UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2020
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.
Form 20-F ☒ Form
40-F ☐
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6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
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security holders.
Indication by check mark if the registrant is submitting the Form
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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
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to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.
Yes ☐ No
☒
If “Yes” is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
This Form 6-K consists of the following:
1.
Press
release issued by ABB Ltd dated July 22, 2020 titled “Q2 2020 results”.
2.
Q2 2020
Financial Information.
3.
Press
release issued by ABB Ltd dated July 22, 2020 titled “ABB to launch share
buyback program”.
4.
Press
release issued by ABB Ltd dated July 22, 2020 titled “ABB appoints Theodor
Swedjemark as Chief Communications Officer”.
5.
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, JULY 22, 2020
Q2
2020 results
Strong COVID-19 headwinds; Power Grids
divestment completed
– Orders $6.1 billion, -18%; comparable -14%1
– Revenues $6.2 billion, -14%; comparable -10%
– Income from operations $571 million; margin 9.3%
– Operational EBITA1 $651 million; margin1
10.6%
– Net income $319 million, +398%2
– Basic EPS $0.15, +398%3; operational EPS1
$0.22, -35%
– Cash flow from operating activities $680 million; resilient
cash delivery expected for the full year
– Power Grids divestment completed July 1
– Net cash proceeds to be returned to
shareholders, as planned
“As expected, the second quarter has been heavily impacted by
COVID-19. At the same time, we were very focused on cost mitigation efforts
which provided some resilience. Operational margins for the Group turned out
better than we had anticipated, with Motion doing particularly well,” said
Björn Rosengren, CEO of ABB. “A lot of uncertainty remains and we still see
some challenging quarters ahead. At the same time, our way forward is clear. We
will continue to roll out our new operating model, review our business
portfolio and start our share buyback program.”
Key figures
|
|
|
ChangE
|
|
|
ChangE
|
($ millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Comparable
|
H1 2020
|
H1 2019
|
US$
|
Comparable
|
Orders
|
6,054
|
7,401
|
-18%
|
-14%
|
13,400
|
15,014
|
-11%
|
-7%
|
Revenues
|
6,154
|
7,171
|
-14%
|
-10%
|
12,370
|
14,018
|
-12%
|
-8%
|
Income from operations
|
571
|
123
|
+364%
|
|
944
|
713
|
+32%
|
|
Operational EBITA1
|
651
|
825
|
-21%
|
-20%4
|
1,287
|
1,591
|
-19%
|
-18%4
|
as % of operational revenues
|
10.6
|
11.5
|
-0.9 pts
|
|
10.4
|
11.4
|
-1.0 pts
|
|
Income from continuing operations, net of tax
|
395
|
(54)
|
n.a.
|
|
721
|
361
|
+100%
|
|
Net income attributable to ABB
|
319
|
64
|
+398%
|
|
695
|
599
|
+16%
|
|
Basic EPS ($)
|
0.15
|
0.03
|
+398%3
|
|
0.33
|
0.28
|
+16%3
|
|
Operational EPS ($)1
|
0.22
|
0.34
|
-35%3
|
-33%3
|
0.52
|
0.64
|
-19%3
|
-18%3
|
Cash flow from operating activities5
|
680
|
0
|
n.a.
|
|
103
|
(256)
|
n.a.
|
|
On December 17, 2018, ABB announced an
agreed sale of its Power Grids business. Consequently, the results of the Power
Grids business are presented as discontinued operations.
__
1 For a reconciliation of non-GAAP measures, see “supplemental
reconciliations and definitions” in the attached Q2 2020 Financial Information.
2 The result benefited mainly from the absence of the charge booked
in 2019 in relation to the sale of the solar inverters business.
3 EPS growth rates are computed using unrounded amounts. Comparable
operational earnings per share is in constant currency (2019 exchange rates not
adjusted for changes in the business portfolio).
4 Constant currency (not adjusted for portfolio changes).
5 Amount represents total for both continuing and discontinued
operations.
Q2 2020 Group results
Summary
Trading
conditions during the second quarter were challenging, influenced by the
escalating COVID-19 pandemic. Alongside the sharp drop in short-cycle demand
that lowered product volumes, system installation and service activities faced
extensive mobility restrictions. Reflecting this, orders and revenues for the
second quarter period were severely dampened across the Group when compared to
the prior year period. Motion’s result fared better, aided by a strong rebound
in China and strong backlog execution. Despite intensified cost mitigation,
operational margins contracted in Electrification, Industrial Automation and
Robotics & Discrete Automation compared to the prior year period, while
Motion improved its margin year-on-year.
Orders
Orders
were 18 percent lower (14 percent comparable) in the quarter compared
to the prior year period. Foreign exchange translation effects had a net
negative impact of 2 percent and portfolio changes a net negative impact
of 2 percent. The order backlog was 1 percent lower (up 5 percent
comparable) at the end of the quarter.
Regional overview
– Orders
from Europe were 18 percent lower (14 percent comparable). Most
countries had materially lower orders, driven mainly by lockdowns. Orders were
4 percent lower in Germany (2 percent comparable), 4 percent
lower in the UK (up 1 percent comparable) and 3 percent lower in
Switzerland (4 percent comparable). Orders fell materially in Italy, which
was 13 percent lower (9 percent comparable), and in Finland, Norway,
Spain and the Netherlands declined even more steeply. Orders from Sweden
advanced 9 percent (11 percent comparable).
– Orders
from the Americas were 26 percent lower (23 percent comparable), with
nearly all countries reporting lower order levels. In the US, orders declined
by 25 percent (23 percent comparable).
– In
Asia, Middle East and Africa (AMEA), orders were 11 percent lower (5 percent
comparable), with a notable drop in India of 40 percent (33 percent
comparable). In China, demand improved sequentially; orders were 3 percent
lower (up 3 percent comparable) on a year-on-year basis in the second
quarter.
End-market
overview
– In
discrete industries, orders were disrupted in most end-markets, with orders
from automotive and automotive sector-related industries as well as machine
builders severely impacted. 3C activities were challenged, although they
trended more favorably toward quarter end.
– Process
industry activities fell sharply in the quarter. Service activities were
severely constrained by lockdowns, as well as customers reducing operational
expenditure. In addition, multiple capital expenditure projects have been
deferred as customers adapt to a softer demand outlook.
– In
transport & infrastructure, investments in rail, e-mobility, water & wastewater
and data centers continued. As well, orders were resilient in electrical
distribution utilities. However, marine and renewables activities declined
steeply.
– Buildings
were challenged, with construction activity constrained by lockdowns.
Revenues
Revenues
were 14 percent lower (10 percent comparable) year-on-year. Foreign
exchange translation effects had a net negative impact of 2 percent and
portfolio changes a net negative impact of 2 percent. The book-to-bill
ratio for the quarter was 0.98x1, compared to 1.03x in the prior
year period.
Income from operations and operational EBITA
Income
from operations of $571 million increased 364 percent. Compared to
the prior year, the result benefited mainly from the absence of the charge
booked in 2019 in relation to the sale of the solar inverters business. The
year-on-year increase was also aided by a net $86 million gain related to
timing differences on commodities and foreign exchange, and lower expenses
related to restructuring and integration efforts.
Operational
EBITA1 of $651 million was 21 percent lower (20 percent
in local currencies). The operational EBITA margin1 of 10.6 percent
was 90 basis points lower year-on-year. Margins were higher in Motion
while all other businesses reported lower margins compared to the prior year
period, mainly reflecting lower volumes, despite intensified cost mitigation
efforts. Corporate & Other costs, including $19 million stranded
costs, improved when compared to the prior year period.
Net
income and basic earnings per share
Net
income from continuing operations was $395 million, significantly higher
mainly due to the aforementioned absence of the solar inverters charge. The
Group’s effective tax rate was 24.8 percent. Discontinued operations
reported $49 million in losses, reflecting a material non-operational
pension charge as well as subdued operational performance mainly due to
COVID-19 disruption.
Group net
income attributable to ABB was $319 million and basic EPS $0.15, 398 percent
higher for both on a year-on-year basis. Operational EPS of $0.221
was 35 percent3 lower compared to the prior year period.
Cash flow
from operating activities
Cash flow
from operating activities was $680 million, versus $0 million in the
second quarter of 2019. Despite the reduction in business activities, cash flow
from operating activities from continuing operations improved materially, while
the amount from discontinued operations was $32 million.
Cash flow
from operating activities from continuing operations was supported mainly by
timing differences on employee incentive payments, which were distributed in
the first quarter this year as opposed to the second quarter last year. As
well, cash flow benefited from timing of tax payments and favorable net working
capital movement. Net working capital as a percent of revenues ended the
quarter at 12.6 percent.
Q2 2020 business area results
All
commentary by business area relates to second quarter results on a year-on-year
basis.
Electrification
(EL)
Key
figures
|
|
|
ChangE
|
|
|
ChangE
|
($ millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Comparable
|
H1 2020
|
H1 2019
|
US$
|
Comparable
|
Orders
|
2,737
|
3,339
|
-18%
|
-12%
|
5,858
|
6,702
|
-13%
|
-7%
|
Order backlog
|
4,465
|
4,553
|
-2%
|
+6%
|
4,465
|
4,553
|
-2%
|
+6%
|
Revenues
|
2,764
|
3,272
|
-16%
|
-10%
|
5,537
|
6,329
|
-13%
|
-9%
|
Operational EBITA1
|
348
|
440
|
-21%
|
|
666
|
817
|
-18%
|
|
as % of operational revenues
|
12.6%
|
13.5%
|
-0.9 pts
|
|
12.0%
|
12.9%
|
-0.9 pts
|
|
– Orders were impacted by a fall in short-cycle
demand including in the buildings market, and a material decline in the oil
and gas and renewables markets. Select markets including electric
distribution utilities, rail, e-mobility and data centers offered relative
resilience. All regions declined, with demand from the Americas materially
impacted by COVID-19.
– Revenues declined due to weak short-cycle
business as well as constrained project activities, mainly in Distribution
Solutions.
– Margin contraction was essentially driven by
lower volumes. This was partly mitigated by supportive cost savings
initiatives and resilient pricing, as well as the ongoing turnaround of GEIS
and Installation Products, both of which remain firmly on track.
|
Industrial
Automation (IA)
Key
figures
|
|
|
ChangE
|
|
|
ChangE
|
($ millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Comparable
|
H1 2020
|
H1 2019
|
US$
|
Comparable
|
Orders
|
1,305
|
1,622
|
-20%
|
-17%
|
3,062
|
3,288
|
-7%
|
-4%
|
Order backlog
|
5,210
|
5,240
|
-1%
|
+3%
|
5,210
|
5,240
|
-1%
|
+3%
|
Revenues
|
1,382
|
1,580
|
-13%
|
-9%
|
2,844
|
3,098
|
-8%
|
-5%
|
Operational EBITA1
|
115
|
190
|
-39%
|
|
259
|
395
|
-34%
|
|
as % of operational revenues
|
8.4%
|
12.1%
|
-3.7 pts
|
|
9.1%
|
12.8%
|
-3.7 pts
|
|
– Orders reflect a sharp downturn across energy
and process industries as well as a fall-off in marine, even while the
business area benefited from select large order wins. Orders were lower in
all regions, with a severe drop in the Americas.
– Revenues were impacted by a substantial drop
in book-and-bill activities, particularly mobility constrained services.
– Aside from lower volumes, margins were held
back by under-absorption and negative mix, mainly from lower service
activities.
|
Motion (MO)
Key
figures
|
|
|
ChangE
|
|
|
ChangE
|
($ millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Comparable
|
H1 2020
|
H1 2019
|
US$
|
Comparable
|
Orders
|
1,586
|
1,762
|
-10%
|
-7%
|
3,487
|
3,562
|
-2%
|
0%
|
Order backlog
|
3,384
|
3,050
|
+11%
|
+13%
|
3,384
|
3,050
|
+11%
|
+13%
|
Revenues
|
1,583
|
1,641
|
-4%
|
-1%
|
3,093
|
3,246
|
-5%
|
-3%
|
Operational EBITA1
|
279
|
275
|
+1%
|
|
509
|
538
|
-5%
|
|
as % of operational revenues
|
17.7%
|
16.7%
|
+1.0 pts
|
|
16.5%
|
16.6%
|
-0.1 pts
|
|
– A broad-based short-cycle downturn weighed on
orders, even while orders remained healthy in the rail and chemicals sectors.
Orders across the Americas fell steeply, substantially mitigated by a strong
rebound in China.
– Resilient revenue development mainly reflects
strong backlog execution.
– Margin expansion was driven by strong cost
actions and favorable mix.
|
Robotics
& Discrete Automation (RA)
Key
figures
|
|
|
ChangE
|
|
|
ChangE
|
($ millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Comparable
|
H1 2020
|
H1 2019
|
US$
|
Comparable
|
Orders
|
638
|
883
|
-28%
|
-25%
|
1,449
|
1,850
|
-22%
|
-19%
|
Order backlog
|
1,478
|
1,586
|
-7%
|
-4%
|
1,478
|
1,586
|
-7%
|
-4%
|
Revenues
|
629
|
845
|
-26%
|
-23%
|
1,300
|
1,696
|
-23%
|
-21%
|
Operational EBITA1
|
43
|
105
|
-59%
|
|
102
|
200
|
-49%
|
|
as % of operational revenues
|
6.8%
|
12.3%
|
-5.5 pts
|
|
7.8%
|
11.8%
|
-4.0 pts
|
|
– Against a tough comparison base for large
orders, RA’s order result moved sharply lower, as expected. Activity levels
declined materially across key end-markets, including automotive, general
industry and machine builders. Orders fell sharply in Europe and the
Americas, while demand from the AMEA region remained weak.
– Revenues were severely impacted by lower
systems business and service activities, as well as lower product volumes.
– Margin contraction reflects steep volume
decline, which outweighed supportive cost actions.
|
Corporate
and Other
Key
figures
|
|
|
ChangE
|
|
|
ChangE
|
($ millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
H1 2020
|
H1 2019
|
US$
|
Orders
|
(212)
|
(205)
|
(7)
|
(456)
|
(388)
|
(68)
|
Revenues
|
(204)
|
(167)
|
(37)
|
(404)
|
(351)
|
(53)
|
|
|
|
|
|
|
|
Income from operations
|
(153)
|
(285)
|
+132
|
(326)
|
(515)
|
+189
|
Operational EBITA1
|
(134)
|
(185)
|
+51
|
(249)
|
(359)
|
+110
|
– Corporate and Other operational EBITA
improved to -$134 million. Compared to a year ago this reflects lower
stranded and lower ongoing corporate costs.
– In the second quarter of 2020, stranded costs
of $19 million were recognized, impacting operational EBITA margin by 30
basis points.
|
Corporate and Other orders
and revenues primarily represent intersegment eliminations.
|
Capital structure optimization
ABB
divested 80.1 percent of its Power Grids business to Hitachi on July 1,
2020, as planned, delivering on an important milestone in the company’s
transformation agenda as announced in December 2018.
ABB is
committed to returning to shareholders net cash proceeds from the Power Grids
divestment of $7.6-7.8 billion. ABB will initially launch a share buyback
program of 10 percent6 of the company’s share capital to begin
imminently. This represents about 180 million shares in addition to those
already held in treasury.
Also, as
part of the overall capital structure optimization program, ABB has now repaid
fully the €2 billion short-term revolving credit facility put in place to
strengthen liquidity in the face of COVID-19. The Group plans to implement
further deleveraging actions, including a review of certain defined benefit
pension structures, as well as repayment of a €1 billion bond that matures
in October 2020. ABB aims to maintain its single A credit rating.
“ABB’s
capital structure optimization during the coming years will focus on
shareholder returns, by executing on its share buyback program, as planned, as
well as by improving the company’s risk profile and finance costs through an
efficient deleveraging strategy. In these challenging times, ABB has a
resilient financial framework and strong balance sheet,” said Timo Ihamuotila,
CFO of ABB.
Transformation progress
ABB’s CEO
presented his First Perspectives to investors on June 10, 2020, outlining ABB’s
way forward on creating value for shareholders, customers and employees.
Following a new ABB Way of working, the Group intends to accelerate its
transition to a fully decentralized operating model. This comprises four
business areas – Electrification, Industrial Automation, Motion and Robotics
& Discrete Automation – with 18 divisions, governed by a lean corporate.
Going forward, the 18 divisions will have full accountability for their P&L
and operational balance sheet. ABB’s management team will prioritize
improvement of the Group’s financial performance, with a clear profitability
focus for underperforming
__
6 Maximum 10 percent of the company’s issued share capital,
including treasury shares.
divisions, as well as active portfolio management. A new,
division level, scorecard system using standardized KPIs to measure performance
and drive continuous improvement will be introduced in the third quarter of
2020. ABB is on track for faster delivery of ~$500 million per annum net
savings initiated through the ABB-OS simplification program.
ABB plans to host a Capital Markets Day in November 2020 that will
provide more detail on the portfolio’s evolution and business area and
divisional strategies, while also setting out ABB’s 2030 sustainability
targets.
Short-term outlook
The
global economy is expected to contract in 2020 after a rapid deterioration in
outlook driven by the COVID-19 pandemic. Despite unprecedented stimuli by
governments and central banks around the world and a recovery in economic
activity in China in the second quarter, macro-indicators continue to point to
a deep global recession with uncertainty around the pace of recovery. Many countries
continue to face ongoing or new restrictions, with anticipated long-term
economic consequences.
The
impact of COVID-19 continues to weigh on the short-term outlook across many
end-markets, and particularly in oil and gas, conventional power generation,
automotive, marine and buildings. Some end markets such as electrical
distribution, transport, data centers and food and beverage continue to show
relative resilience.
Potential
easing of COVID-19 impacts remain subject to considerable uncertainties.
Against this background, ABB expects some improvement in year-on-year order
decline already in the third quarter. Revenues are expected to remain strongly
impacted on a year-on-year basis, at best recovering somewhat in the fourth
quarter.
As ABB
continues to adapt its operations and cost base to safeguard profitability, it
expects its operational margin to steady on a sequential basis. The company
anticipates resilient cash delivery for the full year.
More information
The Q2
2020 results press release and presentation slides are available on the ABB
News Center at www.abb.com/news and on the Investor Relations homepage at
www.abb.com/investorrelations. A conference call and webcast for analysts and
investors is scheduled to begin today at 10:00 a.m. CEST (9:00 a.m. BST). 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.
ABB (ABBN:
SIX Swiss Ex) is a leading global technology company that energizes the
transformation of society and industry to achieve a more productive,
sustainable future. By connecting software to its electrification, robotics,
automation and motion portfolio, ABB pushes the boundaries of technology to
drive performance to new levels. With a history of excellence stretching back
more than 130 years, ABB’s success is driven by about 110,000 talented
employees in over 100 countries.
Investor calendar
|
Q3 2020 results
|
October 23, 2020
|
Capital Markets Day
|
November 2020
|
Important
notice about forward-looking information
This press release includes forward-looking information and
statements as well as other statements concerning the outlook for our business,
including those in the sections of this release titled “Capital structure
optimization”, “Transformation progress” and “Short-term outlook”. 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,” “believes,” “estimates,” “plans”, “targets” or similar expressions.
However, there are many risks and uncertainties, many of which are beyond our
control, that could cause our actual results to differ materially from the
forward-looking information and statements made in this press release and which
could affect our ability to achieve any or all of our stated targets. The
important factors that could cause such differences include, among others,
business risks associated with the volatile global economic environment and
political conditions, costs associated with compliance activities, market
acceptance of new products and services, changes in governmental regulations
and currency exchange rates and such other factors as may be discussed from
time to time in ABB Ltd’s filings with the U.S. Securities and Exchange
Commission, including its Annual Reports on Form 20-F. Although ABB Ltd believes
that its expectations reflected in any such forward-looking statement are based
upon reasonable assumptions, it can give no assurance that those expectations
will be achieved.
Zurich, July 22, 2020
Björn Rosengren, CEO
—
For more information please contact:
|
Media Relations
Phone: +41 43 317 71 11
Email: media.relations@ch.abb.com
|
Investor Relations
Phone: +41 43 317 71 11
Email:
investor.relations@ch.abb.com
|
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
|
1 Q2
2020 Financial Information
2 Q2
2020 Financial Information
—
Key Figures
|
|
|
|
|
CHANGE
|
|
($ in
millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Comparable(1)
|
|
Orders
|
6,054
|
7,401
|
-18%
|
-14%
|
|
Order
backlog (end June)
|
13,917
|
14,016
|
-1%
|
5%
|
|
Revenues
|
6,154
|
7,171
|
-14%
|
-10%
|
|
Income
from operations
|
571
|
123
|
364%
|
|
|
Operational
EBITA(1)
|
651
|
825
|
-21%
|
-20%(2)
|
|
|
as % of
operational revenues(1)
|
10.6%
|
11.5%
|
-0.9 pts
|
|
|
Income
from continuing operations, net of tax
|
395
|
(54)
|
n.a.
|
|
|
Net
income attributable to ABB
|
319
|
64
|
398%
|
|
|
Basic
earnings per share ($)
|
0.15
|
0.03
|
398%(3)
|
|
|
Operational
earnings per share(1) ($)
|
0.22
|
0.34
|
-35%(3)
|
-33%(3)
|
|
Cash
flow from operating activities(4)
|
680
|
-
|
n.a
|
|
|
|
|
|
|
CHANGE
|
|
($ in
millions, unless otherwise indicated)
|
H1 2020
|
H1 2019
|
US$
|
Comparable(1)
|
|
Orders
|
13,400
|
15,014
|
-11%
|
-7%
|
|
Revenues
|
12,370
|
14,018
|
-12%
|
-8%
|
|
Income
from operations
|
944
|
713
|
32%
|
|
|
Operational
EBITA(1)
|
1,287
|
1,591
|
-19%
|
-18%(2)
|
|
|
as % of
operational revenues(1)
|
10.4%
|
11.4%
|
-1.0 pts
|
|
|
Income
from continuing operations, net of tax
|
721
|
361
|
100%
|
|
|
Net
income attributable to ABB
|
695
|
599
|
16%
|
|
|
Basic
earnings per share ($)
|
0.33
|
0.28
|
16%(3)
|
|
|
Operational
earnings per share(1) ($)
|
0.52
|
0.64
|
-19%(3)
|
-18%(3)
|
|
Cash
flow from operating activities(4)
|
103
|
(256)
|
n.a
|
|
(1) For
a reconciliation of non-GAAP measures see “Supplemental Reconciliations and Definitions” on page 36.
(2) Constant currency (not adjusted for
portfolio changes).
(3) EPS growth rates are computed using
unrounded amounts. Comparable operational earnings per share is in constant
currency (2019 exchange rates not adjusted for changes in the business portfolio).
(4) Cash flow from operating activities
includes both continuing and discontinued operations.
