ABB's first-quarter earnings growth, will actively deploy GE industrial systems business

[ABB's revenue growth in the first quarter results, and will actively deploy GE's industrial system business] - Order volume increased by 6%, and all divisions achieved growth

- Base order growth of 5%, growth in all three major business regions in the world

- Affected by the order reserve at the beginning of the year, sales revenue increased by 1%

- The order shipping ratio is 1.13

- Profit margin before operating EBIT increased by 20 basis points to 12.3%

- Net profit of US$572 million, which will increase after deducting proceeds from the 2017 cable business divestiture

- Cash flow from operations is -5.18 billion U.S.

ABB Group Chief Executive Officer Spiep said: “In the first quarter of 2018, all divisions achieved growth in their orders, and sales revenue and operating performance also increased. The integration of B&R has progressed smoothly; at the same time, we are actively preparing for it. It is expected that the acquisition of GE's industrial systems business will be completed in the second quarter of 2018 and follow-up integration will be initiated."

He further stated: “We will continue to invest in sales, R&D, and leading ABBAbility digital platforms and solutions. In 2017, ABB will transform itself into a more streamlined and more powerful company. On this basis, we will focus more firmly on Customer-oriented and full implementation."

Short-term outlook

The macroeconomic indicators of Europe and the United States show a good trend, and the Chinese market is also expected to continue to grow. On the whole, the global market is regaining momentum, but parts of the world are still full of uncertainty. Changes in oil prices and exchange rates will continue to have an impact on company performance.

2018 first quarter results

Order amount

The volume of orders increased by 6% in this quarter (increase by 16% in US dollars), and the orders of the four business divisions all increased year-on-year. Basic orders (orders under $15 million) increased by 5% (15% increase in US dollars), and the three major business regions in the world achieved full growth. Large-scale orders accounted for 10% of total orders, which was the same as last year.

The year-on-year change in the U.S. dollar exchange rate resulted in a 7% increase in the volume of orders. After the acquisition of B&R in 2017, offsetting the changes in the business mix brought about by the divestment-related business, the net increase in orders was driven by 3%. The order shipping ratio in the first quarter was 1.13, compared to 1.07 in the same period of last year.

Service business orders increased by 8% year-on-year (15% increase in US dollars), accounting for 19% of total orders.

market Overview

Regional demand trends in the first quarter are positive:

● European market orders performed well in rail transit, special ships and process industries, but orders fell by 3% (15% increase in U.S. dollar denominations), and orders in France, the UK, Finland, and Sweden decreased, offsetting Switzerland, Norway, Spanish and German growth. Base orders in the region grew by 2% (increase by 21% in US dollars).

● Thanks to the increase in demand from the general industrial market and the improvement of the market conditions in the process industry, the total volume of orders in the Americas market remained stable (increase in dollar terms by 1%). The amount of orders in the United States was the same as last year; Brazil achieved growth; and orders for Canada and Mexico declined. Base orders in the region grew by 1% (increase by 3% in US dollars).

● Total orders in Asia, the Middle East and Africa increased by 20% (30% in USD). Among them, basic orders increased by 12% (increase by 19% in US dollars). The China, India and UAE markets have achieved good growth in large orders and basic orders.

The trends in ABB's three major customer market segments are as follows:

● Customers in the power sector, especially in Asia, the Middle East and Africa, continue to increase investment in grid-connected, grid automation and high-voltage products.

● In the industrial sector, the market demand for robots and short-cycle products has shown steady growth, and demand for transformers and other power grid products has increased. Affected by expected commodity prices, the market demand for process industries such as oil, natural gas and mining increased. Large orders for process industries continued to slump. Continued attention to the food and beverage, automotive, and 3C (computer, communications, and consumer electronics) industries has driven orders growth, especially in the area of ​​robotic solutions.

● The market demand for transportation and infrastructure has grown steadily, and the rail transit industry has achieved excellent orders for electrified products. Customers in the special marine industry presented selective investments. Thanks to the release of a series of innovative products, the market demand for building automation solutions continues to grow steadily. Orders for data centers and electric vehicle charging business maintained strong growth.

