“In the second quarter, we drove order growth in all divisions and across all regions. Through our continued productivity efforts, we delivered margin improvement and double-digit operational EPS growth,” said ABB CEO Ulrich Spiesshofer. “We completed the acquisition of GE Industrial Solutions within the committed time-frame and have started the integration at full speed together with our new colleagues.”

“With disciplined focus on relentless execution, our four divisions are continuing their drive towards worldclass efficiency and effectiveness,” he added. “These results show that our transformation over the past years is delivering.”

Short-term outlook

Macroeconomic signs are trending positively in Europe and the United States, with growth expected to continue in China. The overall global market is growing, with rising geopolitical uncertainties in various parts of the world. Oil prices and foreign exchange translation effects are expected to continue to influence the company’s results.

Q2 2018 Group results

Orders
Total orders rose 8 percent (14 percent in US dollars), up in all divisions and regions compared to a year ago. Base orders (classified as orders below $15 million) increased 9 percent (14 percent in US dollars), up in all divisions and regions. Large orders represented 7 percent of total orders, compared to 8 percent in the same quarter of 2017. ABB’s comprehensive digital offering, ABB Ability™, was a significant contributor to the quarter’s order growth.

The book-to-bill ratio increased to 1.07x at the end of the quarter compared with 0.99x in the previous year. Service orders were up 2 percent (5 percent in US dollars) on a tough comparable period. Service orders represent 19 percent of total orders, compared to 20 percent in the prior year period.

Changes in the business portfolio related to the acquisition of B&R resulted in a net positive impact of 3 percent on total reported orders. A stronger US dollar versus the prior year period provided a 3 percent positive translation impact on reported orders.

Market overview

ABB saw strong demand from all regions in the quarter:

• Total orders from Europe rose 10 percent (22 percent in US dollars), with positive contribution from Germany, Italy, the UK, Norway, Spain and France more than offsetting declines in Sweden, Finland and Switzerland. Base orders rose 12 percent (24 percent in US dollars) with Italy and the UK as the main contributors.
• The Americas delivered a 7 percent rise in total orders (7 percent in US dollars). Higher orders were recorded in the United States, Canada and Mexico. Base orders increased 7 percent (7 percent in US dollars). The United States grew, on a comparable basis, 6 percent (7 percent in US dollars) in total order terms and 7 percent (8 percent in US dollars) in base orders.
• In Asia, Middle East and Africa (AMEA), total orders grew 7 percent (11 percent in US dollars) with good order demand from China, India and the UAE. Base orders rose 7 percent (12 percent in US dollars) with positive contributions from China, India and Australia more than offsetting lower intake from South Korea and South Africa. In China, total and base orders increased 20 percent and 23 percent (29 percent and 32 percent in US dollars) respectively.

Demand grew in the majority of ABB’s key customer segments:

• Utility demand was mixed in the second quarter. Activity related to grid integration for renewables and investments in improving grid reliability, particularly through digitalization, continued to grow. Larger grid investments, for example in long distance transmission, remained subdued.
• Industrial demand grew well across a broad customer base in the quarter. Process industries, including oil and gas and mining, continued to increase investments, with capex concentrated on upgrading and automating brown-field assets. An ongoing focus on select industries such as food and beverage and automotive, proved beneficial for order momentum, particularly ABB’s automation and robotics solutions.
• Transport and infrastructure demand was solid, with good orders received for rail electrification, from the construction sector and in specialty vessels. Highlights for the quarter include continued strong growth in data centers and for electric vehicle fast-charging solutions.

Revenues

Revenues were up 1 percent (5 percent higher in US dollars), well-supported by continued solid growth in Robotics and Motion and Electrification Products. This was tempered by steady revenues in Industrial Automation and lower revenues in Power Grids due to the lower opening order backlog in both divisions.

Service revenues were up 13 percent (16 percent in US dollars), and represented 19 percent of total revenues, up from 17 percent in the prior year period. Services growth was bolstered by ABB’s leading digital portfolio, ABB Ability™ solutions.

Change in exchange rates resulted in a positive translation impact on reported revenues of 2 percent. Business portfolio changes had a net positive effect of 2 percent on reported revenues.

Operational EBITA

Operational EBITA of $1,167 million increased 8 percent in local currencies (12 percent in US dollars) in the second quarter. The operational EBITA margin increased 60 basis points to 13 percent, supported by continued productivity efforts. ABB continued to invest in its sales, brand and ABB Ability™ over the quarter.

Cash flow from operating activities

The cash flow from operating activities result of $1,010 million compares to $467 million in the second quarter of 2017. Relative to a year ago, cash flow primarily reflects a change in the timing of employee incentive payments paid in the first quarter this year which in 2017 were paid in the second quarter. ABB expects solid cash delivery for the full year.