ABB Ltd

Greetings, and welcome to this presentation of ABB's first quarter results. Next to me here, I have our CEO, Moten Virud, and our CFO, Timo Jamutila. And I'm Ann-Sofie Nord, Head of Investor Relations. As per usual, Moten and Timo will talk through the results, and after that, we focus on today's announcement of portfolio change. So today the presentation will be a little bit longer than we normally have before we open up for the Q&A. And with that said, I ask you, Martin, to kick off the presentation.

Thanks, Anssi. And a warm welcome also from my side. I would say that we had a strong start to the year. The team did a good job at staying focused in what has been a quarter with intense news flow. I would guess that we all have had tariffs on our radar screens. But if I was to pick up a few highlights from the quarter, those would be. First of all, market activity was high and it was good to see that demand was strong throughout the quarter with a good finish in March. In total, we increased comparable orders by 5% from last year. Secondly, we beat our own expectation for operational EBITDA margin in all business areas. On top of this, our margin got an extra boost from a one-timer which contributed 170 basis points to the margin of 20.2%. The third point I want to mention is the free cash flow of 652 million. This is good for a first quarter, which usually is a softer period for our cash generation. And it puts us now in a good position to improve our annual free cash flow from the 3.9 billion we generated last year. We also made good progress towards our sustainability targets. My final point is that we continue to be active with the business portfolio. In early March, the team in Smart Building closed the acquisition of the Siemens wiring accessory business in China. This adds to our already strong product portfolio. And importantly, it gives us additional market reach through our distribution network across 230 cities. The deal adds about $150 million in sales, and it is margin accretive. Today, we also announced our plan to spin off the robotics division as a separately listed company. In our view, this change will support value creation for both companies. And, as Ansi mentioned already, we will cover this separately later on. As part of the annual reporting suite, we published our sustainability statement. And we made good progress in 2024. We are already close to fulfilling our 2030 targets for 80% reduction of CO2 emissions. At the end of 2024, we were down 78% from the 2019 base level. But it's not only about us. I'm proud to say that with our technology, we helped our customers avoid 66 megatons of emissions with our products sold in 2024. Over the last three years, we have accumulated nearly 205 megatons of avoided customer emissions. I also want to mention safety as this is something we cover in all our internal reviews. Keeping our people safe is an important KPI that we follow carefully. Zero incidents is always the target and it's good to see that we continue to track on a low score and we achieved 0.15 for 2024. So let's take a look at the market developments. And the short version is that orders were stable or up in most of our customer segments. Like I mentioned, comparable orders were up by 5%. This was driven by mid single digit growth in our short cycle orders, which improved in all business areas. We also had 11% growth in the service business, but we had a slightly lower contribution from large orders. Some of the stronger areas were utilities, marine, ports, commercial buildings, and most of the process-related areas, although chemicals and pulp and paper are generally more muted segments. Our robotics business had increased orders from the automotive segment, and our paint technology is the best on the market, and we had customers choosing to remain with us as they expanded their international footprint. One can say we travel with the customer. Data center is usually a focused topic, and there has been quite some news flow in Q1. The general sentiment remains very strong. We see some customers even accelerating their investments, even if some slower activity from one of the hyperscalers is noted in this quarter. Rail remains a strong area. One example from our traction business is the collaboration with Stadler in the US. We will supply converters and pro series batteries for train sets in Illinois and California as the US moves towards greener rail transport. But even if the market is strong, orders in rail dropped from a high large order comparable. Switching to the revenue chart, the 7.9 billion and 3% comparable growth was a bit below our original expectation. We did not convert the backlog or recent short cycle orders as quickly as expected. Volumes were the larger driver to growth with some added contribution from positive pricing. Turning to look at the different geographies, we were actually up in all three regions. The Americas with good support from the US was again the main growth engine and increased by 11%. Asia, Middle East, Africa improved by 4% and China turned to positive order growth of the 10 quarters in decline. All business areas contributed to the China growth of 13%. And Europe was up 1% with a mixed picture between the countries. Looking at our large markets, Germany declined while for example Italy improved. Uncertainty triggered by the tariff new slope has put focus on footprint and operational setup between regions. I've said to our teams to continue to focus on what we can control and take action to defend our market position and profitability. We have been successful in this area before. Our legacy of a local for local footprint serves us well. In the United States, we cover as much as 75 to 80% of our sales with local production. And we invest to increase this number. In Europe and China, we have already reached an even higher local value chain. So I feel we are in a relatively good situation when it comes to local for local. In addition, we'd also benefit from an exemption such as the USMCA. Turning to earnings, the chart shows that we continue the upward trend for both absolute operational EBITDA and margin. I said that I wanted us to become a plus 40% gross margin company. And that is what we delivered in Q1 when gross margin improved by 280 basis points to 41.7. Admittedly, there was about 110 basis points of improvement coming from FX and commodity timing differences. But we have shown we can reach the 40% level. And now we have to work towards consistency. The team did a good job also on operational EBIT-A. Margin improved in three out of our four business areas. Only robotics and discrete automation declined from last year. But importantly, they showed a positive sequential development and the machine automation division improved to a break-even level. On top of the improved business performance, we had support from a property sale we completed here in Zurich, which added about $140 million. This was booked in corporate and other and supported the margin by about 170 basis point to the total of 20.2%. Even without this one-timer, it has a good start to the year. And it sets us up to deliver on our guidance to improve margin from last year, assuming no significant changes in the global economy.

