ABB Ltd

Greetings to you all, and welcome to this presentation of ABB's fourth quarter results. I have our CEO, Moten Virud, and our CFO, Timo Hujamottila, here next to me. And I'm Ann-Sofie Nord, Head of Investor Relations. Moten and Timo will take you through the results presentation, after which we'll open for Q&A. So with that said, and without further ado, Moten, would you kick it off?

Thanks, Ansi, and a warm welcome also from my side. Let's start by taking a look at the full year 2024, which was a new record year for us in many ways. We improved on most of our financial headlines and on the sustainability side, one of the highlights was to get our scope one, two and three targets approved by the SBTI. Taking a high-level markets perspective, I would say it was a continued, robust trading environment in three out of our four business areas. Orders in our short cycle businesses improved in the mid single digit range, which offset the impact from large orders softening from last year's high level. Electrification was the big growth engine, and I think it is fair to say that both robotics and discrete automation, as well as e-mobility, farred worse than what we originally expected. From here on, these two should be less of a drag on group performance. Despite some of our businesses not yet delivering to their full potential, the operational EBITDA was up by 10%. We took another step towards the high end of our margin target range as we achieved a new record level of 18.1%. We did this with strong support from higher gross margin, which reached the all-time high of 37.4%. I'm pleased about the good progress we're making here. Earnings per share was up by 6%. And I know that Timo is happy about us delivering on our ambition to improve free cash flow. The $3.9 billion corresponds to a free cash flow margin of 12%, making it the second consecutive year at this double-digit level. Cash flow should be good also going forward. Another strong point for us is Roche at 22.9%. We will become more transparent with Roche, and Timo will talk about that later on. Towards the end of the year, we also got a better momentum for M&A. Based on the deals we have already announced, but not closed, we set ourselves up to approach our long-term target range for acquired growth in 2025. Our strong balance sheet supports more acquisition and we want to utilize it. All in all, it was a good year for ABB, and the board has proposed a dividend increase of 3 Rappen to 0.9 Swiss franc. The cash distribution is in addition to the 1 billion we have used for share buybacks in 2024. And today, we announced a new and larger program of up to 1.5 billion, which will start to execute in the early days of February. To finish off 2024, I want to say that I'm proud of what we have as a team have accomplished. We stay true to our strategy, including the ABB way model, and we are still making our operations more efficient and transparent as we increase accountability even further down in our organization. We continuously look at how we can optimize our business portfolio, which is positioned at the core of the energy transition, as well as energy and automation efficiency. And I look forward to 2025 when I'm confident we will yet again deliver some new records. So let's now look at the fourth quarter in isolation, which in my view represents a good ending to the year. The strong growth in short cycle orders more than offset a lower level of incoming large orders for which the base was really high. In total, our comparable orders increased by 7%, driven by a stellar performance in electrification. Robotics and discrete automation turned a corner by delivering positive order growth, despite an adverse impact from the team having gone back to customers to reconfirm the backlog. Timo will talk through the details on the RI slide later on. But without these de-bookings, our group orders would have been two percentage points higher. Looking at the income statement, you see that we improved on virtually all lines. The 5% comparable revenue growth was mainly driven by higher volume, but also by positive pricing of about 1%. This generated a good drop through to operational EBITDA driven by a higher gross margin. I'll come back to that on the earnings slide. Some of you may remember that I mentioned our brand positioning. we have now launched our new tagline, Engineered to Outrun, which I think nicely represents who we are and what we do. We help industries outrun leaner and cleaner. To me, it articulates what we want to be known for in the minds of our customers. This is a long-term project, but assuming we do it right, we should have a commercial upside from a more focused industrial positioning. And again, this does not mean a higher spend. We will simply be more focused. At the Q3 presentation, I talked about data centers and how we are first in the market with a medium voltage switchgear. There's been a lot of AI related news flow recently. Our objective is to make data centers more capex and energy efficient. And I am sure that this will continue to be a focus point for our customers. We invest to innovate, to create customer value. We are now receiving orders for the so-called HyperGuard medium voltage UPS system. This brings ever better UPS solutions when the server power rack requirements goes up. This means that we also can help customers to reduce their capex spend by up to 30%, reduce complexity and become more energy efficient in their next generation of data centers design. I look forward to follow the team's progress in this area. As you can see here in the chart to the left, the pattern suggests a softer order intake towards the end of the year, and book to bill tends to be negative in our fourth quarters. So also this year at 0.94. In my view, it was a solid order quarter, which adds to my confidence for a positive book to bill for the full year of 2025. It was good to see that despite the second highest base ever for large order, we managed to deliver comparable order growth of 7% to $8.1 billion. This was driven by a strong growth in our short cycle businesses, which delivered a low double digit improvement from last year. It improved in three out of four business areas with electrification being the outperformer. The short version is that the trading environment remained robust in most customer segments, except for weakness linked to discrete automation and the e-mobility businesses. Looking a bit deeper into the details, both data centers and utilities stand out on the strong side. Order growth was good also with the building segment as the persistent weakness in China was more than offset by other regions. Automotive is still a challenge for our robotics business, but this quarter it was actually a positive on orders. Transport and infrastructure are generally solid, although marine and rail were down due to the timing of large orders. If you now switch to the revenue chart, the 8.6 billion we delivered was supported by backlog execution as well as conversion of recent uptick in short cycle orders. Notably, the 8.6 billion is the highest quarterly level ever from ABB, and it was up by 5% on a comparable basis with a positive development in three out of our four business areas. Now, looking at the regional orders, we were up in all three regions. China continues to be a challenge in several customer segments, but the negative 11% you see stated on this slide is impacted by the backlog adjustments in robotics and discrete automation. Excluding this, China is down by the more limited 1%. But as a total, Asia and Middle East Africa was up by 4%, with weakness in China offset by strength elsewhere in the region. The Americas improved by 7% and continues to be the most robust area driven by the US, where however quarterly growth was limited to 1% due to last year's high base. Europe was up by 9%, with a strong improvement in many of the larger markets, including Germany, although from a low level. The seasonal pattern is visible also in the earnings and margin chart, but importantly, it shows that we continue to improve performance. We are making further progress on the gross margin. The 35.5% is up by 100 basis points from last year, and we offset the intentionally higher R&D spend while we manage to keep SG&A more or less stable. The underlying corporate and other costs of about 60 million were slightly lower than the 75 million we had expected as we benefited from a settlement in a non-core project. Operational EBITDA was up by 8% and we improved the margin by 40 basis point to 16.7%. This means that we delivered the highest fourth quarter margin on record. And as I mentioned earlier, we achieved a new all-time high for 2024 as a whole. The way I see it, we are in a good position to nudge the margin north, also in 2025. Now I'll hand over to you, Tuimo, to give you some more color on the different business areas.