3 Q2
2020 Financial Information
|
|
|
|
CHANGE
|
|
($ in
millions, unless otherwise indicated)
|
Q2 2020
|
Q2 2019
|
US$
|
Local
|
Comparable
|
|
Orders
|
ABB
Group
|
6,054
|
7,401
|
-18%
|
-16%
|
-14%
|
|
|
Electrification
|
2,737
|
3,339
|
-18%
|
-16%
|
-12%
|
|
|
Industrial
Automation
|
1,305
|
1,622
|
-20%
|
-17%
|
-17%
|
|
|
Motion
|
1,586
|
1,762
|
-10%
|
-7%
|
-7%
|
|
|
Robotics
& Discrete Automation
|
638
|
883
|
-28%
|
-25%
|
-25%
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(212)
|
(205)
|
|
Order
backlog (end June)
|
ABB
Group
|
13,917
|
14,016
|
-1%
|
3%
|
5%
|
|
|
Electrification
|
4,465
|
4,553
|
-2%
|
1%
|
6%
|
|
|
Industrial
Automation
|
5,210
|
5,240
|
-1%
|
3%
|
3%
|
|
|
Motion
|
3,384
|
3,050
|
11%
|
13%
|
13%
|
|
|
Robotics
& Discrete Automation
|
1,478
|
1,586
|
-7%
|
-4%
|
-4%
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(620)
|
(413)
|
|
Revenues
|
ABB
Group
|
6,154
|
7,171
|
-14%
|
-12%
|
-10%
|
|
|
Electrification
|
2,764
|
3,272
|
-16%
|
-13%
|
-10%
|
|
|
Industrial
Automation
|
1,382
|
1,580
|
-13%
|
-9%
|
-9%
|
|
|
Motion
|
1,583
|
1,641
|
-4%
|
-1%
|
-1%
|
|
|
Robotics
& Discrete Automation
|
629
|
845
|
-26%
|
-23%
|
-23%
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl. intersegment
eliminations)
|
(204)
|
(167)
|
|
Income
from operations
|
ABB
Group
|
571
|
123
|
|
|
|
|
|
Electrification
|
305
|
(104)
|
|
|
|
|
|
Industrial
Automation
|
117
|
187
|
|
|
|
|
|
Motion
|
284
|
249
|
|
|
|
|
|
Robotics
& Discrete Automation
|
18
|
76
|
|
|
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(153)
|
(285)
|
|
Income
from operations %
|
ABB
Group
|
9.3%
|
1.7%
|
|
|
|
|
|
Electrification
|
11.0%
|
(3.2)%
|
|
|
|
|
|
Industrial
Automation
|
8.5%
|
11.8%
|
|
|
|
|
|
Motion
|
17.9%
|
15.2%
|
|
|
|
|
|
Robotics
& Discrete Automation
|
2.9%
|
9.0%
|
|
|
|
|
Operational
EBITA
|
ABB
Group
|
651
|
825
|
-21%
|
-20%
|
|
|
|
Electrification
|
348
|
440
|
-21%
|
-18%
|
|
|
|
Industrial
Automation
|
115
|
190
|
-39%
|
-37%
|
|
|
|
Motion
|
279
|
275
|
1%
|
4%
|
|
|
|
Robotics
& Discrete Automation
|
43
|
105
|
-59%
|
-58%
|
|
|
|
Corporate
and Other(1)
|
|
|
|
|
|
|
|
(incl. intersegment
eliminations)
|
(134)
|
(185)
|
|
|
|
|
Operational
EBITA %
|
ABB
Group
|
10.6%
|
11.5%
|
|
|
|
|
|
Electrification
|
12.6%
|
13.5%
|
|
|
|
|
|
Industrial
Automation
|
8.4%
|
12.1%
|
|
|
|
|
|
Motion
|
17.7%
|
16.7%
|
|
|
|
|
|
Robotics
& Discrete Automation
|
6.8%
|
12.3%
|
|
|
|
|
Cash
flow from operating activities
|
ABB
Group
|
680
|
–
|
|
|
|
|
|
Electrification
|
277
|
232
|
|
|
|
|
|
Industrial
Automation
|
75
|
(4)
|
|
|
|
|
|
Motion
|
279
|
152
|
|
|
|
|
|
Robotics
& Discrete Automation
|
57
|
67
|
|
|
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(40)
|
(516)
|
|
|
|
|
|
Discontinued
operations
|
32
|
69
|
|
|
|
|
(1)
Corporate and Other includes Stranded corporate costs of $19 million and $66
million for the three months ended June 30, 2020 and 2019, respectively.
|
4 Q2
2020 Financial Information
|
|
|
|
CHANGE
|
|
($ in
millions, unless otherwise indicated)
|
H1 2020
|
H1 2019
|
US$
|
Local
|
Comparable
|
|
Orders
|
ABB
Group
|
13,400
|
15,014
|
-11%
|
-9%
|
-7%
|
|
|
Electrification
|
5,858
|
6,702
|
-13%
|
-10%
|
-7%
|
|
|
Industrial
Automation
|
3,062
|
3,288
|
-7%
|
-4%
|
-4%
|
|
|
Motion
|
3,487
|
3,562
|
-2%
|
0%
|
0%
|
|
|
Robotics
& Discrete Automation
|
1,449
|
1,850
|
-22%
|
-19%
|
-19%
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(456)
|
(388)
|
|
|
|
|
Order
backlog (end June)
|
ABB
Group
|
13,917
|
14,016
|
-1%
|
3%
|
5%
|
|
|
Electrification
|
4,465
|
4,553
|
-2%
|
1%
|
6%
|
|
|
Industrial
Automation
|
5,210
|
5,240
|
-1%
|
3%
|
3%
|
|
|
Motion
|
3,384
|
3,050
|
11%
|
13%
|
13%
|
|
|
Robotics
& Discrete Automation
|
1,478
|
1,586
|
-7%
|
-4%
|
-4%
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(620)
|
(413)
|
|
Revenues
|
ABB
Group
|
12,370
|
14,018
|
-12%
|
-9%
|
-8%
|
|
|
Electrification
|
5,537
|
6,329
|
-13%
|
-10%
|
-9%
|
|
|
Industrial
Automation
|
2,844
|
3,098
|
-8%
|
-5%
|
-5%
|
|
|
Motion
|
3,093
|
3,246
|
-5%
|
-3%
|
-3%
|
|
|
Robotics
& Discrete Automation
|
1,300
|
1,696
|
-23%
|
-21%
|
-21%
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(404)
|
(351)
|
|
Income
from operations
|
ABB
Group
|
944
|
713
|
|
|
|
|
|
Electrification
|
504
|
193
|
|
|
|
|
|
Industrial
Automation
|
241
|
382
|
|
|
|
|
|
Motion
|
475
|
500
|
|
|
|
|
|
Robotics
& Discrete Automation
|
50
|
153
|
|
|
|
|
|
Corporate
and Other
|
|
|
|
|
(incl.
intersegment eliminations)
|
(326)
|
(515)
|
|
Income
from operations %
|
ABB
Group
|
7.6%
|
5.1%
|
|
|
|
|
|
Electrification
|
9.1%
|
3.0%
|
|
|
|
|
|
Industrial
Automation
|
8.5%
|
12.3%
|
|
|
|
|
|
Motion
|
15.4%
|
15.4%
|
|
|
|
|
|
Robotics
& Discrete Automation
|
3.8%
|
9.0%
|
|
|
|
|
Operational
EBITA
|
ABB
Group
|
1,287
|
1,591
|
-19%
|
-18%
|
|
|
|
Electrification
|
666
|
817
|
-18%
|
-16%
|
|
|
|
Industrial
Automation
|
259
|
395
|
-34%
|
-33%
|
|
|
|
Motion
|
509
|
538
|
-5%
|
-4%
|
|
|
|
Robotics
& Discrete Automation
|
102
|
200
|
-49%
|
-47%
|
|
|
|
Corporate
and Other(1)
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(249)
|
(359)
|
|
|
|
|
Operational
EBITA %
|
ABB
Group
|
10.4%
|
11.4%
|
|
|
|
|
|
Electrification
|
12.0%
|
12.9%
|
|
|
|
|
|
Industrial
Automation
|
9.1%
|
12.8%
|
|
|
|
|
|
Motion
|
16.5%
|
16.6%
|
|
|
|
|
|
Robotics
& Discrete Automation
|
7.8%
|
11.8%
|
|
|
|
|
Cash
flow from operating activities
|
ABB
Group
|
103
|
(256)
|
|
|
|
|
|
Electrification
|
212
|
230
|
|
|
|
|
|
Industrial
Automation
|
34
|
40
|
|
|
|
|
|
Motion
|
388
|
295
|
|
|
|
|
|
Robotics
& Discrete Automation
|
110
|
95
|
|
|
|
|
|
Corporate
and Other
|
|
|
|
|
|
|
|
(incl.
intersegment eliminations)
|
(492)
|
(826)
|
|
|
|
|
|
Discontinued
operations
|
(149)
|
(90)
|
|
|
|
|
(1)
Corporate and Other includes Stranded corporate costs of $40 million and $133
million for the six months ended June 30, 2020 and 2019, respectively.
|
5 Q2
2020 Financial Information
Operational EBITA
|
|
|
|
Industrial
|
|
Robotics
& Discrete
|
|
|
ABB
|
Electrification
|
Automation
|
Motion
|
Automation
|
|
($ in
millions, unless otherwise indicated)
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
|
Revenues
|
6,154
|
7,171
|
2,764
|
3,272
|
1,382
|
1,580
|
1,583
|
1,641
|
629
|
845
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences
in total revenues
|
(16)
|
3
|
–
|
(4)
|
(18)
|
(5)
|
(4)
|
1
|
4
|
7
|
|
Operational
revenues
|
6,138
|
7,174
|
2,764
|
3,268
|
1,364
|
1,575
|
1,579
|
1,642
|
633
|
852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
571
|
123
|
305
|
(104)
|
117
|
187
|
284
|
249
|
18
|
76
|
|
Acquisition-related
amortization
|
65
|
67
|
29
|
30
|
1
|
1
|
13
|
13
|
19
|
19
|
|
Restructuring,
related and
|
|
|
|
|
|
|
|
|
|
|
|
implementation
costs
|
67
|
74
|
29
|
13
|
13
|
7
|
9
|
2
|
4
|
2
|
|
Changes
in obligations related to
|
|
|
|
|
|
|
|
|
|
|
|
divested
businesses
|
1
|
4
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes
in pre-acquisition estimates
|
–
|
13
|
–
|
13
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Gains
and losses from sale of businesses
|
4
|
3
|
4
|
(4)
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Fair
value adjustment on assets and
|
|
|
|
|
|
|
|
|
|
|
|
liabilities
held for sale
|
–
|
455
|
–
|
455
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Acquisition-
and divestment-related
|
|
|
|
|
|
|
|
|
|
|
|
expenses
and integration costs
|
16
|
30
|
16
|
29
|
–
|
–
|
–
|
–
|
–
|
1
|
|
Certain
other non-operational items
|
–
|
43
|
(7)
|
1
|
1
|
–
|
4
|
2
|
1
|
1
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences
in income from operations
|
(73)
|
13
|
(28)
|
7
|
(17)
|
(5)
|
(31)
|
9
|
1
|
6
|
|
Operational
EBITA
|
651
|
825
|
348
|
440
|
115
|
190
|
279
|
275
|
43
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational
EBITA margin (%)
|
10.6%
|
11.5%
|
12.6%
|
13.5%
|
8.4%
|
12.1%
|
17.7%
|
16.7%
|
6.8%
|
12.3%
|
|
|
|
|
Industrial
|
|
Robotics
& Discrete
|
|
|
ABB
|
Electrification
|
Automation
|
Motion
|
Automation
|
|
($ in
millions, unless otherwise indicated)
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
|
Revenues
|
12,370
|
14,018
|
5,537
|
6,329
|
2,844
|
3,098
|
3,093
|
3,246
|
1,300
|
1,696
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences
in total revenues
|
9
|
(8)
|
10
|
(9)
|
(1)
|
(5)
|
(7)
|
1
|
2
|
3
|
|
Operational
revenues
|
12,379
|
14,010
|
5,547
|
6,320
|
2,843
|
3,093
|
3,086
|
3,247
|
1,302
|
1,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
944
|
713
|
504
|
193
|
241
|
382
|
475
|
500
|
50
|
153
|
|
Acquisition-related
amortization
|
130
|
135
|
57
|
59
|
2
|
2
|
26
|
27
|
38
|
39
|
|
Restructuring,
related and
|
|
|
|
|
|
|
|
|
|
|
|
implementation
costs
|
107
|
142
|
44
|
53
|
16
|
12
|
11
|
5
|
11
|
3
|
|
Changes
in obligations related to
|
|
|
|
|
|
|
|
|
|
|
|
divested
businesses
|
1
|
7
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Changes
in pre-acquisition estimates
|
–
|
13
|
–
|
13
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Gains
and losses from sale of businesses
|
5
|
4
|
5
|
(3)
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Fair
value adjustment on assets and
|
|
|
|
|
|
|
|
|
|
|
|
liabilities
held for sale
|
19
|
455
|
19
|
455
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Acquisition-
and divestment-related
|
|
|
|
|
|
|
|
|
|
|
|
expenses
and integration costs
|
27
|
54
|
27
|
51
|
–
|
–
|
–
|
–
|
–
|
1
|
|
Certain
other non-operational items
|
47
|
76
|
(7)
|
2
|
1
|
2
|
9
|
5
|
2
|
1
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
|
|
|
|
differences
in income from operations
|
7
|
(8)
|
17
|
(6)
|
(1)
|
(3)
|
(12)
|
1
|
1
|
3
|
|
Operational
EBITA
|
1,287
|
1,591
|
666
|
817
|
259
|
395
|
509
|
538
|
102
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational
EBITA margin (%)
|
10.4%
|
11.4%
|
12.0%
|
12.9%
|
9.1%
|
12.8%
|
16.5%
|
16.6%
|
7.8%
|
11.8%
|
6 Q2
2020 Financial Information
Depreciation
and Amortization
|
|
|
|
Industrial
|
|
Robotics
& Discrete
|
|
|
ABB
|
Electrification
|
Automation
|
Motion
|
Automation
|
|
($ in
millions)
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
Q2 20
|
Q2 19
|
|
Depreciation
|
147
|
160
|
63
|
63
|
14
|
12
|
28
|
28
|
11
|
11
|
|
Amortization
|
81
|
89
|
34
|
39
|
3
|
2
|
13
|
14
|
19
|
20
|
|
including
total acquisition-related amortization of:
|
65
|
67
|
29
|
30
|
1
|
1
|
13
|
13
|
19
|
19
|
|
|
|
|
|
|
Industrial
|
|
|
Robotics
& Discrete
|
|
|
ABB
|
Electrification
|
Automation
|
Motion
|
Automation
|
|
($ in
millions)
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
H1 20
|
H1 19
|
|
Depreciation
|
292
|
304
|
124
|
128
|
26
|
23
|
56
|
56
|
22
|
22
|
|
Amortization
|
163
|
176
|
68
|
76
|
5
|
4
|
27
|
29
|
39
|
40
|
|
including
total acquisition-related amortization of:
|
130
|
135
|
57
|
59
|
2
|
2
|
26
|
27
|
38
|
39
|
Orders received and revenues by region
|
($ in
millions, unless otherwise indicated)
|
Orders
received
|
CHANGE
|
Revenues
|
CHANGE
|
|
|
|
|
|
|
Com-
|
|
|
|
|
Com-
|
|
Q2 20
|
Q2 19
|
US$
|
Local
|
parable
|
Q2 20
|
Q2 19
|
US$
|
Local
|
parable
|
|
Europe
|
2,181
|
2,658
|
-18%
|
-15%
|
-14%
|
2,217
|
2,535
|
-13%
|
-9%
|
-8%
|
|
The
Americas
|
1,758
|
2,379
|
-26%
|
-24%
|
-23%
|
1,872
|
2,321
|
-19%
|
-18%
|
-17%
|
|
Asia,
Middle East and Africa
|
2,056
|
2,321
|
-11%
|
-8%
|
-5%
|
2,004
|
2,258
|
-11%
|
-9%
|
-5%
|
|
Intersegment
orders/revenues(1)
|
59
|
43
|
|
|
|
61
|
57
|
|
|
|
|
ABB
Group
|
6,054
|
7,401
|
-18%
|
-16%
|
-14%
|
6,154
|
7,171
|
-14%
|
-12%
|
-10%
|
|
($ in
millions, unless otherwise indicated)
|
Orders received
|
CHANGE
|
Revenues
|
CHANGE
|
|
|
|
|
|
|
Com-
|
|
|
|
|
Com-
|
|
H1 20
|
H1 19
|
US$
|
Local
|
parable
|
H1 20
|
H1 19
|
US$
|
Local
|
parable
|
|
Europe
|
4,994
|
5,439
|
-8%
|
-5%
|
-4%
|
4,588
|
4,982
|
-8%
|
-5%
|
-4%
|
|
The
Americas
|
3,998
|
4,611
|
-13%
|
-12%
|
-11%
|
3,964
|
4,519
|
-12%
|
-11%
|
-11%
|
|
Asia,
Middle East and Africa
|
4,286
|
4,862
|
-12%
|
-9%
|
-6%
|
3,710
|
4,407
|
-16%
|
-14%
|
-11%
|
|
Intersegment
orders/revenues(1)
|
122
|
102
|
|
|
|
108
|
110
|
|
|
|
|
ABB
Group
|
13,400
|
15,014
|
-11%
|
-9%
|
-7%
|
12,370
|
14,018
|
-12%
|
-9%
|
-8%
|
(1) Intersegment orders/revenues
include sales to the Power Grids business which is presented as discontinued
operations and are not eliminated from Total orders/revenues.
7 Q2
2020 Financial Information
—
Consolidated
Financial Information
|
ABB Ltd Consolidated
Income Statements (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in
millions, except per share data in $)
|
Jun. 30, 2020
|
Jun. 30, 2019
|
Jun. 30, 2020
|
Jun. 30, 2019
|
|
Sales
of products
|
10,028
|
11,392
|
5,035
|
5,832
|
|
Sales
of services and other
|
2,342
|
2,626
|
1,119
|
1,339
|
|
Total
revenues
|
12,370
|
14,018
|
6,154
|
7,171
|
|
Cost of
sales of products
|
(7,039)
|
(7,946)
|
(3,464)
|
(4,069)
|
|
Cost of
services and other
|
(1,434)
|
(1,563)
|
(703)
|
(802)
|
|
Total
cost of sales
|
(8,473)
|
(9,509)
|
(4,167)
|
(4,871)
|
|
Gross
profit
|
3,897
|
4,509
|
1,987
|
2,300
|
|
Selling,
general and administrative expenses
|
(2,432)
|
(2,784)
|
(1,180)
|
(1,429)
|
|
Non-order
related research and development expenses
|
(521)
|
(583)
|
(262)
|
(298)
|
|
Other
income (expense), net
|
–
|
(429)
|
26
|
(450)
|
|
Income
from operations
|
944
|
713
|
571
|
123
|
|
Interest
and dividend income
|
27
|
37
|
9
|
18
|
|
Interest
and other finance expense
|
(112)
|
(123)
|
(90)
|
(61)
|
|
Non-operational
pension (cost) credit
|
71
|
44
|
35
|
21
|
|
Income
from continuing operations before taxes
|
930
|
671
|
525
|
101
|
|
Provision
for taxes
|
(209)
|
(310)
|
(130)
|
(155)
|
|
Income
(loss) from continuing operations, net of tax
|
721
|
361
|
395
|
(54)
|
|
Income
(loss) from discontinued operations, net of tax
|
5
|
291
|
(49)
|
142
|
|
Net
income
|
726
|
652
|
346
|
88
|
|
Net
income attributable to noncontrolling interests
|
(31)
|
(53)
|
(27)
|
(24)
|
|
Net
income attributable to ABB
|
695
|
599
|
319
|
64
|
|
|
|
|
|
|
|
Amounts
attributable to ABB shareholders:
|
|
|
|
|
|
Income (loss)
from continuing operations, net of tax
|
703
|
325
|
378
|
(72)
|
|
Income
(loss) from discontinued operations, net of tax
|
(8)
|
274
|
(59)
|
136
|
|
Net
income
|
695
|
599
|
319
|
64
|
|
|
|
|
|
|
|
Basic
earnings per share attributable to ABB shareholders:
|
|
|
|
|
|
Income
(loss) from continuing operations, net of tax
|
0.33
|
0.15
|
0.18
|
(0.03)
|
|
Income
(loss) from discontinued operations, net of tax
|
0.00
|
0.13
|
(0.03)
|
0.06
|
|
Net
income
|
0.33
|
0.28
|
0.15
|
0.03
|
|
|
|
|
|
|
|
Diluted
earnings per share attributable to ABB shareholders:
|
|
|
|
|
|
Income (loss)
from continuing operations, net of tax
|
0.33
|
0.15
|
0.18
|
(0.03)
|
|
Income
(loss) from discontinued operations, net of tax
|
0.00
|
0.13
|
(0.03)
|
0.06
|
|
Net
income
|
0.33
|
0.28
|
0.15
|
0.03
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in millions) used to compute:
|
|
|
|
|
|
Basic
earnings per share attributable to ABB shareholders
|
2,134
|
2,132
|
2,134
|
2,132
|
|
Diluted
earnings per share attributable to ABB shareholders
|
2,137
|
2,134
|
2,137
|
2,132
|
|
Due to
rounding, numbers presented may not add to the totals provided.
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to the Consolidated Financial Information
|
|
|
|
|
8 Q2
2020 Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
ABB Ltd Condensed
Consolidated Statements of Comprehensive
|
|
Income (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
Three months
ended
|
|
($ in
millions)
|
Jun. 30, 2020
|
Jun. 30, 2019
|
Jun. 30, 2020
|
Jun. 30, 2019
|
|
Total
comprehensive income, net of tax
|
484
|
652
|
611
|
90
|
|
Total
comprehensive income attributable to noncontrolling interests, net of tax
|
(27)
|
(54)
|
(31)
|
(19)
|
|
Total comprehensive
income attributable to ABB shareholders, net of tax
|
457
|
598
|
580
|
71
|
|
Due to
rounding, numbers presented may not add to the totals provided.
