
Derivative
translation
available-for-sale
postretirement
instruments
($ in millions)
adjustments
securities
plan adjustments
and hedges
Total OCI
Balance at January 1, 2021
(2,460)
17
(1,556)
(3)
(4,002)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(521)
(10)
411
8
(112)
Amounts reclassified from OCI
(9)
(5)
56
(13)
29
Total other comprehensive (loss) income
(530)
(15)
467
(5)
(83)
Less:
Amounts attributable to
4
–
–
–
4
Balance at December 31, 2021
(1)
(2,993)
2
(1,089)
(8)
(4,088)
Other comprehensive (loss) income:
Other comprehensive (loss) income
before reclassifications
(685)
(23)
226
(12)
(494)
Amounts reclassified from OCI
46
2
29
12
89
Total other comprehensive (loss) income
(639)
(21)
255
–
(405)
Spin-off of the Turbocharging Division
(93)
–
(5)
–
(98)
Less:
Amounts attributable to
redeemable noncontrolling interests
(34)
–
(1)
–
(35)
Balance at December 31, 2022
(3,691)
(19)
(838)
(8)
(4,556)
(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:
Year ended
Three months ended
($ in millions)
Location of (gains) losses
December 31,
December 31,
Details about OCI components
reclassified from OCI
2022
2021
2022
2021
Foreign currency translation adjustments:
Changes attributable to divestments
Other income (expense), net
41
(9)
41
(9)
Net loss on complete or substantially complete
liquidations of foreign subsidiaries
Other income (expense), net
5
–
–
–
Amounts reclassified from OCI
46
(9)
41
(9)
Pension and other postretirement plan adjustments:
Amortization of prior service cost (credit)
Non-operational pension (cost) credit
(1)
(13)
(14)
(5)
(5)
Amortization of net actuarial loss
Non-operational pension (cost) credit
(1)
55
65
13
14
Net gain (loss) from settlements and curtailments
Non-operational pension (cost) credit
(1)
11
7
11
8
Changes attributable to divestments
Other income (expense), net
(8)
(8)
(8)
(8)
Total before tax
45
50
11
9
Tax
Income tax expense
(16)
4
(6)
(5)
Changes attributable to divestments
Other income (expense), net
–
2
–
2
Amounts reclassified from OCI
29
56
5
6
The amounts in respect of Unrealized gains (losses) on available-for-sale securities and Derivative instruments and hedges were not significant for the year and
three months ended December 31, 2022 and 2021.
30 Q4 2022 FINANCIAL INFORMATION
─
Note 16
Restructuring and related expenses
Other restructuring-related activities
In the year and three months ended December 31, 2022 and 2021, the Company executed various other restructuring -related activities and incurred the following
expenses:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Employee severance costs
81
101
17
57
Estimated contract settlement, loss order and other costs
209
31
4
16
Inventory and long-lived asset impairments
7
24
2
7
Total
297
156
23
80
Expenses associated with these activities are recorded in the following line items in the Consolidated Income Statements:
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Total cost of sales
24
71
11
35
Selling, general and administrative expenses
40
21
1
11
Non-order related research and development expenses
2
2
–
2
Other income (expense), net
231
62
11
32
Total
297
156
23
80
During the second quarter of 2022, the Company completed a plan (initiated in 2021) 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 December 31, 2022 and 2021, $198 million and $212 million, respectively, was recorded for other restructuring -related liabilities and is included
primarily in Other provisions.
─
Note 17
Operating segment data
The Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM allocates resources to and assesses the performance of each operating
segment using the information outlined below. The Company is organized into the following segments, based on products and services: Electrification, Motion,
Process Automation and Robotics & Discrete Automation. The remaining operations of the Company are included in Corporate and Other.
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 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 Q4 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 and Measurement & Analytics, as well as, prior to its spin-off in October 2022, the Turbocharging
Division (Accelleron).
●
Robotics includes industrial robots, autonomous mobile robotics, 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 year and three months ended December 31, 2022 and 2021, as well as total assets
at December 31, 2022 and 2021.
Year ended December 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
4,449
2,031
2,248
1,494
63
10,285
The Americas
5,332
2,148
1,566
524
3
9,573
of which: United States
3,918
1,787
943
373
2
7,023
Asia, Middle East and Africa
4,123
2,101
2,199
1,155
10
9,588
of which: China
1,984
1,147
666
897
2
4,696
13,904
6,280
6,013
3,173
76
29,446
Product type
Products
12,179
5,380
1,337
1,863
7
20,766
Systems
830
–
1,974
832
69
3,705
Services and other
895
900
2,702
478
–
4,975
13,904
6,280
6,013
3,173
76
29,446
Third-party revenues
13,904
6,280
6,013
3,173
76
29,446
Intersegment revenues
201
465
31
8
(705)
–
Total revenues
(1)
14,105
6,745
6,044
3,181
(629)
29,446
32 Q4 2022 FINANCIAL INFORMATION
Year ended December 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
4,517
2,015
2,416
1,578
3
10,529
The Americas
4,465
2,346
1,431
439
5
8,686
of which: United States
3,304
1,952
833
308
–
6,397
Asia, Middle East and Africa
3,975
2,111
2,367
1,270
7
9,730
of which: China
2,087
1,156
740
949
–
4,932
12,957
6,472
6,214
3,287
15
28,945
Product type
Products
10,706
5,555
1,496
2,159
4
19,920
Systems
1,367
–
1,802
645
11
3,825
Services and other
884
917
2,916
483
–
5,200
12,957
6,472
6,214
3,287
15
28,945
Third-party revenues
12,957
6,472
6,214
3,287
15
28,945
Intersegment revenues
230
453
45
10
(738)
–
Total revenues
(1)
13,187
6,925
6,259
3,297
(723)
28,945
Three months ended December 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,158
601
522
424
60
2,765
The Americas
1,403
574
431
147
–
2,555
of which: United States
1,048
480
262
106
2
1,898
Asia, Middle East and Africa
1,057
537
592
317
1
2,504
of which: China
454
259
168
251
1
1,133
3,618
1,712
1,545
888
61
7,824
Product type
Products
3,146
1,449
292
526
(2)
5,411
Systems
218
–
599
234
63
1,114
Services and other
254
263
654
128
–
1,299
3,618
1,712
1,545
888
61
7,824
Third-party revenues
3,618
1,712
1,545
888
61
7,824
Intersegment revenues
45
133
6
3
(187)
–
Total revenues
(1)
3,663
1,845
1,551
891
(126)
7,824
Three months ended December 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions)
Electrification
Motion
Automation
Automation
and Other
Total
Geographical markets
Europe
1,160
532
700
377
(13)
2,756
The Americas
1,153
514
421
108
2
2,198
of which: United States
839
412
256
72
–
1,579
Asia, Middle East and Africa
1,070
557
673
313
–
2,613
of which: China
510
295
193
235
–
1,233
3,383
1,603
1,794
798
(11)
7,567
Product type
Products
2,600
1,353
399
520
(11)
4,861
Systems
543
–
544
153
–
1,240
Services and other
240
250
851
125
–
1,466
3,383
1,603
1,794
798
(11)
7,567
Third-party revenues
3,383
1,603
1,794
798
(11)
7,567
Intersegment revenues
62
132
11
1
(206)
–
Total revenues
(1)
3,445
1,735
1,805
799
(217)
7,567
(1) Due to rounding, numbers presented may not add to the totals provided.
