Post on 14-Apr-2018
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ABB Investor PresentationSeptember 2012
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Safe-harbor statement
This presentation includes forward-looking information and statements including statements concerning theoutlook for our businesses. These statements are based on current expectations, estimates and projectionsabout the factors that may affect our future performance, including global economic conditions, the economicconditions of the regions and industries that are major markets for ABB Ltd. These expectations, estimatesand projections are generally identifiable by statements containing words such as expects, believes,estimates,targets,plans,outlook or similar expressions.There are numerous risks and uncertainties, many of which are beyond our control, that could cause our
actual results to differ materially from the forward-looking information and statements made in thispresentation and which could affect our ability to achieve any or all of our stated targets. The importantfactors that could cause such differences include, among others:
business risks associated with the with the volatile global economic environment and politicalconditions
costs associated with compliance activities
raw materials availability and prices
market acceptance of new products and services
changes in governmental regulations and currency exchange rates and
such other factors as may be discussed from time to time in ABB Ltds filings with the U.S.Securities and Exchange Commission, including its Annual Reports on Form 20-F.
Although ABB Ltd believes that its expectations reflected in any such forward-looking statement are basedupon reasonable assumptions, it can give no assurance that those expectations will be achieved.
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Introducing ABB
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ABB at a glanceABB: A company with global reach
$38 bnin revenue 2011
135 000+employees in
100countries
HQ located in
Zurich,Switzerland
Traded onSwitzerland,Sweden and
the US
Market Capitalization1
~$45 bn
1as of 31 December 2011
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ABB at a glanceABB operates in more than 100 countries in the world
Manufacturing sites
Sales offices
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Switch, protect, transform and measurepower transmission and distribution forindustries, utilities and power generation
Delivers systems for utilities, industrial andcommercial customers for the generation,transmission and distribution of electricity
ABB: A global leader in power and automationFive operating divisions: Two Power
Power Products
$10.9 billion1
Power Systems
$8.1 billion1
Market leader across most of the portfolio
12011 revenues non-consolidated
Power transmission & distributionsolutions for utilities and industry
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Integrated automationsolutions, movement andcontrol for industrialapplications
Products and solutions toprovide protection, controland measurement for LVelectrical installations
Products and solutions toprocess control, safety,energy and informationmanagement, plantmaintenance andperformance enhancement
ABB: A global leader in power and automationFive operating divisions: Three Automation
DiscreteAutomationand Motion
$8.8 billion1
Low VoltageProducts
$5.3 billion1
ProcessAutomation
$8.3 billion1
Among Top 3 in most markets
1 2011 revenues non-consolidated
Energy efficiency solutions for process industries (eg, oil &gas), factory automation and building & construction
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55% 30% 15%
Offering a diverse business mixProducts, systems & service
Systems
ServiceBusiness MixApprox. share of orders received 2011
Products
ABB engineersworking at onshoregas processing plant
Industrial robots infurniture industry
Power GenerationSolutions: SwitchyardPower Plant
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48%
32%
20%
A balanced portfolio across cyclesEarly, mid and late cycle businesses
Share of orders 2011Approximate; Percent
Early cycle
Late cycle
Mid cycle
Low-Voltage Products
Discrete Automation
and Motion
Process Automation
PowerProducts
PowerSystems
Industrial production(machinery, electronics)
Utility (T&D) and industrycapex, renewables
Construction, early-cycle industry (GDP)
Demand forcommodities, industrialcapex
Key macro drivers
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Geographically balanced portfolioTapping profitable growth opportunities wherever they arise
Orders by region% of 2011 orders (non-consolidated)
Americas
23%
Europe
38%
Middle East and Africa
9%
Asia30%
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A broad base of emerging market demandEmerging markets account for nearly half of total orders
Order growth 2006-11*
Mature markets 5%
Emerging markets 7%
Total ABB 6%* CAGR, local currencies
Top emerging markets by orders received in 2011
> $1 billion
> $100 million
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5-year performance through the cycleSteady growth and earnings
$34.4
$38.3
$31.0$32.7
$40.2
-6%
-3%
0%
3%
6%
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
2007 2008 2009 2010 2011
$29.2
$34.9$31.8 $31.6
$38.0
0.0%
10.0%
20.0%
30.0%
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
2007 2008 2009 2010 2011