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to the Consolidated Financial Information
|
|
|
|
|
9 Q2
2020 Financial Information
|
—
|
|
|
|
ABB Ltd Consolidated Balance
Sheets (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
($ in
millions, except share data)
|
Jun. 30, 2020
|
Dec. 31, 2019
|
|
Cash
and equivalents
|
2,518
|
3,544
|
|
Marketable
securities and short-term investments
|
1,878
|
566
|
|
Receivables,
net
|
6,150
|
6,434
|
|
Contract
assets
|
1,110
|
1,025
|
|
Inventories,
net
|
4,395
|
4,184
|
|
Prepaid
expenses
|
256
|
191
|
|
Other
current assets
|
668
|
674
|
|
Current
assets held for sale and in discontinued operations
|
10,712
|
9,840
|
|
Total
current assets
|
27,687
|
26,458
|
|
|
|
|
|
Property,
plant and equipment, net
|
3,861
|
3,972
|
|
Operating
lease right-of-use assets
|
890
|
994
|
|
Goodwill
|
10,830
|
10,825
|
|
Other
intangible assets, net
|
2,112
|
2,252
|
|
Prepaid
pension and other employee benefits
|
145
|
133
|
|
Investments
in equity-accounted companies
|
37
|
33
|
|
Deferred
taxes
|
840
|
910
|
|
Other
non-current assets
|
501
|
531
|
|
Total
assets
|
46,903
|
46,108
|
|
|
|
|
|
Accounts
payable, trade
|
4,062
|
4,353
|
|
Contract
liabilities
|
1,703
|
1,719
|
|
Short-term
debt and current maturities of long-term debt
|
6,383
|
2,287
|
|
Current
operating leases
|
282
|
305
|
|
Provisions
for warranties
|
777
|
816
|
|
Other
provisions
|
1,329
|
1,375
|
|
Other
current liabilities
|
3,447
|
3,761
|
|
Current
liabilities held for sale and in discontinued operations
|
5,226
|
5,650
|
|
Total
current liabilities
|
23,209
|
20,266
|
|
|
|
|
|
Long-term
debt
|
6,237
|
6,772
|
|
Non-current
operating leases
|
635
|
717
|
|
Pension
and other employee benefits
|
1,845
|
1,793
|
|
Deferred
taxes
|
840
|
911
|
|
Other
non-current liabilities
|
1,562
|
1,669
|
|
Total
liabilities
|
34,328
|
32,128
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
Common
stock, CHF 0.12 par value
|
|
|
|
(2,168,148,264
issued shares at June 30, 2020, and December 31, 2019)
|
188
|
188
|
|
Additional
paid-in capital
|
62
|
73
|
|
Retained
earnings
|
18,495
|
19,640
|
|
Accumulated
other comprehensive loss
|
(5,828)
|
(5,590)
|
|
Treasury
stock, at cost
|
|
|
|
(33,573,603
and 34,647,153 shares at June 30, 2020, and December 31, 2019,
respectively)
|
(761)
|
(785)
|
|
Total
ABB stockholders’ equity
|
12,156
|
13,526
|
|
Noncontrolling
interests
|
419
|
454
|
|
Total
stockholders’ equity
|
12,575
|
13,980
|
|
Total
liabilities and stockholders’ equity
|
46,903
|
46,108
|
|
Due to
rounding, numbers presented may not add to the totals provided.
|
|
|
|
|
|
|
|
See
Notes to the Consolidated Financial Information
|
|
|
10 Q2
2020 Financial Information
|
—
|
|
|
|
|
|
ABB Ltd Consolidated
Statements of Cash Flows (unaudited)
|
|
|
|
|
|
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in
millions)
|
Jun. 30, 2020
|
Jun. 30, 2019
|
Jun. 30, 2020
|
Jun. 30, 2019
|
|
Operating
activities:
|
|
|
|
|
|
Net
income
|
726
|
652
|
346
|
88
|
|
Loss
(income) from discontinued operations, net of tax
|
(5)
|
(291)
|
49
|
(142)
|
|
Adjustments
to reconcile net income to
|
|
|
|
|
|
net
cash provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation
and amortization
|
455
|
480
|
228
|
249
|
|
Deferred
taxes
|
(1)
|
(62)
|
(45)
|
(33)
|
|
Net
loss (gain) from derivatives and foreign exchange
|
25
|
(4)
|
(48)
|
22
|
|
Net
loss (gain) from sale of property, plant and equipment
|
(4)
|
(40)
|
4
|
(6)
|
|
Net
loss (gain) from sale of businesses
|
5
|
4
|
4
|
3
|
|
Fair
value adjustment on assets and liabilities held for sale
|
19
|
455
|
–
|
455
|
|
Share-based
payment arrangements
|
21
|
25
|
14
|
14
|
|
Other
|
(105)
|
(60)
|
(68)
|
(34)
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
Trade
receivables, net
|
58
|
(151)
|
119
|
(66)
|
|
Contract
assets and liabilities
|
(87)
|
(142)
|
(46)
|
(114)
|
|
Inventories,
net
|
(114)
|
(286)
|
187
|
(73)
|
|
Accounts
payable, trade
|
(214)
|
(195)
|
(147)
|
112
|
|
Accrued
liabilities
|
(75)
|
(285)
|
(16)
|
(439)
|
|
Provisions,
net
|
(60)
|
(5)
|
(7)
|
13
|
|
Income
taxes payable and receivable
|
(157)
|
(30)
|
61
|
(41)
|
|
Other
assets and liabilities, net
|
(235)
|
(231)
|
13
|
(77)
|
|
Net
cash provided by (used in) operating activities – continuing operations
|
252
|
(166)
|
648
|
(69)
|
|
Net
cash provided by (used in) operating activities – discontinued operations
|
(149)
|
(90)
|
32
|
69
|
|
Net
cash provided by (used in) operating activities
|
103
|
(256)
|
680
|
–
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Purchases
of investments
|
(1,614)
|
(680)
|
(1,372)
|
(150)
|
|
Purchases
of property, plant and equipment and intangible assets
|
(303)
|
(376)
|
(140)
|
(169)
|
|
Acquisition
of businesses (net of cash acquired)
|
|
|
|
|
|
and
increases in cost- and equity-accounted companies
|
(80)
|
(6)
|
(7)
|
(4)
|
|
Proceeds
from sales of investments
|
455
|
540
|
62
|
120
|
|
Proceeds
from maturity of investments
|
–
|
80
|
–
|
80
|
|
Proceeds
from sales of property, plant and equipment
|
27
|
54
|
4
|
6
|
|
Proceeds
from sales of businesses (net of transaction costs
|
|
|
|
|
|
and
cash disposed) and cost- and equity-accounted companies
|
(142)
|
18
|
(2)
|
39
|
|
Net
cash from settlement of foreign currency derivatives
|
(76)
|
(51)
|
53
|
(53)
|
|
Other
investing activities
|
(14)
|
(4)
|
1
|
(4)
|
|
Net
cash used in investing activities – continuing operations
|
(1,747)
|
(425)
|
(1,401)
|
(135)
|
|
Net
cash used in investing activities – discontinued operations
|
(110)
|
(81)
|
(73)
|
(37)
|
|
Net
cash used in investing activities
|
(1,857)
|
(506)
|
(1,474)
|
(172)
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Net
changes in debt with original maturities of 90 days or less
|
3,582
|
916
|
(146)
|
460
|
|
Increase
in debt
|
315
|
2,230
|
251
|
1,369
|
|
Repayment
of debt
|
(568)
|
(1,533)
|
(388)
|
(93)
|
|
Dividends
paid
|
(1,736)
|
(1,675)
|
(1,736)
|
(1,675)
|
|
Dividends
paid to noncontrolling shareholders
|
(71)
|
(73)
|
(69)
|
(71)
|
|
Other
financing activities
|
(104)
|
23
|
–
|
7
|
|
Net
cash provided by (used in) financing activities – continuing operations
|
1,418
|
(112)
|
(2,088)
|
(3)
|
|
Net
cash provided by (used in) financing activities – discontinued operations
|
17
|
(51)
|
25
|
(27)
|
|
Net
cash provided by (used in) financing activities
|
1,435
|
(163)
|
(2,063)
|
(30)
|
|
|
|
|
|
|
|
Effects
of exchange rate changes on cash and equivalents
|
(98)
|
(8)
|
13
|
(20)
|
|
Adjustment
for the net change in cash and equivalents in discontinued operations
|
(609)
|
–
|
(609)
|
–
|
|
Net change
in cash and equivalents
|
(1,026)
|
(933)
|
(3,453)
|
(222)
|
|
|
|
|
|
|
|
Cash
and equivalents, beginning of period
|
3,544
|
3,445
|
5,971
|
2,734
|
|
Cash
and equivalents, end of period
|
2,518
|
2,512
|
2,518
|
2,512
|
|
|
|
|
|
|
|
Supplementary
disclosure of cash flow information:
|
|
|
|
|
|
Interest
paid
|
102
|
158
|
86
|
100
|
|
Income
taxes paid
|
462
|
487
|
196
|
261
|
|
Due to
rounding, numbers presented may not add to the totals provided.
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to the Consolidated Financial Information
|
|
|
|
|
11 Q2
2020 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, 2019
|
188
|
56
|
19,839
|
(5,311)
|
(820)
|
13,952
|
582
|
14,534
|
|
Adoption
of accounting
|
|
|
|
|
|
|
|
|
|
standard
update
|
|
|
36
|
(36)
|
|
–
|
|
–
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
599
|
|
|
599
|
53
|
652
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
adjustments,
net of tax of $(4)
|
|
|
|
(54)
|
|
(54)
|
1
|
(53)
|
|
Effect
of change in fair value of
|
|
|
|
|
|
|
|
|
|
available-for-sale
securities,
|
|
|
|
|
|
|
|
|
|
net of
tax of $2
|
|
|
|
13
|
|
13
|
|
13
|
|
Unrecognized
income (expense)
|
|
|
|
|
|
|
|
|
|
related
to pensions and other
|
|
|
|
|
|
|
|
|
|
postretirement
plans,
|
|
|
|
|
|
|
|
|
|
net of
tax of $15
|
|
|
|
35
|
|
35
|
|
35
|
|
Change
in derivatives qualifying as
|
|
|
|
|
|
|
|
|
|
cash
flow hedges, net of tax of $0
|
|
|
|
5
|
|
5
|
|
5
|
|
Total
comprehensive income
|
|
|
|
|
|
598
|
54
|
652
|
|
Changes
in noncontrolling interests
|
|
(5)
|
|
|
|
(5)
|
(1)
|
(6)
|
|
Fair
value adjustment to
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests recognized
|
|
|
|
|
|
|
|
|
|
in
business combination
|
|
|
|
|
|
–
|
(44)
|
(44)
|
|
Dividends
to
|
|
|
|
|
|
|
|
|
|
noncontrolling
shareholders
|
|
|
|
|
|
–
|
(109)
|
(109)
|
|
Dividends
paid to shareholders
|
|
|
(1,675)
|
|
|
(1,675)
|
|
(1,675)
|
|
Share-based
payment arrangements
|
|
30
|
|
|
|
30
|
|
30
|
|
Delivery
of shares
|
|
(20)
|
|
|
20
|
–
|
|
–
|
|
Balance
at June 30, 2019
|
188
|
62
|
18,800
|
(5,349)
|
(801)
|
12,900
|
483
|
13,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2020
|
188
|
73
|
19,640
|
(5,590)
|
(785)
|
13,526
|
454
|
13,980
|
|
Adoption
of accounting
|
|
|
|
|
|
|
|
|
|
standard
update
|
|
|
(82)
|
|
|
(82)
|
(9)
|
(91)
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
695
|
|
|
695
|
31
|
726
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
adjustments,
net of tax of $(2)
|
|
|
|
(283)
|
|
(283)
|
(4)
|
(287)
|
|
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 $7
|
|
|
|
34
|
|
34
|
|
34
|
|
Change
in derivatives qualifying as
|
|
|
|
|
|
|
|
|
|
cash
flow hedges, net of tax of $0
|
|
|
|
(4)
|
|
(4)
|
|
(4)
|
|
Total
comprehensive income
|
|
|
|
|
|
457
|
27
|
484
|
|
Changes
in noncontrolling interests
|
|
(16)
|
|
|
|
(16)
|
36
|
20
|
|
Dividends
to
|
|
|
|
|
|
|
|
|
|
noncontrolling
shareholders
|
|
|
|
|
|
–
|
(88)
|
(88)
|
|
Dividends
paid to shareholders
|
|
|
(1,758)
|
|
|
(1,758)
|
|
(1,758)
|
|
Share-based
payment arrangements
|
|
30
|
|
|
|
30
|
|
30
|
|
Delivery
of shares
|
|
(24)
|
|
|
24
|
–
|
|
–
|
|
Balance
at June 30, 2020
|
188
|
62
|
18,495
|
(5,828)
|
(761)
|
12,156
|
419
|
12,575
|
|
Due to
rounding, numbers presented may not add to the totals provided.
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to the Consolidated Financial Information
|
12 Q2
2020 Financial Information
—
Notes to
the Consolidated Financial Information (unaudited)
─
Note 1
The Company and basis of presentation
ABB Ltd and its subsidiaries (collectively, the Company) together
form a leading global technology company, connecting software to its
electrification, robotics, automation and motion portfolio to drive performance
to new levels.
The
Company’s Consolidated Financial Information is prepared in accordance with
United States of America generally accepted accounting principles (U.S. GAAP)
for interim financial reporting. As such, the Consolidated Financial
Information does not include all the information and notes required under U.S.
GAAP for annual consolidated financial statements. Therefore, such financial
information should be read in conjunction with the audited consolidated
financial statements in the Company’s Annual Report for the year ended December 31,
2019.
The preparation of financial information in
conformity with U.S. GAAP requires management to make assumptions and estimates
that directly affect the amounts reported in the Consolidated Financial
Information. These accounting assumptions and estimates include:
·
growth rates, discount rates and other assumptions used to determine
impairment of long-lived assets and in testing goodwill for impairment,
·
estimates to determine valuation allowances for deferred tax
assets and amounts recorded for uncertain tax positions,
·
assumptions used in determining inventory obsolescence and net
realizable value,
·
estimates and judgements used to measure credit losses,
·
estimates and assumptions used in determining the fair values of
assets and liabilities assumed in business combinations,
·
assumptions used in the determination of corporate costs directly
attributable to discontinued operations,
·
estimates of loss contingencies associated with litigation or
threatened litigation and other claims and inquiries, environmental damages,
product warranties, self-insurance reserves, regulatory and other proceedings,
·
estimates used to record expected costs for employee severance in
connection with restructuring programs,
·
assumptions used in the calculation of pension and postretirement
benefits and the fair value of pension plan assets, and
·
assumptions and projections, principally related to future
material, labor and project related overhead costs, used in determining the
percentage of completion on projects, as well as the amount of variable consideration the Company
expects to be entitled to.
The
actual results and outcomes may differ from the Company’s estimates and
assumptions.
A
portion of the Company’s activities (primarily long-term construction
activities) has an operating cycle that exceeds one year. For classification of
current assets and liabilities related to such activities, the Company elected
to use the duration of the individual contracts as its operating cycle.
Accordingly, there are accounts receivable, contract assets, inventories and
provisions related to these contracts which will not be realized within one
year that have been classified as current.
Basis of presentation
In the
opinion of management, the unaudited Consolidated Financial Information
contains all necessary adjustments to present fairly the financial position,
results of operations and cash flows for the reported periods. Management
considers all such adjustments to be of a normal recurring nature. The
Consolidated Financial Information is presented in United States dollars ($)
unless otherwise stated. Due to rounding, numbers presented in the Consolidated
Financial Information may not add to the totals provided.
Adjustment
related to prior periods
In the
three months ended June 30, 2020, the Company recorded a cumulative adjustment to
increase the value of certain privately-held equity investments to fair value
based on observable market price changes for an identical or similar investment
of the same issuer (Level 2 inputs). These changes in fair value primarily
occurred in 2019 and 2018. The correction resulted in a gain of $58 million
being recorded in “Other income (expense)” in the Interim Consolidated Income
Statements for the three months ended June 30, 2020. The Company evaluated the
impact of the correction on both a quantitative and qualitative basis under the
guidance of ASC 250, Accounting Changes and Error Corrections, and determined
that there were no material impacts on the trend of net income, cash flows or
liquidity for previously issued annual financial statements.
13 Q2
2020 Financial Information
─
Note 2
Recent accounting pronouncements
Applicable for current periods
Measurement of
credit losses on financial instruments
In January 2020, the Company adopted a new
accounting standard update, along with additional related updates containing targeted
improvements and clarifications, that replaces the previous incurred loss impairment methodology for most financial assets
with a new “current expected credit loss” model. The new model requires
immediate recognition of the estimated credit losses expected to occur over the
remaining life of financial assets such as trade and other receivables,
held-to-maturity debt securities, loans and other instruments. Measurement
of expected credit losses is now based on historical experience, current
conditions, and reasonable and supportable forecasts. The update also requires
additional disclosures related to estimates and judgments used to measure
credit losses. Credit losses relating to available-for-sale debt securities are
now measured in a manner similar to the loss impairment methodology, except
that the losses are recorded through an allowance for credit losses rather than
as a direct write-down of the security.
The Company has adopted these updates on a modified retrospective
basis and has therefore recorded a cumulative-effect adjustment of $91 million
to the opening balance of retained earnings on January 1, 2020, relating to
an increase in the allowance for credit losses on financial assets carried at
amortized cost.
Disclosure
Framework — Changes to the disclosure requirements for fair value measurement
In January 2020, the Company adopted a new
accounting standard update which modified the disclosure requirements for fair
value measurements. The update eliminates the requirements to disclose the
amount of and reasons for transfers between Level 1 and 2 of the fair value
hierarchy, the timing of transfers between levels and the Level 3 valuation
process, while expanding the Level 3 disclosures to include the range and
weighted‑average used to develop significant unobservable inputs and the
changes in unrealized gains and losses on recurring fair value measurements. This update was applied
prospectively for the changes and modifications to the Level 3
disclosures, while all other amendments were applied retrospectively. The
update does not have a significant impact on the Company’s consolidated
financial statements.
Applicable
for future periods
Simplifying
the accounting for income taxes
In December 2019, an accounting standard update
was issued which enhances and simplifies various aspects of the income tax
accounting guidance related to intraperiod tax allocations, ownership changes
in investments, and certain aspects of interim period tax accounting. This
update is effective for the Company for annual and interim periods beginning
January 1, 2021, with early adoption in any interim period permitted. Depending
on the amendment, adoption may be applied on a retrospective, modified
retrospective or prospective basis. The Company is currently evaluating the
impact of this update on its consolidated financial statements.
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. The update can be adopted and applied no later than December 31, 2022,
with early adoption permitted. The Company is currently evaluating the impact
of adopting this optional guidance on its consolidated financial statements.
14 Q2
2020 Financial Information
─
Note 3
Discontinued operations, business divestments and
assets held for sale
Discontinued operations
The
Company reports a disposal, or planned disposal, of a component or a group of components
as a discontinued operation if the disposal represents a strategic shift that
has or will have a major effect on the Company’s operations and financial
results. A strategic shift could include a disposal of a major geographical
area, a major line of business or other major parts of the Company. A component
may be a reportable segment or an operating segment, a reporting unit, a
subsidiary, or an asset group.
Assets
and liabilities of a component reported as a discontinued operation are
presented as held for sale and in discontinued operations in the Company’s Consolidated
Balance Sheets.
Interest
expense that is not directly attributable to or related to the Company’s
continuing business or discontinued business is allocated to discontinued
operations based on the ratio of net assets to be sold less debt that is
required to be paid as a result of the planned disposal transaction to the sum
of total net assets of the Company plus consolidated debt. General corporate
overhead is not allocated to discontinued operations.
On December 17,
2018, the Company announced an agreement to divest 80.1 percent of its Power
Grids business to Hitachi Ltd. (Hitachi) valuing the business at $11 billion.
As this divestment represents a strategic shift that will have a major effect
on the Company’s operations and financial results, the results of operations
for this business have been presented as discontinued operations and the assets
and liabilities are reflected as held for sale for all periods presented. In
addition, amounts relating to stranded corporate costs have been excluded from
discontinued operations and are included as a component of Corporate and Other.
Stranded costs represent overhead and other management costs which were
previously able to be included in the measure of segment profit (Operational
EBITA) for the former Power Grids operating segment but are not directly attributable
to the discontinued operation and thus do not qualify to be recorded as part of
income from discontinued operations. The sale was completed on July 1, 2020.
The assets and liabilities and results of operations related the Power Grids
business remained classified as held for sale and discontinued operations as of
June 30, 2020.
Operating results of the discontinued operations are summarized as
follows:
|
|
Six
months ended
|
Three
months ended
|
|
($ in
millions)
|
Jun. 30, 2020
|
Jun. 30, 2019
|
Jun. 30, 2020
|
Jun. 30, 2019
|
|
Total
revenues
|
4,008
|
4,455
|
2,067
|
2,326
|
|
Total
cost of sales
|
(3,058)
|
(3,382)
|
(1,587)
|
(1,792)
|
|
Gross profit
|
950
|
1,073
|
480
|
535
|
|
Expenses
|
(780)
|
(657)
|
(386)
|
(327)
|
|
Income
from operations
|
170
|
417
|
94
|
208
|
|
Net
interest and other finance expense
|
(5)
|
(28)
|
(2)
|
(14)
|
|
Non-operational
pension (cost) credit
|
(94)
|
6
|
(97)
|
3
|
|
Income
(loss) from discontinued operations before taxes
|
70
|
395
|
(6)
|
197
|
|
Provision
for taxes
|
(65)
|
(104)
|
(43)
|
(55)
|
|
Income
(loss) from discontinued operations, net of tax
|
5
|
291
|
(49)
|
142
|
Of the
total Income (loss) from discontinued operations before taxes in the table
above, $55 million and $379 million in the six months ended June 30,
2020 and 2019, respectively, and $(17) million and $193 million in
the three months ended June 30, 2020 and 2019, respectively, are
attributable to the Company, while the remainder is attributable to
noncontrolling interests.
Income
from discontinued operations before taxes excludes stranded costs which were
previously able to be allocated to the former Power Grids operating segment. As
a result, for the six months ended June 30, 2020 and 2019, $40 million
and $133 million, respectively, and in the three months ended
June 30, 2020 and 2019, $19 million and $66 million,
respectively, of allocated overhead and other management costs, which were
previously able to be included in the measure of segment profit for the Power
Grids operating segment are now reported as part of Corporate and Other. In the
table above, Net interest and other finance expense in the six months ended
June 30, 2020 and 2019, includes $20 million and $24 million,
respectively, and in the three months ended June 30, 2020 and 2019,
includes $11 million and $12 million, respectively, of
interest expense which has been recorded on an allocated basis in accordance
with the Company’s accounting policy election. In
addition, as required by U.S. GAAP, subsequent to December 17, 2018, the
Company has not recorded depreciation or amortization on the property, plant
and equipment, and intangible assets reported as discontinued operations.
Included
in the reported Total revenues of the Company for the six months ended June 30,
2020 and 2019, are revenues from the Company’s operating segments’ sales to the
Power Grids business of $108 million and $109 million, respectively, and
for the three months ended June 30, 2020 and 2019, of $61 million and
$56 million, respectively, which represent intercompany transactions that,
prior to Power Grids being classified as a discontinued operation, were
eliminated in the Company’s Consolidated Financial Information (see Note 16).
In
addition, the Company also has retained obligations (primarily for
environmental and taxes) related to other businesses disposed or otherwise
exited that qualified as discontinued operations. Changes to these retained
obligations are also included in Income from discontinued operations, net of
tax, above.
15 Q2
2020 Financial Information
The major components of assets and liabilities
held for sale in the Company’s Consolidated Balance Sheets are summarized as
follows:
|
($ in
millions)
|
Jun. 30, 2020
|
Dec. 31, 2019
|
|
Cash
and equivalents
|
609
|
–
|
|
Receivables,
net
|
2,393
|
2,541
|
|
Contract
assets
|
1,269
|
1,243
|
|
Inventories,
net
|
1,754
|
1,667
|
|
Property,
plant and equipment, net
|
1,860
|
1,754
|
|
Goodwill
|
1,621
|
1,631
|
|
Other
current assets
|
1,206
|
1,004
|
|
Current
assets held for sale and in discontinued operations
|
10,712
|
9,840
|
|
|
|
|
|
Accounts
payable, trade
|
1,594
|
1,722
|
|
Contract
liabilities
|
1,273
|
1,121
|
|
Pension
and other employee benefits
|
221
|
419
|
|
Other
current liabilities
|
2,138
|
1,984
|
|
Current
liabilities held for sale and in discontinued operations
|
5,226
|
5,246
|
Divestment
of the solar inverters business
In February 2020, the Company completed the sale of its solar
inverters business for no consideration. Under the agreement, which was reached
in July 2019, the Company was required to transfer $143 million of cash to the
buyer on the closing date. In addition, payments totaling EUR 132 million
($145 million) are required to be transferred to the buyer from 2020 through
2025. In the six months ended June 30, 2019, the Company recorded an initial
loss of $455 million representing the excess of the carrying value, which includes
a loss of $99 million arising from the cumulative translation adjustment, over
the estimated fair value of this business. During the six months ended June 30,
2020, $19 million was in “Other income (expense), net” for changes in fair
value occurring prior to the date of sale. The loss in 2020 includes the $99
million reclassification from other comprehensive income of the currency
translation adjustment related to the business.
