Q4 2023 ABB Ltd Earnings Call

February 1, 2024

Ansofi Nord: Greetings to you all and nice to connect again as I welcome you to this presentation where we will talk through the results for ABB's fourth quarter. I'm Ansofi Nord, Head of Investor Relations, and next to me here is our CEO, Björn Rosengren, and our CFO, Timo Ihamotila. They will take you through the presentation before we open up for questions.

Greetings to all and nice to connect again S. I welcome you to this presentation, where we will talk through the results for ABB fourth quarter. I'm also can note head of Investor Relations and next to me here is our CEO will be on roast and ground and our CFO T Mo.

I'm with the law and they will take you through the presentation before we open up for questions, but before we begin I should mention the information regarding safe Harbor notices and our use of non-GAAP measures on slide two of the presentation.

Ansofi Nord: But before we begin, I should mention the information regarding safe harbor notices and our use of non-gap measures on slide two of the presentation. This call includes forward-looking statements based on the company's current expectations and assumptions, which are subject to risks and... And with that said, we kick off the presentation, and I hand over to you, Bjrn. Thank you, Annecy, and a warm welcome from me as well.

This call includes forward looking statements based on the company's current expectations and assumptions, which are subject to risks and uncertainties.

And with that said, we kick off the presentation and I hand over to India. Thank you Ann Sofie and a warm welcome from me as well.

Bjrn Klas Otto Rosengren: I want to start with some quick reflections on 2020, and I'm proud to say that it was a record year for ABB. Some proof points of our success include that we improved on all lines in the PNL and, in many cases, to new all-time high levels. We delivered record-high cash flow and return on capital. A great team effort.

India: I want to start with some quick reflections on 2023.

India: And I'm proud to say that it was a record year for ABB.

India: Some proof points of our success includes that we improved on our all lines in the P&L and in many cases to new all time high levels.

India: We delivered record high cash flow and return on capital employed.

India: A great team effort.

Bjrn Klas Otto Rosengren: So how did we do this? First, the overall market environment was solid. We have a good business mix, and this year we saw strong momentum in the long cycle business, which more than offset the weakness in part of the short cycle. In total, our comparable orders improved by 3%, and our book-to-bill ratio was 1.05.

India: So how did we do this first it was a solid overall market environment, we have a good business mix and this year, we saw a strong momentum in the long cycle business, which more than offset the weakness in part of their short chicken offerings.

India: In total our comparable orders improved by 3% and our book to Bill ratio was one point to one five.

Bjrn Klas Otto Rosengren: Secondly... We are a more efficient and agile company. We took actions to further push the ABB way operating model within some divisions, and one success story is the turnaround in the large motor division. They have done a great job and improved in many ways, including how they work with value-based prices. It was really good to see that they took the margin to double digits, but I do not look at 2023 as anything extraordinary.

India: Secondly.

India: We are more efficient and agile company, we took actions to further push the ABB way operating model within some divisions and one success story is that the turnaround in the large motor business.

India: They have done a great job and improved in many ways, including how they work with value based pricing.

India: It was really good to see that they took the margin to a double digit territory.

India: But I do not look at 2023 something extraordinary.

Bjrn Klas Otto Rosengren: What do I mean by that? You know, our business is to help the world accelerate the energy transition toward electricity. We also help customers to become more efficient and safe through our automated and digital manufacturing. ABB has a leading position in markets driven by strong second, and we are confident about it, which is why we raised our long-term financial and sustainability targets at the CMD in November. In short, we target higher growth and higher returns while enabling a world with net zero. Finally, for 2023, the board proposes a dividend of 0.87 Swiss francs. The increase of three francs from last year is more than the usual annual increase of two.

India: What do I mean with that.

India: You know our business is to help the world accelerate the energy transition towards electrification.

India: We also have customers to become more efficient and safe through our automated and digital manufacturing.

India: ABB has a leading position in markets driven by strong secular trends.

And we are confident about the future, which is why we raised our long term financial and sustainability targets at the CMT in November in short, we target higher growth and higher returns, while enabling a world with net zero emissions.

India: Finally on 2023 the board.

India: Poses a dividend of <unk> 87 suites Frank.

India: The increase of three wrapping from last year is more than the usual annual increase them too.

This is based on the strength of the ABB way operating model and a future proof market position.

Bjrn Klas Otto Rosengren: This is based on the strength of the ABB way operating model and the future proof market. We also expect to continue to utilize share buybacks as a way to return excess cash to shareholders. Now let's turn to page 4 for some more detailed comments on the 4th court. My key takeaway from Q4 is that comparable orders remain stable from last year, meaning total demand is holding despite weakness in the short cycle. The book to bill ratio was below one, but I'm not so worried about that.

India: We also expect to continue to utilize share buybacks as a way to return excess cash to shareholders now lets turn to page four for some more detailed comments on the fourth quarter.

India: My key takeaway from Q4 or that comparable orders remained stable from last year.

India: Meaning total demand is holding up despite weakness in the short cycle business booked.

India: Book to Bill was below one, but I'm not so worried about that it is a normal pattern in the fourth quarter.

Bjrn Klas Otto Rosengren: It is a normal pattern in the fourth quarter. However, I expect a stronger outcome already in Cuba. Secondly, we improved operational performance and delivered record cash of 1.9 billion, up by 1.2 billion from last year and even stronger than expected. And we improved return on capital employed by 460 basic points to 21.1, a strong outcome in my. Lastly, I'm pleased to see the division utilizing our strong balance. We have recently signed seven small bolt-on acquisitions, most of these deals add more embedded software and AI capabilities to our platform. These will support our market position long-term in the summer. We deliver in line with our guidance, and I'm pleased with the solid finish of the year. Now, let's turn to page five for some more detailed comments on market developments.

India: I expect a stronger outcome already in Q1.

India: Secondly, we improved operational performance and delivered record cash of $1 9 billion.

India: Up by $1 2 billion from last year, and even stronger than expected.

India: And we improved return on capital employed by 460 basis points to 21.1% a strong outcome in my view.

India: Lastly, I'm pleased to see the division utilizing our strong balance sheet. We have recently signed seven small bolt on acquisition. Most of these deals add more embedded software and AI capabilities to our offerings. This will support our <unk>.

India: Market position long term.

India: In summary, we delivered in line with our guidance and I'm pleased with the solid finish of the year.

India: Now, let's turn to page five for some more detailed comments on the market development.

Bjrn Klas Otto Rosengren: As I mentioned earlier, demand was resilient, and comparable orders increased in three out of four business areas. We saw a stable to positive development in most customer segments, with the softer areas to mention being residential construction, where we see weakness in both China and the US, while Europe seems to be stabilizing at a low level. The other area was discrete automation, where we saw a similar pattern as in recent quarters. Timo will talk more about the details on the slides about robotics and discrete automation. We expect the challenge in R.A. to persist also in Q1. However, we believe the fourth quarter was a low point for absolute order.

India: As I mentioned earlier.

India: Demand was resilient and comparable orders increased in three out of four business areas. We saw a stable to positive development in most customer segments.

India: We then the softer areas to mention B.

India: Residential constructions, where we see weakness in both China and U S. While Europe seems to be stabilizing at a low level.

India: The other areas was discrete automation, where we saw a similar pattern as in recent quarters team with the T. Mo will talk more about the details on the slides on the robotics and discrete automation.

T. Mo: We expect the challenge in our a to persist also in Q1. However, we believe the fourth quarter was a low point for absolute orders.

Bjrn Klas Otto Rosengren: In total, for ABB, orders remained stable year over year, and the order backlog remained strong at $21.6 billion. Now let's turn to slide six and look at the market pattern from a geographical perspective. Comparable orders increased in two out of three regions. The Americas is still where the underlying market is most active, with their continued solid custom activity in the U.S. AMEA grew by 2% and we see strong developments in, for example, India, but China is a challenge. With the software activity in several segments, Europe declined by 5%, mainly impacted by the weakness in discrete automation.

T. Mo: In total for ABB orders remained stable year over year.

T. Mo: And the order backlog remained strong at $21.6 billion.

T. Mo: Now, let's turn to slide six and look at the market patent from geographical perspective.

T. Mo: Comparable orders increased in two out of three regions. The Americas is still where the underlying market is most robust.

Ansofi Nord: But before we begin, I should mention the information regarding safe harbor notices and our use of non-gap measures on slide two of the presentation. This call includes forward-looking statements based on the company's current expectations and assumptions, which are subject to risks and consequences. And with that said, we kick off the presentation, and I hand over to you, Björn. Thank you, Annecy, and a warm welcome from me as well.

T. Mo: With our continued solid customer activity in the U S.

T. Mo: EMEA grew by 2% and we see a strong development in for example, India, but China is a challenge with the softer activity in several segments Europe declined by 5% mainly in the impacted by the weakness in discrete.

Björn Rosengren: I want to start with some quick reflections on 2020, and I'm proud to say that it was a record year for a. Some proof points of our success include that we improved on all lines in the PNL and, in many cases, to new all-time high levels. We delivered record-high cash flow and return on capital. A great team effort.

T. Mo: <unk>.

Bjrn Klas Otto Rosengren: Now let's turn to slide seven, our earnings out. In the chart, you see the strong improvement in both earnings and margins. Operation EBITDA was up by 16%, and margin increased by 150 basic points to 16.3%.

T. Mo: Now, let's turn to slide seven our earnings outcome.

T. Mo: In the chart you see the strong improvement in both earnings and margin operation EBITDA was up by 16%.

T. Mo: And margin increased by 150 basis points to 16, 3%. This was supported by good price development and higher volumes, which clearly offset the labor cost inflation.

Björn Rosengren: So how did we do this? First, the overall market environment was solid. We have a good business mix. And this year, we saw strong momentum in the long cycle business, which more than offset the weakness in part of the short cycle. In total, our comparable orders improved by 3%, and our book-to-bill ratio was 1.05.

Bjrn Klas Otto Rosengren: This was supported by good price development and higher volume, which clearly offset the labor cost. I am pleased about the outcome. This was the fourth consecutive quarter where gross margin was about 35%, a strong improvement compared to historic levels. In total, the fourth quarter was a solid end to the year. With that, I will hand over to Timo.

T. Mo: I am pleased about the outcome. This was our fourth consecutive quarter, where gross margin was about 35% a strong improvement compared to historic levels.

T. Mo: In total the fourth quarter was a solid and of the year.

Björn Rosengren: Secondly... We are a more efficient and agile company. We took actions to further push the ABB way operating model within some divisions, and one success story is the turnaround in the large motor division. They have done a great job and improved in many ways, including how they work with value-based prices. It was really good to see that they took the margin to double digits, but I do not look at 2023 as anything extraordinary.

Tmall: With that I will hand over to Tmall.

Timo Ihamuotila: Thank you, Bjrn, and greetings to everyone from my side as well. As usual, we'll start with electrification on slide A. The market pattern remained very similar to the previous quarter, although comparable orders improved by 2% from last year. So there continued resilient demand where the project and systems relating offerings were robust, and the short cycle business actually stabilized after some weak quarters. In terms of market segments, as a total, it was only residential construction which declined overall.

Tmall: Thank you Burton and greetings to everyone from my side as well.

Tmall: As usual, let's start with electrification on slide eight.

Tmall: The market pattern remained very similar to the previous quarter comparable orders improved by 2% from last year. So a continued resilient demand where the projects and systems relating offerings was robust.

Burton: And the short cycle business actually stabilized after some weak quarters.

Burton: In terms of market segments as adult all it was only residential construction, which declined overall.

Björn Rosengren: What do I mean by that? You know, our business is to help the world accelerate the energy transition toward electricity. We also help customers to become more efficient and safe through our automated and digital manufacturing. ABB has a leading position in markets driven by strong secondary demand, and we are confident about it, which is why we raised our long-term financial and sustainability targets at the CMD in November. In short, we target higher growth and higher returns while enabling a world with net zero emissions. Finally, for 2023, the board proposes a dividend of 0.87 Swiss francs.

Timo Ihamuotila: We are weighted down by weakness in both the U.S. and China. However, on a positive note, we saw some signs of stabilization for residential demand in Europe, including Germany, albeit at a low level. The other area to mention is China. Not all is bad, like continuing strong demand for data centers, but several other large segments declined, including both construction and utility. Turning now to revenues, the electrification team again did a great job executing during the quarter, resulting in 8% comparable growth. Higher volumes were the main driver, with good additional support from price expectations. It's really nice to see electrification holding on to their established higher margin level. At 19.7%, the operational EBITDA margin improved by 310 basis points from last year, with fairly even support from volume and price. This more than offsets the higher labor costs, as well as higher investments in R&D and SG&A. All in all, another strong quarter for electrification.

Burton: Weighted down by weakness in both the U S and China.

Burton: However on a positive note we saw some signs of stabilization for residential demand in Europe, including Germany, albeit at a low level.

Burton: The other area of dimension is China, not all is bad like continuing strong demand for data centers, but several other large segments declined including both construction and utilities.

Burton: Turning now to revenues the electrification deep team again did a great job executing during the quarter, resulting in 8% comparable growth.

Burton: Higher volumes was the main driver with good additional support from price execution, it's really nice to see electrification holding onto their established higher margin level.

Björn Rosengren: The increase of three rapids from last year is more than the usual annual increase of two. This is based on the strength of the ABB way operating model and the future-proof market. We also expect to continue to utilize share buybacks as a way to return excess cash to shareholders. Now, let's turn to page four for some more detailed comments on the fourth quarter. My key takeaway from Q4 is that comparable orders remain stable from last year, meaning total demand is holding despite weakness in the short cycle. Book-to-bill was below 1. But I'm not so worried about that.

Burton: At 19, 7% the operational EBITA margin improved by 310 basis points from last year with a fairly even support from volume and price.

And these more than offset the higher labor costs as well as higher investments in R&D and SG&A expenses.

Burton: All in all another strong quarter for electrification.

Burton: Looking ahead into the first quarter. We currently expect the growth rate in comparable revenues to be similar to what we saw in Q4 and the operational EBITA margin to be slightly up sequentially.

Burton: Let's then move to slide nine and the motion business area.

Burton: Thanks to the continued good momentum in the long cycle businesses with some large orders booked mainly in the traction division comparable orders increased by as much as 13% admittedly from a relatively low level last year.

Björn Rosengren: It is a normal pattern in the fourth quarter. However, I expect a stronger outcome already in Cuba. Secondly, we improved operational performance and delivered record cash of 1.9 billion, up by 1.2 billion from last year and even stronger than expected. And we improved return on capital employed by 460 basic points to 21.1, a strong outcome in my. Lastly, I'm pleased to see the division utilizing our strong balance. We have recently signed seven small Bolton Acts.

Burton: From a segment view and this meant that customer activity was high in the process related areas of oil and gas chemicals and mining as well as for food and beverage and rail.

Burton: A weak construction market weighted on demand for the HVAC side.

Timo Ihamuotila: Looking ahead into the first quarter, we currently expect the growth rate in comparable revenues to be similar to what we saw in Q4, and the operational EBITDA margin to be slightly. Let's then move to slide nine and the motion business area. Thanks to the continued good momentum in the long cycle businesses, with some large orders booked mainly in the traction division, comparable orders increased by as much as 13%, admittedly from a relatively low level last year. From a segment view, this meant that customer activity was high in the process-related areas of oil and gas, chemicals, and mining, as well as for food and beverage and rail. A weak construction market waited on demand for the HVAC site.

Burton: Revenues were up by 2% again, surpassing the $1 9 billion dollar level.

The impact from higher pricing and volumes in the drives divisions more than offset the slightly softer volumes in the motor divisions. While the gross margin was slightly up from last year motions operational EBITA margin came in at 16, 6% decreasing by 80 basis points.

Björn Rosengren: Most of these deals add more embedded software and AI capabilities to our platform. These will support our market position long-term in summer. We deliver in line with our guidance, and I'm pleased with the solid finish of the year. Now let's turn to page five for some more detailed comments on the market development. As I mentioned earlier, demand was resilient, and comparable orders increased in three out of four business areas. We saw stable to positive developments in most customer segments, with the softer areas to mention being residential construction, where we see weakness in both China and the US, while Europe seems to be stabilizing at a low level. The other area was discrete automation, where we saw a similar pattern as in recent quarters. Timo will talk more about the details on the slides about robotics and discrete automation. We expect the challenge in R.A. to persist in Q1. However, we believe the fourth quarter was a low point for absolute order.

Burton: The main reason to the drop was some product quality costs with a negative impact of about 60 basis points year on year.

Burton: This was limited to this period and should not be a topic in the coming quarters.

Burton: Looking ahead into the first quarter, we anticipate a low single digit growth year on year in comparable revenues and operational EBITA margin to decline somewhat from last year due to a changing mix with a higher share of long cycle deliveries.

Timo Ihamuotila: Revenues were up by 2%, again surpassing the $1.9 billion level. The impact of higher pricing and volumes in the drives divisions more than offset the slightly softer volumes in the motor divisions. [inaudible] The main reason for the drop was some product quality costs with a negative impact of about 60 basis points year on year. This was limited to this period and should not be a topic in the coming quarter.

Burton: Turning to slide 10, and protests automation, where comparable orders increased by 5% year on year.

Burton: This includes a launch order booking of about 150 million, which will be delivered over a number of years.

Burton: From a segment view, the marine and ports demand was strong but we also saw good momentum in low carbon related areas, such as LNG hydrogen and carbon capture.

Burton: The product business note did some slowing momentum after a period of really strong growth.

Burton: Comparable revenues were up by 10% with strong growth in all divisions.

Timo Ihamuotila: Looking ahead into the first quarter, we anticipate a low single-digit growth year on year in comparable revenues and operational EBIT R margin to decline somewhat from last year due to a changing mix with a higher share of long cycle delivery. Turning to slide 10, and process automation, where comparable orders increased by 5% year-on-year. This includes a large order booking of about 150 million, which will be delivered over a number of years. From a segment view, marine and port demand was strong, but we also saw good momentum in low-carbon related areas, such as LNG, hydrogen, and carbon capture. The product business noted some slowing momentum after a period of really strong growth. Comparable revenues were up by 10%, with strong growth in all divisions.

Burton: This was driven mainly by volumes, but also some positive pricing coming through.

Björn Rosengren: In total, for ABB, orders remained stable year over year, and the order backlog remained strong at $21.6 billion. Now let's turn to slide six and look at the market pattern from a geographical perspective. Comparable orders increased in two out of three regions. The Americas is still where the underlying market is most active, with their continued solid custom activity in the U.S. AMEA grew by 2% and we see strong developments in, for example, India, but China is a challenge. With the software activity in several segments, Europe declined by 5%, mainly impacted by the weakness in discrete automation.

Burton: It was another good margin quarter for protest automation, they delivered an operational EBITA margin of 14% improving 80 basis points year on year.

Burton: And with all divisions at double digit margin levels.

Burton: Most divisions contributed to the underlying improvement on the back of better project execution and delivering higher volumes from the backlog with improved gross margin.

Burton: Looking at our expectations for the first quarter, we foresee a mid single digit growth rate for comparable revenues and operational EBITA margin to be slightly up from the Q4 level.

Burton: On slide 11, we turn to robotics, and discrete automation, where comparable orders declined sharply by 33% from last year.

Burton: The market pattern is similar to the previous quarters.

Burton: Meaning in machine automation customers are holding back back on placing new orders as our dealer delivery lead times are reducing back to the short term normal time span.

Björn Rosengren: Now let's turn to slide seven, earnings out. In the chart, you see the strong improvement in both earnings and margins. Operation EBITDA was up by 16%, and margin increased by 150 basic points to 16.3%. These were supported by good price developments and higher volume, which clearly offset labor costs. I am pleased about the outcome. This was the fourth consecutive quarter where gross margin was about 35%, a strong improvement compared to historic levels. In total, the fourth quarter was a solid end to the year. With that, I will hand over to Timo.

Burton: In robotics demand declined across the board <unk> electronics was the key weeks segment and all fall out the motive orders softened somewhat year on year. This is more linked to timing of some large orders rather than a real change in the market.

Timo Ihamuotila: This was driven mainly by volumes, but also some positive pricing coming through. It was another good margin quarter for process automation. They delivered an operational EBITDA margin of 14%, improving 80 basis points year-on-year, and with all divisions at double-digit margin levels.

Burton: Are they are a orders are challenged right now, but we expect as Bjorn said the fourth quarter to have been the trough quarter for absolute order intake.

Burton: We anticipate order normalization to level off during the first half of the year.

Burton: Moving to revenues, which decreased by 7% on comparable basis. The machine automation Division had strong revenue growth as they execute on the order backlog.

Timo Ihamuotila: Thank you, Björn, and greetings to everyone from my side as well. As usual, we'll start with electrification on slide A. The market pattern remained very similar to the previous quarter. Comparable orders improved by 2% from last year, so there continued resilient demand where the project and systems relating offerings were robust, and the short cycle business actually stabilized after some weak quarters. In terms of market segments, as a total, it was only residential construction which declined overall, weighted down by weakness in both the U.S. and China.

