Q4 2021 Abb Ltd Earnings Call
Two points to 14, 2%, which puts us on a level, we havent seen in recent history.
This improvement was supported by higher volumes strong pricing execution and operational efficiency.
We saw strong demand across most customer segments and regions.
After a strong first half of the year, we experienced during the second half increased headwinds from raw materials supply chain disruptions and cost inflation.
But our business and managed to successfully offset these negative impacts and we delivered a strong year and a clear path towards our 2023 targets.
I'm, even more happy about the cash flow, which increased by 78% to $3 3 billion.
Strengthening our balance sheet to a net cash position.
This is an excellent achievement.
Besides the good financial performance, we continue to execute our portfolio reinforcement in line with our purpose. For example, we sold the mechanical power transmission business for $2 9 billion.
Or more than 22 times EBITDA.
This may be the highest price ever paid or mechanical business.
This year, we also kicked off the systematic development of our 2030 sustainability agenda.
We then updated governance and leveraging our performance management process.
We're already driving progress across all strategic pillars.
The improving financial performance enable us to propose a dividend of <unk> 82 streets Frank.
This is up two tenths from last year.
Our balance sheet is strong and this dividend proposal still allows for financial headroom to grow through acquisitions.
We will also continue with our share buybacks.
Also in excess of the P. G capital return program.
Now, let's shift focus from the full year and look at the Q4.
On slide four.
In Q4, we saw high level of customer activity in virtually all segments dim.
Demand increased for our product businesses as well as our project and service orders increased by 21% and this despite that we booked a lower level of large orders compared to last year.
As you see in the charge there are absolutely level of $8 3 billion is the highest quarter since Q4 2019.
Comparable revenues increased by 8% a bit stronger than we initially expected as we manage to deliver some projects late in the quarter.
That said, we could have delivered more if it had not been for the supply chain disruptions.
These include said component shortages as well as strained logistic and tightening labor market.
In the total book to Bill was 109%, resulting in an order backlog as high as $16 6 billion up by 21% year over year.
Now, let's take a quick look at the different regions on slide five.
Excluding the impact from large orders, we saw a strong double digit growth in all three regions.
In Americas, the important U S market increased by 46% supported by all business areas in Europe . Most of the top 10 markets improved by strong double digit growth rates.
Growth in Italy was impacted by the high comparable from last year, when a large order and process automation was booked.
At the EMEA regions declined overall by 2%. This drop is again related to large orders received last year generally speaking we saw a positive development in several important countries, including Angra order growth of.
14% in China.
Let's turn to slide six and our earnings outcome.
We achieved a 20% increase in operational EBITA.
And we improved our margins by 160 basis points to 13.1.
The strongest Q4 margin report it seems that at least 2017.
Excluding the higher special charges last year, the margin improved by 80 basis basic points.
This was driven by good step up in P E and R E electric.
Electrification maintained its gross margin, but the operational EBITA margin declined on mainly higher sales cost.
The margin decline in motion was mainly due to the divestment of the high margin business Dodge.
And with that I hand over to Tim to take us through the numbers in more details. So T. Mo. Thank you Burton and greetings to everyone also from my side.
And as usual, let's start by taking a closer look at electrification, which continued to see strong demand across virtually all customer segments.
<unk> was particularly strong in E mobility business, where orders were up over 150%.
But also areas like food and beverage buildings and renewables were clearly strong.
In total comparable orders increased by 20% to $3 $6 billion, which actually is one of the highest levels on record for electrification.
Looking at the different geographies, we saw strong double digit growth in both Americas, and Europe , while Amit declined slightly including a mid single digit decline in China on a relatively high comparable from last year.
Comparable revenues improved by 4% and this was mainly on the back of a strong pricing execution.
Volumes on the other hand continued to be hampered by supply chain disruptions, including some component shortages and also a tighter labor market.
Consequently, electrification enters 2022 with a record high order backlog of $5 $5 billion to execute.
That said, we foresee the supply chain challenges to persist at least in the near term.
Taking a step back and looking through the Covid turbulence of 2020 comparable orders and revenues are now up 16% and 8% respectively.
Compared with Q4 2019.
A strong performance by E. L. In this period and clearly above its historic growth trajectory.
In the quarter electrification faced significantly higher raw material costs compared with last year when favorable hedges were still in play.
We were able to offset the higher input costs with strong pricing execution, but cost inflation due to the tight supply chain and higher sales costs resulted in an overall decline of 80 basis points in the operational EBITA margin.