The fair value was based on the estimated current market values
using Level 3 inputs, considering the agreed-upon sale terms with the buyer.
The solar inverters business, which includes the solar inverters business
acquired as part of the Power-One acquisition in 2013, is part of the Company’s
Electrification segment.
As this divestment does not qualify as a discontinued operation,
the results of operations for this business prior to its disposal are included
in the Company’s continuing operations for all periods presented. The assets
and liabilities of this business were shown as assets and liabilities held for
sale in the Company’s Consolidated Balance Sheet at December 31, 2019, and at
that date, the carrying amounts of the major classes of these assets and
liabilities held for sale were as follows:
|
($ in
millions)
|
|
Dec. 31, 2019
|
|
Assets
|
|
|
|
Receivables,
net
|
|
70
|
|
Inventories,
net
|
|
127
|
|
Property,
plant and equipment, net
|
|
69
|
|
Other
intangible assets, net
|
|
27
|
|
Other
assets
|
|
26
|
|
Valuation
allowance on assets held for sale
|
|
(319)
|
|
Current
assets held for sale
|
|
–
|
|
|
|
|
|
Liabilities
|
|
|
|
Accounts
payable, trade
|
|
86
|
|
Contract
liabilities
|
|
59
|
|
Provisions
for warranties
|
|
108
|
|
Other
liabilities
|
|
49
|
|
Fair
value adjustment on disposal group
|
|
102
|
|
Current
liabilities held for sale
|
|
404
|
Including the above loss of $19 million, in the six months end
June 30, 2020, Income from continuing operations before taxes includes net
losses of $33 million, from the solar inverters business prior to its sales. In
the six and three months ended June 30, 2019, and including the
$455 million above, Income from continuing operations before taxes includes
net losses of $497 million and $483 million, respectively, from this
business.
16 Q2
2020 Financial Information
─
Note 4
Cash and equivalents, marketable securities and
short-term investments
Cash and equivalents, marketable securities and short-term
investments consisted of the following:
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
Marketable
|
|
|
|
|
Gross
|
Gross
|
|
|
securities
|
|
|
|
|
unrealized
|
unrealized
|
|
Cash and
|
and short-term
|
|
($ in
millions)
|
Cost basis
|
gains
|
losses
|
Fair value
|
equivalents
|
investments
|
|
Changes
in fair value
|
|
|
|
|
|
|
|
recorded
in net income
|
|
|
|
|
|
|
|
Cash
|
1,551
|
|
|
1,551
|
1,551
|
|
|
Time
deposits
|
966
|
|
|
966
|
966
|
–
|
|
Other
short-term investments
|
|
|
|
|
|
|
|
Equity
securities
|
1,350
|
4
|
|
1,354
|
|
1,354
|
|
|
3,867
|
4
|
–
|
3,871
|
2,517
|
1,354
|
|
Changes
in fair value recorded
|
|
|
|
|
|
|
|
in
other comprehensive income
|
|
|
|
|
|
|
|
Debt
securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S.
government obligations
|
274
|
22
|
|
296
|
1
|
295
|
|
|
European
government obligations
|
154
|
4
|
|
158
|
|
158
|
|
|
Other
government obligations
|
|
|
|
|
|
|
|
|
Corporate
|
65
|
6
|
|
71
|
|
71
|
|
|
493
|
32
|
–
|
525
|
1
|
524
|
|
Total
|
4,360
|
36
|
–
|
4,396
|
2,518
|
1,878
|
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Marketable
|
|
|
|
|
Gross
|
Gross
|
|
|
securities
|
|
|
|
|
unrealized
|
unrealized
|
|
Cash and
|
and short-term
|
|
($ in
millions)
|
Cost basis
|
gains
|
losses
|
Fair value
|
equivalents
|
investments
|
|
Changes
in fair value
|
|
|
|
|
|
|
|
recorded
in net income
|
|
|
|
|
|
|
|
Cash
|
2,111
|
|
|
2,111
|
2,111
|
|
|
Time
deposits
|
1,433
|
|
|
1,433
|
1,433
|
–
|
|
Equity
securities
|
294
|
10
|
|
304
|
|
304
|
|
|
3,838
|
10
|
–
|
3,848
|
3,544
|
304
|
|
Changes
in fair value recorded
|
|
|
|
|
|
|
|
in
other comprehensive income
|
|
|
|
|
|
|
|
Debt
securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S.
government obligations
|
191
|
7
|
(1)
|
197
|
–
|
197
|
|
|
Corporate
|
61
|
4
|
|
65
|
–
|
65
|
|
|
252
|
11
|
(1)
|
262
|
–
|
262
|
|
Total
|
4,090
|
21
|
(1)
|
4,110
|
3,544
|
566
|
─
Note 5
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
17 Q2
2020 Financial Information
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
are used to manage the interest rate risk associated with certain debt and
generally such swaps are designated as fair value hedges. In addition, from
time to time, the Company uses instruments such as interest rate swaps,
interest rate futures, bond futures or forward rate agreements to manage
interest rate risk arising from the Company’s balance sheet structure but does
not designate such instruments as hedges.
Equity risk
The Company is exposed to fluctuations in the fair value of its
warrant appreciation rights (WARs) issued under its management incentive plan.
A WAR gives its holder the right to receive cash equal to the market price
of an equivalent listed warrant on the date of exercise. To eliminate such
risk, the Company has purchased cash-settled call options, indexed to the
shares of the Company, which entitle the Company to receive amounts equivalent
to its obligations under the outstanding WARs.
Volume of derivative activity
In general, while the Company’s primary objective in its use of
derivatives is to minimize exposures arising from its business, certain
derivatives are designated and qualify for hedge accounting treatment while
others either are not designated or do not qualify for hedge accounting.
Foreign exchange and interest rate derivatives
The gross notional amounts of outstanding foreign exchange and
interest rate derivatives (whether designated as hedges or not) were as
follows:
|
Type of
derivative
|
Total
notional amounts at
|
|
($ in
millions)
|
June 30, 2020
|
December 31, 2019
|
June 30, 2019
|
|
Foreign
exchange contracts
|
16,505
|
15,015
|
12,977
|
|
Embedded
foreign exchange derivatives
|
982
|
924
|
774
|
|
Interest
rate contracts
|
4,335
|
5,188
|
4,453
|
Derivative
commodity contracts
The Company uses derivatives to hedge its direct or indirect
exposure to the movement in the prices of commodities which are primarily
copper, silver and aluminum. The following table shows the notional amounts of
outstanding derivatives (whether designated as hedges or not), on a net basis,
to reflect the Company’s requirements for these commodities:
|
Type of
derivative
|
Unit
|
Total
notional amounts at
|
|
|
|
June 30, 2020
|
December 31, 2019
|
June 30, 2019
|
|
Copper
swaps
|
metric
tonnes
|
38,935
|
42,494
|
44,936
|
|
Silver
swaps
|
ounces
|
2,063,142
|
2,508,770
|
2,461,631
|
|
Aluminum
swaps
|
metric
tonnes
|
7,698
|
8,388
|
8,443
|
Equity
derivatives
At June 30, 2020, December 31, 2019, and June 30, 2019,
the Company held 37 million, 40 million and 36 million
cash-settled call options indexed to ABB Ltd shares (conversion ratio 5:1) with
a total fair value of $21 million, $26 million and $7 million,
respectively.
Cash flow hedges
As noted above, the Company mainly uses forward foreign exchange
contracts to manage the foreign exchange risk of its operations, commodity
swaps to manage its commodity risks and cash-settled call options to hedge its
WAR liabilities. Where such instruments are designated and qualify as cash flow
hedges, 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.
At June 30, 2020, and December 31, 2019, “Accumulated other
comprehensive loss” included net unrealized losses of $9 million and $5 million,
respectively, net of tax, on derivatives designated as cash flow hedges. Of the
amount at June 30, 2020, net losses of $2 million are expected to be
reclassified to earnings in the following 12 months. At June 30, 2020, the
longest maturity of a derivative classified as a cash flow hedge was 55 months.
The amount of gains or losses, net of tax, reclassified into
earnings due to the discontinuance of cash flow hedge accounting and the amount
of ineffectiveness in cash flow hedge relationships directly recognized in earnings
were not significant in the six and three months ended June 30, 2020 and
2019.
The pre-tax effects of derivative instruments, designated and
qualifying as cash flow hedges, on “Accumulated other comprehensive loss” (OCI)
and the Consolidated Income Statements were not significant.
Fair value hedges
To
reduce its interest rate exposure arising primarily from its debt issuance
activities, the Company uses interest rate swaps. Where such instruments are
designated as fair value hedges, the changes in the fair value of these
instruments, as well as the changes in the fair value of the risk component of
the underlying debt being hedged, are recorded as offsetting gains and losses
in “Interest and other finance expense”. Hedge ineffectiveness of instruments
designated as fair value hedges for the six and three months ended June 30,
2020 and 2019, was not significant.
18 Q2
2020 Financial Information
The
effect of interest rate contracts, designated and qualifying as fair value
hedges, on the Consolidated Income Statements was as follows:
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
Gains (losses)
recognized in Interest and other finance expense:
|
|
|
|
|
|
- on
derivatives designated as fair value hedges
|
26
|
57
|
2
|
31
|
|
- on
hedged item
|
(27)
|
(57)
|
(2)
|
(31)
|
Derivatives not designated in hedge relationships
Derivative instruments that are not designated as hedges or do not
qualify as either cash flow or fair value hedges are economic hedges used for
risk management purposes. Gains and losses from changes in the fair values of
such derivatives are recognized in the same line in the income statement as the
economically hedged transaction.
Furthermore,
under certain circumstances, the Company is required to split and account
separately for foreign currency derivatives that are embedded within certain
binding sales or purchase contracts denominated in a currency other than the
functional currency of the subsidiary and the counterparty.
The gains (losses) recognized in the Consolidated Income
Statements on derivatives not designated in hedging relationships were as
follows:
|
Type of
derivative not
|
Gains
(losses) recognized in income
|
|
designated
as a hedge
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions)
|
Location
|
2020
|
2019
|
2020
|
2019
|
|
Foreign
exchange contracts
|
Total
revenues
|
(67)
|
1
|
67
|
(2)
|
|
|
Total
cost of sales
|
43
|
(38)
|
(33)
|
(1)
|
|
|
SG&A
expenses(1)
|
4
|
(1)
|
(4)
|
2
|
|
|
Non-order
related research
|
|
|
|
|
|
|
and
development
|
(1)
|
1
|
–
|
1
|
|
|
Interest
and other finance expense
|
(32)
|
(79)
|
74
|
(59)
|
|
Embedded
foreign exchange
|
Total
revenues
|
6
|
(3)
|
(26)
|
(1)
|
|
contracts
|
Total
cost of sales
|
(2)
|
–
|
2
|
–
|
|
Commodity
contracts
|
Total
cost of sales
|
(12)
|
(2)
|
54
|
(20)
|
|
Other
|
Interest
and other finance expense
|
1
|
–
|
2
|
–
|
|
Total
|
|
(60)
|
(121)
|
136
|
(80)
|
(1)
SG&A expenses represent “Selling, general and administrative expenses”.
The fair values of derivatives included in the Consolidated
Balance Sheets were as follows:
|
|
June 30,
2020
|
|
|
Derivative
assets
|
|
Derivative
liabilities
|
|
|
Current in
|
Non-current in
|
|
Current in
|
Non-current in
|
|
|
“Other current
|
“Other non-current
|
|
“Other current
|
“Other non-current
|
|
($ in
millions)
|
assets”
|
assets”
|
|
liabilities”
|
liabilities”
|
|
Derivatives
designated as hedging instruments:
|
|
|
|
|
|
|
Foreign
exchange contracts
|
–
|
–
|
|
2
|
6
|
|
Interest
rate contracts
|
–
|
99
|
|
–
|
–
|
|
Cash-settled
call options
|
8
|
13
|
|
–
|
–
|
|
Total
|
8
|
112
|
|
2
|
6
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
Foreign
exchange contracts
|
119
|
14
|
|
116
|
14
|
|
Commodity
contracts
|
21
|
–
|
|
6
|
–
|
|
Cross-currency
interest rate swaps
|
–
|
–
|
|
1
|
–
|
|
Embedded
foreign exchange derivatives
|
13
|
4
|
|
16
|
5
|
|
Total
|
153
|
18
|
|
139
|
19
|
|
Total
fair value
|
161
|
130
|
|
141
|
25
|
19 Q2
2020 Financial Information
|
|
December
31, 2019
|
|
|
Derivative
assets
|
|
Derivative
liabilities
|
|
|
Current in
|
Non-current in
|
|
Current in
|
Non-current in
|
|
|
“Other current
|
“Other non-current
|
|
“Other current
|
“Other non-current
|
|
($ in
millions)
|
assets”
|
assets”
|
|
liabilities”
|
liabilities”
|
|
Derivatives
designated as hedging instruments:
|
|
|
|
|
|
|
Foreign
exchange contracts
|
–
|
–
|
|
2
|
6
|
|
Interest
rate contracts
|
–
|
72
|
|
–
|
–
|
|
Cash-settled
call options
|
11
|
14
|
|
–
|
–
|
|
Total
|
11
|
86
|
|
2
|
6
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
Foreign
exchange contracts
|
85
|
14
|
|
127
|
14
|
|
Commodity
contracts
|
17
|
–
|
|
2
|
–
|
|
Cash-settled
call options
|
–
|
1
|
|
–
|
–
|
|
Embedded
foreign exchange derivatives
|
7
|
3
|
|
12
|
3
|
|
Total
|
109
|
18
|
|
141
|
17
|
|
Total
fair value
|
120
|
104
|
|
143
|
23
|
Close-out
netting agreements provide for the termination, valuation and net settlement of
some or all outstanding transactions between two counterparties on the
occurrence of one or more pre-defined trigger events.
Although
the Company is party to close-out netting agreements with most derivative
counterparties, the fair values in the tables above and in the Consolidated
Balance Sheets at June 30, 2020, and December 31, 2019, have been
presented on a gross basis.
The Company’s netting agreements and other similar arrangements
allow net settlements under certain conditions. At June 30, 2020, and December 31,
2019, information related to these offsetting arrangements was as follows:
|
($ in
millions)
|
June 30,
2020
|
|
|
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
|
274
|
(127)
|
–
|
–
|
147
|
|
Total
|
274
|
(127)
|
–
|
–
|
147
|
|
|
|
|
|
|
|
|
($ in
millions)
|
June 30,
2020
|
|
|
Gross amount
|
Derivative liabilities
|
Cash
|
Non-cash
|
|
|
Type of
agreement or
|
of recognized
|
eligible for set-off
|
collateral
|
collateral
|
Net liability
|
|
similar
arrangement
|
liabilities
|
in case of default
|
pledged
|
pledged
|
exposure
|
|
Derivatives
|
145
|
(127)
|
–
|
–
|
18
|
|
Total
|
145
|
(127)
|
–
|
–
|
18
|
|
($ in
millions)
|
December
31, 2019
|
|
|
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
|
214
|
(102)
|
–
|
–
|
112
|
|
Total
|
214
|
(102)
|
–
|
–
|
112
|
|
|
|
|
|
|
|
|
($ in
millions)
|
December
31, 2019
|
|
|
Gross amount
|
Derivative liabilities
|
Cash
|
Non-cash
|
|
|
Type of
agreement or
|
of recognized
|
eligible for set-off
|
collateral
|
collateral
|
Net liability
|
|
similar
arrangement
|
liabilities
|
in case of default
|
pledged
|
pledged
|
exposure
|
|
Derivatives
|
151
|
(102)
|
–
|
–
|
49
|
|
Total
|
151
|
(102)
|
–
|
–
|
49
|
20 Q2
2020 Financial Information
─
Note 6
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 certain actively traded debt securities.
Level 2: Valuation
inputs consist of observable inputs (other than Level 1 inputs) such as
actively quoted prices for similar assets, quoted prices in inactive markets
and inputs other than quoted prices such as interest rate yield curves, credit
spreads, or inputs derived from other observable data by interpolation,
correlation, regression or other means. The adjustments applied to quoted
prices or the inputs used in valuation models may be both observable and
unobservable. In these cases, the fair value measurement is classified as Level
2 unless the unobservable portion of the adjustment or the unobservable input
to the valuation model is significant, in which case the fair value measurement
would be classified as Level 3. Assets and liabilities valued or disclosed
using Level 2 inputs include investments in certain funds, certain debt
securities that are not actively traded, interest rate swaps, commodity swaps,
cash‑settled call options, forward foreign exchange contracts, foreign
exchange swaps and forward rate agreements, time deposits, as well as financing
receivables and debt.
Level 3: Valuation
inputs are based on the Company’s assumptions of relevant market data
(unobservable input).
Whenever
quoted prices involve bid‑ask spreads, the Company ordinarily determines
fair values based on mid‑market quotes. However, for the purpose of
determining the fair value of cash‑settled call options serving as hedges
of the Company’s management incentive plan, bid prices are used.
When
determining fair values based on quoted prices in an active market, the Company
considers if the level of transaction activity for the financial instrument has
significantly decreased or would not be considered orderly. In such cases, the
resulting changes in valuation techniques would be disclosed. If the market is
considered disorderly or if quoted prices are not available, the Company is
required to use another valuation technique, such as an income approach.
Recurring fair value measures
The fair values of financial assets and liabilities measured at
fair value on a recurring basis were as follows:
|
|
June 30,
2020
|
|
($ in
millions)
|
Level 1
|
Level 2
|
Level 3
|
Total fair value
|
|
Assets
|
|
|
|
|
|
Securities
in “Marketable securities and short-term investments”:
|
|
|
|
|
|
Equity
securities
|
–
|
1,354
|
–
|
1,354
|
|
Debt
securities—U.S. government obligations
|
295
|
–
|
–
|
295
|
|
Debt
securities—European government obligations
|
158
|
–
|
–
|
158
|
|
Debt
securities—Corporate
|
–
|
71
|
–
|
71
|
|
Derivative
assets—current in “Other current assets”
|
–
|
161
|
–
|
161
|
|
Derivative
assets—non-current in “Other non-current assets”
|
–
|
130
|
–
|
130
|
|
Total
|
453
|
1,716
|
–
|
2,169
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Derivative
liabilities—current in “Other current liabilities”
|
–
|
141
|
–
|
141
|
|
Derivative
liabilities—non-current in “Other non-current liabilities”
|
–
|
25
|
–
|
25
|
|
Total
|
–
|
166
|
–
|
166
|
21 Q2
2020 Financial Information
|
|
December
31, 2019
|
|
($ in
millions)
|
Level 1
|
Level 2
|
Level 3
|
Total fair value
|
|
Assets
|
|
|
|
|
|
Securities
in “Marketable securities and short-term investments”:
|
|
|
|
|
|
Equity
securities
|
–
|
304
|
–
|
304
|
|
Debt
securities—U.S. government obligations
|
197
|
–
|
–
|
197
|
|
Debt securities—Corporate
|
–
|
65
|
–
|
65
|
|
Derivative
assets—current in “Other current assets”
|
–
|
120
|
–
|
120
|
|
Derivative
assets—non-current in “Other non-current assets”
|
–
|
104
|
–
|
104
|
|
Total
|
197
|
593
|
–
|
790
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Derivative
liabilities—current in “Other current liabilities”
|
–
|
143
|
–
|
143
|
|
Derivative
liabilities—non-current in “Other non-current liabilities”
|
–
|
23
|
–
|
23
|
|
Total
|
–
|
166
|
–
|
166
|
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:
·
Securities in “Marketable securities and short-term investments”: 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 nonperformance risk. The inputs used in present value techniques
are observable and fall into the Level 2 category.
·
Derivatives: The fair values of derivative instruments are
determined using quoted prices of identical instruments from an active market,
if available (Level 1 inputs). If quoted prices are not available, price quotes
for similar instruments, appropriately adjusted, or present value techniques,
based on available market data, or option pricing models are used. Cash-settled
call options hedging the Company’s WAR liability are valued based on bid prices
of the equivalent listed warrant. The fair values obtained using price quotes
for similar instruments or valuation techniques represent a Level 2 input
unless significant unobservable inputs are used.
Non-recurring fair value measures
The Company elects to record private equity
investments without readily determinable fair values at cost, less impairment,
adjusted by observable price changes. The Company reassesses at each reporting
period whether these investments continue to qualify for this treatment. In the three months ended June 30, 2020, the Company recognized net
increases in fair value of $58 million related to certain of its private
equity investments based on observable market price changes for an identical or
similar investment of the same issuer (see Note 1 for additional details). The fair
values of these investments totaled $81 million and were determined using level
2 inputs.
In June 2019, upon meeting the criteria as
held for sale, the Company adjusted the carrying value of the solar inverters
business which was sold in February 2020 (See Note 3 for details). Apart from
the transactions above, there were no additional significant non-recurring fair
value measurements during the six and three months ended June 30, 2020 and
2019.
Disclosure about financial instruments
carried on a cost basis
The fair values of financial instruments
carried on a cost basis were as follows:
|
|
June 30,
2020
|
|
($ in
millions)
|
Carrying value
|
|
Level 1
|
Level 2
|
Level 3
|
Total fair value
|
|
Assets
|
|
|
|
|
|
|
|
Cash
and equivalents (excluding securities with original
|
|
|
|
|
|
|
|
maturities
up to 3 months):
|
|
|
|
|
|
|
|
Cash
|
1,551
|
|
1,551
|
–
|
–
|
1,551
|
|
Time
deposits
|
966
|
|
–
|
966
|
–
|
966
|
|
Other
non-current assets:
|
|
|
|
|
|
|
|
Loans
granted
|
33
|
|
–
|
36
|
–
|
36
|
|
Restricted
time deposits
|
38
|
|
38
|
–
|
–
|
38
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Short-term
debt and current maturities of long-term debt
|
|
|
|
|
|
|
|
(excluding
finance lease obligations)
|
6,361
|
|
1,241
|
5,120
|
–
|
6,361
|
|
Long-term
debt (excluding finance lease obligations)
|
6,100
|
|
6,403
|
118
|
–
|
6,521
|
22 Q2
2020 Financial Information
|
|
December
31, 2019
|
|
($ 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
|
2,111
|
|
2,111
|
–
|
–
|
2,111
|
|
Time
deposits
|
1,433
|
|
–
|
1,433
|
–
|
1,433
|
|
Other
non-current assets:
|
|
|
|
|
|
|
|
Loans
granted
|
30
|
|
–
|
31
|
–
|
31
|
|
Restricted
time deposits
|
37
|
|
37
|
–
|
–
|
37
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Short-term
debt and current maturities of long-term debt
|
|
|
|
|
|
|
|
(excluding
finance lease obligations)
|
2,270
|
|
1,534
|
736
|
–
|
2,270
|
|
Long-term
debt (excluding finance lease obligations)
|
6,618
|
|
6,267
|
692
|
–
|
6,959
|
The Company uses the following methods and assumptions in
estimating fair values of financial instruments carried on a cost basis:
·
Cash and equivalents (excluding securities with original
maturities up to 3 months), and Marketable securities and short-term
investments (excluding securities): The carrying amounts approximate the fair
values as the items are short-term in nature.
