ABB: Positioned for Profitable Growth

ABB (SWX:ABBN):

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FULL YEAR 2017 HIGHLIGHTS

• Base orders up 5%¹, higher in all divisions and regions;
  total orders steady
• Revenues +1%
• ABB Ability^TM drives growth across all divisions
• Streamlined and strengthened portfolio:
  • B&R, Keymile acquisitions completed; GE Industrial Solutions
    acquisition signed
  • High-voltage cables divested, two joint ventures signed for EPC
    activities
  • Business model change in Power Grids, Robotics and Motion and
    Industrial Automation under way
• Operational EBITA margin² 12.1%, impacted 30 bps due to
  charges related to the EPC businesses
• Net income up 17% to $2,213 million
• Cash flow from operating activities steady; net working capital as a
  percentage of revenues reduced to 11.3%
• 9th consecutive dividend increase to CHF0.78 per share proposed

FOURTH QUARTER HIGHLIGHTS

• Base orders up 9%; higher in all divisions and regions; service orders
  up 7%
• Revenues -1%
• Operational EBITA margin 10.9% impacted 150 bps due to charges related
  to the EPC businesses
• Power Grids profitability within 2018 target margin corridor ahead of
  plan, on a pro-forma basis
• Cash flow from operating activities up 31 percent

“In the transition year 2017, we shaped a streamlined and strengthened
ABB. Now, our digital-first portfolio for customers in utilities,
industry and transport and infrastructure is based on two clear value
propositions: bringing electricity from any power plant to any plug, and
automating industries from natural resources to finished products,” said
ABB CEO Ulrich Spiesshofer. “The annual results include the dampening
effect of our massive transformation. With our targeted actions to shift
our center of gravity, we have improved competitiveness, addressed
higher-growth segments and de-risked ABB. We delivered four consecutive
quarters of increasing base-order growth. The momentum we have built in
2017 positions us for profitable growth as the global markets are
improving. Today’s proposal to increase the dividend for the 9th
consecutive year demonstrates our confidence in the future.”

KEY FIGURES						CHANGE								CHANGE
($ in millions, unless otherwise indicated)		Q4 2017		Q4 2016		US$		Comparable1		FY 2017		FY 2016		US$		Comparable1
Orders		8,478		8,277		+2%		-3%		33,387		33,379		0%		0%
Revenues		9,280		8,993		+3%		-1%		34,312		33,828		+1%		+1%
Operational EBITA2		1,021		1,057		-3%		-7%3		4,130		4,191		-1%		-2%3
as % of operational revenues		10.9%		11.7%		-0.8pts				12.1%		12.4%		-0.3pts
Net income attributable to ABB		393		425		-8%				2,213		1,899		+17%
Basic EPS ($)		0.18		0.20		-7%4				1.04		0.88		+17%4
Operational EPS2($)		0.33		0.33		-2%4		+2%4		1.25		1.29		-4%4		-1%4
Cash flow from operating activities		1,869		1,428		+31%				3,799		3,843		-1%
Free cash flow2										2,926		3,065		-5%
Cash return on invested capital (CROI)2										12.4%		13.8%		-1.4pts

Short-term outlook

Macroeconomic signs are trending positively in Europe and the United
States, with growth expected to continue in China. The overall global
market is back to growth whilst still impacted by uncertainties in
various parts of the world. Oil prices and foreign exchange translation
effects are expected to continue to influence the company’s results.

Full-year 2017 Group Results

ABB delivered a steady financial performance in 2017 despite market
headwinds and its ongoing transformation. Total orders were steady
(steady in US dollars). Base-order growth (base orders are classified as
orders below $15 million) showed increasing momentum each quarter, and
for the full year increased 5 percent (6 percent in US dollars),
mitigating the effect of lower large orders. The large order share of
total orders in 2017 was 8.5 percent, versus 13.5 percent in 2016, in
part as a consequence of ABB’s business model shift. Total service
orders grew 8 percent (8 percent in US dollars) to 20 percent of total
group orders.