Looking ahead into the first quarter, we expect a higher comparable revenue growth and margin to remain broadly similar compared with Q4.
Let's move on to motion on slide eight.
First of all I, just want to remind you about us closing the divestment of mechanical power transmission division or adults as we call. It on November 1st.
This of course means that charge our numbers for motion include only one month of contribution from Dodge, which we sold for $2 $9 billion in cash.
Non operational gain of $2 2 billion is included in income from operations.
The comparable order growth, which adjusts for structural impacts like the divestment increased by 29% and reflected strong demand across the customer segments and regions.
Orders grew double digit in both the short and long short long cycle product businesses and service was up by 11%.
As a headline number the 70 basis points decline in operational EBITA margin is surprising given that comparable revenues were up 9%.
The majority of the margin decline, meaning about 50 basis points was actually due to the divestment of Dodge, which had Bob B a average profitability.
The additional slight margin pressure was due to both the divisional mix as well as increased raw material and freight costs, which offset the positive impact from higher revenues and efficiency measures.
For the first quarter, we expect similar comparable revenue growth and the margin to remain broadly stable or slightly increase compared with Q4.
Turning to slide nine and process automation, where demand continues to recover across the process related industries, including oil and gas and growth while the power generation segment remained stable.
It's worth pointing out that the flat headline order growth was impacted by a higher comparable from last year.
Excluding large orders, meaning orders of more than $15 million in size, there was a significant double digit improvement.
Revenues increased by 19% year on year with support from all divisions, reflecting successful execution of the order backlog and a double digit growth rate in services.
Component shortages have been manageable so far for P E, but may intensify a bit near term.
Whereby adding uncertainty timing of converting orders to revenues.
It was excellent to see the margin recovery and process automation as the operational EBITA margin improved from six eight to 13, 7% with approximately 270 basis points of this improvement coming from the absence of last year's project charges.
The profitability improvement was driven by higher volumes and benefits from earlier, taking cost measures, however, slightly offset by mixed due to a higher share of systems business.
All peer divisions are making good progress and had over 11% operational EBITA margins during the quarter.
As part of the process to exit the turbocharging business Daniela Bischofberger has been appointed as new divisional President as of first of March.
We aim to make the final decision on the way forward towards the end of the first quarter, although a spin off at the moment looks like the most likely option.
In Q1, we expect comparable revenue growth to be lower than what we saw in Q4.
This will most likely also weigh on the sequential margin development.
On slide 10, we turn to robotics, and discrete automation, which had another quarter with high order intake, resulting in a year on year growth of 59%.
Strength was more broad based across customer segments with continued stellar growth in general industry, which should support profitability going forward as the backlog is executed.
For the full year of 2021 order intake in the general Industrial segment has been almost as high as the combined orders of the auto Oems and out of tier one segments.
Another. Good example of how we are expanding in new attractive robotics areas is our strategic partnership with the start up seven cents that we entered into in Q4.
This will enhance our new autonomous mobile robotics, offering with artificial intelligence and three D vision mapping technology.
Very exciting field going forward.
Despite the strong order intake revenues remained broadly stable year on year as component shortage has slowed the pace of customer deliveries in both divisions.
The supply constraints in our a primarily relating to semiconductor shortages and you can clearly see the impact on our ability to convert orders into revenues when looking at the left in the middle on this slide.
Orders have outpaced revenues over the last three quarters, resulting in a record high order backlog of $1 $9 billion at the end of the year.
We remain confident about the quality of our order backlog and revenue growth will improve once the supply chain imbalances east.
Andres operational EBITA margin increased by 80 basis points year on year to eight 1%.
Despite the lack of revenue growth.
While the business.
Our area faced adverse impacts from increased freight and input costs. This was more than offset by the positive impact from improved efficiency as well as favorable mix due to a lower share of automotive system sales compared with last year.
Looking into Q1, we expect comparable revenue decline to be similar to what we saw in Q4, but we anticipate a slight sequential margin improvement.
Moving on to slide 11, showing the group revenues and operational EBITA Bridge as you can see the comparable earnings earnings improvement benefited from our positive organic development as well as the absence of last years.
Charge related to the Coachella project.
The operational improvement was driven by the positive impact from higher volumes.
Positive price development, and increased efficiencies, which more than offset the adverse effect from cost inflation.
The reduction of losses incurred in non core business helped margin by 30 basis points, while acquisitions and divestments were slightly diluting on a group level, mainly due to the due to the negative impact from the Dutch divestment.
