Q4 2022 Abb Ltd Earnings Call
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Great. Thanks to you all and nice to connect again, that's I welcome you to the presentation of our fourth quarter results.
Also in the old head of Investor Relations here at ABB and next to me here I have our CEO beyond rosengren, and our CFO , Tim Oyama Gila.
And as always they will take you through the presentation before we open up for a Q&A session.
Before we begin I want to mention the information regarding safe Harbor notices and our use of non-GAAP measures on slide two of the presentation.
Also this call will include forward looking statements, which are based on the company's current expectations and certain assumptions and are therefore subject to risks and uncertainties.
But with that said I will hand over to be on and T mall for that quarterly comments. Thank you Ann Sofie and a warm welcome from me as well.
I would like to start with a quick look back at the full year of 2022.
And it's safe to say it was another eventful year.
We have executed on our business promises.
By being challenged by several external factors.
Before we move on with the presentation I want to give a big credit to all the ABB colleagues, who pushed through and delivered what I would call a record year for ABB.
This is a strong achievement considering that they had to manage the implications from the war in Ukraine.
Energy crises locked down in China, and they're strained supply chain and on top of that we were also hit by significant negative FX impact.
Despite all of this the team delivered orders revenues and operational EBITA and margins at the highest level in recent history.
We achieved an operational EBITA margin of 15, 3%, meaning we delivered on our margin targets one year ahead of plan.
And beyond the key items impacting comparability EPS performance was good.
And we improved our royalty.
To 16, 5%, which means we brought it within our target range.
Based on the improved performance and in addition to distributing the turbocharging division to shareholders in October we propose a steady increase of the dividend two point 84 suites right.
We also plan to continue with the share buyback during 2023.
I allow myself to include the signing of the power conversion divestment in this 2022 summary.
And in doing so we have delivered on our promises for 2020 to streamline our business portfolio by exiting three divisions.
From here on we will continue to review our businesses on a product group level within our current divisions.
One example.
The decision to exit the emergency lighting operations within smart building in the business area electrification.
Related to portfolio changes I Wonder you also want to mention the private placement founding we finalized just after the end of the year.
We have raised about 525 million Swiss franc for approximately 20% ownership in our E mobility business.
These are new investors, who share our long term belief in the growth story of E mobility.
This is good news, but I want to make it clear that we remain committed to our plan to separate the business when market.
The additions are constructive.
All in all in my view, our 2020 due deliveries shows that we have taken a big step in setting a performance culture based on divisional ownership of operations.
We are making good progress in making ABB best in class company.
Now, let's look at the Q4, indeed Jess.
To frame the big picture, one can say that most customer segments were stable or improved slightly.
Remember that we are now talking about order improving from an already high level.
It was only two segments, which stood out and that was weak.
Weakness in residential building.
And it mainly impacted the smart building division like vacation, whereas Germany is a key market, which dropped compared to last year.
China was also weak as we have mentioned in earlier quarter.
Quarters.
Also the U S residential building market soft it although it's not such a big driver for us.
The other area I wanted to mention is machine automation and robotics and discrete automation.
While the long term market outlook remains solid orders in the fourth quarter were hampered by customers normalizing order pattern. After a period of a pre buy.
Out of all our businesses the machine automation business was one of the most impacted by the strained supply chain and component shortage.
Now that supply chain constraints hobbies delivery.
Believers lead times are shortening these means that the customers start to trust our ability to deliver again and therefore, returning to a more normal order pattern.
I'm not worried about the long term market potential.
Near term this pre buy hangover may weight on the near term or the growth in machine automation.
In total for ABB.
But the order intake was up 2%.
<unk> remained stable or improved in three out of four business areas.
I mentioned earlier that the supply chain had east.
This supported our comparable revenues growth of 16% as we could execute our order backlog.
All business areas to improve comparable revenues by at least 6% from last year.
It was very good to see an improved flow in our customer deliveries.
That said it was yet another quarter, where the order growth. So our order backlog remains at a very high level of close to $20 billion.
This represents an increase of 29% compared with last year.
And it will support our revenues in 2023, as we convert the backlog into deliveries.
Now, let's take a quick look at the different regions.
The Americas was the growth engine of the quarter.
Comparator or they increase by 50%.
And the important U S market was strong contributing at plus 13%.
The positive trend was strong in three out of four business area.
Both Europe and EMEA declined at a single digit rate.
In Europe , the decline was mainly related to the German market and softening in the residential building.
In EMEA, our China orders declined in three business areas with only motion in positive growth.
We saw a decline in the Chinese business activity towards the end of the quarter.
This was in tandem with the intensifying COVID-19 situation.
Let's see how this develops the near term but of course this add some uncertainties.
Let's turn to slide six and our earnings outcomes.
