Q1 2021 Abb Ltd Earnings Call
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I wanted to show you a short video.
On the go fat and Swift there so enjoy.
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And the new launch.
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Eric.
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Peter.
John.
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And the economy.
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And Peter.
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Lee.
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I Hope you got a good feeling of the offering.
Through this launch we aim to unlock customer groups, which share currently our low level of automation.
Second thing I want to mention is the topic here of that active portfolio management.
We have separated our EV charging business into its own division called E mobility.
This is an exciting and fast growing business.
And we want to make sure we put it in the best position to accelerate growth and development.
Today, we have a market leading position and we want to make sure that we stay ahead.
To create the value platform for accelerated growth, we are looking into the option of a possible public listing of the business. We are evaluating pros and cons and we'll update you as soon as possible on the way forward.
I will come back and describe the mobility business later in this presentation.
Now, let's look a bit closer at the business development in Q1.
As you can see on our order chart on the right hand side of the slide we have had a good sequential momentum since the lowest point during last summer.
Demand was driven by a strong development in the short cycle business, which improved by about 15% from last year.
And it was driven by most customer segments for example, residential buildings and discrete automation.
And the process related industries underlying demand in net segments like new water and wastewater and chemicals was very positive, but that was offset by the soft demand in oil and gas.
Although there was some initial signs of stabilization.
The aftermarket in the marine business continued to be weak highly affected by the low activity, especially in the cruising industry.
The bars in the chart shows that Q1 and.
Tends to be a strong quarter for orders and the net total our orders were largely stable plus 1% year over year with base orders up 3%.
We believe some demand was extra fueled by customers building inventory to secure components availability.
That said, it's difficult to access exactly to what extent.
Revenues were up 7% from Q1 last year, when we started to feel the impact of COVID-19, now, let's take a quick look at the different regions here on slide number five.
If we compare sequentially from Q4, we see a positive underlying business momentum in all the three major regions compared with last year. It is clear that China is the main growth engine with orders up 24%. However, this was offset on a re.
And the level and the <unk>.
And middle East was up 2%.
Americas was stable.
With you is actually declining 2% as last year had no real COVID-19 impact and more large orders in process automation base orders were up 4% and the U S. Europe was up 3% with a mixed picture from different countries, but.
Our largest market, Germany increased slightly.
Our margin was very strong in Q1.
Although revenues increased our SG&A expenses declined by 4%.
This is good but of course and the continued restrictions on travel et cetera also supported the result.
Importantly, our gross margin improved by two and a 20 basis points.
Three of our four business areas and improved and their support was mainly from increased volumes, but also from structural improvements, including portfolio management and some plant closures and those of you who know me are familiar with my.
Passion for technology and R&D.
Our R&D spend increased 6% year over year and it is important we stay focused in this area to remain <unk>.
Technology leader.
And with that I hand over to demo our head of number crunching to go through the results in more detail. Please table. Thanks Darren.
Nice crunching. This time, so I'm glad to take you through the details and let's start with electrification, where comparable orders and revenues were up nine and 11% respectively year on year.
Clearly the underlying markets improved and we saw it and wait virtually all segments, except for in oil and gas, which remained overall and you did.
That said demand was also to some extent fueled by customer building stock interface of tightening supply situation and.
And it's difficult to call out the exact impact here and let's see how this pans out but there was an element of stockpiling and tier one.
The higher volume drove better cost absorption.
And could that the positive impact of electrification, having taken prompt actions on pricing in order to offset that the oncoming headwinds from higher raw material costs, while still enjoying the benefits of lower input costs this quarter.
The situation should change as from Q2, when raw materials board at higher rates come out of inventories.
In total electrification operational EBITDA margin increased by 480 basis points year on year to 16, 2%.
Looking ahead at the second quarter, we anticipate growth rates to reflect the easy comparable from last year and be in the mid teens range for both orders and revenues.
We expect a slight sequential increase and margin inline with seasonal pattern.
Let's then turn to slide eight and business area motion, which delivered yet another quarter of solid performance.
In absolute terms motion delivered one of the highest order quarters and recent history there.
And there was admittedly some support from FX as on a comparable basis orders declined 4%.
Revenues were up 6% with development, reflecting strong book and Bill and solid customer activity in most sectors, except for oil and gas.
The operational EBITA margin of 17, 1% was up by 180 basis points.
And the main drivers were the contribution from additional volume as well as a supportive divisional mix and lower discretionary spending.
Also emotion the higher raw material costs will have to be offset as from the second quarter onwards, when older hedges start to phase out.
We're also carefully watching the tightening of the supply and areas of semiconductors and also electric steel.
