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ABB Presents Plan to Divest Three Divisions
ZURICH, Switzerland — ABB hosted its annual Capital Markets Day today. CEO, Björn Rosengren, and CFO, Timo Ihamuotila, as well as the four business area Presidents, gave an update on the recent strategic and operational developments.
- Improving performance under ABB Way
- Review of business portfolio
- ABB’s digital strategy
- Updated financial framework and long-term sustainability targets
“ABB is a leading technology company, now and in the future. We have the global R&D capabilities, digital solutions and innovation focus to support our customers. The COVID-19 pandemic still weighs on the near-term outlook, but the long-term market trends of electrification, automation, digitalization and energy efficiency remain intact. At the same time, we are taking additional steps to improve performance in order to drive value creation for all stakeholders going forward,” said CEO Björn Rosengren.
Improved performance in the making
Since the start of this year, ABB has further decentralized its organization to bring operating decisions closer to the customer and successfully rolled out its new operating model called ABB Way, including the introduction of a scorecard-based performance management system reinforced through incentivization. This creates a clear focus on stability and profitability before growth in order to strengthen underperforming divisions.
Furthermore, ABB has carried out a portfolio review of its divisions to ascertain whether it is ultimately the best owner. As a result, ABB has decided to explore all options to exit three divisions:
- Turbocharging (Industrial Automation)
- Mechanical Power Transmission (Motion)
- Power Conversion (Electrification)
These divisions represent roughly $1.75 billion of combined annual revenues or approximately six percent of ABB’s total revenues.
“All three divisions are high-quality businesses, with Operational EBITA margins above the group’s target margin corridor. In this process, we will seek the best value-accretive solution for ABB and those businesses and not put ourselves under time pressure,” said Rosengren. “Furthermore, portfolio reviews will continue to be a key element of the ABB Way.”
ABB will increase the number of divisions to 20 as of January 1, 2021, due to a split in the Motion business area portfolio, while Industrial Automation will be renamed Process Automation to better reflect its customer base.
CFO Timo Ihamuotila will highlight in his presentation that ABB has delivered on sustainable cost reductions: “Due to the reorganization of the Group, the ABB-OS target of $500 million net savings has been reached one year ahead of plan.”
ABB’s digital strategy
ABB has recently carried out a review of its digital strategy under the ABB Ability™ brand, which is comprised of software-enabled products and systems, as well as software and digital services. The company intends to accelerate the expansion of its digital offering that is tailored to specific sectors or applications based on ABB’s domain expertise. This will be done through increasing R&D and investments to about 5 percent of revenues per year and will be led by the business. This approach creates superior value for customers and drives a higher quality of revenues for the company. ABB will also continue to pursue select strategic partnerships in the digital sphere, as well as synergetic bolt-on acquisitions.Tagged with top 20