In the chart you see the strong improvement in earnings and margins.
We improved operational EBITDA by 16% and if we exclude the negative effects earnings were actually up 28%.
The operational EBITA margin was up by 170 basis points to 14, 8%.
This improvement from last year includes an adverse margin impact of about 30 basis points from portfolio changes primarily related to the spin off up et cetera.
This was the first quarter when they were not part of the family.
It's good to see how this strong revenue growth feeds into the sharp improvement of the gross margin higher volumes improved cost absorption and production and pricing was up about 7%.
In total we improved the gross margin to 34% up from 31, 7% last year.
If there is one area, where I had to hold for a little bit more it was cash flow.
The 720 million in cash from operating activities includes about $350 million from Christina settlement and taking that into account.
It's an okay quarter.
But still I would have liked to see us work down the net working capital a little bit faster.
We are turning inventories into receivable. So it's a timing question before it becomes cash.
With that said I expect a good cash delivery in the coming quarters with that I hand over to peer.
Thank you Burton and greetings to everyone also from my side, starting with electrification, which had another quarter with positive order development.
Her intake amounted to $3 $6 billion on a comparable growth of 6% from last year.
Looking at the total picture demand continued to be overall robot.
And particularly so in the Americas, driven by the large U S market, where comparable orders grew by 25%.
Some weakness wasn't all beat in Europe , where Germany, which is an important market for us continued to see a decline in residential buildings weighing on our smart buildings Division in China orders declined by 6% here, we saw somewhat of a slowdown in business activity towards the end of the year linked to the intensified.
And COVID-19 related situation.
Revenues grew by 16% on a comparable basis. This completes a strong year when comparable revenues have grown at a double digit rate in each quarter.
The order backlog remains at an all time high level of $6 $9 billion and should continue to support revenue generation in 'twenty three.
Electrification operational EBITDA margin came in at 15, 7% improving by 90 basis points year on year on strong volume and price.
While this was the highest Q4 margin in recent years. It did come in slightly below our expectations. This is mainly due to some lower volumes in the more asset intense and high margin products business smart buildings on the back of software in the residential building segment.
Overall this was again a strong year for the electrification business area with full year margin of 16, 5%.
Excluding the E mobility business, which will be reported as part of corporate and other from Q1 'twenty three the operational EBITA margin for E. L would have been approximately 17, 2%.
I will come back to this in a few minutes.
Now looking ahead into the first quarter of 2023, we currently expect a low double digit growth in comparable revenues and some improvement in operational EBITA margin on like for like basis.
Let's then move to slide eight and the motion business area, which showed continued strong delivery.
After a period of exceptional growth motions orders came in flat year on year on a comparable basis the.
Overall intake was hampered by fewer project orders and a high comparable particularly in Europe , where a large direction orders was booked Q4 'twenty one.
The underlying base business continued to improve at a mid single digit rate with a hail to development in the U S drives business and continued growth in China.
For the full year of 2022 comparable orders in motion grew by a very strong 20%.
Revenues came in at about one $8 billion, making it one of the highest revenue quarters at least since I've been with the company.
Comparable revenue growth was strong at 20% supported by all divisions.
Similarly to the third quarter. This was driven more or less 50, 50 by volume and price.
The strong top line, what's reflected in motions operational EBITA margin of 17, 4%, representing a 130 basis point improvement from last year.
Higher volumes support an improved fixed cost absorption and price increases more than offset the adverse impact from higher input costs.
This rounds off another strong year for motion, where the operational EBITA margin improved by 20 basis points to 17, 3%.
This means the team managed to more than offset the approximately 60 basis points dilution from the divested guardsman business, a really very good achievement.
Looking ahead into Q1, we anticipate a strong growth.
In comparable revenues and we expect operational EBITA margin to be similar or slightly higher compared with last year's level, depending on the mix during the quarter.
Then turning to slide nine and process automation, where customer activity in the more late late cyclical end markets continued to be robust.
Momentum was particularly strong in marine ports refining and renewables.
On the other hand, there were some signs of hesitation noted in the metals industry on back of elevated energy prices.
Overall total comparable orders grew by 11% and the book to Bill ratio was clearly above one driven by the Americas and Europe , while orders in EMEA and China in particular declined.
Comparable revenues grew by 6% from a already very high level last year with a good flow of customer deliveries in virtually all divisions.
With orders still strong the order backlog increased slightly and stood at $6 $2 billion at the end of the year.
This should support revenues going forward and is particularly encouraging as the business area has successfully improved the gross margin and quality in new orders taken.
As the headline number the operational EBITA margin declined by 50 basis points does however include a negative impact of about 160 basis points due to the accelerant spinoff, which had an ababa b a average profitability the underlying improvement in profitability was due to both higher.