This good particularly impact our drives products division.
For the second quarter, we anticipate comparable order and revenue growth in the mid single digit range and overall continued solid operational execution with some risk on the semi conductor availability to the business mix.
And process automation orders declined 11% year on year due to fewer large orders received this year and weak demand in the oil and gas and also parts of the marine segment.
On a more positive note business activity increased and pulp and paper chemicals and water and wastewater.
On a sequential basis at the underlying customer activity remained largely stable.
The order backlog at quarter end was $5 9 billion up about $100 million from the end of Q4.
Revenues declined 9% on comparable basis.
The negative volume develop web development was offset by the positive impact from earlier implemented cost measures stronger operational execution and positive impact from foreign exchange rates in total profit improved by 8% and margin by 130 basis points.
In Q2, we expect significant growth in orders and we expect revenue growth to turn to positive.
Margin should remain broadly stable on a sequential basis.
On slide 10, we turn to robotics and discrete automation, where we saw a steep increase in business activity in both robotics and machine automation and most customer segments outside of automotive and the bleak ultimate development and orders relates both to the underlying market as well as through our active.
Joyce to deselect to stem related orders in order to improve long term quality of revenues.
Revenues rose by an exceptional and our lives 10% year on year supported by strong execution on deliveries from the order backlog as well as a generally strong development in the short cycle business.
The operational EBITA margin of 12, 4% was up 360 basis points year on year with particularly good performance in the machine and factory automation Division.
The rise was primarily driven by better cost absorption due to higher volumes positive mix from higher share of service revenues and as previously implemented cost measures.
Or as the area, where we see the largest near term risk for delayed customer deliveries due to semiconductor constraints in the market, we expect protracted delivery times in some areas of our raw already in Q2.
Overall looking into Q2, we expect double digit growth rates for comparable orders and revenues with higher growth rates in orders.
We expect slightly lower margin versus Q1.
We look next at our group revenues and operational EBITA Bridge on slide 11.
As you see in this table the strongest contribution to the year on year progression comes from the organic development.
The volume leverage was good and we also benefited from our earlier cost actions and somewhat abnormally low discretionary spending.
Cash flow from operating activities of $500 and $23 million up over 900 million from last year is a very strong for a first quarter.
As you can see and the chart Q1 tends to be seasonally low for cash.
Please note that we compare and compare here and continuing operations only and thus the cash flow numbers here differ from what we report did when power grids or still a part of ABB.
And this very strong and good cash herself reflects higher income from all business areas less working capital buildup and favorable timing of tax payments.
This is a good start for what we expect will be a year when we see meaningful improvement in our cash delivery.
And then to finish off I, just quickly want to discuss the outlook statement.
For the full year 2021 we expect comparable revenue growth of about 5% or higher.
The short cycle is already support Dillon.
And like we have already said before we anticipate the process related industries to start to recover during the second half of this year, including the service business in the Marine segment.
Our operational EBITA margin should improve at a steady pace towards our 2023 margin target as described in our release today.
In Q2 growth rates for comparable orders and revenues will benefit from a lower base due to the COVID-19 impact in 2020.
We anticipate comparable growth to be at least 10% year on year with how a higher growth rate for orders and for revenues.
The operational EBITA margin for the group is expected to be approximately 14% for the second quarter.
Our estimates can be affected by development of the COVID-19 situation as well as by component availability.
And with that let me hand, you back over to Barry Thank you Guillermo and.
I would just like to close this presentation by coming back to the E mobility Division.
And in this deviation, we offer EV charging hardware, but also.
And look to grow in the digital services for EV charging operators.
This could be services like analytics, and real time fleet management for scheduling billing registrations et cetera.
It generated about 220 million us dollar and and revenues last year, we have grown this business at about 50% CAGR since 2016, and we achieved and number one position.
This business fits right with their secondary EBIT trend and we expect to see continued strong growth.
To secure our global leading position, we have invested to broaden the geographic scope by acquiring the majority stake in net charge dots early last year.
They are the leading Chinese E mobility solution provider.
Like I mentioned, we have now separated into its own division. We have also initiated the process by separating it into its own legal structure.
And to explore the option of a separate listing.
We do this to create a high value growth platform, where we can accelerate our organic and nonorganic expansion.
At this stage I will not put a timeline on things, but I promise and we will let you know as soon as possible about and are any new decision on how we extract the full value out of this business.
And with this.
I will ask and see to open the Q&A session. Please answer.
And beyond and female side.
We will now open up for Q&A and should you want to ask a question. Please register by pressing star 14 and to secure the sound quality pay per member tenure the webcast at your line is open for questions.