Timo Ihamuotila: Most divisions contributed to the underlying improvement on the back of better project execution and delivering higher volumes from the backlog with improved gross margin. Looking at our expectations for the first quarter, we foresee a mid-single-digit growth rate for comparable revenues and the operational EBITDA margin to be slightly up from the Q2-4 level. On slide 11, we turn to robotics and discrete automation, where comparable orders declined sharply by 33% from last year. The market pattern is similar to the previous quarter, meaning in machine automation, customers are holding back on placing new orders as our delivery lead times are reducing back to shorter normal times. In robotics, demand declined across the board.

Burton: However, this was more than offset by the meeting book and Bill volume in the Robotics Division.

Burton: It was good to see that our a margin held up well at 13, 8% and keeping largest stable. Despite the drop in revenues and added pressure from labor inflation.

Burton: This was achieved through improved mix with higher volumes in machine automation as well as by stringent cost control.

Burton: For the first quarter, we expect a mid single digit negative growth in comparable revenues and some sequential pressure on the operational EBITA margin due to mix impacts.

Timo Ihamuotila: However, on a positive note, we saw some signs of stabilization for residential demand in Europe, including Germany, albeit at a low level. The other area to mention is China. Not all is bad, like continuing strong demand for data centers, but several other large segments declined, including both construction and utilities. Turning now to revenues, the electrification team again did a great job executing during the quarter, resulting in 8% comparable growth. Higher volumes were the main driver, with good additional support from price expectations. It's really nice to see electrification holding on to their established higher margin level. At 19.7%, the operational EBITDA margin improved by 310 basis points from last year, with fairly even support from volume and price, which more than offset the higher labor costs, as well as higher investments in R&D and SG&A. All in all, another strong quarter for electrification.

Burton: Then moving on to slide 12, showing the group operational EBITA bridge.

Burton: The profile is very similar to the last couple of quarters with the earnings improvement driven by strong operational performance.

Burton: The impact from our positive price execution at about 2% and leverage on higher volumes more than offset the adverse effects from cost inflation related mainly to labor.

Burton: All in all a 16% improvement in operational EBITA with 150 basis points margin increase.

Speaker Change: Let's now move on to cash flow on slide 13.

Now this is a really nice picture you may remember, we set a target for ourselves to deliver a free cash flow of $3 billion. This year.

Timo Ihamuotila: 3C Electronics was the key weak segment, and although automotive orders softened somewhat year on year, this is more linked to the timing of some large orders rather than a real change in the market. R.A. orders are challenged right now, but we expect, as Bjrn said, the fourth quarter to have been the trough quarter for absolute order in. We anticipate order normalization to level off during the first half of 2020. Moving to revenues, which decreased by 7% on a comparable basis, the machine automation division had strong revenue growth as it executed on the order backlog. However, this was more than offset by the missing book and bill volume in the robotics division. It was good to see that RA's margin held up well at 13.8% and remained largely stable despite the drop in revenues and added pressure from labor inflation. This was achieved through an improved mix with higher volumes in machine automation as well as by stringent cost control.

Speaker Change: We did even better with total free cash flow of $3 $7 billion.

Speaker Change: All business areas contributed with improved operational cash flow and the fourth quarter. It was a really strong finish to the year.

Speaker Change: It was good to see and that our focused efforts paid off as networking capital was reduced sequentially and the ratio to revenues was at 10.2% down from 12.8 at the end of Q3 Wheeler.

Speaker Change: We lowered inventory levels and reduced receivables despite the strong revenue growth.

Speaker Change: We also had some additional support from customer advances.

Speaker Change: Great job done by the ABB team and.

Speaker Change: And we expect a good cash D cash delivery also in 2024 supported by operational earnings and continued focus on networking capital.

Speaker Change: Then taking a look at our return on capital employed development you see in the chart that we clearly beat our target of about 18% as we reached an all time high level of 21.1%.

Speaker Change: A strong return on capital improvement of 460 basis points was driven mainly by better operational performance.

Speaker Change: You can see last year's capital employed calculation included the negative impact from the 19.9% ownership in Hitachi energy. However, even excluding this the improvement was still an impressive 330 basis points.

Speaker Change: Overall, the improved return on capital employed is a good indicator that we are really improving abb's long term performance and operating at a best in class level and with that I will hand off the bureau to round off this presentation.

Timo Ihamuotila: For the first quarter, we expect a mid-single-digit negative growth in comparable revenues and some sequential pressure on the operational EBITDA margin due to mixed investment. Then, moving on to slide 12, showing the group's operational EBITA bridge. The profile is very similar to the last couple of quarters, with the earnings improvement driven by strong operational performance.

Timo Ihamuotila: Revenues were up by 2%, again surpassing the $1.9 billion level. The impact of higher pricing and volumes in the drives divisions more than offset the slightly softer volumes in the motor divisions. While the gross margin was slightly up from last year, Motion's operational EBITDA margin came in at 16.6%, decreasing by 80 basis points. The main reason for the drop was some product quality costs with a negative impact of about 60 basis points year on year. This was limited to this period and should not be a topic in the coming quarter.

Round: Thank you Tim for the insight.

Speaker Change: Let's finish off with the slide 15, and some outlook comments as I know this is a focus area.

Speaker Change: In the full year of 2024, we expect the positive book to Bill.

Speaker Change: We anticipate the comparable revenue growth of about 5% and the operational EBITA margin to slightly improve from the 2023 level of 16, 9%.

Timo Ihamuotila: The impacts from our positive price execution at about 2% and leverage on higher volumes more than offset the adverse effects from cost inflation related mainly to labor. All in all, a 16% improvement in operational EBITDA with a 150 basis points margin increase. Let's now move on to cash flow on page 13. Now, this is a really nice picture.

Speaker Change: For the first quarter, we anticipate comparable revenues to grow at a low to mid single digit digit rate and the operation EBITA margin to remain stable or slightly improve year over year.

Speaker Change: With that said, let's open up for questions, Yes, let's say.

Speaker Change: And for those of you who have dialed in on the phone as you Press Star 14 to register to ask a question.

Speaker Change: And to secure the sound quality. Please remember to mute the webcast as your line is open for questions.

Timo Ihamuotila: You may remember we set a target for ourselves to deliver a free cash flow of $3 billion this year. We did even better, with a total free cash flow of $3.7 billion. All business areas contributed to improved operational cash flow, and the fourth quarter was a really strong finish to the year. It was good to see that our focused efforts paid off as networking capital was reduced sequentially, and the ratio to revenues was at 10.2%, down from 12.8% at the end of Q3. We lowered inventory levels and reduced receivables despite the strong revenue growth.

Speaker Change: You can also put questions through the online tool in the webcast.

Speaker Change: For the phone lines I kindly ask you to limit it to one question and then get back in line for any additional I know there are plenty.

Speaker Change: Moving up per Se kindly ask you to respect that.

Speaker Change: And with that said, let's open up for the question, we'll take one for from the phone lines and we open up for Andy at J P. Morgan. Please your line should be open.

Andy: Hi, Good morning, everyone. Thanks for taking my question.

Andy: It's actually around the comments on the buyback.

Andy: Just trying to get a better understanding kind of the various talk because it's sort of playing into the thinking on not explicitly announcing anything today, but I guess, making comment sort of insulating towards that given obviously what was a fantastic.

Andy: Fantastic Q4, cash performance and balance sheet until the team very good shape when it takes something mechanical in terms of.

Timo Ihamuotila: We also had some additional support from customer advances. A great job done by the ABB team, and we expect a good cash delivery also in 2024, supported by operational earnings and continued focus on networking capital. Then taking a look at our return on capital employed development, you see in the chart that we clearly beat our target of about 18% as we reached an all-time high level of 21.1%. A strong return on capital improvement of 460 basis points was driven mainly by better operational performance. As you can see, last year's capital employed calculation included the negative impact from the 19.9% ownership in Hitachi Energy.

Andy: When you would announce it or is there more to it just to think about and.

Speaker Change: I will excuse you for this time, because you haven't been following us too long, but the one of you who has been following us knows that.

Speaker Change: This is actually an AGM question. So that has to be decided on day jam and after that is normally when we announce it so that that is absolutely. The reason, but we indicated of course that we will continue to use the buyback as a tool to return cash.

Timo Ihamuotila: Most divisions contributed to the underlying improvement on the back of better project execution and delivering higher volumes from the backlog with improved gross margin. Looking at our expectations for the first quarter, we foresee a mid-single-digit growth rate for comparable revenues and the operational EBITDA margin to be slightly up from the Q2-4 level. On slide 11, we turn to robotics and discrete automation, where comparable orders declined sharply by 33% from last year. The market pattern is similar to the previous quote, meaning in machine automation, customers are holding back on placing new orders as our delivery lead times are reducing back to shorter normal times. In robotics, demand declined across the board.

Speaker Change: I hope that's okay. That's very clear. Thank you that's very clear thank you.

Speaker Change: And we'll take the next question from Max at Morgan Stanley.

Max: You're with US Matt. Thank you. Good morning, Yes, yes. Thank you. Good morning. Good morning. Good morning, I just wanted to ask about your your confidence on that.

Max: The positive book to Bill for 2024, because I guess.

Max: If I look at the sort of cadence of your orders as you've as you've gone through this year, we started out.

Nine 9 billion plus we're exiting the year sorry, we started at 9 billion plus we're exiting the year at seven 6 billion.

Timo Ihamuotila: However, even excluding this, the improvement was still an impressive 330 basis. Overall, the improved return on capital employed is a good indicator that we are really improving ABB's long-term performance and operating at a best-in-class level. And with that, I will hand off to Bjrn to round off this presentation. Thank you, Timo, for the insight. Let's finish off with slide 15 and some Outlook comments.

Max: Obviously, if we take the second half run rates, where we're running kind of low I guess close to.

Max: The book to Bill. So I guess my question is from where we stand today at sort of the.

Max: Seven and a half to 8 billion level, which if those which of those divisions do you really expect to kind of sharply improve I guess.

Max: Excluding robotics and discrete automation with somebody that is one of the smaller divisions, but just where do you really see the kind of sequential improvements as we go through the year.

Timo Ihamuotila: 3C Electronics was the key weak segment. And although automotive orders softened somewhat year on year, this is more linked to the timing of some large orders rather than a real change in the market. RA orders are challenged right now, but we expect, as Björn said, the fourth quarter to have been the trough quarter for absolute order in. We anticipate order normalization to level off during the first half of 2020. Moving to revenues, which decreased by 7% on a comparable basis.

Max: To secure that posted a book to bill.

Speaker Change: Yeah of course, all our numbers is built up from our divisions consolidated up to be the expectations, but yes. We think that we are well positioned on many of these larger transformational deals that are that we expect that will come in during this year also and during the second part of the year.

Ansofi Nord: As I know, this is the focus area. In the full year of 2024, we expect a positive book to be, We anticipate comparable revenue growth of about 5%, and Operation EBITDA margin to slightly improve from the 2023 level of 16.9%. For the first quarter, we anticipate comparable revenues to grow at a low to mid-single digit rate and Operation EBITDA margin to remain stable or slightly improve year over year. With that said, let's open up for questions. Yes, let's do so. And for those of you who have dialed in on the phone, you should press star 14 to register to ask a question. And to secure sound quality, please remember to mute the webcast as your line is open for questions. You can also submit questions through the online tool in the webcast.

Speaker Change: We expect the short cycle business also to improve so this is of course, an earlier time of the year to announce that but these are the best indication that we have.

Speaker Change: From our businesses.

Speaker Change: Okay.

Speaker Change: I think when we come to the robot.

From the order perspective on the robot in discrete automation, we believe that the fourth quarter that we've seen is the bottom out of that business and we should see an improvement in this.

Timo Ihamuotila: The machine automation division had strong revenue growth as it executed on the order backlog. However, this was more than offset by the missing book and bill volume in the robotics division. It was good to see that RA margin held up well at 13.8% and remained largely stable despite the drop in revenues and added pressure from labor inflation. This was achieved through an improved mix with higher volumes in machine automation, as well as by stringent cost control.

Speaker Change: Six of her coming enduring during the year and especially on the second part of the year that's in our plan.

Speaker Change: Okay. Thank you and thank you. Thank you and we'll continue on the topic of sort of orders book to Bill with a site with a question here from the online tool. It comes from my mate, Yes, One day and it says given the guidance of book to Bill of more than one in 2024 should we view the elevate the length of the backlog as a new norm.

Speaker Change: Or do you expect at some point to work down the backlog maybe for you Tim Yeah, maybe yeah. So first of all on this backlog length. So it's fair to say that our orders are a little bit longer at the moment, but you really have to look at this now a business area by business area. So if you look at for example, electrification that we have that dialogue up quite a.

Speaker Change: Maybe just round numbers soda by over 100 million type of number that pretty much is going to convert all during the year and also in P. A clearly we are up a lot we will get support from the backlog on growth in motion, we have bit longer at the moment, but we will still get.

Ansofi Nord: For the phone lines, I kindly ask you to limit it to one question and then get back in line for any additionals. I know there are plenty queuing up here, so I kindly ask you to respect that. And with that said, let's open up for the first question. We'll take one from the phone lines, and we open up for Andy at J.P. Morgan. The line should be... Hi, good morning everyone.

Timo Ihamuotila: The impact from our positive price execution at about 2% and leverage on higher volumes more than offset the adverse effects from cost inflation related mainly to labor. All in all, a 16% improvement in operational EBITDA, with a 150 basis points margin increase. Let's now move on to cash flow on page 13. Now, this is a really nice picture.

Speaker Change: Support for growth and then <unk> of course quite a different story, where the backlog is down quite a bit. So you really have to look at the backlog dynamics at the moment business area by business area, but of course, we are S. Bjorn said, we are also expecting improvement in the shorter cycle business just to remind everybody that during 'twenty three I think our short cycle order.

Speaker Change: <unk> went down.

Speaker Change: Close to 10%. So we are of course coming from a bit of a different level there.

Bjrn Klas Otto Rosengren: Thanks for taking my question. It's actually about the comments on the buyback, Bjorn. I guess just trying to get a bit better understanding of the various factors.

Speaker Change: Okay, and then we go back to the phone lines and open up for Daniela.

With us are Daniela.

Daniela: Hi, Good morning, all thanks for taking my question.

Daniela: Bryan.

Daniela: Can you comment a little bit on the outlook that youre seeing now that things seem to be normalizing across the value chains and maybe in particular focus on on what Youre seeing in China, where we hear lots of comments about deflation in other areas of the economy.

Bjrn Klas Otto Rosengren: [inaudible] When you would announce it, or is it more, And I will excuse you for this time because you haven't been following us for too long, but the one of you who has been following us knows that this is actually an AGM question, so that has to be decided at the AGM, and after that is normally when we... So that is absolutely the reason. But we indicated, of course, that we would continue to use the buyback as a tool to return cash. I hope that's okay.

Speaker Change: Thank you.

Speaker Change: Yeah, I mean this year you saw about 2% price increase compared with us and I think moving into next year is more related around one ish percent that we are expecting China I think we should not expect too much when it comes to price increases that would be the challenging part or the pricing as you will probably come from.

Speaker Change: From the other parts of North America, and somewhat also Europe.

Speaker Change: Thank you.

Speaker Change: We'll continue I'll tell you on to that on the topic of China.

Speaker Change: Had a couple of questions here coming through on enlighten and I'll bundle them into one here.

Bjrn Klas Otto Rosengren: That's very clear. Thank you. And we take the next question from Max at Morgan Stanley. Thank you. Good morning Bjorn, good morning Timo.

Speaker Change: I think for you beyond can you gave some more color on China, specifically discrete automation or basically what do you expect for China in 2024.

Beyond: Yeah I actually recently was also spending some time in China with the with our operations said, it's quite clear that it's the robotics and discrete automation, who asked there the biggest headwind and that has also been during the last three quarters. If you look at from that perspective.

Bjrn Klas Otto Rosengren: I just wanted to ask about your confidence in the positive book to bill for 2024 because I guess, If I look at the cadence of your orders as you've gone through this year, we started at 9 billion plus, and we're exiting the year at 7.6 billion. Obviously, if we take the second half run rates, we're running below, I guess, a positive booked bill. So I guess my question is, from where we stand today at the $7.5 billion to $8 billion level, [inaudible] Yeah, of course, all our numbers are built up from our divisions and consolidated up to be expectations. But yes, we think that we are well positioned on many of these larger transformational deals that we expect that will come in during this year also. And during the second part of the year, we expect short cycle business also.

Speaker Change: Yeah, it's difficult to say, China for what's going to happen and normally a good indication of in China, you get after the new.

Speaker Change: New year Chinese new year, then it sets the standard for the year. So we still have to wait a little bit a couple of weeks before we get the feeling of where it will come.

Speaker Change: China is a little bit of a mixed bag we see.

Speaker Change: Better development in the motion a part as well as in the electrification also on on the process automation. There's some good stuff. So it varies a little bit between the business. It's clearly, it's a discrete automation and robotics, who has the most headwind yeah you want to add.

Speaker Change: I was just going to add to this that we said today in the whole array orders that we expect this $550 million to leap to be the low point. So already for Q1, we expect higher orders in all right.

Speaker Change: Okay, and then we go to the phone lines again and open up for a goal of Deutsche Bank.

Björn Rosengren: However, even excluding this, the improvement was still an impressive 330 basis points. Overall, the improved return on capital employed is a good indicator that we are really improving ABB's long-term performance and operating at a best-in-class level. And with that, I will hand off to Björn to round off this presentation. Thank you, Timo, for the insight. Let's finish off with slide 15 and some Outlook comments.

Deutsche Bank: Oh, thanks, very much good morning, everybody.

Bjrn Klas Otto Rosengren: This is, of course, an early time of the year to announce that, but these are the best indications that we have from our government. I think when you come to the robot and from the order perspective on the robot and discrete automation, we believe that the fourth quarter that we've seen is the bottom of that business, and we should see an improvement in this. Thanks for coming during the year.

Deutsche Bank: You could you provide perhaps a little bit more color on the growth.

Deutsche Bank: Margin guidance for 2024, I mean in which business areas do you see contributing the most.

Speaker Change: The growth and the margin targets. This year and specifically are you still confident that it's all sorts of automation and robotics and discrete will deliver margins of at least 15%.

Ansofi Nord: As I know, this is the focus area. In the full year of 2024, we expect a positive book to be, We anticipate comparable revenue growth of about 5%, and Operation EBITDA margin to slightly improve from the 2023 level of 16.9%. For the first quarter, we anticipate comparable revenues to grow at a low to mid-single digit rate and the operation EBITDA margin to remain stable or slightly improve year-over-year. With that said, let's open up for questions. Yes, let's do so. And for those of you who have dialed in on the phone, you should press star 14 to register to ask a question. And to secure sound quality, please remember to mute the webcast as your line is open for questions. You can also submit questions through the online tool in the webcast.

Speaker Change: Yeah, I mean, you've probably seen that both of them first they are around between 14 and 15% are both of those business areas I mean on the process automation.

Speaker Change: My feeling of that is well positioned business.

Speaker Change: There we are really benefiting from the transformation towards a more sustainable future and this is both when it comes to base industry tradition based indices that are changing as well as you're seeing some of those new exciting.

Bjrn Klas Otto Rosengren: Thank you. And we'll continue on the topic of sort of orders from book to bill with a question here from the online tool. It comes from Mattias Holmberg.

Timo Ihamuotila: And it says, given the guidance of book to bill of more than one in 2024, should we view the elevated length of the backlog as a new normal? Or do you expect at some point to work down the back? Yeah, maybe. Yeah. So first of all, on this backlog length, it's fair to say that our orders are a little bit longer at the moment, but you really have to look at this now business area by business. So if you look at, for example, electrification, there we have a backlog up quite a bit, maybe just round numbers, sort of 500 million type of number that pretty much is going to be converted all during the year. And also in PE We will get support from the backlog on growth and motion.

Speaker Change: Project I think yeah. When it comes to process automation, they have dynamic excellent job in getting that performance.

Speaker Change: Bob what they actually expect it is possible and you should also know that this is without the turbot. So the performance over 14 or around 14, 5%. This is an excellent.

Bob: Performers yeah, we believe that they have the capacity to stay on this margin I don't expect them to go much higher at the moment, but around these margins I I expect on the on the discrete automation and robotics of course as the volumes have gone down.

Bob: They will they will face some more margin pressure during the year that that is pretty clear, but they are taking the actions in.

Bob: In our in both PNR as well as in our robotics to adjust there.

Bob: Our organization in line with the demand in the market and I think they will be doing that in a good way.

Speaker Change: Yeah, maybe if I just comment on the on the top line part of the question on because we said around 5%. So as we go into the year now our base case would be a little bit like electrification, maybe notch higher than that and same for P. E. On top line and then may be motion could be bit lower let's see and then are a tough time.

Timo Ihamuotila: We have a bit longer at the moment, but we will still get there. Support for growth and then RA is, of course, quite a different story where the backlog is down quite a bit. So you really have to look at these backlog dynamics. Of course, we are, as Bjrn said, we are also expecting improvement in the shorter cycle business. Just to remind everybody that during 23, I think our shorter cycle orders went down by close to 10%, so we're, of course, coming. Okay, and then we go back to the phone lines and open up for Daniela. Are you with us there, Daniel?