And now, I hand it over to you, Timo. Thank you, Morten, and welcome to you all from my side as well. Let's now talk through the different business areas, starting with electrification. And the EL team keeps delivering new records. In Q1, they achieved a new all-time high orders of $4.4 billion. This is up 2% on a comparable basis from the previous high, a testament to strong underlying markets. Customer activity was stable to positive in most customer segments. This includes our two largest segments of utilities and buildings. Demand in buildings continues to be driven by the commercial market outside of China. And the residential market was overall stable, although the China market is still weak. Moten talked about the data center segment earlier and the slower activity we saw from one of the hyperscalers. I want to emphasize that outside of this specific event, we still see a very strong data center market. If we exclude this one hyperscaler, orders in data centers increased at mid-teen space. The base is now quite sizable as we had data center orders of about 2.5 billion last year. So generally it is still a very strong general environment in this tech segment. Turning now to revenues, electrification delivered 6% comparable growth with contribution from virtually all divisions. Volumes were driven by conversion of the order backlog related to medium voltage and power protection, and also the short cycle business improved by mid single digit. The profit chart on the right side shows the steady improvement trend electrification has achieved. At this quarter was no exception. Operational EBIT A was up by 7% to $886 million with a margin of 23.2%. The gains from higher volumes and operational efficiencies more than offset higher expenses mainly related to SG&A. All in all, a very strong quarter for electrification, adding to our confidence for the year. Now looking into the second quarter, we currently expect low double-digit growth in comparable revenues and the operational EBITDA margin to improve slightly from last year. Now turning to Motion, which delivered another quarter with order intake above $2 billion. That said, lower large order bookings, mainly in traction division, triggered a decline from last year's record high level. The strongest growth was noted in the service division, while the short cycle improved slightly versus the prior year. We saw favorable order development in HVAC for commercial buildings, as well as in the 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 linked to the larger order comparable I just mentioned. Shifting now to revenues, which was supported by both higher volumes and a positive price impact. The long cycle divisions improved as they executed on their high order backlogs, even if this was slightly below our original expectation. This improvement was partly offset by a decline in the service division, while the short cycle areas were broadly stable. In total, this sums up to an increase of 3% in comparable revenues to just over $1.8 billion. The positive price development coupled with continued operational improvements contributed to a strong margin improvement of 110 basis points to 19.6%. And most divisions improved their profitability year on year. For the second quarter, we anticipate comparable revenue growth in the mid single digit range and the operational EBITDA margin to remain broadly stable year on year. In process automation, we saw a continued healthy market environment and orders came in at the high level of $2 billion, increasing 23% year on year. The PA team delivered yet another quarter with a positive book-to-bill, at this time 1.24, and the backlog is now $8.1 billion. The marine and port segment continues to be a growth driver. In this segment, we are mainly exposed to passenger vessels, like cruise, and specialized vessels, which could, for example, include icebreakers or coast guard. Port automation also continued to see strong underlying demand. As for the other segments, we saw a stable to positive order development in most of the energy and process related industries. The business climate, however, remains more muted in chemical, pulp and paper and mining. Revenues got off to a good start and increased by 5% on a comparable basis. The team executed on their steadily increasing order backlog with added support from pricing. The team has done a really good job on quality of revenues as the order backlog gross margin has been increasing. As they now execute on this backlog, we see this supporting profitability in the business area. The contribution from the backlog more than offset the impact from lower volumes in the product division. All in all, it resulted to a new record operational EBITDA margin of 15.8%, improving 20 basis points year on year. Looking at our expectation for the second quarter, we foresee comparable revenues to improve in the mid single digit range and the operational EBITDA margin to be stable or slightly up year on year. If we flip now to robotics and discrete automation, it was good to see that this time both divisions contributed to the strong order growth of 17%. The robotics division saw positive order developments in the automotive and consumer electronics sectors. Both of these important segments remain generally challenging, but we were able to grow orders as customers stick with our leading technology as they expand their geographical exposure. Other positive segments included food and beverage, the fashion industry, as well as industrial machinery. In machine automation, orders increased sharply from last year's low level. Inventory levels at our customers are normalizing, but we will have some inventory adjustments spilling over into the second quarter. But we still expect orders to continue to slightly improve sequentially. Moving now to revenues. the robotics division reported a mid-single digit growth rate driven by higher volumes from the book and bill business. This was however clearly offset by significantly lower volumes in machine automation. In total, this resulted in comparable revenues being down 11% year on year. Although the profitability was down sharply year on year due to the lower production volumes in machine automation, the sequential improvement was better than anticipated. The previously announced cost savings measures in machine automation helped improve the margin, and this business is now back at break-even level. The robotics division increased margin from last year, supported by higher volumes and efficiency measures. it remains well into the double digit territory. Combined, this resulted in an operational EBITDA margin of 9.9%, down 330 basis points year on year, but up 200 basis points sequentially. For RA in the second quarter, we expect a slight sequential increase in absolute revenues and operational EBITDA. Now let's move on to the cash flow. All business areas had a positive operating cash flow. It was supported by strong earnings, which offset the typical buildup of networking capital in the first quarter. The 652 million of free cash flow was, in my view, very good for a first quarter. The year-on-year increase of 101 million dollars was mainly driven by the real estate sale. The improved operational performance was mostly offset by higher payments related to taxes and interest. Networking capital remained broadly stable. I think the first quarter puts us on a good path to improve our annual free cash flow from last year's 3.9 billion. The last time we met, we mentioned some reporting changes, including return on capital employed. We now report Group ROSI on quarterly basis, and it remains a focus area for us. The chart here shows that the strong trend continued in the first quarter. Rochi reached 23% and improved 250 basis points from last year. The increase was driven by three out of four business areas as a result of higher earnings, the positive one-timer and focused networking capital management. And with that, I hand it back to you, Morten. Thanks, Timo.