Thanks, Morten, and welcome to you all from my side as well. And we start with electrification, where comparable orders were up by as much as 16%. The quality of this order growth was, in my view, underpinned by the fact that we had improvements across most of the divisions as well as across regions. Data centers and utilities continues to be strong areas, but the building segment also contributed in a good way, where we on the commercial side saw good momentum in both the US and Europe. In the residential area, it was broadly stable at low levels outside of China, which is persistently weak for both residential and commercial. Now, if you look at the chart in the middle, you'll see that the electrification achieved another milestone. With the 11% comparable revenue growth, they for the first time surpassed quarterly revenues of more than $4 billion. All divisions contributed with higher revenues, which came primarily from higher volumes with some additional support from price. The outcome was even a bit better than our expectations on back of higher project deliveries. Electrification improved operational EBITDA by 19% to 863 million, resulting in a margin of 21.3%. The gains from higher volumes and price more than offset higher expenses mainly related to R&D, but also for SG&A, as well as the stronger than expected adverse revenue mix towards project business. Looking into the first quarter, we currently expect a mid to high single digit growth rate in comparable revenues and the operational EBITDA margin to remain broadly stable or slightly increase from last year. Let's then flip to motion, where orders remained around the 1.9 billion level, down 3% on comparable basis. The short cycle orders improved, but this was offset by lower project and system related orders, where the comparable was one of the highest ever. We saw favorable order development in commercial buildings, HVAC, as well as in water and wastewater and power generation. The softer areas included the process related segments of oil and gas, chemicals and food and beverage. Rail also declined, but this was mainly linked to the large order comparable I just mentioned. In the revenue chart, you see that motion comparable revenues was up by 6%, resulting in a record quarter for motion for the first time above 2 billion. Most divisions saw positive developments supported mainly by strong backlog execution resulting in higher volumes, but also by some positive pricing. The higher volumes as well as operational improvements contributed to a strong margin improvement of 210 basis points to 18.7%. I should mention that the part of the improvement relates to the one-time product quality cost which weighted on last year's margin by approximately 60 basis points. But importantly, the higher profitability is more an outcome of benefits from higher comparable revenues and efficiencies which clearly offset the higher spend in R&D and SG&A. For the first quarter, we anticipate a mid to high single digit comparable revenue growth and the operational EBITDA margin to slightly improve year on year. Turning now to slide 11 and process automation, where the market environment is solid. Total orders remain broadly stable despite the tough large order base. This resulted in PA continuing their streak of positive book-to-bill for now 17th straight quarter. The underlying trading environment is still robust in the marine and port segment, although this time quarterly orders declined due to a large 150 million booking last year. A stable to positive order development was noted in most of the energy and process industry related segments, with weakness noted primarily in chemicals. Process automation improved comparable revenues by 4% due mainly to execution of the large order backlog, which added support from pricing in the product business and good service growth. The backlog execution comes through at the higher gross margin. This helped driving operational EBITDA up by 8 percentage points from last year with a 40 basis points margin improvement to 14.4%. Looking at our expectations for the first quarter, we foresee comparable revenues to improve in the mid single digit range and the operational EBITDA margin to be broadly stable year on year. Now we turn to robotics and discrete automation, where orders turn to positive growth after eight consecutive quarters in decline. It has been an unusually turbulent time for IRA when markets have corrected after a significant pre-buy period. We have now completed a thorough analysis of the backlog, which included going back to customers to reconfirm status. This triggered debookings of about 130 million in what is