·
Other non-current assets: Includes (i) loans granted whose fair values
are based on the carrying amount adjusted using a present value technique to
reflect a premium or discount based on current market interest rates (Level 2
inputs), and (ii)
restricted time deposits whose fair values approximate the carrying amounts
(Level 1 inputs).
·
Short-term debt and current maturities of long-term debt
(excluding finance lease obligations): 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.
·
Long-term debt (excluding finance lease obligations): 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 7
Commitments and contingencies
Contingencies—Regulatory, Compliance and Legal
Regulatory
As a
result of an internal investigation, the Company self-reported to the
Securities and Exchange Commission (SEC) and the Department of Justice (DoJ) in
the United States as well as to the Serious Fraud Office (SFO) in the United
Kingdom concerning certain of its past dealings with Unaoil and its
subsidiaries, including alleged improper payments made by these entities to
third parties. In May 2020, the SFO closed its investigation, which it
originally announced in February 2017, as the case did not meet the relevant
test for prosecution. The Company continues to cooperate with the U.S.
authorities as requested. At this time, it is not possible for the Company to
make an informed judgment about the outcome of this matter.
Based on
findings during an internal investigation, the Company self-reported to the SEC
and the DoJ, to various authorities in South Africa and other countries as well
as to certain multilateral financial institutions 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. Although the Company believes that there may be
an unfavorable outcome in one or more of these compliance-related matters, at
this time it is not possible for the Company to make an informed judgment about
the possible financial impact.
General
The Company is aware of proceedings, or the threat of proceedings,
against it and others in respect of private claims by customers and other third
parties with regard to certain actual or alleged anticompetitive practices.
Also, the Company is subject to other claims and legal proceedings, as well as
investigations carried out by various law enforcement authorities. With respect
to the above-mentioned claims, regulatory matters, and any related proceedings,
the Company will bear the related costs, including costs necessary to resolve
them.
Liabilities
recognized
At June 30, 2020, and December 31, 2019, the Company had
aggregate liabilities of $155 million and $157 million, respectively,
included in “Other provisions” and “Other non‑current liabilities”, for
the above regulatory, compliance and legal contingencies, and none of the
individual liabilities recognized was significant. As it is not possible to
make an informed judgment on, or reasonably predict, the outcome of certain
matters and as it is not possible, based on information currently available to
management, to estimate the maximum potential liability on other matters, there
could be material adverse outcomes beyond the amounts accrued.
23 Q2
2020 Financial Information
Guarantees
General
The following table provides quantitative data regarding the
Company’s third-party guarantees. The maximum potential payments represent a
“worst‑case scenario”, and do not reflect management’s expected outcomes.
|
Maximum
potential payments ($ in millions)
|
June 30, 2020
|
December 31, 2019
|
|
Performance
guarantees
|
1,868
|
1,860
|
|
Financial
guarantees
|
12
|
10
|
|
Indemnification
guarantees
|
48
|
64
|
|
Total(1)
|
1,928
|
1,934
|
(1) Maximum
potential payments include amounts in both continuing and discontinued operations.
The carrying amount of liabilities recorded in the Consolidated
Balance Sheets reflects the Company’s best estimate of future payments, which
it may incur as part of fulfilling its guarantee obligations. In respect of the
above guarantees, the carrying amounts of liabilities at June 30, 2020,
and December 31, 2019, were not significant.
The Company is party to various guarantees providing financial or
performance assurances to certain third parties. These guarantees, which have
various maturities up to 2027, 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 eight
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 June 30, 2020, and December 31, 2019, the
maximum potential payable under these guarantees amounts to $897 million
and $898 million, respectively, and these guarantees have various
maturities ranging from one to ten years.
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 June 30, 2020, and
December 31, 2019, the total outstanding performance bonds aggregated to $6.8
billion and $6.8 billion, respectively, of which $3.3 billion and $3.7
billion, respectively, relates to discontinued operations. There have been no
significant amounts reimbursed to financial institutions under these types of
arrangements in the six and three months ended June 30, 2020 and 2019.
Product and order-related contingencies
The Company calculates its provision for product warranties based
on historical claims experience and specific review of certain contracts.
The reconciliation of the “Provisions for warranties”, including
guarantees of product performance, was as follows:
|
($ in
millions)
|
2020
|
2019
|
|
Balance
at January 1,
|
816
|
948
|
|
Net
change in warranties due to acquisitions, divestments and liabilities held
for sale(1)
|
7
|
(105)
|
|
Claims
paid in cash or in kind
|
(100)
|
(137)
|
|
Net
increase in provision for changes in estimates, warranties issued and
warranties expired
|
67
|
138
|
|
Exchange
rate differences
|
(13)
|
(2)
|
|
Balance
at June 30,
|
777
|
842
|
(1) Includes
adjustments to the initial purchase price allocation recorded during the
measurement period.
24 Q2
2020 Financial Information
─
Note 8
Contract assets and liabilities
The following table provides information about Contract assets and
Contract liabilities:
|
($ in
millions)
|
June 30, 2020
|
December 31, 2019
|
June 30, 2019
|
|
Contract
assets
|
1,110
|
1,025
|
1,159
|
|
Contract
liabilities
|
1,703
|
1,719
|
1,610
|
Contract
assets primarily relate to the Company’s right to receive consideration for work
completed but for which no invoice has been issued at the reporting date. Contract
assets are transferred to receivables when rights to receive payment become
unconditional.
Contract
liabilities primarily relate to up-front advances received on orders from
customers as well as amounts invoiced to customers in excess of revenues
recognized, primarily for long-term projects. Contract liabilities are reduced
as work is performed and as revenues are recognized.
The significant changes in the Contract assets and Contract
liabilities balances were as follows:
|
|
Six
months ended June 30,
|
|
|
2020
|
|
2019
|
|
|
Contract
|
|
Contract
|
|
Contract
|
|
Contract
|
|
($ in
millions)
|
assets
|
|
liabilities
|
|
assets
|
|
liabilities
|
|
Revenue
recognized, which was included in the Contract liabilities balance at Jan 1,
2020/2019
|
|
|
(600)
|
|
|
|
(543)
|
|
Additions
to Contract liabilities - excluding amounts recognized as revenue during the
period
|
|
|
633
|
|
|
|
482
|
|
Receivables
recognized that were included in the Contract asset balance at Jan 1,
2020/2019
|
(373)
|
|
|
|
(455)
|
|
|
At June 30, 2020, the Company had unsatisfied performance
obligations totaling $13,917 million and, of this amount, the Company
expects to fulfill approximately 53 percent of the obligations in 2020,
approximately 32 percent of the obligations in 2021 and the balance
thereafter.
─
Note 9
Debt
The Company’s total debt at June 30, 2020, and
December 31, 2019, amounted to $12,620 million and $9,059 million,
respectively.
Short-term debt and current maturities of long-term debt
The Company’s “Short-term debt and current maturities of long-term
debt” consisted of the following:
|
($ in
millions)
|
June 30, 2020
|
December 31, 2019
|
|
Short-term
debt
|
4,531
|
838
|
|
Current
maturities of long-term debt
|
1,852
|
1,449
|
|
Total
|
6,383
|
2,287
|
Short-term
debt primarily represented issued commercial paper and short-term bank
borrowings from various banks. At June 30, 2020, and December 31,
2019, $1,282 million and $706 million, respectively, was outstanding under the
$2 billion commercial paper program in the United States. At June 30,
2020, $1,571 million was outstanding under the $2 billion
Euro-commercial paper program. No amount was outstanding under this program at
December 31, 2019.
On March 25,
2020, the Company entered into a bank-funded short-term EUR 2 billion Revolving
Credit Agreement (the “Agreement”). The Agreement provided for fixed-term euro‑denominated
borrowings up to a maximum principal of EUR 2 billion and was to expire after six
months, with the option for the Company to extend the Agreement to December 15,
2020. Outstanding amounts were subject to interest at the rate of EURIBOR plus a
margin of 0.25 percent. The Company requested the full amount to be
borrowed and the proceeds were received on March 31, 2020, amounting to $2,183 million,
net of issuance costs. At June 30, 2020, EUR 1.2 billion (equivalent
to $1,345 million) was outstanding under the Agreement. The Agreement
required that all outstanding amounts repaid within 15 days after the
completion of the sale of the Power Grids business and after the sale on
July 1, 2020, the Company repaid the remaining EUR 1.2 billion
outstanding (equivalent to $1,354 million on the date of payment) on July 8,
2020, and the Agreement was terminated.
At June 30,
2020, the Company continues to have access to the full amount under its
existing $2 billion revolving credit facility.
On April 3,
2020, the Company repaid at maturity its USD 300 million 2.8% Notes.
Long-term debt
The Company’s long-term debt at June 30, 2020, and
December 31, 2019, amounted to $6,237 million and $6,772 million,
respectively.
25 Q2
2020 Financial Information
Outstanding bonds (including maturities within the
next 12 months) were as follows:
|
|
June 30,
2020
|
December
31, 2019
|
|
(in
millions)
|
Nominal
outstanding
|
Carrying value(1)
|
Nominal
outstanding
|
Carrying value(1)
|
|
Bonds:
|
|
|
|
|
|
|
|
|
|
2.8%
USD Notes, due 2020
|
|
|
|
–
|
USD
|
300
|
$
|
300
|
|
Floating
EUR Notes, due 2020
|
EUR
|
1,000
|
$
|
1,121
|
EUR
|
1,000
|
$
|
1,122
|
|
4.0%
USD Notes, due 2021
|
USD
|
650
|
$
|
648
|
USD
|
650
|
$
|
648
|
|
2.25%
CHF Bonds, due 2021
|
CHF
|
350
|
$
|
377
|
CHF
|
350
|
$
|
373
|
|
5.625%
USD Notes, due 2021
|
USD
|
250
|
$
|
257
|
USD
|
250
|
$
|
260
|
|
2.875%
USD Notes, due 2022
|
USD
|
1,250
|
$
|
1,291
|
USD
|
1,250
|
$
|
1,267
|
|
3.375%
USD Notes, due 2023
|
USD
|
450
|
$
|
449
|
USD
|
450
|
$
|
448
|
|
0.625%
EUR Instruments, due 2023
|
EUR
|
700
|
$
|
801
|
EUR
|
700
|
$
|
799
|
|
0.75%
EUR Instruments, due 2024
|
EUR
|
750
|
$
|
865
|
EUR
|
750
|
$
|
859
|
|
0.3%
CHF Notes, due 2024
|
CHF
|
280
|
$
|
294
|
CHF
|
280
|
$
|
288
|
|
3.8%
USD Notes, due 2028
|
USD
|
750
|
$
|
746
|
USD
|
750
|
$
|
746
|
|
1.0%
CHF Notes, due 2029
|
CHF
|
170
|
$
|
179
|
CHF
|
170
|
$
|
175
|
|
4.375%
USD Notes, due 2042
|
USD
|
750
|
$
|
725
|
USD
|
750
|
$
|
724
|
|
Total
|
|
|
$
|
7,753
|
|
|
$
|
8,009
|
(1) USD carrying
values include unamortized debt issuance costs, bond discounts or premiums, as
well as adjustments for fair value hedge accounting, where appropriate.
Subsequent
events
At July 21,
2020, the amount outstanding under the $2 billion program in the United
States decreased to $345 million from $1,282 million at June 30,
2020 and the amount outstanding under the Euro-commercial $2 billion decreased
to $89 million from
$1,571 million
at June 30, 2020.
─
Note 10
Income taxes
In calculating the provision for income taxes, the Company uses an
estimate of the annual effective tax rate based upon the facts and
circumstances known at each interim period. On a quarterly basis, the actual
effective tax rate is adjusted, as appropriate, based upon changed facts and
circumstances, if any, as compared to those forecasted at the beginning of the
year and each interim period thereafter.
The effective tax rate of 22.5 percent in the six
months ended June 30, 2020, was lower than the effective tax rate of 46.2
percent in the six months ended June 30, 2019, primarily due to the
non-tax-deductible loss recorded in the six months ended June 30, 2019,
relating to the divestment of the solar inverters business (see Note 3). In
addition, the lower rate was also due to a favorable resolution of an uncertain
tax position during the first quarter of 2020, partially offset by increases to
the valuation allowance in certain countries.
─
Note 11
Employee benefits
The Company operates defined benefit pension plans, defined
contribution pension plans, and termination indemnity plans, in accordance with
local regulations and practices. These plans cover a large portion of the
Company’s employees and provide benefits to employees in the event of death,
disability, retirement, or termination of employment. Certain of these plans
are multi-employer plans. The Company also operates other postretirement
benefit plans including postretirement health care benefits, and other employee-related
benefits for active employees including long-service award plans. The
measurement date used for the Company’s employee benefit plans is December 31.
The funding policies of the Company’s plans are consistent with the local
government and tax requirements.
26 Q2
2020 Financial Information
The following tables include amounts relating to
defined benefit pension plans and other postretirement benefits for both continuing
and discontinued operations.
Net periodic benefit cost of the Company’s defined benefit pension
and other postretirement benefit plans consisted of the following:
|
($ in
millions)
|
Defined
pension benefits
|
|
Other
postretirement
|
|
|
Switzerland
|
International
|
|
benefits
|
|
Six
months ended June 30,
|
2020
|
2019
|
2020
|
2019
|
|
2020
|
2019
|
|
Operational
pension cost:
|
|
|
|
|
|
|
|
|
Service
cost
|
45
|
38
|
50
|
56
|
|
–
|
–
|
|
Operational
pension cost
|
45
|
38
|
50
|
56
|
|
–
|
–
|
|
Non-operational
pension cost (credit):
|
|
|
|
|
|
|
|
|
Interest
cost
|
1
|
8
|
60
|
88
|
|
1
|
2
|
|
Expected
return on plan assets
|
(65)
|
(56)
|
(133)
|
(138)
|
|
–
|
–
|
|
Amortization
of prior service cost (credit)
|
(7)
|
(7)
|
1
|
1
|
|
(1)
|
(2)
|
|
Amortization
of net actuarial loss
|
5
|
–
|
55
|
54
|
|
(2)
|
(1)
|
|
Curtailments,
settlements and special termination benefits(1)
|
–
|
–
|
108
|
1
|
|
–
|
–
|
|
Non-operational
pension cost (credit)
|
(66)
|
(55)
|
91
|
6
|
|
(2)
|
(1)
|
|
Net
periodic benefit cost (credit)
|
(21)
|
(17)
|
141
|
62
|
|
(2)
|
(1)
|
|
($ in
millions)
|
Defined
pension benefits
|
|
Other
postretirement
|
|
|
Switzerland
|
International
|
|
benefits
|
|
Three
months ended June 30,
|
2020
|
2019
|
2020
|
2019
|
|
2020
|
2019
|
|
Operational
pension cost:
|
|
|
|
|
|
|
|
|
Service
cost
|
23
|
19
|
23
|
28
|
|
–
|
–
|
|
Operational
pension cost
|
23
|
19
|
23
|
28
|
|
–
|
–
|
|
Non-operational
pension cost (credit):
|
|
|
|
|
|
|
|
|
Interest
cost
|
1
|
4
|
28
|
44
|
|
–
|
1
|
|
Expected
return on plan assets
|
(34)
|
(28)
|
(70)
|
(68)
|
|
–
|
–
|
|
Amortization
of prior service cost (credit)
|
(3)
|
(3)
|
–
|
–
|
|
–
|
(1)
|
|
Amortization
of net actuarial loss
|
3
|
–
|
30
|
27
|
|
(1)
|
–
|
|
Curtailments,
settlements and special termination benefits(1)
|
–
|
–
|
108
|
–
|
|
–
|
–
|
|
Non-operational
pension cost (credit)
|
(33)
|
(27)
|
96
|
3
|
|
(1)
|
–
|
|
Net
periodic benefit cost (credit)
|
(10)
|
(8)
|
119
|
31
|
|
(1)
|
–
|
(1) Includes
$101 million in discontinued operations for the settlement of the pension
plan in Sweden.
The components of net periodic benefit cost
other than the service cost component are included in the line “Non-operational
pension (cost) credit” in the income statement. Net periodic benefit cost
includes $121 million and $20 million, for the six months ended
June 30, 2020 and 2019, respectively and $109 million and
$10 million for the three months ended June 30, 2020 and 2019,
respectively, related to discontinued operations.
Employer contributions were as follows:
|
($ in
millions)
|
Defined
pension benefits
|
|
Other
postretirement
|
|
|
Switzerland
|
International
|
|
benefits
|
|
Six
months ended June 30,
|
2020
|
2019
|
2020
|
2019
|
|
2020
|
2019
|
|
Total
contributions to defined benefit pension and
|
|
|
|
|
|
|
|
|
other
postretirement benefit plans
|
48
|
48
|
47
|
44
|
|
3
|
4
|
|
Of
which, discretionary contributions to defined benefit
|
|
|
|
|
|
|
|
|
pension
plans
|
–
|
2
|
143
|
–
|
|
–
|
–
|
|
($ in
millions)
|
Defined
pension benefits
|
|
Other postretirement
|
|
|
Switzerland
|
International
|
|
benefits
|
|
Three
months ended June 30,
|
2020
|
2019
|
2020
|
2019
|
|
2020
|
2019
|
|
Total
contributions to defined benefit pension and
|
|
|
|
|
|
|
|
|
other
postretirement benefit plans
|
24
|
25
|
26
|
20
|
|
2
|
2
|
|
Of
which, discretionary contributions to defined benefit
|
|
|
|
|
|
|
|
|
pension
plans
|
–
|
2
|
143
|
–
|
|
–
|
–
|
The
Company expects to make contributions totaling approximately $504 million
and $10 million to its defined pension plans and other postretirement
benefit plans, respectively, for the full year 2020.
27 Q2
2020 Financial Information
─
Note 12
Stockholder's equity
At the Annual
General Meeting of Shareholders on March 26, 2020, shareholders approved
the proposal of the Board of Directors to distribute 0.80 Swiss francs per
share to shareholders. The declared dividend amounted to $1,758 million
and was paid in April 2020.
In July 2020,
the Company announced it initially intends to buy 10 percent of its share
capital through the recently announced share buyback program. This represents a
maximum of 180 million shares, in addition to those already held in treasury. The
share buyback program will be executed on a second trading line on the SIX
Swiss Exchange and is planned to run until the Company’s Annual General Meeting
(AGM) on March 25, 2021. At the AGM, the Company intends to request shareholder
approval to cancel the shares purchased through this program.
─
Note 13
Earnings per share
Basic earnings per share is calculated by dividing income by the
weighted-average number of shares outstanding during the period. Diluted
earnings per share is calculated by dividing income by the weighted-average
number of shares outstanding during the period, assuming that all potentially
dilutive securities were exercised, if dilutive. Potentially dilutive
securities comprise outstanding written call options, and outstanding options
and shares granted subject to certain conditions under the Company’s
share-based payment arrangements.
|
Basic
earnings per share
|
|
|
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions, except per share data in $)
|
2020
|
2019
|
2020
|
2019
|
|
Amounts
attributable to ABB shareholders:
|
|
|
|
|
|
Income
(loss) from continuing operations, net of tax
|
703
|
325
|
378
|
(72)
|
|
Income
(loss) from discontinued operations, net of tax
|
(8)
|
274
|
(59)
|
136
|
|
Net
income
|
695
|
599
|
319
|
64
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in millions)
|
2,134
|
2,132
|
2,134
|
2,132
|
|
|
|
|
|
|
|
Basic
earnings per share attributable to ABB shareholders:
|
|
|
|
|
|
Income
(loss) from continuing operations, net of tax
|
0.33
|
0.15
|
0.18
|
(0.03)
|
|
Income
(loss) from discontinued operations, net of tax
|
0.00
|
0.13
|
(0.03)
|
0.06
|
|
Net
income
|
0.33
|
0.28
|
0.15
|
0.03
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions, except per share data in $)
|
2020
|
2019
|
2020
|
2019
|
|
Amounts
attributable to ABB shareholders:
|
|
|
|
|
|
Income
(loss) from continuing operations, net of tax
|
703
|
325
|
378
|
(72)
|
|
Income
(loss) from discontinued operations, net of tax
|
(8)
|
274
|
(59)
|
136
|
|
Net
income
|
695
|
599
|
319
|
64
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in millions)
|
2,134
|
2,132
|
2,134
|
2,132
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
Call
options and shares
|
3
|
2
|
3
|
–
|
|
Adjusted
weighted-average number of shares outstanding (in millions)
|
2,137
|
2,134
|
2,137
|
2,132
|
|
|
|
|
|
|
|
Diluted
earnings per share attributable to ABB shareholders:
|
|
|
|
|
|
Income
(loss) from continuing operations, net of tax
|
0.33
|
0.15
|
0.18
|
(0.03)
|
|
Income
(loss) from discontinued operations, net of tax
|
0.00
|
0.13
|
(0.03)
|
0.06
|
|
Net
income
|
0.33
|
0.28
|
0.15
|
0.03
|
28 Q2
2020 Financial Information
─
Note 14
Reclassifications out of accumulated other
comprehensive loss
The following table shows changes in “Accumulated other
comprehensive loss” (OCI) attributable to ABB, by component, net of tax:
|
|
|
Unrealized gains
|
Pension and
|
Unrealized gains
|
|
|
|
Foreign currency
|
(losses) on
|
other
|
(losses) of cash
|
|
|
|
translation
|
available-for-sale
|
postretirement
|
flow hedge
|
|
|
($ in
millions)
|
adjustments
|
securities
|
plan adjustments
|
derivatives
|
Total OCI
|
|
Balance
at January 1, 2019
|
(3,324)
|
(4)
|
(1,967)
|
(16)
|
(5,311)
|
|
Adoption
of accounting standard update(1)
|
–
|
–
|
(36)
|
–
|
(36)
|
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
Other
comprehensive (loss) income
|
|
|
|
|
|
|
before
reclassifications
|
(53)
|
11
|
3
|
5
|
(34)
|
|
Amounts
reclassified from OCI
|
–
|
2
|
32
|
–
|
34
|
|
Total
other comprehensive (loss) income
|
(53)
|
13
|
35
|
5
|
–
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Amounts
attributable to
|
|
|
|
|
|
|
noncontrolling
interests
|
1
|
–
|
–
|
–
|
1
|
|
Balance
at June 30, 2019(2)
|
(3,378)
|
9
|
(1,968)
|
(11)
|
(5,349)
|
|
|
|
Unrealized gains
|
Pension and
|
Unrealized gains
|
|
|
|
Foreign currency
|
(losses) on
|
other
|
(losses) of cash
|
|
|
|
translation
|
available-for-sale
|
postretirement
|
flow hedge
|
|
|
($ in
millions)
|
adjustments
|
securities
|
plan adjustments
|
derivatives
|
Total OCI
|
|
Balance
at January 1, 2020
|
(3,450)
|
10
|
(2,145)
|
(5)
|
(5,590)
|
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
Other
comprehensive (loss) income
|
|
|
|
|
|
|
before
reclassifications
|
(386)
|
18
|
(89)
|
(6)
|
(463)
|
|
Amounts
reclassified from OCI
|
99
|
(3)
|
123
|
2
|
221
|
|
Total
other comprehensive (loss) income
|
(287)
|
15
|
34
|
(4)
|
(242)
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
Amounts
attributable to
|
|
|
|
|
|
|
noncontrolling
interests
|
(4)
|
–
|
–
|
–
|
(4)
|
|
Balance
at June 30, 2020
|
(3,733)
|
25
|
(2,111)
|
(9)
|
(5,828)
|
(1) Amount
relates to the adoption of an accounting standard update in 2019 regarding the
Tax Cuts and Jobs Act of 2017.