And with that, let's talk about today's portfolio announcement or plan to spin off the robotics division as a separately listed company. We start these preparations now and we'll work towards a proposal for the 2026 AGM. If all goes to plan, we will distribute the business to shareholders as a dividend in kind, meaning shareholders in ABB will receive shares in the robotics company in proportion to their existing holding. We plan for the robotics company to start trading during the second quarter of 2026. But we have not yet decided where the listing will take place. We are now looking at different alternatives, including Sweden and Switzerland. So why are we doing this? The prerequisite is of course that we think that it will benefit value creation in both companies. Robotics is a strong performer in its industry and this will become more transparent and we think it will be rewarded for its strong position and performance as a pure play robotics company. As you see in the chart to the left, robotics represents 7% of ABV group revenues and 5% of earnings. And I should also mention that numbers on these slides are pre-carve out estimates. Some balance sheet numbers may change for the standalone entity. Robotics performance profile is different versus the three larger business areas we have. And we believe it will benefit from being evaluated on its own merits instead of competing over capital allocation within ABV. Also, while it's a strong contender in its industry, there are limited synergies with other businesses in ABV. It almost already has a standalone profile, but without getting the full benefits. Last year robotics generated about 2.3 billion in revenues and in my view they have proven themselves under the ABB way decentralized operating model. They have delivered a double digit margin in most quarters since 2019. A strong achievement in what has been an unusually volatile market. First it was COVID when they had to shut down the hub in China. Then the component shortages with the significant pre-buys followed by the normalization periods. Now they have shown order growth in the last four quarters. They've also been active on their portfolio. The low margin system business has been exited. They now have the broadest mechatronics portfolio after expanding with cobots and AMRs. On top of the already most advanced robotic offering with its control and software platform. So ABB Robotics is well positioned to help customers improve productivity and flexibility to solve operational challenges such as labor shortages and the need to operate more sustainable. I mentioned earlier the double-digit operational EBITDA margin. It is good to see that this has been supported by a strong gross margin improvement. Since 2022, the robotics gross margin is up by 600 basis points. Free cash flow margin is at the average of 10% since 2019. And the business is well invested. They have state-of-the-art hubs for manufacturing and R&D in China and US. and we recently started the construction for a major upgrade of the European hub in Sweden. They have spent 5-6% of revenues on R&D and launched its unique Omnicore platform last year and their Picker technology is a good example of their strong AI-based solutions. So all in all, we think a listing of the robotics business will support its ability to create customer value, growth and attract talent. We also think it will benefit ABB, which would consist of three business areas with sales and technology synergies. And why do I say three business areas? We will move the machine automation business to be a division in process automation to build on their software and control synergies, for example, towards hybrid industries. While robotics is only 7% of group revenues, this portfolio change will have a slight positive impact on ABB's performance. The main target is to allow for both companies to optimize its value creation. We start working towards this now and will come back with more details in due course and in good time before the AGM in 2026. So finally, let's finish off with the outlook. We leave our 2025 outlook unchanged, but acknowledge the increased uncertainty for the global business environment. We still expect a positive book to build and we see comparable revenue growth in the mid single digit range and we expect to further improve the operational EBITDA margin from last year. Since we had a positive one-timer in the first quarter, I want to mention that the margin outlook for the year is supported by improvements in our businesses. It's not only driven by one-off gains. For the second quarter, we foresee comparable growth in the mid single digit range and the operational EBITDA margin to remain broadly stable with 19% last year. Some of you may say that that stable margin development is underwhelming, but actually it means we need to improve our business results in Q2 2025 to offset the positive impact of 30 basis point from a non-repeat last year. So now, Ansi, let's open up for questions.