Let's look at the cash flow on Slide 12, I know Bureau, and highlight did it earlier, but I want to also mention that I am really really pleased about the overall cash delivery for the year as we achieved cash flow from operating activities of $3 $3 billion, which is up 78.
Sent from the prior year.
Volatility between quarters declined a result of high focus on networking capital management and it was great to see that even with 8% revenue growth free cash flow conversion to net income was 108%.
Looking at Q4 in isolation Gaslog from operating activities amounted to $1 billion supported by improved operational performance.
But we are a bit less contribution from a reduction in trade working capital compared to last year.
In Q4 cash flow also reflects approximately $300 million of cash paid for income taxes related to the Dodge transaction, while we had approximately a $200 million impact due to the cost of cordless element and pension plan transfers in the same quarter last year.
Again overall, a good year for cash flow from operating activities in continuing operations and I expect a continued good performance broadly at a similar level also in 'twenty to 'twenty two.
Let's finish off by taking a look at our return on capital employed where we also showed strong progress in 2021.
As you see on slide 13, rosy improved to 14, 9% just shy of our target of 15% to 20%.
The improvement was driven by both the higher operational EBITA in combination with lower adjusted group effective tax rate.
In fact, if you already know would exclude the negative impact on our capital employed related to our 19, 9% ownership in Hitachi energy, we would already be comfortably in our target range.
The Hitachi impact is only transitory in nature and will reverse after a sale of this investment.
Clearly improved return on capital employed is a good indicator that we are really improving abb's long term performance.
And with that let me hand back to be earned for some finishing slides.
Thank you T Mo.
On the next slide we take a quick look at the expectations for Q1.
We expect the current high level of underlying market activity to remain sequentially stable.
That said there is some added near term uncertainty in relation to revenues due to the supply change disruptions, which we expect to persist near term.
In this environment, we expect the margin to remain broadly stable or slightly improved quarter on quarter.
Now, let's finish this session by summarizing our focus areas for 2022.
From what we see at this early stage, we expect a positive market momentum in 2022, and so far we have seen solid start of the year.
To support our long term growth targets. It is time to ramp up the pace when it comes to acquisition in.
In line with ambitions I was pleased to see the mobility business increased their ownership in in charge energy to strengthen their position on the U S EV charging market.
As I said before our ambition is to make at least five acquisition per year.
We will continue to drive the performance culture.
In all our businesses this year I expect the steady margin improvement towards the 2023 target of at least 15%.
As we achieve this we will continue our journey to deliver even more profitable growth.
We will continue our ongoing in alignment on the business portfolio. In addition, we have the turbocharging business. Although we have not yet made the final decision a spinoff is looking likely.
We will make a final decision by the end of Q1.
We aim to have the both the E mobility and the turbocharging processes completed during the first half of this year.
It would be an exciting year and I look forward to it with confidence.
And with that I'll, let Andy take over to guide us through the Q&A.
Yes. Thank you Ben So, let's now open up for Q&A and for those of you who have dialed in on the phone and I just wanted to remind you to please press star followed 14 to register to ask a question.
And.
Just to secure the sound quality. Please do remember can use the webcast that says should you have it on at the same time as your line is open for questions for those of you who want to put two questions using the online tool in the webcast there should be a failed in the bottom right corner of the screen, where you can tie to your question and I will put it away from here.
And I can see that we already know has a lot of questions coming through so.
And as usual please limit yourself to two questions and then we'll do our best to get through as many of the questions as possible.
And we start with a question from the conference call and I believe we should have been you from Morgan Stanley .
Finally on the line.
With us.
Good morning, everyone and thank you very much for taking the question I hope everyone is well.
So two kind of areas.
Areas. One is just the let's call it the operating leverage within electrification and motion.
Yeah.
In terms of the margin change.
I don't want to get too granular on bridges, but.
So down about 80 basis points on higher revenues and electrification.
Motion 20 basis points underlying.
On our revenues in terms of what's driving that effect.
I realize this is very very difficult.
Can you quantify how much of this is simply price cost right. How much of this is due to raw materials and not being able to get the price up fast enough and how much of it could be due to other factors, whether it's supply chain wages or kind of more normal cost coming back is this sort of over 50.
Percent price call. So can you sort of just give us an idea of what are the main drivers in that margin bridge.
Thank you Ben for the question I think I'll just start and then I will maybe go to the some number crunching it just in a minute.
First I'll say that the.
Pricing this is.
Really one of my favorite subject and both of these business there yet.
Motion as well as electrification are are really doing an amazing job on this side.