I can already now see that we have a long queue for question and so I kindly ask you to limit yourself to two questions and then we'll do our best to get through as many of you as possible.
And with that we have.
And up for question and yes, let me remind you again that to register for a question. Please press Star 14, and just to make sure you keep your line. Please stay so again, even if you've already done and say.
And we opened up with a question from Martin Wilkie and city. Please open the line.
And I can refer to your line is open.
Thanks, and good morning, as margin calls and so question.
The project coordination of all I mean, you pointed obviously.
The area of short cycle, very strong, but just to get a sense of.
All the momentum and process in terms of when you're speaking to customers.
Since we are close to an inflection and we get that to lock a little bit from some other companies and linked to that and you still talk about service being down.
And mid single digit I think John.
Just to get.
Some sort of expenses, how big a drag that is on your gross margin and and also are we approaching a point where that can begin to improve as well. Thank you. Thank.
Thank you Martin.
I'll take care of you know when it come to process automation, we have a number of divisions and I think it varies a lot between there.
And the different divisions it's.
It's quite clear that day short cycle business.
Which of course includes the service is being more affected in this business there than anything else and we said, yes on the orders we were around about 7% down on service, but if you look actually on their revenues it was down 12 or 13% so.
And we see better orders, but still on the revenues is lower and that is the highest.
And this varies of course between different segments, we've seen recovery and somewhat of the segments for instance in net turbocharging has come back in there in a very strong way we have seen good day in the mining and part of the business, while at the oil and gas its still holding back a little.
Right.
Marine is as you know affected we had good orders on hand from from last year. So we have and egg exceptionally good order book, but these deliveries will come during the coming quarters from that perspective and on the service side.
We know that.
And that the cruising industry is of greatest importance for our Asa acid politesse electrical propulsion side and that business is still.
I mean, just standing still and we know that they have very good order levels actually and the cruising business for the second half of the year. So hopefully when the vaccine is being spread out more and we'll see this industry to come back, but we shouldn't see that really into our margins and revenues before the second half.
Of the year, so it's pretty clear as you can see it's a process automation that has the biggest headwind at the moment, but there are some some light and the tunnel and there are numerous of these sales segments and we think by you and all.
The third and fourth quarter, we should be back here.
And levels before the pandemic.
And in terms of the shape of that when it comes back.
There's a lot of these kids need servicing before it goes back to utilization and I mean, do you all must see and.
Elastic band Big Snapback and service or is some of the service revenue simply mixed and it'll be cold-cock. The next time. They can T. G per service just to get some sort of central to.
Really how quickly that service business could come back, even though coming during the second half and O I.
I don't think we'll see a kick back like a rubber band from that perspective, I think is more of that when the asset Paul to start working when the engines and the large engines, Nevada to lend and see and the power plants as well as C and the cruise ships has talked a movie and then you need service is ongoing so I.
I think last year, let's say serve as part from these businesses actually lost and we should look forward to as the equipment is operating more in that direction.
Okay. Thank you very much. Thank you, thanks mountain and Willy shoot straight off with and with another question and with this open up the line for Guillermo <unk> with UBS.
And the animals.
Yeah, good morning, yarn and demand and actually thank you for taking my question.
Two questions if I may one related.
And operating profit bridge and you.
Put their volume and price.
Wondering if you could give us something about the mix between volume and price.
In that and that bridge and also how do you see that evolving and moving into Q2.
And then second.
With regards to.
As far as I could businesses, whether you see at the mom and any impact from the <unk>.
Purposes of production that we see and from some automotive and actually truck Oems such as states. Thank you.
And I'll, let Tim and I'll start up with a little bit under on the bridge there yeah. Thanks, Guillermo on the bridge and when you look at it the way we calculate this volume impact is that we take.
And last year's gross margin times volume and in price. So if you look at that week onto something like maybe 100 and.
For 235 on volume and then also having a positive net price, meaning that our price still after all discounts and stuff like that what's driving positive margin. So that's how we look at the bridge.
Yeah, I think Jim and on the.
On the short cycle business.
I think we've seen as we also reported very strong growth within this area. It is clear that there are challenges and the logistics side semiconductor is something that we've talked about but it's also for for the other component. So all we are doing our utmost to try to to GAAP I mean the.
And is tough there you have the automotive industry, who is actually a bigger off taker of some of these components on the other hand I think.
The way, we are structured and our divisions, we have 21 management team working hard to make sure that we get components produced products and deliver so actually in our projection for Q2. We actually include all these assets when it comes to component shortage.
I hope that answers some of that question, but it is a challenging time, that's pretty clear.
Thanks, John and maybe a follow up on C malls out there running.