Björn Rosengren: Thanks for taking my question. It's actually about the comments on the buyback, Bjorn. I guess just trying to get a bit better understanding of the various factors.

Speaker Change: Getting there so bit lower clearly done than to buy them. So that's kind of like how we see the dynamics between the business areas.

Speaker Change: Okay.

Speaker Change: Very much thank you.

Speaker Change: And then we take the next question from Sebastian with RBC.

Björn Rosengren: Thank you. When would you announce it, or is there more? And I will excuse you for this time because you haven't been following us for too long, but the one of you who has been following us knows that this is actually an AGM question, so that has to be decided at the AGM, and after that is normally when we... So that is absolutely the reason. But we indicated, of course, that we would continue to use the buyback as a tool to return cash. I hope that's OK with you.

Sebastian: Yeah. Good morning, Thanks for taking my question I have a follow up on the pricing and raw materials.

Sebastian: Gross margin. So you mentioned that pricing helped quite a bit on the revenue and margin in Q4, but of course the orders you've taken on average within the 8% lead time.

Bjrn Klas Otto Rosengren: Hi, good morning all. Thanks for taking my question. So I'll move over from volumes to pricing. Can you comment a little bit on the outlook that you're seeing now that things seem to be normalizing across all the value chains and maybe focus in particular on what you're seeing in China, where we hear lots of comments about deflation in other areas of the economy? Yeah, I mean, this year, you saw about 2% price increase compared to that. And I think moving into next year is more related, around one ish percent that we are, China. I think we should not expect too much when it comes to price increases that challenge parts or the pricing you will probably come from from other parts of North America and in somewhat. Thank you. And we'll continue. I'll tie on to that on the topic of China. We have a couple of questions here coming through on the online chat, and I'll bundle them into one here.

Sebastian: Wondering once you see basically on the current order intake that you have do you expect.

Sebastian: The gross margin to grow up from that you know with all your calculations on.

Sebastian: Raw material and of course there.

Speaker Change: I like the idea of the gross margin development, yes. Thank you very much yeah, I mean, the gross margin developments one of course, one of the big success stories. During the last year said, if you does see during Q4, we saw somewhat improvement a small improvement on the gross margins, which continues to go up.

Björn Rosengren: That's very clear, thank you, and we will take the next question from Max at Morgan Stanley. Thank you. Good morning.

Björn Rosengren: I just wanted to ask about your confidence in the positive book to bill for 2024. If I look at the cadence of your orders as you've gone through this year, we started at 9 billion plus, and we're exiting the year at 7.6 billion. Obviously, if we take the second half run rates, we're running kind of below, I guess, a positive booked bill.

Speaker Change: And the order book has a quite a good gross margin.

Speaker Change: In the whole order books, so that looked quite promising it's of course difficult to say what the future has to offer.

Speaker Change: We believe that we are not getting out as much pricing as we did on the on the previous on the other hand, there is less pressure on inflation from from suppliers because the world is actually normalizing in a way that we had before so the businesses will continue to drive efficiency and.

Björn Rosengren: So I guess my question is, from where we stand today, it's sort of the seven and a half to eight billion level, which of those, or which of those divisions do you really expect to kind of sharply improve, I guess, and excluding robotics and discrete automation because, obviously, that is one of the smaller divisions, but just where do you really see the kind of sequential improvements as we go through the year? Thank you. Yeah, of course, all our numbers are built up from our divisions and consolidated to be the expectations. But yes, we think that we are well positioned on many of these larger transformational deals that we expect will come in during this year also.

Speaker Change: You know for US it's important that the businesses have what we say gross margin productivity and that's just the gross margin.

Speaker Change: Jim.

Speaker Change: Our employee pool.

Speaker Change: Over 5% that is the target for each of the business and that's also what we expect them to deliver and you can do that of course, either two to grow your pricing or you need to keep your cost under control yeah. Yeah. If I just throw numbers in there. So as we already said, we have a notch higher diglot gross margin.

Speaker Change: Going into 'twenty four than we had going into 'twenty three so that's like a good thing on the gross margin side and then we have also a situation where there is not much as we expect again going into a year not much other inflation and labor inflation in the gross margin and that we should be.

Bjrn Klas Otto Rosengren: And I think for you, Bjrn, can you give some more color on China, specifically discrete automation, or basically, what do you expect for China in 2020? Yeah, I actually recently spent some time in China with our operations, and it's quite clear that it's the robotic and discrete automation who has the biggest headwind, and that's also been during the last three quarters, if you look at it from that point of view. Yeah, it's difficult to say. [inaudible] China is a little bit of a mixed bag. We see, you know, better development in the motion part as well as in the electrification, also in the process automation. There's some good stuff. It varies a little bit between them. It's clearly, it's discrete automation and robotics. Would you like to add something?

Speaker Change: We're able to sort of cover with the 1% price what what Bill mentioned and then of course with growth we should get some leverage on the gross margin side as well so it looks like an okay picture going into the year with the gross margin as well.

Speaker Change: Understood. Thank you very much.

Speaker Change: And we moved to Andre.

Björn Rosengren: And during the second part of the year, we expect short cycle business also. This is, of course, an early time of the year to announce that, but these are the best indications that we have from our government. I think when you come to the robot and from the order perspective on the robot and discrete automation, we believe that the fourth quarter that we've seen is the bottom of that business, and we should see an improvement in this. Thanks for coming during the year. The Bulletproof Executive 2013. All rights reserved.

Andre: Your line should be open now.

Andre: Oh, Hi, good morning, Thank you very much for taking my question.

Just to dig into the trends in medium voltage part of your business you did more detail them sticky day electrification thoughts.

Andre: Can you talk about maybe at what pace. This is growing now and how pricing develops in that business within the 2% that you delivered overall.

Andre: And also are you planning to ramp up capacity in this space given the growth of all we're still at the stage, where there's still ample and you can just benefits from leveraging that.

Speaker Change: Thank you for the question, Yeah, I'd be happy to talk about the medium.

Speaker Change: Walter and I see this is both in electrification as well as medium voltage drives which has had a tremendous development in you know D. S, which is the medium voltage business have had a great development. Both when it comes to orders and growth, but these are of course, a little bit longer terms. So we.

Bjrn Klas Otto Rosengren: No, I was just going to add that we said today in the whole RA orders that 550 million would be the low point, so already for Q1, higher. Okay, and then we go to the phone lines again and open up for Gael, Deutsche Bank. Oh, thanks very much. Good morning, everybody. You you provide.

Should see in the years coming closer but.

Speaker Change: Mainly the gross margin in this business and the profitability of this business has now come up to where actually it should be in both of these business and this is actually compensating some of this somewhat weak low voltage business that you're seeing in for instance in low voltage drives so that has had a good good.

Timo Ihamuotila: Thank you, and we'll continue on the topic of sort of orders book-to-bill with a question here from the online tool. It comes from Mattias Holmberg, and it says, given the guidance of more than one in 2024, should we view the elevated length of the backlog as a new normal, or do you expect at some point to work down the back? Yeah, maybe.

Bjrn Klas Otto Rosengren: [inaudible] Margin Guidance for 2024. I mean, which business areas? The Growth and Margin Targets, and specifically, are you still confident that process automation and Robert Hicks and District will deliver margins of at least 15%? Yeah, I mean, you probably saw that both of them first; they are around between 14 and 15% in both of those business areas. I mean, on process automation, you know, my feeling about that is that it is a well-positioned business. [inaudible] I think when it comes to process automation, they have done an excellent job of getting the performance above what they actually expected was possible, and you should also know that this is without the turbo. So the performance over 14 or around 14.5% is an excellent performance. Yeah, we believe that they have the capacity to stay on this margin. I don't expect them to go much higher at the moment, but around these margins, I expect.

Speaker Change: Development and it is as much as 25% of our our portfolio today or our invoicing is actually a medium voltage medium voltage then and that is developing in a good way anything you'd like to add that T. Mo no I actually I have to admit I didn't check that number now going into this call. This except because we have earlier spoken about this.

Speaker Change: So I don't have it on top of my head, but if you look at some of these areas, where we were we had order growth like Bill mentioned system drives or traction and so forth. So it is definitely continuing the trend in those areas.

Timo Ihamuotila: Yeah, So first of all, on this backlog length, it's fair to say that our orders are a little bit longer at the moment, but you really have to look at this now business area by business. So if you look at, for example, electrification, there we have a backlog up quite a bit, maybe just round numbers, sort of 500 million type of number that pretty much is going to change all during the year. And also in PEA, clearly, we are up a lot. We will get support from the backlog on growth, motion We have a bit longer at the moment, but we will still get there. Support for growth, and then RA is, of course, quite a different story where the backlog is down quite a bit.

Speaker Change: If this is really the strongest part of our business at the moment.

Speaker Change: Thank you and if I may just.

Speaker Change: Double digit growth kind of territory, there and then just on capacity if I may.

Speaker Change:

Speaker Change: Oh, you mean on the investment.

Speaker Change: Sure sure.

Speaker Change: Yeah, I mean this is seth.

Seth: Yes, we are investing in capacity, especially in North America that is and that's also why we expect a little bit more capex. During the year that we saw last year that is related to building some factories.

Bjrn Klas Otto Rosengren: On discrete automation and on robotics, of course, as the volumes have gone down, they will face some more margin pressure during the year. That is, But they are taking steps in in both BNR as well as in robotics to adjust their organization in line with the demand, and I think they will be doing that. Maybe if I just comment on the top line part of the question because we said around five percent. So, as we go into the year now, our base case would be a little bit like electrification. Maybe not higher than that and same for PA on the top line and then maybe motion, bit lower, let's see, and then RA has a tough time Lower, And then we take the next question from Sebastian at RBC. Good morning.

Seth: And that is it's a combination of them.

Seth: Our medium voltage going up but also to become more self sufficient in the north American market.

Seth: So yes, there will be some capacity building out.

Timo Ihamuotila: So you really have to look at these backlog dynamics at the moment. Of course, as Bjorn said, we are also expecting improvement in the shorter cycle business. Just to remind everybody that during 23, I think our shorter cycle orders went down by close to 10%, so we're, of course, coming. Okay, and then we go back to the phone lines and open up for Daniela. Are you with us there, Daniela? Hi, good morning, all.

Speaker Change: Alright, Thank you very much thank you.

Thank you and then we'll open up the line for Alex Virgo. Please Alex are you there.

Alexander Virgo: Yes, thanks very much.

Alexander Virgo: Julien good morning.

Alexander Virgo: I wondered if you could just dig a little bit more into the details for us.

Alexander Virgo: In short cycle trends in <unk>.

Alexander Virgo: They may be.

Alexander Virgo: Could you give us the differences between robotics and machine automation, just as I'm just trying to think about.

Alexander Virgo: Max's question earlier on around the sort of the book and Bill.

Alexander Virgo: And thinking about how you you see that sort of trajectory of recovery I. Appreciate your comment on on orders in robotics normalizing in the first half.

Bjrn Klas Otto Rosengren: Thanks for taking my question. I have a follow-up on pricing and raw materials and the gross margin. You mentioned that pricing helps quite a bit with revenue and margin in Q4. But, of course, the orders you take in are on average within 8% lead time.

Alexander Virgo: I'm, just trying to get a sense of.

Alexander Virgo: Stabilization.

Alexander Virgo: And.

Alexander Virgo: Short cycle that Youre talking about where that's coming from given given that will see your comments on the short cycle any outlet as well so yes.

Björn Rosengren: Thanks for taking my question. So I'll move over from volumes to pricing. Can you comment a little bit on the outlook that you're seeing now that things seem to be normalizing across all the value chains, and maybe in particular focus on what you're seeing in China, where we hear lots of comments about deflation in other areas of the economy? Yeah, I mean, this year, you saw about 2% price increase compared to that. And I think moving into next year is more related, around one-ish percent that we are in. China, I think we should not expect too much when it comes to price increases, challenging parts, or the pricing you will probably come from from other parts of North America and, in some part, Thank you. And we'll continue. I'll tie on to that on the topic of China. We have a couple of questions here coming through on the online chat, and I'll bundle them into one here.

Speaker Change: Short cycle could you sort of split that out for us a little bit more please.

Bjrn Klas Otto Rosengren: I was wondering what you see based on the current order intakes that you have. Do you expect the gross margin to go up from that, you know, with all your calculations on raw materials and costs there? So I would like to have a better idea of the gross margin development. Yeah, I mean, gross margin development is one, of course, one of the big success stories during the last years. And if you just look during Q4, we saw some improvement, a small improvement on the gross margin, so it continues to go up. And the order book has quite a good gross margin. The way that we had before. So the businesses will continue to drive efficiency and, you know, for us, it's important that the businesses have, what we say, gross margin productivity, that is, gross margin per employee. [inaudible] if I just throw in a couple of numbers.

Speaker Change: Yeah, maybe I'll just stop.

Speaker Change: <unk> up a little bit with the robotic business. So when you see.

Speaker Change: Orders down 33% this varies between the discrete automation and robotics and robotics is down about 16% and rest of it is actually on the discrete automation it didn't looks a little bit different also in their order book in the two different businesses we are quiet.

Speaker Change: We have a smaller order book in robotics today than we have in discrete automation and you probably remember when during that time, where we had difficult with the supply chain issues. We had a quite a big building up of order book in the discrete automation, while we believe it should be sufficient for at least.

Speaker Change: Two two more quarters.

Speaker Change: That side by lower but robotics is more depending on getting short cycle business in during this period, maybe I'll, just say proportionately smaller because it's of course smaller business as well, but we are in is absolutely right. So if.

Speaker Change: If you look at before this whole supply hustle.

Speaker Change: Imagine automation the order book was maybe sort of two or 300, we are still somewhere like 700. So we have I don't know you know a couple of quarters still to execute from the order book and then we will need to see in machine automation also improvement in short cycle, whereas in robotics, we are expecting that to start to happen.

Timo Ihamuotila: So, as Bjrn said, we have a notch higher bagel lacrosse margin going into 24 than we had going into 23. So that's a good thing on the Grossman side. And then we have also a situation where there is not much, as we expect again going into the year, not much else. [inaudible] Thank you very much. Hi, good morning.

Already earlier as we said.

Speaker Change: Okay, Okay great.

Speaker Change: On the EBITDA as well could you just comment on the short cycle, you mentioned low voltage in the answer to the last question. So.

Björn Rosengren: And I think for you, Björn, can you give some more color on China, specifically discrete automation, or basically what you expect for China in 2020? Yeah, I actually recently spent some time in China with our operations, and it's quite clear that it's the robotic and discrete automation who has the biggest headwind, and that's also been during the last three quarters, if you look at it from that. Yeah, it's difficult to say, trying to crack it.

Speaker Change: Yeah, Yeah lizard short on that.

Speaker Change: Electrification, it's a little bit different I see this as a more solid order book right. All of US are on the low voltage of course with a lot on the brake business or we call. It smart power continued to be very very strong and our book, where we seen some headwind.

Bjrn Klas Otto Rosengren: Thank you very much for taking my question. I wanted to dig into the transient medium voltage part of your business in a bit more detail, and particularly the electrification. Could you talk about maybe at what pace this is growing now and how pricing has developed in that business within the, And also, are you planning to ramp up capacity in this space given the growth, or are we still at the stage where... [inaudible] Thank you for the question. Yeah, I'd be happy to talk about medium voltage.

Speaker Change: For quite some long time is in the smart building part of it and it's very much related to the German.

Speaker Change: Market, where but they have taken the.

Speaker Change: The measures to adjust the organization and you've seen some of those restructuring costs taken during the fourth quarter actually related to that but it's quite clear also that the D. S.

Speaker Change: Medium voltage part of the package is is where you're seeing the best improvement during the year. Both when it comes to orders in as well as financial perform that exactly and that's as I said earlier.

Bjrn Klas Otto Rosengren: And I think this is both in electrification as well as medium voltage drive, which has had a tremendous development. And you know, DS, which is the medium voltage base, has had a great development both when it comes to orders and growth. But these are, of course, a little bit longer term, so we should see them in the years coming closer. But mainly, the gross margin in this business and the profitability of this business have now come up to where they should be in both of these businesses. And this is actually compensating for some of the somewhat weaker low voltage business that you're seeing, for instance, in low voltage drives. So that has had a good development, and it is as much as 25% of our portfolio today, or our invoicing is actually medium voltage, and that is developing in a good way. Anything you'd like to add, Timo?

Speaker Change: About 500 million higher order book and El I mean, that's in our papers, which we put out today and if you look at it 50, whatever whatever 15 billion business. So that will give you a couple of points at least coming from the order book and then the rest will need to come from book and Bill I E on the short cycle.

Björn Rosengren: China is a little bit of a mixed bag. We see better development in the motion part as well as in the electrification, and also in the process automation. There's some good stuff. It varies a little bit between them.

Speaker Change: Alright, thanks, Okay.

Speaker Change: Thanks, Alex.

Speaker Change: And then we open up for Dan can list.

Björn Rosengren: It's clearly, it's a discrete automation and robotics. Want to add something? No, I was just going to add that we said today for the whole RA orders that 150 million would be the low point, so already for Q1, higher. Okay, and then we go back to the phone lines again and open up for Gael, Deutsche Bank. Oh, thanks very much. Good morning, everybody.

Dan: Great. Good morning, good morning, Nancy.

Speaker Change: Question on the cash flow.

Speaker Change: I saw.

Dan: It's really with that working capital is going.

Dan: Nicely $12 eight to 10.2.

Nancy: Do you think it could go below 10.

Nancy: The inventory improvement here.

Nancy: And then if you maintain the margins.

Nancy: I had a slight uptick do you think we could see the peaks of this very strong as a full subsidiary.

Operating cash flow.

Nancy: Going forward.

Nancy: <unk>.

Nancy: Just a high level.

Nancy: Obviously with that.

Speaker Change: That's helpful.

Speaker Change: Any comments on.

Speaker Change: Allocation M&A would be great. Thank you I can tell you that first and then on the capital allocation I give over to team most of or when it when we look at the cash flow and of course, we are very happy to see now the inventory levels going down so it's a combination of.

Björn Rosengren: You provide... along with the margin guidance for 2024. I mean, which business areas Eugene DeMars, The Growth and the Margin Targets, this, and specifically, are you still confident that process automation and Robert Hicks and District will deliver margins of at least 15%? Yeah, I mean, you probably saw that both of them first; they are around between 14 and 15%, both of those business areas.

Speaker Change: Of margin improvement as well as inventory going down, yes, and the cash flow was was of course very strong stronger than we had anticipated we believe that the inventory should go down under 10, yes.

Speaker Change: That should be the journey and we'll see how long time it takes to get there, but I can assure you that part of the incentive program. During next year is to continue to drive down the net working capital and that will ultimately generate.

Bjrn Klas Otto Rosengren: No, I actually have to admit I didn't check that number now going into this call because we have earlier spoken about this number, so I don't have it on top of my head, but if you look at some of these areas where we had order growth, like Bjorn mentioned system drives or traction and so forth, so it is definitely contributing, it is really the strongest part of our business. Thank you, and if I may just ask, are we in double-digit growth kind of territory there, and I'm just on capacity? I mean, on the investment. Yeah, sure. Sure.

Björn Rosengren: I mean, on process automation, you know, my feeling is that it is a well-positioned business. We are really benefiting from the transformation towards a more sustainable future. And this is both when it comes to the base industry, tradition-based industries that are changing, as well as you seeing some of those new exciting projects. I think when it comes to process automation, they have done an excellent job of getting their performance above what they actually expected it to be possible. And you should also know that this is without the turbo.

Speaker Change: I think we have a good potential to deliver good cash flow next year, if it's going to be as high as 3.7, I cannot say, but I think definitely we should be over 3 billion.

Speaker Change: My feeling maybe you would add into that yeah, I mean, well if you kind of like let's call. This sort of a base case type of thinking or so if we would grow this 5%.

Speaker Change: And do it with this margin we will have some cash coming from operating.

Speaker Change: Performance improvements say $250 million to $300 million than that at the same.

Speaker Change: Net working capital to revenue that growth would tie maybe 150 bit more capex bit bigger tax cash flow, but we could be even on sort of $3 5 billion type of areas and then if we can release more us beer more subtle eluding to let's see how it goes and how long it will bake then it could be even a bit better here.

Bjrn Klas Otto Rosengren: Yeah, I mean, this is where we are investing in capacity, especially in North America. That is, and that's also why we expect a little bit more capex during the year than we saw last year, and that is related to building some factories in North America, and that is a combination of the Medium Voltage going up, but also to becoming more self-sufficient in the North American market. So yes, there will be some capacity building. Thank you, and then we will open up the line for Alex Virgo.