ABB Orders received vs GDP growth1US$ bn,
ABB Revenues & op EBITDA marginUS$ bn,
1 Source: Global Insight
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The ABB investment case: Steady growth, earnings &cash generation through the cycle
A leader in attractive long-term growth markets:High-efficiency power grids and industrial automation
Product and geographic scope allows us to captureprofitable growth opportunities wherever they arise
Strength in fast-growing emerging markets ensures bothgrowth and long-term competitiveness
Proven track record in quickly adjusting costs andproduction footprint to changing market demands
Solid balance sheet and credit rating provide a foundation
for both organic and inorganic growth Steady dividend payout through the cycle
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Strategy 2011-2015
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2011-2015 strategyCompetitiveness today underpins future growth
1
Drive competitivenessand stay relevant in our current markets
2
Capitalize onmegatrends
3
Aggressivelyexpand corebusiness
4
DisciplinedM&A
5
Exploitdisruptiveopportunities
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Chart 17
Drive competitiveness and stay relevant in our markets
Strengthen the base
Continue to drive cost and qualitycompetitiveness
Invest in technology leadership
Use assets efficiently: cash,
intellectual property and brand Invest in people development
Execution is top priority
To develop, produce, source and sell optimally to matchmarket needs, profitability growing the business while
increasing levels of productivity and quality
Our ambition
1
Drive competitiveness
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75% 74% 70%50%
25% 26% 30%50%
2009 2010 2011 2015F
Annual R&D spend as % of sales Share of total employees by market
Drive competitiveness and stay relevant in our marketsTechnology development: In country for country
Moving closer to customers and markets allows ABB tomove at local speeds and develop products for local
markets
In country for country
Emergingmarkets
Maturemarkets
2.9%3.3% 3.4%
3.6%4.0%
2008 2009 2010 2011 2015F
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Processes & systems
Improved quality processes
Proactive risk management
Common ERP structure
People
Training & certification
Supportive organizational structure
Strategic vs. transactional thinking
Collaboration with suppliers
Drive competitiveness and stay relevant in our marketsReducing costs while improving quality
Strategy
Glocalized strategic commoditymanagement
Maximum efficiency in logistics
Cost savings
Supply Chain ManagementLeverage volumes, Boost supply chain competences
Operational ExcellenceQuality improvements, on-time delivery
Global FootprintOptimize geographic footprint
50%
45%
5%
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Chart 20
Capitalize on mega trends
Focus on industries growing faster than world GDP
Traditional mature markets still with significant opportunity
Anticipate, participate and lead in key markets
ResourceEconomies Green
Urbanization
Emerging economiesand power shift
DigitalinformationElectrification
Transportationmobility (people,
goods)
Global megatrends will mitigate short-term volatility
2
Capitalize onmegatrends
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Aggressively expand core business
Key drivers
Tap leading installed base
Integrate service into productdesign
Optimize software businessmodel
Invest in service sales
Secure next level of growth
Drivecompetitiveness
Integration IT and OT2010 2011 2012 2013 2014 2015
Grow service to ~25% of revenues
InformationTechnology
OperationsTechnology
EnergyManagementInfrastructure
3
Aggressivelyexpand corebusiness
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Disciplined M&A
Key drivers for a successfulacquisition
Deeply grounded in strategy
Disciplined approach to valuation
Rigorous due diligence
Integration planning from Day One
Across products, markets and geographies
Increase NorthAmerican exposure
Increase softwareexposure
4
DisciplinedM&A
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Exploit disruptive opportunitiesAddressing major developments
# 9 ABBs Technology FACTs
An enabler for a smarter grid
Increase transmission capacity Improve system stability Improve power quality
ABB position
Worlds leading supplier Delivered >50% of world total
installations Pioneer and technology leader
#1 Smart Phone
#2 SocialNetworking
#3 Voice OverIP
Top technologies of the decade
1
5
Exploitdisruptiveopportunities
1Institute of Electricaland Electronics Engineers
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Key drivers for market growth to 2015
2010 2015
KeyDrivers Aging network in North America and
Europe
Remote renewable integration andinterconnections
Emerging market grid and generationbuild-out
Wind and solar to reach grid parity inmany markets by 2015
Smart grids to manage powersystem volatility
Power
Estimated total market sizes and expected growth ratesUS$ bn and percent change
$100 bn
$130 bn
6% CAGR
Assumes average annual global GDP growth of 3-4%
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Key drivers for market growth to 2015
2010 2015
KeyDrivers
Energy efficiency
Commodity demand
Use of energy (oil & gas)
Factory automation
Transportation and mobility
Automation
Estimated total market sizes and expected growth ratesUS$ bn and percent change
$285 bn