(2) Due
to rounding numbers presented may not add to the totals provided.
The following table reflects
amounts reclassified out of OCI in respect of Foreign currency translation
adjustments and Pension and other postretirement plan adjustments:
|
|
|
Six
months ended
|
Three
months ended
|
|
($ in
millions)
|
Location
of (gains) losses
|
June 30,
|
June 30,
|
|
Details
about OCI components
|
reclassified
from OCI
|
2020
|
2019
|
2020
|
2019
|
|
Foreign
currency translation adjustments:
|
|
|
|
|
|
|
Translation
loss on solar inverters business (see Note 3)
|
Other
income (expense), net
|
99
|
–
|
–
|
–
|
|
|
|
|
|
|
|
|
Pension
and other postretirement plan adjustments:
|
|
|
|
|
|
|
Amortization
of prior service cost (credit)
|
Non-operational
pension (cost) credit(1)
|
(7)
|
(8)
|
(3)
|
(4)
|
|
Amortization
of net actuarial loss
|
Non-operational
pension (cost) credit(1)
|
58
|
53
|
32
|
27
|
|
Net
gains from pension settlements and curtailments
|
Non-operational
pension (cost) credit(1)
|
108
|
–
|
108
|
–
|
|
Total
before tax
|
|
159
|
45
|
137
|
23
|
|
Tax
|
Provision
for taxes
|
(36)
|
(13)
|
(30)
|
(6)
|
|
Amounts
reclassified from OCI
|
|
123
|
32
|
107
|
17
|
(1) Amounts
include
a total of $94 million and $6 million for the six months ended June 30,
2020 and 2019, respectively, and $97 million and $3 million for the
three months ended June 30, 2020 and 2019, respectively, reclassified from
OCI to Income from discontinued operations.
The amounts
in respect of Unrealized gains (losses) on available-for-sale securities and
Unrealized gains (losses) of cash flow hedge derivatives were not significant
for the six and three months ended June 30, 2020 and 2019.
29 Q2
2020 Financial Information
─
Note 15
Restructuring and related expenses
OS program
In
December 2018, the Company announced a two-year restructuring program with the
objective of simplifying its business model and structure through the
implementation of a new organizational structure driven by its businesses. The program includes the elimination of the country and
regional structures within the current matrix organization, including the
elimination of the three regional Executive Committee roles. The operating businesses will each be responsible for both
their customer-facing activities and business support functions, while the
remaining Group-level corporate activities will primarily focus on Group
strategy, portfolio and performance management, capital allocation, core
technologies and the ABB Ability™ platform. The program is expected to be performed over two years
and incur restructuring expenses of $350 million, primarily relating to
employee severance costs.
The following table outlines the costs incurred in the six and
three months ended June 30, 2020 and 2019, respectively, the cumulative
costs incurred up to June 30, 2020, and the total amount of costs expected
to be incurred under the program per operating segment:
|
|
Cost
incurred
|
Cumulative net
|
Total
|
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
cost incurred up to
|
expected
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
June 30, 2020
|
costs
|
|
Electrification
|
18
|
(4)
|
16
|
(2)
|
68
|
75
|
|
Industrial
Automation
|
6
|
2
|
6
|
2
|
30
|
60
|
|
Motion
|
5
|
1
|
5
|
1
|
12
|
30
|
|
Robotics
& Discrete Automation
|
7
|
3
|
1
|
3
|
15
|
20
|
|
Corporate
and Other
|
21
|
24
|
11
|
23
|
86
|
165
|
|
Total
|
57
|
26
|
39
|
27
|
211
|
350
|
Of the total expected costs of $350 million the majority is
related to employee severance costs. The Company recorded the following
expenses, net of changes in estimates, under this program:
|
|
Six
months ended
|
Three
months ended
|
Cumulative
costs
|
|
|
June 30,
|
June 30,
|
incurred
up to
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
June 30,
2020
|
|
Employee
severance costs
|
36
|
26
|
21
|
27
|
182
|
|
Estimated
contract settlement, loss order and other costs
|
4
|
–
|
2
|
–
|
5
|
|
Inventory
and long-lived asset impairments
|
17
|
–
|
16
|
–
|
24
|
|
Total
|
57
|
26
|
39
|
27
|
211
|
Expenses, net of changes in estimates, associated with this
program are recorded in the following line items in the Consolidated Income
Statements:
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
Total
cost of sales
|
11
|
–
|
8
|
1
|
|
Selling,
general and administrative expenses
|
7
|
19
|
7
|
19
|
|
Other
income (expense), net
|
39
|
7
|
24
|
7
|
|
Total
|
57
|
26
|
39
|
27
|
Liabilities associated with the OS program are
primarily included in “Other provisions”. The following table shows the
activity from the beginning of the program to June 30, 2020, by expense
type:
|
|
|
Employee
|
Contract settlement,
|
|
|
($ in
millions)
|
|
severance costs
|
loss order and other
costs
|
Total
|
|
Liability
at January 1, 2018
|
|
–
|
–
|
–
|
|
Expenses
|
|
65
|
–
|
65
|
|
Liability
at December 31, 2018
|
|
65
|
–
|
65
|
|
Expenses
|
|
111
|
1
|
112
|
|
Cash
payments
|
|
(44)
|
(1)
|
(45)
|
|
Change
in estimates
|
|
(30)
|
–
|
(30)
|
|
Exchange
rate differences
|
|
(3)
|
–
|
(3)
|
|
Liability
at December 31, 2019
|
|
99
|
–
|
99
|
|
Expenses
|
|
41
|
4
|
45
|
|
Cash
payments
|
|
(46)
|
(1)
|
(47)
|
|
Change
in estimates
|
|
(5)
|
–
|
(5)
|
|
Exchange
rate differences
|
|
–
|
(1)
|
(1)
|
|
Liability
at June 30, 2020
|
|
89
|
2
|
91
|
30 Q2
2020 Financial Information
Other
restructuring-related activities
In the six
months ended June 30, 2020 and 2019, the Company executed various
other restructuring‑related activities and incurred expenses. These
expenses, which in the six months ended June 30, 2019, mainly relate to
employee severance costs, are recorded in:
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
Total
cost of sales
|
2
|
32
|
2
|
10
|
|
Selling,
general and administrative expenses
|
8
|
16
|
3
|
4
|
|
Non-order
related research and development expenses
|
–
|
(1)
|
–
|
(1)
|
|
Other
income (expenses), net
|
10
|
26
|
9
|
9
|
|
Total
|
20
|
73
|
14
|
22
|
At June 30, 2020, and
December 31, 2019, $130 million and $189 million, respectively, was
recorded for other restructuring-related liabilities and is primarily included
in “Other provisions”.
─
Note 16
Operating segment data
The Chief Operating Decision Maker (CODM) is the Chief Executive
Officer. The CODM allocates resources to and assesses the performance of each
operating segment using the information outlined below. The
Company is organized into operating segments based on products and services and
these operating segments consist of Electrification, Industrial Automation,
Motion, 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:
·
Electrification: manufactures and sells electrical products and
solutions which are designed to provide sustainable, smarter and safer
electrical flow from the substation to the socket. The portfolio of increasingly
digital and connected solutions includes electric vehicle charging
infrastructure, solar 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.
·
Industrial Automation: develops and sells integrated automation and
electrification systems and solutions, such as process and discrete control
solutions, advanced process control software and manufacturing execution
systems, sensing, measurement and analytical instrumentation and solutions,
electric ship propulsion systems, as well as large turbochargers. In addition,
the business offers a comprehensive range of services ranging from repair to advanced
services such as remote monitoring, preventive maintenance and cybersecurity
services.
·
Motion: manufactures and sells motors, generators,
drives, wind converters, mechanical power transmissions, complete electrical
powertrain systems and related services and digital solutions for a wide range
of applications in industry, transportation, infrastructure, and utilities.
·
Robotics & Discrete Automation: develops and sells
robotics and machinery automation solutions, including robots, controllers,
software, function packages, cells, programmable logic controllers (PLC),
industrial PCs (IPC), servo motion, engineered manufacturing solutions,
turn-key solutions and collaborative robot solutions for a wide range of
applications. In addition, the business offers a comprehensive range of digital
solutions as well as field and after sales service.
·
Corporate and Other: includes headquarters, central research and development, the Company’s real
estate activities, Corporate Treasury Operations 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:
·
amortization expense on intangibles arising upon acquisitions
(acquisition-related amortization),
·
restructuring, related and implementation costs,
·
changes in the amount recorded for obligations related to divested
businesses occurring after the divestment date (changes in obligations related
to divested businesses),
·
changes in estimates relating to opening balance sheets of
acquired businesses (changes in pre-acquisition estimates),
·
gains and losses from sale of businesses (including fair value
adjustment on assets and liabilities held for sale),
·
acquisition- and divestment-related expenses and integration
costs,
·
certain other non-operational items, as well as
·
foreign exchange/commodity timing differences in income from
operations consisting of: (a) unrealized gains and losses on derivatives
(foreign 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 other fair value
changes, as well as other items which are determined by management on a
case-by-case basis.
31 Q2
2020 Financial Information
The CODM primarily reviews the results of each
segment on a basis that is before the elimination of profits made on inventory
sales between segments. Segment results below are presented before these
eliminations, with a total deduction for intersegment profits to arrive at the
Company’s consolidated Operational EBITA. Intersegment sales and transfers are
accounted for as if the sales and transfers were to third parties, at current
market prices.
The following tables present disaggregated segment revenues from
contracts with customers, Operational EBITA, and the reconciliations of
consolidated Operational EBITA to Income from continuing operations before
taxes for the six and three months ended June 30, 2020 and 2019, as well
as total assets at June 30, 2020, and December 31, 2019.
|
|
Six
months ended June 30, 2020
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Total
|
|
Geographical
markets
|
|
|
|
|
|
|
|
Europe
|
1,842
|
1,126
|
937
|
652
|
31
|
4,588
|
|
The
Americas
|
1971
|
689
|
1,115
|
187
|
2
|
3,964
|
|
of
which USA
|
1550
|
445
|
955
|
128
|
1
|
3,079
|
|
Asia,
Middle East and Africa
|
1513
|
959
|
797
|
428
|
13
|
3,710
|
|
of
which China
|
761
|
268
|
370
|
279
|
1
|
1,679
|
|
|
5,326
|
2,774
|
2,849
|
1,267
|
46
|
12,262
|
|
End
Customer Markets
|
|
|
|
|
|
|
|
Utilities
|
879
|
470
|
374
|
–
|
5
|
1,728
|
|
Industry
|
2,564
|
1,624
|
1,781
|
1,231
|
21
|
7,221
|
|
Transport
& infrastructure
|
1,883
|
680
|
694
|
36
|
20
|
3,313
|
|
|
5,326
|
2,774
|
2,849
|
1,267
|
46
|
12,262
|
|
Product
type
|
|
|
|
|
|
|
|
Products
|
4,636
|
634
|
2,444
|
754
|
41
|
8,509
|
|
Systems
|
289
|
800
|
–
|
317
|
5
|
1,411
|
|
Services
and other
|
401
|
1,340
|
405
|
196
|
–
|
2,342
|
|
|
5,326
|
2,774
|
2,849
|
1,267
|
46
|
12,262
|
|
|
|
|
|
|
|
|
|
Third-party
revenues
|
5,326
|
2,774
|
2,849
|
1,267
|
46
|
12,262
|
|
Intersegment
revenues(1)
|
211
|
70
|
244
|
33
|
(450)
|
108
|
|
Total
Revenues(2)
|
5,537
|
2,844
|
3,093
|
1,300
|
(404)
|
12,370
|
|
|
Six
months ended June 30, 2019
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Total
|
|
Geographical
markets
|
|
|
|
|
|
|
|
Europe
|
1,995
|
1,194
|
929
|
830
|
35
|
4,983
|
|
The
Americas
|
2,325
|
777
|
1,182
|
232
|
3
|
4,519
|
|
of
which USA
|
1,808
|
469
|
1,004
|
149
|
–
|
3,430
|
|
Asia,
Middle East and Africa
|
1,784
|
1,069
|
881
|
603
|
70
|
4,407
|
|
of
which China
|
840
|
302
|
416
|
440
|
–
|
1,998
|
|
|
6,104
|
3,040
|
2,992
|
1,665
|
108
|
13,909
|
|
End
Customer Markets
|
|
|
|
|
|
|
|
Utilities
|
1,060
|
526
|
334
|
–
|
42
|
1,962
|
|
Industry
|
2,502
|
1,816
|
1,952
|
1,630
|
49
|
7,949
|
|
Transport
& infrastructure
|
2,542
|
698
|
706
|
35
|
17
|
3,998
|
|
|
6,104
|
3,040
|
2,992
|
1,665
|
108
|
13,909
|
|
Product
type
|
|
|
|
|
|
|
|
Products
|
5,300
|
774
|
2,573
|
937
|
61
|
9,645
|
|
Systems
|
308
|
796
|
–
|
487
|
47
|
1,638
|
|
Services
and other
|
496
|
1,470
|
419
|
241
|
–
|
2,626
|
|
|
6,104
|
3,040
|
2,992
|
1,665
|
108
|
13,909
|
|
|
|
|
|
|
|
|
|
Third-party
revenues
|
6,104
|
3,040
|
2,992
|
1,665
|
108
|
13,909
|
|
Intersegment
revenues(1)
|
225
|
58
|
254
|
31
|
(459)
|
109
|
|
Total
Revenues(2)
|
6,329
|
3,098
|
3,246
|
1,696
|
(351)
|
14,018
|
32 Q2
2020 Financial Information
|
|
Three
months ended June 30, 2020
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Total
|
|
Geographical
markets
|
|
|
|
|
|
|
|
Europe
|
878
|
549
|
486
|
299
|
5
|
2,217
|
|
The
Americas
|
940
|
299
|
546
|
84
|
3
|
1,872
|
|
of
which: United States
|
749
|
198
|
463
|
58
|
1
|
1,469
|
|
Asia,
Middle East and Africa
|
835
|
500
|
429
|
230
|
10
|
2,004
|
|
of
which: China
|
478
|
158
|
216
|
160
|
1
|
1,012
|
|
|
2,653
|
1,348
|
1,461
|
613
|
18
|
6,093
|
|
End
Customer Markets
|
|
|
|
|
|
|
|
Utilities
|
448
|
234
|
213
|
–
|
3
|
898
|
|
Industry
|
1,279
|
795
|
897
|
595
|
15
|
3,581
|
|
Transport
& infrastructure
|
926
|
319
|
351
|
18
|
–
|
1,614
|
|
|
2,653
|
1,348
|
1,461
|
613
|
18
|
6,093
|
|
Product
type
|
|
|
|
|
|
|
|
Products
|
2,274
|
328
|
1,246
|
367
|
16
|
4,231
|
|
Systems
|
177
|
404
|
–
|
160
|
2
|
743
|
|
Services
and other
|
202
|
616
|
215
|
86
|
–
|
1,119
|
|
|
2,653
|
1,348
|
1,461
|
613
|
18
|
6,093
|
|
|
|
|
|
|
|
|
|
Third-party
revenues
|
2,653
|
1,348
|
1,461
|
613
|
18
|
6,093
|
|
Intersegment
revenues(1)
|
111
|
34
|
122
|
16
|
(222)
|
61
|
|
Total
Revenues(2)
|
2,764
|
1,382
|
1,583
|
629
|
(204)
|
6,154
|
|
|
Three
months ended June 30, 2019
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Total
|
|
Geographical
markets
|
|
|
|
|
|
|
|
Europe
|
1,012
|
609
|
487
|
409
|
19
|
2,536
|
|
The
Americas
|
1,219
|
405
|
582
|
112
|
3
|
2,321
|
|
of
which: United States
|
946
|
240
|
489
|
74
|
1
|
1,750
|
|
Asia,
Middle East and Africa
|
919
|
536
|
449
|
306
|
48
|
2,258
|
|
of
which: China
|
441
|
155
|
214
|
219
|
–
|
1,029
|
|
|
3,150
|
1,550
|
1,518
|
827
|
70
|
7,115
|
|
End
Customer Markets
|
|
|
|
|
|
|
|
Utilities
|
600
|
277
|
187
|
–
|
39
|
1,103
|
|
Industry
|
1,351
|
923
|
962
|
808
|
22
|
4,066
|
|
Transport
& infrastructure
|
1,199
|
350
|
369
|
19
|
9
|
1,946
|
|
|
3,150
|
1,550
|
1,518
|
827
|
70
|
7,115
|
|
Product
type
|
|
|
|
|
|
|
|
Products
|
2,723
|
419
|
1,306
|
460
|
22
|
4,930
|
|
Systems
|
168
|
379
|
–
|
251
|
48
|
846
|
|
Services
and other
|
259
|
752
|
212
|
116
|
–
|
1,339
|
|
|
3,150
|
1,550
|
1,518
|
827
|
70
|
7,115
|
|
|
|
|
|
|
|
|
|
Third-party
revenues
|
3,150
|
1,550
|
1,518
|
827
|
70
|
7,115
|
|
Intersegment
revenues(1)
|
122
|
30
|
123
|
18
|
(237)
|
56
|
|
Total
Revenues(2)
|
3,272
|
1,580
|
1,641
|
845
|
(167)
|
7,171
|
(1) Intersegment
revenues include sales to the Power Grids business which is presented as
discontinued operations and are not eliminated from Total revenues.
(2) Due
to rounding, numbers presented may not add to the totals provided.
33 Q2
2020 Financial Information
|
|
Six
months ended
|
Three months
ended
|
|
|
June 30,
|
June 30,
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
Operational
EBITA:
|
|
|
|
|
|
Electrification
|
666
|
817
|
348
|
440
|
|
Industrial
Automation
|
259
|
395
|
115
|
190
|
|
Motion
|
509
|
538
|
279
|
275
|
|
Robotics
& Discrete Automation
|
102
|
200
|
43
|
105
|
|
Corporate
and Other
|
|
|
|
|
|
‒ Non-core
and divested businesses
|
(19)
|
(43)
|
(8)
|
(3)
|
|
‒
Stranded corporate costs
|
(40)
|
(133)
|
(19)
|
(66)
|
|
‒
Corporate costs and Other Intersegment elimination
|
(190)
|
(183)
|
(107)
|
(116)
|
|
Total
|
1,287
|
1,591
|
651
|
825
|
|
Acquisition-related
amortization
|
(130)
|
(135)
|
(65)
|
(67)
|
|
Restructuring,
related and implementation costs(1)
|
(107)
|
(142)
|
(67)
|
(74)
|
|
Changes
in obligations related to divested businesses
|
(1)
|
(7)
|
(1)
|
(4)
|
|
Changes
in pre-acquisition estimates
|
–
|
(13)
|
–
|
(13)
|
|
Gains
and losses from sale of businesses
|
(5)
|
(4)
|
(4)
|
(3)
|
|
Fair
value adjustment on assets and liabilities held for sale
|
(19)
|
(455)
|
–
|
(455)
|
|
Acquisition-
and divestment-related expenses and integration costs
|
(27)
|
(54)
|
(16)
|
(30)
|
|
Foreign
exchange/commodity timing differences in income from operations:
|
|
|
|
|
|
Unrealized
gains and losses on derivatives (foreign exchange,
|
|
|
|
|
|
commodities,
embedded derivatives)
|
7
|
13
|
81
|
7
|
|
Realized
gains and losses on derivatives where the underlying hedged
|
|
|
|
|
|
transaction
has not yet been realized
|
(3)
|
(3)
|
1
|
(2)
|
|
Unrealized
foreign exchange movements on receivables/payables (and
|
|
|
|
|
|
related
assets/liabilities)
|
(11)
|
(2)
|
(9)
|
(18)
|
|
Certain
other non-operational items:
|
|
|
|
|
|
Costs
for planned divestment of Power Grids
|
(99)
|
(58)
|
(55)
|
(38)
|
|
Regulatory,
compliance and legal costs
|
–
|
(8)
|
–
|
–
|
|
Business
transformation costs
|
(12)
|
(6)
|
(5)
|
(3)
|
|
Executive
Committee transition costs
|
2
|
(14)
|
–
|
(14)
|
|
Favorable
resolution of an uncertain purchase price adjustment
|
8
|
–
|
8
|
–
|
|
Gain on
sale of investments
|
–
|
15
|
–
|
15
|
|
Asset
write downs/impairments and other fair value changes
|
58
|
–
|
58
|
–
|
|
Other
non-operational items
|
(4)
|
(5)
|
(6)
|
(3)
|
|
Income
from operations
|
944
|
713
|
571
|
123
|
|
Interest
and dividend income
|
27
|
37
|
9
|
18
|
|
Interest
and other finance expense
|
(112)
|
(123)
|
(90)
|
(61)
|
|
Non-operational
pension (cost) credit
|
71
|
44
|
35
|
21
|
|
Income
from continuing operations before taxes
|
930
|
671
|
525
|
101
|
(1) Amounts
include implementation costs in relation to the OS program of $30 million and
$43 million for the six months ended June 30, 2020 and 2019, respectively,
and $14 million and $24 million for the three months ended June 30,
2020 and 2019, respectively.
|
|
Total
assets(1), (2)
|
|
($ in
millions)
|
June 30, 2020
|
December 31, 2019
|
|
Electrification
|
11,746
|
11,671
|
|
Industrial
Automation
|
4,505
|
4,559
|
|
Motion
|
6,158
|
6,149
|
|
Robotics
& Discrete Automation
|
4,588
|
4,661
|
|
Corporate
and Other
|
19,906
|
19,068
|
|
Consolidated
|
46,903
|
46,108
|
(1)
Total assets are after intersegment eliminations and therefore reflect
third-party assets only.
(2) At
June 30, 2020, and December 31, 2019, respectively, Corporate and
Other includes $10,712 million and $9,840 million of assets in the
Power Grids business which is reported as discontinued operations (see Note 3).
34 Q2
2020 Financial Information
35 Q2
2020 Financial Information
—
Supplemental Reconciliations and Definitions
The following reconciliations and definitions include measures
which ABB uses to supplement its Consolidated Financial Information (unaudited)
which is prepared in accordance with United States generally accepted
accounting principles (U.S. GAAP). Certain of these financial measures are, or
may be, considered non-GAAP financial measures as defined in the rules of the
U.S. Securities and Exchange Commission (SEC).