33 Q4 2022 FINANCIAL INFORMATION
Year ended
Three months ended
December 31,
December 31,
($ in millions)
2022
2021
2022
2021
Operational EBITA:
Electrification
2,328
2,121
572
507
Motion
1,163
1,183
318
278
Process Automation
848
801
203
247
Robotics & Discrete Automation
340
355
125
64
Corporate and Other
‒
Non-core and divested businesses
5
(39)
(3)
–
‒ Corporate costs and Other Intersegment elimination
(174)
(299)
(69)
(108)
Total
4,510
4,122
1,146
988
Acquisition-related amortization
(229)
(250)
(55)
(59)
Restructuring, related and implementation costs
(1)
(347)
(160)
(47)
(79)
Changes in obligations related to divested businesses
88
(9)
71
7
Changes in pre-acquisition estimates
(10)
6
(10)
–
Gains and losses from sale of businesses
(7)
2,193
(3)
2,184
Acquisition- and divestment-related expenses and integration costs
(195)
(132)
(24)
(58)
Other income/expense relating to the Power Grids joint venture
(57)
(34)
10
–
Foreign exchange/commodity timing differences in income from operations:
Unrealized gains and losses on derivatives (foreign exchange,
commodities, embedded derivatives)
32
(54)
139
52
Realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized
(48)
(2)
–
(7)
Unrealized foreign exchange movements on receivables/payables (and
related assets/liabilities)
(15)
20
(70)
(13)
Certain other non-operational items:
Regulatory, compliance and legal costs
(317)
–
16
3
Business transformation costs
(2)
(152)
(92)
(38)
(33)
Favorable resolution of an uncertain purchase price adjustment
15
6
15
1
Gains and losses from sale of investments in
equity-accounted companies
43
–
43
–
Certain other fair value changes, including asset impairments
45
119
(13)
1
Other non-operational items
(19)
(15)
5
(12)
Income from operations
3,337
5,718
1,185
2,975
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Non-operational pension (cost) credit
115
166
13
36
Income from continuing operations before taxes
3,394
5,787
1,197
2,985
(1) Includes impairment of certain assets.
(2) Amount includes ABB Way process transformation costs of $131 million and $80 million for year ended December 31, 2022 and 2021, respectively, and $33 million and $28 million for
the three months ended December 31, 2022 and 2021, respectively.
Total assets
(1)
($ in millions)
December 31, 2022
December 31, 2021
Electrification
13,992
12,831
Motion
6,565
5,936
Process Automation
4,598
5,009
Robotics & Discrete Automation
4,901
4,860
Corporate and Other
(2)
9,092
11,624
Consolidated
39,148
40,260
(1) Total assets are after intersegment eliminations and therefore reflect third-party assets only.
(2) At December 31, 2022 and 2021, respectively, Corporate and Other includes $96 million and $136 million of assets in the Power Grids business which is reported as discontinued
operations (see Note 3). In addition, at December 31, 2021, Corporate and Other included $1,609 million, related to the equity investment in Hitachi Energy Ltd, which was
subsequently sold in December 2022 (see Note 4).
2023 Realignment of segments
Commencing in January 2023, the E-mobility Division is no longer managed within the Electrification Business Area and has become an independent Division and
a separate operating segment. The Division does not currently meet any of the size thresholds to be considered a reportable segment and will be presented within
Corporate and Other.
34 Q4 2022 FINANCIAL INFORMATION
35 Q4 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 year and three months ended December 31, 2022.
Comparable growth rates
Growth rates for certain key figures may be presented and discussed on a “comparable” basis. The comparable growth rate measures growth on a constant
currency basis. Since we are a global company, the comparability of our operating results reported in U.S. dollars is affected by foreign currency exchange rate
fluctuations. We calculate the impacts from foreign currency fluctuations by translating the current-year periods’ reported key figures into U.S. dollar amounts using
the exchange rates in effect for the comparable periods in the previous year.
Comparable growth rates are also adjusted for changes in our business portfolio. Adjustments to our business portfolio occur due to acquisitions, divestments, or
by exiting specific business activities or customer markets. The adjustment for portfolio changes is calculated as follows: where the results of any business
acquired or divested have not been consolidated and reported for the entire duration of both the current and comparable periods, the reported key figures of such
business are adjusted to exclude the relevant key figures of any corresponding quarters which are not comparable when computing the comparable growth rate.