Volumes and continued benefits from improved quality in the order book backlog and higher gross margin.
Looking at the expectations for the first quarter, we expect single digit growth in comparable revenues and a sequential decline in operational EBITA margin.
The sequential decline is driven by normal seasonal pattern, but also by marine imports division, where the missing Russia Arctic LNG business will have some dampening impact to margins during 2023.
On slide 10, we turn to robotics <unk> discrete automation.
Business area was adversely impacted by customers normalizing order patterns, primarily in machine automation, that's pure and discussed this follows a period of preordering due to long delivery lead times caused mainly by the shortages in semiconductors overall comparable orders declined by 19% driven by the machine automation.
<unk> that was up against a very high comparable while robotics, so a stable development.
Taking a step back and looking at the order development for the full year, one can see that 'twenty 'twenty. Two was another strong demand year for our a with comparable orders growing 15% on top of the 29% growth in 'twenty one.
Looking at the chart in the Middle It is very promising to see revenues continuing to rebound as the easing of short the cheese of electronic electrical component support the execution of volumes from the order backlog.
Comparable revenues improved by 23% in the quarter with solid contribution from both divisions.
This translated into a strong operating leverage doubling the profit to about $125 million at.
Additionally, the operational EBITA margin was supported by better pricing execution as well as positive divisional mix and improved almost by six percentage points to 14%.
For the first quarter of in 'twenty, three we expect even higher comparable revenue growth then in Q4, and the Q1 margin to be around the Q4 level, that's really depending on the COVID-19 situation in China.
Moving on to slide 11, showing the group operational EBITA bridge as you can see the comparable earnings improvement benefited from our strong price execution and the continued recovery in volumes, which again more than offset the adverse effects from cost inflation.
Noncore movements in FX as well exports as well as portfolio changes I E, mainly the turbocharging spinoff and for the last time also the impact of the Deutsche Divestment, we're slightly diluting on a group level.
Now, let's look at the cash flow on slide 12, which is one area that did not quite meet our expectations.
Slow from operating activities and continuing operations was $720 million in Q4, approximately 300 million lower year on year.
While we saw some cash release from inventories during the quarter the impact from overall networking capital was less compared with last year as trade receivables increased sequentially.
As mentioned in October the settlement for the Coachella project resulted in a cash outflow during the quarter timing wise. It was a bit more front end loaded than expected and with approximately $315 million impact in Q4. It means that we now have only roughly 10 million impact in coming quarters.
On a more positive note. The Gaslog statement also reflects a net positive inflow from investing activities of approximately $1 $4 billion from the closing of the BG divestment looking into 2023 cash generation will be an important focus area for us as we work down net working capital.
We should also have less adverse impact from items impacting comparability. So all in all I expect a good cash generation in 'twenty three already starting in Q1.
Now taking a look at the development of our return on capital employed or Rosy you can see in the chart that we moved into our 15% to 20% target range for the first time in many years the strong rosy improvement to 16, 5% is driven by better operational performance.
It is also worth highlighting that the capital employed calculation still includes the negative impact from the 19, 9% ownership in Hitachi energy in 'twenty two.
Impact will reverse from 'twenty onwards, moving us even more comfortably into the target range and overall of course the improved gross is a good indicator that we are really improving abb's long term performance.
Let's finish off by quickly taking a look at yesterdays announcement.
B E mobility has signed an agreement to raise an additional 325 million Swiss franc in second and final part of pre IPO private placement.
This comes on top of the 200 million suites ranked announced in November 22.
The E mobility business will use the proceeds to continue the execution of its growth strategy, comprising both organic and M&A investments in hardware and software.
Following the second round ABB has a shareholding in ABB E mobility of approximately 80% and we remain committed to our strategy to separately list the business subject to constructive market conditions.
The riffs, if Rick the new governance structure and the size of the business E. Mobility has been moved out of the electrification business area as of beginning of January .
And we'll be external report data as part of corporate and other as from Q1.
You can see pro forma figures for El excluding E mobility, and the new corporate and other on the right side of this slide.
We will also publish historical re reported numbers prior to our Q1 results on the Investor Relations section of our homepage.
At the same time, we are happy that the noncore business has become so insignificant that we will no longer reported as a separate line and with that I hand, it over back to Bureau in the round off this presentation. Thank you team off.
As we sat down to summarize the year, we came to reflect on what an exceptional period, we have been through in the past three years.
Firstly COVID-19 slump in 2020, followed by a very strong year in orders.
Despite all of the major external events.
The tight supply chain has been the trigger and as I mentioned earlier, we are seeing customers normalizing order pattern at the supply constraints.
This may hamper our orders growth in the first half of 2023 as the Comparables are very high.