And maybe into Q2, how is that relationship changing and if I may well well if we look at Q2 as we say, we expect more than 10% growth. So clearly we would expect a positive impact from volume and of course, we are doing our utmost best on the pricing side.
Two collyn.
Counter the component prices, so, let's see how it plays out but we will have as we said if you look at a little bit the puts and takes it sort of and we will have a tailwind from more volume both little bit sequentially and of course, and particularly year on year, but then we will have a bit more headwind from on the cost side.
And from commodity and then as beer and said we need to see how this whole supply situation plays out.
Thank you.
Thanks, Jamel and just let me remind you again, if you want and register to ask a question. Please press star 14 and.
And we continue now with Jerry and Joe Giordano from Cowen and co.
Please go ahead and open the line.
Hey, good morning, good morning, everyone. Thanks for taking my question.
I was under the impression.
And some of the chips that you use and some of your products or different generation than what maybe some competitors use and maybe some of the most in demand from some of the auto industry and you kind of talk about that dynamic and maybe just maybe this is hitting you at a different timing and maybe.
How the how the set up for that.
And I think it varies a little bit between our divisions and our businesses I think where we see the biggest impact is actually and the robot business and.
T for income to semiconductors, they are quite similar to the ones that are being used in and the automotive industry. We also see some effect and the motion business on the drive side, but there we have the possibility to do some changes in our design with the technology is more technology changes, but you actually help.
Bus and.
Little bit to overcome some of these challenges so it varies a little bit but these other two business areas that are mostly affected from from the semiconductor business.
Sure.
Thanks, Joe we can't really hear you know if you have any follow up questions. Please reach out to us and I are out there. So with that I think we just continue with the second question or another question and that comes from Simon Jonathan would you. Please open this line.
Hi, Good morning can you hear me, yes, we can again wanting.
Good morning, everyone.
Two questions. Please.
And on price cost.
I think you mentioned last time that electrification was positive last year.
But you were a bit more skeptical on this year I think that's the full year results could you just talk a bit more about whether you think you're able to offset the raw mats increase with price actions this year.
Particularly for electrification, but also on the group level.
And secondly on free cash flow you mentioned, obviously that.
And happy with the Q1.
Cash flow generation at a tumor you guided for around 262 7 billion minus capex at the last set of results.
Given how you're seeing Q1 now.
What changed your view there on full year free cash flow guidance. Thank you.
Yeah, Thank you Simon and.
And maybe I'll go with this and I'd say kind of yeah.
Yeah. So first of all on the electrification so we had.
Positive net bias price during Q1 actually on <unk> question majority of that price impact gain from electrification now as I said it will get tougher during the year. So we really have to see how it goes but we are in a good start and of course all of these actions on pricing and and also what we would expect to come through and the input cost from commodities and <unk>.
Others are included in our guidance statement as what was said earlier, but I don't think I can give you much more color on this I think we have a really good and solid modelo or and how we drive pricing and it really goes a SKU by SKU. So it's a very very analytically based and and and all so far so good on the start but.
But we will see how it goes and then on the on the cash flow dropping to a free cash so compared to what you said.
I think we should see a bit better equation and the way to look at this is that we should basically see our operating result increased drop to cash and then of course, depending on the growth dynamics, we cant really say what happens with net working capital, but we had such a good performance in Q1 that I would be so.
Priced if we would lose all that during the year and then using our Capex guidance of seven and 50, and then tax rate of 26, just assuming that the tax is sort of a cash at the same time, you come to a bit higher free cash flow number than what you mentioned.
Thanks, Tim.
Okay.
And do Lee there was another question.
On electrification or I think I covered most of it covered that one sorry I fell asleep.
Moving onto the next question that comes from Daniela Costa would you. Please open Daniels line.
Hi, Good morning, everyone and thanks for taking my question I wanted to ask two questions on the portfolio and the first one just regarding sort of what prompted you what was the motivation to do the announcement on the E mobility now.
I guess, you've done three announcements on portfolio and November at the C and D. So wondering sort of what changed or if this is part of the broader process of other things youre still revisiting and and kind of sweep you will make these type of announcements going forward and then and I ask the second one once U S.
And so Cheryl and thank you Daniela I think is a very motivated question because when we look at the E mobility and EV charging this is actually core of our electrification business and we definitely want to be and this business and benefit both growth and profitability from the future of this business.
The reason why we've taken these says step piece that the business is a little bit different from some of the other electrification businesses is much faster growing and we mentioned it has a CAGR of over 50% in 2016, and this first quarter, we had actually 120% growth and this business due to some great orders.
And we received.
