ZURICH -Wednesday 22 July 2020 [ AETOS Wire ]
Strong COVID-19 headwinds; Power Grids divestment completed
• Orders $6.1 billion, -18%; comparable -14%1
• Revenues $6.2 billion, -14%; comparable -10%
• Income from operations $571 million; margin 9.3%
• Operational EBITA1 $651 million; margin1 10.6%
• Net income $319 million, +398%2
• Basic EPS $0.15, +398%3; operational EPS1 $0.22, -35%
• Cash flow from operating activities $680 million; resilient cash delivery expected for the full year
• Power Grids divestment completed July 1
• Net cash proceeds to be returned to shareholders, as planned
ZURICH--(BUSINESS WIRE/AETOSWire)-- “As expected, the second quarter has been heavily impacted by COVID-19. At the same time, we were very focused on cost mitigation efforts which provided some resilience. Operational margins for the Group turned out better than we had anticipated, with Motion doing particularly well,” said Björn Rosengren, CEO of ABB. “A lot of uncertainty remains and we still see some challenging quarters ahead. At the same time, our way forward is clear. We will continue to roll out our new operating model, review our business portfolio and start our share buyback program.”
KEY FIGURES CHANGE CHANGE
($ millions, unless otherwise indicated) Q2 2020 Q2 2019 US$ Comparable H1 2020 H1 2019 US$ Comparable
Orders 6,054 7,401 -18% -14% 13,400 15,014 -11% -7%
Revenues 6,154 7,171 -14% -10% 12,370 14,018 -12% -8%
Income from operations 571 123 +364% 944 713 +32%
Operational EBITA1 651 825 -21% -20%4 1,287 1,591 -19% -18%4
as % of operational revenues 10.6 11.5 -0.9 pts 10.4 11.4 -1.0 pts
Income from continuing operations, net of tax 395 (54) n.a. 721 361 +100%
Net income attributable to ABB 319 64 +398% 695 599 +16%
Basic EPS ($) 0.15 0.03 +398%3 0.33 0.28 +16%3
Operational EPS ($)1 0.22 0.34 -35%3 -33%3 0.52 0.64 -19%3 -18%3
Cash flow from operating activities5 680 0 n.a. 103 (256) n.a.
On December 17, 2018, ABB announced an agreed sale of its Power Grids business. Consequently, the results of the Power Grids business are presented as discontinued operations.
Q2 2020 Group results
Trading conditions during the second quarter were challenging, influenced by the escalating COVID-19 pandemic. Alongside the sharp drop in short-cycle demand that lowered product volumes, system installation and service activities faced extensive mobility restrictions. Reflecting this, orders and revenues for the second quarter period were severely dampened across the Group when compared to the prior year period. Motion’s result fared better, aided by a strong rebound in China and strong backlog execution. Despite intensified cost mitigation, operational margins contracted in Electrification, Industrial Automation and Robotics & Discrete Automation compared to the prior year period, while Motion improved its margin year-on-year.
Orders were 18 percent lower (14 percent comparable) in the quarter compared to the prior year period. Foreign exchange translation effects had a net negative impact of 2 percent and portfolio changes a net negative impact of 2 percent. The order backlog was 1 percent lower (up 5 percent comparable) at the end of the quarter.
– Orders from Europe were 18 percent lower (14 percent comparable). Most countries had materially lower orders, driven mainly by lockdowns. Orders were 4 percent lower in Germany (2 percent comparable), 4 percent lower in the UK (up 1 percent comparable) and 3 percent lower in Switzerland (4 percent comparable). Orders fell materially in Italy, which was 13 percent lower (9 percent comparable), and in Finland, Norway, Spain and the Netherlands declined even more steeply. Orders from Sweden advanced 9 percent (11 percent comparable).
– Orders from the Americas were 26 percent lower (23 percent comparable), with nearly all countries reporting lower order levels. In the US, orders declined by 25 percent (23 percent comparable).
– In Asia, Middle East and Africa (AMEA), orders were 11 percent lower (5 percent comparable), with a notable drop in India of 40 percent (33 percent comparable). In China, demand improved sequentially; orders were 3 percent lower (up 3 percent comparable) on a year-on-year basis in the second quarter.
– In discrete industries, orders were disrupted in most end-markets, with orders from automotive and automotive sector-related industries as well as machine builders severely impacted. 3C activities were challenged, although they trended more favorably toward quarter end.
– Process industry activities fell sharply in the quarter. Service activities were severely constrained by lockdowns, as well as customers reducing operational expenditure. In addition, multiple capital expenditure projects have been deferred as customers adapt to a softer demand outlook.
– In transport & infrastructure, investments in rail, e-mobility, water & wastewater and data centers continued. As well, orders were resilient in electrical distribution utilities. However, marine and renewables activities declined steeply.
– Buildings were challenged, with construction activity constrained by lockdowns.
Revenues were 14 percent lower (10 percent comparable) year-on-year. Foreign exchange translation effects had a net negative impact of 2 percent and portfolio changes a net negative impact of 2 percent. The book-to-bill ratio for the quarter was 0.98x1, compared to 1.03x in the prior year period.
Income from operations and operational EBITA
Income from operations of $571 million increased 364 percent. Compared to the prior year, the result benefited mainly from the absence of the charge booked in 2019 in relation to the sale of the solar inverters business. The year-on-year increase was also aided by a net $86 million gain related to timing differences on commodities and foreign exchange, and lower expenses related to restructuring and integration efforts.
Operational EBITA1 of $651 million was 21 percent lower (20 percent in local currencies). The operational EBITA margin1 of 10.6 percent was 90 basis points lower year-on-year. Margins were higher in Motion while all other businesses reported lower margins compared to the prior year period, mainly reflecting lower volumes, despite intensified cost mitigation efforts. Corporate & Other costs, including $19 million stranded costs, improved when compared to the prior year period.
Net income and basic earnings per share
Net income from continuing operations was $395 million, significantly higher mainly due to the aforementioned absence of the solar inverters charge. The Group’s effective tax rate was 24.8 percent. Discontinued operations reported $49 million in losses, reflecting a material non-operational pension charge as well as subdued operational performance mainly due to COVID-19 disruption.
Group net income attributable to ABB was $319 million and basic EPS $0.15, 398 percent higher for both on a year-on-year basis. Operational EPS of $0.221 was 35 percent3 lower compared to the prior year period.
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