The chart also shows that the revenues have lagged orders, we have an order backlog of 19.9 billion. We plan for about 75% of these to be delivered during 2023 supporting our revenues.
And to continue on the topic of what we expect from 2023.
Finish off with slide 16.
Looking ahead, nobody really knows what he's come in and we have a stop speculating too much instead, we have prepared for different scenarios.
And based on what we see now we do not expect a major setback in the market.
Our revenues will be supported by execution of the record high order backlog and we expect our comparable revenue growth to be about 5%.
We are committed to deliver an operational EBITDA margin of at least 15%, even if we see a slight softer market.
Cash flow is in focus.
By working down the net working capital in combination with the lower negative one offs, we expect to see a robust cash flow for the next year.
On top of the dividend of a point to 84 Swiss franc, we are planning to continue with our share buyback program.
Rounding off with a quick look at the first quarter, we expect a double digit growth in comparable revenues and some year over year improvements in the operational EBITA margin.
Meaning from the 14, 3%, we reported last year, including the high margin business accelerating which we now have exited.
It should be a good start to what we expect to be another year of solid performance for ABB.
That's a good ending to.
To finish off the presentation with beyond before we know what it's been up for the Q&A and I just want to say for those who have dialed in using the phone.
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And with that and we.
Oh, it's been up for questions and I think we should start with a question from the.
Conference call do we have someone on the line there please.
If not we'll just kick off with a question from the online tool, while we're waiting for the telephones to come alive. We have a question here from when the I pod.
And he wants to know a little bit about the outlook comment.
He says for Q1.
The comparable growth more low double digits somewhere around mid to high teens.
Let me start with that one of them has to follow up.
Yeah.
Can I take that one yeah I don't think we would go into that it's going to be a high low we believe that's going to be a double digit growth.
Which is of course, good supported by the order book and that is the first quarter and then you have also seen that we do expect for the full year to be about 5% or so when it comes to revenues.
Yes, and now we go to the conference call I think.
It shouldn't be lost and they're all showing from Barclays. So you that.
I am good morning, Thank you and see good morning beyond T. Mo Firstly briefly T. Mo on electrification margins I wonder whether you can give us a bit more color on the profit bridge that and electrification. Thank you for providing some pro forma numbers.
E mobility I gather in the quarter, it's about an 80% 80 basis point dilution helped us a little bit if you can but yet the mix towards more systems and also the impact from under absorption in the rest of the business and secondly, if I just kind of briefly on the pricing outlook for 2023, you're pricing up 7% at the group level currently.
A higher emotion I'm, assuming around 10% I wonder if you maybe look a bit deeper into 'twenty two 'twenty three I'm trying to understand price stickiness that as input cost starts to ease, particularly in motion. While you have some formulaic pricing choices in last mile which is can you talk a bit about the risks, perhaps surprising as we get into the back end of this year just from a mechanical.
Reset two low enrollment prices. Thank you.
Why don't you take the first one to move on that.
Vacation there yeah on the margin yeah. It's as we said we came in slightly lower than we expected I mean, the main drivers. There are as we said there was a bit less demand on the basic construction and Thats a high margin business in smart buildings for US then we also had as is totally normal mouse Moor.
And it's grown distribution solutions, which is lower margin business than the.
Average and then third and this is what's actually almost 40 basis point Delta on El margin coming simply from the fact that E. Mobility was bigger Q4 this year than last year. So those are really the main drivers.
Now the pricing Dan do you want to take that yeah.
Yes, we are at 7% is what we report for the quarter.
We know the inflation rate during last year, which was.
Quiet broke job both when it comes to logistics.
But also for commodities during the period.
Now in line with the interest rates going up and we see more and more normalized demand I think we are seeing somewhat less.
Inflation and I do believe that is also going to reflect our our pricing. So we have a pretty good picture of what are the cost increases in our operations and we will make sure that we compensate that also going forward, but also of course are getting full value for a good price.
For the value that we are delivering to them to their customers. So we believe that that would be somewhat lower inflation. During next year, Yeah, maybe just to chip in it we expect about 2% pricing carryover from 'twenty to 'twenty three something like that yeah.
And with that we've taken out of the banks loss.
And Oh, sorry that was more than one question.
I would like to add.
And we'll take our next question from James small, Okay. You said went bad.
Yes, good morning, everyone. Thanks for taking the question.
Got one question on your performance management system, if I could I mean, you could think.
Think about 'twenty divisions at the moment could you say, how the mix of what is in a growth mandate.
Ability mandates changed and Jeff that the numbers and could you talk about those divisions still with the probability mandates and say something about that potential.
It will.
Yes, I think it's a very good question and you know this is very close to my heart, it's too into implementing this performance culture, which I think here ABB you really have shown.
