ZURICH, Switzerland — ABB today posted 2022’s first-quarter financial results.
“ABB has started the year with a promising performance in the face of multiple external uncertainties. I expect this year to result in improving profitability, solid cash flow and execution of our planned portfolio activities,” said Björn Rosengren, CEO.
CEO Summary
In the first quarter, we witnessed the start of the war in Ukraine – a human tragedy – and consequently one of our key priorities was to ensure the safety and wellbeing of our people. In an effort to support the people of Ukraine, we have made a significant donation to the International Committee of the Red Cross. Prior to suspending the intake of any new orders in Russia, it represented only 1-2% of ABB revenues.
Customer activity was strong throughout the quarter, resulting in the very high order growth of 21% year-on-year (28% comparable). Most major customer segments and regions developed favorably and three out of four business areas reported high double-digit growth. Notably, the high order intake was driven by high general customer activity and not by large orders, and includes a de-booking of approximately $190 million in Process Automation.
We saw an increase in revenues which improved by 1% (7% comparable), supported by a positive development in all business areas except for Robotics & Discrete Automation, which was hampered by component shortages. The order backlog increased to $18.9 billion at the end of the period, up by 28% year-on-year (32% comparable). The zero-Covid strategy in China had no material impact on our ability to fulfill customer deliveries in the first quarter. That said, we are monitoring the situation and although difficult to quantify, we do not rule out somewhat of an adverse near-term impact on operations due to the local lock-downs.
In total, we achieved an Operational EBITA margin of 14.3%. Due to the support from higher volumes and successful pricing activities we managed to offset the adverse impacts from cost inflation, primarily related to raw materials, certain components, logistics and tight labor markets. In addition, the result was supported by low costs in Corporate & Other. As a reminder, last year’s Operational EBITA margin of 13.8%, was positively impacted by 30 basis points from the recently divested Mechanical Power Transmission business. Looking at the underlying operations, I am pleased that we were able to slightly improve the Operational EBITA margin in the current environment of inflation and strained value chain. This reflects that our hard work towards increased accountability, transparency and speed is yielding results.
Cash flow from operating activities, amounted to -$573 million. As expected, it declined compared with last year, but the drop was sharper than anticipated due primarily to a higher-than-expected build-up of net working capital, to support deliveries from the order backlog. Cash delivery will clearly be in focus going forward and I expect a solid full-year cash flow.
We made overall good progress towards our 2030 sustainability goals in 2021, as publicized in our Sustainability Report in March. As an example, we reduced our own CO2e emissions by 39%, from the 2019 baseline. Additionally, our products, services and solutions sold last year will enable our customers to reduce their CO2e emissions by 11.5 megatons after the first year, which is a good start towards our target of more than 100 megatons by 2030.
We made progress with the portfolio activities. We plan for an exit of the Turbocharging business, although the geo-political uncertainties caused us to delay the final decision on a spin-off or sale to the second quarter. Preparing for the separation, we launched the new company name and brand – Accelleron. For the E-mobility business, our plan for a separate listing during the second quarter remains intact, assuming constructive market conditions.
I look forward to the impacts of the leadership exchange in Electrification and Motion. I have great confidence in both Tarak and Morten and expect them to continue to improve operational performance for both growth and profitability. The change was effective as of April 1.
Finally, I am pleased we announced a continuation of share buybacks of up to $3 billion, including the fulfillment of the promise to return the remaining $1.2 billion of proceeds related to the divestment of Power Grids. This new buyback program was launched on April 1.
Outlook
In the second quarter of 2022, ABB anticipates the underlying market activity to remain broadly similar compared with the prior quarter. Revenues in the second quarter tend to be sequentially stronger in absolute terms, supporting a slight sequential margin increase, assuming no escalation of lock-downs in China.
In full-year 2022, we expect a steady margin improvement towards the 2023 target of at least 15%, supported by increased efficiency as we fully incorporate the decentralized operating model and performance culture in all our divisions. Furthermore, we expect support from an anticipated positive market momentum and our strong order backlog.
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