Björn Rosengren: On discrete automation and on robotics, of course, as the volumes have gone down, they will face some more margin pressure during the year. That is, But they are taking actions in both BNR as well as in robotics to adjust their organization in line with the demand, and I think they will do that. Maybe if I just comment on the top line part of the question because we said around five percent so as we go into the year now, our base case would be a little bit like electrification, maybe not higher than that and same for PA on the top line and then maybe motion and, bit lower, let's see, and then R.A. has a tough time there, lower, but that's kind of like. Thank you very much.

Speaker Change: Okay perfect. Thank you very much thanks, Dan and then we have Joe Giordano in line here when you're enjoying should be open.

Joseph Giordano: Hi, guys. Thanks for taking my question.

Joseph Giordano:

Joseph Giordano: Just curious on on.

Joseph Giordano: On <unk> can you give us some color on that large order and then also there was an article the other day about Saudi Arabia kind of directing Aramco to pause expansion plans and I'm just curious if youre seeing.

Björn Rosengren: Thank you. Thank you. And then we take the next question from Sebastian at RBC. Yeah, good morning.

Joseph Giordano: When you think about forward orders for stuff like that and like oil and gas in that region.

Björn Rosengren: Thanks for taking my question. I have a follow-up on pricing and raw materials and the gross margin. You mentioned that pricing helps quite a bit with revenue and margin in Q4. But, of course, the orders you take in are on average within 8% lead time.

Joseph Giordano: The slowdown at all in any of that.

Speaker Change: Thanks for the question Yeah.

Speaker Change: I mean, the middle East have been quite good for US also of course, driven also by P. A projects.

Bjrn Klas Otto Rosengren: Yeah, thanks very much, Ansi. Good morning, good morning, good morning, Timo. I wondered if you could just dig a little bit more into the details for us on short cycle trends, and Timo, maybe you could give us the differences between robotics and machine automation just as we're trying to think about building on Max's question earlier on around the sort of the book and bill and thinking about how you see that sort of trajectory of recovery. I appreciate your comment on orders in robotics normalizing in the first half. I'm just trying to get a sense of this sort of stabilization in the short cycle that you're talking about and where that's coming from, given also your comments on the short cycle in EL as well. So EL and RA short cycle; could you sort of split that out for us a little bit more, please?

Speaker Change: In that body that you saw.

Björn Rosengren: I was wondering what you see based on the current order intakes that you have. Do you expect the gross margin to go up from that, you know, with all your calculations on raw materials and costs there? So I would like to have a better idea of the gross margin development. Yeah, I mean, gross margin development is one, of course, one of the big success stories during the last years. And if you just look during Q4, we saw some improvement, a small improvement on the gross margin, so it continues to go up. And the order book has quite a good gross margin, in the audience, way that we had before. So the businesses will continue to drive efficiency and, you know, for us, it's important that the businesses have, what we say, gross margin productivity, that is, gross margin per employee for all the 5%.

We actually see the the Asia.

Speaker Change: Cheyenne.

Speaker Change: Middle East during the same part so the weak China was actually compensated goodbye, both strong India, but also strong in the Middle East then yes that amcor is an important player there, but it's not only in the oil and gas project is actually in a lot of renewable projects also while we've been benefiting you know they are setting up.

Speaker Change: The world's largest hydrogen plant, where we actually got the one of our biggest order a number of quarters back. So yes, it's a quite a lot of activities and we believe that there should be a mix from both the transit transition.

Speaker Change: The.

Speaker Change: Energy security risk regarding to LNG.

Speaker Change: <unk> at the same time that many of these companies will continue to invest in transformation of projects. So and I think we also saw the coffee tea now down in the region. There of course also triggers a lot of activities and historically ABB as a pretty good position they're in.

Speaker Change: We should benefit from from that area. So it's a P. A's is exciting.

Björn Rosengren: That is the target for each business, and that's also what we expect them to deliver. And you can do that, of course, either to grow your pricing, or you need to keep your cost under, if I just throw out a couple of numbers. And there, as Bjorn said, we have a notch higher bagel across margin going into 24 than we had going in. 23.

Bjrn Klas Otto Rosengren: And maybe I just start a little bit with the robotics business. So when you see orders down 33%, this varies between discrete automation and robotics. The robotics is down about 16%, and the rest of it is actually on the discrete automation. It looks a little bit different also in the order book between the two different types.

Of course, it's very mature.

Speaker Change: Large order in the east, but it also has a very strong service organization, which is about 50% of that part.

Speaker Change: That's actually I forgot to mention they said when we were talking about the drivers for 'twenty.

Speaker Change: For that we actually had a very strong service orders during Q4 actually in all Bas. The service orders were growing so that's also a bit of a.

Timo Ihamuotila: We have a smaller order book in robotics today than we have in discrete algorithms. And you probably remember when, during that time when we had difficulty with the supply chain issues, we had quite a big build-up of orders in discrete automation, where we believe it should be sufficient for at least two more quarters on that side. Biolo-robotics is more depending on getting short cycle business in during this. Maybe I'll just say proportionately smaller because it's, of course, a smaller business as well, but Bjrn is absolutely right. So, If you look at before this whole supply hassle in machine automation orders, maybe sort of 200-300, we are still somewhere like 700, so we have, I don't know. We have a couple of quarters still Okay, great. And on the EL as well, could you just comment on the short cycle? You mentioned low voltage in the answer to the last question.

Speaker Change: Positive going into into 'twenty four.

Björn Rosengren: So that's like a good thing on the Grossman side. And then we have also a situation where there is, And not much, as we expect again going into the year, not much else. Thanks for watching!

Speaker Change: I hope that answers your question Joe you saw on that large order there.

Speaker Change: And then just a question I'm curious any detail on the $1 50 on that Big order you had there.

Speaker Change: Is that one that 150, the large order, which we mentioned separately yeah I see.

Björn Rosengren: Thank you very much. Hi, good morning. Thank you very much for taking my question. I wanted to dig into the trends in the medium voltage part of your business in a bit more detail and particularly in electrification. Could you talk about maybe at what pace this is growing now and how pricing has developed in that business within the, and also, are you planning to ramp up capacity in this space given the growth, or are we still at the stage where... Delampolo. And you can...

Speaker Change: If this is related to marine.

Speaker Change: And there were you know it's good to see that the crew.

Speaker Change: Cruising industries.

Speaker Change: On building there is booming.

Speaker Change: Enormously.

Speaker Change: As you know we have a very strong position there with our assay pods and the electrification of the pot and we're benefiting quite a well of that yes.

Speaker Change: Thank you. Thank you. Thanks, Joe and then we moved to will Mackie. Please I think your line should be open now.

William Mackie: Yes, good morning, everyone. Thanks for the time my question Mike.

William Mackie: My question relates to.

William Mackie: Risk political risk actually it's been a significant year for elections, particularly in the U S.

William Mackie: Changes in geopolitics. So I guess the question is how well is ABB position to address potential risks from changes in regulation around imports or exports into China.

Björn Rosengren: Thank you for the question. Yeah, I'd be happy to talk about medium voltage. And I think this is both in electrification as well as medium voltage drive has had a tremendous development, and you know, DS, which is the medium voltage base, has had a great development, both when it comes to orders and growth. But these are, of course, a little bit longer term. So we should see the years coming closer. But mainly, the gross margin in this business and the profitability of this business have now come up to where it actually should be in both of these businesses. And this is actually compensating some of the somewhat weaker low voltage business that you're seeing in, for instance, low voltage drives.

Bjrn Klas Otto Rosengren: Yeah, a little short on that. I mean, on the electrification, it's a little bit different. I think this is a more solid order book right over. So on the low voltage, of course, a lot of the breaker business, or we call it smart power, continues to be very, very strong in our book where we've seen some headwinds for quite some a long time is in the smart building part of it. And it's very much related to the German market, where they have taken measures to adjust the organization. And you've seen some of those restructuring costs taken during the fourth quarter actually related to that. But it's quite clear also that the DS, the medium voltage part of the package, is where you're seeing the best improvement during the year, both when it comes to orders seen as well as financial performance.

William Mackie: Actions, such as an across the board tax increases three inputs into the USA.

Speaker Change: Thank you for the question well. This is of course, one of the subjects that we have been focusing on for many many years, but all saw even more during the last years because of the situation.

We have this tragedy local for local.

Speaker Change: Meaning that we've tried to be as a self sufficient in the different regions as ever possible and.

Speaker Change: We are as you know in China, 90% to 95% self sufficient that means supply production and deliveries and we are now investing in North America, It's based on the IRR, but also that.

Speaker Change: That we think yeah.

Speaker Change: U S will be maybe a.

Speaker Change: The risk for you as being more.

Speaker Change: That's a challenging to transport into Sarnia, we need to be more local there I think we're going from 85% 80, 85% that we're moving towards 90% self sufficient so it's part of it it's quite interesting that you asked is because we have got a lot of questions today regarding the Suez can.

Björn Rosengren: So that has had a good development. And it is as much as 25% of our portfolio today, or our invoicing is actually medium voltage. And that is developing in a good way. Anything you'd like to add, Timo?

Speaker Change: All on the impact on on ABB here and it's quite.

Timo Ihamuotila: No, I actually, I have to admit, I didn't check that number before going into this call, this exam because we had earlier spoken about this number. So I don't have it on top of my head.

Timo Ihamuotila: And as I said earlier, about 500 million higher order book in the year. All the papers which we put out today, and if you look at them, business. So, I'll give you a couple of points coming from the order book and then the rest. Great, thank you. And then we open up for Dan Cunliffe.

Speaker Change: Interesting that the.

Speaker Change: Yeah.

Speaker Change: Up until today, we have no material impact at all from <unk>.

Speaker Change: That.

Speaker Change: Challenges down there and logic.

Björn Rosengren: But if you look at some of these areas where we had order growth, like you mentioned, system drives or traction and so forth. So it is definitely if this is really the strongest part of our business at, Thank you, and if I may just ask, are we in double-digit growth kind of territory there, and I'm just on capacity? Oh, you mean on the investment? Yeah, sure, sure.

Speaker Change: Logistics.

Speaker Change: No longer delivery times says so so so far our strategy has worked quite well, but on the geopolitical side. There is of course another angle on this is that this is moura.

Bjrn Klas Otto Rosengren: I'm a great morning, team. Questions? [inaudible] Unknown Speaker. Go. Nicely 12.8, take it out below 10, here, and then if you maintain the margin of this very strong sort of 4-plus, operating cash flow going... High Level. And then obviously with that... I've got any, any comment. OK. I can take it first, and then on the capital occasion, I give over to Timo.

Speaker Change: Uncertain the future is as more hesitant to all the individuals and their companies to invest and I think that is probably a bigger impact on us and that's why we also mentioned that in fact in the report.

Björn Rosengren: Yeah, I mean, we are investing in capacity, especially in North America. And that's also why we expect a little bit more capex during the year than we saw last year that is related to building some factories. And that is, it's a combination of medium voltage going up, but also becoming more self-sufficient in the North American market. So yes, there will be some capacity building. Thank you very much.

Speaker Change: One really knows where the world is growing at this moment is too much as that's a lot of uncertainties there.

Speaker Change: Yeah.

Speaker Change: Yes, Thanks will.

Speaker Change: And then we open up the line for Jonathan.

Jonathan: I don't think.

Jonathan: Hi, Yes, good morning, Jonathan.

Jonathan: Some that Andy talked about Exxon.

Jonathan: Just a couple of questions Festival.

Jonathan: Touched on China or anything else.

Jonathan: The 5% organic sales growth at the group level within that does that assume that China contributes to growth next year, and probably singly on Germany. The message on order intake similar so flashy double digit declines in Q4.

Bjrn Klas Otto Rosengren: When we look at the cash flow, and of course, we are very happy to see the inventory levels going down now. So it's a combination of margin improvement as well as inventory going down, yes. And the cash flow was, of course, very strong, stronger than we anticipated. We believe that the inventory should go down under 10. Yes, that should be the journey.

Jonathan: Given how weak that intake was where are we tracking sequentially and Jim is it leveling off in Germany will contribute to that growth.

Björn Rosengren: Thank you, and then we will open up the line for Alex Virgo. That's all the time we have. Yeah, thanks very much, Ansi, good morning, good morning, Timo. I wondered if you could just dig a little bit more into the details for us on short cycle trends, and Timo, maybe you could give us the differences between robotics and machine automation just as we're trying to think about building on Max's question earlier on around the sort of the book and bill and thinking about how you see that sort of trajectory of recovery. I appreciate your comment on orders in robotics normalizing in the first half. I'm just trying to get a sense of this sort of stabilization in the short cycle that you're talking about and where that's coming from given also your comments on the short cycle in EL as well, so EL and RA short cycle. Could you sort of split that out for us a little bit more please? And maybe I will just start up a little bit with the robotic business.

Jim: Yeah, Let me start with Germany, because you saw in Q3, we had we were down 33% at that time. We also said that this is also because it is a tough comparison, we saw an hour minus 17%.

Jim: And that our feeling is now that we are bottoming out in Germany. It has not been worse, rather maybe we see some small improvement so let's let's see what's coming up but we are we are a little bit optimistic that that could be some some better from from really low levels.

Bjrn Klas Otto Rosengren: And we'll see how long it takes to get there. But I can assure you, part of the incentive program for next year is to continue to drive down the networking capital, and that will automatically, I think we have the good potential to deliver good cash flow next year. If it's going to be as high as 3.7, I cannot say, but I think definitely we should be over 3 billion. My feeling is maybe you would add into that, yeah, I mean, if you're kind of like, Let's call this sort of a base case type of thinking or so if we would grow this five, Operator. Performance Improvement, say 250, 300 million, then that at the same time, Networking Capital Revenue, that Bigger tax cash flow, but we could be even on sort of 3.5 billion type of areas. And then if we can release more as. Buren was sort of eluding to, let's see how it goes, how long it will take, then it could be... And then we have Giordano in line here.

Jim: On China I mean, if you look at the full year I think we on orders were down 12%.

Jim: Therefore for the full year and you saw 7% and in the last quarter I think it will be difficult for China actually to contribute to our to the revenue growth.

Jim: For next year, we are of course, a little bit early to say, we think it has good potential to come back in because we know that the GDP development last year, a five 2% that they expect four seven this year and that should generate some interesting business for us.

Björn Rosengren: So when you see orders down 33%, this varies between discrete automation and robotics. The robotics is down about 16%, and the rest of it is actually on discrete automation. It looks a little bit different in the order book between the two different types.

Jim: China is very.

Jim: Focused on technology.

Jim: Technology for the Green transformation actually 70% to 80% of all technologies that are needed for these green transformation is developed and produced in China.

Björn Rosengren: We have a smaller order book in robotics today than we have in discrete algorithms. And you probably remember when, during that time when we had difficulty with the supply chain issues, we had quite a big build-up of orders in discrete automation, where we believe it should be sufficient for at least two more quarters on that side. Biorobotics is more depending on getting short cycle business in during this. Maybe I'll just say proportionately smaller because it's, of course, a smaller business as well, but Björn is absolutely right. If you look at before this whole supply hassle in machine automation, the order, maybe sort of 200-300, we are still somewhere like 700, so we have, I don't know, still to execute from the order book, and then we Okay, great. And on the EL as well, could you just comment on the short cycle? You mentioned low voltage in the answer to the last question.

Jim: I think we should not underestimate China potential going forward.

Speaker Change: Very good and then it might contribute.

Speaker Change: Yes.

Speaker Change: Got it.

Speaker Change: We're not giving sort of quite I'm, sorry, we're not giving like country specific guidance is on.

Bjrn Klas Otto Rosengren: I got it. Thanks for taking my question. And PA, can you give us some color on that large order? And also, there was an article the other day about Saudi Arabia kind of directing a rampage.

Speaker Change: So we can't go there because we really run this business area level.

Speaker Change: Thank you.

Speaker Change: So then we'll move to Sean.

Sean: B C.

Sean: Yeah.

Sean: Good morning, Thank you for taking my question just.

Bjrn Klas Otto Rosengren: When you think about forward orders for stuff like that, I don't expect a slowdown at all in any of that. Thank you for the question. Yeah. I mean, the Middle East has been quite good for us, of course, driven also by P-8 projects in that part. You see, we actually see Asia and the Middle East doing the same part. So the weak China was actually compensated well by both strong India and also strong in the Middle East. And yes, Aramco is an important player there, but it's not only in the oil and gas projects; it's actually in a lot of renewable projects also where we've been benefiting. You know, they're setting up the world's largest hydrogen plant where we actually got one of our biggest orders a number of quarters back. So yes, it's quite a lot of activities.

Sean: I'd like to confirm that.

Sean: The comment from the press conference about E mobility that the IPO is now looking unlikely in 2024, just wondering whether that's market driven or if there's anything else and I think more broadly on the portfolio. How are you thinking maybe about the divisions that are not yet in growth mode any potential scope of new areas for divestment.

Sean:

Speaker Change: Yeah, let me start with the mobility, a little bit yeah, It's correct I mentioned that on the <unk>.

Speaker Change: Media call that I would be surprised if we would make the IPO. During this this year I tickets.

Speaker Change: It's some headwind there in the market. So I think the financial market is not so good at this time, but also some headwind in the in the market, especially in Europe, Germany for instance.

Björn Rosengren: Yeah, a little short on that. I mean, on the electrification, it's a little bit different. I think this is a more solid order book right over. So on the low voltage, of course, a lot of the breaker business, or we call it smart power, continues to be very, very strong in our book where we've seen some headwinds for quite some a long time is in the smart building part of it. And it's very much related to the German market, where they have taken measures to adjust the organization. And you've seen some of those restructuring costs taken during the fourth quarter actually related to that. But it's quite clear also that the DS, the medium voltage part of the package, is where you're seeing the best improvement during the year, both when it comes to orders seen as well as financial performance. And as I said earlier, about 500 million higher order book in the year, the papers which we put out today, and if you look at business, you get a couple of points coming from the order book and then the rest. Great, thank you. And then we open up for Dan Cunliffe.

Speaker Change: Subsidies has been taken away in many of.

Speaker Change: The suppliers have seen a drop in.

Speaker Change: In the market par. So yes, we have some work to do in in the organization. We have taken in the investors as you as you all know.

Bjrn Klas Otto Rosengren: And we believe that there should be a mix of energy security regarding LNG investments at the same time that many of these companies continue to invest in transformation of projects. And I think we also saw the COP meeting down in the region, which of course also triggers a lot of activities, and historically, ABB has a pretty good position there, and we should [inaudible] for that we actually had a very strong service order. During Q4, actually, in all BEAs, the service orders were growing, so that's also a bit of a positive goal. I hope that answers your question, Joe. Yeah, and just of course, here's any detail on the 150 on that big worry you had there, is that 150 the large order which we mentioned separately? Yeah, I think this is related to marine. And you know, it's good to see that the cruising industry in building there is booming enormously, and as you know, we have a very strong position there with our ACI ports and electrification of the port, and we're benefiting Thank you. Thank you. Thanks, Joe. And then we move to Will Massey.

Speaker Change: And I think we have sufficient capital in the company and I think that business is well in the ABB home and I think for the time being it fits.

Speaker Change: Good in there and I think we have both resources and knowledge that to make sure that that business will be on top and.

Speaker Change: Maybe next next year it could be a time to do something but we need to see some improvement in that business before we feel that that business is ready to go go life.

Speaker Change: What was it more of a general portfolio question.

Speaker Change: Yeah.

Speaker Change: <unk>.

Speaker Change: First.

Speaker Change: It's quite clear that the majority of our our divisions are today in a growth mode.

Speaker Change: But we also have a number of additions in profitability mode. We actually just upgraded the last transformational division, which was the large motors and generators, which is a little bit of a success story that I'm very very happy for their really managed to get their performance up and is too.

Speaker Change: <unk> double digit profit and I think they're doing an excellent job. It's quite interesting also because in this whole green transformation project large motors and medium voltage drives is an excellent combination for these projects and we had lot of success lately. So today, we have no.

Björn Rosengren: A great good morning, team. Questions?,,,,,,, and Jeffrey Sprague. Thank you. Go. Nicely, 12.8.

Bjrn Klas Otto Rosengren: I think your line should be open now. Yeah, good morning, everyone. Thanks for the time.

Björn Rosengren: Take it out below 10, here, and then if you maintain the margin of this very strong sort of four plus, operating cash flow is going to a high level, and then obviously with that. I've got any comments. OK. I can take it first, and then on the capital allocation, I will give it over to Timo. When we look at the cash flow, and, of course, we are very happy to see the inventory levels going down now. So it's a combination of margin improvement as well as inventory going down, yes. And the cash flow was, of course, very strong, stronger than we had anticipated. We believe that the inventory should go down under 10. Yes, that should be the journey.

Bjrn Klas Otto Rosengren: My question, my question relates to risk, political risk. Actually, it's been a significant year for elections, particularly in the US, and changes in geopolitics. So I guess the question is, how well is ABB positioned to address potential risk from changes in regulation around imports or exports into China or actions such as an across the board tax increase for imports into the USA? Yeah, thank you for the question, Will.

<unk> business is really underperforming some of the business could do.

Speaker Change: Do a little bit better even though the business as they are in or maybe a little bit more challenging than some of the other businesses, but we still have a couple of divisions that we expect an improvement during the year, but but overall I must say last year is.