Just to.
To give you a little bit first on the because it's a little bit of different.
Topic when it comes to these two business areas, but starting up with the emotion.
I think motion has done an excellent job in compensating some of those of course, we know.
Increases that has come everything from wages to.
Component prices.
And also semiconductors of course.
So the biggest difference here in the margin actually comes from divestment of the.
Of the Dodge that house.
Has any pik and there is a little bit also as you know.
When it comes to motion they have two different areas is the electric motors and it is that drives business likely motors are.
As the lower margin, so it's a little bit of a mix issue there so the <unk>.
The Lithia motors grew a little bit more than the drive business did that this moment, which has some effect.
I think the managed from pricing actions to compensate the increases in inflation on.
Electrification is little bit of different story, because as you know electrification actually can.
<unk> two business that you have there fast moving.
Business like Smart power Smart building.
Installation product all of them have done an excellent job too quick compensate for the prices. Then we have the distribution solution, which is more of the big projects switch gear.
And many of these orders were actually take over.
Over a year ago and have been executed during the year and many of them are these both for utilities as maybe pour a lot of process industries and the largest industries.
And here the pricing.
He is of course set at an early stage and during the year, we've seen quite a dramatic increase in components logistic and all of this and that has affected the margin here I think now when we are more used to this.
Inflation by economy. Apart I think also in the distribution solution are now being more active in adjusting.
The pricing in line with the other businesses. So it's a little bit of a mixed story. If you go to the two number crunching maybe.
You can give a little bit more sure happy labor. Thanks, Ben for the question. So maybe easiest is to look at this sequentially because of course, the inflationary pressure has been coming in sequentially. So we actually had a better pricing than Q3. So if you put it to numbers we got.
Over $200 million on price and that well covered the cost from input cost in commodities and raw materials and that kind of stuff. But then we had additional costs coming from for example, logistics and these kind of things in gross margin that was maybe in the area of $30 million and then we actually.
Every year have bit higher fixed cost.
Q4, which we also had now as well there was in electrification for example, a bit more sales of course, I mean, we have a really good year on top line and that's going to stop so that I would put in the in the situation of normal. So I don't think there is any any particular drama here I think we have been able to do pricing well in SBR. Instead, we have some businesses where it comes in with a.
Bit of a lag about but we looked at where we'll have a good ability to pricing going into 2022 as well.
Understood.
Really helpful color. Thank you and then one quick follow up.
Just on working capital.
In terms of the moving parts was there anything that stood out.
It's always variable in the fourth quarter, but in your mind was there anything that stood out.
That was significant in that movement.
Yeah, yeah. Thanks for pointing that out. So this is of course not exactly a normal quarter. I mean first of all I want to say that we did a really really good job in working capital overall, our working capital to revenue ratio was eight 1%. So I haven't seen it that low and then if you look at the components, we actually got about 100 million.
In receivables and our overdue our lowest.
Ever pretty much so really really good performance on the team on managing that we got also about $200 million in payables, but then when you look at inventory and this is now delta compared to last year, because last year, our inventory really decreased significantly at the end of the quarter, we didn't have a similar.
Impact and the Delta impact on inventories is about 500, but again as we have discussed we have a solid backlog and we expect that inventory will be commute.
It will be consumed when we execute the backlog.
Understood very helpful. Thank you very much I'll pass it all have a good day.
Thanks Ben.
And on the topic of backlog, we have a couple of questions say committed from Danielle at Goldman Sachs.
So the only line too and I start with one aimed at E.
T Mo.
And then it says how much of the order backlog do you expect delivered in 2022 and also your expectations for organic revenues in this year.
Yeah, So let's start with the backlog actually this is in our report it's little bit hidden there, but what we would expect to deliver provided we get the supply of course, 75% of the backlog during two.
2022.
So that's basically the number but of course, you know long cycle short cycle will depend this year a little bit on <unk>.
On the supply situation, which is maybe a good bridge to the revenue number and sort of do you want to jump in there beyond what you want me to.
I can say on the revenue side.
It is of course depended on what we can see maybe some small challenges in the beginning of the year, but it should ease up.
So what we do expect of course for the year to be somewhat higher than our overall cycle target. During this year of course is so.
We need to execute on a huge one.
There are some Honda.
That will be the focus during this year yeah, yeah. So I would just complement that answer by saying that if we if we get the supply both for the short cycle and executing the backlog it could be a good revenue year.
And then to follow up from Daniela here on this topic on the order book Oh, sorry on the order intake how much of the recent strong orders could potentially be do it could double booking.
