Q4 2024 ABB Ltd Earnings Call
I have our CEO Morten Veeva and our CFO T Mo young with did I hear next to me.
And I'm also an old had Dolby Investor Relations Martin and T. Mo will take you through the results presentation after which we'll open for Q&A.
So with that said and without further Ado Martin would you kick it off thanks, Onthe and a warm welcome also from my side.
Let's start by taking a look at the full year 'twenty 'twenty, four which was a new record year for us in many ways. We improved on most of our financial headlines and on the sustainability side one of the highlights supposed to get over scope, one two and three targets approved by the S. P T I.
Taking a high level market's perspective, I would say it was a continued robust trading environment in three out of our four business areas.
Orders in our short cycle businesses improved in the mid single digit range, which offset the impact from large orders softening from last year's high level.
Electrification, most the big growth engine and I think it is fair to say that both the robotics and discrete automation as well as E mobility part of worse than what they originally expected.
From here on these two should be less of a drag on group performance.
Despite some of our business, that's not yet delivering to their full potential the operational EBITA was up by 10%. We took another step towards the high end of our margin target range as we achieved a new record level of 18, 1%.
We did this with strong support from higher gross margin, which reached the all time high of 37.4% I'm pleased about the good progress we're making here.
Earnings per share was up by 6% and I know that team always happy about us delivering on our ambition ambitions to improve free cash flow.
The third point 9 billion corresponds to a free cash flow margin of 12%, making it the second consecutive year at this double digit level cash flow should be good also going forward.
Another strong point for US is road see at 22, 9%, we will become more transparent with rotary <unk> and T mobile talk about that later on.
Towards the end of the year, we also got a better momentum for M&A base.
Based on the deals we have already announced but not closed we set ourselves up to approach our long term target range for acquired growth in 2025.
Our strong balance sheet supports more acquisition and they want to utilize it.
All in all it was a good year for ABB and the board has proposed a dividend increase or three rapid to 0.9 Swiss franc.
The cash distribution is in addition to the 1 billion, we have used for share buybacks in 2024.
And today, we announced a new and larger program of up to $1 5 billion, we should start to execute in the early days of February.
To finish off our 2024 I want to say that I'm proud of what we have as a team have accomplished we stay true to our strategy, including the ABB way model.
And we are still making our operations more efficient and transparent as we increase accountability, even further down in our organization.
We continuously look at how we can optimize silver business portfolio, which is positioned at the core of the energy transition as well as energy and automation efficiency.
And I look forward to 2025, what I'm confident we will yet again deliver some new records.
So.
Let's now look at the fourth quarter in isolation, which in my view represents a good ending to the year.
The strong growth in short cycle orders more than offset a lower level of incoming large orders for which the base was really high.
In total our comparable orders increased by 7% driven by a stellar performance in electrification.
Robotics and discrete automation turned a corner by delivering positive order growth. Despite an adverse impact from the team having gone back to customers to recall reconfirm the backlog.
Speaker Change: T mobile talk through the details on the hour I slide later on.
Speaker Change: But without these de bookings our group orders would have been two percentage points higher.
Speaker Change: Looking at the income statement, you'll see that we improved on virtually all lines. The 5% comparable revenue growth was mainly driven by higher volume, but also by positive pricing of about 1%.
Speaker Change: This generated a good drop through to operational EBITDA, driven by a higher gross margin outcome.
Speaker Change: I'll come back to that on the earnings slide.
Speaker Change: Some of you may remember that I mentioned, our brand positioning.
Speaker Change: We have no launched over new tagline engineered to outrun it.
Speaker Change: I think nicely up represent who we are and what we do we help industries out run leaner and cleaner to be it articulates, what we want to be known for in the minds of our customers. This is a long term project, but assuming we do it right. We should have a commercial upside from a more focused.
Speaker Change: Industrial pump Sydney.
Speaker Change: And again this has not been a higher spend we will simply be more focused.
Speaker Change: At the Q3 presentation I talked about data centers and how we are first in the market with a medium voltage switchgear.
Speaker Change: That's been a lot of AI related news flow recently or objective is to make data centers more capex and energy efficient and I am sure that this will continue to be a focus point for our customers.
Speaker Change: We invest and innovate to create customer value.
Speaker Change: We are now receiving orders for the so-called hyper guard medium voltage UBS system. These springs ever better UBS solutions, when the server power rack requirements goes up.
Speaker Change: This means that we also can help customers to reduce their capex spend by up to 30% reduced complexity and become a more energy efficient in their next generation of data Center design.
Speaker Change: I look forward to follow the team's progress in this area.
Speaker Change: As you can see here in the chart to the left the pattern suggests a softer order intake towards the end of the year and book to Bill tends to be negative in our fourth quarters. So also this year at Cedar point 94.
Speaker Change: In my view it was a solid order quarter, which adds to my confidence for a positive book to bill for the full year or 2025.
Speaker Change: It was good to see that despite the second highest base ever for large order, we managed to deliver comparable order growth of 7% to $8.1 billion.
Speaker Change: This was driven by a strong growth in our short cycle businesses, which delivered a low double digit improvement from last year.
Speaker Change: It improved in three out of four business areas with electrification being the outperformer.
Speaker Change: The short version is that the trading environment remained robust in most customer segments.
Speaker Change: Sept for weakness linked to discrete automation and the E mobility businesses.
Speaker Change: Looking a bit deeper into the details both data centers and utilities stand out on the strong side.