Certain portfolio changes which do not qualify as divestments under U.S. GAAP have been treated in a similar manner to divestments. Changes in our portfolio
where we have exited certain business activities or customer markets are adjusted as if the relevant business was divested in the period when the decision to
cease business activities was taken. We do not adjust for portfolio changes where the relevant business has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by Business Area
Q4 2022 compared to Q4 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
-2%
8%
0%
6%
6%
10%
0%
16%
Motion
-11%
8%
3%
0%
6%
11%
3%
20%
Process Automation
-8%
8%
11%
11%
-14%
8%
11%
5%
Robotics & Discrete Automation
-27%
8%
0%
-19%
12%
11%
0%
23%
ABB Group
-8%
8%
2%
2%
3%
10%
3%
16%
FY 2022 compared to FY 2021
Order growth rate
Revenue growth rate
US$
Foreign
US$
Foreign
(as
exchange
Portfolio
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
reported)
impact
changes
Comparable
Electrification
11%
6%
0%
17%
7%
7%
0%
14%
Motion
4%
7%
9%
20%
-3%
8%
9%
14%
Process Automation
1%
7%
3%
11%
-3%
7%
3%
7%
Robotics & Discrete Automation
7%
9%
-1%
15%
-4%
9%
-1%
4%
ABB Group
7%
6%
3%
16%
2%
7%
3%
12%
36 Q4 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation
Regional comparable growth rate reconciliation for ABB Group - Quarter
Q4 2022 compared to Q4 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
-17%
12%
0%
-5%
0%
15%
1%
16%
The Americas
10%
1%
4%
15%
16%
1%
5%
22%
of which: United States
9%
0%
4%
13%
20%
0%
6%
26%
Asia, Middle East and Africa
-15%
10%
3%
-2%
-4%
11%
3%
10%
of which: China
-22%
9%
1%
-12%
-8%
10%
3%
5%
ABB Group
-8%
8%
2%
2%
3%
10%
3%
16%
Regional comparable growth rate reconciliation by Business Area - Quarter
Q4 2022 compared to Q4 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
-17%
13%
0%
-4%
-1%
16%
0%
15%
The Americas
20%
0%
0%
20%
21%
1%
0%
22%
of which: United States
25%
0%
0%
25%
25%
0%
0%
25%
Asia, Middle East and Africa
-14%
10%
0%
-4%
-2%
12%
0%
10%
of which: China
-15%
10%
0%
-5%
-12%
10%
0%
-2%
Electrification
-2%
8%
0%
6%
6%
10%
0%
16%
Q4 2022 compared to Q4 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
-26%
11%
0%
-15%
9%
17%
0%
26%
The Americas
-7%
2%
10%
5%
12%
1%
12%
25%
of which: United States
-9%
1%
10%
2%
16%
1%
13%
30%
Asia, Middle East and Africa
5%
11%
0%
16%
-2%
12%
0%
10%
of which: China
-8%
11%
0%
3%
-9%
10%
0%
1%
Motion
-11%
8%
3%
0%
6%
11%
3%
20%
Q4 2022 compared to Q4 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%
12%
12%
15%
-25%
10%
11%
-4%
The Americas
11%
2%
9%
22%
2%
2%
12%
16%
of which: United States
0%
1%
7%
8%
2%
1%
13%
16%
Asia, Middle East and Africa
-21%
9%
10%
-2%
-12%
8%
13%
9%
of which: China
-42%
7%
5%
-30%
-13%
9%
17%
13%
Process Automation
-8%
8%
11%
11%
-14%
8%
11%
5%
Q4 2022 compared to Q4 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
-28%
10%
0%
-18%
13%
16%
0%
29%
The Americas
-13%
1%
0%
-12%
36%
-1%
0%
35%
of which: United States
-34%
0%
0%
-34%
49%
0%
0%
49%
Asia, Middle East and Africa
-33%
8%
0%
-25%
2%
11%
0%
13%
of which: China
-35%
8%
0%
-27%
7%
13%
0%
20%
Robotics & Discrete Automation
-27%
8%
0%
-19%
12%
11%
0%
23%
37 Q4 2022 FINANCIAL INFORMATION
Regional comparable growth rate reconciliation for ABB Group – Year to date
FY 2022 compared to FY 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%
14%
0%
13%
-2%
14%
0%
12%
The Americas
19%
1%
8%
28%
10%
1%
8%
19%
of which: United States
20%
0%
9%
29%
10%
0%
9%
19%
Asia, Middle East and Africa
3%
6%
1%
10%
-1%
6%
1%
6%
of which: China
1%
3%
1%
5%
-5%
4%
1%
0%
ABB Group
7%
6%
3%
16%
2%
7%
3%
12%
Regional comparable growth rate reconciliation by Business Area – Year to date
FY 2022 compared to FY 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%
14%
0%
13%
-2%
15%
0%
13%
The Americas
30%
1%
0%
31%
19%
1%
0%
20%
of which: United States
36%
0%
0%
36%
19%
0%
0%
19%
Asia, Middle East and Africa
0%
6%
0%
6%
3%
7%
0%
10%
of which: China
-5%
4%
0%
-1%
-5%
4%
0%
-1%
Electrification
11%
6%
0%
17%
7%
7%
0%
14%
FY 2022 compared to FY 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%
18%
1%
15%
0%
16%
The Americas
-4%
2%
25%
23%
-8%
1%
26%
19%
of which: United States
-3%
0%
29%
26%
-8%
1%
28%
21%
Asia, Middle East and Africa
12%
6%
1%
19%
0%
6%
1%
7%
of which: China
7%
4%
1%
12%
-1%
5%
0%
4%
Motion
4%
7%
9%
20%
-3%
8%
9%
14%
FY 2022 compared to FY 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%
12%
3%
5%
-7%
12%
3%
8%
The Americas
21%
2%
3%
26%
9%
2%
3%
14%
of which: United States
15%
0%
3%
18%
13%
1%
4%
18%
Asia, Middle East and Africa
-2%
7%
3%
8%
-7%
6%
3%
2%
of which: China
-9%
4%
2%
-3%
-10%
5%
3%
-2%
Process Automation
1%
7%
3%
11%
-3%
7%
3%
7%
FY 2022 compared to FY 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
3%
13%
-1%
15%
-5%
13%
-1%
7%
The Americas
15%
0%
0%
15%
19%
0%
0%
19%
of which: United States
9%
0%
0%
9%
21%
0%
0%
21%
Asia, Middle East and Africa
10%
5%
0%
15%
-9%
5%
0%
-4%
of which: China
18%
4%
0%
22%
-5%
4%
0%
-1%