Okay.
I kept I mentioned that.
Of course, when you your deliveries are a little bit down and youre not actually delivering in line with expectations in the market, which has been during the last quarter and maybe also during third quarter.
There might be some.
Bookings I'm sure there are customers, who are putting in orders to secure deliveries for the future. So that that I'm sure, but I think the good most important is that we see is steady.
Strong orders actually in all our three regions and we see this order continue actually at the beginning of this year and we haven't seen any actually.
Cancellation of any bookings, which gives us the confidence that the quality of the orders are also good.
Very good and just to finish off here a question on <unk>.
The EV the E mobility business.
Daniela says we have seen strong decreases on the multiples in the market has been willing to pay for EV charging businesses in recent weeks. If this persists would you consider delaying the Eva listing.
Or is the timeline fully firmed up.
And that could of course.
The World goes coupled but.
It looks like today, we feel very comfortable and comfortable about the agenda that we have today the business is doing great.
I think we had last year, a 150% growth, which if you look at the last.
Five years, it's actually a CAGR of 60% I don't think you'll see them any business like that.
I think it's even making profit.
It's a great business and I think our advisers, saying that they their viewpoint is that it will be of great interest for this I also urge you. If you haven't booked up next week you can you can actually find the link on our website, we will have in depth going through that business with the management.
I'm talking about the strategy and the future for that say I think it will be interesting and hope you have a chance to look in.
Very good and we take another question from the conference call from Alex at Bank of America Merrill Lynch Alexa lines should be open.
Yes.
Good morning to you all.
Nice to see you and hopefully that will that can be physically again soon thanks.
Thanks for taking the question. So a couple a couple if I may the first I wondered if you might provide us with some quantification as to what you feel you've missed in revenue terms in Q4 was a function of supply chain.
Constraints.
Assuming that that will be a similar sort of magnitude in Q1 by by the comments.
Comments that you've made so far.
And then the follow up was just on the comments you made there at the end about Roseann Hitachi investment.
Am I right in thinking that.
Three year lockup, and so presumably that sometime middle of next year, if you could just clarify that.
Would be very helpful. Thank you I'll start with the latter because youre correct the.
Put option works in a way that we have a board.
After three years. So it's mid mid 23, when we can kind of execute the boat and that's how that works. So yes. That's correct. So then on the revenue maybe.
Use an example from robotics and discrete automation, where the impact is the largest till you saw we had kind of like 60% order growth on flat revenue.
And orders in that business have been now on $1 1 billion type of area and the revenue has been sort of 800 million type of area and you know not all of that of course, good up coming into the quarter, but that business could easily be closer to 1 billion type of a business in the quarter in a quarter.
And that of course would have a significant accretion on the margin. That's the biggest and then Dubuque and assets between the the orders and revenue on some of the other businesses I think the impact has been probably our smallest in NPA and then you know somewhere in between and in motion and electrification.
Maybe I just come at all so that the order book is up 21% compared to last year, which is of course very good and you have seen their book to bill ratio above one the last four quarters. So.
You can imagine if we could deliver everything.
Very good.
Oh.
Are you finished there Alex so do you have other questions just to sorry, yes.
Ill start with my two thank you very much [laughter]. Thank you for that I appreciate it.
And with that.
Move to Andre as really I think I hope your line is open.
Yeah. Thank you. Good morning, everybody. My first question is on on the supply chain. What is your view on the reasons why ABB seems to be more impacted than most peers on a like for like basis in terms of the constrained.
You're facing and what changes can you do or are you doing to improve resilience going forward, obviously, you haven't quite seen.
The results from your peers, yet, but in Q3 that was already.
Visa both to some degree that's my first question.
Yeah, maybe I can take that Don So maybe you know more than we know but.
I think if you looked at ABB.
Product.
It has a lot of semiconductors.
Included within the electrification business in the robotic discrete automation.
And also in the motion product.
I think we have the similar.
Problems as everyone else, we're trying to get our share all our businesses are working hard when it comes to semiconductors, because I think that the overall the biggest.
Impact for US I think we it's clear we've gone together, we have our team wherever coordinating all our activities with the suppliers, we are redesigning products to.
To get the other type of more available of semiconductors in and I think they're down at quite a good job maybe you remember when we went into the <unk>.
Into the quarter, we said, we would have a 4% growth and we managed to get 8% and I see that as a full credit to the businesses that they really got themselves through this in the 8% is actually better than we expected.