While ABB’s management believes that the non-GAAP financial
measures herein are useful in evaluating ABB’s operating results, this
information should be considered as supplemental in nature and not as a
substitute for the related financial information prepared in accordance with
U.S. GAAP. Therefore these measures should not be viewed in isolation but
considered together with the Consolidated Financial Information (unaudited)
prepared in accordance with U.S. GAAP as of and for the six and three months
ended June 30, 2020.
On January 1, 2019, the Company adopted a new accounting standard
for lease accounting and on January 1, 2020, the Company adopted a new
accounting update for the measurement of credit losses on financial instruments
(see Note 2 to the Consolidated Financial Information). Consistent with the
method of adoption elected, comparable information has not been restated to
reflect the adoption of this new standard and accounting update and continues
to be measured and reported under the accounting standard in effect for those
periods presented.
Comparable growth rates
Growth rates for certain key figures may be presented and
discussed on a “comparable” basis. The comparable growth rate measures growth
on a constant currency basis. Since we are a global company, the comparability
of our operating results reported in U.S. dollars is affected by foreign
currency exchange rate fluctuations. We calculate the impacts from foreign
currency fluctuations by translating the current-year periods’ reported key
figures into U.S. dollar amounts using the exchange rates in effect for the
comparable periods in the previous year.
Comparable growth rates are also adjusted for changes in our
business portfolio. Adjustments to our business portfolio occur due to
acquisitions, divestments, or by exiting specific business activities or
customer markets. The adjustment for portfolio changes is calculated as
follows: where the results of any business acquired or divested have not been consolidated
and reported for the entire duration of both the current and comparable
periods, the reported key figures of such business are adjusted to exclude the
relevant key figures of any corresponding quarters which are not comparable
when computing the comparable growth rate. Certain portfolio changes which do
not qualify as divestments under U.S. GAAP have been treated in a similar
manner to divestments. Changes in our portfolio where we have exited certain
business activities or customer markets are adjusted as if the relevant
business was divested in the period when the decision to cease business
activities was taken. We do not adjust for portfolio changes where the relevant
business has annualized revenues of less than $50 million.
The following tables provide reconciliations of reported growth
rates of certain key figures to their respective comparable growth rate.
Comparable growth rate reconciliation by business
|
|
Q2 2020
compared to Q2 2019
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Business
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Electrification
|
-18%
|
2%
|
4%
|
-12%
|
|
-16%
|
3%
|
3%
|
-10%
|
|
Industrial
Automation
|
-20%
|
3%
|
0%
|
-17%
|
|
-13%
|
4%
|
0%
|
-9%
|
|
Motion
|
-10%
|
3%
|
0%
|
-7%
|
|
-4%
|
3%
|
0%
|
-1%
|
|
Robotics
& Discrete Automation
|
-28%
|
3%
|
0%
|
-25%
|
|
-26%
|
3%
|
0%
|
-23%
|
|
ABB
Group
|
-18%
|
2%
|
2%
|
-14%
|
|
-14%
|
2%
|
2%
|
-10%
|
|
|
H1 2020
compared to H1 2019
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Business
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Electrification
|
-13%
|
3%
|
3%
|
-7%
|
|
-13%
|
2%
|
2%
|
-9%
|
|
Industrial
Automation
|
-7%
|
3%
|
0%
|
-4%
|
|
-8%
|
3%
|
0%
|
-5%
|
|
Motion
|
-2%
|
2%
|
0%
|
0%
|
|
-5%
|
2%
|
0%
|
-3%
|
|
Robotics
& Discrete Automation
|
-22%
|
3%
|
0%
|
-19%
|
|
-23%
|
2%
|
0%
|
-21%
|
|
ABB
Group
|
-11%
|
2%
|
2%
|
-7%
|
|
-12%
|
3%
|
1%
|
-8%
|
36 Q2
2020 Financial Information
Regional comparable growth rate reconciliation
|
|
Q2 2020
compared to Q2 2019
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Region
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Europe
|
-18%
|
3%
|
1%
|
-14%
|
|
-13%
|
4%
|
1%
|
-8%
|
|
The
Americas
|
-26%
|
2%
|
1%
|
-23%
|
|
-19%
|
1%
|
1%
|
-17%
|
|
Asia, Middle
East and Africa
|
-11%
|
3%
|
3%
|
-5%
|
|
-11%
|
2%
|
4%
|
-5%
|
|
ABB
Group
|
-18%
|
2%
|
2%
|
-14%
|
|
-14%
|
2%
|
2%
|
-10%
|
|
|
H1 2020
compared to H1 2019
|
|
|
Order
growth rate
|
|
Revenue
growth rate
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
Region
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Europe
|
-8%
|
3%
|
1%
|
-4%
|
|
-8%
|
3%
|
1%
|
-4%
|
|
The
Americas
|
-13%
|
1%
|
1%
|
-11%
|
|
-12%
|
1%
|
0%
|
-11%
|
|
Asia, Middle
East and Africa
|
-12%
|
3%
|
3%
|
-6%
|
|
-16%
|
2%
|
3%
|
-11%
|
|
ABB
Group
|
-11%
|
2%
|
2%
|
-7%
|
|
-12%
|
3%
|
1%
|
-8%
|
Order backlog growth rate reconciliation
|
|
June 30,
2020 compared to June 30, 2019
|
|
|
|
US$
|
Foreign
|
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
|
Business
|
reported)
|
impact
|
changes
|
Comparable
|
|
|
Electrification
|
-2%
|
3%
|
5%
|
6%
|
|
|
Industrial
Automation
|
-1%
|
4%
|
0%
|
3%
|
|
|
Motion
|
11%
|
2%
|
0%
|
13%
|
|
|
Robotics
& Discrete Automation
|
-7%
|
3%
|
0%
|
-4%
|
|
|
ABB
Group
|
-1%
|
4%
|
2%
|
5%
|
|
Other growth rate reconciliations
|
|
Q2 2020
compared to Q2 2019
|
|
H1 2020
compared to H1 2019
|
|
|
US$
|
Foreign
|
|
|
|
US$
|
Foreign
|
|
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
(as
|
exchange
|
Portfolio
|
|
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
reported)
|
impact
|
changes
|
Comparable
|
|
Service
orders
|
-24%
|
3%
|
0%
|
-21%
|
|
-15%
|
3%
|
0%
|
-12%
|
|
Service
revenues
|
-16%
|
3%
|
0%
|
-13%
|
|
-11%
|
3%
|
0%
|
-8%
|
37 Q2
2020 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:
·
acquisition-related amortization (as defined below),
·
restructuring, related and implementation costs,
·
changes in the amount recorded for obligations related to divested
businesses occurring after the divestment date (changes in obligations related
to divested businesses),
·
changes in estimates relating to opening balance sheets of
acquired businesses (changes in pre-acquisition estimates),
·
gains and losses from sale of businesses (including fair value
adjustment on assets and liabilities held for sale),
·
acquisition- and divestment-related expenses and integration
costs,
·
certain other non-operational items, as well as
·
foreign exchange/commodity timing differences in income from
operations consisting of: (a) unrealized gains and losses on derivatives
(foreign 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
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.
Operational
revenues
The Company presents Operational revenues solely for the purpose
of allowing the computation of Operational EBITA margin. Operational revenues
are total revenues adjusted for foreign exchange/commodity timing differences
in total revenues of: (i) unrealized gains and losses on derivatives,
(ii) realized gains and losses on derivatives where the underlying hedged
transaction has not yet been realized, and (iii) unrealized foreign exchange
movements on receivables (and related assets). Operational revenues are not
intended to be an alternative measure to Total Revenues, which represent our
revenues measured in accordance with U.S. GAAP.
Reconciliation
The following tables provide reconciliations of consolidated
Operational EBITA to Net Income and Operational EBITA Margin by business.
Reconciliation of consolidated Operational EBITA to Net Income
|
|
Six
months ended June 30,
|
Three months
ended June 30,
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
Operational
EBITA
|
1,287
|
1,591
|
651
|
825
|
|
Acquisition-related
amortization
|
(130)
|
(135)
|
(65)
|
(67)
|
|
Restructuring,
related and implementation costs(1)
|
(107)
|
(142)
|
(67)
|
(74)
|
|
Changes
in obligations related to divested businesses
|
(1)
|
(7)
|
(1)
|
(4)
|
|
Changes
in pre-acquisition estimates
|
–
|
(13)
|
–
|
(13)
|
|
Gains
and losses from sale of businesses
|
(5)
|
(4)
|
(4)
|
(3)
|
|
Fair
value adjustment on assets and liabilities held for sale
|
(19)
|
(455)
|
–
|
(455)
|
|
Acquisition-
and divestment-related expenses and integration costs
|
(27)
|
(54)
|
(16)
|
(30)
|
|
Certain
other non-operational items
|
(47)
|
(76)
|
–
|
(43)
|
|
Foreign
exchange/commodity timing differences in income from operations
|
(7)
|
8
|
73
|
(13)
|
|
Income
from operations
|
944
|
713
|
571
|
123
|
|
Interest
and dividend income
|
27
|
37
|
9
|
18
|
|
Interest
and other finance expense
|
(112)
|
(123)
|
(90)
|
(61)
|
|
Non-operational
pension (cost) credit
|
71
|
44
|
35
|
21
|
|
Income
from continuing operations before taxes
|
930
|
671
|
525
|
101
|
|
Provision
for taxes
|
(209)
|
(310)
|
(130)
|
(155)
|
|
Income
from continuing operations, net of tax
|
721
|
361
|
395
|
(54)
|
|
Income
from discontinued operations, net of tax
|
5
|
291
|
(49)
|
142
|
|
Net
income
|
726
|
652
|
346
|
88
|
(1) Amounts
include implementation costs in relation to the OS program of $30 million and
$43 million for the six months ended June 30, 2020 and 2019, respectively, and
$14 million and $24 million for the three months ended June 30, 2020 and 2019,
respectively.
38 Q2
2020 Financial Information
Reconciliation
of Operational EBITA margin by business
|
|
Three
months ended June 30, 2020
|
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
Robotics &
|
Other and
|
|
|
|
|
Industrial
|
|
Discrete
|
Intersegment
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
elimination
|
Consolidated
|
|
Total
revenues
|
2,764
|
1,382
|
1,583
|
629
|
(204)
|
6,154
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in total revenues:
|
|
|
|
|
|
|
|
Unrealized
gains and losses
|
|
|
|
|
|
|
|
on
derivatives
|
(23)
|
(30)
|
(13)
|
(3)
|
(1)
|
(70)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
–
|
(1)
|
–
|
1
|
–
|
–
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables (and related assets)
|
23
|
13
|
9
|
6
|
3
|
54
|
|
Operational
revenues
|
2,764
|
1,364
|
1,579
|
633
|
(202)
|
6,138
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
305
|
117
|
284
|
18
|
(153)
|
571
|
|
Acquisition-related
amortization
|
29
|
1
|
13
|
19
|
3
|
65
|
|
Restructuring,
related and
|
|
|
|
|
|
|
|
implementation
costs
|
29
|
13
|
9
|
4
|
12
|
67
|
|
Changes
in obligations related to
|
|
|
|
|
|
|
|
divested
businesses
|
–
|
–
|
–
|
–
|
1
|
1
|
|
Gains
and losses from sale of businesses
|
4
|
–
|
–
|
–
|
–
|
4
|
|
Acquisition-
and divestment-related expenses
|
|
|
|
|
|
|
|
and
integration costs
|
16
|
–
|
–
|
–
|
–
|
16
|
|
Certain
other non-operational items
|
(7)
|
1
|
4
|
1
|
1
|
–
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in income from operations:
|
|
|
|
|
|
|
|
Unrealized
gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign
exchange, commodities,
|
|
|
|
|
|
|
|
embedded
derivatives)
|
(30)
|
(23)
|
(30)
|
(2)
|
4
|
(81)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
(1)
|
–
|
–
|
1
|
(1)
|
(1)
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables/payables
|
|
|
|
|
|
|
|
(and
related assets/liabilities)
|
3
|
6
|
(1)
|
2
|
(1)
|
9
|
|
Operational
EBITA
|
348
|
115
|
279
|
43
|
(134)
|
651
|
|
|
|
|
|
|
|
|
|
Operational
EBITA margin (%)
|
12.6%
|
8.4%
|
17.7%
|
6.8%
|
n.a.
|
10.6%
|
In the three months ended June 30, 2020, Certain other
non-operational items in the table above includes the following:
|
|
Three
months ended June 30, 2020
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Consolidated
|
|
Certain
other non-operational items:
|
|
|
|
|
|
|
|
Costs
for planned divestment of Power Grids
|
–
|
–
|
–
|
–
|
55
|
55
|
|
Asset
write downs/impairments and
|
|
|
|
|
|
|
|
other
fair value changes
|
–
|
–
|
–
|
–
|
(58)
|
(58)
|
|
Business
transformation costs
|
1
|
–
|
4
|
1
|
(1)
|
5
|
|
Favorable
resolution of an uncertain
|
|
|
|
|
|
|
|
purchase
price adjustment
|
(8)
|
–
|
–
|
–
|
–
|
(8)
|
|
Other
non-operational items
|
–
|
1
|
–
|
–
|
5
|
6
|
|
Total
|
(7)
|
1
|
4
|
1
|
1
|
–
|
39 Q2
2020 Financial Information
|
|
Three
months ended June 30, 2019
|
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
Robotics &
|
Other and
|
|
|
|
|
Industrial
|
|
Discrete
|
Intersegment
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
elimination
|
Consolidated
|
|
Total
revenues
|
3,272
|
1,580
|
1,641
|
845
|
(167)
|
7,171
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in total revenues:
|
|
|
|
|
|
|
|
Unrealized
gains and losses
|
|
|
|
|
|
|
|
on
derivatives
|
(9)
|
(10)
|
–
|
6
|
(1)
|
(14)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
–
|
5
|
–
|
–
|
–
|
5
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables (and related assets)
|
5
|
–
|
1
|
1
|
5
|
12
|
|
Operational
revenues
|
3,268
|
1,575
|
1,642
|
852
|
(163)
|
7,174
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
(104)
|
187
|
249
|
76
|
(285)
|
123
|
|
Acquisition-related
amortization
|
30
|
1
|
13
|
19
|
4
|
67
|
|
Restructuring,
related and
|
|
|
|
|
|
|
|
implementation
costs
|
13
|
7
|
2
|
2
|
50
|
74
|
|
Changes
in obligations related to
|
|
|
|
|
|
|
|
divested
businesses
|
–
|
–
|
–
|
–
|
4
|
4
|
|
Changes
in pre-acquisition estimates
|
13
|
–
|
–
|
–
|
–
|
13
|
|
Gains
and losses from sale of businesses
|
(4)
|
–
|
–
|
–
|
7
|
3
|
|
Fair
value adjustment on assets and liabilities
|
|
|
|
|
|
|
|
held
for sale
|
455
|
–
|
–
|
–
|
–
|
455
|
|
Acquisition-
and divestment-related expenses
|
|
|
|
|
|
|
|
and
integration costs
|
29
|
–
|
–
|
1
|
–
|
30
|
|
Certain
other non-operational items
|
1
|
–
|
2
|
1
|
39
|
43
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in income from operations:
|
|
|
|
|
|
|
|
Unrealized
gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign
exchange, commodities,
|
|
|
|
|
|
|
|
embedded
derivatives)
|
2
|
(11)
|
6
|
5
|
(9)
|
(7)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
(1)
|
3
|
–
|
(1)
|
1
|
2
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables/payables
|
|
|
|
|
|
|
|
(and
related assets/liabilities)
|
6
|
3
|
3
|
2
|
4
|
18
|
|
Operational
EBITA
|
440
|
190
|
275
|
105
|
(185)
|
825
|
|
|
|
|
|
|
|
|
|
Operational
EBITA margin (%)
|
13.5%
|
12.1%
|
16.7%
|
12.3%
|
n.a.
|
11.5%
|
In the three months ended June 30, 2019, Certain other
non-operational items in the table above includes the following:
|
|
Three
months ended June 30, 2019
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Consolidated
|
|
Certain
other non-operational items:
|
|
|
|
|
|
|
|
Costs
for planned divestment of Power Grids
|
–
|
–
|
–
|
–
|
38
|
38
|
|
Business
transformation costs
|
–
|
–
|
2
|
1
|
–
|
3
|
|
Executive
Committee transition costs
|
–
|
–
|
–
|
–
|
14
|
14
|
|
Gain on
sale of investments
|
–
|
–
|
–
|
–
|
(15)
|
(15)
|
|
Other
non-operational items
|
1
|
–
|
–
|
–
|
2
|
3
|
|
Total
|
1
|
–
|
2
|
1
|
39
|
43
|
40 Q2
2020 Financial Information
|
|
Six
months ended June 30, 2020
|
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
Robotics &
|
Other and
|
|
|
|
|
Industrial
|
|
Discrete
|
Intersegment
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
elimination
|
Consolidated
|
|
Total
revenues
|
5,537
|
2,844
|
3,093
|
1,300
|
(404)
|
12,370
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in total revenues:
|
|
|
|
|
|
|
|
Unrealized
gains and losses
|
|
|
|
|
|
|
|
on
derivatives
|
15
|
(1)
|
(3)
|
3
|
2
|
16
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
1
|
7
|
–
|
1
|
(2)
|
7
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables (and related assets)
|
(6)
|
(7)
|
(4)
|
(2)
|
5
|
(14)
|
|
Operational
revenues
|
5,547
|
2,843
|
3,086
|
1,302
|
(399)
|
12,379
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
504
|
241
|
475
|
50
|
(326)
|
944
|
|
Acquisition-related
amortization
|
57
|
2
|
26
|
38
|
7
|
130
|
|
Restructuring,
related and
|
|
|
|
|
|
|
|
implementation
costs
|
44
|
16
|
11
|
11
|
25
|
107
|
|
Changes
in obligations related to
|
|
|
|
|
|
|
|
divested
businesses
|
–
|
–
|
–
|
–
|
1
|
1
|
|
Gains
and losses from sale of businesses
|
5
|
–
|
–
|
–
|
–
|
5
|
|
Fair
value adjustment on assets and liabilities
|
|
|
|
|
|
|
|
held
for sale
|
19
|
–
|
–
|
–
|
–
|
19
|
|
Acquisition-
and divestment-related expenses
|
|
|
|
|
|
|
|
and
integration costs
|
27
|
–
|
–
|
–
|
–
|
27
|
|
Certain
other non-operational items
|
(7)
|
1
|
9
|
2
|
42
|
47
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in income from operations:
|
|
|
|
|
|
|
|
Unrealized
gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign
exchange, commodities,
|
|
|
|
|
|
|
|
embedded
derivatives)
|
12
|
(5)
|
(11)
|
–
|
(3)
|
(7)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
(1)
|
6
|
–
|
1
|
(3)
|
3
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables/payables
|
|
|
|
|
|
|
|
(and
related assets/liabilities)
|
6
|
(2)
|
(1)
|
–
|
8
|
11
|
|
Operational
EBITA
|
666
|
259
|
509
|
102
|
(249)
|
1,287
|
|
|
|
|
|
|
|
|
|
Operational
EBITA margin (%)
|
12.0%
|
9.1%
|
16.5%
|
7.8%
|
n.a.
|
10.4%
|
In the six months ended June 30, 2020, Certain other
non-operational items in the table above includes the following:
|
|
Six
months ended June 30, 2020
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Consolidated
|
|
Certain
other non-operational items:
|
|
|
|
|
|
|
|
Costs
for planned divestment of Power Grids
|
–
|
–
|
–
|
–
|
99
|
99
|
|
Asset
write downs/impairments and
|
|
|
|
|
|
|
|
other
fair value changes
|
–
|
–
|
–
|
–
|
(58)
|
(58)
|
|
Business
transformation costs
|
1
|
–
|
9
|
2
|
–
|
12
|
|
Executive
Committee transition costs
|
–
|
–
|
–
|
–
|
(2)
|
(2)
|
|
Favorable
resolution of an uncertain
|
|
|
|
|
|
|
|
purchase
price adjustment
|
(8)
|
–
|
–
|
–
|
–
|
(8)
|
|
Other
non-operational items
|
–
|
1
|
–
|
–
|
3
|
4
|
|
Total
|
(7)
|
1
|
9
|
2
|
42
|
47
|
41 Q2
2020 Financial Information
|
|
Six
months ended June 30, 2019
|
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
Robotics &
|
Other and
|
|
|
|
|
Industrial
|
|
Discrete
|
Intersegment
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
elimination
|
Consolidated
|
|
Total
revenues
|
6,329
|
3,098
|
3,246
|
1,696
|
(351)
|
14,018
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in total revenues:
|
|
|
|
|
|
|
|
Unrealized
gains and losses
|
|
|
|
|
|
|
|
on
derivatives
|
(10)
|
(9)
|
–
|
4
|
(2)
|
(17)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
–
|
1
|
–
|
(1)
|
1
|
1
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables (and related assets)
|
1
|
3
|
1
|
–
|
3
|
8
|
|
Operational
revenues
|
6,320
|
3,093
|
3,247
|
1,699
|
(349)
|
14,010
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
193
|
382
|
500
|
153
|
(515)
|
713
|
|
Acquisition-related
amortization
|
59
|
2
|
27
|
39
|
8
|
135
|
|
Restructuring,
related and
|
|
|
|
|
|
|
|
implementation
costs
|
53
|
12
|
5
|
3
|
69
|
142
|
|
Changes
in obligations related to
|
|
|
|
|
|
|
|
divested
businesses
|
–
|
–
|
–
|
–
|
7
|
7
|
|
Changes
in pre-acquisition estimates
|
13
|
–
|
–
|
–
|
–
|
13
|
|
Gains
and losses from sale of businesses
|
(3)
|
–
|
–
|
–
|
7
|
4
|
|
Fair
value adjustment on assets and liabilities
|
|
|
|
|
|
|
|
held
for sale
|
455
|
–
|
–
|
–
|
–
|
455
|
|
Acquisition-
and divestment-related expenses
|
|
|
|
|
|
|
|
and
integration costs
|
51
|
–
|
–
|
1
|
2
|
54
|
|
Certain
other non-operational items
|
2
|
2
|
5
|
1
|
66
|
76
|
|
Foreign
exchange/commodity timing
|
|
|
|
|
|
|
|
differences
in income from operations:
|
|
|
|
|
|
|
|
Unrealized
gains and losses on derivatives
|
|
|
|
|
|
|
|
(foreign
exchange, commodities,
|
|
|
|
|
|
|
|
embedded
derivatives)
|
(5)
|
(6)
|
–
|
3
|
(5)
|
(13)
|
|
Realized
gains and losses on derivatives
|
|
|
|
|
|
|
|
where
the underlying hedged
|
|
|
|
|
|
|
|
transaction
has not yet been realized
|
1
|
2
|
–
|
(1)
|
1
|
3
|
|
Unrealized
foreign exchange movements
|
|
|
|
|
|
|
|
on
receivables/payables
|
|
|
|
|
|
|
|
(and
related assets/liabilities)
|
(2)
|
1
|
1
|
1
|
1
|
2
|
|
Operational
EBITA
|
817
|
395
|
538
|
200
|
(359)
|
1,591
|
|
|
|
|
|
|
|
|
|
Operational
EBITA margin (%)
|
12.9%
|
12.8%
|
16.6%
|
11.8%
|
n.a.
|
11.4%
|
In the six months ended June 30, 2019, Certain other
non-operational items in the table above includes the following:
|
|
Six
months ended June 30, 2019
|
|
|
|
|
|
Robotics &
|
|
|
|
|
|
Industrial
|
|
Discrete
|
Corporate
|
|
|
($ in
millions, unless otherwise indicated)
|
Electrification
|
Automation
|
Motion
|
Automation
|
and Other
|
Consolidated
|
|
Certain
other non-operational items:
|
|
|
|
|
|
|
|
Costs
for planned divestment of Power Grids
|
–
|
–
|
–
|
–
|
58
|
58
|
|
Regulatory,
compliance and legal costs
|
–
|
–
|
–
|
–
|
8
|
8
|
|
Business
transformation costs
|
–
|
–
|
5
|
1
|
–
|
6
|
|
Executive
Committee transition costs
|
–
|
–
|
–
|
–
|
14
|
14
|
|
Gain on
sale of investments
|
–
|
–
|
–
|
–
|
(15)
|
(15)
|
|
Other
non-operational items
|
2
|
2
|
–
|
–
|
1
|
5
|
|
Total
|
2
|
2
|
5
|
1
|
66
|
76
|
42 Q2
2020 Financial Information
Operational EPS
Definition
Operational
EPS
Operational EPS is calculated as Operational net income divided by
the weighted-average number of shares outstanding used in determining basic
earnings per share.
