ABB reports ‘solid finish to a record year’

ABB has published its Q4 financial results for 2023 which shows Gross profit increased by 7% (6% constant currency) to $2,848 million, reflecting a gross margin improvement of 50 basis points to 34.5%. Gross margin improved in all four business areas.

Income from operations amounted to $1,116 million and dropped by 6% year-on-year, mainly due to higher restructuring and transformation related costs year-on-year, and the provision release related to the non-core operations which supported last year’s result. Margin on Income from operations was 13.5%, down by 160 basis points year-on-year.

Orders were flat year-on-year (comparable 0%) at $7,649 million, with strong contribution from large orders, including one in business area Process Automation for approximately $150 million. This offset a mid-single digit order decline in the short-cycle businesses, year-on-year.

Comparable orders increased in three business areas, while Robotics & Discrete Automation declined sharply as customers for machine automation continued the sequential trend of normalizing order patterns, and due to inventory adjustments in a declining robotics market. These inventory adjustments are expected to level off towards the end of the first quarter.

Orders increased in two out of the three regions. Americas was up by 3% (comparable 3%) driven by strong improvement of 5% (comparable 6%) in the United States. Asia, Middle East and Africa remained overall stable (up comparable 2%) where the strong development in countries like India and South Korea more than offset the decline in China of 8% (comparable 7%). Europe softened by 2% (comparable 5%) due mainly to a double-digit decline in Germany.

In 2023 the overall demand for ABB’s offering remained robust, with most customer segments improving or remaining stable. Weakness in the short-cycle businesses related primarily to residential construction and discrete automation was however more than offset by strong momentum in the project- and systems-related businesses. Orders remained stable or increased in three out of four business areas, with a decline noted only in Robotics & Discrete Automation. Orders amounted to $33,818 million and were down 1% versus the prior year (up 3 % comparable).

Björn Rosengren, CEO, ABB summarized: “The fourth quarter of 2023, was a solid end to a fantastic year. We improved operational performance and delivered a very strong cash flow year-on-year. We increased the annual return on capital employed (ROCE) by 460bps1 to 21.1% and we are utilizing our strong balance sheet by recently signing seven small bolt-on acquisitions, with the majority adding additional embedded software and AI capabilities to our customer offerings. We delivered in line with our guidance, and I am pleased with the solid finish to the year.

“Comparable order intake remained stable year-on-year, with increases noted in three out of four business areas. Most customer segments improved or remained stable, with softer demand noted mainly in residential construction and discrete automation, with the latter hampered by normalizing order patterns as well as by weakness in the robotics market. In tune with the historical fourth quarter pattern the book-to-bill ratio was below one, at 0.93, when revenues tend to be supported by end-of-the-year systems deliveries.

“Revenues amounted to $8,245 million and increased by 5% (6% comparable), supported by both higher volumes and contribution from earlier implemented price increases. Thanks to our ongoing focus on improving the quality of revenues, the gross margin improved by 50 basis points to 34.5%, contributing to the Operational EBITA margin improvement of 150 basis points to 16.3%. The contribution from mainly price and leverage on higher volumes clearly offset the impact mainly from higher labor costs. This represents the highest fourth quarter margin in recent history. The historical pattern of a sequentially softer fourth quarter margin repeated, as expected.

“In the quarter we generated Cash flow from operating activities of $1.9 billion. This contributed to Free Cash Flow of $3.7 billion for the year, even stronger than what we originally expected.

“In my view, the strong 2023 performance is evidence of ABB being a more efficient and agile company, but also of how demand for our offerings benefits from our leading position in markets accelerating the energy transition towards electrification and increased automation and digitalization. We feel confident in future performance, which led us to raising our financial and sustainability targets at our Capital Markets Day in November. In short, we are targeting higher growth and higher returns while enabling a net zero world.

“Looking to 2024, the geopolitical situation adds uncertainty, however we currently expect another year of good performance.”

Click here to read the full 2023 financial results and download the ABB company presentation.

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