now a reconfirmed order book. The majority of the impact was linked to machine automation and China, and reduced the business area's comparable order growth by 24%. With that said, excluding the debookings, the strong year-on-year order growth could appear as a very big improvement in the underlying demand. I would comment that it is more linked to last year's very low base, as we have not seen a big change in the market environment versus what we saw in the third quarter in either of the divisions. So looking beyond the backlog adjustment, robotics division saw positive order development in the automotive sector. The segment remains challenging, but in this quarter we benefited from ramp ups in hybrids as well as by some replacement capex. Other positives were the areas of general industry and food and beverage, while electronics and metals were muted. In machine automation, customers remain focused on inventory management and we stick to our earlier prediction that this will ease toward the end of the first quarter or at latest during Q2. But we expect a slight sequential order increase in both divisions in the first quarter of 2025 when excluding the backlog correction we have just talked about. Moving now to revenues, the robotics division executed on their backlog, resulting in a low double-digit growth rate for comparable revenues. This was however clearly offset by significantly lower volumes in machine automation. The previously announced cost savings measures in machine automation is increasingly coming through, but did not compensate for the lower production volumes. So while robotics delivered a double digit margin, the total operational EBITDA almost half with the margin at 7.9%. For RA in the first quarter, we expect the absolute revenues and operational EBITDA margin to remain broadly stable versus Q4. We ended the year by delivering free cash flow of $1.3 billion in the fourth quarter. This in combination with the strong cash generation from the first nine months resulted in the annual free cash flow of $3.9 billion, meaning we delivered on our ambition to step up from last year. As Morten mentioned, cash flow should be good also in 2025, and I see it being in the similar to 24 level. Looking at the fourth quarter in separation, the free cash flow decreased by approximately $420 million. The improvement in operational performance was offset by less reduction in networking capital versus previous year. Networking capital management has been an area of strong internal focus this year, and I was very pleased to see that we were able to bring the networking capital as percentage of revenues down to 8.6%. This actually is in line with where we were prior to the supply chain crisis, a job really well done by the team. Taking a look at the ROSI development, you see in the chart that the 22.9% we reached is again clearly above our target of greater than 18%. ROSI improved by 180 basis points, driven mainly by better operational performance, but also by our focus on networking capital. Overall, the improved ROSI is a good indicator that we continue to improve ABB's long-term performance and are really operating at the best in class level. Before I hand back to Morten, I want to mention some reporting changes that will come into effect as from Q1. With these changes, we want to more closely align our reporting with our day-to-day operations with the aim to drive operational focus and improvement on our gross margin, networking capital and return on capital employed. Firstly, we will be reclassifying certain IT costs from gross margin and will report them based on the nature of the system rather than by headcount allocation. This will allow us to move more closely to track cross margin and costs directly linked to the business and hold our functions accountable for the cost associated with their infrastructure. Secondly, to take another step in our efforts on capital efficiency, we are introducing a new measure focused purely on trade networking capital. It means that this KPI will include only trade receivables and payables, contract balances and accrued liabilities. This will be the ratio that we will present as percentage of revenue, and we will use fourth quarter average to smoothen the seasonality of the net working capital, which tends to be front and loaded in the year. And lastly, we will better align the ROSI calculation with operations by using the estimated operational tax rate and also for this KPI based calculation on the four-quarter average to remove seasonality. All restated and new numbers will be on the IR website in February. And with that, I will hand back over to you, Morten.