The order backlog at the end of December 2017 was $22,414 million, 4
percent lower (2 percent in US dollars) compared with the prior year.
The book-to-bill ratio² was 0.97x for 2017, compared with
0.99x in 2016.

Revenues improved 1 percent (1 percent in US dollars) to $34,312
million, with positive contributions from Electrification Products and
Robotics and Motion more than offsetting the declines in Industrial
Automation and Power Grids. Total services revenues grew 3 percent (3
percent in US dollars) and now stand at 18 percent of total group
revenues.

ABB executed on its Next Level strategy throughout 2017. The company
launched ABB Ability^TM, its digital solutions offering, and
continued to invest in digital, sales, branding and research &
development. It delivered strong cost savings in White Collar
Productivity and supply chain/operational excellence and completed or
announced a number of important transactions. It continued to de-risk
its portfolio by divesting non-core businesses, and taking actions to
implement its EPC (Engineering, Procurement and Construction) business
model change. These activities impacted full year results. The company’s
operational EBITA declined 2 percent (1 percent in US dollars) to $4,130
million, inclusive of approximately $140 million of charges related to
the EPC businesses. The reported operational EBITA margin was 12.1
percent, 30 basis points lower due to charges related to the EPC
businesses and would have been steady without these charges.

Net income in 2017 rose 17 percent compared with the previous year to
$2,213 million, reflecting primarily lower transformation-related
restructuring and restructuring-related expenses and net gains recorded
on the business divestments in the year. Basic earnings per share grew
17 percent to $1.04. Operational EPS² was $1.25, 1 percent
lower in constant currency⁴.

Cash flow from operating activities was steady compared with 2016 at
$3,799 million for the full year. ABB continued to benefit from
improvements in net working capital which generated approximately $600
million of cash during 2017. Net working capital as a percentage of
revenues² was reduced to 11.3 percent, a 10 basis point
improvement year on year. Capital expenditures for the group were $949
million during 2017. Free cash flow² of $2,926 million was 5
percent lower than 2016 and the company’s cash return on invested
capital (CROI) was 12.4 percent², mainly impacted by the
acquisition of B&R.

Dividend

ABB’s board has proposed the 9th consecutive increase in the ordinary
dividend to 0.78 Swiss francs per share for 2017, an increase of 0.02
Swiss francs compared with the dividend distribution for the year 2016,
subject to shareholder approval at the company’s annual general meeting
on March 29, 2018. The proposal is in line with ABB’s dividend policy to
pay a steadily rising, sustainable dividend over time. The ex-dividend
and payout dates in Switzerland are expected to be in April 2018.
Further information is available on ABB’s website.

Q4 2017 Group results

Orders

Total orders were 3 percent lower (2 percent higher in US dollars) in
the fourth quarter as strong base order development could not offset the
impact of lower large orders in Power Grids and Industrial Automation
compared with the exceptionally strong prior year period. Base orders
improved 9 percent (15 percent in US dollars), with third-party base
order growth in all divisions. Large orders represented 7 percent of
total orders compared with 17 percent in the prior year period. A weaker
US dollar versus the prior year period resulted in a positive
translation impact of 3 percent on reported orders. Changes in the
business portfolio related to the acquisition of B&R and the divestments
made in 2017 had a net positive impact of 2 percent on total reported
orders. The book-to-bill ratio was 0.91x in the fourth quarter compared
with 0.92x in the fourth quarter of 2016.

Total services orders grew 7 percent (11 percent in US dollars),
increasing service orders as a percentage of total orders to 21 percent,
versus 20 percent in the same period last year.

