Q4 2023 results

Q4 2023 results

Solid finish to a record year

Ad hoc Announcement pursuant to Art. 53 Listing Rules of SIX Swiss Exchange

Q4 2023

  • Orders $7.6billion, 0%; comparable1 0%
  • Revenues $8.2 billion, +5%; comparable +6%
  • Income from operations $1,116 million; margin 13.5%
  • Operational EBITA1 $1,333 million; margin1 16.3%
  • Basic EPS $0.50, -18%2
  • Cash flow from operating activities $1,897 million; +176%

FY 2023

  • Orders $33.8 billion, -1%; comparable1 +3%
  • Revenues $32.2 billion, +9%; comparable +14%
  • Income from operations $4,871 million; margin 15.1%
  • Operational EBITA1 $5,427 million; margin1 16.9%
  • Basic EPS $2.02, +55%2
  • Cash flow from operating activities $4,290 million; +233%
  • Dividend proposal of CHF0.87 per share
KEY FIGURES
($ millions, unless otherwise indicated)

CHANGE

CHANGE
Q4 2023 Q4 2022 US$ Comparable1 FY 2023 FY 2022 US$ Comparable1
Orders 7,649 7,620 0% 0% 33,818 33,988 -1% 3%
Revenues 8,245 7,824 5% 6% 32,235 29,446 9% 14%
Gross Profit 2,848 2,658 7%
11,214 9,710 15%
    as % of revenues 34.5% 34.0% +0.5 pts
34.8% 33.0% +1.8 pts
Income from operations 1,116 1,185 -6%
4,871 3,337 46%
Operational EBITA1 1,333 1,146 16% 13%3 5,427 4,510 20% 20%3
    as % of operational revenues1 16.3% 14.8% +1.5 pts
16.9% 15.3% +1.6 pts
Income from continuing operations, net of tax 946 1,168 -19%
3,848 2,637 46%
Net income attributable to ABB 921 1,132 -19%
3,745 2,475 51%
Basic earnings per share ($) 0.50 0.61 -18%2
2.02 1.30 55%2
Cash flow from operating activities4 1,897 687 176%
4,290 1,287 233%

1 For a reconciliation of non-GAAP measures, see “supplemental reconciliations and definitions” in the attached Q4 2023 Financial Information.
2 EPS growth rates are computed using unrounded amounts.
3 Constant currency (not adjusted for portfolio changes).
4 Amount represents total for both continuing and discontinued  operations.

“Our strong 2023 delivery was the result of both our leading market position in electrification and automation, as well as ABB being a more agile and efficient company in its execution. With our upgraded financial and sustainability targets we look to the future with confidence.”

Björn Rosengren, CEO

CEO summary

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. We expect a positive book-to-bill and revenues to be supported by execution of parts of the $21.6 billion order backlog. In the projects- and systems business we expect continued high customer activity, although we face high comparables from last year when large orders came through at a very high level. In total, order growth year-on-year should show stronger momentum in the latter part of the year when comparables ease. We expect to improve on comparable revenues as well as on Operational EBITA margin, and cash flow should benefit from continued strong operational performance and our continued focus on net working capital efficiency.

Considering the improving performance, robust cash flow and a solid balance sheet, the Board of Directors proposes an ordinary dividend of CHF0.87 per share, up from CHF 0.84 in the previous year. We also plan to continue utilizing share buybacks as a tool to return excess cash to shareholders also during 2024.

<b>Björn Rosengren</b>, CEO
Björn Rosengren, CEO
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Outlook

In the first quarter of 2024, we anticipate a low to mid-single digit comparable revenue growth and the Operational EBITA margin to remain stable or slightly improve year-on-year.

In full-year 2024, we expect a positive book-to-bill, comparable revenue growth to be about 5% and the Operational EBITA margin to slightly improve from the 2023 level of 16.9%.

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