Thanks, Timo. So let's finish off the outlook, and I've already alluded to a positive development in 2025. We acknowledge that there are geopolitical market-related uncertainties, and at the moment, the strong US dollar puts some pressure on numbers. But from what we see right now, we expect a positive book-to-bill comparable revenue growth in the mid-single-digit range and the operational EBITDA margin to improve from last year. For the first quarter, we foresee growth for comparable revenues in the mid single digit range and operational EBITDA margin to remain broadly stable year on year. So now, Ansi, let's open up for questions.

Yes, let's do so. And as a quick reminder for those of you who have dialed in on the phone, please press star 14 to register to ask a question. And also, please remember to mute the webcast as your line is open and limit it to one question, please. This way we allow for as many of you as possible to be heard. You can also put questions through the online tool in the webcast and I will then voice them over from here. that it's time for q and a's but before we put we take the first question i just want to let you know that timo as you see will not be able to join us for the q a session due to personal reasons so today it's you and me morton indeed and with that said uh we open up the line for the first question and it should come from martin at city are you with us martin

Good morning. Thank you. It's Martin from Citi. The question I had was inside electrification and particularly data centers. Obviously, a lot of market debates over the last week or so on the efficiency of BPC and so forth. And I realize it's way too early to really sort of discern what's happening with your business there. But just so we can understand a bit more about what's happening in data centers, your backlog overall in EL – Could you give us some numbers on data centers within that? And also as part of that, have lead times on some of these products that were clearly in supply constraint mode for a while. Is that beginning to normalize? How do we think about the backlog conversion when it comes to some of those products within data centers? Thank you.

Well, thanks, Martin. I'll start with that. I mean, the whole data center market last week, we first talked about the $500 billion investments in IAM machine learning. And then we had DeepSeek on Monday that kind of also stirred the pot, so to say, this week. So it's been in a new market like the data center, it is changing. Talking with our customers, our partners, the last two days, uh kind of the reconfirmation that the investment plans stands as it was before from last week it hasn't changed to this week so that i i can confirm all those early early discussions uh to give a bit of the size also our data center business we gave a uh in 2023 it was 12 of our order intake in the electrification In 2024, it reached 15%. And with good growth on the rest of the business, it shows also what kind of magnitude we are talking here on growth rates. So we see that that positive development will happen. I would rather say it's a good thing if we get more energy efficiency into some of the algorithms or in the deep learning model the large language models that are being used because it would kind of take a bit down the constraint on or reduce some of the bottlenecks that we we are facing in this industry when we look to some years ahead Our, as you know, our engagement there is very much on the medium voltage and on the low voltage switchgear side. This is giving all that infrastructure into data center, but also the UPS systems. And as we already mentioned, today was the... The good win also that we have more now getting get traction on medium voltage UPS. That means we're taking equipment out of the more the white space of the data center or inside the data center and to an outside facility, which again. Sorry, it reduces the capex, but also it increases energy efficiency. So I think for us, that's a great win. It's something I'm really proud of what the team have done from an organic. It shows technology leadership from the team. So we are still confident in the data center market. AI will be widely deployed and more data centers and more investments is needed to be able to support it. And I think the lower the cost of it, the wider the deployment is. So therefore, I'm still very optimistic when I look to the future of data centers.

And if I may add to your sort of comments or question on the sort of lead times related to the data centers. So when I speak to the guys, I mean, let's say we're now hovering at about 35 weeks, which is still higher than what it used to be historically, but it has come down from, let's say, topping out at 50-ish. Yep.

Great. That's very helpful. Thank you.

Thanks, Martin. And we take the next question from Alex, please. Virgo.

Yep, thanks, Ansi. Morning to you and morning to Morten. I beg your pardon. I wondered if you could just go through a little bit on this margin improvement guidance. So if I think last year you guided to a slight improvement and delivered 120 basis points, this time around you're talking about improvement. I think you mentioned nudge on the call a little bit earlier on. If I look at the starting points. You're 100 basis points or so higher on gross margins. You're talking to further pricing tailwinds. You've got robotics recovery and mid-single-digit organic growth, which means your operating leverage should support decent margins as well. What are the headwinds? What are the mixed comments you made, I guess? And I'm just trying to clarify what slight nudge, improvement, et cetera, might actually mean. Thank you.

Thank you. Maybe you start.