Robotics & Discrete Automation
7%
9%
-1%
15%
-4%
9%
-1%
4%
38 Q4 2022 FINANCIAL INFORMATION
Order backlog growth rate reconciliation
December 31, 2022 compared to December 31, 2021
US$
Foreign
(as
exchange
Portfolio
Business Area
reported)
impact
changes
Comparable
Electrification
27%
6%
0%
33%
Motion
26%
8%
0%
34%
Process Automation
2%
6%
8%
16%
Robotics & Discrete Automation
40%
9%
-1%
48%
ABB Group
20%
6%
3%
29%
Other growth rate reconciliations
Q4 2022 compared to Q4 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
6%
7%
0%
13%
5%
10%
0%
15%
Motion
-2%
10%
0%
8%
5%
11%
0%
16%
Process Automation
-21%
7%
18%
4%
-23%
6%
18%
1%
Robotics & Discrete Automation
4%
10%
0%
14%
4%
10%
0%
14%
ABB Group
-11%
7%
11%
7%
-11%
8%
11%
8%
FY 2022 compared to FY 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
6%
8%
0%
14%
1%
8%
0%
9%
Motion
7%
8%
0%
15%
-2%
9%
0%
7%
Process Automation
-2%
7%
5%
10%
-7%
6%
6%
5%
Robotics & Discrete Automation
4%
9%
0%
13%
-1%
9%
0%
8%
ABB Group
1%
8%
3%
12%
-4%
7%
3%
6%
39 Q4 2022 FINANCIAL INFORMATION
Operational EBITA as % of operational revenues (Operational EBITA margin)
Definition
Operational EBITA margin
Operational EBITA margin is Operational EBITA as a percentage of operational revenues.
Operational EBITA
Operational earnings before interest, taxes and acquisition-related amortization (Operational EBITA) represents Income from operations excluding:
●
●
●
divested businesses),
●
●
●
●
●
●
exchange, commodities, embedded derivatives), (b) realized gains and losses on derivatives where the underlying hedged transaction has not yet been
realized, and (c) unrealized foreign exchange movements on receivables/payables (and related assets/liabilities).
Certain other non-operational items generally includes certain regulatory, compliance and legal costs, certain asset write downs /impairments and certain other fair
value changes, as well as other items which are determined by management on a case-by-case basis.
Operational EBITA is our measure of segment profit but is also used by management to evaluate the profitability of the Company as a whole.
Acquisition-related amortization
Amortization expense on intangibles arising upon acquisitions.
Restructuring, related and implementation costs
Restructuring, related and implementation costs consists of restructuring and other related expenses, as well as internal and external costs relating to the
implementation of group-wide restructuring programs.
Other income/expense relating to the Power Grids joint venture
Other income/expense relating to the Power Grids joint venture consists of amounts recorded in Income from continuing operations before taxes relating to the
divested Power Grids business including the income/loss under the equity method for the investment in Hitachi Energy Ltd. (Hitachi Energy), amortization of
deferred brand income as well as changes in value of other obligations relating to the divestment.
Operational revenues
The Company presents operational revenues solely for the purpose of allowing the computation of Operational EBITA margin. Operational revenues are Total
revenues adjusted for foreign exchange/commodity timing differences in total revenues of: (i) unrealized gains and losses on derivatives, (ii) realized gains and
losses on derivatives where the underlying hedged transaction has not yet been realized, and (iii) unrealized foreign exchange movements on receivables (and
related assets). Operational revenues are not intended to be an alternative measure to Total revenues, which represent our revenues measured in accordance
with U.S. GAAP.
Reconciliation
The following tables provide reconciliations of consolidated Operational EBITA to Net Income and Operational EBITA Margin by business.
Reconciliation of consolidated Operational EBITA to Net Income
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Operational EBITA
4,510
4,122
1,146
988
Acquisition-related amortization
(229)
(250)
(55)
(59)
Restructuring, related and implementation costs
(1)
(347)
(160)
(47)
(79)
Changes in obligations related to divested businesses
88
(9)
71
7
Changes in pre-acquisition estimates
(10)
6
(10)
–
Gains and losses from sale of businesses
(7)
2,193
(3)
2,184
Acquisition- and divestment-related expenses and integration costs
(195)
(132)
(24)
(58)
Other income/expense relating to the Power Grids joint venture
(57)
(34)
10
–
Certain other non-operational items
(385)
18
28
(40)
Foreign exchange/commodity timing differences in income from operations
(31)
(36)
69
32
Income from operations
3,337
5,718
1,185
2,975
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Non-operational pension (cost) credit
115
166
13
36
Income from continuing operations before taxes
3,394
5,787
1,197
2,985
Income tax expense
(757)
(1,057)
(29)
(282)
Income from continuing operations, net of tax
2,637
4,730
1,168
2,703
Loss from discontinued operations, net of tax
(43)
(80)
(7)
(35)
Net income
2,594
4,650
1,161
2,668
(1) Includes impairment of certain assets.