I could have managed during the last two years, we are seeing an improvement. So it's correct that we see more and more divisions.
Deviations moving into the growth mandate and I think I've been mentioning close to 70%.
Which have that mandate today, we still have a number of divisions, who have a little bit of a challenging some of them.
Moving and profitability, but we also have two dv shifts actually raised more on the stabilization phase.
And one of them is large motors and generators, where it's been a tough.
Market for them they are working hard to improve their performance and the other one is the yes, and I think team have talked a little bit about that we had quite good deliveries big deliveries on DSA distribution solution in electrification and then as you probably know that we have it.
Now New Division President for that Division. We have also split did that business and moved some of the lower voltage switchgear into smart power and D. S would be concentrating more on the medium voltage why we have this strong position in the market. So I think.
The right measures are going to be implemented during the year and we should see a gradual improvement of these two businesses.
Then of course in every division there are a lot of activities for both the growing as well as improving profitability and that's part of the performance culture and continuous improvement, which is so important for <unk>.
For ABB and also giving us the comfort in saying that we will be delivering over 15% also next year.
Thank you very much.
Thanks, James and I will continue actually where they're sort of related question here from the online tool.
It comes from Joe Giordano.
And it's it will take it to the decision to exit the lighting business units in electrification. What drove this decision is it going to be say at Haile or organic exit yeah. Let me take this one on here Firstly I would like to say now is we are extremely happy that we have now delivered on our <unk>.
Hmm is which we put out 2020 to exit three businesses to align our portfolio with our purpose.
That's good I think it's very clear today, we don't look upon ABB as a conglomerate anymore. We are a purpose driven company. So I think that is good. So now we can concentrate on growing that means acquisitions.
And organic growth and to make sure it could strengthen the group.
The division level that is continuous pruning of the businesses that we in some cases can be fixed Sunday too can be driven better performance than you with a good transparency also see what do you make in the different product lines.
In some businesses they have product lines that maybe don't fit in very well or you could be a small fish in it being bought and we.
Say that the best way here is to find a home for that where that business can develop better than win in our and I think electrification and the team that I have that have either.
Then to fight these emergency lighting is one of the businesses that we believe that should be exited and find the new home.
For that and I think we will start the process now and we haven't decided yet if it's going to why it's going to end up in a in but we will start the process of identifying opportunities and look for the best cold.
For that business and we will continue to.
Our challenge all our divisions and their product lines that we have.
Our market, leading fresh well performing businesses within the divisions.
Okay. Good and then we'll take the next question from the telephone lines and then you go you'll your line should be other things.
Good morning, everyone I hope I hope that all of the well it's really a question for T Mo.
Around the cash underlying cash situation. So I guess, if we if we step back you you had a couple of years, including last year, where you have them.
$3 3 billion of cash from operations will probably pardon me in 2021.
Three three and we've done that level in the past, where we are today. It's about 1 billion 2 billion pardon me less but about 1.3, I guess that 2 billion swing is almost exclusively coming from working capital I guess.
Question is who knows how long to two questions. One is how quickly can we get that working capital from 2 billion down to a few hundred million I E are we going to see the vast majority of this reverse in 2023.
The second sort of related question because it obviously depends on a few other things is how realistic is it to think that we're going to be coming back to the 3 billion or thereabouts of cash from operations.
Within the foreseeable future. So all are always going to get back to the cash levels that we were at in 2018 and in 2021.
Okay. Thanks, Ben for the question I was kind of thinking that you might go to that direction, but let's first start with the $2 billion 2 billion GAAP. So about $1 4 billion of that is actually coming from trade net working capital. There I would just say we have good quality inventory, we have good quality receivables and actually the inventory now alright.
We started to reduce which is a good sign so it's moving more to receivables and then we did not release that much money from payables because the payables are going down as we are sort of seeing these release and business coming from inventory.
If you look at next year, So I would maybe answer this in a way that if you look at what we have said on our guidance and we can use sort of round numbers here. So stay approximately 30 billion all the while revenue and you put into that this 5% growth and then you take 15% margin. So this is just a rough.
Matt and then you move to EBIT. So you take out the cash items, which is about $330 million in our guidance and then if we would have net working capital efficiency, improving say by a point. So we will come back to about 10% of revenue and you take 25% tax rate.
And all of that that you will actually dropped into numbers, which would indicate some $3 billion of free cash flow. So that's kind of like you see from there how we think about it for 2023.
Understood.
Very helpful I'll leave it.
Thoughtfully in the interest of time, thank you.
Thank you and we'll take the next question again from the telephone line Gail.
Your line should definitely.
Thanks, Good morning, everyone.
Can I ask about the decline in orders in the Michigan Automation Division.