Yes, let's do so. And just as a quick reminder, for those of you who have dialed in on the phone, press star 14 to register to ask a question. And please also remember to mute the webcast as your line is opened. And I kindly ask you to limit it to one question. That way we will allow for as many of you as possible to be heard. And I can see there's a queue already. You can also put questions through the online tool in the webcast and I will then voice them over from here. And with that, we open up for the first question. And we have Max from Morgan Stanley first in line. Max, can you hear us?

Yes, I can. Can you hear me?

Yes, indeed.

Yeah, good morning, everyone. So just the first question I'd like to focus on is just the data center business. And while I appreciate kind of the business is up in order terms, mid-teens, X this large customer, we obviously know it It is a very large customer that we're talking about. So I just wanted to understand, I think you mentioned this customer had paused ordering by 30 to 45 days during the quarter. Have we now seen that go back to normal? And should we now expect the kind of data center orders as a whole will be more in that kind of double digit order growth range for the rest of the year. So because obviously, while we don't want to kind of talk about one specific customer, it obviously is moving the needle on what's happening to the overall business. So just trying to kind of understand, is that a good approximation of what we should see for the rest of the year? Or do we think that particular customer will continue to be the exception in the industry and be a bit more volatile? Thank you.

Thanks, Max. As you said, with that exception, we had a mid-teens growth in the data center segments. And long term, we are confident also with the growth rate in data centers due to the AI trend that we see these days. What we look at, and I don't want to speculate, I think they're on the outlook on single or individual customer performance. I think you will see that in the news as well. So I rather refer, let's say, directly to the source and the current news flow more than that we come out with any firm statements on what our other companies' plans.

Okay, thank you.

Thanks, Max. And then we move to the next question comes from Andre at UBS. Your line should be open.

Yes, good morning. Thank you very much for taking my question. I'll go with the obvious one on tariffs. I just wanted to ask whether you've taken any pricing action so far to respond to what's been announced in the US and also just quite keen to kind of double click on the US for US piece, which you very helpfully laid out. But within that, U.S. for U.S., have you looked into your suppliers and their sourcing and kind of geographical arrangements? And have you seen any evidence of them coming to you with price increases if they happen to source from China or other high-tariff countries? And how are you responding to that, please?

Now we have of course looked at all of these elements as you say. First of all the main part is what we produce the 75 to 80 percent. We have as ABB more or less no import from China coming into those numbers. So that is not an impact for us. The other part is we already Also, a lot of the Mexico and Canada import, a lot of that is with exemption from tariffs based on the USMCA trade agreement. So that helps as well. And then it's what comes from Europe. where that will be exposed later on for tariffs and there we will take price actions as you mentioned. There has been already taken price actions this year but that is more of the steel and aluminum tariffs that has been implemented and because that has been as a general price increase in the market on raw materials and of course that is something that goes through on to the other side. So that's how we work with it when we talk about the suppliers and the suppliers of our suppliers. We have an overview on where it comes from. We have been working on that for quite some time to minimize especially the China exposure. I don't have details to give you on what I can say. I can confirm. that it's worked on, it's understood and it's mitigated to a vast effect. That is why we can come also out with the guidance that we're doing that we don't believe. I don't see this with the current knowledge. I mean, as of today or as of now, we don't have seen any significant impact on our overall performance.

Maybe if I can just add super quickly on this one. So we have done, as Morten said, a thorough analysis with and without tariffs. And the tariffs itself, they don't have a big impact. It really is the economic uncertainty which we are now dealing with, which we have to then see how it plays out. But as I said, all of this has been taken up in our thinking on the guidance for the year.

And we have a question coming through online here, sort of linked to tariffs, I would assume. Somebody asked, could you please tell us if there was any pull forward in orders in Q1?

No, we did not see that in the first quarter that people were pre-buying. I think that is just due to the uncertainty of what kind of would you buy to be able to mitigate. So no, we have not seen that.