Speaker Change: Order growth was good also with the building segment as the persistent weakness in China was more than offset by other regions.
Speaker Change: The motive is still a challenge for our robotics business, but this quarter. It was actually a positive on orders.
Speaker Change: Transport and infrastructure are generally solid although marine and rail were down due to the timing of large orders. If he now switch to the revenue chart. The $8 6 billion, we delivered well supported by backlog execution as well as conversion a recent uptick in short cycle orders.
Speaker Change: Notably the $8 6 billion is the highest quarterly level ever from a b D and he goes up by 5% on a comparable basis with a positive development in three out of our four business areas.
Speaker Change: Now looking at the regional orders, we were up in all three regions, China continues to be a challenge in several customer segments, but the negative 11% you see stated on this slide is impacted by the backlog adjustments in robotics and discrete automation excluding.
Speaker Change: Excluding this China is down by the more limited 1%, but.
Speaker Change: But as a total Asia Middle East Africa was up by 4% weak weakness in China offset by strength elsewhere in the region.
Speaker Change: The Americas improved by 7% and continues to be the most robust area driven by the U S, where however quarterly growth was limited to 1% due to last year's high base.
Speaker Change: Europe was up by 9% with a strong improvement in many of the larger markets, including Germany, although from a low level.
Speaker Change: The seasonal pattern is visible also in the earnings and margin chart, but importantly, it shows that we continue to improve performance they're.
Speaker Change: We are making further progress on the gross margin.
Speaker Change: The 35, 5% is up by 100 basis points from last year, and we offset the intentionally higher R&D spend while they manage to keep SG&A more or less stable.
Speaker Change: The underlying corporate and other costs of about $60 million were slightly lower than the 75 million. We had expected as we benefited from a settlement in our noncore project.
Speaker Change: Operational EBITDA was up by 8% and we improved the margin by 40 basis points to 16, 7%.
Speaker Change: This means that we delivered the highest fourth quarter margin on record.
Speaker Change: And as I mentioned earlier, we achieved a new all time high for 2024 as a whole.
Speaker Change: The way I see it we are in a good position to nudge the margin North also in 2025.
Speaker Change: Now I'll hand over to U T Mo to give you some more color on the different business areas.
Speaker Change: Thanks, Martin and welcome to you all from my side as well.
Speaker Change: And we start with electrification, where comparable orders were up by as much as 16%.
Speaker Change: The quality of this order growth was in my view underpinned by the fact that we had improvements across most of the divisions as well as across regions.
Speaker Change: Data centers and utilities continues to be strong areas.
Speaker Change: The building segment also contributed in a good way, where we on the commercial side saw good momentum in both the U S and Europe.
Speaker Change: In the residential area. It was broadly stable at low levels outside of China, which is persistently weak for both residential and commercial.
Speaker Change: Now if you look at the chart in the Middle you will see that the electrification achieved another milestone.
Speaker Change: With the 11% comparable revenue growth they for the first time surpassed quarterly revenues of more than $4 billion.
Speaker Change: All divisions contributed with higher revenues, which came primarily from higher volumes with some additional support from price.
The outcome was even a bit better than our expectations on back of higher project deliveries.
Speaker Change: Electrification improved operational EBITDA by 19% to $863 million, resulting in a margin of 21, 3%.
The gauge with gains from higher volumes and price more than offset higher expenses, mainly related to R&D, but also for SG&A as well as the stronger than expected adverse revenue mix towards project business looking into the first quarter. We currently expect a.
Speaker Change: Mid to high single digit growth rate in comparable revenues and the operational EBITA margin to remain broadly stable or slightly increased from last year.
Speaker Change: Let's then flip the motion where orders remained around 1.9 billion level down 3% on comparable basis.
Speaker Change: The short cycle orders improved but this was offset by lower project and Sue stem related orders, where the comparable was one of the highest ever.
Speaker Change: We saw a favorable order development in commercial buildings Patriarch as well as in water and waste water and power generation.
Speaker Change: The softer areas included the process related segments of oil and gas chemicals, and food and beverage rail.
Speaker Change: Rail also declined but this was mainly linked to the large order comparable I just mentioned.
Speaker Change: In the revenue chart, you see that motion comparable revenues was up by 6%, resulting in a record quarter of promotion for the first time above 2 billion.
Speaker Change: Most divisions. So a positive development supported mainly by strong backlog execution, resulting in higher volumes, but also by some positive pricing.
Speaker Change: The higher volumes as well as operational improvements contributed to a strong margin improvement of 210 basis points to 18.7%.
Speaker Change: I should mention that the part of the improvement relates to the one time product quality cost, which weighted on last year's margin by approximately 60 basis points, but.
Speaker Change: But importantly, the higher profitability is more an outcome of benefits from higher comparable revenues and efficiencies, which clearly offset the higher spend in R&D and SG&A.
Speaker Change: For the first quarter, we anticipate a mid to high single digit comparable revenue growth and the operational EBITA margin to slightly improve year on year.
Speaker Change: Turning now to slide 11, and process automation, where the market environment is solid.
Speaker Change: Total orders remained broadly stable despite the tough large order base.
Speaker Change: This resulted in be a continuing their streak of positive book to Bill for now seven deans straight quarter.
Speaker Change: The underlying trading environment is still robust in the marine and Port segment. Although this time quarterly orders declined due to a large 150 million booking last year.