I mean, you mentioned a significant throughout the day on a year on year basis, I guess the book to Bill is also clearly below one now.
But I mean, we've just heard about the Rockwell automation, you know highlighting that Bose the orders and backlog continued to increase sequentially with continued strong automation demand. So could you perhaps elaborate on your specific market positioning and mission to mission.
Have you been.
Perhaps too focused on margins not enough on growth I mean, what's going on there because it seems that you'll perhaps losing a bit of market share. Thanks very much.
Thank you for the question I think I'd take that one.
First I would like to say when you look at it.
Robot does that mean machine automation for the full year, we had the growth of 15% and the year before 29%. So that gives you a little bit of the growth. If you look at the fourth quarter.
And then first I can say that the comparison with last year, we had a 60% growth in Q4, the year before and that was actually when we start seeing the problems with the semiconductors side about the brutal compare its thing.
With that part.
We look at the end markets, we see as very strong demand patent we feel very comfortable that both the machine automation and you can of course see you also you can't see it but the growth in revenues and the order book that we have for that base that we have.
The increase in order book during last year, with 49%, which is which is of course, a huge that need to be delivered out and if you look at our machine automation business, mainly our customers because we have a very strong niche there is on the machine automation it's OEM.
And they were quite nervous when we had difficulties with seem to come back just because you know that part so they actually pushed orders earlier.
And now when we actually delivering and we don't have any issues on the supply chain, where the semiconductors are bought they are feeling much more relieved and they can go into a normal order pattern. So that is what we have see we are very optimistic about the machine automation market in the coming years from that also.
The robotics.
Can actually say that.
We had actually a flat daughter styrene, yeah during the quarter.
So we think this is more mechanical change and then that actually from the demand from the market.
Sure, we can prove that going forward.
Thank you.
Thanks.
Thanks, very much but just can I can I just come back to the point you made on order growth in each one being challenged by high Combs normalization and so on I mean, I think I get that maybe.
I'd be interested to know if you actually would you anticipate group orders to be up or down sequentially.
As a group we don't we haven't guided on the orders on that side.
But of course.
No the first quarter during last year was quite dramatic because of the supply chain issue. So it went up very much or.
So, it's a little bit more challenging.
On that side, so I think from our perspective, we guiding on the revenues, where we say we kind of get a double digit growth, we're very comfortable with that.
When you want to add in something that came off yeah. Maybe just if you look at the first half so the comparable order growth from last year is about 24%. So that's of course very very high SVR and was saying, but if we look at the full year, we expect actually at the moment when we sit here that the book to be able to continue to be up by one so in that sense.
We expect to see healthy market for 2023, we'll just have a super high comparables on the orders.
Yeah.
Thank you very much.
Thank you and I'll just connect to the Oh Ray question you had earlier.
There's a question here from Sean Mclachlan, who wants to know have you seen any cancellations of orders in the backlog in robotics as part of the normalizing thing no. Its a very solid order book Yeah.
For our robotics, but both but both are about the discrete automation to do like to say, it's a huge order book and we have to deliver on that during the year, but no cancellations there what we have seen so far.
Okay. Then we'll take the next question from the conference call and Alex from Bank of America Merrill Lynch should be on the line.
Yet I am indeed, thanks, very much on seaborne and beyond.
I wondered if you could dig a little bit into the <unk> construction.
Comments that you are making there with respect to Germany, and China are I guess trying to maybe a little bit more obvious.
Given given the broader backdrop in China property, but if you could give us some more color around that the overall market across your global construction business I'd be okay great.
Yeah.
I can start and then Tim who can cover it I mean, we've been reporting a week.
Residential construction industry for it for a couple of quarters and I think that actually is remained we see it in Europe , mainly in Germany, where we have a really strong position in that.
Is it reflected in it.
In the numbers, but we also see it in U S and in in.
China at that stage that is actually the segments that we don't see positive at the moment that is the only one which has been softening.
Something off.
That is something you can just maybe a chip in a couple of numbers here. So when we look at residential construction out of the electrification business overall it may be some 15%, but Germany is actually about double that because we have the strong position that beer and said we have the bushy agribusiness, which is very strong so in that sense, Germany is having a bigger impact for us.
And we all know that the German situation given the.
Gas prices, which are now luckily coming back down on the market task or some pullback on demand on the consumer side, which is understandable. So I think this is really the situation now let's look at how it moves forward because we are seeing I think.
Electricity prices have been coming down maybe faster than expected. So let's see what that does and then of course, we could have some pent up demand in China as well on different thoughts when we start to come out of Covid. So I think it's very difficult to read at the moment, but maybe I would say it looks maybe slightly more positive than couple of months Mike Yeah.
Okay, and you won't be seeing any kind of mitigating factors from energy efficiency argument, so changing equipment.