40 Q4 2022 FINANCIAL INFORMATION
Reconciliation of Operational EBITA margin by business
Three months ended December 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,663
1,845
1,551
891
(126)
7,824
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(74)
(35)
(25)
(10)
(5)
(149)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
(2)
(1)
1
3
2
Unrealized foreign exchange movements
on receivables (and related assets)
44
15
14
10
2
85
Operational revenues
3,634
1,823
1,539
892
(126)
7,762
Income (loss) from operations
557
316
183
101
28
1,185
Acquisition-related amortization
27
8
1
19
–
55
Restructuring, related and
implementation costs
10
5
23
2
7
47
Changes in obligations related to
divested businesses
1
–
–
–
(72)
(71)
Changes in pre-acquisition estimates
9
–
–
1
–
10
Gains and losses from sale of businesses
–
3
–
–
–
3
Acquisition- and divestment-related expenses
and integration costs
8
3
12
2
(1)
24
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
(10)
(10)
Certain other non-operational items
–
–
–
(9)
(19)
(28)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(86)
(27)
(21)
1
(6)
(139)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
2
(1)
(2)
1
–
–
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
44
11
7
7
1
70
Operational EBITA
572
318
203
125
(72)
1,146
Operational EBITA margin (%)
15.7%
17.4%
13.2%
14.0%
n.a.
14.8%
In the three months ended December 31, 2022, certain other non -operational items in the table above includes the following:
Three months ended December 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
(16)
(16)
Certain other fair values changes,
–
–
–
8
5
13
Business transformation costs
(1)
5
–
–
–
33
38
Favorable resolution of an uncertain
purchase price adjustment
–
–
–
(15)
–
(15)
Gains and losses from sale of investments
in equity-accounted companies
–
–
–
–
(43)
(43)
Other non-operational items
(5)
–
–
(2)
2
(5)
Total
–
–
–
(9)
(19)
(28)
(1) Amounts include ABB Way process transformation costs of $33 million for the three months ended December 31, 2022.
41 Q4 2022 FINANCIAL INFORMATION
Three months ended December 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
3,445
1,735
1,805
799
(217)
7,567
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(20)
(13)
(10)
(4)
(7)
(54)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
4
(1)
2
6
Unrealized foreign exchange movements
on receivables (and related assets)
(3)
3
1
–
3
4
Operational revenues
3,423
1,725
1,800
794
(219)
7,523
Income (loss) from operations
418
2,464
193
45
(145)
2,975
Acquisition-related amortization
29
7
2
21
–
59
Restructuring, related and
implementation costs
34
4
33
1
7
79
Changes in obligations related to
divested businesses
–
–
–
–
(7)
(7)
Gains and losses from sale of businesses
9
(2,195)
–
–
2
(2,184)
Acquisition- and divestment-related expenses
and integration costs
34
7
18
–
(1)
58
Certain other non-operational items
8
–
(2)
–
34
40
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(30)
(12)
(2)
(3)
(5)
(52)
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/payables
(and related assets/liabilities)
4
3
–
–
6
13
Operational EBITA
507
278
247
64
(108)
988
Operational EBITA margin (%)
14.8%
16.1%
13.7%
8.1%
n.a.
13.1%
In the three months ended December 31, 2021, certain other non -operational items in the table above includes the following:
Three months ended December 31, 2021
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
(3)
(3)
Certain other fair values changes,
including asset impairments
1
–
–
–
(2)
(1)
Business transformation costs
(1)
10
–
–
–
23
33
Favorable resolution of an uncertain
purchase price adjustment
–
–
(1)
–
–
(1)
Other non-operational items
(3)
–
(1)
–
16
12
Total
8
–
(2)
–
34
40
(1) Amounts include ABB Way process transformation costs of $28 million for the three months ended December 31, 2021.
42 Q4 2022 FINANCIAL INFORMATION
Year ended December 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
14,105
6,745
6,044
3,181
(629)
29,446
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(38)
(18)
25
4
–
(27)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
14
–
10
1
30
55
Unrealized foreign exchange movements
on receivables (and related assets)
10
4
(2)
1
(13)
–
Operational revenues
14,091
6,731
6,077
3,187
(612)
29,474
Income (loss) from operations
2,159
1,092
663
247
(824)
3,337
Acquisition-related amortization
116
31
4
78
–
229
Restructuring, related and
implementation costs
(1)
28
16
29
11
263
347
Changes in obligations related to
divested businesses
1
–
–
–
(89)
(88)
Changes in pre-acquisition estimates
11
–
–
(1)
–
10
Gains and losses from sale of businesses
(1)
8
–
–
–
7
Acquisition- and divestment-related expenses
and integration costs
40
15
134
6
–
195
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
57
57
Certain other non-operational items
(24)
–
–
(7)
416
385
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(32)
(5)
6
4
(5)
(32)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
13
–
9
1
25
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
17
6
3
1
(12)
15
Operational EBITA
2,328
1,163
848
340
(169)
4,510
Operational EBITA margin (%)
16.5%
17.3%
14.0%
10.7%
n.a.
15.3%
(1) Includes impairment of certain assets.
In the year ended December 31, 2022, certain other non-operational items in the table above includes the following:
Year ended December 31, 2022
Robotics &
Process
Discrete
Corporate
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
and Other
Consolidated
Certain other non-operational items:
Regulatory, compliance and legal costs
–
–
–
–
317
317
Certain other fair values changes,
including asset impairments
(57)
–
–
8
4
(45)
Business transformation costs
(1)
20
–
–
–
132
152
Favorable resolution of an uncertain
purchase price adjustment
–
–
–
(15)
–
(15)
Gains and losses from sale of investments
in equity-accounted companies
–
–
–
–
(43)
(43)
Other non-operational items
13
–
–
–
6
19
Total
(24)
–
–
(7)
416
385
(1) Amounts include ABB Way process transformation costs of $131 million for the year ended December 31, 2022.