I'll have a go and see where we end. Well, I think just for a bit of sort of starting point, the improvement in 23 to 24 is to some extent driven by the corporate costs actually being lower than what we originally guided for, which helped us with about 40 basis points in the 2024 improvement. Now going into 2025, we have the reverse of that. So we come from a lower level of corporate cost and we're guiding now for 300, which is like a 40 bps headwind, just so we have that framed. And then if we just talk a little bit about the puts and takes here, like you say, we have the comparable revenue growth. which obviously should help us in terms of operational leverage. And then on the other sort of bucket, we have the corporate costs just mentioned. The mix, while RA should improve, it's still sort of negative mix on the total with higher proportion of revenue stemming from, hopefully, from robotics and discrete automation. And I think in terms of improvement potential, while we still see you, I think this, I'm stepping into your turf now, Morten, but we still have improvement potential from the sort of pushing the ABB way into our organisation further. But maybe we're coming, maybe the improvement potential isn't as big as it was. Maybe you want to allude to that, Morten.

I always say as one of my guiding principles to everyone is that we never want to go backwards and therefore we're always looking for how we can improve and that goes for every business area and And that kind of gives a starting point. And then you mentioned already some of the operational performance opportunities that we have when you get revenue growth in our type of business. So that's there, but then we also have as Anssi was referring to, a few headwind factors that we also need to take in. But we are looking for a new record performance in 2025 from ABB up from the 18.1 where we ended in 24. So that's what we are guiding for.

Okay, thank you.

Thanks. And we open up for the next question from Will at Kepler-Chevre. No, we're trying Max Yates.

Yes, I'm here.

Yeah, very good.

Good morning to you, Morten Ansi. Thanks for the time. I guess my question would go to the cash flow guidance where you've said it will be similar. I'm just thinking if you can walk through some of the main reasons why it would be similar, given that we should expect good revenue growth, margin expansion, and further improvements in the management of operational networking capital. So some of the key levers there, perhaps the exception of CapEx, should all point to a much better or further gains in free cash flow performance. So what is it? And if it's CapEx, could you maybe allude on where the investment growth is concentrated? Thank you.

Yes, let me start with this and I'll see you can follow up. It starts with CapEx investments that we are increasing. We did that also in 2024 and it is to secure the growth. This is especially related to our electrification business and especially to North America. but also to India where we have significant, these are growth markets and we're also allocating capex to those two markets. So that is, you will see more. This is not always new investment. These are mostly expansion of existing facilities. And we have quite a long list of facilities that will get 50 or even up to 100 percent larger footprint, but also more automation, more robotics, more automation on the factory floor of those units so that we can be even more what we talk about local for local, that we can support that initiative avoiding any tariffs or any changes in trade that we may face. So this is kind of how we continue to build resiliency and capacity of the business. So that's where the CAPEX thinking. So that is part of the question or the answer to it. And Ansi, maybe you have a couple of more comments as well.

Well, I think you sort of framed it, Will, with the sort of CapEx being in the negative bucket. So if we manage to deliver similar to what we had in 2024, or if we manage to bunch it up a little bit, let's wait and see how we go. But ballpark there.

Thank you.

And now we try the next question from Max at Morgan Stanley. Max, your line should be open.

Good morning, both. Thanks for the question. I guess I just wanted to dig into the electrification growth a bit. When I look at your kind of commentary and your electrification growth over the past few quarters, it feels like it's not just the data centers and grid bits. I mean, you've talked about kind of the non-data center bit growing double digit. And it feels like, look, construction markets are not. fantastic in either residential or commercial is okay but it feels like your orders are growing at a much faster rate in specifically the construction vertical so i just wanted wondered can you talk a little bit about what is driving that because it definitely feels like your orders are growing faster than underlying construction demand um is this kind of the electrification of buildings more power protection is this market share gains and would you agree with that statement that if kind of building the markets are growing

low to mid single digit maybe in commercial you're growing much faster so maybe just unpacking some of that would be really helpful thank you well thanks it is as you say we are the electrification of everything is kind of it's a red thread that goes through all geographies that means america's asia or europe so that that is happening that is kind of what is the underlying growth of it uh the commercial building is also we see some improvement the residential still being weak so we still have kind of upside from more of the traditional industries when they come back but we have to remember that a lot of the what's happening in industries today when we're talking about decarbonization It is about moving then into a kind of new equipment, taking a diesel or a gas turbine or generator and replacing that with electric propulsion. These are where electrification is needed. It benefits our motion business and our process automation, but also for everything of these applications. You need electric switchgear, electric devices, that is because none... no electric motor is able to turn without power, without electricity to the connection point. And all of that comes from switchgear and the electrification business. So that is kind of an underlying foundation that everything that's happening in industries. So this is why you see the electrification trend kind of being now more kind of independent of the pure GDP or general market growth. It is that kicker. So that is... what is driving really the performance also of the electrification business. And then you, of course, have the data center on top as the turbocharger, say, for that business where you take it from 10, 11 up to 16% in this quarter. So that's kind of how things hang together.

