ABB Ltd

Greetings, and welcome to this presentation of ABB's second quarter results. And as you can see, we're shooting from our new ABB studio. And as per usual, we have our CEO, Moten Virud, and our CFO, Timo Uyammutula. And without further ado, I will ask Moten to kick off the presentation.

Thank you, Hansi. And a warm welcome also from my side. In the second quarter, we delivered on plan with mid single digit revenue growth and increased operational earnings in three out of four business areas. I'm pleased with the overall results. That said, I acknowledge that not all is perfect. We still have work to do to improve, for example, the machine automation and e-mobility business. When it comes to the market, I would say that the business environment was more or less unchanged compared with the first quarter. Our broader markets remain fundamentally strong as the world turns to electric power and automation. And just like in Q1, we, just like everybody else, live with the added layer of uncertainty in terms of potential tariffs. I have said to our teams to continue to focus on what we can control. Our legacy of a local for local footprint serves us well. We do what we have done before, take balanced actions to defend our market position and profitability. One key highlight in the quarter was the record high order intake of $9.8 billion. We booked a very large ordering process automation, which helped us to get to this new all-time high. But momentum was also good when looking through this impact. We had positive order growth in all four business areas, supported by all regions and the majority of customer segments. Another happening was that we got recognized by Time Magazine. They listed ABB as one of the top 15 most sustainable companies in the world across all industries. I view it as a testament to the success of the ABB way operating model. We have embedded and made sustainability part of all our operation based on accountability and transparency. Another highlight was the launch of three new robot families. These new offerings broadens the market scope for our robotics business as we expand to mid-market value propositions. Entering into this market segment with a fully local-for-local offering will support long-term growth and profitability for ABB Robotics. And it will strengthen our already leading position in China, as we have helped lowering the bar for automation also for smaller operators. So, we move towards the spin-off of robotics from a position of strength. And the process towards Q2 next year is progressing according to our plan. A really exciting event was Electrification launching the upgrade of its already technology-leading air circuit breaker, the Emax 3. The previous version has been out since 2013. And now we have an even sharper offering, clearly ahead of the competition. It has a world-leading cybersecurity technology. It includes sensing, intelligence and advanced algorithms to improve energy security and resilience of power systems in critical infrastructure. You find it in data centers, factories, hospitals and so on. We have had great success with the earlier version and we have gained market share and have already installed more than 5 million EMAX 2 breakers. This upgraded version is purposely designed with the same proportions, meaning customers can upgrade their retrofits for the switchgear to become even safer. The E-Max is one good example of how our business areas benefit from each other. Motion can leverage on the applications technology developments as they include the E-Max in their power drives. And in my view, this is one clear proof point on how we create customer value by embedding software in all of our products. Let's take a quick look at this video. This was a first flavor, and I leave it as a cliffhanger for Giampiero to talk more about the Emacs 3 at the Capital Markets Day in November. I already mentioned the record high order intake of 9.8 billion, which is up 14% on a comparable basis. This includes the very large booking of about 600 million in process automation. Congratulations to the PA team on that. But you should note that our orders increased by 7%, also excluding this large impact. And it's encouraging to see that it was not one single driver. All four business areas improved orders in the 3% to 9% range. We had positive development in all three regions, in the majority of customer segments, and in our service short and long cycle businesses. In my view, a really solid performance. Looking at the different segments, demand was strong in utilities. The same for data centers, and these are strong medium voltage exposure that also drive demand for our service business. The building segment was overall positive, and marine is an area which continues to be very good for us. The same goes for ports, where we help customers automate and electrify system for container and bulk handling. I also want to mention rail, where we see a continued solid pipeline as train fleets convert to electric power. So what is weaker? The automotive segment is challenging, and it put pressure on robotics orders. And similar to what we have seen in previous quarters, customer activity is subdued in pulp and paper and chemical. If you look at the right-hand chart, you see that we actually hit an all-time high also for revenues, which reached $8.9 billion. It was up 6%, with positive contribution from three out of four business areas. and it was supported by both the short and the long cycle businesses as well as service. In total, revenues were strong but orders even stronger, so we continued to build order backlog and book to bill was 1.1 in total and positive at 1.03 also when excluding the large order in PA. Turning to look at the different geographies, we were actually up in all three regions. The Americas was again the main growth engine and increased by 28%, like for like. The high number is helped by the large order booking, but the region is up by a high single digit, also excluding this driven by the US. Asia, Middle East and Africa improved by 6%, with China being virtually stable to positive in all business areas. Europe was up by 6% on a comparable basis, with a positive development in our largest market, Germany. It was good to see that we convert positive top-line growth into improved business performance. Operational EBITDA was up by 9%. And, at risk of repeating myself, also here we have delivered a new all-time high of $1.7 billion. I'm pleased to see that we kept the gross margin at the 40% level, and the outcome for operational EBITDA margin was even a bit better than what we expected at 19.2%. This was driven by electrification and process automation, while motion was almost stable. This offset margin pressure in the machine automation division, as well as headwind of 30 basis points from last year's positive non-repeats in corporate and other. meaning our underlying margin improved by 50 basis points from last year. If we continue down the P&L and look at our net delivery, EPS was up by 6% to 63 cents. I'm pleased with our delivery.