The benefit of energy efficiency.
No I can say.
It is of course, correct that is the math.
Globally through towards energy efficiency, and we see a lot of the investments that have been driving.
Demand for us is related to energy efficiency and we do expect that will continue I mean, the I R. A act.
North America is going to be extremely important for us that with green investments, which is actually our core in our business or so yes, we expect Europe to come up with some contraction salary in a week from now so I think that probably going to help to drive some demand in our core segments.
So I think it's looking pretty good.
Okay, great. Thanks very much.
Thanks, Alex.
We continue with a question from Andy at J P. Morgan.
Hi, Good morning, everyone, Yes, Hi, hi, everyone.
Thanks for taking my question and I, just wanted to kind of I guess slow down a little bit on China. It's kind of been mentioned a couple of times in terms of some time towards the end of the period, which I don't think it's a surprise and I guess some expectation that probably continues in the early Q1, but I know he says well beyond some of the comments and input on Bloomberg.
Is sort of an optimistic view on China. So is it as simple as the underlying activity, we would expect to improve but in the very near term, it's still going to be challenging to you to see that in the numbers delivered in terms of volumes or can we be a bit more positive maybe a little bit earlier in the year, just trying to get a sense of what you're hearing on the ground when you're sleeping.
Yeah.
Can't give you a little bit more meat on the bone here when it comes to China.
It's correct that December was a weak.
Months in China, if compared to the two earlier Wang said very much related to Covid, we were running factories at 50% capacity due to people.
Being home from from Covid and that was really the situation during the end of December .
In January this has gradually improved and before they're our employees went on a new air for a Chinese new year, we were actually up 800%, meaning that.
This is <unk>.
Net from Covid had actually gone through very very fast and people are coming back.
So and I think as maybe leave too early to draw too much conclusion for China normally.
Historically, we know that the week or the month after Chinese new year will set the pace for the for the year.
Personally I am.
I think.
I think there could be an upside on China, because you know its been locked down for now three years people spending very little little travelling Lil consumption at the moment, then and I think kipp.
There is a chance that China will experience some what we have seen in the rest of the world when opening up but let's let's wait until the end of Q1 to throw I need to be conclusions.
Sure.
That's very good thank you very much.
Thanks, and we take the next question from Andre <unk> from Credit Suisse, Andrea you with us on the line.
Yes, I am thank you very much for taking my question I have a much broader one I just wanted to ask whether given the performance over this year, but also looking at the whole kind of revenue growth performance from 2019 order was in the guidance for 2023.
And given the.
Crow trends and all the push for energy efficiency electrification, whether you are.
Tianjin Youre thinking on the 3% to 5% growth like for like growth outlook that you gave.
Just over a year ago, given that it looks like you've printed about five virgins going to do another one five and 2023.
Yeah, probably expected that question to come out and said we have delivering on a one year early on that performance also on the operational EBITDA.
I'll put it this way that.
It's been a very unusual time now with Covid and the opening up of coal with which has put volumes.
I think we did an overview one year ago on the capital market day, if you remember, we actually lifted our guidance opera.
Three to five but also including a small acquisition and a four to seven and we think at this stage, it's maybe a little premature to do any kind of adjustment in that part, but you know we're having the capital market day in November end of November this year, and we will definitely do.
View our targets. After this year also to say I mean, we reached the 15% that we of course need to continue so we will look into that and that will be.
<unk> reviewed during the second half of this year and some kind of message we should have by the capital market day, I see a cab, but not not at this stage, we don't speculate too much.
Thank you May I, just follow up on electrification, specifically, if you could give us some idea of how much of the whole portfolio and like give us any individual pieces of course was all converted very much that is geared towards the push for high energy efficiency.
And kind of electrification of buildings and mobility.
Yeah.
Question I don't know if Jim Mccann asked it but let's put it this way that I think the two driving forces now in there.
In the Green transition that is taking place one is the electrification electrifying the world you are now.
Electrify America you have elected finding Europe that is of course, one of the big driving forces. Then you have also the energy efficiency side that means that many operations all around the world are investing in more efficiency in the operation and I think that is possible.
Reflect the electrification, but also a notion. So these two divisions are really the big drivers in efficiency.
Yeah.
So and I don't think I have the number exactly to repeat that but I would say our portfolio overall is supporting both electrification and efficiency movement, you want to add something people.
Again, I don't have a number to this exactly but if you. If you look at the division. So clearly in smart buildings, we have things like you know sockets in that kind of stuff. So okay. You can say is that.
Energy efficiency or not or yeah, but then when you look at the majority of the staff, even I would say an installation products. We also have stuff, which goes to medium voltage and and is actually in energy efficiency and then if you look at the D. S. S. B E mobility and majority of the service. So I think that's also there so.