Speaker Change: A stable to positive order development was noted in most of the energy and process the industrial related segments with weakness noted primarily in chemicals.
Speaker Change: Without the nation improved comparable revenues by 4% due mainly to execution of the large order backlog, which added support from pricing in the product business and food service growth.
Speaker Change: The backlog execution comes through at the higher gross margin.
Speaker Change: This helped driving operational EBITA up by eight percentage points from last year with a 40 basis points of margin improvement to 14.4%.
Speaker Change: Looking at our expectations for the first quarter before see comparable revenues to improve in the mid single digit range and the operational EBITA margin to be broadly stable year on year.
Speaker Change: Now, we turn to robotics, and discrete automation, where orders turned to positive growth after eight consecutive quarters in decline.
It has been an unusual it's durable it's time for I R E. When markets have corrected after a steven's significant pre buy period.
Speaker Change: We have now complete did a thorough analysis of the backlog, which included going back to customers to reconfirm status.
Speaker Change: This triggered a deep bookings of about $130 million in what is now a reconfirmed order book.
Speaker Change: The majority of the impact was linked to machine automation and China.
Speaker Change: And reduced the business areas comparable order growth by 24%.
Speaker Change: With that said, excluding the D bookings the strong year on year order growth good appear as a very big improvement in the underlying demand.
Speaker Change: I would comment that it is more linked to last years very low base as we have not seen a big change in the market environment versus what we saw in the third quarter in either of the divisions.
Speaker Change: So looking beyond the backlog adjustment remote robotics division saw positive order development in the automotive sector.
Speaker Change: The segment remains challenging but in this quarter, we benefited from ramp ups or in hybrids as well as by some replacement capex.
Speaker Change: Other positives were the areas of general industry, and food and beverage, while electronics and metals were muted.
Speaker Change: Imagine automation of course from our customers remained focused on inventory management and we stick to our earlier predictions that these will east toward the end of first quarter or at latest during Q2.
Speaker Change: But we expect a slight sequential order increase in both divisions.
Speaker Change: Okay.
Speaker Change: Of 2025, when excluding the burglar correction, we have just talked about.
Speaker Change: Moving now the revenues the robotics division executed on their backlog, resulting in a low double digit growth rates for comparable revenues.
Speaker Change: This was however, clearly offset by significant lower significantly lower volumes in machine automation.
Speaker Change: The previously announced cost savings measures in Martin automation is increasingly coming through but did not compensate for the lower production volumes.
Speaker Change: So while robotics delivered a double digit margin the total operational EBITA almost path with a margin at seven 9%.
Speaker Change: For our E. In the first quarter, we expect the absolute revenues and operational EBITA margin to remain broadly stable versus Q4.
Speaker Change: We ended the year by delivering free cash flow of $1.3 billion in the fourth quarter. These in combination with our strong cash generation from the first nine months resulted in the annual free cash flow of $3 9 billion, meaning we have delivered on our ambition.
Speaker Change: Step up from last year.
Speaker Change: As Martin mentioned cash flow should be a good also in 2025 and I see it being in the similar 224 level.
Speaker Change: Looking at the fourth quarter in separation the free cash flow decreased by approximately $420 million.
Speaker Change: The improvement in operational performance was offset by less reduction in networking capital of words as previous year.
Speaker Change: Net working capital management has been an area of strong internal focus this year and I was very pleased to see that we were able to bring the net working capital as a percentage of revenues down to eight 6%.
Speaker Change: This actually is in line with where we were prior to the supply chain crisis, a job really well done by the team.
Speaker Change: Taking a look at the Rosy development you see in the chart that the 22.9%. We reached is again clearly above our target of greater than 18% Roe.
Speaker Change: Rosa improved by 180 basis points, driven mainly by better operational performance, but also by our focus on networking capital.
Speaker Change: Overall, the improved Rosie is a good indicator that we continue to improve ABB is long term performance and are really operating at the best in class level.
Speaker Change: Before I hand back the more than I want to mention some reporting changes that will come into effect as from Q1.
Speaker Change: With these changes we want to more closely align our reporting with our day to day operations with the aim to drive operational focus and improvement on our gross margin net working capital and return on capital employed.
Speaker Change: Firstly, we will be reclassifying certain idea cost from gross margin and we report them based on the nature of the system rather than by head count allocation.
Speaker Change: This will allow us to move more closely to track gross margin and cost directly linked to the business and hold our functions accountable for the cost associated with their infrastructure.
Speaker Change: Secondly to take another step in our efforts on capital efficiency, we are introducing a new measure focused purely on trade net working capital.
Speaker Change: It means that these kpis will include only trade receivables and payables contract balance sheets and accrued liabilities.
Speaker Change: These will be the ratio that we will present as a percentage of revenue and we will use fourth quarter average to smooth the seasonality of the networking capital, which tends to be front end loaded in the year.
Speaker Change: And lastly, we will better align the Rosa calculation with operations by using the estimated operational tax rate and also for these kpis base the calculation on the four quarter average to remove seasonality.
Speaker Change: All restated our new numbers will be on the IR website in February and will that I will hand back over to you Morten. Thanks Namal.
Morten: So let's finish off the outlook and I've already alluded to a positive development in 2025.
Morten: We acknowledge that there are geopolitical market related uncertainties and at the moment the strong U S. Dollar put some pressure on numbers, but from what we see right now we expect a positive book to bill comparable revenue growth in the mid single digit range and the operational EBIT margin to improve from last year.