Very good. Then we go back to the conference call and we open up the line for Martin at Citi. Martin?

Yeah, thank you. Good morning, it's Martin. Yeah, thank you. Morning, it's Martin. Can I ask on the order pipeline? It seems no immediate impact on tariffs and orders so far, but when you are talking to customers about the pipeline for the remainder of the year, Are customers worried about the environment and seeing the potential for significant pauses on decisions for the year ahead, and perhaps which industries are more worried around that? And linked to it, you've already talked about some capacity expansion in the US. Is that primarily demand-driven, or is it more to give you further hedging against tariffs as well? Thank you.

Thanks, Martin. The order pipeline, when we're looking at the... it's still still strong when it comes to the overall and the long-term need for electrification and automation that is clearly there you see some of the decision making as you remember as we mentioned may take and we saw that already in the first quarter that it takes a bit may take a bit longer time to get that final decision we win and we get the order but sometimes you take another round maybe with the board you know for major investments what we see is that the no regret moves they are being taken that's the same on our side and others where there is much bigger uncertainty days or where you take another extra round and may discuss so that's the how, I mean, uncertainty is not good for decision making. That's clear. But we are taking this uncertainty into account when we also make our forecast for the second quarter and year end. So it's something we believe we have under control and I'm not kind of worried about it, but it will take a bit more of our sales work also to get the papers signed. And I think the second point, maybe help me here, Anssi.

Capacity increases in the US, demand driven or tariff driven?

Yeah, thank you. It is driven very much by demand driven. Because we don't have many of these investments is driven by its kind of products that has special US or what we call NEMA North America standard. And therefore, we need more capacity because the demand has over time been bigger, been larger than supply. So we are expanding because we see also a long term. That goes with the two announcements we had in electrification business in Sonantopia, Mississippi, and Selmer in Tennessee. It's about $120 million there. expanding those two facilities for low-voltage bus bars and for low-voltage circuit breakers that is used by utilities, that's used in industry and in data centers. So that goes into that general capacity build-up. And of course there will not be US tariffs on it when it's produced in the US, but that's not the primary driver of it.

Very good. Thank you. Thanks, Martin. We've had a couple of questions come through here online regarding the portfolio change announcement. So basically the question is, why now?

Yeah, we believe the robotics business is now ready to stand on its own two feet. The synergies with the rest of ABB is limited when you look at technology and customers. Their electrification, motion and process automation very much have common features. much more common technology, common go-to-market customer base and even common competitors. So we believe this is a good value creation opportunity both for ABB and also for the ABB robotics division being a separately listed company. So therefore it will take a bit of time. We know we said that in Q2 So a good year from now is when we can do the listing, as there are some internal work on the carve-out and the preparation to be done. So therefore we need that time, but I believe now it's good timing because the robotics business is among the very best in their class and being measured against peers. You will also see that, and I think then they don't need to fight for capital inside ABB, but have now access also for investor in the market. There is now an opportunity to get 100 cent on the dollar on robotics investment, as was not the case at ABB, where it's about 7% of revenue and 5% of over earnings. So that's where we believe that the timing and the team is ready to stand on its own feet, that it's a long-term good business in automation and robotics.

Yeah, I mean, maybe just add there, of course, it's important also what ABB will look like after the spin happens. And there we are seeing increased gross margin, maybe 40 basis points increased operating margin, maybe 50 basis points, clearly higher return on capital. I think the growth rates probably will be about similar. If you look at history, we would also have a notch higher there. So it really kind of like shows that these are a little bit different kind of companies.

And with that, we have a question coming through from Alex at Bank of America Merrill Lynch.

Thanks, Anssi. Morning, Morten, Timo. I appreciate you taking the question. I wanted to talk about electrification, if I could, please. And I appreciate it. It's one question with two parts. Question on the acceleration on the growth guide into Q2. Low double digits, very strong. I just wondered if you could give us a sense of what's driving that and the visibility that you obviously got in Q2, but for the full year. And just linked to that, the margin expansion. You mentioned about a month or so ago, the conference, the differential on margins between the North American business and the rest of the world in electrification. I just wondered if we're starting to see that gap starting to close as we see the margins moving up here and whether that's something that can accelerate through the year. Thank you.

Yeah, so let's start on the Q2 growth outlook. So we have some of the revenue where we were a bit short in Q1. We saw that some of those deliveries were slipping over to Q2. So that's why we are confident we have a strong order backlog and order book now being on a record high level. So even at, just to mention, like on electrification, it grew by another 11% in Q1, even if the order growth just for the quarter were 2%, but the order book increased by another up 11%. A good setup and a good outlook when it comes to the second quarter. And you talk about margin expansion, as we say there, especially for the, we mentioned that in the electrification businesses, North America is diluted to the electrification margin. It still was in Q1, it will still be in Q2, but that gap is getting smaller. And I think that's the focus for the team and has been for for several years and how we can close the gap to the rest of the world level. So we have you will see not just in electrification, but we have all four business areas are expecting a margin improvement for the full year. So I'm sure Timo can mention a bit about the The one-off that's special, but the operational performance is expected to increase in all four of our business areas at year-end.