Bjrn Klas Otto Rosengren: This is, of course, one of the subjects that we have been focusing on for many, many years, but also even more during the last years because of the situation. You know, we have the strategy local for local, meaning that we try to be as self-sufficient in the different regions as possible. And we are, as you know, in China, 90 to 95% self-sufficient. That means supply, production, and delivery, and we are now investing in North America, based on the IRA, but also because we think. The US will be maybe a risk for us being more, [inaudible] It's quite interesting that you ask this because we have got a lot of questions today regarding the Suez Canal and the impact on ABB here. Up until today, we have had no material impact at all from the challenges down there and logistics, you know, longer delivery times. So far, our strategy has worked quite well.

Speaker Change: Amazing year for ABB, and I really wonder underlying that you know when we went into the journey 2020, our objective was to the companies should reach a 15% profit margin and we did 16.9 this year and it's actually the second year over 50% so.

Speaker Change: Gabe over 15% EBIT this year actually.

Gabe: That's a good point.

It's not only ebitdas over also EBIT or about 15% of whether or not the target.

Gabe: I think many of and you know ABB is a sum of 19 divisions. So if the divisions are doing good ABB is doing good the central resources in ABB today is the minimum.

Gabe: And are not going to grow in the future. So that the future is going to be their businesses.

Björn Rosengren: And we'll see how long it takes to get there. But I can assure you, part of the incentive program for next year is to continue to drive down networking capital, and that will automatically, I think we have the potential to deliver good cash flow next year. If it's going to be as high as $3.7 billion, I cannot say, but I think definitely we should be over $3 billion. My feeling is, maybe you would add in to that, yeah. I mean, if you're kind of like, let's call this sort of a base case type of thinking or so if we would grow this five The Bulletproof Executive 2013, performance improvement, say 250, 300 million, then that at the same Network Stay safe, and then we have Joe Giordano in line here.

Speaker Change: Just a little bit curious I think.

For me. This is a very warm feeling to see that ABB is in great shape, even though market is getting a little bit tougher.

Speaker Change: And then.

Speaker Change: Thanks, Sean.

Speaker Change: And then we have a couple of follow up lets see if we can squeeze them. The other thing that we start with the Sebastian again at RBC.

Sebastian: Thank you for taking my follow up.

Bjrn Klas Otto Rosengren: But on the geopolitical side, there is, of course, another angle on this, which is that there's more uncertainty about the future as more hesitant are individuals and companies to invest. I think that is probably a bigger impact on us. And that's why we also mentioned it in the report. No one really knows where the world is going at this moment. That's too much.

Sebastian: Question on the Red Sea situation I recall that are doing corporate ABB.

Sebastian: Booked up quite a lot on inventory, you're getting early into the market to buy raw materials and components and people complained about it and then you basically had very little issues with your supply chain and it really helps you.

Sebastian: We have a kind of a comparable suggestion in the Red Sea and I was wondering if you are considering also now again restock on certain components from Asia.

Bjrn Klas Otto Rosengren: That's a lot of money. Thanks, Will. And then we open up the line for Jonathan. Mounsey.

Sebastian: Personal potential voltages.

Bjrn Klas Otto Rosengren: Ah yes, good morning. Sorry about Exxon. Just a couple of questions, Group.

Speaker Change: Thanks, Mark and thank you for the question and it's correct that.

Speaker Change: We are of course looked into it and we we don't have any material effect a negative effect from the region at the moment if that is related to that we have too much inventory that could be but I see give for us. It's more important you know as we are regional self sufficient so when we talk about the inventory write off.

Bjrn Klas Otto Rosengren: Within that, does that assume that China... Growth next year, and probably similarly in Germany, where the message on ordering is leveling off, and do you think Germany will... Yeah, let me start with Germany. Because you saw in Q3, we were down 33%. At that time, we also said that this was also because there was a tough comparison. We have now seen minus 17%, and our feeling is now that we are bottoming out in Germany. It has not been worse.

Björn Rosengren: Your line should be open. I got it. Thanks for taking my question. Um, I'm curious about... And PA, can you give us some color on that large order? And then also, there was an article the other day about Saudi Arabia kind of directing a rampage. When you think about forward orders for stuff like that... I don't expect a slowdown at all in any of that.

Speaker Change: We also source the majority of the products from the local market. So that is quite limited or products and components that are going across the different regions. If we have a little bit more inventory that is not the end of the world that was it.

Bjrn Klas Otto Rosengren: Rather, maybe we'll see some small improvements. So let's see what's coming up. But we are a little bit optimistic that there could be some better from really low levels. On China, I mean, if you look at the full year, I think we on orders were down 12% for the full year, and you saw 7% in the last quarter. [inaudible] focused on technology for the green transformation. Actually, you know, 70 to 80% of all technologies that are needed for this green transformation are developed and produced in China. So I think we should not underestimate China's potential to go very, very good. And then...

Björn Rosengren: Thank you for the question. Yeah. I mean, the Middle East has been quite good for us, of course, driven also by P-8 projects in that part. You see, we actually see Asia and the Middle East doing the same part. So the weak China was actually compensated well by both strong India and also strong in the Middle East. And yes, Aramco is an important player there, but it's not only in the oil and gas projects; it's actually in a lot of renewable projects also where we've been benefiting. You know, they're setting up the world's largest hydrogen plant where we actually got one of our biggest orders a number of quarters back. So yes, there's quite a lot of activities, and we believe that there should be a mix of energy security regarding LNG investments and the same time that many of these companies will continue to invest in transformational projects. And I think we also saw the COP meeting down in the region, which of course, triggers a lot of activities, and historically ABP has a pretty good position there, and we should actually, I forgot to mention this when we were talking Yeah, and of course, here's any detail on the 150 on that big worry you had there. I think this is related to the Marines.

Speaker Change: I still think we have a little bit you know, we're talking up now we're not stocking out.

Speaker Change: No. We don't want to that is you know, it's pretty clear and you saw during the quarter that finally, we see the inventory going down towards normal levels. We are still not there there's more potential to come but we are.

Speaker Change: We have no objective to to build big inventory going forward.

Speaker Change: Absolutely not.

Speaker Change: Okay. Thank you and we round off this session with the follow up question from Andre Please.

Speaker Change: Yeah.

Andre: Hello again, thank you very much for taking the follow up I just wanted to circle back on some of the comments on robotics <unk> discrete.

Andre: Absolutely.

Andre: The message that China is the biggest challenge could you comment on how your market shares.

Bjrn Klas Otto Rosengren: Pardon me. We are not giving country-specific guidance on this, so we can't go there because we really run this, you know, in the divisional and business areas. So then we move to Sean at HSBC. Good morning.

Andre: Holds across the year.

Andre: In fact transformation and the.

Speaker Change: Our robotics business.

Speaker Change: Secondly, just looking at the comments you made them.

Speaker Change: Orders in Q4 that within the overall, what do you see some decline in robotics is minus 16 that obviously implies a substantial.

Bjrn Klas Otto Rosengren: Thank you for taking my question. Just I'd like to confirm the Conference on E-mobility, maybe about the divisions that are not yet in growth mode, new areas for diversity. Let me start with immobility a little bit.

Speaker Change: The 67% drop.

Speaker Change: So the factual information.

Speaker Change: Could you just comment on where is this business now.

Speaker Change: Versus 2019 or kind of on the other benchmark because I understand there are some pretty substantial sums effects. There. So just wanted to understand.

Bjrn Klas Otto Rosengren: Yeah, it's correct. I mentioned on the media call that I would be surprised if we would make the IPO during this year. I think there are some headwinds in the markets. I think the financial market is not so good at this time, but there are also some headwinds in the market, especially in Europe, Germany, for instance, where subsidies have been taken away and many of the suppliers have seen a drop in the market part.

Speaker Change: How that's performing versus what we see in maybe from others.

Speaker Change: Businesses are close to yes. Thank.

Speaker Change: Thank you, let me elaborate a little bit on the.

Speaker Change: Robotic market.

Speaker Change: The Chinese market, it's a combination of the global players you know some of those international large companies, including US there and I'm sure you seen some of the reports from our peers that everybody is facing the same challenges at the Chinese market is tough.

Bjrn Klas Otto Rosengren: So, yes, we have some work to do in the organization. We have taken in investors, as you all know, and I think we have sufficient capital in the company. And I think that business is well in the ABB home. And I think for the time being, it fits well in there. And I think we have both resources and knowledge there to make sure that that business will be on top. And maybe next year, it could be time to do something. But we need to see some improvement in that business before we feel that that business is ready to go. What was it more?

Speaker Change: There is also which we have talked about earlier.

Björn Rosengren: And, you know, it's good to see that the cruising industry on building there is booming enormously. And, as you know, we have a very strong position there with our ACI ports and electrification of the port, and we're benefiting quite well. Thank you. Thank you. Thanks, Joe. And then we move to Will Massey.

Speaker Change: A number of local players more coming from the lower end market.

Speaker Change: And been growing better.

Speaker Change: In the Chinese market. So, yes, I think there will be more challenged from local players on the other hand.

Speaker Change: Our business is very local Hamas say you know we have the our R&D in China, we have the production in China. So all they are also adjusting product more suitable for the for the Chinese market, meaning you're taking some of that.

Bjrn Klas Otto Rosengren: That was a general portfolio question. Yeah. Yeah, you know, I mean, first of all, it's quite clear that the majority of our divisions are today in growth mode, but we also have a number of additions in the profitability mode. We actually just upgraded the last transformational division, which was the large motors and generators, which is a little bit of a success story that I'm very, very happy for. They really managed to get their performance up and are today double-digit profitable. And I think they're doing an excellent job. It's quite interesting also because in this whole green transformation project, large motors and medium voltage drives are an excellent combination for these projects.

Björn Rosengren: I think your line should be open now. Yeah, good morning, everyone. Thanks for the time.

Björn Rosengren: My question, my question relates to risk, uh political risk. Actually, it's a significant year for elections, particularly in the U.S., and uh changes in geopolitics, so I I guess the question is, how well is ADB positioned to address potential risk from changes in uh regulation around imports or exports into China or actions such as an across-the-board tax increase for imports into the USA. Yeah This is, of course, one of the subjects that we have been focusing on for many, many years, but also even more during the last years because of the situation. You know, we have the strategy local for local, meaning that we try to be as self-sufficient in the different regions as possible. And we are, as you know, in China, 90 to 95% self-sufficient. That means supply, production, and delivery, and we are now investing in North America, based on the IRA, but also because we think. The U.S. will be maybe risked for being more challenging to transport into. So you need to be more local there.

Speaker Change: Maura.

Speaker Change: Extensive cost out of products.

Speaker Change: That is the focus but I think it's the overall market that is slow and we do expect that it will come back where we were we in many of our peers will also benefit.

Speaker Change: When we look at the orders it was a market share question I think there as well on the robotics market share Yeah, I think their market share. If you look at the international players we feel it's pretty stable I don't think there is any big changes is more related to some of those Chinese.

Speaker Change: It is coming up words, where we probably lost a little bit of market share.

Speaker Change: But not not towards the traditional players, but not in the end not in there in the high end market.

Speaker Change: And with that got it and just on that piece on <unk>, sorry to push button there.

Bjrn Klas Otto Rosengren: And we have had a lot of success lately, so today we have no businesses really underperforming. Some of the businesses could do a little bit better, even though the businesses they are in are maybe a little bit more challenging than some of the other businesses. But we still have a couple of divisions that we expect to improve during the year. But overall, I must say, last year was an amazing year for ABB, and I really want to underline that.

Speaker Change: Discrete quite a substantial decline for the discrete yeah, yeah, Yeah. Let me, let me talk about that a little bit you know our this is machine automation and these are sold to OEM customers. These other machine builders. So that follows pretty much but you also know that we had huge issues.

Speaker Change: A little bit more than a year ago when it comes to supply chain and we build up a big order book to this so we still have a good order book bigger order book than we normally have and I think it's probably sufficient for a couple of quarters, but we of course need to see orders. During these periods to come in so we have.

Bjrn Klas Otto Rosengren: You know, when we went into the journey 2020, our objective was that the company should reach a 15% profit margin. And we did 16.9% this year. And it's actually the second year over 15%. I think ABB... Actually, that's a good point. It's not only EBITDA, it's also EBIT, about 15%. That was not the target.

Good deliveries also for the second half of the year.

Speaker Change: And with that.

Speaker Change: We're sort of on the hour so we round off.

Björn Rosengren: I think we're going from 85 percent, 80, 85 percent, and we're moving towards 90 percent. It's quite interesting that you ask this because we have got a lot of questions today regarding the Suez Canal and the impact on ABB here, and it's quite interesting that, up until today, we have had no material impact at all from the challenges down there and logistics, you know, longer delivery times. So far, our strategy has worked quite well. But on the geopolitical side, there is, of course, another angle on this is that there's more... uncertainty about the future is as more hesitant are individuals and companies to invest. I think that probably has a bigger impact on us, and that's why we also mentioned it in the report. No one really knows where the world is going at this moment. That's too much.

Speaker Change: So at this time, thank you very much for joining us and we'll see you soon again bye bye bye. Thank you.

Bjrn Klas Otto Rosengren: But I think many... And you know, ABB is the sum of 19 divisions. So if the deviations are doing well, ABB is doing well. The central resources in ABB today are the minimum, and are not going to grow in the future.

Speaker Change: Yes.

Yes.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: So the future is going to be the, I'm just a little bit curious, I think. For me, this is a very warm feeling to see that ABB is in great shape, even though the markets are getting a little bit..., and then we have a couple of follow-ups. Let's see if we can squeeze them both in.

Speaker Change: [music].

Speaker Change: Yeah.

Bjrn Klas Otto Rosengren: But we start with Sebastian again at RBC, restock on certain components from Asia in anticipation of potential, you know. Thank you for the question. And it's correct that we have, of course, looked into it, and we don't have any material effect, or negative effects from the region at the moment. If that is related to that we have too much inventory, that could be. But I think for us, it's more important, you know, as we are regional and self-sufficient. So when we talk about inventory reduction, we also source the majority of the products from the local market. So there is quite a limited number of products and components that are going across the different regions.

Speaker Change: Sure.

Speaker Change: Okay.

Björn Rosengren: That's a lot. Thanks, Will. And then we open up the line for Jonathan. Mounsey.

Björn Rosengren: Ah, yes, good morning, by Exxon. Just a couple of questions. The Five Percent Organic group.

Björn Rosengren: Within that, does that assume that China... all of it? Given how weak that intake was, where were we tracking? Is it levelling off, and do you think Germany will... Yeah, let me start with Germany, because you saw in Q3, we were down 33%. At that time, we also said that this was also because there's a tough comparison. We have now seen minus 17%, and our feeling is now that we are bottoming out in Germany. It has not been worse.

Björn Rosengren: Rather, maybe we'll see some small improvements. So let's see what's coming up. But we are a little bit optimistic that there could be some better from really low levels in China. I mean, if you look at the full year, I think we on orders were down 12% for the full year, and you saw 7% in the last quarter. I think it will be difficult for China to actually contribute to revenue growth next year. But we are, of course, a little bit early to say.

Speaker Change: [music].

Björn Rosengren: We think it has good potential to come back, and because we know that GDP development last year was 5.2 percent, they expect 4.7 this year. And that should generate some interesting business for us, focused on technology for the green transformation. Actually, you know, 70 to 80% of all technologies that are needed for this green transformation are developed and produced in China. So I think we should not underestimate China's potential. Thank you very much. Pardon me?

Speaker Change: Yes.

Yes.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: If we have a little bit more inventory there, it's not the end of the world. That was a limited supply of products and components that are going across the different regions. I still think we have a little bit more time. No, we don't want to, that is, you know.

Okay.

Speaker Change: Okay.

Speaker Change: [music].

Björn Rosengren: We're not giving country-specific guidance on this, so we can't go there because we really run this, you know, in the divisional and business areas. So then we move to Sean at HSBC. Good morning.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Bjrn Klas Otto Rosengren: It's pretty clear, and you saw during the quarter that finally, we've seen the inventory going down towards normal levels. We are still not there. There is more potential to come, but we have no objective to build a big inventory going forward. Absolutely. Okay, thank you.

Speaker Change: [music].

Björn Rosengren: Thank you for taking my question. Just, um, I'd like to confirm the conference about e-mobility that the IPO is now looking, unlike for watching, perhaps about the divisions that are not yet in growth mode. New areas for diversity. And let me start with immobility a little bit.

Björn Rosengren: Yeah, it's correct. I mentioned on the media call that I would be surprised if we would make the IPO during this year. There are some headwinds in the markets. I think the financial market, not so good at this time, but also some headwinds in the market, especially in Europe, Germany, for instance, where subsidies have been taken away and many of the suppliers have seen a drop in the market part. So, yes, we have some work to do in the organization. We have taken in investors, as you all know. And I think we have sufficient capital in the company, and I think that business is well at the ABB home. And I think for the time being, it fits well in there. And I think we have both resources and knowledge there to make sure that that business will be successful. And maybe next year, it could be time to do something, but we need to see some improvement in that business before we feel that that business is ready to go live. What was it, Mo?

Bjrn Klas Otto Rosengren: And we round off this session with a follow-up question from Andre. Hello again, thank you very much for taking the time to ask the follow-up question. I just want to circle back on some of the comments on robotics and discrete. Firstly, the message that China is the biggest challenge; could you comment on how your market shares have evolved across Manufacturing Automation and the Robotics Business? And secondly, just looking at the comments you made on... What is in Q4 that within the overall 43% decline in robotics..., minus 16 that obviously implies a substantial Hi, could you just comment on where this business is now? Maybe versus 2019 or kind of against other benchmarks because I understand there are some pretty substantial prompt effects there.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Björn Rosengren: That was a general portfolio question. Yeah. Yeah, you know, I mean, first...

Björn Rosengren: It's quite clear that the majority of our divisions are today in growth mode, but we also have a number of additions in the profitability mode. We actually just upgraded the last transformational division, which was the large motors and generators, which is a little bit of a success story that I'm very, very happy about. They really managed to get their performance up, and it's double-digit profitable today. And I think they're doing an excellent job.

Bjrn Klas Otto Rosengren: I just want to understand how that's kind of performing versus what we see maybe from other Let me elaborate a little bit on the robotic market. Yeah, the Chinese market is a combination of the global players, you know, some of those large international companies, including us there. And I'm sure you've seen some of the reports from our peers that everybody's facing the same challenge. The Chinese market is, There are also, as we have talked about earlier, a number of local players, more coming from the lower end market, and have been growing better in the Chinese market. So, yes, I think there will be more challenges from local players.

Speaker Change: Okay.

Okay.

Bjrn Klas Otto Rosengren: On the other hand, our business is very local, I must say. You know, we have the R&D in China, we have the production in China, so they are also adjusting products more suitable for the Chinese market, meaning taking some of that more extensive cost out of the product. That is the focus. But I think it's the overall market, and we do expect that it will come back, from which we and many of our peers will also benefit. When we look at the orders, [inaudible] Yeah, I think the market share, if you look at the international players, we feel it's pretty stable. I don't think there are any big changes.

Speaker Change: Yes.

Speaker Change: [music].

Yes.

Speaker Change: Okay.

Speaker Change: [music].

Björn Rosengren: It's quite interesting also because in this whole green transformation project, large motors and medium-voltage drives are an excellent combination for these projects, and we have had a lot of success lately. So today we have no businesses really underperforming. Some of the businesses could do a little bit better, even though the businesses they are in are maybe a little bit more challenging than some of the other businesses. But we still have a couple of divisions that we expect to improve during the year. But overall, I must say, last year was an amazing year for ABB, and I really want to underline that.

Speaker Change: Yes.

Speaker Change: [music].

Bjrn Klas Otto Rosengren: It's more related to some of those Chinese competitors coming up, where we probably lost a little bit of market, not in the high-end market. And with that, I'm just on a piece on GA, sorry to push, but I'm just with quite a substantial decline for the discrete, yeah, yeah, yeah, let me, let me talk about that a little bit. You know, this is machine automation, and these are sold to OEM customers; these are the machine builders. So that follows pretty much.

Speaker Change: Okay.

Speaker Change: [music].

Sure.

Speaker Change: Sure.

Okay.

Bjrn Klas Otto Rosengren: But you also know that we had huge issues a little bit more than a year ago when it comes to the supply chain. And we built up a big order book to deal with these. So we still have a good order book, a bigger order book than we normally have. And I think it's probably sufficient for a couple quarters.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Hi.

Speaker Change: [music].

Speaker Change: Hi.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Sure.

Bjrn Klas Otto Rosengren: But we, of course, need to see orders during these periods come in so we have good deliveries also for the sector. And with that, we're sort of on the hour. So we round off for this time. Thank you very much for joining us. And we'll see you soon again.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Ansofi Nord: Bye bye. Thank you. [inaudible] © transcript Emily Beynon [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? Greetings to you all and nice to connect again as I welcome you to this presentation where we will talk through the results for ABB's fourth quarter. I'm Ansofi Nord, Head of Investor Relations, and next to me here is our CEO, Bjrn Rosengren, and our CFO, Timo Ihamotila. They will take you through the presentation before we open up for questions.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Björn Rosengren: You know, when we went into the journey 2020, our objective was that the company should reach a 15% profit margin, and we did 16.9% this year, and it's actually the second year over 15%. I think ABB... Actually, that's a good point. It's not only EBITDA, it's also EBIT, about 15%. That was not the target.