$380 bn
6% CAGR
Assumes average annual global GDP growth of 3-4%
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2011 2015 new targetsOverview
2 Organic incl. acquisitions closed as of end-Oct. 2011; CAGR = Compound annual growth rate, base year 2010
+3% to 4%
Within the same corridor
+3%
Same conversion rate
Depends on acquisition timing,steady over the long term
Group targets1
7 10%
13 19%
10 15%
Annual average>90%
>20% by 2015
1 See Appendix for definition of non-GAAP measures
Organic revenuegrowth (CAGR2)
Operational EBITDAmargin corridor
Organic EPS growth(CAGR2)
Free cash flowconversion
Cash flow return oninvested capital
2011-15Targets2
Metric Potential Impact from M&A
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Chart 27
0
2
4
6
2009.520102010.520112011.520122012.520132013.520142014.520152015.5
2011 2015 plan assumptions
Key assumptions
Economic slowdown in next 18 months,not a deep recession
World GDP to grow 34%1, emerging market
(EM) growth >2x developed markets
Global industrial capex to grow 56%1,EM capex share growing to 65% from 2x GDP
1 Compound annualgrowth rate, baseyear 2010;
2 Source: Global Insight
3% CAGR
4% CAGR
2010 20152011 20142012 2013
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Market assumptions
Emerging markets keep commodity prices high good for business,challenge for input costs
Plan assume stable forex, changes compensated by hedging policy andbalanced footprint
Price pressure and emerging market competition are a fact of lifecontinuous cost savings required to incrementally improve gross margin
Strategic parameters
Portfolio remains focused on Power and Automation no divestmentsplanned
M&A capacity to potentially increase top line CAGR1 by 3 4 % (notincluded in targets)
2011 2015 plan assumptionsExecution to balance cost AND growth remains key
1 Compound annualgrowth rate, baseyear 2010
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Clearly defined credit and investment targetsSolid single A rating remains our standard
Long-termrating
Outlook
Standard and Poors* A Stable
Moodys* A2 Stable
1 Organic growth, R&D, and capex
2 Paying annual dividend in line with policy
3 Value-creating acquisitions
4 Returning additional cash to shareholders
Investment priorities
Cash return > WACC within 3 years
IRR > WACC + specific hurdles
M&A Investments criteria
Net debt /EBITDA
GrossGearing
ABB Target ~1.5-2x < 40%
ABB at end-June 2012 0.7x 37%
Key debt ratios
* As of March 31, 2012
Credit Rating by Agency
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R&D locations to grow regional marketswith locally developed products
Location of ABBs corporate research centers, 2011
RaleighUSA
LadenburgGermany
BadenSwitzerland
VsterasSweden
KrakowPoland
BangaloreIndia
BeijingChina
ShanghaiChina
>$1.3 bninvested
annually in R&D
7,500R&D scientists
Collaboration with 70 universities MIT (US) Tsinghua (China) KTH Royal Institute of Technology (Sweden) Indian Institute of Science (Bangalore)
ETH (Switzerland) Karlsruhe (Germany) AGH University of Science and Technology
(Poland)
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Chart 31
Technology: Our competitive advantageLocalized R&D: New products for new markets
Examples of new products launched in 2011
Gas Insulated Switchgeartype ELK-14
Space saver for high-voltagesubstations
Highly modular, easy to
customize
Electric Vehicle
fast-chargerOperating in Europe, Asia
Full charge
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Chart 32
Sustainability one of highest business prioritiesBalancing economic success, environmentalstewardship and social progress
Offer eco-friendly products that minimize waste andreduce environmental impact
Helping customers in implementing environmentallysound processes and technologies
Complying with all applicable environmental, health,safety standards and social legislation
Working to achieve best practices in occupationalhealth, safety for employees and our customers
Integrity embedded in ABB DNA, e.g. zero toleranceto fraud, bribery and corruption
Code of Conduct followed by all ABB employees
No business with sensitive countries such asSomalia and North Korea
Completed withdrawal from Sudan in 2009
Not pursuing new business in Iran since 2007 andcompleted our withdrawal from oil and gas in Iran in2011
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Press ReleaseJune 11, 2012
Making a more efficient worldOur products are inherently sustainable
ABB electric drives save 310million megawatt hours in 2011
Equivalent to the output of 41 nuclear reactors
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Sustainability in productdevelopment
Focus on resource and energyefficiency over product lifecycle
Independently verifiedEnvironmental Product
Declarations for main products
Sustainability in operations
Reduce use of energy, rawmaterials, hazardous substances
Example: China
63% lower energy use per unitof revenue from 2002 to 2010
Developing sustainability of products and operationsLowering environmental impact and costs
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ABBs vision and culture
Global leader in power and automationtechnologies that enable utility and industrycustomers to improve performance whilelowering environmental impact.
Vision
Demonstrate personal, professional and
corporate responsibility, showing respect forthe views and needs of others and applyingour shared determination to win.