The important now I think we do expect that this market is going to accelerate with all the measures that are taking by the politicians and the direction towards more and.
Electric vehicles, and we havent market, leading position and we want to secure this position also going forward. So we actually creating what we call a growth platform. So we are not planning to lose control over this business, but we expect this to be a significantly higher value then.
ABB by itself and gives us a good platform both to grow organic but also through acquisitions.
And we are really focusing on the software part and we all know that.
And the multiples in this business are high and we will use this platform to make sure that we have this leading position going forward. So it's a.
The ABB brand and the control of ABB will definitely remain.
Eric.
Can you hear me.
And.
And I hear you again, yeah yeah.
Perfect. Thank you that's very clear my second question relates to the other three divestments, which you said you are on track just thinking about.
And the allocation of the proceeds later on and shall we look at there's more like they're there like power grid he'll give back the cash to shareholders or do you need to keep some of that for potential future M&A purposes, or other or other organic investments and if you can shed any light there that would be super helpful. Thank you share Daniela and I think here and our cash.
This structure is quite good at the moment and we are well prepared for doing acquisitions and of course, we want to use the proceeds to grow the businesses. We are and we are moving into more growth mode and more of our divisions, while we will actually be focusing on both organic but very much on the acquisition from small to.
And medium size here. So that's our primary target to use their exceeds four that if we wouldn't find the right targets or if we would you know.
I'll have too much cash we have no intention to become a bank and then we of course, we have to look at different ways to transfer that money to our shareholders in the and.
Our objective is to create shareholder value going forward.
If I can add to that.
No change to our capital allocation principles for what we have said earlier so exactly in line with what Barry said.
Thank you. Thank you. Thanks, Daniela and then we'll move to move to a question from venue glow when Bill Please open Bernstein.
Okay.
Morning, everyone and I hope that everybody is as well.
Question really for for fuel and given.
Given how.
And how significant some other kind of comp effects arbiter and year on year etcetera can you give us a sense for how business was trending in China during the quarter. So if we look sequentially January through April.
How how did kind of demand move and where there any particular end markets that either strengthened or softened.
And I think we have seen strong China growth.
Ever since the second quarter, and moving forward and that has become stronger and stronger and this quarter. We saw a 23% growth give you a little bit of flavor on this one I mean electrification grew with 50% I mean, that's that's a huge number in last quarter, we saw the Robotics Act.
Lee growing and 95% so.
From that perspective, there are certain areas, which are picking up a little bit during the different quarters, but I mean, 23% is a is very very strong and mark, especially when you say it on the process automation, which was actually negative so for some of the other businesses are good growth even motion had a very strong.
A quarter from from from China.
Is that sustainable going forward, that's very difficult to say, but I mean normally and when you look at the ABB business day, we should grow in line with the GDP development and are in their country and now I see here things are coming back a little bit from the COVID-19 and of course, we do not expect these kind of growth.
Rates if you go further forward.
Thank you and a couple of follow ups I mean, just in terms of obviously I understand the year over year growth the 90%.
Okay, and what I'm, just trying to get a sense of is the actual kind of level of activity as we go kind of month by month five E.
Was march and kind of acceleration over what we saw and Gen. Fab how does April versus March so basically that that sequential trend and was really what I was trying to draw and the second question maybe for <unk>.
M O.
One on working capital could you just.
You had a 700 million sort of benefit from working capital and Nicole water.
Yeah.
700 million less outflow.
In response to Simon's question, and you basically thinking we can kind of hold onto that over the remainder of the areas that day is that the kind of informal guidance.
Yeah, maybe I M.
Start up then with the China question.
Yeah, I think we've seen good growth during the quarter, but as we mentioned in the report.
Strong ending on their March side, and as equally as seen continuous good growth. There also in AR and the beginning of Q2 from from that perspective, but I mean, if you I mean, we have been communicating strong market share for.
More than six months at the moment now and I think it can go up a little bit demand and little bit down and other months, but overall I think it is quite strong.
Strong movement and it is definitely not week and during March and.
More and more more transparent and that will be difficult assay, both Peter and maybe adding to that we had more trading days and watch as well, which drove the short cycle. So in a way March was I think very good good points that team or that when it comes to electrification, where we had the 50% growth is of course more trading days.
And this then.
During March and that'll that this is quite a lot.
So thanks, a lot for that clarification and I didn't even even think about it I should have gone through the network and capital component for Q1, and so if you look at the so called operating net working capital receivable.
Our receivables payables inventory there we made about 250 million of progress and this is really more what I was referring to and then we have about 400 450 coming from tax and other items like that also some prepayments for example related to the solar exit which happened.