Market overview

Regional demand patterns were positive in the fourth quarter:

• Europe benefited from positive market developments in industry and
  infrastructure. Total orders improved 5 percent (19 percent in US
  dollars), with positive contributions from Germany and Norway more
  than offsetting declines in the UK, Italy and Sweden. Base orders rose
  8 percent (23 percent in US dollars) with positive order trends in
  Germany, Norway and Italy.
• The Americas grew 3 percent (5 percent in US dollars) driven by
  increased demand in construction and general industries and some
  improvement in process industries. Orders from the United States and
  Canada contributed to this growth, offsetting large order weakness in
  Brazil. Base orders for the region grew 12 percent (14 percent in US
  dollars), with strong contribution from the United States, Canada and
  Brazil.
• Asia, Middle East and Africa (AMEA) orders were 14 percent lower (12
  percent in US dollars) as the exceptionally large ultra-high-voltage
  direct current (UHVDC) order that was awarded in the fourth quarter
  2016 in India was not repeated. Total orders in China were moderately
  lower, down 3 percent (2 percent higher in US dollars) with 1 percent
  base order growth (6 percent in US dollars). Base orders for the
  region increased 6 percent (8 percent in US dollars) with positive
  base order development from India, South Korea and Australia.

In ABB’s key customer segments, the following trends were observed:

• Utility customers continued to integrate renewables globally, add new
  capacity in emerging markets and invest in energy efficiency. This
  resulted in strong base order growth for ABB’s products including
  transformers, as well as ABB’s automation and digital solutions.
• In industry, ABB saw strong demand from the automotive and general
  industry sectors for robotic solutions. Process industries, including
  oil and gas and mining, showed some first signs of recovery, however
  customer investment decisions remained highly selective.
• Transport & infrastructure demand was mixed. Transport orders were
  subdued in the marine sector, with the exception of cruise ships,
  while demand for building automation solutions remained strong. Data
  centers and electric vehicle charging orders were a highlight in the
  quarter.

Revenues

Revenues were 1 percent lower (3 percent higher in US dollars) as solid
growth in Robotics and Motion was offset by the revenue decline in Power
Grids. The Industrial Automation and Electrification Products divisions
had steady revenues. Service revenues were 7 percent higher (11 percent
in US dollars) and represented 20 percent of total revenues, compared
with 19 percent a year ago. A weaker US dollar versus the prior year
period resulted in a positive translation impact on reported revenues of
3 percent. Changes in the business portfolio related to the acquisitions
of B&R and the divestments made in 2017 had a net negative 1 percent
impact on total reported revenues.

Operational EBITA

Operational EBITA was $1,021 million, 7 percent lower in constant
currency (3 percent in US dollars). Positive net savings actions that
lifted operational EBITA were more than offset by the approximately $140
million of charges related to the EPC businesses. As well the impacts
from volume, net commodity prices and investments in growth lowered the
results. The reported operational EBITA margin for the quarter was 10.9
percent, 150 basis points lower due to charges related to the EPC
businesses and would have been higher without these charges.

Net income, basic and operational earnings per share

Net income was $393 million, 8 percent lower in US dollars and in
addition to the items described above was also impacted by higher
restructuring and restructuring-related expenses, the loss from the
divestment of the Oil & Gas EPC business as well as changes in foreign
currency and commodity timing differences. Basic earnings per share of
$0.18 was 7 percent lower compared with the fourth quarter of 2016.
Operational earnings per share of $0.33 was 2 percent higher in constant
currency terms⁴.

Cash flow from operating activities

Cash flow from operating activities was $1,869 million, an increase of
31 percent on the $1,428 million delivered in the same quarter of 2016.
The result was supported by stronger working capital improvements in the
fourth quarter of 2017 compared with 2016 reflecting improvements in
collections from customers.

Q4 divisional performance

($ in millions, unless otherwise indicated)		Orders		CHANGE				3rd party base orders		CHANGE				Revenues		CHANGE				Op EBITA %		CHANGE
				US$		Compa- rable 1				US$		Compa- rable1				US$		Compa- rable1
Electrification Products		2,556		+12%		+10%		2,394		+10%		+8%		2,696		+2%		-1%		14.7%		+1.4pts
Robotics and Motion		2,040		+10%		+6%		1,838		+10%		+5%		2,187		+10%		+6%		10.8%		-3.1pts
Industrial Automation		1,796		+16%		-1%		1,638		+26%		+5%		2,012		+15%		0%		14.8%		-0.4pts
Power Grids		2,493		-13%		-16%		1,994		+18%		+15%		2,809		-5%		-7%		7.8%		-2.8pts
Corporate & other (incl. inter-division elimination)		-407						18						-424
ABB Group		8,478		+2%		-3%		7,882		+15%		+9%		9,280		+3%		-1%		10.9%		-0.8pts