Morten: For the first quarter, we foresee growth for comparable revenues in the mid single digit range.
Morten: And operational EBIT, a margin to remain broadly stable year on year.
Morten: So now Onthe, let's open up for questions, Yes, let's do it.
Morten: Quick reminder, for those of you who have dialed in on the phone. Please press Star 14 to register to ask a question.
Morten: And also please remember 10 years the webcast as your line is open and limit it to one question place. This way we allow for as many of you as possible too bad.
Morten: You can also put questions through the online tool in the webcast and I will then voice familiar from here.
Speaker Change: That hey, it's time for Q&A, but before we would take the first question I just want to let you know that T. Mo as you see it will not be able to join us for the Q&A session due to personal reasons.
Morten: Today, It's even me Morten.
Speaker Change: Indeed, and with that said and we open up the line for the first question and it should come from Martin at city with a small team.
Martin: Good morning. Thank you it's Martin from Citi. The question I had was in.
Martin: In exploration and particularly data centers, obviously, a lot of market debate over the last week or so on the efficiency of BT consumer and I realize it's way too early to too easy to just say on what's happening with your business, but just so we can understand a bit more about what's happening in data centers you backlog overall EEO is too close to peak could you.
Martin: Give us some numbers on big centers within that and also a portion of that have lead times on some of the products that were clearly in some supply constraint for a while is that beginning to normalize how should we think about that.
Martin: Backlog conversion when it comes to some of those products within data centers. Thank you, okay, well, thanks Martin I'll.
Martin: I'll start with that I mean, the whole data center market last week with first talked about the 500 billion dollar investments in machine learning and then we had deep seek on Monday that kind of also stirred the pot. So to say this week. So it's been in a new market like the data center.
Martin: It is a changing talking with all of our customers our partners the last two days.
Martin: Oh, the reconfirmation that the investment plans stance as it was beef from last week. It hasn't change to this week so that I can confirm all those early early discussions.
Martin: To give you a bit of the size sold through our data center business. We gave a Ah in 2023, it was 12% of our order intake in the electrification in.
Martin: In 2024, it reached 15%.
Martin: So and with good growth on the rest of the business. It shows also what kind of magnitude. We are talking here of growth rates. So we see that that a positive development will happen.
Martin: I would rather say, it's a good thing if we get more energy efficiency into some of the algorithms or in the deep learning more.
Martin: The large language models that are being used.
Martin: Because if we would kind of take a bit down the constrain on or reduce some of the bottlenecks that we are facing in this industry. When we look to some years ahead.
Martin: As you know over engagement there is very much on the medium voltage and low voltage switchgear side. This is gave us all that infrastructure into data center, but also the U P. S system Sanofi.
Martin: As I already mentioned today was the.
Martin: The good win also that we have more now getting get traction on medium voltage UBS that means we're taking equipment out of the the more of the white space or they have a data center or inside the data center and to an outside facility, which again.
Martin: Sorry, it reduces the capex, but also it really increases energy efficiency. So I'd say for us that's a great way and that's something I'm really proud of what the team have done from an organic it shows technology leadership from the from the team. So we are still confident in the data center market AI will be widely deployed and moored Dave.
Martin: The centers and more more investments as needed to be able to support it and I think the lower the cost of it the wider the deployment. So therefore I'm still are very optimistic.
Martin: When I look to the future of data centers.
Martin: And if I may add to your sort of comments. So a question on the so the lead times are related to the data centers.
Martin: When I speak to the Guy I mean, let's say, we know Halloween at about 35 weeks, which is still higher than what it used to be historically, but it has come down from let's say topping out at 50 ish.
Martin: Yep.
Martin: Great.
Martin: Very helpful. Thank you.
Martin: Hunting and we take the next question from Alex place Saga.
Alex: Yes. Thanks.
Alex: To you and welcome to Martin Martin I Beg your pardon.
Alex: I Wonder if you could just go through a little bit on this.
Alex: Margin improvement guidance.
Alex: So if I think last year, you guided to a slight improvements and delivered 120 basis points.
Alex: This time around you're talking about improvements I think you mentioned.
Alex: Nudge on the call a little bit earlier on.
Alex: I looked at the starting points.
Alex: You're 100 basis points or so higher on gross margins you were talking to further pricing tailwind you've got robotics recovery and mid single digit organic growth, which means your operating leverage should support decent margins as well what are the headwinds what are the what are the mix comments you made I guess.
Alex: And I'm, just trying to clarify what.
Alex: Lights, nudge improvement et cetera might actually mean, thank you.
Alex: Thank you I like maybe it was part of it and have a go and see where we end.
Alex: Well I think just guess too for a bit.
Alex: The starting point the improvement in 'twenty three to 'twenty four.
Alex: And to some extent driven by the coast to coast actually being lower than what we originally guided for which helped us with about 40 basis points in the 'twenty to 'twenty four miles in the 'twenty 'twenty four imprisonment.
Alex: Now going into 2025, we have the results of that say, we come from a lower level of corporate cost and we are guiding now for 300, which is like 40 bps headwind. Just so we have that Frank and then if we just talk little bit about the puts and takes here I like to say, we have the comparable revenue growth.
Alex: We told me he should help us in terms of operational leverage.
Alex: And then on the other sort of bucket we have.
Alex: And the corporate costs just mentioned.