Operational
net income
Operational net income is calculated as Net income attributable to
ABB adjusted for the following:
(i) acquisition-related
amortization,
(ii) restructuring,
related and implementation costs
(iii) non-operational
pension cost (credit),
(iv) changes
in obligations related to divested businesses,
(v) changes
in pre-acquisition estimates,
(vi) gains
and losses from sale of businesses (including fair value adjustment on assets
and liabilities held for sale),
(vii) acquisition-
and divestment-related expenses and integration costs,
(viii) certain
other non-operational items,
(ix) foreign
exchange/commodity timing differences in income from operations consisting of:
(a) unrealized gains and losses on derivatives (foreign 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),
(x) The
amount of income tax on operational adjustments either estimated using the
Adjusted Group effective tax rate or in certain specific cases, computed using
the actual income tax effects of the relevant item in (i) to (ix) above, and
(xi) Certain
other non-operational amounts recorded within Provision for taxes.
Adjustment for
certain non-operational amounts recorded within Provision for taxes
Adjustments are made for certain amounts recorded within Provision
for taxes primarily when the amount recorded has no corresponding underlying
transaction recorded within income from continuing or discontinued operations
before taxes. This would include the amounts recorded in connection with
internal reorganizations of the corporate structure of the Company.
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.
Adjusted Group
effective tax rate
The Adjusted Group effective tax rate is computed by dividing a
combined adjusted provision for taxes (for both continuing and discontinued
operations) by a combined adjusted pre-tax income (from both continuing and
discontinued operations). Certain amounts recorded in income before taxes and
the related provision for taxes (primarily gains and losses from sale of
businesses) are excluded to arrive at the computation. Amounts recorded in
Provision for taxes for certain non-operational items and quantified in the
table below are also excluded from the computation of the Adjusted Group
effective tax rate.
Constant
currency Operational EPS adjustment and Operational EPS growth rate (constant
currency)
We compute the constant currency operational net income using the
relevant monthly exchange rates which were in effect during 2019 and any
difference in computed Operational net income is divided by the relevant
weighted-average number of shares outstanding to identify the constant currency
Operational EPS adjustment.
43 Q2
2020 Financial Information
Reconciliation
|
|
Six
months ended June 30,
|
|
|
($ in
millions, except per share data in $)
|
2020
|
2019
|
Growth(3)
|
|
Net
income (attributable to ABB)
|
695
|
599
|
16%
|
|
Non-operational
adjustments:
|
|
|
|
|
Acquisition-related
amortization
|
130
|
135
|
|
|
Restructuring,
related and implementation costs(1)
|
107
|
142
|
|
|
Non-operational
pension cost (credit)
|
(71)
|
(44)
|
|
|
Changes
in obligations related to divested businesses
|
1
|
7
|
|
|
Changes
in pre-acquisition estimates
|
–
|
13
|
|
|
Gains
and losses from sale of businesses
|
5
|
4
|
|
|
Fair
value adjustment on assets and liabilities held for sale
|
19
|
455
|
|
|
Acquisition-
and divestment-related expenses and integration costs
|
27
|
54
|
|
|
Certain
other non-operational items
|
47
|
76
|
|
|
FX/commodity
timing differences in income from operations
|
7
|
(8)
|
|
|
Non-operational
adjustments in discontinued operations
|
196
|
56
|
|
|
Tax on
non-operational adjustments(2)
|
(62)
|
(124)
|
|
|
Operational
net income
|
1,101
|
1,365
|
-19%
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in millions)
|
2,134
|
2,132
|
|
|
|
|
|
|
|
Operational
EPS
|
0.52
|
0.64
|
-19%
|
|
Constant
currency Operational EPS adjustment
|
0.01
|
–
|
|
|
Operational
EPS (constant currency basis)
|
0.53
|
0.64
|
-18%
|
|
|
Three
months ended June 30,
|
|
|
($ in
millions, except per share data in $)
|
2020
|
2019
|
Growth(3)
|
|
Net
income (attributable to ABB)
|
319
|
64
|
398%
|
|
Non-operational
adjustments:
|
|
|
|
|
Acquisition-related
amortization
|
65
|
67
|
|
|
Restructuring,
related and implementation costs(1)
|
67
|
74
|
|
|
Non-operational
pension cost (credit)
|
(35)
|
(21)
|
|
|
Changes
in obligations related to divested businesses
|
1
|
4
|
|
|
Changes
in pre-acquisition estimates
|
–
|
13
|
|
|
Gains
and losses from sale of businesses
|
4
|
3
|
|
|
Fair
value adjustment on assets and liabilities held for sale
|
–
|
455
|
|
|
Acquisition-
and divestment-related expenses and integration costs
|
16
|
30
|
|
|
Certain
other non-operational items
|
–
|
43
|
|
|
Foreign
exchange/commodity timing differences in income from operations
|
(73)
|
13
|
|
|
Non-operational
adjustments in discontinued operations
|
119
|
56
|
|
|
Tax on
non-operational adjustments(2)
|
(15)
|
(83)
|
|
|
Operational
net income
|
468
|
718
|
-35%
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding (in millions)
|
2,134
|
2,132
|
|
|
|
|
|
|
|
Operational
EPS
|
0.22
|
0.34
|
-35%
|
|
Constant
currency Operational EPS adjustment
|
–
|
–
|
|
|
Operational
EPS (constant currency basis)
|
0.22
|
0.34
|
-33%
|
(1) Amounts
include implementation costs in relation to the OS program of $30 million
and $43 million for the six months ended June 30, 2020 and 2019,
respectively, and $14 million and $24 million for the three months
ended June 30, 2020 and 2019, respectively.
(2)
Tax amount is computed by applying the Adjusted Group effective tax rate to the
non-operational adjustments, except for certain costs for the planned
divestment of the Power Grids business, gains and losses from sale of
businesses (including fair value adjustment on assets and liabilities held for
sale) and certain non-operational pension costs in discontinued operations, for
which the actual provision for taxes resulting from the gain or loss has been
computed.
(3)
Growth is computed using unrounded EPS amounts.
44 Q2
2020 Financial Information
Net debt
Definition
Net debt
Net debt is defined as Total debt less Cash and marketable
securities.
Total debt
Total debt is the sum of Short-term debt and current maturities of
long-term debt, and Long-term debt.
Cash and
marketable securities
Cash and marketable securities is the sum of Cash and equivalents,
and Marketable securities and short-term investments.
Reconciliation
|
($ in
millions)
|
June 30, 2020
|
December 31, 2019
|
|
Short-term
debt and current maturities of long-term debt
|
6,383
|
2,287
|
|
Long-term
debt
|
6,237
|
6,772
|
|
Total
debt
|
12,620
|
9,059
|
|
Cash
and equivalents
|
2,518
|
3,544
|
|
Cash
and equivalents in discontinued operations
|
609
|
–
|
|
Marketable
securities and short-term investments
|
1,878
|
566
|
|
Cash
and marketable securities
|
5,005
|
4,110
|
|
Net
debt
|
7,615
|
4,949
|
Net working capital as a percentage of revenues
Definition
Net working
capital as a percentage of revenues
Net working capital as a percentage of revenues is calculated as
Net working capital divided by Adjusted revenues for the trailing twelve
months.
Net working
capital
Net working capital is the sum of (i) receivables, net, (ii)
contract assets, (iii) inventories, net, and (iv) prepaid expenses; less (v)
accounts payable, trade, (vi) contract liabilities, and (vii) other current
liabilities (excluding primarily: (a) income taxes payable, (b) current
derivative liabilities, and (c) pension and other employee benefits); and
including the amounts related to these accounts which have been presented as
either assets or liabilities held for sale but excluding any amounts included
in discontinued operations.
Adjusted
revenues for the trailing twelve months
Adjusted revenues for the trailing twelve months includes total
revenues recorded by ABB in the twelve months preceding the relevant balance
sheet date adjusted to eliminate revenues of divested businesses and the
estimated impact of annualizing revenues of certain acquisitions which were
completed in the same trailing twelve-month period.
Reconciliation
|
($ in
millions, unless otherwise indicated)
|
June 30, 2020
|
June 30, 2019
|
|
Net
working capital:
|
|
|
|
Receivables,
net
|
6,150
|
6,517
|
|
Contract
assets
|
1,110
|
1,159
|
|
Inventories,
net
|
4,395
|
4,456
|
|
Prepaid
expenses
|
256
|
250
|
|
Accounts
payable, trade
|
(4,062)
|
(4,107)
|
|
Contract
liabilities
|
(1,703)
|
(1,610)
|
|
Other
current liabilities(1)
|
(2,869)
|
(2,881)
|
|
Net
working capital in assets and liabilities held for sale
|
–
|
69
|
|
Net
working capital
|
3,277
|
3,853
|
|
Total
revenues for the three months ended:
|
|
|
|
June 30,
2020 / 2019
|
6,154
|
7,171
|
|
March
31, 2020 / 2019
|
6,216
|
6,847
|
|
December
31, 2019 / 2018
|
7,068
|
7,395
|
|
September
30, 2019 / 2018
|
6,892
|
7,095
|
|
Adjustment
to annualize/eliminate revenues of certain acquisitions/divestments
|
(269)
|
(119)
|
|
Adjusted
revenues for the trailing twelve months
|
26,061
|
28,389
|
|
Net
working capital as a percentage of revenues (%)
|
12.6%
|
13.6%
|
(1) Amounts
exclude $578 million and $566 million at June 30, 2020 and 2019,
respectively, related primarily to (a) income taxes payable, (b) current
derivative liabilities, and (c) pension and other employee benefits.
45 Q2
2020 Financial Information
Free cash flow conversion to net income
Definition
Free cash flow
conversion to net income
Free cash flow conversion to net income is calculated as free cash
flow divided by Net income attributable to ABB.
Free cash flow
Free cash flow is calculated as net cash provided by operating
activities adjusted for: (i) purchases of property, plant and equipment and intangible
assets, and (ii) proceeds from sales of property, plant and equipment.
Free cash flow
for the trailing twelve months
Free cash flow for the trailing twelve months includes free cash
flow recorded by ABB in the twelve months preceding the relevant balance sheet
date.
Net income for
the trailing twelve months
Net income for the trailing twelve months includes net income
recorded by ABB in the twelve months preceding the relevant balance sheet date.
Free cash flow conversion to net income
|
|
Twelve
months to
|
|
($ in
millions, unless otherwise indicated)
|
June 30, 2020
|
December 31, 2019
|
|
Net
cash provided by operating activities
|
2,684
|
2,325
|
|
Adjusted
for the effects of:
|
|
|
|
Continuing
operations:
|
|
|
|
Purchases
of property, plant and equipment and intangible assets
|
(689)
|
(762)
|
|
Proceeds
from sale of property, plant and equipment
|
55
|
82
|
|
Discontinued
operations:
|
|
|
|
Purchases
of property, plant and equipment and intangible assets
|
(179)
|
(167)
|
|
Proceeds
from sale of property, plant and equipment
|
8
|
8
|
|
Free
cash flow
|
1,879
|
1,486
|
|
Net
income attributable to ABB
|
1,535
|
1,439
|
|
Free
cash flow conversion to net income
|
122%
|
103%
|
Reconciliation of the trailing
twelve months to June 30, 2020
|
|
|
Continuing
operations
|
|
Discontinued
operations
|
|
|
($ in millions)
|
Net cash provided by
operating activities
|
Purchases of property,
plant and equipment and intangible assets
|
Proceeds
from sale of property,
plant and equipment
|
|
Purchases of property,
plant and equipment and intangible assets
|
Proceeds
from sale of property,
plant and equipment
|
Net income attributable
to ABB
|
|
Q3 2019
|
670
|
(152)
|
13
|
|
(38)
|
8
|
515
|
|
Q4 2019
|
1,911
|
(234)
|
15
|
|
(48)
|
–
|
325
|
|
Q1 2020
|
(577)
|
(163)
|
23
|
|
(33)
|
–
|
376
|
|
Q2 2020
|
680
|
(140)
|
4
|
|
(60)
|
–
|
319
|
|
Total
for the trailing
|
|
|
|
|
|
|
|
|
twelve
months to
|
|
|
|
|
|
|
|
|
June 30,
2020
|
2,684
|
(689)
|
55
|
|
(179)
|
8
|
1,535
|
46 Q2
2020 Financial Information
Net finance expenses
Definition
Net finance expenses is calculated as Interest and dividend income
less Interest and other finance expense.
Reconciliation
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions)
|
2020
|
2019
|
2020
|
2019
|
|
Interest
and dividend income
|
27
|
37
|
9
|
18
|
|
Interest
and other finance expense
|
(112)
|
(123)
|
(90)
|
(61)
|
|
Net
finance expenses
|
(85)
|
(86)
|
(81)
|
(43)
|
Book-to-bill ratio
Definition
Book-to-bill ratio is calculated as Orders received divided by
Total revenues.
Reconciliation
|
|
Six
months ended June 30,
|
Three
months ended June 30,
|
|
($ in
millions, unless otherwise indicated)
|
2020
|
2019
|
2020
|
2019
|
|
Orders
received
|
13,400
|
15,014
|
6,054
|
7,401
|
|
Total
revenues
|
12,370
|
14,018
|
6,154
|
7,171
|
|
Book-to-bill
ratio
|
1.08
|
1.07
|
0.98
|
1.03
|
47 Q2
2020 Financial Information
—
ABB Ltd
Corporate Communications
P.O. Box 8131
8050 Zurich
Switzerland
Tel: +41 (0)43 317 71 11
www.abb.com
48 Q2
2020 Financial Information
—
ZURICH,
SWITZERLAND, JULY 22, 2020
ABB to launch share buyback program
Following the completion of the divestment of its Power Grids
business to Hitachi on July 1, 2020, and consistent with its overall
capital structure optimization program, ABB will launch its previously
announced share buyback program on July 23, 2020.
As part of its plan to return to shareholders net cash proceeds of
$7.6–7.8 billion from the sale of Power Grids ABB initially intends to buy 10
percent1 of its issued share capital through this share buyback
program. ABB will purchase a maximum of 180 million shares, in addition to
those already held in treasury. The corresponding maximum buyback amount of
CHF 4.2 billion for this program is based on ABB’s share price on
July 21, 2020. The maximum number of shares that may be repurchased under
the program on any given trading day is 2,188,145.
The total number of ABB’s outstanding shares currently amounts to
2,134,574,661. ABB currently holds 33,573,603 own shares in treasury.
The share buyback program is for capital reduction purposes and
will be executed on a second trading line on the SIX Swiss Exchange (Valor:
35.767.961; ISIN: CH0357679619).
The program is planned to run from July 23, 2020 until the
company’s Annual General Meeting (AGM) on March 25, 2021. At the AGM, ABB
intends to request shareholder approval to cancel the shares purchased through
this program and to announce next steps.
The share buyback program will be lead-managed by a bank mandated
by ABB that will make its trading decisions concerning the timing of share
repurchases independently of ABB, within pre-agreed parameters. ABB can change
these parameters outside of its closed periods and if no inside information
exists within ABB, if necessary.
The purchase price per share will not exceed the last independent
closing price on the ordinary trading line on the SIX Swiss Exchange or the
current best independent bid price on the ordinary trading line on the SIX
Swiss Exchange, provided this is below the last independent closing price. In
addition, customary spread on purchases on the second trading line on the SIX
Swiss Exchange will be paid, observing the limitations of the Ordinance on
Financial Market Infrastructures and Market Conduct in Securities and
Derivatives Trading (FMIO). Payment for the shares will be made in cash.
The buyback program is being carried out in accordance with the
Market Abuse Regulation (EU) No 596/2014 (“MAR”) and the Commission Delegated
Regulation (EU) No 2016/1052 (the “Safe Harbour Regulation”). Weekly updates on
the program will be published on ABB’s investor relations website at
https://global.abb/group/en/investors/investor-and-shareholder-resources and
issued by press release.
1 Maximum 10 percent of the company’s issued share
capital, including treasury shares
ABB (ABBN: SIX Swiss Ex) is a leading global technology company that
energizes the transformation of society and industry to achieve a more
productive, sustainable future. By connecting software to its electrification,
robotics, automation and motion portfolio, ABB pushes the boundaries of
technology to drive performance to new levels. With a history of excellence
stretching back more than 130 years, ABB’s success is driven by about 110,000
talented employees in over 100 countries. www.abb.com
Important notice about forward-looking information
This press release
includes forward-looking information and statements concerning the share
buyback program. These statements are based on current expectations, estimates
and projections about the factors that may affect our future performance, and
are generally identifiable by statements containing words such as “intends”,
“expects,” “plans”, or similar expressions. However, there are many risks and
uncertainties, many of which are beyond our control, that could affect our
ability to achieve any or all of our stated targets. 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.
—
For more information please contact:
|
Media Relations
Tel: +41 43 317 65 68
media.relations@ch.abb.com
|
Investor Relations
Tel. +41 43 317 71 11
investor.relations@ch.abb.com
|
ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
|
ABB TO LAUNCH SHARE BUYBACK PROGRAM
|
2/2
|
—
ZURICH,
SWITZERLAND, JULY 22, 2020
ABB appoints Theodor Swedjemark as Chief
Communications Officer
As of August 1, 2020, Theodor Swedjemark (40) will join the
Executive Committee of ABB as the company’s Chief Communications Officer.
Swedjemark has held the position on an interim basis since March 1, 2020.
Swedish-national Swedjemark has been at ABB since 2006. He joined
the company as an executive management trainee before moving to the group
M&A department at ABB’s headquarters in Zurich. In 2014, he took over a
senior management role for Electrification products in the Czech Republic,
covering the Central and Eastern European market. After returning to Zurich,
Swedjemark managed the Strategic Portfolio Review of the Power Grids project
during 2016, after which he assumed the role of Chief of Staff in 2017, later
adding group responsibility for government relations & public affairs.
Under his remit, Swedjemark will be functionally responsible for:
external and internal communications, brand management, ABB Formula E,
government relations & public affairs, as well as sustainability & HSE.
Swedjemark holds a master’s degree in business administration and economics
from Linköping University in Sweden.
Björn Rosengren, CEO of ABB said: “We are delighted that Theodor
has taken this all-important role that is now elevated to the level of
Executive Committee, underlying the importance of professional and clear communication
at a time of change for ABB. Theodor is a true ABB-insider, with a strong range
of business, financial, leadership and diplomatic skills to support the company
with the implementation of its strategy.”
As of August 1, 2020, the Executive Committee will comprise of:
Björn Rosengren, Chief Executive Officer; Timo Ihamuotila, Chief Financial
Officer; Tarak Mehta, President Electrification; Peter Terwiesch, President
Industrial Automation; Morten Wierod, President Motion; Sami Atiya, President
Robotics & Discrete Automation; Sylvia Hill, Chief Human Resources Officer;
Maria Varsellona, General Counsel & Company Secretary; and Theodor Swedjemark,
Chief Communications Officer.
ABB (ABBN: SIX Swiss Ex) is a leading global technology
company that energizes the transformation of society and industry to achieve a
more productive, sustainable future. By connecting software to its electrification,
robotics, automation and motion portfolio, ABB pushes the boundaries of
technology to drive performance to new levels. With a history of excellence
stretching back more than 130 years, ABB’s success is driven by about 110,000
talented employees in over 100 countries. www.abb.com
—
For more information please contact:
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Media Relations
Tel: +41 43 317 65 68
media.relations@ch.abb.com
|
Investor Relations
Tel. +41 43 317 71 11
investor.relations@ch.abb.com
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ABB Ltd
Affolternstrasse 44
8050 Zurich
Switzerland
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April 2 — Jun 30, 2020
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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:
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Name
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Date
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Description
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Received *
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Purchased
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Sold
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Price
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Timo Ihamuotila
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June 15, 2020
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Share
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29,930
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CHF
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19.84
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Tarak Mehta
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June 15, 2020
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Share
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16,767
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CHF
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19.84
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Peter Terwiesch
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June 15, 2020
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Share
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19,616
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CHF
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19.84
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Morten Wierod
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June 15, 2020
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Share
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10,263
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CHF
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19.84
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Sami Atiya
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June 15, 2020
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Share
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18,343
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CHF
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19.84
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Peter Voser
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May 15, 2020
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Share
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32,642
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CHF
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17.47
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Matti Alahuhta
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May 15, 2020
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Share
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7,155
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CHF
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17.47
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Gunnar Brock
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May 15, 2020
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Share
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7,379
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CHF
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17.47
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David Constable
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May 15, 2020
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Share
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3,833
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CHF
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17.47
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Frederico Curado
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May 15, 2020
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Share
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6,646
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CHF
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17.47
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Lars Förberg
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May 15, 2020
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Share
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8,688
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CHF
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17.47
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Jennifer Xin-Zhe Li
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May 15, 2020
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Share
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3,239
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CHF
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17.47
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Geraldine Matchett
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May 15, 2020
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Share
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4,722
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CHF
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17.47
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David Meline
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May 15, 2020
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Share
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4,380
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CHF
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17.47
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Satish Pai
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May 15, 2020
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Share
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3,340
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CHF
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17.47
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Jacob Wallenberg
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May 15, 2020
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Share
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4,928
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CHF
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17.47
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Key:
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* Received instruments were delivered as
part of the ABB Ltd Director’s or Executive Committee Member’s compensation
as compensation for foregone benefits
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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.
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ABB LTD
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Date: July 22,
2020.
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By:
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Name:
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Jessica Mitchell
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Title:
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Group Senior Vice President and
Head of Investor Relations
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Date: July 22,
2020.
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By:
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Name:
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Richard A. Brown
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Title:
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Group Senior Vice President and
Chief Counsel
Corporate & Finance
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