Electrification Products

Total orders were 10 percent higher (12 percent in US dollars), as all
regions and end markets showed strong demand, in particular for data
center, food and beverage and electric vehicle fast-charging solutions.
Third-party base orders increased 8 percent (10 percent in US dollars).
Revenues declined 1 percent (2 percent higher in US dollars), as
increases in short-cycle revenues were not enough to offset lower system
revenues. Operational EBITA margin of 14.7 percent was aided by cost
savings and improved pricing despite ongoing commodity price headwinds.

Robotics and Motion

Total orders improved 6 percent (10 percent in US dollars), growing in
all regions. The division saw improved demand from process end markets,
whilst large orders declined due to the timing of tender awards.
Third-party base orders grew 5 percent (10 percent in US dollars).
Revenues were 6 percent higher (10 percent in US dollars) on strong
execution of the order backlog. The operational EBITA margin of 10.8
percent was primarily impacted by the charges related to the EPC
business and continued higher material costs. These EPC charges
negatively impacted the operational EBITA margin by 300 basis points.

Industrial Automation

Third-party base orders continued to be positive at 5 percent on
continued operational investment by process customers; total orders
declined 1 percent. Selective capital expenditure was seen in mining and
specialty vessels. Including B&R and currency effects, the total
reported order growth was 16 percent and revenue growth 15 percent.
Revenues were steady reflecting the strong book and bill within the
quarter. The operational EBITA margin of 14.8 percent reflects the
digital investments and negative business mix. The joint venture
completed with Arkad was established before the end of the year and the
results of that divested business have been excluded from the results of
the division and reported under Corporate and Other in all periods.

Power Grids

Third-party base orders grew 15 percent (18 percent in US dollars)
mainly driven by industry, particularly in transportation and
infrastructure. Total orders declined 16 percent (13 percent in US
dollars) due to the exceptionally large UHVDC order that was awarded in
India in 2016. The division continues to drive business model changes as
it further expands its digital and service offering. Revenues were 7
percent lower (5 percent in US dollars) due to the lower order backlog,
primarily in EPC. The operational EBITA margin of 7.8 percent was
impacted by charges related to the EPC business. Excluding this charge,
the division’s margin would have been 240 basis points higher. The
division’s ‘Power Up’ program, driving its transformation and value
creation, is underway.

Next Level strategy – stage 3

ABB is delivering on its Next Level strategy to unlock value and deliver
attractive shareholder returns. 2017 was a transition year, in which the
company streamlined and strengthened its portfolio and operations. ABB
shifted its center of gravity to a simplified, strengthened digital and
market-leading portfolio. It completed and announced a number of key
acquisitions, divested certain businesses and implemented business model
changes. ABB strengthened its operations through the completion of its
1,000-day execution programs. It continued to focus on operational
excellence, delivering supply chain and operational cost savings. A
number of key Executive Committee appointments were made in 2017 while
continuing to focus on leadership development and bringing all of ABB
under one unified brand. With these transformational actions complete,
ABB is positioned for profitable growth.

Profitable growth

As part of the drive towards profitable growth, ABB made significant
progress in 2017 to streamline and strengthen its portfolio. Base order
growth momentum continued each quarter and was higher in all divisions
and regions.

With the launch of ABB Ability^TM, in March 2017, ABB is
making a quantum leap in digital. With more than 210 ABB Ability^TM
solutions available today, ABB is leveraging its large installed base of
connected systems and devices. ABB Ability^TM is a
solution-led approach based on ABB’s leading portfolio and domain
expertise. It has a secure, open architecture ranging from edge to
cloud. ABB Ability^TM is central to ABB’s strategy to drive
growth through expansion of high value-add solutions and services.