Alex: The make and while always should improve its still sort of a negative mix on the total with higher proportion of revenues stemming from hopefully from the robotics and discrete automation.
Alex: And I think in terms of improvement potential while we still see you I think there's some stephanie to your tests now mocked in but we still have improvement potential from the sort of pushing the ABB weigh into our organization further but may be were coming maybe they've been improvement potential isn't as big as it was.
Alex: Maybe you want to allude to that model.
Alex: I always say is one of my kind of guiding principles to everyone is that we never want to go backwards and therefore, we are always looking for how we can improve and that goes for every business area and the and that kind of gives us start gives us starting point and then you mentioned already some of the operational.
Alex: <unk> perform performance are opportunities that we have.
Alex: When you get a revenue growth in our type of business. So that's that's there but then we also have a.
Alex: So honestly I was referring to.
Alex: If you had been factors that we also need to take it but we are looking for a new record performance in 2025 for maybe be up from the $18 one where we ended in the 24. So that's what we are guiding for.
Alex: Okay. Thank you.
Will: Thanks, and we open up for the next question from will at catalyst.
Max: No we try and Max.
Speaker Change: Yes, yes, I'm here, yes, very good.
Speaker Change: Good morning to you.
Speaker Change: <unk>. Thanks for the time I guess my question would go to the cash flow guidance, where you've said it will be similar I'm just thinking if you can walk through some of the main reasons why it would be similar given that we should expect good revenue growth margin expansion and further.
Speaker Change: The improvements in the management of operational networking capital.
Speaker Change: So some of the key lever is there with perhaps the exception of Capex should all point to a much better.
Speaker Change: Further gains in free cash flow performance. So what is it and if it's capex could you maybe allude on where the investment growth is concentrated thank you.
Speaker Change: Yeah. So let me start with this and answer you can follow up there. It starts with Capex investments that we are increasing we did that also in 2024 and it is to secure the growth this is especially.
Speaker Change: Related to over our electrification business and especially to North America, but also to in India, where we have significant these are growth markets and we're also allocating capex to those two are two markets. So that is our you will see more this is not new always new investment. These are mostly expansion of.
Speaker Change: All of existing facilities.
Speaker Change: We have a quite a long list of facilities that will get 50, or even up to 100% larger footprint, but also more automation more robotics more automation on the factory floor of those units. So that we can be even more of what we're talking about local for local that we can support that initiative avoiding any.
Speaker Change: Ty rates or any changes in trade that we may face. So this is kind of how we continue to build resiliency and capacity of the business. So that's where the capex, taking so that is part of the question, but the order of the answer to it.
Speaker Change: I don't see it maybe you have a couple of more comments as well well I think I think you sort of framed it well with the sort of capex being they in their in the negative bucket if we.
Speaker Change: Managed to deliver similar to what we had in 'twenty 'twenty four away from managed to bunch it up a little bit, let's wait and see how it goes but ballpark that.
Speaker Change: Thank you.
Speaker Change: And.
Max: Now we try the next question from Max at Morgan Stanley Max Your lines.
Max: Good morning, Thanks for the.
Max: Thanks for the question I guess I just wanted to dig into the electrification grows the best and when I look when I look at your kind of commentary on your electrification growth over the past few quarters. It feels like it's not just the data centers and grid bits I mean, you've talked about kind of thing.
Max: Non data center growing double digit and it feels like look construction markets are not fantastic in either residential commercial is okay, but it feels like your orders are growing at a much faster rate and specifically the construction vertical so.
Max: Just wondering can you talk a little bit about what is driving that because it definitely feels like your orders are growing faster than underlying construction demand.
Max: Is this kind of the electrification of building small power protection is this market share gains and would you agree with that statement that if kind of building in the markets are growing.
Max: Low to mid single digit maybe in commercial youll growing much faster. So maybe just unpacking some of that would be really helpful. Thank you.
Max: It is as you say we are the electrification of everything is kind of always a red thread that goes through all geographies that piece Americas Asia or Europe. So that that is happening that is kind of what is the underlying growth of it.
Max: The.
Max: Commercial building.
Max: So we see some improvement the residential is still being weak so.
Max: We still have kind of upside from more of the traditional industries when they come back, but we have to remember that a lot of the what's happening in the industry today. When we're talking about decarbonization is about moving them into a kind of new equipment taking.
Max: A diesel or a gas turbine generator and replacing that with electric electric propulsion. These are are where electrification is needed it benefits our motion business, but it ain't over process automation, but also for every thing of these application you need electric switchgear electric deal.
Max: ISIS studies, because none of them there are no electric motor is able to turn without the power without electricity to the connection point that all of that comes from switchgear and had the electrification business. So that is kind of an underlying foundation that everything that's happening in industries. So this is why you see the expert.
Max: <unk> trend kind of being in now more of a kind of an independent audit pure GDP or general market growth. It is that that kicker so that is.
Max: What is driving really the performance also of the electrification business and they knew how force have.
Max: The data center on top as the turbocharger for say for that business, where you take it from 10 to 11 up to 16% in this quarter. So that's kind of how things are hanging together.
Max: Okay. Thank you very much. Thank you and I will cut in with a question here from let's say, yes, they're on the through the online tool. So it wasn't related to electrification and he says he is that how you project mix and that hit electrification margins in care for temporary or should we expect to sustain given the strong project orders.
Max: As for the Q4. This is both a special quarter, where we had a very.
Max: Strong revenue was the first time more than $4 billion. It was more system versus product balance than what we normally face an oversold over the year so at Boston.