43 Q4 2022 FINANCIAL INFORMATION
Year ended December 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
13,187
6,925
6,259
3,297
(723)
28,945
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
17
4
9
1
(4)
27
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
1
2
(2)
–
4
Unrealized foreign exchange movements
on receivables (and related assets)
(19)
(3)
(6)
(6)
2
(32)
Operational revenues
13,188
6,927
6,264
3,290
(725)
28,944
Income (loss) from operations
1,841
3,276
713
269
(381)
5,718
Acquisition-related amortization
117
43
5
83
2
250
Restructuring, related and
implementation costs
66
22
48
7
17
160
Changes in obligations related to
divested businesses
–
–
–
–
9
9
Changes in pre-acquisition estimates
(6)
–
–
–
–
(6)
Gains and losses from sale of businesses
13
(2,196)
(13)
–
3
(2,193)
Acquisition- and divestment-related expenses
and integration costs
70
26
35
1
–
132
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
34
34
Certain other non-operational items
(5)
1
1
–
(15)
(18)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
33
14
15
(2)
(6)
54
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
4
(1)
(2)
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(9)
(3)
(7)
(2)
1
(20)
Operational EBITA
2,121
1,183
801
355
(338)
4,122
Operational EBITA margin (%)
16.1%
17.1%
12.8%
10.8%
n.a.
14.2%
In the year ended December 31, 2021, certain other non-operational items in the table above includes the following:
Year ended December 31, 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,
(15)
–
–
–
(104)
(119)
Business transformation costs
17
–
–
–
75
92
Favorable resolution of an uncertain
purchase price adjustment
(5)
–
(1)
–
–
(6)
Other non-operational items
(2)
1
2
–
14
15
Total
(5)
1
1
–
(15)
(18)
(1) Amounts include ABB Way process transformation costs of $80 million for the year ended December 31, 2021.
44 Q4 2022 FINANCIAL INFORMATION
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of long-term debt, and Long-term debt.
Cash and marketable securities
Cash and marketable securities is the sum of Cash and equivalents, Restricted cash (current and non-current) and Marketable securities and short-term
investments.
Reconciliation
December 31,
($ in millions)
2022
2021
2020
Short-term debt and current maturities of long-term debt
2,535
1,384
1,293
Long-term debt
5,143
4,177
4,828
Total debt
7,678
5,561
6,121
Cash and equivalents
4,156
4,159
3,278
Restricted cash - current
18
30
323
Marketable securities and short-term investments
725
1,170
2108
Restricted cash - non-current
–
300
300
Cash and marketable securities
4,899
5,659
6,009
Net debt (cash)
2,779
(98)
112
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)
December 31, 2022
December 31, 2021
Total stockholders' equity
13,187
15,957
Net debt (cash) (as defined above)
2,779
(98)
Net debt (cash) / Equity ratio
0.21
-0.01
Net debt/EBITDA ratio
Definition
Net debt/EBITDA ratio
Net debt/EBITDA ratio is defined as Net debt divided by EBITDA.
EBITDA
EBITDA is defined as Income from operations for the trailing twelve months preceding the balance sheet date before depreciati on and amortization for the same
trailing twelve-month period.
Reconciliation
($ in millions, unless otherwise indicated)
December 31, 2022
December 31, 2021
Income from operations
3,337
5,718
Depreciation and Amortization
814
893
EBITDA
4,151
6,611
Net debt (cash) (as defined above)
2,779
(98)
Net debt (cash) / EBITDA
0.67
-0.01
45 Q4 2022 FINANCIAL INFORMATION
Net working capital as a percentage of revenues
Definition
Net working capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated as Net working capital divided by Adjusted revenues for the trailing twelve months.
Net working capital
Net working capital is the sum of (i) receivables, net, (ii) contract assets, (iii) inventories, net, and (iv) prepaid expenses; less (v) accounts payable, trade, (vi)
contract liabilities (including non-current amounts) and (vii) other current liabilities (excluding primarily: (a) income taxes payable, (b) current derivative liabilities, (c)
pension and other employee benefits, (d) payables under the share buyback program, (e) liabilities related to certain other restructuring -related activities and
(f) liabilities related to the divestment of the Power Grids business ); and including the amounts related to these accounts which have been presented as either
assets or liabilities held for sale but excluding any amounts included in discontinued operations.
Adjusted revenues for the trailing twelve months
Adjusted revenues for the trailing twelve months includes total revenues recorded by ABB in the twelve months preceding the relevant balance sheet date adjusted
to eliminate revenues of divested businesses and the estimated impact of annualizing revenues of certain acquisitions which were completed in the same trailing
twelve-month period.
Reconciliation
December 31,
($ in millions, unless otherwise indicated)
2022
2021
2020
Net working capital:
Receivables, net
6,858
6,551
6,820
Contract assets
954
990
985
Inventories, net
6,028
4,880
4,469
Prepaid expenses
230
206
201
Accounts payable, trade
(4,904)
(4,921)
(4,571)
Contract liabilities
(1)
(2,275)
(1,894)
(1,903)
Other current liabilities
(2)
(3,675)
(3,509)
(3,283)
Net working capital
3,216
2,303
2,718
Total revenues for the twelve months ended
29,446
28,945
26,134
Adjustment to annualize/eliminate revenues of certain acquisitions/divestments
(513)
(517)
(167)
Adjusted revenues for the trailing twelve months
28,933
28,428
25,967
Net working capital as a percentage of revenues (%)
11.1%
8.1%
10.5%
(1) Amount includes certain amounts relating to contract liabilities that are presented in other non-current liabilities.