Do you want me to throw it now?

A bit of an opening there. So when we look at this, I mean, when you look at our corporate guidance last year, we had a very strong sort of corporate performance. We were about 150 million. Now we're saying 200. So that would be a bit of a negative on the full year. But when you combine that with e-mobility, we are going to see some tens of basis points positive on that whole corporate e-mobility combined. And then, as Morten said, also the businesses, we are expecting them to improve.

Okay, and then we take the next question from Sean at HSBC. Your line should be open.

Yes, good morning. Thank you. A question around process automation. You make a very interesting point on your competitive advantage of being the only supplier with direct access to electrification and motion. How much are you seeing that already as part of the existing strength in process automation orders? Is this something that will be, let's say, something that you push much harder on going forward? And you've also highlighted the marine side of things. Just wondering if there's any regional focus of where you see particular order strength there. Thank you.

Yeah, I think that is very much a play that the strength between our process automation, electrification and motion business is very clear in areas, for instance, in LNG, you know, where you do drilling, you do the whole pipeline with compression and you do the terminals and later on you even do the LNG ships. So if you look at these four applications, that's a nice ABB combination of automation systems of motors and drives that is to get the right compression for compressors. And it's also with electrification because No motor or no drive or any automation system is working without electricity and all the switchgear that is needed. So these, if you look at LNG to be as one, we have some very successful, especially North America project. We are working the three business areas or the divisions that is relevant here. They work together as a team, as a common task force. And that's how we go to market and how we support project OEMs and OEMs. end users on the ground and later on also with service and taking care of that equipment over the lifetime of 25 30 years plus which is the expected lifetime and it's the same if you're talking about over marine business uh a propulsion of the cruise ship uh you will see there from uh from the general from um you will have the electric generator, the switchgear, the drives that is driving the speed of the motor and the torque and then the propeller system known as Ossipod leading in the cruise industry. So these are just a couple of examples where you see that this electrification, motion and process automation really working together in tandem. where often process automation takes the lead versus the end customer. They are the one carrying the APP flag there, but then with strong support from their brothers and sisters coming from the other divisions. So that's how we work together. And I think that's what I know, it's a unique combination which is highly appreciated by customers Latest confirmed that was in Houston at the Sierra Week this year. And this is one of the winning arguments why we are performing really well in these segments compared to many of our competitors.

I think there was this regional comment. I can just confirm that PA orders were very strong, broad based. So actually also in China grew, but also Europe grew and US grew or America. So very broad based.

Very good. And then we have a question from Simon at Jefferies here via the online tool. Can you please elaborate a bit on what you saw in the US during the quarter? Did the market hold up and perhaps particularly so in the short cycle business?

No, it did. We had growth in all four business areas in the United States. It was 9% on order intake overall, and all business areas contributed to that growth rate. And we had also a strong March, so there was not really a big change throughout the quarter. It was a healthy business generated in all three months. So that was overall a good start to the year in the United States.

Very good. And we take the next question from James at Redburn.

Yeah, good morning, everyone. Thanks for the time. Timo, you mentioned that economic uncertainty is the biggest risk, and I totally agree. That makes sense. And I got the impression from other comments that your orders at the start of April are kind of largely unchanged, a comment we're hearing from a number of companies. But I guess in reality, the tariffs didn't start in the first two weeks of April. This is the first week. And I wouldn't normally ask about live trading, but are you seeing anything in the order running rate and the daily rate of this week that is materially different, particularly in the U.S., that would suggest that we are going to see any economic impact? And tagging to that, where you've got that import, the 20-25% import, some of it comes from Europe. Where you've got a product coming from Europe to U.S. customers, and you're raising price, are you seeing customers accept that or do you think that they will switch to a local producing competitor?

I can start on the last part of that question. Again, just giving you an example from the electrification business, where the portfolio is so wide, it is very difficult, especially to have... I mean, very difficult to have a full production in everywhere in the world. And some of the... You know, there are different standards between the US, what we call the NEMA standards, and in Europe and the rest of the world with IEC. And there is to use some of these IEC products that is produced in Europe by all companies, which goes into, for instance, into a machine building or a project built in the US that is re-exported or exported outside the United States. So this accounts for some of those products that is not produced in the United States. And we don't see, I also don't think, or I know that anyone Nobody is really producing those components in the United States and therefore it will come as a price change in the market because for most of these cases there is no local alternative available.