Max: An abnormal situation in for Q4 versus what we see through the year, but also what we expect for the future. So they showed more looking at the year to date than the last three months in isolation. So because there is.
Max: No kind of change in that business. When you look at the different parts of it but it was more of this mixed picture in the fourth quarter, where we have significantly more.
Max: Large project deliveries that went out.
Max: And it was the same also in the motion business.
Max: I'm sure we get that question as well later, because we cannot use the excuse or explanation is probably the right term.
Max: The Q3 numbers, we got questions wireless motion low in revenues and I always say, we talked about project delays you could see now in the numbers in the fourth quarter that the revenue really came out also in motion where the for the first time ever about $2 billion in the motion business levels, because now some of those deals.
Max: We were able to catch up so good to see that also coming through in the revenue numbers promotion.
Max: Okay. Good.
Max: And then we open up the line for James that went bad.
Max: You bet.
Max: I supposed to James earlier today, I don't know he's had some I T and shifts and it seems like they continue so we put James on hold for now and move to Daniela and Goldman Sachs Daniela.
Speaker Change: Your line open.
Daniela: Hello can you hear me.
Speaker Change: Well now we can hear you James.
Speaker Change: Alright.
Speaker Change: From you, saying that I can talk to the line being Amit and I think that's why you couldn't EMEA and some others and thanks for the question Antigua and.
Speaker Change: Could I just clarify did you mention the percentage order growth number for data center in it if you didn't could you but my question was on the books and automation business. When you talk about sort of margin of 8% in the first quarter roughly flat does that include any of the <unk>.
Speaker Change: <unk>, having already yet to come through.
Speaker Change: And what is the timing on the savings.
Speaker Change: How should that sort of drive presumably the MA business is just sort of a breakeven business can we be double digits at the end of the year when those savings come through I'm, just trying to understand that the shape and the timing of that.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: No I think savings all started to come through in the MMA business, we started to see it come through towards the end of the quarter, but given the lower volumes they have in their production that under absorption it.
Speaker Change: Still sort of impacting them, so while and hold them already business area sort of benefits from the double digit margin in robotics.
Speaker Change: And in my business is still very very weak side of it.
Speaker Change: Due to that low volume per trade.
Speaker Change: We said that the inventory adjustments among customers should come towards finalization towards the end of Q1.
Speaker Change: The latest during the second quarter, so with that said, we should still see handset performance in machine automation also in Q1, hence the guidance for our a S. A total I hope that helps.
Speaker Change: And I can add there to the your question around datacenter growth I think what we have said earlier is we had from 2019 to 24, we had a CAGR of 25% in that segment and.
Speaker Change: I'd say in 24 of us are pulling that number up and not down without going into more detail on that.
Speaker Change: Okay, and when you say that it would have been 10 11 without <unk> 16, with its and playing around with the share as it does that mean, you were like 30 or 40% in the fourth quarter.
Speaker Change: I think that would be the mathematic.
Speaker Change: Calculation.
Speaker Change: Yeah, great. Thanks very much.
Speaker Change: Okay. Thanks, James and now we try to put things right again by opening up the line for Daniela.
Daniela: Hi, Good morning, hopefully you can hear me okay.
Speaker Change: The first thing I have a follow up on in terms of thinking about the electrification.
Speaker Change: Our margin for for next for 2025, and if you could help US one what do you see in the backlog in terms of the mix for delivery in 2005 and electrification and also given how strong the growth in the end market across the board has been in the capacity constraints do you see price stronger pricing there than in other parts of the of the group.
Speaker Change: Talking about pricing for 2024, we got about 1%.
Speaker Change: For the group out of price almost the same in the electrification business. So we're a bit more to the back to the situation of own sales for referred to over lead times today, It's more it's not back to let's say normal but it is shorter so the capacity is more in place, which also leads to I don't expect a lot of help from price.
Speaker Change: In a in a in.
Speaker Change: In 2025, so it's more of the self help that is needed, but I am happy to see this year. If I shall also been driving performance in 'twenty four is that the traditional work of supply management of continuous improvement more automation more productivity in the units that is also driving the performance and that is a part of the DNA.
Speaker Change: The electrification team as you know I I know, though that seem very well, let's say I was running it up until last summer and I know that that work is just a continuous ongoing program or improvement year by year end and that is not stopping that is our need to continue on with that pace. So.
Speaker Change: That is and we will see of course revenue growth and therefore expect also a drop through and end up having improvements also in that doesn't say, we always want to improve in every business areas. In every business that we operate and that goes also for electrification even they are performing.
Speaker Change: Really well in 'twenty four we expect even more in 'twenty five.
Speaker Change: And then the mix.
Speaker Change: I would say that we don't see a law, we don't see any significant change of mix in the year or 25. It may be as we have now in the fourth quarter you could have a quarterly mix changes, but for the full year, we don't see any significant change in mix now.
Speaker Change: Got it. Thank you thanks, Daniela and we open up for banner Yoga Your line should be open. Thank you.
Speaker Change: Morning, Mutlu Nancy Thank you for taking the question.
Speaker Change: My question really broadly to China.
Martin Martin: Martin can you give us a sense of what you'll see on the ground qualitatively.
Speaker Change: That.
Speaker Change: Reported backlog issue it looks somewhat stable I'm kind of interested in what you're hearing in electrification because they reach obviously takes the change of business going on in China.