(2) Amounts exclude $648 million, $858 million and $898 million at December 31, 2022, 2021 and 2020, respectively, related primarily to (a) income taxes payable, (b) current derivative
liabilities, (c) pension and other employee benefits, (d) payables under the share buyback program and (e) liabilities related to the divestment of the Power Grids business.
46 Q4 2022 FINANCIAL INFORMATION
Free cash flow conversion to net income
Definition
Free cash flow conversion to net income
Free cash flow conversion to net income is calculated as free cash flow divided by Adjusted net income attributable to ABB.
Adjusted net income attributable to ABB
Adjusted net income attributable to ABB is calculated as net income attributable to ABB adjusted for: (i) impairment of goodwill, (ii) losses from extinguishment of
debt, and (iii) gains arising on the sale of the equity-accounted investment in Hitachi Energy Ltd., the Mechanical Power Transmission Division (Dodge) and the
Power Grids business, the latter being included in discontinued operations.
Free cash flow
Free cash flow is calculated as net cash provided by operating activities adjusted for: (i) purchases of property, plant and equipment and intangible assets and (ii)
proceeds from sales of property, plant and equipment.
Free cash flow conversion to net income
Twelve months to
($ in millions, unless otherwise indicated)
December 31, 2022
December 31, 2021
Net cash provided by operating activities – continuing operations
1,334
3,338
Adjusted for the effects of continuing operations:
Purchases of property, plant and equipment and intangible assets
(762)
(820)
Proceeds from sale of property, plant and equipment
127
93
Free cash flow from continuing operations
699
2,611
Net cash used in operating activities – discontinued operations
(47)
(8)
Free cash flow
652
2,603
Adjusted net income attributable to ABB
(1)
2,442
2,416
Free cash flow conversion to net income
27%
108%
(1) Adjusted net income attributable to ABB for the year ended December 31, 2022, is adjusted to exclude the gain on the sale of Hitachi Energy Joint Venture of $43 million and
reductions to the gain on the sale of Power Grids of $10 million. For the year ended December 31, 2021, Adjusted net income attributable to ABB 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 $65 million.
47 Q4 2022 FINANCIAL INFORMATION
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income less Interest and other finance expense.
Reconciliation
Year ended December 31,
Three months ended December 31,
($ in millions)
2022
2021
2022
2021
Interest and dividend income
72
51
22
14
Interest and other finance expense
(130)
(148)
(23)
(40)
Net finance expenses
(58)
(97)
(1)
(26)
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by Total revenues.
Reconciliation
Year ended December 31,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
15,901
14,105
1.13
14,381
13,187
1.09
Motion
7,896
6,745
1.17
7,616
6,925
1.10
Process Automation
6,825
6,044
1.13
6,779
6,259
1.08
Robotics & Discrete Automation
4,116
3,181
1.29
3,844
3,297
1.17
Corporate and Other
(750)
(629)
n.a.
(752)
(723)
n.a.
ABB Group
33,988
29,446
1.15
31,868
28,945
1.10
Three months ended December 31,
2022
2021
($ in millions, except Book-to-bill presented as a ratio)
Orders
Revenues
Book-to-bill
Orders
Revenues
Book-to-bill
Electrification
3,565
3,663
0.97
3,638
3,445
1.06
Motion
1,649
1,845
0.89
1,843
1,735
1.06
Process Automation
1,746
1,551
1.13
1,898
1,805
1.05
Robotics & Discrete Automation
798
891
0.90
1,100
799
1.38
Corporate and Other
(138)
(126)
n.a.
(222)
(217)
n.a.
ABB Group
7,620
7,824
0.97
8,257
7,567
1.09
48 Q4 2022 FINANCIAL INFORMATION
Return on Capital employed (ROCE)
Definition
Return on Capital employed (ROCE)
Return on Capital employed is calculated as Operational EBITA after tax, divided by the average of the period’s opening and closing Capital employed, adjusted to
reflect impacts from the timing of significant acquisitions/divestments occurring during the period.
Capital employed
Capital employed is calculated as the sum of Adjusted total fixed assets and Net working capital (as defined above).
Adjusted total fixed assets
Adjusted total fixed assets is the sum of (i) property, plant and equipment, net, (ii) goodwill, (iii) other intangible assets, net, (iv) investments in equity-accounted
companies, and (v) operating lease right-of-use assets, less (vi) deferred tax liabilities recognized in certain acquisitions.
Notional tax on Operational EBITA
The Notional tax on Operational EBITA is computed using the adjusted group effective tax rate multiplied by Operational EBITA.
Adjusted Group effective tax rate
The Adjusted Group effective tax rate is computed by dividing an adjusted income tax expense by an adjusted pre-tax income. Certain amounts recorded in
income before taxes and the related income tax expense (primarily due to gains and losses from sale of businesses and in 2022, regulatory penalties in connection
with the Kusile project) are removed from the reported amounts when computing these adjusted amounts. Certain other amounts recorded in income tax expense
are also excluded from the computation to determine the Adjusted Group effective tax rate.
Reconciliation
December 31,
($ in millions, unless otherwise indicated)
2022
2021
2020
Adjusted total fixed assets:
Property, plant and equipment, net
3,911
4,045
4,174
Goodwill
10,511
10,482
10,850
Other intangible assets, net
1,406
1,561
2,078
Investments in equity-accounted companies
130
1,670
1,784
Operating lease right-of-use assets
841
895
969
Total fixed assets
16,799
18,653
19,855
Less: Deferred taxes recognized in certain acquisitions
(1)
(358)
(417)
(597)
Adjusted total fixed assets
16,441
18,236
19,258
Net working capital - (as defined above)
3,216
2,303
2,718
Capital employed
19,657
20,539
21,976
Average Capital employed:
Capital employed at the end of the previous year
20,539
21,976
20,141
(2)
Capital employed at the end of the current year
19,657
20,539
21,976
20,098
21,258
21,059
Adjusted for timing of acquisitions/divestments
948
224
–
Average Capital employed
21,046
21,482
21,059
Operational EBITA for the year ended
4,510
4,122
2,899
Notional tax on Operational EBITA
(1,037)
(929)
(731)
Operational EBITA after tax
3,473
3,193
2,168
Return on Capital employed (ROCE)
16.5%
14.9%
10.3%
(1) Amount relates to GEIS acquired in 2018, B&R acquired in 2017, Power-One acquired in 2013, Thomas & Betts acquired in 2012 and Baldor acquired in 2011.