Yeah, and on the trading, I think we can only say there that we have not seen anything kind of like in the trading sort of these months, which would sort of fundamentally change any view, any customer behavior or anything like that. But I think we need to leave it at that. Thank you very much.

Thanks, James. And then we open up the line for Daniela at Goldman Sachs.

Hi, good morning. Thank you so much for taking my question. I just wanted to ask regarding low voltage and supply and demand in the market, you're adding capacity. We also see a lot of your peers adding capacity. Just maybe if you could give some color on that, especially like where are lead times, what's the sort of visibility that is there, especially if we go into a slightly softer U.S. macro part of these products are short cycle, but just to give us a picture of how the supply demand is.

As you said, the increased, the expansion of our facilities is to meet that extended or the expanded demand that we see in the market. And again, to also to limit the number of imports, what comes from outside, because that's why we also take some of the components that comes from Europe today is because we don't have enough capacity in United States. So I see there is still much longer lead time than the industry was used to. So we still have work to do there to get it further down. I don't see any short term or midterm kind of overcapacity or issues in the market. It is the whole the trend of electrification even if there is the global economy goes a bit slower nobody is immune but i see that the electrification and the automation trend that we are facing especially and i mentioned in infrastructure that is not going to change quickly because those capex plans are made those are ongoing projects and we see that that is desperately needed especially in the united states in some of the infrastructure investments so therefore i don't have any shorter mid-term worries when it comes to capacity. It's more as I say, we are still building capacity at this point of time.

Very good. Thank you. Thanks, Daniela. And then we have a question here from Olof at Danske Bank. He says, what impact do you expect from the stimulus package announced in Germany? And when do you expect that to impact, if so?

Yeah. I mean, overall, it's good that Germany starts also to investing again. It has been a bit of a tough situation in Germany for the last two years. And we do see some more optimism on the ground, also with large customers. There is still too early. There was no impact in the first quarter and we will not see that in the second quarter either. It is because, you know, from planning permitting into starting building until the electrification automation is in the ground is more of a. So from there of an impact point of view, we are more into the 2026. onwards. So but I think it's kind of it's good to see that there is a more an environment of investing again. And I think the mood starts to change. And that is maybe the I think is the first and important part that the customers and our partners starts to look at the opportunities and not kind of looking backwards of everything that went wrong, but more of what can we do in the marketplace? And there is a bit more of optimism that will help. And for us, it's about all those investment in either in infrastructure, you know, getting more affordable but more reliable energy supplies of Europe and Germany especially will support the business of ABB. So I think that we are well positioned to take part in those investments that will come.

but a bit still a bit early very good and we open up the line for under set abg are you with us yeah thank you um just yeah exciting news on on the robotic spin just wonder about the thought process behind going for a spin uh rather than a trade sale is there anything to i mean if those discussions came up here is there anything that would sort of prevent you from or, you know, would you engage in such discussions if it came up here?

Yeah, I can start and you continue. We have looked at, of course, the different options when we do make such a decision. And the options what we are launching now is the separate listing of the robotics company, because we believe that is also a good opportunity for the shareholders to participate in that value creation opportunity that we are confident about. So therefore, that's why we've chosen this role. But portfolio management is an important part of the whole APB way operating model. And we are always looking at different options and that would also be the same here as we have our obligation to our shareholders to consider any option that may occur. But right now we are on the path of a listing and that's the work that is ongoing. So that is our clear primary plan at the moment.

yeah maybe maybe a little bit also on the thought process so if you look at some of the previous transactions what we have done so i think the key point is that is there a natural industrial consolidator in the business hopefully two or three of them and then it's sort of easier to go for the trade sale which was very much the case for example in the bearings business whereas in Acceleron, that didn't exactly exist. And here, it's not necessarily the case either. So I think that's sort of a little bit just on the thought process.

That's very helpful. Thank you. Thanks, Anders. And while we're on this topic, there's a question here from Ben. Just to clarify, will machine automation be a separate division in process automation, or could there be other changes in process automation?

No, they will be a separate division there, and I believe they are on a clear path of improving their performance. We talked earlier about, you know, they had a record performance in Q1 last year that has declined since when they had kind of used the backlog and customers were sitting on a large inventory. Now we are graining back, we said that now in Q2, we will be ending that situation at the customer side and therefore we are more back to a more normal order pattern and revenue situation and therefore I'm also satisfied to see that we are able, that plan that was made is followed and that was good to see now. So that will remain in process automation. and they will keep as a separate divisions but working together on projects even with the motion business or electrification where this makes sense or they will work with their colleagues and team members in process automation when automation solutions or PLC solutions for instance in tunnel projects in energy industry it's done then they will be a contributor into those project as one example so this is how we work across the company where one division takes the lead to the towards the customer but then working also with their colleagues in other divisions so of course that will continue also when they are in process automation

And we keep going on the portfolio spin topic here. Here's one question from Gail. Could you also talk about the competitive environment for the robotics business?