Speaker Change: Sorry.
Speaker Change: Motion just just we talked to them about stimulus we've been waiting for things to get better do you see any green shoots or is it premature.
Speaker Change: It is still premature to we don't see it yet right now our Chinese colleagues ace on Chinese new year.
Speaker Change: And you know that.
Speaker Change: So when they are back in the office next Wednesday, I think you will see also a lot of things will be starting in China at least that is often how the Chinese market is working that post Chinese new year. The you will see a lot of the activities and that's also what I think versus things were decided in October last year. It takes time to implement so we.
Speaker Change: Haven't seen it yet I am though optimistic that some of these measures that has been taken will play an effect, especially in the renovation declaration of apartments and buildings I don't expect any building boom in China, you would not see that those new new residential or even <unk>.
Speaker Change: Building and not see a boom there but to have this opportunity on the renovation, which is a big portion of the part of the building business in electrification, where we do see.
Speaker Change: Strong growth. These days is in the utility space integration of renewables more in the solar and wind that is going and the data center business is growing very well in China as it does at all over the world. So that's the they are when we look at China. The different segments is kind of from the plus.
Speaker Change: The 22, the minus 20, that's kind of where we ended up at minus one when you take out the order cancellation for the fourth quarter to kind of so China is a it's a mix between a has been a bit between the frozen ice sudden and boiling water. That's the that's been a bit the average when we look into the market.
Speaker Change: So all the job also as a company is to fly to take advantage of those growth opportunity that does exist in China, and maximize that and not kind of sit back and wait for you all or some of the traditional applications to to come back that will still take some sometime before the kind of the building construction market this space back.
Speaker Change: In China that will still I don't expect that to come back in 'twenty five.
Speaker Change: That's great. Thank you very much thanks Ben.
Andreas: And we move on to Andreas from UBS.
Speaker Change: Okay.
Andreas: Oh Hi, good morning. Thank you for taking my question I, just wanted to dig into ABB way contribution a bit more you said that it contributed meaningfully in 2024, you expect to get less.
Andreas: 20 to 25 could you give us some idea of how much it helped the margin in 2024.
Andreas: Just thinking more broadly about the scope for you.
Andreas: Kind of looking into under the Hood as I think he said in Boston Dion said.
Andreas: Business areas and looking at the overheads that sit there business area level that should really be pushed into business units.
Andreas: What is the scope of the opportunity here altogether.
Andreas: Oh yeah.
Andreas: We are now in the process and many of the division has already completed the rest is underway by setting up their divisions in what we call business lines and when we do that B will be we are around 80 business lines for those 18 operating divisions, that's how we divide the company.
Andreas: And today, 75% of the revenue of ABB in the divisions sits in a in that growth mode, which means that 25% is then under profitability improvement or under a into the stability mode that we have one which is the.
Andreas: Machine automation division, but they also do this I'll say further down in the business and that's the for me. It's two things, it's how we drive the right behaviors. When it comes to target setting incentive plans, but then also the behavior. How you act in the market yeah. Its important theyre down on a business line level and it's also.
Andreas: It builds resilience when you see one division or one business line within a division is facing more of headwinds. They are expected to take actions and act quickly faster and to deal with the challenge even if the overall division is running well and that's kind of the ownership to performance.
Andreas: With that I liked what I kind of I appreciate that you see because that builds resilient not just to take a growth opportunity.
Andreas: So antibodies are of course also to to watch any downturn more performance that you need to act quickly even if your brothers and sisters decide is doing well if you're not performing you need to take actions in and fix it I think that's the for me if they both the opportunity for growth, but it's also to build that resilience overtime that people take actions.
Andreas: Right away. So we don't need large corporate programs to do cost savings. This is on everybody's agenda us everyday and I think that's the and so there is as I say, 25% of their revenue or all of the business is still looking at how they have to focus even more on cost and operational improvement and 70.
Andreas: 5% still have to do that but they are also in play and expect it to do M&A, but I expect it to take more of a marketing investment and expand and grow the business faster.
Andreas: Right and then 2020 full contribution if I may.
Andreas: We are I mean, we removed from our survey already talked about from the $16 nine to 18.1 to say, how many basis points out of that came from the ABB where implementation I think is very it's very hard to quantify but I mean, what we do is that we have and I believe that this is.
Andreas: An important part to know how we over years now having moved from the 10 11 and now up to 18 and I also said that we will continue to take benefits out of the way of working and that will drive performance. So we can come up to the sort of kind of our next target is to reach that end all over margin corridor before.
Andreas: Before we move on.
Andreas: Great. Thank you.
Speaker Change: Andre and then we open up for <unk> at Cowen.
Speaker Change: Where are you with us.
Andreas: Yeah.
Andreas: Hey, guys can you hear me we can.
Andreas: Hey.
Speaker Change: Thanks for taking my question I was just curious about the margins in P. A I mean, you've had really good trends there on the top line and the orders you mentioned I think 17 quarters in a row positive.
Andreas: Are we kind of approaching like.
Andreas: Structural margins for the current portfolio and if so what what can you do there to push to the ceiling higher in the future.
Andreas: Oh, Thanks, a fact show there how we are driving performance. There is to say there we have again back to my last explanation on this business line setup is to grow these high margin business lines faster and also to looking at how can we expand those portfolios I was.