Through active portfolio management, ABB is streamlined and
strengthened. These actions continue to shift ABB’s center of gravity
towards strengthened competitiveness, higher growth segments and lower
risk.

ABB strengthened its position as the #2 industrial automation player
globally by completing the acquisition of B&R in July. With this
acquisition, ABB closed its historic gap in machine and factory
automation and created a uniquely comprehensive automation portfolio for
customers globally. The integration of B&R is well underway and fully on
track.

ABB acquired the mission-critical communication network business from
the Keymile Group to strengthen its portfolio and further enhance ABB
Ability^TM. It adds reliable communications technologies that
are essential to maintain today’s dynamic and complex digital electrical
grids. The acquisition brings with it products, software and service
solutions, as well as research and development expertise.

On September 25, ABB announced an agreement to acquire GE Industrial
Solutions (GE IS), General Electric’s global electrification solutions
business. GE IS has deep customer relationships in more than 100
countries and an established installed base with strong roots in North
America, ABB’s biggest market. Through this purchase, ABB will
strengthen its #2 position in electrification globally and expand its
access to the attractive North American market. The transaction is
expected to close in the first half of 2018.

ABB continued to shape its portfolio with the divestment of its
high-voltage cables and cable accessories business to NKT Cables,
completed on March 1, 2017.

During the fourth quarter, actions were implemented across three
divisions to complete the business model change for EPC. In the Power
Grids division, consistent with ABB’s shift in focus away from non-core
EPC activity, ABB signed an agreement to form a joint venture with
SNC-Lavalin for electrical substation EPC projects; SNC-Lavalin is
expected to have a majority interest. In the Industrial Automation
division, ABB completed the formation of an oil & gas EPC joint venture
with Arkad Engineering and Construction Ltd., a fully integrated EPC
contractor for the energy sector based in Saudi Arabia. In Robotics and
Motion, ABB announced that it was exiting its turnkey full train
retrofit business, beyond meeting its current contractual commitments.
ABB will report remaining EPC activities related to these businesses as
a non-core operating unit within Corporate & Other, effective January 1,
2018.

Relentless execution

In 2017, ABB continued to drive towards further streamlining and
strengthening its operations. At the end of 2017, the company concluded
its strategic 1,000-day programs. The company’s White Collar
Productivity program produced a run-rate of more than $1.3 billion of
gross savings by the end of 2017, more than $300 million ahead of
original ambitions. The savings program was delivered within the
announced timeframe and with approximately $300 million lower combined
restructuring and implementation costs than originally expected.
Excluding the impacts of business portfolio changes, working capital was
$1.9 billion lower. Improved net working capital discipline freed up
$1.5 billion of cash and reduced net working capital as a percentage of
revenues by 280 basis points since the end of 2014. Working capital
management has improved across all division and regions since the
program was initiated. Further net working capital benefits are targeted
from ongoing inventory optimization.

Business-led collaboration

ABB has completed its transition to a simpler, leaner and more
customer-focused business while at the same time linking executive
compensation firmly to performance and delivery of strategy.

A number of key Executive Committee appointments were made in the year.
Effective April 1, 2017, Timo Ihamuotila joined ABB from Nokia as Chief
Financial Officer and a member of the Executive Committee. Effective
July 1, 2017, Chunyuan Gu, Managing Director of ABB in China, became
President of the Asia, Middle East and Africa (AMEA) region and a member
of the Executive Committee. Chunyuan took over AMEA from Frank Duggan,
who was appointed President of the Europe region.

A focus on leadership development remains key to ensuring the company’s
leadership is fully empowered to meet its growth agenda along with the
alignment of all activities under the unified and strengthened ABB brand.

Short- and long-term outlook

Macroeconomic signs are trending positively in Europe and the United
States, with growth expected to continue in China. The overall global
market is back to growth whilst still impacted by uncertainties in
various parts of the world. Oil prices and foreign exchange translation
effects are expected to continue to influence the company’s results.