Yeah, I think if you look at how robotics are doing, and again, when I say I think they will benefit from being measured and compared with their peers in the robotics industry. And there you will see that they are having a very strong performance, both from a top line, but also a bottom line performance. So being among the top and the very best in their class. And therefore, that's the... Also, I see the benefit of having that focused company, which we now will have. And I think they're also doing a good job when I look at what's happening in China coming up now and launching this year. more of a China for China portfolio with for lighter application, which is kind of it's the robotics market in China is quite different from the rest of the world. And therefore we have also adopted to that new reality, not just from a competition, but also from an application and technology point of view. And there, I think, has done a really good job both of coming up with new products that is fit for purpose, fit for some of these light applications, but at the same time also using local components and sub-assemblies, not using imports from, let's say, the West, but using those local Chinese components at at the right cost level versus what they use in China, but also they are having with a bad performance that is expected from customers because that's again what drives it. So I think there is how you need to adopt this local for local strategy when it's a new application and things with robots being used in China for other things. I mentioned, I think on these calls earlier, the soup kitchen, ramen soup or noodle soup, being one but many of these kind of a much higher robot density than what we see in Europe and especially in the United States so therefore it's also a different portfolio and I'm happy to see that that portfolio is coming online and I mean now with a kind of big expansion now in 2025.

OK, we change topics for a little while and maybe towards you, Timo, could you elaborate on why backlog execution was lower than planned in the first quarter and does it change your view on the full year outlook?

Yeah, happy to. I think that really is only a timing issue, so there is nothing dramatic on that. A little bit more in motion and a little bit in EEL and then in motion also we had a little lower service revenue actually than we expected. But looking forward, we actually saw very strong growth in base orders, actually higher than our normal order growth. We don't usually talk about it, but just wanted to mention that because it converts faster. We also had that was 6%. We had 11% growth in service, which also service orders, which also supports revenue for the year. And then when we look at the overall backlog, we have maybe 3-4% coming from backlog when you look at the backlog conversion of the 23 billion and 60% expected to convert this year. So we should be overall in a pretty good place regarding our revenue guidance for the year.

Very good. Then we open up the line for Erik at CIC Market Solutions.

Yes. Hi. Good morning. I got a question on the US reshoring. I understand the objective of the Trump administration is to accelerate reshoring, but to reduce immigration as well. And I suspect you are well-placed with your automation business there. And I was wondering what's your view on that. Do you currently observe any acceleration on that side? And do you observe any, I don't know, more optimism from your local teams on that particular issue? Thank you.

Only automation... Reshoring. I have to say, it's been a trend that has been ongoing for quite a few years now, because with the risk of tariffs being one, But also, I think the importance of being closer to customers is just a trend that has become more and more important. So we have done it as ABB, but I know we're not the only company in the world that has moved production closer to customers. And I think that was a bit of a learning after the whole COVID shutdown in the beginning of 2021. So I think this is just the trend what we're seeing and we do say that's what we are helping also our customers when they are building up more of their local manufacturing. I think that's the important, but I can also use an example that we had even from China, which just shows this where in the electric vehicle space, when some of the leading electric vehicle companies go outside China and set up new manufacturing, that being Indonesia, that being in Thailand or here in Europe, then we are also following customers abroad. That's why it's important to have this global presence, but then you can also travel with the customers out when they establish new production, so that what we've done in China or what we've done in Europe or in the US, when they go out to a new region, then we can bring that technology and the know-how from their original design and also do kind of more of a copy-paste outside. So there is where some really good wins also in this quarter in that space, not just in the US, but even going out of China, becoming more local in Asia or in Europe. in the automotive industry as one example. And we don't see it only there, but also in other industries. So this importance of being truly global, but acting local and having service, having people on the ground that can support, it's one of the key elements why our customers choose to work with us on large projects.

OK, thank you. But do you think the Trump administration policy could accelerate that trend in the U.S.?

Yeah, I mean, there will be more investments in local manufacturing in the United States. That is clear. So I think the flip side here, as Timo mentioned, is kind of the question mark. How will it affect the global economy? But of course, it will drive some more investments in the United States in manufacturing. That's clear. But how effective it will have on the global economy is for me more the question mark. But that it will drive some more investments in the United States, that's clear.

Understood. Thank you.

Thank you. And time flies when you're having fun. We're going to have to make that our last question. Thank you very much for joining us today and have a lovely spring break if you're getting one. I'll see you soon.