Okay. Thank you very much.

Thank you. And I will cut in with a question here from Mattias through the online tool, also related to electrification. And he says, is the higher project mix that hit electrification margins in Q4 temporary, or should we expect a sustained shift given the strong project orders?

For the Q4, this was a special quarter where we had a very strong revenue. It was the first time more than $4 billion. It was more system versus product balance than what we normally face over the year. So it was an abnormal situation in Q4 versus what we see to the year, but also what we expect for the future. So They showed more looking at the year to date than the last three months in isolation. So because there is no kind of change in that business when you look at the different parts of it, but it was more of this mixed picture in the fourth quarter where we have significantly more large project deliveries that went out. And it was the same also in the motion business. I'm sure we get that question as well later because we kind of use the excuse or explanation is probably the right term. When the Q3 numbers, we got questions, why was motion low in revenues? And now you say we talked about project delays. You could see now in the numbers in the fourth quarter that revenue really came out also in motion numbers. with, for the first time ever, about $2 billion in the motion business. And that was because now some of those delays we were able to catch up. So good to see that also coming through in the revenue numbers on motion.

Very good. And then we open up the line for James at Redbird. Your line should be open. I spoke to James earlier today, and I know he's had some IT issues, and it seems like they continue. So we put James on hold for now and move to Daniela at Goldman Sachs. Daniela, is your line open?

Hello, can you hear me?

Well, now we can hear you, James.

Sorry, there's a delay from you saying that I can talk to the line being unmuted. I think that's why you couldn't hear me and some others. Thanks for the question. Anthony, could I just clarify, did you mention the percentage order growth number for data center? And if you didn't, could you? But my question was on the robotics and automation business. When you talk about a sort of margin of 8% in the first quarter, roughly flat, does that include any of the savings having already yet come through? And what is the timing on the savings? And how should that sort of drive, presumably the MA business is a sort of break-even business. Can we be double digits at the end of the year when those savings come through? I'm just trying to understand the shape and the timing of that.

Yes. No, I think savings are starting to come through in the MA business. We started to see it come through more towards the end of the quarter, but given the low volumes they have in their production, that underabsorption is still sort of impacting them. So while the whole of RA business area sort of benefits from the double-digit margin in robotics, the MA business is still sort of very, very weak. So... due to that low volume put through. We've said that the inventory adjustments among customers should come towards finalization towards the end of Q1, latest during the second quarter. So with that said, we should still see a hampered performance in machine automation also in Q1, hence the guidance for RA as a total. I hope that helps.

And I can add there to your question around data center growth. I think what we have said earlier is we had from 2019 to 24, we had a CAGR of 25% in that segment. And it will say in 24 was pulling that number up and not down without going into more detail than that.

And when you say that it would have been 10-11 without it and 16 with it and playing around with the share of it, does that mean you're like 30-40% in the fourth quarter?

I think that would be the mathematic calculation. Yeah, great. Thanks very much.

Okay, thanks, James. And now we try to put things right again by opening up the line for Daniela.

Hi, good morning. Hopefully you can hear me. We can. Perfect. I have a follow-up in terms of thinking about the electrification margin for 2025. And if you could help us on what do you see in the backlog in terms of the mix for delivery in 2025 in electrification and also given how strong the growth in the end market across the board has been and the capacity constraints, do you see stronger pricing there than in other parts of the group?

Talking about pricing, for 2024, we got about 1% for the group out on price, almost the same in the electrification business. So a bit more back to the situation, as Ansi also referred to over lead times today. It's not back to, let's say, normal, but it is shorter. So the capacity is more in place, which also leads to, I don't expect a lot of help from price in 2020. in 2025. So it's more of the self-help that is needed. What I am happy to see this year, which has also been driving performance in 2024, is that the traditional work of supply management, of continuous improvement, more automation, more productivity in the units, that is also driving the performance. And that is part of the DNA of the electrification team. As you know, I know that team very well. I was running it up till last summer. And And I know that that work is just a continuous ongoing program or improvement year by year. And that is not stopping. That is need to continue on with that pace. So that is and we will see, of course, revenue growth and therefore expect also a drop through and having improvement also in that, as I say, we always want to improve in every business areas and every business that we operate. goes also for electrification. Even they are performing really well in 24. We expect even more in 25.

And a mix?

I see that we don't see any significant change or mix in the year of 2025. It may be, as we had now in the fourth quarter, you could have quarterly mix changes. But for the full year, we don't see any significant change in mix, no.

Got it. Thank you.

Thanks, Daniela. And we open up for Ben Uglow. Your line should be open. Thank you.