Say over 50% I would say clearly yeah. If you look at the <unk>.
EV charging.
Millions of millions of patients is being put up their board for heavy vehicles as well for commercial vehicles.
Our private vehicles.
And all of this of course need the power supply. So it's driving everything from medium voltage to do installations to support these stations all around so yes that is the push in these kind of investments, which this these industries driving.
Okay. Thank you. Thank you very much for your time.
Thanks, Andre and while we're on the topic of the electrification. We have a question here from Nick Class Nielsen, who wants to know more about the private placements and that has been announced.
Yeah, I think we were very happy to announce that we have.
A couple more reactive for more investors that share our view of the the growth opportunity you see in the mobility side is as you know we responded the.
The IPO due to that.
In constructive market at the moment at the same time, we rethink the strategy is correct, which means that we have separated the business and as you can see in our press release. We are now also separated out of electrification, which will have a positive impact on electrification and we've put.
Under corporate we would also make it transparent for you to see how this business is developing we have a new board and now we have $525 million of fresh cash into that piece is to support both inorganic as well as the organic growth and it's now a.
Of course important that this business.
<unk> continues.
Continues to be a leader in the market when it comes to that airport. So we think there are good companies that have come in and then we say that.
Getting these private placement puts us of course, a little bit more relaxed when it comes to the IPO, we don't need to make it. This year, we will do it when the markets are constructive enough and.
But the strategy doesn't change.
And I'll just throw in a couple of numbers. So I think they sort of prove out proves our thesis that this is a different kind of business and that's why it sort of deserves these kind of separate capitalization and if you look at now this is like just ballpark ballpark four to five.
He beat the revenue if you look at 'twenty, who number so it's clearly different numbers than ABB, yeah, and that's the whole thing what we are looking at here. So we're looking for fast growth for this business and also it's being able to Aspira in said grow both organically and inorganically to having having the means to do so.
And I know, we're sort of coming up to the hour hand that we'll see if we can squeeze in at least another question from and get them more on the conference call lines. Please so you that Guillermo.
Yes, I'm here good morning.
Good morning, Nancy.
Thank you.
Just wanted to ask about pricing and then I guess Uh huh.
Well, what I understood, obviously, the 2% sale.
No.
2023, but I was wondering with demand levels, where they are.
Whether you see any.
And any direction on pricing as we stand.
Now, let on a sequential basis.
As you see it are you just trying to gauge whether there's any.
From pricing in any of the segment business units divisions or actually any Megan you may have.
I want to highlight that thank.
Thank you.
Yeah, Let me start here maybe than people can now be in a little bit first I think it's very important to know that.
Our viewpoint of pricing is what we work with what we call value based pricing and we implemented these already in 2020 long before we saw inflation numbers see in commodities oriented net in logistic cost tends to work and the important thing is of course too to analyze what kind of value are we creating.
To our customers said that we're getting paid for it. This is our value based pricing module then the world.
The little bit Crazy as we all know the years and we saw commodity prices going up and we saw.
The logistics and then inflation society was coming in the good stop offs. There that we had out in every division and pricing strategy Department.
Which meant that we had good control over the costs.
In our operations and our objective became of course to offset these costs, which I think they proved to do very well now when we see the inflation slowly is going down and we do expect and less off price increases compared to what you saw during last year, but that's of course up to the east.
Strategic pricing strategic to define what we need to do.
It is of course important to make sure that pricing is an important strategic part of our performance management systems that is the basis and we will of course make sure that we offset cost increases, but also to get get the right value priced for the value that we can create for our customer. So that's the.
The basis for it.
Yet I am.
Actually not going to ship in any numbers here, but I will use this as a bridge to just say that deep, but you'd mentioned here on the tools to really understand how we drive value based pricing is something what we are building with this <unk> way transformation as well so that will really get cohesive information per customer.
For SK U and so forth I mean, we're good at that but we can be even better and that is what we're doing when we are wiring the company in line with ABB way and I just wanted to say that this is now.
Hi, number about $180 million as we said ABB way transformation. It will start to go down already 'twenty 'twenty, four and we might have a bit of a tail twenty-five and then it's done. So you shouldn't look at it like something which is there forever.
And with that thank you.
Thanks, Campbell with that we're up to the hour and I realize we haven't got through the list of callers please reach out.
To us in our Investor relations and with health care the best we can.
And before we finish I, just want to sort of a bit of a commercial break here and when we have I mean Dion mentioned the capital markets day that were planning for this year Thursday November we're gonna hosted in Italy at one of our electrification sites and I Hope you will save the date and then join us for the day.
In Italy, and with that we say thank you for joining us today, and we'll see you in a quarters time.
Thank you. Thank you.
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