This will continue at least in the beginning of the year and then we will see it.
Slowly go away and we are pretty optimistic about the second half of the year when it comes to supply.
Last quarter.
That was not only semiconductors as well as material plastics steel and all these and shipment.
Logistic chain was was most difficult. So there are many factors. Many of these have been solved and we have seen an improvement actually during the quarter. So October was the worst actually a month and then we saw improvement in November and improvement in December .
That's that's been very good. So today, it's very much focused on semiconductors. The other things I think the businesses have managed.
Well during the period.
Thank you and my follow up is on China construction I think you mentioned.
Could you maybe elaborate on what you're seeing in the market residential versus non residential outlook for 'twenty two.
If you look at China overall.
We saw 14% growth and we should note that is a very high comparable.
Overall, so I think that that is.
A strong achievement, but it's clear that is the residential part which has taken the softest during the period and you've seen a stronger on the industrial side.
That will probably continue going into two.
This year, but we should also know that the levels in China are at the very high level at the moment, then we have the whole.
Covid situation, where China has a zero vision as we all know which means that any kind of break out they are very aggressive in closing down factories and seeing so that might be disruptions on that side, maybe a little bit too early we haven't seen it yet we've been able to run.
Our operations and I think we have good development in China, but this is of course, a potential risk for any company, who has a big businesses in China.
Thank you very much.
Thanks, and just a follow up on the expectations and comment earlier comment on the revenue growth for 2022 here chemo.
I believe it was you who answered it.
When you say 2022 above through cycle target do you refer to the 5% or what did you.
Oh, yes.
I think we would have the same answer.
No.
Dave are you kept grabbing.
No.
We are referring to.
Bob the 3% to 5% organic growth because we're really talking about the organic growth here.
On that answer so yeah, and I mean, it would be a lot of focus on executing order book also you know to get access growth going forward.
Very good.
We'll take the next question.
From the conference call and Joe.
Are you on the line.
Hi, everyone can you hear me, yes, we can hi, Joe.
Hi.
Would you expect to.
I know you expect to clear some of this backlog over the year, but would you expect book to bill to remain over one throughout the year.
I mean, that's a difficult question to be honest I think we have discussed the orders expectations also you know with our board going forward I think this is probably one of the most difficult areas today to see.
Where things that where things are going well.
We're seeing a very strong start of this year is that going to continue during the years or is.
Will it we can often so I think it's I wouldn't actually speculate in this we will be able to handle both of these the good stuff is that when you have larger orders on hand, you get a little bit.
More time to adjust your.
Yourself.
It will be softer but.
Now we go full speed in all operations and it's about delivery and we have plenty to deliver going forward.
Yeah.
Okay fair enough.
Okay.
Sure.
Understood.
Yes.
Deployment.
You mentioned you'd like to do five deals a year youre, obviously sitting in a position with.
Severely under Levered balance sheet once you get the cash in particularly after a turbo and look at when you look at all of those.
One do you have to evaluate.
Significantly higher buyback activity or at what point in the year do you have to kind of make a determination on something like that when it's appropriate.
Yeah, I mean, I can team, who can talk a little bit Doug our cash position and what we expect them to do during the year.
Add something later, yeah sure so.
Yes. Thanks for the question. So if you look at our overall capital allocation principles. We are actually quite pleased where we are so you know we have a really strong backlog as we have discussed we are investing behind the organic growth I mean, the board is proposing an increase in the dividend and then as discussed we are looking to execute the five or so.
Deals and M&A, so we're putting capital in us there as well of course, we want to do smart deals I mean, it's not like you know the.
The tap is often we do whatever we will continue exactly the same rigor on assessing the deals and then we also said in our release that we expect to continue the buybacks. During 'twenty. Two 2022 also in excess of the power grids capital return now with the board. We will then make an assessment on this one.
Going into into the AGM, but we of course with this wanted to seeing and all that that we are looking to continue the buyback program also after the power, which money has been fully return to shareholders.
Perfect. Thank you.
Thanks, Joe.
We move on.
Martin Wilkie I think and hope your line is open and you gave us.
Yes, I can yes, good morning Martin.
First question just coming back to you.
We will.
Could you.
Firstly, you can design will change.
Also when your component suppliers, you're adding.
It.
Can you give us any sort of example.
When some of these.
Sure P J.
Unfortunately, because of some of your own actions or actually acquire supplies I guess, we're all hoping that the world generally opens up in the second half.
And I'm guessing.
Yes.
He has immediately.
Couple of quarters.