The attractive long-term demand outlook in ABB’s three major customer
sectors – utilities, industry and transport & infrastructure – is driven
by the Energy and Fourth Industrial Revolutions. ABB is well-positioned
to tap into these opportunities for long-term profitable growth with its
strong market presence, broad geographic and business scope, technology
leadership and financial strength.

^{More information}

^{The Q4 2017 results press release and presentation slides are
available on the ABB News Center at www.abb.com/news
and on the Investor Relations homepage at www.abb.com/investorrelations.}

^{ABB will host a press conference today starting at 10:00 a.m.
Central European Time (CET) (9:00 a.m. BST, 4:00 a.m. EDT). The event
will be accessible by webcast on http://new.abb.com/media/annual-press-conference-2018.}

^{A conference call and webcast for analysts and investors is
scheduled to begin today at 2:00 p.m. CET (1:00 p.m. BST, 8:00 a.m.
EDT). Callers from the UK should dial +44 207 107 0613. From Sweden, the
number to dial is +46 85 051 00 31, and from the rest of Europe, +41 58
310 50 00. Callers from the US and Canada should dial +1 866 291 41 66
(toll-free) or +1 631 570 56 13 (long-distance charges). Callers are
requested to phone in 10 minutes before the start of the call. The call
will also be accessible on the ABB website and a recorded session will
be available as a podcast one hour after the end of the conference call
and can be downloaded from our website. www.abb.com/investorrelations}

^{ABB (ABBN: SIX Swiss Ex) is a pioneering technology leader
in electrification products, robotics and motion, industrial automation
and power grids, serving customers in utilities, industry and transport
& infrastructure globally. Continuing a history of innovation spanning
more than 130 years, ABB today is writing the future of industrial
digitalization with two clear value propositions: bringing electricity
from any power plant to any plug and automating industries from natural
resources to finished products. As title partner of Formula E, the fully
electric international FIA motorsport class, ABB is pushing the
boundaries of e-mobility to contribute to a sustainable future. ABB
operates in more than 100 countries with about 135,000 employees. www.abb.com}

		INVESTOR CALENDAR 2018/2019
Annual General Meeting		March 29, 2018
First quarter 2018 results		April 19, 2018
Second quarter 2018 results		July 19, 2018
Third quarter 2018 results		October 25, 2018
Fourth quarter and full year 2018 results		February 2019

^{Important notice about forward-looking information}

^{This press release includes forward-looking information and
statements as well as other statements concerning the outlook for our
business, including those in the sections of this release titled
“Short-term outlook”, “Dividend”, “Next Level strategy – stage 3” and
“Short- and long-term outlook”. These statements are based on current
expectations, estimates and projections about the factors that may
affect our future performance, including global economic conditions, the
economic conditions of the regions and industries that are major markets
for ABB Ltd. These expectations, estimates and projections are generally
identifiable by statements containing words such as “expects,”
“believes,” “estimates,” “targets,” “plans,” “is likely”, “intends” or
similar expressions. However, there are many 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 this press release and which could affect our ability
to achieve any or all of our stated targets. The important factors that
could cause such differences include, among others, business risks
associated with the volatile global economic environment and political
conditions, costs associated with compliance activities, 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 Ltd’s 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 based upon reasonable assumptions, it
can give no assurance that those expectations will be achieved.}

Zurich, February 8, 2018

Ulrich Spiesshofer, CEO

1 Growth rates for orders, base orders, revenues and order backlog are on a comparable basis (local currency adjusted for acquisitions and divestitures). US$ growth rates are presented in Key Figures table.

2 For non-GAAP measures, see the “Supplemental Financial Information” attachment to the press release.

3 Constant currency (not adjusted for portfolio changes).

4 EPS growth rates are computed using unrounded amounts. Comparable operational earnings per share is in constant currency (2014 exchange rates not adjusted for changes in the business portfolio).

View source version on businesswire.com: http://www.businesswire.com/news/home/20180207006428/en/

Source: Business Wire
(February 8, 2018 - 12:53 AM EST)

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