Björn Rosengren: But I think many... And you know, ABB is the sum of 19 divisions. So if the deviations are doing well, ABB is doing well. The central resources in ABB today are the minimum, and are not going to grow in the future.

Speaker Change: Okay.

Speaker Change: Right.

Speaker Change: Okay.

Björn Rosengren: So the future is going to be the. I'm just a little bit curious, I think... For me, this is a very warm feeling to see that ABB is in great shape, even though the markets are getting a little bit... And then, thanks Sean, and then we have a couple of follow-ups. Let's see if we can squeeze them both in. But we'll start with Sebastian again at our beginning. Thank you for taking my follow up. I have a question on the Red Sea situation.

Speaker Change: Okay.

Speaker Change: Yes.

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Speaker Change: [music].

Björn Rosengren: I recall that during COVID, ABB stocked up quite a lot on inventory, getting early into the market to buy raw materials and components, and people complained about it. And then you basically had very few issues with your supply chain, and it really helped you. And now we have a kind of a comparable situation in the Red Sea.

Speaker Change: Yes.

Yes.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: So how did we do this? First, it was a solid overall market environment. We have a good business mix, and this year, we saw strong momentum in the long cycle business, which more than offset the weakness in part of the short cycle. In total, our comparable orders improved by 3%, and our book-to-bill ratio was 1.05. Secondly, we are a more efficient and agile company. We took actions to further push the ABB Way operating model within some divisions.

Speaker Change: Yes.

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Speaker Change:

Speaker Change: [music].

Björn Rosengren: And I was wondering if you are considering also to now, again, restock on certain components from Asia in anticipation of potential, you know, Thank you for the question. And it's correct that we have, of course, looked into it, and we don't have any material effect, negative effects from the region at the moment. If that is related to that we have too much inventory, that could be. But I think for us, it's more important, you know, as we are regional and self-sufficient. So when we talk about inventory reduction, we also source the majority of the products from the local market. So there is quite a limited number of products and components that are going across the different regions. If we have a little bit more inventory there, it's not the end of the world, I would say. I still think we have a little bit more time. No, we don't want to, that is, you know.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: And one success story is the turnaround in the large motor business. They have done a great job and improved in many ways, including how they work with value-based prices. It was really good to see that they took the margin to double digits. But I do not look at 2023 as anything extraordinary.

Speaker Change: Okay.

Speaker Change: Yes.

Bjrn Klas Otto Rosengren: What do I mean by that? You know, our business is to help the world accelerate the energy transition toward electricity. We also help customers to become more efficient and safe through our automated and digital manufacturing. ABB has a leading position in markets driven by strong sectors, and we are confident about this, which is why we raised our long-term financial and sustainability targets at the CMD in November. In short, we target higher growth and higher returns while enabling a world with net zero emissions. Finally, for 2023, the board proposes a dividend of 0.87 Swiss francs.

Speaker Change: Okay.

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Björn Rosengren: It's pretty clear, and you saw during the quarter that we finally saw the inventory going down towards normal levels. But we are still not there. There is more potential to come, but we have no objective to build a big inventory going, Absolute. Okay, thank you. And we round off this session with a follow-up question from Andre. Hello again, thank you very much for taking the time to ask the follow-up question. I just want to circle back on some of the comments on robotics and discrete. Firstly, the message that China is the biggest challenge. Could you comment on how your market shares have evolved across the, and orders in Q4 that within the overall 43% decline in robotic orders..., minus 16, that obviously implies a substantial, Sandrop.

Speaker Change: Yes.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: The increase of three weapons from last year is more than the usual annual increase of two. This is based on the strength of the ABB Way operating model and the future proof market. We also expect to continue to utilize share-buy-backs as a way to return excess cash to shareholders.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.

Bjrn Klas Otto Rosengren: Now let's turn to page four for some more detailed comments on the fourth quarter. My key takeaway from Q4 is that comparable orders remain stable from last year, meaning total demand is holding, despite weakness in the short cycle. Book-to-bill was below 1, but I'm not so worried about that. It is a normal pattern in the fourth quarter. I expect a stronger outcome already in Cuba.

Speaker Change: Okay.

Speaker Change: No.

Speaker Change: Thanks.

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Speaker Change: Yes.

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Speaker Change: Yes.

Speaker Change: [music].

Björn Rosengren: Alright, could you just comment on where this business is now, maybe versus 2019 or kind of other benchmarks, because I understand there are some pretty substantial immediate effects there, so I just want to understand how that's kind of performing versus what we're seeing maybe from other distributors. Let me elaborate a little bit on the robotic market. Yeah, the Chinese market, it's a combination of global players, you know, some of those large international companies, including us there. And I'm sure you've seen some of the reports from our peers that everybody's facing the same challenge.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: Secondly, we improved operational performance and delivered record cash of 1.9 billion, up by 1.2 billion from last year and even stronger than expected. And we improved return on capital employed by 460 basic points to 21.1. A strong outcome, in my opinion.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Thank you.

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Speaker Change: Yes.

Speaker Change: Thanks.

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Bjrn Klas Otto Rosengren: Lastly, I'm pleased to see the division utilizing our strong balance. We have recently signed seven small bolt-on acquisitions. Most of these deals add more embedded software and AI capabilities to our. These will support our market position longer. In summary, we deliver in line with our guidance and I'm pleased with the solid finish of the year. Now, let's turn to page five for some more detailed comments on the market development.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].

Björn Rosengren: The Chinese market is. There is also, which we have talked about earlier, a number of local players, more coming from the lower end market, and they have been growing better in the Chinese market. So, yes, I think there will be more challenges from local players.

Björn Rosengren: On the other hand, our business is very local, I must say. You know, we have the R&D in China, we have the production in China, so they are also adjusting products more suitable for the Chinese market, meaning taking some of that more extensive cost out of the product. That is the focus. But I think it's the overall market, and we do expect that it will come back, where we and many of our peers will also benefit. When we look at the orders, Mark Yeah, I think the market share, if you look at the international players, we feel it's pretty stable. I don't think there are any big changes. It's more related to some of those Chinese competitors coming up, where we probably lost a little bit of market, not on the trajectory. Not in the high-end market.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: As I mentioned earlier, demand was resilient, and comparable orders increased in three out of four business areas. We saw a stable to positive development in most customer sectors, with the softer areas to mention being residential construction, where we see weakness in both China and the US, while Europe seems to be stabilizing at a low level. The other area was discrete automation, where we saw a similar pattern as in recent quarters. Timo will talk more about the details on the slides about robotics and discrete automation. We expect the challenge in R.A. to persist also in Q1. However, we believe the fourth quarter was a low point for absolute order.

Speaker Change: Okay.

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Speaker Change:

Björn Rosengren: And with that, I'm just on a piece on GA, sorry to push, but I'm just with quite a substantial decline for the discrete, yeah, yeah, yeah, let me, let me talk about that a little bit. You know, this is machine automation, and these are sold to OEM customers; these are the machine builders. So that follows pretty much.

Björn Rosengren: But you also know that we had huge issues a little bit more than a year ago when it comes to the supply chain. And we built up a big order book to deal with these. So we still have a good order book, a bigger order book than we normally have. And I think it's probably sufficient for a couple quarters.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Björn Rosengren: But we, of course, need to see orders during these periods come in so we have good deliveries also for the sector. And with that, we're sort of on the hour. So we round off for this time. Thank you very much for joining us. And we'll see you soon again.

Speaker Change: Yes.

Speaker Change: Okay.

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Speaker Change: Yeah.

Speaker Change: Okay.

Bjrn Klas Otto Rosengren: In total, for ABB, orders remained stable year-over-year, and the order backlog remained strong at $21.6 billion. Now let's turn to slide six and look at the market pattern from a geographical perspective. Comparable orders increased in two out of three regions. The Americas is still where the underlying market is most representative, with their continued solid customer activity in the U.S. AMEA grew by 2% and we see strong developments in, for example, India, but China is a challenge. With the decline in software activity in several segments, Europe declined by 5%, mainly impacted by the weakness in discrete automation. Now, let's turn to slide seven.

Speaker Change: Okay.

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Speaker Change: Great. Thanks to you all and nice to connect again S. I welcome you to this presentation, where we will talk through the results for ABB is fourth quarter.

Ansofi Nord: Bye bye. Thank you. M.D.

Ansofi Nord: Sun in Creighton, Kentucky, and California; text on screen says Special Thanks to, Greetings to you all and nice to connect again as I welcome you to this presentation, where we will talk through the results for ABB's fourth quarter. I'm Ansofi Nord, Head of Investor Relations, and next to me here is our CEO, Björn Rosengren, and our CFO, Timo Ihamuotila. They will take you through the presentation before we open up for questions.

Speaker Change: Also to note our head of Investor Relations and next to me here is our CEO will be unrealistic.

Speaker Change: And our CFO, Tim O'hara, and whatnot and they will take you through the presentation before we open up for questions, but before we begin I should mention the information regarding safe Harbor notices and our use of non-GAAP measures on slide two of the presentation.

Björn Rosengren: But before we begin, I should mention the information regarding safe harbor notices and our use of non-gap measures on slide two of the presentation. This call includes forward-looking statements based on the company's current expectations and assumptions, which are subject to risks and... And with that said, we kick off the presentation, and I hand over to you, Björn. Thank you, Anssi, and a warm welcome from me as well.

Speaker Change: This call includes forward looking statements based on the company's current expectations and assumptions, which are subject to risks uncertainties.

Speaker Change: And with that said, we kick off the presentation and I hand over to India. Thank you ANSI and a warm welcome from me as well.

Bjrn Klas Otto Rosengren: In the chart, you see the strong improvement in both earnings and margins. [inaudible] and margin increased by 150 basic points to 16.3 points. This was supported by good price development and high volume, which clearly offset the labor cost. I am pleased about the outcome.

India: I want to start with some quick reflections on 2023.

India: And I'm proud to say that it was a record year for ABB.

Some proof points of our success includes that we improved on all lines in the P&L and in many cases to new all time high levels.

India: We delivered record high cash flow and return on capital employed.

India: A great team effort.

Bjrn Klas Otto Rosengren: This was the fourth consecutive quarter where gross margin was about 35%, a strong improvement compared to historic levels. In total, the fourth quarter was a solid end to the year. With that, I will hand over to Timo.

Björn Rosengren: I want to start with some quick reflections on 2020, and I'm proud to say that it was a record year for us. Some proof points of our success include that we improved on all lines in the PNL and, in many cases, to new all-time high levels. We delivered record-high cash flow and return on capital. A great team effort.

India: In total our comparable orders improved by 3% and our book to Bill ratio was 1.15.

Timo Ihamuotila: Thank you, Bjrn, and greetings to everyone from my side as well. As usual, let's start with electrification on slide 8. The market pattern remained very similar to the previous quarter. Comparable orders improved by 2% from last year, so there continued resilient demand where the project and systems relating offerings were robust, and the short cycle business actually stabilized after some weak quarters. In terms of market segments, as a total, it was only residential construction which declined overall.

India: Secondly.

Björn Rosengren: So how did we do this? First, it was a solid overall market environment. We have a good business mix, and this year we saw strong momentum in the long cycle business, which more than offset the weakness in part of the short cycle. In total, our comparable orders improved by 3%, and our book-to-bill ratio was 1.05. Secondly, we are a more efficient and agile company. We took actions to further push the ABB Way operating model within some divisions.

India: They have done a great job and improved in many ways, including how they work with value based pricing.

India: It was really good to see that they took the margin to a double digit territory.

India: But I do not look here at 2023 as something extraordinary.

India: What do I mean with that.

India: You know our business is to help the world accelerate the energy transition towards electrification.

India: We also have customers to become more efficient and safe through our automated and digital manufacturing.

Timo Ihamuotila: We are weighted down by weakness in both the U.S. and China. However, on a positive note, we saw some signs of stabilization for residential demand in Europe, including Germany, albeit at a low level. The other area to mention is China. Not all is bad, like continuing strong demand for data centers, but several other large segments declined, including both construction and utilities. Turning now to revenues, the electrification team again did a great job executing during the quarter, resulting in 8% comparable growth. Higher volumes were the main driver, with good additional support from price expectations. It's really nice to see electrification holding on to their established higher margin level. At 19.7%, the operational EBITDA margin improved by 310 basis points from last year, with fairly even support from volume and price. This more than offsets higher labor costs, as well as higher investments in R&D and SG&A.

India: ABB has a leading position in markets driven by strong secular trends.

Björn Rosengren: And one success story is the turnaround in the large motor business. They have done a great job and improved in many ways, including how they work with value-based pricing. It was really good to see that they took the margin to double-digit territory. But I do not look at 2023 as anything extraordinary.

India: And we are confident about the future, which is why we raised our long term financial and sustainability targets at the CMT in November in short, we target higher growth and higher returns, while enabling a world with net zero emissions.

India: Finally on 2023 the board.

India: Posted a dividend of <unk> 87 suites Frank.

India: The increase of three wrapping from last year is more than the usual annual increase up to.

Björn Rosengren: What do I mean by that? You know, our business is to help the world accelerate the energy transition toward electricity. We also help customers to become more efficient and safe through our automated and digital manufacturing. ABB has a leading position in markets driven by strong sectors, and we are confident about this, which is why we raised our long-term financial and sustainability targets at the CMD in November. In short, we target higher growth and higher returns while enabling a world with net zero emissions. Finally, for 2023, the board proposes a dividend of 0.87 Swiss francs.

India: This is based on the strength of the ABB way operating models and a future proof market position.

India: We also expect to continue to utilize share buybacks as a way to return excess cash to shareholders now lets turn to page four for some more detailed comments on the fourth quarter.

India: My key takeaway from Q4 or that comparable orders remained stable from last year.

India: Meaning total demand is holding up despite weakness in the short cycle business.

India: Book to Bill was below one, but I'm not so worried about that it is a normal pattern in the fourth quarter.

Timo Ihamuotila: All in all, another strong quarter for electrification. Looking ahead into the first quarter, we currently expect the growth rate in comparable revenues to be similar to what we saw in Q4, and the operational EBITDA margin to be slightly lower. Let's then move to slide nine and the motion business area. Thanks to the continued good momentum in the long cycle businesses, with some large orders booked mainly in the traction division, comparable orders increased by as much as 13%, admittedly from a relatively low level last year. From a segment view, this meant that customer activity was high in the process-related areas of oil and gas, chemicals, and mining, as well as for food and beverage and rail. A weak construction market waited on demand for the HVAC site.

India: I expect a stronger outcome already in Q1.

India: Secondly, we improved operational performance and delivered record cash of $1 9 billion.

India: Up by $1 2 billion from last year, and even stronger than expected.

India: And we improved return on capital employed by 460 basis points to 21.1% a strong outcome in my view.

India: Lastly, I am pleased to see that division utilizing our strong balance sheet. We have recently signed seven small bolt on acquisition. Most of these deals add more embedded software and AI capabilities to our offerings. This will support our.

Björn Rosengren: The increase of three rapids from last year is more than the usual annual increase of two. This is based on the strength of the ABB Way operating model and the future-proof market. We also expect to continue to utilize share buybacks as a way to return excess cash to shareholders. Now, let's turn to page four for some more detailed comments on the fourth quarter. My key takeaway from Q4 is that comparable orders remain stable from last year, meaning total demand is holding despite weakness in the short cycle. However, book-to-bill was below one. But I'm not so worried about that.

India: Market position long term.

India: In summary, we delivered in line with our guidance and I am pleased with the solid finish of the year.

India: Now, let's turn to page five for some more detailed comments on the market development.

India: As I mentioned earlier.

India: Demand was resilient and comparable orders increased in three out of four business areas. We saw a stable to positive development in most customer segments.

Björn Rosengren: It is a normal pattern in the fourth quarter. However, I expect a stronger outcome already in Cuba. Secondly, we improved operational performance and delivered record cash of $1.9 billion, up by 1.2 billion from last year and even stronger than expected. And we improved return on capital employed by 460 basic points to 21.1, a strong outcome in my opinion. Lastly, I'm pleased to see the division utilizing our strong balance. We have recently signed seven small bolt-on acquisitions.

India: We then the softer areas to mention B.

Timo Ihamuotila: Revenues were up by 2%, again surpassing the $1.9 billion level. The impact of higher pricing and volumes in the drives divisions more than offset the slightly softer volumes in the motor divisions. While the gross margin was slightly up from last year, Motion's operational EBITDA margin came in at 16.6%, decreasing by 80 basis points. The main reason for the drop was some product quality costs with a negative impact of about 60 basis points year on year. This was limited to this period and should not be a topic in the coming quarter.

India: Residential constructions, where we see weakness in both China and U S. While Europe seems to be stabilizing at a low level.

India: The other areas was discrete automation, where we saw a similar pattern as in recent quarters team a team of will talk more about the details on the slides on the robotics and discrete automation.

India: We expect the challenge in our a to persist also in Q1. However, we believe the fourth quarter was the low point for absolute orders.

India: In total for ABB orders remained stable year over year.

India: And the order backlog remains strong at $21 $6 billion.

India: Now, let's turn to slide six and look at the market Pat them from geographical perspective.

Björn Rosengren: Most of these deals add more embedded software and AI capabilities to our. These will support our market position longer. In summary, we delivered in line with our guidance, and I'm pleased with the solid finish of the year. Now let's turn to page five for some more detailed comments on the market development. As I mentioned earlier, demand was resilient, and comparable orders increased in three out of four business areas. We saw stable to positive developments in most customer sectors, with the softer areas to mention being residential construction, where we see weakness in both China and the US while Europe seems to be stabilizing at a low level. The other areas were discrete automation, where we saw a similar pattern as in recent quarters. Timo will talk more about the details on the slides about robotics and discrete automation. We expect the challenge in R.A. to persist in Q1. However, we believe the fourth quarter was a low point for absolute order.

India: Comparable orders increased in two out of three regions. The Americas is still where the underlying market is most robust.

Timo Ihamuotila: Looking ahead into the first quarter, we anticipate a low single-digit growth year on year in comparable revenues and operational EBIT R margin to decline somewhat from last year due to a changing mix with a higher share of long cycle delivery. Turning to slide 10, and process automation, where comparable orders increased by 5% year-on-year. This includes a large order booking of about 150 million which will be delivered over a number of years. From a segment view, marine and port demand was strong, but we also saw good momentum in low-carbon related areas, such as LNG, hydrogen, and carbon capital. The product business noted some slowing momentum after a period of really strong growth. Comparable revenues were up by 10%, with strong growth in all divisions.

India: With our continued solid customer activity in the U S.

India: EMEA grew by 2% and we see a strong development in for example, India, but China is a challenge with the softer activity in several segments Europe declined by 5% mainly in the impacted by the weakness in discrete delta.

India: Imation.

India: Now, let's turn to slide seven our earnings outcome.

India: In the chart you see the strong improvement in both earnings and margin operation EBITDA was up by 16%.

India: And margin increased by 150 basis points to 16, 3%. These.

India: This was supported by good price development and higher volumes, which clearly offset the labor cost inflation.

India: I am pleased about the outcome. This was the fourth consecutive quarter, where gross margin was about 35% a strong improvement compared to historic levels.

Björn Rosengren: In total, for ABB, orders remained stable year-over-year, and the order backlog remained strong at $21.6 billion. Now let's turn to slide six and look at the market pattern from a geographical perspective. Comparable orders increased in two out of three regions. The Americas is still where the underlying market is most representative, with their continued solid custom activity in the U.S. AMEA grew by 2% and we see strong developments in, for example, India, but China is a challenge. With the decline in software activity in several segments, Europe declined by 5%, mainly impacted by the weakness in discrete automation.

India: In total the fourth quarter was a solid.

India: And of the year.

India: With that I will hand over to T. Mo. Thank you Burton.

T. Mo: And greetings to everyone from my side as well.

T. Mo: As usual, let's start with electrification on slide eight.

T. Mo: The market better and remained very similar to the previous quarter comparable orders improved by 2% from last year. So a continued resilient demand where the project and systems relating offerings was robust.

T. Mo: And the short cycle business actually stabilized after some weak quarters.

In terms of market segments as adult all it was only residential construction, which declined overall.

T. Mo: Weighted down by weakness in both the U S and China.

T. Mo: However on a positive note we saw some signs of stabilization for residential demand in Europe, including Germany, albeit at a low level.

T. Mo: The other area of dimension is China, not all is bad like continuing strong demand for data centers, but several other large segments declined including both construction and utilities.

T. Mo: Turning now to revenues the electrification theme again did a great job executing during the quarter, resulting in 8% comparable growth.

T. Mo: Higher volumes was the main driver with good additional support from price execution, it's really nice to see electrification holding onto their established higher margin level.