(2) Adjusted to include $1,196 million of operating lease right-of-use assets, recorded on adoption of the new lease accounting standard on January 1, 2019.
49 Q4 2022 FINANCIAL INFORMATION
2023 Realignment of segments - Electrification Business Area excluding E-Mobility
Commencing in January 2023, the E-mobility Division is no longer managed within the Electrification Business Area and has become an independent Division and
a separate operating segment. The Division does not currently meet any of the size thresholds to be considered a reportable segment and will be presented within
Corporate and Other. The tables below present Operational EBITA and Operational EBITA margin for 2022 and 2021, restated to reflect the new structure.
Year ended December 31, 2022
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
13,619
6,745
6,044
3,181
(143)
29,446
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
(37)
(18)
25
4
(1)
(27)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
11
–
10
1
33
55
Unrealized foreign exchange movements
on receivables (and related assets)
6
4
(2)
1
(9)
–
Operational revenues
13,599
6,731
6,077
3,187
(120)
29,474
Income (loss) from operations
2,140
1,092
663
247
(805)
3,337
Acquisition-related amortization
104
31
4
78
12
229
Restructuring, related and
implementation costs
(1)
28
16
29
11
263
347
Changes in obligations related to
divested businesses
1
–
–
–
(89)
(88)
Changes in pre-acquisition estimates
11
–
–
(1)
–
10
Gains and losses from sale of businesses
(1)
8
–
–
–
7
Acquisition- and divestment-related expenses
and integration costs
36
15
134
6
4
195
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
57
57
Certain other non-operational items
30
–
–
(7)
362
385
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
(30)
(5)
6
4
(7)
(32)
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
10
–
9
1
28
48
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
14
6
3
1
(9)
15
Operational EBITA
2,343
1,163
848
340
(184)
4,510
Operational EBITA margin (%)
17.2%
17.3%
14.0%
10.7%
n.a.
15.3%
(1) Includes impairment of certain assets.
50 Q4 2022 FINANCIAL INFORMATION
Year ended December 31, 2021
Corporate and
Robotics &
Other and
Process
Discrete
Intersegment
($ in millions, unless otherwise indicated)
Electrification
Motion
Automation
Automation
elimination
Consolidated
Total revenues
12,894
6,925
6,259
3,297
(430)
28,945
Foreign exchange/commodity timing
differences in total revenues:
Unrealized gains and losses
on derivatives
15
4
9
1
(2)
27
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
3
1
2
(2)
–
4
Unrealized foreign exchange movements
on receivables (and related assets)
(18)
(3)
(6)
(6)
1
(32)
Operational revenues
12,894
6,927
6,264
3,290
(431)
28,944
Income (loss) from operations
1,827
3,276
713
269
(367)
5,718
Acquisition-related amortization
115
43
5
83
4
250
Restructuring, related and
implementation costs
66
22
48
7
17
160
Changes in obligations related to
divested businesses
–
–
–
–
9
9
Changes in pre-acquisition estimates
(6)
–
–
–
–
(6)
Gains and losses from sale of businesses
13
(2,196)
(13)
–
3
(2,193)
Acquisition- and divestment-related expenses
and integration costs
69
26
35
1
1
132
Other income/expense relating to the
Power Grids joint venture
–
–
–
–
34
34
Certain other non-operational items
13
1
1
–
(33)
(18)
Foreign exchange/commodity timing
differences in income from operations:
Unrealized gains and losses on derivatives
(foreign exchange, commodities,
embedded derivatives)
30
14
15
(2)
(3)
54
Realized gains and losses on derivatives
where the underlying hedged
transaction has not yet been realized
1
–
4
(1)
(2)
2
Unrealized foreign exchange movements
on receivables/payables
(and related assets/liabilities)
(8)
(3)
(7)
(2)
–
(20)
Operational EBITA
2,120
1,183
801
355
(337)
4,122
Operational EBITA margin (%)
16.4%
17.1%
12.8%
10.8%
n.a.
14.2%
51 Q4 2022 FINANCIAL INFORMATION
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71
11
www.abb.com
October 1 — December 31, 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
Gunnar Brock
November 01, 2022
Share
2,388
CHF
26.43
David Constable
November 01, 2022
Share
2,316
CHF
26.43
Frederico Curado
November 01, 2022
Share
4,799
CHF
26.43
Lars Förberg
November 01, 2022
Share
5,736
CHF
26.43
Jennifer Xin-Zhe Li
November 01, 2022
Share
2,338
CHF
26.43
Geraldine Matchett
November 01, 2022
Share
3,121
CHF
26.43
David Meline
November 01, 2022
Share
2,895
CHF
26.43
Satish Pai
November 01, 2022
Share
4,523
CHF
26.43
Peter Voser
November 01, 2022
Share
21,565
CHF
26.43
Jacob Wallenberg
November 01, 2022
Share
3,257
CHF
26.43
Key:
* Received instruments were delivered as part of the ABB Ltd Director’s or Executive Committee Member’s compensation or 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: February 2, 2023.
By:
/s/ Ann-Sofie Nordh
Name:
Ann-Sofie Nordh
Title:
Group Senior Vice President and
Head of Investor Relations
Date: February 2, 2023.
By:
/s/ Richard A. Brown
Name:
Richard A. Brown
Title:
Group Senior Vice President and
Chief Counsel Corporate & Finance