Yeah, I think first we buy a huge amount of semiconductors into ABB and in certain application I think <unk> been very successful in the drives business.
Do some of that redesign, but also in other kind of businesses, but.
It varies a lot depending on how big the theories or how much you're selling of the product.
When you go into more of the if you put into the switch gear, which is more related to large projects that are more fewer numbers of is certain semiconductors going in and some of them in process industries have been valuate did during two or three period, you know to get.
Acceptance so that there are still a little bit more difficult. So so it varies a lot but.
I don't think this is ernie.
The bigger issue for us than anyone else.
We've been dealing with it now for three months before a quarter or even longer than that.
We will continue to deal with it and I I feel that we are slowly moving in the right direction and.
As I said as time goes on we will be less dependent.
And I think and I.
Our deliveries of course as you know.
Our revenues will be depending on especially in the beginning of the year how much of this order book, we can get out so.
Great. That's helpful. Thank you very much. Thanks, Thanks, and Martin will take another question from the online option here from Gael de Bray Deutsche Bank.
Can we add some flavor on what we see in the oil and gas market.
And in the different areas there.
Yeah, I mean, maybe you have seen that the the process industries.
Uh huh.
<unk> had a good development.
During the quarter and we see good both when it comes to actually hit the revenues, but also orders maybe the orders doesn't look.
That impressive, but we are had huge orders into Q Q4, the year before in the LNG.
Market. So the comparables are quite good, but we see increased activities.
In all the businesses that we have there also in the oil and gas piece, especially related to gas and chemicals I would say.
So we are quite optimistic here.
Seen the development of the oil price oil and gas prices has gone up dramatically, which of course increases the appetite.
For investments in that region service business, which is if you look at PPA process automation, there is a 50% or approximately 50% of the revenues that we've seen.
Very very strong growth in service are there I think it was up 21%.
So so very strong in service.
The improvement which is good also supports the margin for it. So it gives a little bit an indication of what are the activities in this sector.
David.
And then we take the next question coming from the conference call and we have failed bullet from Baring Bank.
Hi can you hear me.
Yes.
Yes.
Probably a little more on.
The growth outlook for 2020.
Obviously, we don't have a specific comment.
Comment.
Above, 3%, which suggests that.
Maybe it shapes, even alright, but I was wondering if you could comment on how much of the growth you are expecting in 'twenty.
So you're going to be coming from price as opposed to volume.
Or is there a good level of volume and obviously I'm asking because volume helps.
Fixed cost absorption standpoint.
More than that passing on price.
Okay.
I can start with that.
It's quite clear that we expect to have a good growth in revenues. During this year I think you can imagine that we see strong market, but we also began orders on hand, and we're going to execute that so what we are saying that of course, we do expect that we will exceed this over a cycle targets that we put.
Center during the capital market day.
I can only say that and I said, how much more is probably related to some of the supply sand our possibility to execute.
This huge order book that we have.
Okay.
Sure sure.
I'm curious as to how much volume is going to be.
We didn't.
Mark.
If you can comment on that.
Hi.
Yeah, that's fine.
And my second question I'm sorry.
Perfect.
The mobility business.
This is what's going to be discussed on the rent.
Next week, but you have this.
Alright in order to invest.
Last year in Green.
All right.
And obviously the heat.
Part of that puzzle.
It's something that you're spinning out.
Makes a lot of sense from a multiple standpoint, but I was wondering if you could comment on any of that this is Mary.
Exactly.
And what we're putting in place.
The wider ABB.
We're benefiting from.
Okay.
For the first I think it's very important that the IPO that we are doing is only part of that we say at least 20%. So the hall.
Ability development will be consolidated into ABB, we will of course also use the brand ABB because it's.
It's a.
Good way to because it's a very exposed all around the world.
Outside so we think it's a good and I think ABB is well known for electrification. So it fits very well so.
I think the reason why we do it is that.
You've seen our orders grew last year, 150% then we'd have the CAGR. The last five years boutiques, which means there's a little bit of a different kind of business than rest of ABB.
Which means that we believe that the demand in the market need to be met and it's run a little bit more like a startup business than it is in a mature business like here arrest of ABB.
What we do we have a new board in place we have a new chairman, which is actually coming from from this kind of a tech industry. We will have a special board in and they will drive very strong focus as you have to do of any company that are starting up what's unique with our business is that even though we are the <unk>.
Just then growing among the fastest in the market we are still profitable.