Paul, morning, Morten and Nancy. Thank you for taking the question. My question relates broadly to China. Morten, can you give us a sense of what you're seeing on the ground qualitatively? I mean, if we strip out that robotics backlog issue, it looks somewhat stable. I'm kind of interested in what you're hearing in electrification, because there is obviously data center business going on in China, and also process and motion. Just, you know, we talked a lot about stimulus. We've been waiting for things to get better. Do you see any green shoots or is it premature?

It is still premature. We don't see it yet. Right now, our Chinese colleagues are on Chinese New Year. So when they are back in the office next Wednesday, I think you will see also a lot of things will be starting in China. At least that is often how the Chinese market is working. That post-Chinese New Year, you will see a lot of the activities And that's also, I think, where things were decided in October last year. It takes time to implement. So we haven't seen it yet. I am, though, optimistic that some of these measures that has been taken will play an effect, especially in the renovation, decoration of apartments, you know, in buildings. I don't expect any building boom in China. You will not see that of new buildings. new residential or even commercial building, not see a boom there, but to have this opportunity on the renovation, which is a big portion of the part of the building business in electrification. Where we do see strong growth these days is in the utility space, integration of renewables, more in the solar and wind that is going, and the data center business is going very well in China as it does kind of all over the world so that's the the uh when we look at china the different segments is kind of from the plus uh 20 to the minus 20 that's kind of and we ended up at minus one when you take out the order cancellation for the fourth quarter that's a kind of uh so china is a is a mix between uh has been a bit between uh frozen ice and and boiling water that's the that's but has been a bit the average when we look into the market. So our job also as a company is to take advantage of those growth opportunity that does exist in China and maximize that and not kind of sit back and wait for some of the traditional applications to come back. That will still take some time before the kind of the building construction market is back in China that will still, I don't expect that to come back in 25.

That's great. Thank you very much.

Thanks, Ben. And we move on to Andre from UBS. Please.

Hi, good morning. Thank you for taking my question. I just wanted to dig into ABB Way contribution a bit more. You said that it contributed meaningfully in 2024. You expect a bit less for 2025. Could you give us some idea of how much it helped the margin in 2024? i'm just thinking more broadly about it that scope for kind of looking into under the hood as i think you said in the past and beyond said of business areas and looking at the overheads that sit there at business area level that should really be pushed into business units what is the scope of the opportunity here altogether

We are now in the process and many of the division has already completed. The rest is underway by setting up their divisions in what we call business lines. And when we do that, we are around 80 business lines for those 18 operating divisions. That's how we divide the company. And today, 75% of the revenue of ABB in the divisions sits in that growth boat, which means that 25% is then under profitability improvement or into the stability mode that we have won, which is the machine automation division. But we also do this, as I say, further down in the business. For me, it's two things. It's how you drive the right behaviors when it comes to target setting, incentive plans, but then also the behavior, how you act in the market. It's important there down on a business line level. And it's also it builds resilience when you see one division or one business line within a division is facing more of headwinds. they are expected to take actions and act faster and to deal with the challenge, even if the overall division is running well. And that's kind of the ownership to performance that I like, what kind of I appreciate what you see, because that builds resilience, not just to take a growth opportunity, But it's, of course, also to watch any downturn of performance that you need to act quickly, even if your brothers and sisters on the side is doing well. If you're not performing, you need to take actions and fix it. I think that's the, for me, is both the opportunity for growth, but it's also to build that resilience over time that people take actions right away. So we don't need... large corporate programs to do cost saving. This is on everybody's agendas every day. And I think that's the... And so there is, as I say, 25% of their revenue or of the business is still looking at how they have to focus even more on cost and operational improvement. And 75% still have to do that, but they are also and expected to do M&As. They're expected to take more of market investment and expand and grow the business faster. right and on 2024 contribution if i may i we are uh i mean we we moved from as we already talked about from the 16.9 to the 18.1 to say how many basis points out of that came from the abb way implementation i think it's very it's very hard to to quantify but i mean what we do is that we build And I believe that this is an important part, you know, how we over years now have moved from the 10-11 and now up to 18. And I also said that we will continue to take benefits out of the way of working. And that will drive performance so we can come up to the kind of our next target is to reach that end over margin corridor before we move on. Great. Thank you.

Thanks, Andre. And then we open up for Joe at Cowen. Joe, are you with us?

Hey, guys, can you hear me?

We can.

Hey, thanks for taking my question. Just curious about the margins in PA. I mean, you've had really good trends there on the top line and orders. You mentioned, I think, 17 quarters in a row positive. Are we kind of approaching, like, peak structural margins for the current portfolio? And if so, what can you kind of do there to push the ceiling higher in the future?