Timo Ihamuotila: 3C Electronics was the key weak segment, and although automotive orders softened somewhat year-on-year, this is more linked to the timing of some large orders rather than a real change in the market. R.A. orders are challenged right now, but we expect, as Bjrn said, the fourth quarter to have been the trough quarter for absolute order in. We anticipate order normalization to level off during the first half of 2020. Moving to revenues, which decreased by 7% on a comparable basis, the machine automation division had strong revenue growth as it executed on the order backlog. However, this was more than offset by the missing book and bill volume in the robotics division. It was good to see that RA's margin held up well at 13.8% and remained largely stable despite the drop in revenues and added pressure from labor inflation. This was achieved through an improved mix with higher volumes in machine automation as well as by stringent cost control.

T. Mo: At 19, 7% the operational EBITA margin improved by 310 basis points from last year with a fairly even support from volume and price.

Björn Rosengren: I am pleased about the outcome. This was the fourth consecutive quarter where gross margin was about 35%, a strong improvement compared to historic levels. In total, the fourth quarter was a solid end to the year. With that, I will hand over to Timo.

T. Mo: And this more than offset the higher labor costs as well as higher investments in R&D and SG&A expenses.

T. Mo: All in all another strong quarter for electrification.

T. Mo: Looking ahead into the first quarter. We currently expect the growth rate in comparable revenues to be similar to what we saw in Q4 and the operational EBITA margin to be slightly up sequentially.

T. Mo: Let's then move to slide nine and the motion business area.

T. Mo: Thanks to the continued good momentum in the long cycle businesses with some large orders booked mainly in the traction division comparable orders increased by as much as 13% admittedly from a relatively low level last year.

T. Mo: From a segment view and this meant that customer activity was high in the process related areas of oil and gas chemicals and mining as well as for food and beverage and rail.

A weak construction market weighted on demand for the HVAC side.

T. Mo: Revenues were up by 2% again, surpassing the $1 9 billion dollar level.

T. Mo: The impact from higher pricing and volumes in the drives divisions more than offset the slightly softer volumes in the motor divisions. While the gross margin was slightly up from last year motions operational EBITA margin came in at 16, 6% decreasing by 80 basis points.

Timo Ihamuotila: However, on a positive note, we saw some signs of stabilization for residential demand in Europe, including Germany, albeit at a low level. The other area to mention is China. Not all is bad, like continuing strong demand for data centers, but several other large segments declined, including both construction and utilities. Turning now to revenues, the electrification team again did a great job executing during the quarter, resulting in 8% comparable growth. Higher volumes were the main driver, with good additional support from price expectations. It's really nice to see electrification holding on to their established higher margin level. At 19.7%, the operational EBITDA margin improved by 310 basis points from last year, with fairly even support from volume and price. This more than offset the higher labor costs, as well as higher investments in R&D and SG&A expansion.

T. Mo: The main reason to the drop was some product quality costs with a negative impact of about 60 basis points year on year.

T. Mo: This was limited to this period and should not be a topic in the coming quarters.

T. Mo: Looking ahead into the first quarter, we anticipate a low single digit growth year on year in comparable revenues and operational EBITA margin to decline somewhat from last year due to a changing mix with a higher share of long cycle deliveries.

T. Mo: Turning to slide 10, and protests automation, where comparable orders increased by 5% year on year. This.

T. Mo: This includes a launch order booking of about 150 million, which will be delivered over a number of years.

T. Mo: From a segment view, the marine and ports demand was strong but we also saw good momentum in low carbon related area, such as LNG hydrogen and carbon capture.

T. Mo: The product business note did some slowing momentum after a period of really strong growth.

T. Mo: Comparable revenues were up by 10% with strong growth in all divisions.

T. Mo: This was driven mainly by volumes, but also some positive pricing coming through.

T. Mo: It was another good margin quarter for protest automation, they delivered an operational EBITA margin of 14% improving 80 basis points year on year.

T. Mo: And with all divisions at double digit margin levels.

Most divisions contributed to the underlying improvement on the back of better project execution and delivering higher volumes from the backlog with improved gross margin.

T. Mo: Looking at our expectations for the first quarter, we foresee a mid single digit growth rate for comparable revenues and operational EBITA margin to be slightly up from the Q4 level.

T. Mo: On slide 11, we turn to robotics, and discrete automation, where comparable orders declined sharply by 33% from last year.

T. Mo: The market pattern is similar to the previous quarters.

T. Mo: Meaning in machine automation customers are holding back back on placing new orders as our delivery lead times are reducing back to the short term normal time span.

T. Mo: In robotics demand declined across the board <unk> electronics was the key weeks segment and all fall out the motive orders softened somewhat year on year. This is more linked to timing of some large orders rather than a real change in the market.

Are they are a orders are challenged right now, but we expect as Bjorn said the fourth quarter to have been the trough quarter for absolute order intake.

Timo Ihamuotila: Revenues were up by 2%, again surpassing the $1.9 billion level. The impact of higher pricing and volumes in the drives divisions more than offset the slightly softer volumes in the motor divisions. While the gross margin was slightly up from last year, Motion's operational EBITDA margin came in at 16.6%, decreasing by 80 basis points. The main reason for the drop was some product quality costs with a negative impact of about 60 basis points year on year. This was limited to this period and should not be a topic in the coming quarter.

We anticipate order normalization to level off during the first half of the year.

T. Mo: Moving to revenues, which decreased by 7% on comparable basis. The machine automation Division had strong revenue growth as they execute on the order backlog.

T. Mo: However, this was more than offset by the meeting book and Bill volume in the Robotics Division.

T. Mo: It was good to see that our a margin held up well at 13, 8% and keeping largest stable. Despite the drop in revenues and added pressure from labor inflation.

T. Mo: This was achieved through improved mix with higher volumes in machine automation as well as by stringent cost control.

Bjrn Klas Otto Rosengren: As I know, this is the focus area. In the full year of 2024, we expect a positive book to be. We anticipate comparable revenue growth of about 5% and Operation EBITDA margin to slightly improve from the 2023 level of 16.9%. For the first quarter, we anticipate comparable revenues to grow at a low to mid-single digit rate and the Operation EBITDA margin to remain stable or slightly improve year-over-year. With that said, let's open up for questions. Yes, let's do so. And for those of you who have dialed in on the phone, you should press star 14 to register to ask a question. And to secure the sound quality, please remember to mute the webcast as your line is open for questions. You can also ask questions through the online tool in the webcast.

Timo Ihamuotila: Looking ahead into the first quarter, we anticipate a low single-digit growth year on year in comparable revenues and operational EBIT R margin to decline somewhat from last year due to a changing mix with a higher share of long cycle delivery. Turning to slide 10, and process automation, where comparable orders increased by 5% year on year. This includes a large order booking of about 150 million, which will be delivered over a number of years. From a segment view, marine and port demand was strong, but we also saw good momentum in low-carbon related areas such as LNG, hydrogen, and carbon capture. The product business noted some slowing momentum after a period of really strong growth. Comparable revenues were up by 10%, with strong growth in all divisions.

T. Mo: For the first quarter, we expect a mid single digit negative growth in comparable revenues and some sequential pressure on the operational EBITA margin due to mix impacts.

T. Mo: Then moving on to slide 12, showing the group operational EBITA bridge.

T. Mo: The profile is very similar to the last couple of quarters with the earnings improvement driven by strong operational performance.

The impact from our positive price execution at about 2% and leverage on higher volumes more than offset the adverse effects from cost inflation related mainly to labor.

T. Mo: All in all a 16% improvement in operational EBITA with 150 basis points margin increase.

T. Mo: Let's now move on to cash flow onside 13, now this is a really nice picture you may remember, we set a target for ourselves to deliver a free cash flow of $3 billion. This year.

We did even better with total free cash flow of $3 $7 billion.

T. Mo: All business areas contributed with improved operational cash flow and the fourth quarter. It was a really strong finish to the year.

T. Mo: It was good to see that our focused efforts paid off as networking capital was reduced sequentially and the ratio to revenues was at 10.2% down from 12.8 at the end of Q3 Wheeler.

T. Mo: We all over again in inventory levels and reduced receivables despite the strong revenue growth.

T. Mo: We also had some additional support from customer advances.

Bjrn Klas Otto Rosengren: Thanks for taking my question. It's actually about the comments on the buyback, Bjorn. I guess just trying to get a bit better understanding of the various factors.

Speaker Change: Great job done by the ABB team and.

Speaker Change: And we expect a good cash their cash delivery also in 2024 supported by operational earnings and continued focus on networking capital.

Speaker Change: Then taking a look at our return on capital employed development you see in the chart that we clearly beat our target of about 18% as we reached an all time high level of 21.1%.

Speaker Change: A strong return on capital improvement of 460 basis points was driven mainly by better operational performance.

Timo Ihamuotila: 3C electronics was the key weak segment, and although automotive orders softened somewhat year-on-year, this is more linked to the timing of some large orders rather than a real change in the market. RA orders are challenged right now, but we expect, as Björn said, the fourth quarter to have been the trough quarter for absolute order in. We anticipate order normalization to level off during the first half of 2020. Moving to revenues, which decreased by 7% on a comparable basis, the machine automation division had strong revenue growth as it executed on the order backlog. However, this was more than offset by the missing book and bill volume in the robotics division. It was good to see that RA's margin held up well at 13.8% and remained largely stable despite the drop in revenues and added pressure from labor inflation. This was achieved through an improved mix with higher volumes in machine automation, as well as by stringent cost control.

Bjrn Klas Otto Rosengren: That's very clear. Thank you. And we'll take the next question from Max at Morgan Stanley. Thank you. Good morning Bjorn, good morning Timo.

Bjrn Klas Otto Rosengren: I just wanted to ask you about your confidence in the positive book to bill for 2024 because I guess, If I look at the cadence of your orders as you've gone through this year, we started at 9 billion plus, and we're exiting the year at 7.6 billion. Obviously, kind of if we take the second half run rates, we're running kind of below, I guess, a positive booked bill. So I guess my question is, from where we stand today, it's sort of the seven and a half to eight billion level, which of those or which of those divisions do you really expect to kind of sharply improve, I guess, and excluding robotics and discrete automation because obviously that is one of the smaller divisions, but just where do you really see the kind of sequential improvements as we go through the year? Yeah, of course, all our numbers are And during the second part of the year, we expect short cycle business also. Proof.

Beirne: Thank you Tim for the insight.

Beirne: Let's finish off with the slide 15, and some outlook comments as I know this is a focused area.

Beirne: In the full year of 2024, we expect the positive book to Bill.

Beirne: We anticipate the comparable revenue growth of about 5% and the operational EBITA margin to slightly improve from the 2023 level of 16, 9%.

For the first quarter, we anticipate comparable revenues to grow at a low to mid single digit digit rate and the abrasion EBITA margin to remain stable or slightly improve year over year.

Speaker Change: With that said, let's open up for questions, Yes, let's stay Si.

Speaker Change #100: And for those of you who have dialed in on the phone and you Press Star 14 to register to ask a question.

Speaker Change #101: And to secure the sound quality. Please remember to mute the webcast as your line is has been for questions.

You can also put questions through the online tool in the webcast.

Speaker Change #101: For the phone lines I kindly ask you to limit it to one question and then get back in line for any additional I know there are plenty and queuing up per se kindly ask you to respect that.

Timo Ihamuotila: The impact from our positive price execution at about 2% and leverage on higher volumes more than offset the adverse effects from cost inflation related mainly to labor. All in all, a 16% improvement in operational EBITDA with a 150 basis points margin increase. Let's now move on to cash flow on page 13. Now, this is a really nice picture.

Speaker Change #101: And with that said, let's open up for the question, we'll take one for from the phone lines and we open up for Andy at J P. Morgan. Please your line should be open.

Andy: Hi, good morning, everyone.

Andy: Taking my question.

Bjrn Klas Otto Rosengren: So this is, of course, an early time of the year to announce that, but these are the best indications that we have from our own. I think when you come to the robot and from the order perspective on the robot and discrete automation, we believe that the fourth quarter that we've seen is the bottom of that business, and we should see an improvement in that. Thank you.

Andy: It's actually around the comments on the buyback.

Andy: I guess, just trying to get a better understanding kind of the various stock because it's sort of playing into the thinking on not explicitly announcing anything today, but I guess, making comment sort of insulating towards that given obviously what was fantastic.

Andy: Fantastic Q4 cost performance problems. He told us in very good shape when it takes something mechanical in terms of.

Andy: When you would announce it or is there more to it supposed to think about.

Speaker Change #102: And I will excuse you for this time, because you haven't been following us too long, but the one of you who has been following us knows that.

Speaker Change #102: This is actually an AGM question. So that has to be decided on day jam and after that is normally when we announce it so that that is absolutely. The reason, but we indicated of course that we will continue to use the buyback as a tool to return cash.

Timo Ihamuotila: And we'll continue on the topic of sort of orders book to bill with a question here from the online tool. It comes from Mattias Holmberg, and it says, given the guidance of more than one in 2024, should we view the elevated length of the backlog as a new normal, or do you expect at some point to work down the back? Yeah, maybe.

I hope that's okay. That's very clear. Thank you very clear thank you.

Speaker Change #102: And we'll take the next question from Max at Morgan Stanley.

Max: Thank you good morning.

Yes. Thank you good morning, good morning, good morning, Tim.

Max: Just wanted to ask about your your confidence on the positive book to Bill for 'twenty 'twenty four because I guess, if I look at the sort of cadence of your orders as you've as you've gone through this year, we started out.

Timo Ihamuotila: Yeah, So first of all, on this backlog length, it's fair to say that our orders are a little bit longer at the moment, but you really have to look at this now business area by business. So if you look at, for example, electrification, there we have a backlog up quite a bit, maybe just a round number, sort of 500 million type of number that pretty much is going to change all during the year. And also in PEA, clearly, we are up a lot. We will get support from the backlog on growth. In motion.

Max: Nine 9 billion plus we're exiting the year sorry, we started at 9 billion plus we're exiting the year at seven 6 billion.

Speaker Change #103: Obviously kind of if we take the second half run rates, where we're running kind of low I guess positive book to Bill cycle. I guess my question is from where we stand today.

Speaker Change #103: The seven and a half to $8 billion level, which if those which of those divisions do you really expect to kind of sharply improve I guess.

Timo Ihamuotila: We have a bit longer at the moment, but we will still... Support for growth and then RA is, of course, quite a different story where the backlog is down quite a bit. So you really have to look at these backlog dynamics. Of course, we are, as Bjrn said, also expecting improvement in the shorter cycle business. To remind everybody that during 23, I think our shorter cycle orders went down. Close to 10%, so we're, of course, coming. Okay, and then we go back to the phone lines and open it up for Daniela. With us there, Daniel.

Speaker Change #103: Excluding robotics and discrete automation, because obviously that is one of the smaller divisions, but just where do you really see the kind of sequential improvements as we go through the year.

Speaker Change #103: To secure that posted a book to bill.

Speaker Change #103: Yeah of course, all our numbers he's built up from our divisions center consolidated up to be the expectations, but yes, we think that we are well position on many of these larger transformational deals that are that we expect that will come in during this year also and during the second part of the year.

Timo Ihamuotila: However, even excluding this, the improvement was still an impressive 330 basis points. Overall, the improved return on capital employed is a good indicator that we are really improving ABB's long-term performance and operating at a best-in-class level. And with that, I will hand off to Björn to round off this presentation. Thank you, Timo, for the insight. Let's finish off with slide 15 and some Outlook comments. As I know, this is the focus area.

Speaker Change #103: We expect the short cycle business also to improve so this is of course, an early time of the year to announce that but these are the best indication that we have.

Speaker Change #103: From our businesses.

Speaker Change #103: Okay.

Speaker Change #103: I think.

Speaker Change #103: When you come to the robot.

Speaker Change #103: From the order perspective on the robot in discrete automation, we believe that the fourth quarter that we've seen is the bottom out of that business and we should see an improvement in this.

Björn Rosengren: In the full year of 2024, we expect a positive book to be, We anticipate comparable revenue growth of about five, and Operation EBITDA margin to slightly improve from the 2023 level of 16.9%. For the first quarter, we anticipate comparable revenues to grow at a low- to mid-single-digit rate, and the Operation EBITDA margin to remain stable or slightly improve year-over-year. With that said, let's open up for questions. Yes, let's do so. And for those of you who have dialed in on the phone, you should press star 14 to register to ask a question. And to secure the sound quality, please remember to mute the webcast as your line is open for questions. You can also ask questions through the online tool in the webcast.

Speaker Change #103: Six epic coming during during the year and especially on the second part of the year that that's in our plan.

Speaker Change #104: Okay. Thank you and thank you. Thank you and we'll continue on the topic of sort of orders book to Bill with US with a question here from the online tool. It comes from my mate, Yes, One day and it says given the guidance on book to Bill of more than one in 2024 should we view the elevate the length of the backlog as a new norm.

Bjrn Klas Otto Rosengren: And I think moving into next year is more related, around one-ish percent that we are, China. I think we should not expect too much when it comes to price increases. Challenging parts or the pricing you will probably come from from other parts of North America and in some ways, Thank you. And we'll continue.

Speaker Change #104: Or do you expect at some point to work down the backlog maybe for you Tim Yeah, maybe yeah. So first of all on this backlog length. So it's fair to say that our orders are a little bit longer at the moment, but you really have to look at this now a business area by business area. So if you look at for example, electrification that we have that dialogue up quite a bit.

Bjrn Klas Otto Rosengren: I'll tie on to that on the topic of China. We have a couple of questions here coming through on the online channel, and I'll bundle them into one here. And I think for you, Bjrn, can you give some more color on China, specifically discrete automation? Or basically, what do you expect for China in 2020? Yeah, I actually recently was also spending some time in China with our operations.

Speaker Change #104: Maybe just round numbers sort of buy up a 100 million type of number that pretty much is going to convert all during the year and also in P. A clearly we are up a lot we will get support from the backlog on growth in motion, we have bit longer at the moment, but we will still get.

Speaker Change #104: Support for growth and then our age of course quite a different story, where the backlog is down quite a bit. So you really have to look at these <unk> dynamics at the moment business area by business area, but of course, we are SBR and said we are also expecting improvement in the shorter cycle business just to remind everybody that during 'twenty three I think our shorter cycle orders.

Bjrn Klas Otto Rosengren: And it's quite clear that it's the robotic and discrete automation who has The Biggest Headwind and that has also been during the last three quarters, if you look at it from that angle. Yeah, it's difficult to say. China We still have to wait for a couple of weeks before we get the feeling of why it will come. China is a little bit of a mixed bag. We see, you know, better development in the motion part as well as in the electrification, also in the process automation. There's some good stuff. It varies a little bit between the...

Speaker Change #104: <unk> went down.

Speaker Change #104: Close to 10%. So we are of course coming from a bit of a different level there.

Speaker Change #104: Okay, and then we go back to the phone lines and open up for Daniela.

Daniela.

Andrew Wilson: Hi, good morning everyone, thanks for taking my question. It's actually about the comments on the buyback, Bjorn. I guess just trying to get a bit better understanding of the various factors and Larry's game, when you would announce it, or is there more? Andy, I will excuse you for this time because you haven't been following us too long, but the one of you who has been following us knows that this is actually an AGM question, so that has to be decided at the AGM, and after that is normally when we... So that is absolutely the reason why.

Daniela: Hi, good morning, Thanks for taking my question.

Daniela: Sure.

Daniela: Bryan.

Daniela: Can you comment a little bit on the outlook that youre seeing now that things seem to be normalizing across the value chain and then maybe in particular focus on on what Youre seeing in China, where we hear lots of comments about deflation in other areas of the economy.

Speaker Change #105: Thank you.

Speaker Change #105: Yeah, I mean this year you saw about 2% price increase compare to that and I think moving into next year is more related around one ish percent that we are expecting China I think we should not expect too much when it comes to price increases that would be the challenging part or the pricing as you will probably come from.

Bjrn Klas Otto Rosengren: It's clearly, it's discrete automation and robotics, and we said today in the whole RA orders that this would be the low point, so already for Q1. Okay, and then we go back to the phone lines again and open up for Gael, Deutsche Bank. Oh, thanks very much. Good morning, everybody.

Speaker Change #105: From the other parts of North America, and somewhat also Europe.

Speaker Change #106: Thank you and I will continue I'll tell you on to that on the topic of China.

Speaker Change #106: We have a couple of questions here coming through on the online channel bundled them into one here.

Speaker Change #106: And I think for you beyond can you gave some more color on China, specifically discrete automation or basically what do you expect for China in 2024.

Björn Rosengren: But we indicated, of course, that we would continue to use the buyback as a tool to return cash. I hope that's okay. That's very clear. Thank you. And we'll take the next question from Max at Morgan Stanley. Thank you. Good morning.

Bjrn Klas Otto Rosengren: You provide Margin Guidance for 2024. I mean, which business areas? The Growth and Margin Targets, and specifically, are you still confident that process automation, and robotics and district will deliver margins of at least 15%? Yeah, I mean, you've probably seen that both of them first; they are around between 14 and 15%, both of those business areas. I mean, on process automation, you know, my feeling of that is it's a well-positioned business. [inaudible] I think when it comes to process automation, they have done an excellent job of getting their performance above what they actually expected it to be possible, and you should also know that this is without the turbo.