Sales revenue

In the first quarter, sales revenue increased by 1% year-on-year (a 10% increase in US dollars). The continuous increase in orders from the Robotics and Motion Control Division and the Electrical Products Division has ensured an increase in sales revenue. Affected by the decline in order reserve at the end of 2017, the sales revenue of the Industrial Automation Division was flat year-on-year, and the power grid division declined.

Revenue from sales of service business increased by 8% (increased by 15% in US dollars), which accounted for 18% of total sales revenue, compared with 18% in the same period of last year.

The year-on-year change in the U.S. dollar exchange rate resulted in a 7% increase in sales revenue. The net increase of 2% in sales revenue was driven by a change in the business portfolio brought about by the acquisition of B&R in 2017 and the divest-related business.

"New stage" strategy

Since ABB implemented the "new phase" strategy in 2014, it has focused on three major areas: profit growth, full implementation of all efforts, and business-led cross-sector cooperation. During this period, ABB transformed itself into a market-oriented, focused and streamlined company through the transformation of its product portfolio and operations. Currently, ABB technology fully covers the power and industrial automation value chain and is used in various scenarios ranging from generation to end-use, from natural resource extraction to completion of finished products. ABB's four divisions are actively promoting entrepreneurship, promoting profitable growth, and continuing to invest in sales, R&D, and leading ABBAbilityTM digital solutions. ABB's operating model is highly focused on the operation and execution of each division, and strengthens the correlation between compensation and operational performance. In a more favorable market situation, ABB will better grasp market opportunities.

Profit growth

As one of the measures to promote profit growth, ABB has continued to expand its ABBAbilityTM digital solution, which has now reached more than 210 species. In the first quarter, ABB won several new orders for the application of the ABBAbilityTM solution, including two important orders for high-voltage direct current (HVDC) line upgrades in Australia and an order for electric vehicle charging solutions in Trondheim, Norway.

ABB aims to create value through continuous business portfolio management. B&R merged into ABB's Industrial Automation Division and established a new global business unit for machinery and factory automation. The project is progressing smoothly and is expected to achieve a mid-term sales revenue target of more than US$1 billion. Following the acquisition of B&R, ABB recently announced an investment of 100 million euros to build the world's most advanced innovation and training park in Eggelsberg, the headquarters of B&R headquarters. The new campus will be operational in 2020.

The relevant approval work for the acquisition of GE's industrial system business is in progress. The transaction will be completed by the end of the second quarter as planned by ABB.

Spare no effort to fully implement

After completing the transformation of the EPC business model, ABB has included the EPC business as a non-core operating agency in the “Company and Other” project since January 1, 2018, reporting directly to the chief financial officer of ABB Group, managing the existing history of the EPC. project.

At the end of 2017, ABB completed the “Thousand Day Project” focusing on supply chain management and operation quality. On this basis, the Group will continue to promote net cost savings to overcome the impact of commodities and support the Group's goal of achieving a 3% to 5% annual sales cost savings. In the field of quality and operation, the Group continued its efforts to promote the entire company to achieve the world's top level of efficiency through the implementation of Lean Six Sigma projects in various business units.

Business-led cross-sector cooperation

ABB will continue to strengthen its brand building. March 1, 2018, as an initiative to build a unified brand strategy, Shunde Electric officially changed its name to ABB.

In January 2018, ABB announced that it had become the title partner of the International Automobile Federation Electric Formula Championship. The electric equations are an excellent platform for the promotion and testing of electric vehicle-related electrical and digital technologies.

Bond issuance

In order to maintain the efficiency of the financing structure, ABB completed a total of US$1.5 billion bond issuance in the United States on April 3, 2018, including two-year, five-year and 10-year periods. Bond financing will be used for general corporate purposes, including support for the acquisition of GE's industrial systems business.

Prospects

The macroeconomic indicators of Europe and the United States show a good trend, and the Chinese market is also expected to continue to grow. On the whole, the global market is regaining momentum, but parts of the world are still full of uncertainty. Changes in oil prices and exchange rates will continue to have an impact on company performance.

In the long run, the energy revolution and the fourth industrial revolution have created positive development prospects for the three major market sectors: electricity, industry, transportation and infrastructure. With good market positioning, comprehensive market and regional coverage, leading technology and outstanding financial capabilities, ABB aims to seize the opportunity to achieve long-term profit growth.

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