Business Principles
Committed to high moral and ethical standardsand conduct business with integrity and in fullcompliance with regulations, local laws andour own corporate policies.
Integrity
Balance economic success, environmentalstewardship and social progress to benefit allour stakeholders.
Sustainability
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2011 Financial Performance
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Full-year 2011: Financial highlights
Record orders and revenues
Net income up $600 million vs. 2010
Cash from operations close to 2010record
Cash return on invested capitalreflects initial impact of Baldoracquisition
Outstanding results in a tough environment
2011 Chang e vs 2010
Orders 40,210+18%1
(organic. +11%)
Revenues 37,990+15%1
(organic +9%)
Operational EBITDA 6,014+25%
Operational EBITDA % 15.8%+0.5 percentage
points
Net income 3,168 +24%
EPS (basic) 1.38 +23%Dividend per share(CHF)
0.65 +8%
Cash from operations 3,612 -14%
Cash return on investedcapital
14%-7 percentage
points
Financial highlightsUS$ mill unless otherwise stated
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55%
5%
40%
ABBs cost-out focus embedded in its DNA
Over $4 bn in savings since in 2009
Continued commitment to cost-out for 2012 at 3-5 % of cost of sales
Cost savings:
Offset price pressure (in 2011, $970 mill)
Fund M&A activities
1.5 1.5
1.1
2009 2010 2011
Exceeded 2011 cost savings targetSavings continued to outpace negative market impact
Savings by category, 2011Percent
OperationalExcellence
Sourcing
Globalfootprint
$1.1 bn
Historical savings, 2009-2011US$ bn
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0.24
0.48 0.480.51
0.600.65
2006 2007 2008 2009 2010 2011
Ensuring steady cash flows forinvestors over the cycle
2011 dividend up 8% vs. 2010
2011 dividend paid: CHF 0.65 per shareEquivalent to 47% payout ratio, 3.3% yield1
Dividend payout 2005-2011CHF per share
A steadily rising, sustainable annual dividend over time
Dividend policy
1as of 15 February 2012
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2011-2015 New targetsFirst-year performance against our targets
Group targets1
2 Organic incl. acquisitions closed as of end-Oct. 2011; CAGR = Compound annual growth rate, base year 2010
Starting well above the range
Still a good buffer thanks to costprograms
A strong first year
High capital spending; to normalizeover time
1st year show impact of Baldoracquisition
7 10%
1319%
10 15%
Annual average>90%
>20% by 2015
1 See Appendix for definition of non-GAAP measures
Organic revenuegrowth (CAGR2)
Operational EBITDAmargin corridor
Organic EPS growth(CAGR2)
Free cash flowconversion
Cash flow return oninvested capital
15%
15.8%
23%
82%
14%
2011Perfomance2
2011-15Targets2
Metric Comment
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Appendix
Definitions of non-GAAPmeasures
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Appendix: Definitions of non-GAAP measures (1)
Operational EBITDA: Earnings before interest and taxes (EBIT) excluding depreciation andamortization, adjusted for i) unrealized gains and losses on derivatives (FX, commodities,embedded derivatives), ii) realized gains and losses on derivatives where the underlyinghedged transaction has not yet been realized, iii) unrealized foreign exchange movementson receivables/payables (and related assets/liabilities), iv) restructuring and restructuring-related expenses, and v) acquisition-related expenses and certain non-operational items
Operational EBITDA margin: Operational EBITDA as a percentage of Operational revenues
Gross gearing: Total debt divided by total debt plus total stockholders equity (including non-controlling interests)
Net cash (Net debt): Cash and equivalents plus marketable securities and short-terminvestments, less total debt
Free cash flow (FCF): Net cash provided by operating activities adjusted for i) changes infinancing and other non-current receivables; ii) purchases of property, plant and equipmentand intangible assets; and iii) proceeds from sales of property, plant and equipment
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Appendix: Definitions of non-GAAP measures (2)
Free cash flow conversion: Free cash flow as a percentage of net income attributable to ABB
CROI: Cash return on capital invested, calculated as i) cash provided by operating activitiesplus interest paid, divided by ii) capital employed plus accumulated amortization anddepreciation
f
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For more information, call ABB Investor Relationsor visit our website at www.abb.com/investorrelations
Telephone e-mail
Alanna Abrahamson(Zurich)
+41 43 317 3804 alanna.abrahamson@ch.abb.com
John Fox(Zurich) +41 43 317 3812 john.fox@ch.abb.com
Tatyana Dubina(Zurich)
+41 43 317 3816 tatyana.dubina@ch.abb.com
Annatina Tunkelo(Zurich)
+41 43 317 3820 annatina.tunkelo@ch.abb.com