Which makes the business even more interesting in these times are now for the IPO can I be Omega there. Please comment on the synergies as well. So you mentioned the brand, but we are also very carefully considering kind of like the independence of the company of course, they need to be able to invest behind their own business, but we are also offering them a platform.
For them in a smaller country sales they can use E mail sales as a channel so big countries on one channel smaller countries up to them and of course this happens on sort of arm's length pricing and all that but that's another area, where we're really enabling them to grow fast at the same time. So we hopefully we really get the get the best.
Best of both worlds on the independent, but independents, but also getting the synergies.
Great. Thank you thanks, Bill Thanks, Phil.
And we'll take another question from the conference call the animal from UBS.
Okay.
Good morning, Good morning, Anthony.
The O&M seamless.
My question.
Your plan.
Basically two questions one.
On the other one is on on the multifamily information.
The first question on electrification your plan this year.
Okay.
I think it was impacted.
Quarter by Lockdowns related to Colby and I was wondering whether what to do in the quarter or the fourth quarter.
Okay.
That plant in particular.
So when do you expect it to be fully operational.
And I stop there and then.
The second question. Thank you.
I think when it comes I talked a little bit at the beginning of of that relates to education, yes. It was a challenging going into Q3 in North America, and you know where the labor market big volumes.
Component shortages and all that and also and also on the inflation.
Of our commodities and components and so on but I think they did a great job in and actually working with the pricing they are.
Within ABB, probably the most sophisticated machine when it comes to working with our with pricing. There are those two different areas and I think the more the component business you know the smart power in the smart building and installation that is moving on quite as.
Good and delivering what they should be doing this.
Challenge is more related to the switch gear.
The bigger projects, where we have a longer lead times into I think that is now being addressed and we are working with the pricing side. There also to compensate that some of those huge cost increases that haven't been gone. So we feel pretty comfortable that we should see a good development of electrification going into this year.
So on margin.
Okay, but any any lockdown impacting Q4 Q3 or just what are your operations now we had we didn't have any locked down so I think everything went well.
When good during this period.
Thank you and then the second question is on robotics and discrete automation and then I wanted to ask maybe for an update on the used market.
When do you expect it to be fully operational again.
Blur also revenue dynamics that we should be aware.
Yeah. Thank you it's clear that the robot in discrete automation is the two businesses, who has been mostly impacted of the shortages of the semiconductors.
Can see that that we are on the revenues not really getting out you saw order growth of 60% and flat revenues, that's pretty dramatic and then use of course see all the cost inflation that so that process effect. So that is a strong focus during the year and we are.
We are of course expecting significantly improve both when it comes to volumes deliveries as well as margin you know very clear that I have said from the beginning this is business that should be about 15% then we should see a good step in the right direction during this year.
And I believe correct me if I'm wrong, but also I believe you also wanted to know about the new plant, yes, sorry, maybe you want to think about it I don't have anything new on the timeline.
And I think this year, we will actually inaugurate the plant.
<unk> been working very hard during the last years here now and it's getting ready.
We are really looking forward to this new facility because the growth in China.
Exactly where we are growing fastest today in the world.
So it's important that we can meet that both with the right.
Quality.
Acknowledging.
The growth capabilities. There. So we're excited about it and hopefully.
Clearly we will see.
China open up a little bit more so well so some of US can go there.
For longer.
Can I have just mentioned something that just that there's no misunderstanding I mentioned this you know getting closer to the $1 billion of quarterly revenue, we have a capacity to get there and this is really for longer term. So just to be clear we have been on fairly low levered revenue levels. This is not like we need a huge infra to get to those levels, where we are.
And execute very well really nice margin and robotics and discrete and then we can build on from there I mean, the whole production is build on assembly and so I think you need to have the components and you put them together. So if we have the components. We can also deliver.
But maybe if I may actually follow up a little bit.
I was also looking for any front loading of cost maybe on the opening on the ramp up of production.
If you have any guidance at this point or.
What are we going to see any.
<unk> leverage.
On the back book basically new plant opening or you could actually see that bump up.
No I think that we should not have any effects on the on the cost structure not the major driver no.
No not really I think.
I think it's important to see that the gross margin of all our businesses have improved very good during this year, which shows that we're keeping the cost under control and we managed to actually to price in and.
Have a good margin on most of our businesses.
Yes.
Thank you and we are up to the hour. So we say thank you very much for joining us today and again just a quick reminder, as Leon mentioned before if you have the time to tune into the mobility.
Session on the afternoon of the <unk> Please stay safe.
Thank you. Thank you. Thank you.
[music].