Thanks, Joe. How we are driving performance there, as I say, there we have, again, back to my last explanation on this business line setup. It's to grow these high margin business lines faster and also to looking at how can we expand those portfolios. I was... Happy to see last year that we could make an acquisition in the field of, in PA, in the measurement and analytics division. And that goes into the Ferdish group in Germany that came on board. which is into an area where margins is significantly higher than the current PA margin. So that's a good expansion. The same also we made in the marine business, a nice acquisition with DTS in the Netherlands, which is... AI-based guiding systems where you can help ships navigate better and save fuel. This is another great example, I think, in process automation of acquisitions that is built on our strength in these industries and that we can expand the portfolio and therefore also drive both revenue but also margins to a higher level. But again here, margin improvement for self-help. but also to use the M&A tool to see how we can grow the higher margin segments that we are in already, and how can we grow those faster than some, let's say, core more traditional, where we know that the profit pool is not as high. So that is the journey we are on, and it's quite a few steps to take still before we hit any target.

OK, thank you, Joe. And we'll move on to Seb at RBC. Seb, can you hear us?

Yeah, good morning, everyone. Thank you for taking my question. My question is on e-mobility, where you had another 72 million loss and it doesn't seem to be structurally improving. I spoke to your colleague this morning, Beat, and he mentioned that there's not much write-down in that loss. So it seems to be all operating loss. So basically, staff, R&D costs, development costs for the new products. So I wonder, what's now the trajectory for e-mobility going into 2025? Do we still see heavy losses in the first half and then only an improvement when the new products are out? Or how shall we see that business now? Thank you.

Yeah, I mean, we have taken... I mean, e-mobility business was a big drag to the group in 2024. As you say, 270 plus million dollars of losses, where in there also you have the write-off sum of inventory, but also the operational performance. We have... continue to invest in technology to come up with a very competitive offering. This today is known as the T50, the 50 kilowatts, and the T400, the 400 fast chargers, kilowatts chargers, which is today, I would say, based on what I hear from customer feedback, that it's top of the line, and it starts to become a product that will change this whole business of e-mobility. It still takes some time before you get that out in the market and we see that the revenue is being transferred from the old product portfolio to the new one. Therefore, you will see a sequential improvement, which in this case means kind of removal of losses quarter by quarter till we come into a profitability situation. So that's the... So immobility will still be... a drag in 25, but much smaller than what we faced in 24. So that will also, as Ansi mentioned earlier, will help us also in this year to improve the performance of the group.

And if I may just try, maybe I'm repeating now, if I wasn't listening carefully enough. But if I just try to frame sort of the lower losses expected in 2025, I mean, on a high level, expect sort of a half of the loss in 2025. And as you said, versus 2024. And as you said, the profile during the year will be sort of, it will be back and loaded for when we see the sort of improved performance. understood that makes sense thank you very much thank you thanks and we'll take a final question from gail at deutsche bank oh hi thank you morning to you all um

Look, it's been many years now that the ABBWare program has been launched, right? So the thing is, the ABBWare transformation expenses are expected to remain fairly high once again in 2025. I think you mentioned $150 million. So, I mean, at what point do we consider that these transformation expenses are recurring in nature? And more generally, Last year, there was a difference of about 200 bps between the adjusted EBITDA margin and the reported one. So I was wondering whether business areas really feel accountable for all the items below the line and what could be done perhaps to make the performance cleaner in the future.

No, we are running and we have been running two significant programs, what we call internally finance transformation, where we now have all our financial reporting cloud-based on one platform, which makes also a much better transparency internally. And it also drives speed and efficiency internally. So those program that finance transformation program will come to an end now in 2025 by the half year the other uh program that we have been running and that we will also go live is a huge large hr transformation program where we are implementing the use of workday as our one single tool for all employees and we will go live by summer as well with that program so 2025 is the year where you will see these programs being executed it was in 24 it's now in 25 and then you will see lower cost but of course we will work on that we make sure that we get the right cost out and the right return of these investments we have now over the last few years and that is what is our target now for 26 and onwards when now we are when we will be fully up and running in a new environment.

So, just to summarize, from a cost perspective, the line of ABB transformation costs below the line should basically disappear after 2025. Great.

Thank you very much.

Thank you. And with that, we say thank you very much. We made it, Martin.

Well, they are the judges, I guess.

True, true. So we thank you. Thank you very much. And just as a quick reminder as we go, I hope you've seen that we've announced that we'll have a Capital Markets Day in the US in November and hopefully see you before then. But at least I hope to see you there as well. Thank you very much.