Now, I hand it over to you, Timo. Thanks, Morten. And let's now take a look at what happened in the different business areas. Starting with electrification, they delivered new all-time highs for both orders of $4.5 billion and revenues of $4.3 billion. And I have to say that delivering a positive book to bill of 1.04 when the base is record high revenues is a job well done. A testament to strong underlying markets and a very good execution by the team. The strong order intake was supported by improvements across the portfolio, meaning services, short cycle and systems related businesses. And also when looking at the different segments, there was a broad positive development with most areas improving from last year. Utility stands out on the positive side together with data centers where orders improved at double digit rate. The building segment was also supportive to growth, driven by the commercial market outside of China. The residential area, however, continues to be challenging as China is persistently weak. We also noted some softness in the US market, while Europe is more or less stable. And just as a reminder, that building segment is about 30% of electrification, with residential about 10%. Now turning to revenues, which increased by 11% like for like. This was primarily driven by higher volumes as we convert the backlog related to medium voltage and power protection, but also by improved activity in the short cycle business. We also had some additional support from positive pricing and in total it resulted in revenues of 4.3 billion for the quarter. Earnings exceeding the $1 billion mark was another milestone for electrification. They continued their margin journey and improved by 70 basis points from last year, now reaching 23.9%. Even better than what we originally expected, supported primarily by volume leverage and operational efficiency measures. Looking into the third quarter, we currently expect mid to high single digit growth in comparable revenues and the operational EBITDA margin to remain broadly stable from last year's record high level. Let's then flip the motion, which delivered another quarter with order intake above $2 billion. The comparable order increase was 3% and it was due to an improvement in the short cycle businesses, which more than offset the impact from lower large order bookings. In motion, we continue to see favorable order development in HVAC for commercial buildings and data centers. Power generation is another segment which contributed to growth, as well as food and beverage, driven by our project businesses. Oil and gas were stable year on year, while the softer areas included the process-related segments of chemicals, pulp and paper, and metals. Rail actually declined in the quarter, but this was linked to the timing of orders, as this market is something where we see continued strength. Shifting now to revenues, the Motion team executed well at just above $2 billion, improving 4% on a comparable basis. This was supported mainly by higher volumes in the short cycle businesses, combined with backlog execution and some positive pricing. In the earnings chart, you see that profit was up by 5% to $407 million on higher revenues. The margin, however, remained more or less stable, softening by 10 basis points as the positive impact from operational leverage on higher volumes and some pricing was offset by higher SG&A expenses. And before commenting on the outlook, I want to mention that effective as of July, we simplify our divisional structure in motion. We combine the former systems drives and large motor and generator division into the newly formed high-power division. We believe this consolidation will be more efficient and customer-focused setup, deploying go-to-market synergies in the medium voltage space. In this space, customers often buy both drives and motors from the same vendor simultaneously as they want to optimize the performance of large applications. For the third quarter, we anticipate comparable revenue growth in the mid single digit range and the operational EBIT-R margin to remain broadly stable compared with the second quarter of 2025. And speaking of records, in process automation orders reached $2.6 billion, which is an increase of 40% on a comparable basis. This includes the large order, which Morten also mentioned, contributing about 600 million. This was booked late in the quarter and has a multi-year delivery period. However, it is also worth mentioning that when you look at the impact of this large order, the underlying demand remained robust with orders increasing about 8%. The market profile was similar to recent quarters with the strongest customer activity linked to the segments of marine and port automation and electrification. It was also good to see growth in the short cycle product business, even if it was from a relatively easy base. We increased our orders in the mining segment due to a few specific projects. However, the general business environment remains relatively cautious. Orders in oil and gas segment improved, while the more muted process industry related areas were pulp and paper and chemicals. The team executed on their steadily increasing order backlog. However, revenues came in slightly below our expectations at $1.8 billion, improving 2% on a comparable basis. There is no drama here, but relates to the short-term timing of deliveries. It was good to see that process automation now had all divisions operating at around 15% or higher margin area. This resulted in earnings of $290 million, up 10% year on year, and a record margin of 15.9%. Well done by the team. Looking at our expectations for the third 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 comparable orders improved by 4% to $729 million, albeit from last year's low base. And as usual for the second quarter, there was a sequential drop in the order level. There were, however, variances between the two divisions. In robotics, there were softer order intake across customer segments, with the exception of consumer electronics. Customers appear to be a bit in a wait-and-see mode, on the back of continued tariff-related uncertainties, and some projects are pushed to the right. Despite this, we do expect orders to improve sequentially. In machine automation, orders increased sharply from last year's low level. That said, the absolute order level remains subdued as customers cautiously balance new ordering with inventory levels. Nevertheless, we anticipate absolute orders to increase sequentially in machine automation as well. Moving now to revenues, the robotics division reported a mid single digit growth rate driven by higher volumes from the book and build business. This was, however, clearly offset by significantly lower volumes in machine automation. In total, this resulted in comparable revenues being down 5% year on year. Operational EBITDA margin of 9.1%, down 200 basis points year-on-year and 80 basis points sequentially. As in recent quarters, the robotics division's margin was well into the double digit territory and actually improved slightly from last year. The business area margin decline stemmed from weaker results in machine automation. This division recorded a small loss as the volumes in production have not yet recovered enough to cover the cost under absorption. For RA in the third quarter, we expect order intake to increase sequentially, For comparable revenues, we anticipate to be in low to mid single digit range of growth and operational EBITDA margin to improve both year on year and sequentially. Now let's move on to cash flow. The free cash flow of 845 million is slightly down from last year. Although we increased earnings, this was more than offset by some growth-related buildup of networking capital, as well as the planned increase in capex spend. That said, looking at the total for the first six months, we are at 1.5 billion and a few million up on last year's level. Our usual pattern suggests a stronger cash delivery in the second half of the year, and we continue to be confident to improve from last year's annual level. And with that, let me hand back to you, Martin. Thanks, Timo.