Q1 last year. So there was a bit of agreement repayment change. There. We also had a little bit of power grids related tax outflow Q1 last day or so I was really referring to this operating net working capital bucket, which improved about 250.
Understood.
Thank you both up North and I don't think Q4 are reacting to the question.
Thanks, Ben and.
And then we'll take a question from Jonathan Mounsey can we go to net Jonathan Klein. Please.
Good morning, Thanks for letting me ask a question.
Just thinking about the growth outlook, maybe on that on a multiyear now obviously since the last time you report we've heard a lot about stimulus and actually we will just came up with Schneider call, where they were talking about maybe that growth outlook may now and a multi year view of PHP near the top end and how they think they can Greg can you sort of see the same opportunity to grow and meet near the top and.
The range that you put out there and the C and D and if so is that going to cost something in terms of investment and growth and we cannot see capex organic investment R&D et cetera, or rise to capture the opportunity that's likely to be that it was the next day. It also.
Thank you, Jonathan let me talk a little bit about growth.
I mean, you'll see and our predictions for the second quarter about that comes of course also that the comparison is of course much softer and now we were down and out in orders about 10% during Q2 compared to 2019. So we are saying that we will grow faster that piece that we are back in pre call.
And with the numbers and.
Maybe even exceeded that and then as we move during the years.
The comparison will of course be tougher because we've seen a gradual improvements urea and Q3 and Q4. So so from that I don't think you will we will be expecting to see that kind of growth numbers. When we come closer to the end of the year, but I'd say it and all we were.
And when it comes to the growth numbers and we were may be criticized a little bit when it comes through growth and.
Pre actions during the last quarter, but I must say it is very difficult to foresee.
Really what is going to happen and.
You know, we don't want to promise to March we say that and all things that we believe that we can deliver on of course stabilize C. After COVID-19 and might be easier when we move into Q3 to Q4, then than it is to see the future at the moment, but it's pretty clear that day.
The comparison numbers are.
And quite low for next quarter.
Thank you.
Thanks, Jonathan and we please open up the line for Alex.
Alex are you on the line.
Thanks, very much good morning, everybody. Thanks for taking the question and I Wonder if you could dig a little bit into the economics around the other.
And discrete automation.
And and how you see the.
Well I guess, the outlets and tens of order intake.
And we know our crew.
Loss day.
Your line and tens is putting a lower margin.
Backlog behind it and.
And now where we're looking at as a more stable base.
And.
Net margins.
And I guess north of 12.
Yeah.
And thank you Alex let me talk a little bit about the robotics.
Business I think it I mean, we are very pleased to see the recovery both when it comes to this discrete automation and b and our business as well as the robotics. When you look at the numbers, maybe youre not so impressed when you see minus two but if we actually lift out the.
The automotive business, we intentionally actually are taking down you know and that kind of system business.
Robotics is actually growing 20% and we go even a little bit faster than that on the discrete automation and so all segments within robotics. Besides automotive is super strong at the moment and and that's of course driving good gross margin driving you know you and all of our strategy.
You used to focusing on these more and quality of revenues. These more profitable segments, where we really think all sorts of future for robotics is M.
So from that side yeah.
We are here.
Are convinced that robotics is well positioned in the world. We believe that robotic business will grow going forward and a sustainable growth.
And from that perspective.
And I mean margin kick back a little bit extra but we had good invoicing. During this period, we have preempted somewhat lower margin in Q2.
And from their part but.
And in the long run as we said towards 2023. This is definitely a north of 15% business and debt that we stand for it as a high tech business is well positioned and we should see good growth number from that part, but I mean, I think from all of us and in and ABB, we are very really.
We're happy to see robotics sports coming back and the market as well as on the margin you know where they belong.
That's very helpful Bill and thank you very much thanks, Thanks, Alex and.
And we guarantee and gradually and take the next question from him. Please would you. Please open the line for and Jeff.
Yeah, and good morning guaranteed and non M C.
I have a follow up question on robotics and gone on the restocking and robotics, maybe you could help us a little bit in terms of what the remaining level of auto system business that is left so when we forecast the growth of the division and.
And when do you expect that.
Ex day to a reduction to be completed.
ROE is moving more in line with the with the underlying trend.
Trends and secondly on the restocking and you said, it's hard to quantify Schneider. This morning said that total is around wander off the 2% contribution to the 13 and the office and organic growth is that a number that would make sense to you in terms of magnitude as well for ABB.
I mean, if you talk about the growth numbers of course, we could have pushed up growth even more during this quarter, but I think is very important and when it comes to electrification, which is the area where you see probably the most of this is talking is that many distributors and tried to place big orders and and to get <unk>.