Beyond: Yeah I actually recently was also spending some time in China with that with our operations said, it's quite clear that it's their robotics and discrete automation, who asked there the biggest headwind and that has also been during the last three quarters. If you look at from that perspective.

Speaker Change #107: Yeah, Steve.

Steve: I got to say.

Steve: China for what's going to happen are normally good indication in China you get after the.

Max at Morgan Stanley: I just wanted to ask about your confidence in the positive book to bill for 2024. If I look at the cadence of your orders as you've gone through this year, we started at $9 billion plus, and we're exiting the year at $7.6 billion.

Steve: New year Chinese new year, then it sets the standard for the year. So we still have to wait.

Steve: Wait a little bit a couple of weeks before we get the feeling of where it will come.

Steve: China is a little bit of a mixed bag we see.

Steve: Better development in the emotion that part as well as in the electrification all saw on on the process automation. There's some good stuff. So it varies a little bit between the business. It's clearly it's a discrete automation and robotics, who has the most headwind yeah, you want to add no I was.

Björn Rosengren: Obviously, if we take the second half run rates, we're running below, I guess, a positive booked bill. So I guess my question is, from where we stand today at the $7.5 billion to $8 billion level, which of those or which of those divisions do you really expect to kind of sharply improve, excluding robotics and discrete automation because obviously that is one of the smaller divisions, but just where do you really see the kind of sequential improvements as we go through the year to secure that post? Yeah, of course, all our numbers are built up from our divisions and But yes, we think that we are well positioned on many of these larger transformational deals that we expect will come in during this year also.

Speaker Change #109: Just going to add to this that we said today in the whole or a orders that we expect this $550 million to leap to be the low point. So already for Q1, we expect higher orders in all right.

Bjrn Klas Otto Rosengren: So the performance over 14 or around 14.5% is an excellent performance. Yeah, we believe that they have the capacity to stay on this margin. I don't expect them to go much higher at the moment, but around these margins, I expect. On discrete automation and on robotics, of course, as volumes have gone down, they will face some more margin pressure during the year. That is, But they are taking action in both BNR as well as in robotics to adjust their organization in line with the demand. [inaudible] And maybe if I just comment on the top line part of the question, because we said around 5%, so as we go into the year now, our base case would be a little bit like electrification, maybe a notch higher than that, and same for PA on the top line, and then Lower, And then we take the next question from Sebastian at RBC. Good morning.

Speaker Change #110: Okay, and then we go to the phone lines again and open up for a goal of Deutsche Bank.

Deutsche Bank: Oh, thanks, very much good morning, everybody.

Deutsche Bank: Could you could you provide perhaps a little bit more color on the gross margin guidance for 2024, I mean in which business areas do you see contributing the most.

Speaker Change #111: Growth in the margin targets this year and in specific kidney all you're still confident that it's all sorts of automation and robotics and discrete will deliver margins of at least 15%.

Yeah, I mean, you've probably seen that both of them first they are around between 14 and 15% both of those business areas. I mean on the process automation you know my feeling of that is a well positioned business.

That we are really benefiting from the transformation towards a more sustainable future and this is both when it comes to our base industry tradition based indices that are changing as well as you see some of those newer exciting.

Speaker Change #111: Project.

Speaker Change #111: Yeah, when it comes to process automation, they have dynamic excellent job in getting that performance.

Mattias Holmberg: Thank you, and we'll continue on the topic of sort of orders book to bill with a question here from the online tool. It comes from Mattias Holmberg, and it says, given the guidance of more than one in 2024, should we view the elevated length of the backlog as a new normal, or do you expect at some point to work down the back? Yeah, maybe.

Speaker Change #111: Bob what they actually expect it is possible and you should also know that this is without the turbot. So all the performance over 14 or around 14, 5%. This is an excellent.

Speaker Change #111: Performers yeah, we believe that they have the capacity to stay on this margin I don't expect them to go much higher at the moment, but around these margins I expect on the on the discrete automation and robotics of course as the volumes have gone down.

Speaker Change #111: They will they will face some more margin pressure during the year that that is pretty clear, but they are taking the actions in our in both PNR as well as in our robotics to adjust there.

Bjrn Klas Otto Rosengren: I was wondering what you see based on the current order intakes that you have. Do you expect the gross margin to go up from that, you know, with all your calculations on raw materials and costs there? So I would like to have a better idea of the gross margin development. Yeah, I mean, gross margin development is one, of course, one of the big success stories during the last years. And if you just look during Q4, we saw some improvement, a small improvement on the gross margin, so it continues to go up. And the order book has quite a good gross margin across the whole order book. So that's looking quite promising. It's, of course, difficult to say what the future has to offer. We believe that we are not getting out as much pricing as we did in previous years. On the other hand, there is less pressure on inflation from suppliers because the world is actually normalized, the way that it was before.

Speaker Change #111: Our organization in line with the demand in the market and I think they will be doing that in a good way.

Speaker Change #112: Yeah, maybe if I just comment on the on the top line part of the question on we got to we said around 5%. So as we go into the year now our base case would be little bit like electrification, maybe notch higher than that and same for P. E. On top line and then may be motion could be bit lower let's see and then are a tough time.

Speaker Change #112: Getting there so a bit lower clearly then identified so that's kind of like how we see the dynamics between the business areas.

Speaker Change #112: Okay.

Speaker Change #113: Very much thank you.

Speaker Change #113: And then we take the next question from Sebastian with RBC.

Daniela: We will get support from the backlog on growth, motion; we have a bit longer at the moment, but we will still support growth, and then RA is, of course, quite a different story where the backlog is down quite a bit, so you really have to look at these backlog dynamics, moment, business area. Bye. Of course, we are, as Bjorn said, we are also expecting improvement in the shorter cycle business. To remind everybody that during 23, I think our shorter cycle orders went down by close to 10%, so we're, of course, coming. Okay, and then we go back to the phone lines and open up for Daniela. With us there, Daniela. Hi, good morning all.

Sebastian: Yeah. Good morning, Thanks for taking my question I have a follow up on the pricing and raw materials.

Sebastian: Gross margin. So you mentioned that pricing helped quite a bit.

Sebastian: On the revenue and margin in Q4, but of course the orders we've taken on average with an 8% lead time.

Sebastian: Wondering what you see basically on the current order intake that you have do you expect.

Sebastian: The gross margin to grow up from that you know with all your calculations on.

Sebastian: Raw material and of course, there so.

Speaker Change #114: The idea of the gross margin development here. Thank you very much yeah, I mean, the gross margin developments one of course, one of the big success stories. During the last year said, if you does see during Q4, we saw somewhat improvement a small improvement on the gross margins, which continues to go up and the ore.

Björn Rosengren: Thanks for taking my question. So I'll move over from volumes to pricing. Can you comment a little bit on the outlook that you're seeing now that things seem to be normalizing across all the value chains, and maybe in particular focus on what you're seeing in China, where we hear lots of comments about deflation in other areas of the economy? Yeah, I mean, this year, you saw about 2% price increase compared to that. And I think moving into next year is more related, around one-ish percent that we are, China. I think we should not expect too much when it comes to price increases, challenging parts, or the pricing you will probably come from from other parts of North America and in some ways, Thank you. And we'll continue.

Bjrn Klas Otto Rosengren: So the businesses will continue to drive efficiency and, you know. For us, it's important that the businesses have, what we say, a gross margin productivity, that is, the gross margin per employee, of over 5%. That is the target for each of the businesses, and that's also what we expect them to deliver. And you can do that, of course, either to grow your pricing, or you need to keep your cost under, if I just throw out a couple of numbers. And there, as Bjrn said, we have a notch higher bagel lacrosse margin going into 24 than we had going in. 23.

Speaker Change #114: Order book has a quite a good gross margin.

Speaker Change #114: In the whole order books, so that looked quite.

Speaker Change #114: Quite promising it's of course difficult to to say what the future have a.

Speaker Change #114: To offer.

Speaker Change #114: We believe that we are not getting out as much pricing as we did on the on the previous on the other hand, there is less pressure on inflation from from suppliers because the world is accurate normalizing in a way that we had before so the businesses will continue to drive efficiency and.

Speaker Change #114: You know for US it's important that the businesses have what can we say gross margin productivity. That's just a gross margin per employee for over 5% that is the target for each of the business and that's also what we expect them to deliver and you can do that of course either too.

Björn Rosengren: I'll tie in to that on the topic of China. We have a couple of questions here coming through on the online channel, and I'll bundle them into one here. And I think for you, Björn, can you give some more color on China, specifically discrete automation, or basically, what do you expect for China in 2021? Yeah, I actually recently spent some time in China with our operations, and it's quite clear that it's the robotic and discrete automation who has the biggest headwind, and that also happened during the last three quarters, if you're looking at that. Yeah, it's difficult to say, the White House.

Two to grow your pricing or you need to keep your cost under control.

If I just throw gasoline numbers in there. So that's where I said, we have a notch higher backlog gross margin going into 'twenty four than we had going into 'twenty. Three so that's like a good thing on the gross margin side and then we have also a situation where there is not much as we expect again going into.

Timo Ihamuotila: So that's like a good thing on the Grossman side. And then we have also a situation where there is not much, as we expect again going into a year, not much else. Inflation and labor inflation in the growth margin, and that we should be able to sort of cover with the 1% price, as Bjrn mentioned, and then, of course, with growth, we should get some leverage on the growth margin side as well. So it looks like an okay picture going into the year. Thank you very much. Hi, good morning.

Speaker Change #114: Not much other inflation and labor inflation in the gross margin and that we should be able to sort of cover with a 1% price what what we had mentioned and then of course with growth we should get some leverage on the gross margin side as well so it looks like an okay picture going into the year with the gross margin as well.

Björn Rosengren: China is a little bit of a mixed bag. We see better development in the motion part as well as in the electrification, also in the process automation. There's some good stuff. It varies a little bit between the... It's clearly, it's discrete automation and robotics. Would you like to add something?

Speaker Change #115: Understood. Thank you very much thanks Ed.

Bjrn Klas Otto Rosengren: Thank you very much for taking my question. I wanted to dig into the trends in the medium voltage part of your business in a bit more detail and today in electrification. Could you talk about maybe at what pace this is growing now and how pricing has developed in that business within the And also, are you planning to ramp up capacity in this space, given the growth, or are we still at the stage where... PhilanthroPolony, Thank you for the question. Yeah, I'd be happy to talk about medium voltage.

Andre: We moved to Andre.

Andre: And should be open now.

Andre: Oh, Hi, good morning. Thank you very much for taking my question I wanted to dig into the trends of medium voltage part of your business. If it did more detail im still today the electrification polyps.

Andre: Could you talk about maybe at what pace. This is growing now and how pricing.

Björn Rosengren: No, I was just going to add that we said today in the whole RA orders that Henry M.P. should be the low point, so already for Q1, higher, Okay, and then we go to the phone lines again and open up for Gael, Deutsche Bank. Oh, thanks very much. Good morning, everybody. You provide, and Mario Valdez.

Andre: And that business within the 2% that you delivered overall.

Andre: And also are you planning to ramp up capacity in this space given the growth of all we're still at the stage where capacity is still a handful and you can just benefits from leveraging that.

Speaker Change #116: Thank you for the question, Yeah, I'd be happy to talk about the medium voltage and I see this is bought in electrification as well as medium voltage drives which has had a tremendous development in D. S, which is the medium voltage business have had a great development both when it comes to.

Gael, Deutsche Bank: I am Malee Alain Bermudez, margin guidance for 2024. I mean, which business areas and Martin Wilson. Thank you. Thank you. The Growth and the Margin Targets This Year, and specifically, are you still confident that process automation and Robert Hicks and District will deliver margins of at least 15%? Yeah, I mean, you probably saw that both of them first; they are around between 14 and 15% in both of those business areas. I mean, on process automation, you know, my feeling about that is a well-positioned business, and some more. I think when it comes to process automation, they have done an excellent job of getting their performance above what they actually expected was possible, and you should also know that this is without the turbo.

Speaker Change #116: The orders and growth, but these are of course, a little bit longer term. So we should see in the years coming closer but.

Speaker Change #116: Mainly the gross margin in this business and the profitability of this business has now come up to where it actually should be in both of these business and this is actually compensating some of the somewhat weak your low voltage business that you're seeing in for instance in low voltage drives so that has had a good good.

Speaker Change #117: <unk> it is as much as 25% of our our portfolio today or our invoicing is actually a medium voltage medium voltage and that is developing in a good way anything you'd like to add that tmall no I actually I have to admit I didn't check that number now going into this call. This exactly because we have earlier spoken about this.

Timo Ihamuotila: No, I actually have to admit I didn't check that number going into this call because we have spoken about this number before, so I don't have it on top of my head. But if you look at some of these areas where we had order growth, like Bjorn mentioned system drives or traction and so forth, so it is definitely contributing. It is really the strongest part of our business, just on capacity? I mean, on investment. Yeah, sure.

Speaker Change #118: So I don't have it on top of my head, but if you look at some of these areas, where we were we had order growth like Bill mentioned system drives or traction and so forth. So it is definitely continuing the trend in those areas.

Speaker Change #119: If this is really the strongest part of our business at the moment.

Björn Rosengren: So the performance over 14 or around 14.5% is an excellent performance. Yeah, we believe that they have the capacity to stay on this margin. I don't expect them to go much higher at the moment, but around these margins I expect. On discrete automation and on robotics, of course, as volumes have gone down, they will face some more margin pressure during the year. But they are taking actions in both BNR as well as in robotics to adjust their organization in line with the demand, and I think they will be doing that. And maybe if I just comment on the top-line part of the question, because we said around 5%, so as we go into the year now, our base case would be a little bit like electrification, maybe a notch higher than that, and same for P.A. on the top line, and then maybe the motion could be a bit lower, let's see, and then R.A. has tough times there. So that's kind of like, Dynamite.

Speaker Change #120: Thank you and if I may just.

Speaker Change #120: Double digit growth territory there.

Speaker Change #121: Just on capacity if I may.

Speaker Change #122: Uh huh.

Speaker Change #122: Oh, you mean on the investment.

Bjrn Klas Otto Rosengren: Yeah, I mean, this is where we are investing in capacity, especially in North America. That is, and that's also why we expect a little bit more capex during the year than we saw last year that is related to building some factories. And that is a combination of medium voltage going up, but also becoming more self-sufficient in the North American market. So yes, there will be some capacity building. Thank you, and then we open up the line for Alex Virgo. Yeah, thanks very much, Ansi. Good morning, good morning, good morning, Timo.

Speaker Change #123: Sure sure.

Speaker Change #123: Yeah, I mean this is seth.

Speaker Change #123: We are investing in capacity, especially in North America that is and that's also why we expect a little bit more capex. During the year that we saw last year that is related to building some factories.

Speaker Change #123: In there and that is a it's a combination of them.

Speaker Change #123: Our medium voltage going up but also to become more self sufficient in the north American market.

Speaker Change #123: So yes, there will be some capacity building out.

Speaker Change #124: Alright, Thank you very much thank you.

Thank you and then we'll open up the line for Alex Virgo. Please Alex are you there.

Alexander Virgo: Yes, thanks very much.

Alexander Virgo: Julien good morning.

Bjrn Klas Otto Rosengren: I wondered if you could just dig a little bit more into the details for us in short cycle trends and Timo maybe could you give us the differences between robotics and machine automation just as we're trying to think about building on Max's question earlier on around the sort of the book and bill and thinking about how you see that sort of trajectory of recovery I appreciate your comment on orders in robotics normalizing in the first half and just trying to get a sense of this sort of stabilization in short cycle that you're talking about and where that's coming from given also your comments on the short cycle in EL as well so EL and RA short cycle could you sort of split that out for us a little bit more please, And maybe I just start up a little bit with the robotic business. So when you see orders down 33%, this varies between the discrete automation and robotics. The robotics is down about 16%, and the rest of it is actually on the discrete automation. It looks a little bit different also in the order book in the two different.

Alexander Virgo: I wondered if you could just dig a little bit more into the details for us.

Alexander Virgo: In short cycle trends in <unk>.

Sebastian Kuenne: Thank you very much. Thank you. Thank you. And then we'll take the next question from Sebastian at RBC. Good morning.

Alexander Virgo: They may be.

Alexander Virgo: Could you give us the differences between robotics and machine automation just as we're just trying to think about.

Alexander Virgo: Max's question early on around the sort of the book and Bill.

Alexander Virgo: And thinking about how you you see that sort of trajectory of recovery I. Appreciate your comment on on orders in robotics normalizing in the first half.

Alexander Virgo: I'm, just trying to get a sense of.

Alexander Virgo: Stabilization.

Alexander Virgo: And.

Alexander Virgo: Short cycle that Youre talking about where that's coming from given given that will see your comments on the short cycle any outlet as well so yes.

I was wondering what you see based on the current order intakes that you have. Do you expect the gross margin to go up from that, you know, with all your calculations on raw material and cost there? So I would like to have a better idea of the gross margin development. Yeah, I mean, the gross margin development is one, of course, one of the big success stories during the last years. And if you just see during Q4, we saw somewhat improvement, small improvement on the gross margin, so it continues to go up. And the order book has quite a good gross margin, in the whole order book. So that's looking quite promising. It's of course difficult to say what the future has to offer. We believe that we are not getting out as much pricing as we did on the previous. On the other hand, there is less pressure on inflation from suppliers because the world is actually normalizing, way that we had before.

Speaker Change #125: Short cycle could you sort of split that out for us a little bit more please.

Speaker Change #126: Yeah, maybe I'll just stop.

Speaker Change #127: <unk> up a little bit with the robotic business or when you see.

Speaker Change #127: Orders down 33% this varies between the discrete automation and robotics and robotics is down about 16% and rest of it is actually on the discrete automation it didn't looks a little bit different also in their order book in the two different businesses we are quiet.

Bjrn Klas Otto Rosengren: We have a smaller order book in robotics today than we have in discrete algorithms. And you probably remember when, during that time when we had difficulty with the supply chain issues, we had quite a big build-up of orders in discrete automation, where we believe it should be sufficient for at least two more quarters on that side. Biolo Robotics is more depending on getting short cycle business in during this. Maybe I'll just say proportionately smaller because it's, of course, a smaller business as well, but Bjrn is absolutely right. If you look at before this whole supply hassle in machine automation orders, maybe sort of 200-300, we are still somewhere like 700, so we have, I don't know also.

Speaker Change #127: We have a smaller order book in robotics today than we have in discrete automation and you probably remember when during that time, where we had difficult with the supply chain issues. We had a quite a big building up of order book in the discrete automation, while we believe it should be sufficient for at least.

Speaker Change #127: Two two more quarters.

Speaker Change #127: That side by lower but robotics is more depending on getting short cycle business in during this period, maybe I'll, just say proportionately smaller because it's of course smaller business as well, but we are in is absolutely right. So if.

Speaker Change #127: If you look at before this whole supply hustle.

Speaker Change #127: Imagine automation the order book was maybe sort of two or 300, we are still somewhere like 700. So we have I don't know you know a couple of quarters still to execute from the order book and then we will need to see in machine automation also improvement in short cycle, whereas in robotics, we are expecting that to start to happen.

Bjrn Klas Otto Rosengren: OK. Okay, great. And on the EL as well, could you just comment on the short cycle? You mentioned ray voltage in the answer to the last question. Yeah, a little short on that. I mean, on the electrification, it's a little bit different. I think this is a more solidly ordered book right over. So on the low voltage, of course, a lot of the breaking business, or we call it smart power, continues to be very, very strong in our book where we've seen some headwinds for quite some a long time is in the smart building part of it. And it's very much related to the German market, where they have taken the measures to adjust the organization. And you've seen some of those restructuring costs taken during the fourth quarter actually relate to that. But it's quite clear also that the DS, the medium voltage part of the package, is where you see the best improvement during the year, both when it comes to orders as well as financial performance. Exactly. And as I

Speaker Change #127: Already earlier as we said.

Speaker Change #128: Okay, Okay great.

Speaker Change #128: On the EBITDA as well could you just comment on the short cycle, you mentioned low voltage in the answer to the last question. So yes.

Speaker Change #129: Yeah lizard shorter.

Speaker Change #129: Electrification is it's a little bit different I see this as a more solid order book right. All of US are on the low voltage of course with a lot on their break your business or we call. It smart power continued to be very very strong and our book, where we seen some headwind.

Speaker Change #129: For quite some long time, you've seen this smart building part of it and it's very much related to the German.

Speaker Change #129: Market, where but they have taken the.

Speaker Change #129: The measures to adjust the organization and you've seen some of those restructuring costs taken during the fourth quarter actually related to that but it's quite clear also that the D. S.

Speaker Change #129: Medium voltage part of the package is is where you're seeing the best improvement during the year.

Speaker Change #129: When it comes to orders in as well as financial perform that exactly and that's as I said.

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