Andreas: Happy to see last year that we could make an acquisition in the field of in P. A M. In the measurement and analytics division and that goes into the two are the Thirtyish group in Germany that came on board, which is into an area where margins are significantly higher than that.
Andreas: Current P. A margin so that's a good expansion the same old. So we've made in the marine business a nice acquisition in the with Dts in the Netherlands, which is our AI based guiding sisters, where he can help ships navigate better than say fuels. This is another great example, I think in process automation of acquisitions that is built on over strength.
Andreas: In these industries and that we can expand the portfolio and therefore also drive both revenue, but also margins to a higher higher level. So, but again here margin improvement for self help but also to use to use the M&A to add two to see how we can grow.
Andreas: The higher margin segments that we are in already and how do we grow those faster than some let's say core more traditional where we know that the profit pool is not that high. So that is the the the journey. We are on land that is a it's a quite a few steps to take still before we we hit the anteater.
Andreas: Argot.
Andreas: Where sealy.
Andreas: Yeah.
Seth: Okay. Thank you and we'll move on to Seth at RBC.
Speaker Change: Can you hear us.
Seth: Yeah. Good morning, everyone and thank you for taking my question.
Seth: My question is on E mobility, whether you had another $72 million loss and it doesn't seem to be structurally improving.
Seth: I spoke to your colleagues this morning, Beth and she mentioned that theres not much fried dogs in that loss. So it seems to be all operating loss. So basically stopped our R&D costs development costs for the new product well I wonder what's the trajectory for E mobility going into 2025.
Seth: We still see heavy losses in the first half and then only an improvement when the new products are at or how shall we see that business no. Thank you.
Speaker Change: Yeah, I mean, we have taken.
Speaker Change: E mobility business was a big drag to the group in 2024 Ah I should say 270 plus million dollars of losses were in there also you have the write off some of the of inventory, but also the operational.
Speaker Change: Performance, we have continued to invest in technology to come up with that.
Speaker Change: Our competitive offering yeah. This today, it's all about the T 50, 50 kilowatts or the T 400 to 400 false charges kilowatts Chargers, which is today I would say based on what I hear from customer feedback that it's top of the line and it starts to become a product that will change these whole all of the business.
Speaker Change: Even with all the mobility is still take some time before you get that out in the market and we see that the revenue is being transferred from the old product portfolio to the new one therefore, you will see a sequential improvement which in this case means kind of removal of losses score a quarter by quarter until they come into a profit.
Speaker Change: Ability situations. So that's the so E mobility will still be a drag for in 'twenty five but are much smaller than what we faced in 24. So that will also have unsafe mentioned earlier will help US also in this year to improve the performance of the group.
Speaker Change: And on those thoughts.
Speaker Change: And if I may just shy, maybe I'm repeating now so I wasn't listening.
Speaker Change: But if I just try to frame sort of the.
Speaker Change: Yeah, No loss is expected in 2025, I mean on a high level expect sort of the half of the loss in 2025 and as you said, that's just 2024 and as he said the profile during the year will be sort of it will be backend loaded for when we see that sort of improved performance.
Speaker Change: Understood that makes sense. Thank you both very much.
Speaker Change: And we'll take our final question from Gael at Deutsche Bank.
Gael: Oh, Hi, Thank you morning to you all look it's been many years now that the ABB where programs be knowledge right. So.
Gael: Thing is the ABB where transformation expenses.
Speaker Change: Spectrum two remains fairly high once again in 2025, I think you mentioned.
Speaker Change: $150 million, so I mean at what point do we consider that these transformation expenses all right shoring.
Speaker Change: In nature.
Speaker Change: And more generally.
Speaker Change:
Speaker Change: Last year, there was a dearth friends. So it's about 200 bps between the adjusted EBIDTA margin.
Speaker Change: 401, So I was wondering why the business areas really feel accountable for all the items below the dine in and what could be done perhaps to make just pull foreman's cleanup.
Speaker Change: Sure.
Speaker Change: No.
Speaker Change: And running and we have been running at.
Speaker Change: Two significant programs, what we call internally finance transformation.
Speaker Change: Where are we now have all our financial reporting cloud based on one platform, which makes also a much better transparency internally. So we are and it also drives speed and efficiency internally. So those program that finance transformation program will come to an end now and 2012.
Speaker Change: Five by the half year.
Speaker Change: Other.
Speaker Change: Program that we have been running and with that we will also go live is a huge large HR transformation program, where we are implementing the use of workday as over one single tool.
Speaker Change: For all employees and we will go live by summer as well with that program. So 20 to 25 is the year, where you will see these programs being exit kind of executed. It was in 24. It's now in 25, and then you will see a lower cost but of course, we will work on.
Speaker Change: Let me make sure that we get the right right cost out and the right return on these investments we have done over the last few years and that is the <unk>.
Speaker Change: As for what is our target now for 26 and onwards. When now the we are fully when we will be fully up and running in the new environment.
Speaker Change: So I guess to summarize from from.
Speaker Change: A cost perspective, and as they the line of ABB transformation costs below the line should basically disappear after 2025.
Speaker Change: Great. Thank you very much.
Martin Martin: And with that we say thank you very much we made it Martin.
Speaker Change: They are the judges.
Speaker Change: True true and so we think it. Thank you very much and just as a quick reminder, I think I'll I hope you've seen that we've announced that we will have a capital markets day in the U S. In November.
Speaker Change: And hopefully see you before then but at least and I hope to see you there as well thank.
Speaker Change: Thank you very much.
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