Deleverage to secure share.
Future deliveries from that part we are actually of course working actively with all these partners around the world not two and up the products on the shelves and that they go directly to the customers. So that is a hard work from the business area and from the divisions there to make sure that the orders that come in.
Actually will be delivered out there, but but it's clear I mean, we share schneider's viewpoint that there are a number of percentages in that point, which is probably related to.
It's a little bit difficult to determine exactly even though we tried to go into every order and figure this out but I think the number the schneiders gifts gives a pretty good.
Pitcher.
And it wasn't worth the robotics, a backlog question yeah, Okay and on the robotics part I think what's good is that we've seen good orders lately.
And better.
Margins and I mean for us, it's very important that the quality of the orders coming in and with good gross margin and that's what we've been see from other segments from other segments and the automotive if you look at thousand relative I think that was down 65 per cent compared to last year on these system sales. So.
We are slowly transferring this over and we of course delivering out what we have promised and we run that but that will sequentially. During this year become a small minor part of their revenues with and our robotics business.
I think the strategy that they have put up with a strong focus towards some of these new <unk>.
Growing segments, where we also see yeah.
And the value for the customers are seen on AR.
And a good level, where we can get paid.
Thank you very much so it basically means by the end of this year. This transition is largely complete I think that's probably two big Eric Yes.
Thank you.
Thanks Andrea.
And now we take the next question and then up the line for Shane Mckenna from Barclays.
And here, it's Shane and good morning beyond came out and and see.
Can you hear me, we can yes, we do.
Perfect.
And beyond on the call you mentioned the recovery for Turbo are you able to give us and I would say on the trading margin performance and not just that but for the disposal businesses, especially given marine exposure within turbo and all.
Are you expecting this to return to pre crisis levels before year end does that service activity starts to recover and hates to and in terms of timeline and he's still thinking the Dutch business leaves the group first followed by obviously each other.
Towards the end of the year.
And then just as a follow up can.
Can you give us a bit more background around the decision to change management within measurement and analytics.
And what's needed here to get the margins and that activity up in line with the divisional target Judy to make acquisitions and sort of grow that business more so.
So yeah, if you could give us a bit of and update that that would be great. Thanks.
Okay, and starting up with the turbot and so I mean as you know they've been suffering a lot from the low activity on the service part during last year.
And I think it's really great to see that during the first quarter. This year. They are really back to pre COVID-19 times, which means also that the the.
And the service revenues are come up to two really good levels and the performance of the business is more or less back where it was before before COVID-19. So that's very encouraging the same with Dodge I think Dodge business has been the most agile business here with it and the group.
They have a barely been affected negatively at all by the COVID-19 side and and they continue to develop in there and extremely good ways. So good cred to their whole management team from both of these businesses.
And power conversion and I think we mentioned that we are a little bit more hurt by the COVID-19 on the other hand, we saw good orders really strong orders coming in June and Q1, and this business, which will help us to get back in margins that that business should be but but that business, we probably will not start the divested.
This year, but maybe next year.
Yeah. When it comes to the exit I think Dodge is clearly the one first I think the processes is.
Oh and full speed and.
I think here maybe.
And at the beginning of the second half, we should be able to to signed on that side somewhere around there.
And Turbo I think kids I mean, you know that we are looking into the possibility for a four.
Spin off here and that will probably be by the first quarter or second quarter next year. So on and around there we are but we should know more and more direction. When we come closer to the end of the year, it's quite a big job to separate these kind of busy.
Businesses that have been net.
Well integrated into group like ABB. So we have full respect for that work, which is similar what we saw with the power grids.
And there wasn't a manner on them.
Yeah on day measurement and analytics are yes.
I mean.
We are a transparent now in our in our way is set up with the divisions that are fully accountable for their performance and the improvements we have put up a really tough targets for 2023 for all the businesses. We got a full commitment from all of them and the business need to deliver in line with those promises.
Yeah.
If we don't yes of course, we we need to make changes and I think here, we hadn't seen enough progress, which meant that we needed to put some new fresh blood and new management into here, which have started and I think Kim.
And so far of course and markets come back and we're seeing good progress already yourself.
So we will hopefully.
And see that changing during the year.
Understood. Thanks, a lot.
Thanks, Jean and we open up for questions from Andrea <unk> from Credit Suisse.
Good morning. Thanks, so much for taking my questions May I just venture into your.
Full year 'twenty, one margin guidance. Please.
Okay to do that so we've got 13, 8% and Q1 and you're guiding for 14, So second half and then languages and kind of steady improvement, but towards the upper half, which begins at 14 and a half is there any way to kind of calibrate it it sounds like we should be on the right side of 14.
Or Mike going off tangent here.
I think we set up our guidance for 2023 that we should be and all.
And the margin corridor and you know my viewpoint on that we should be over 15%.
And quite clear for the businesses I think we are a little bit had a schedule that is that is pretty clear with a strong start and we do expect to have a reasonably good year for this year as you can imagine, but I don't think there's any reason at this moment to do any change when it comes to guidance. Our objective is still to go.
You know all our businesses and north.
And our into the corridor and and start going over from profit improvement to growth focused.
And this period so.
It's a it's one quarter out or three years, so let's take one quarter by time.
But I think it's good targets, we have set for 2023 and if we reached that I think we see a super strong ABB for future.
Got it. Thank you. Thank you can I ask and.
Terms of all the jewels like E mobility that could qualify for and that's where the money that you're planning. There is there a kind of anything else and ABB portfolio that you could highlight not necessarily kind of having a decision processing.
Put in place but.
Theoretical potential and maybe thinking about the warehouse automation business, there kind of springs to mind, moving robotics and discrete.
And my viewpoint on this and I see ABB has a good day back with a lot of goodness inside and these other divisions and I think there's a lot of potentially and in many of our addition of innovations we are of course yeah.
And with a setup of ABB and our purpose. We believe that ABB is a very strong brand very strong platform for all our businesses to further develop and to create shareholder value from that if we would think that any of the businesses would have a better life outside or than we would.
And of course consider that at the moment I think we have a quite a lot on our plate.
And all three exits and now also are looking into the immobility. So I think we take one time, one thing and a time and make sure that we do this in a good way so our shareholders can benefit from that.
Alright. Thank you bill Thank you. Thanks.
Thanks, Andre and they were running out of time, but I think if if we keep it fairly short and we can squeeze in one more question from game at Deutsche Bank.
Oh, thanks, very much strength empty and good morning and for anybody.
Actually I have two quick questions. The first one is about the E mobility business could you elaborate on the competitive pressures facing the business today, and and what you see and Tim So that site to margins.
Question number one and the second question and I have is about ABB is long term.
M Crow the dynamics.
Because Q1 was and that's typically a pretty strong culture, but I mean, one of your peers. This morning delivered and even stronger performance and then now guide for and organic growth between eight and 11%.
For the full year against your expectations. So you know, let's say only.
More than five per cent. So my question is what do you think ABB needs to do to accelerate its growth potential and and catch up with some of its peers.
Yeah, if we start with the E mobility and part of the business. Yeah. I mean this is a very hot market at the moment, we know that day every country in the world is going to go towards.
Electric vehicles.
To be able to be successful and here you need there.
These chargers you need a high speed charges you'd need charges home unique charges everywhere.
I think here ABB has steering and a long period built up their market, leading position and we see good growth here, but yes. It's clear we are not the only one and the market. There are many players who want to be part of this and we have to secure that we grow faster than our competitors and.
And that's why we have decided to take this step we believe organic growth is super important and that's what we've been growing and mostly so far now we also want to accelerate that growth into acquisition. So.
We think this is a great platform and we will do everything we can to have a strong focus on growth what is quite unique with this business.
And maybe you and I'll.
I'll be careful when I say, it but I think when it comes to also financial performance on the bottom line I think yeah. We are quite unique in this industry.
Really doing quite well on the on this side. So important is to secure that we have strong gross margin and invest and SG&A and our technology and moving forward, but gross margin is very important to secure that.
Going forward.
And if I leave the mobile it to go into growth.
And all of US do you want us to say that we're going to grow.
So fast we believe that our businesses are well positioned we believe that we are leaders within the industries, where we operate we have the ambition to grow in line with the market all even faster than that we have tried to give a little bit of guidance when it comes to growth over a business cycle.
And as we said the 3% to 5%, which we think is a realistic numbers. If you look at our businesses, where we are into and the history going backwards is easy to get a little bit excited in times when things are popping back from really low and those in the market.
But I think Kim and we will do everything we can to grow their businesses, we have but we are not going to grow unprofitable businesses.
Before we get them on track, so first fixing and we say stability and profitability and then growth that's the best way to create shareholder value and as more businesses that comes into the margin rate.
A range that we have set as a target we changed our strategy and these division towards more growth.
So I don't think we should be able to grow any lower than they.
Our competitors in the segments, where we are where we operate so we have the same ambitions and I think we can prove that.
Okay. Thank you very much bill, thank you and scale and with that we close the session. Thank you very much for tuning in and we.
Sales and about two quarters time.
Okay.
Right.
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