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ABB: Continued Profitable Growth

ABB (SWX:ABBN):

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

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

Compa-rable1

Comparable1

+8%3

+30%4

Short-term outlook

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

Q2 2018 Group results

Orders

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

The book-to-bill ratio increased to 1.07x at the end of the quarter
compared with 0.99x in the previous year.

Service orders were up 2 percent (5 percent in US dollars) on a tough
comparable period. Service orders represent 19 percent of total orders,
compared to 20 percent in the prior year period.

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

Market overview

ABB saw strong demand from all regions in the quarter:

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

Revenues

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

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

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

Operational EBITA

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

Net income, basic and operational earnings per share

Net income was $681 million, up 30 percent compared to the prior year’s
$525 million. ABB’s operational net income2 rose 27 percent
to $810 million. Basic earnings per share of $0.32 was 30 percent higher
year-on-year. Operational earnings per share of $0.38 was up 28 percent,
and 27 percent better in constant currency terms4.

Cash flow from operating activities

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

Q2 divisional performance

Op EBITA %

Compa-rable1

Comparable1

Comparable1

Power Grids

Momentum in third-party base order growth continued, rising 7 percent (9
percent in US dollars). Total orders were up 5 percent (6 percent in US
dollars). Power Up initiatives and ABB Ability™ solutions gained
traction. Renewables, grid digitalization and pick up in industrial and
transportation sectors contributed to the growth. At the end of the
second quarter, the order backlog was 4 percent lower (6 percent in US
dollars) versus the prior year period. Revenues were 8 percent lower (6
percent in US dollars), dampened by the lower opening order backlog.
Operational EBITA margin was 9.7 percent, mainly due to lower revenues
and investment in the ongoing Power Up program. Cost management
initiatives are in place.

Electrification Products

Total orders increased 6 percent (9 percent in US dollars) and
third-party base orders improved 4 percent (7 percent in US dollars).
Order growth was broad based, with all business units, particularly
products, performing well across all regions. Revenues increased 4
percent (7 percent in US dollars). Operational EBITA margins expanded
100 basis points year-on-year, benefiting from pricing actions and
sustained productivity efforts.

Industrial Automation

Total orders (including B&R and currency effects) were up 34 percent and
third-party base orders were up 30 percent compared to the prior year
period. On a comparable basis, total orders rose 15 percent and
third-party base orders increased 9 percent. Investments continued for
specialty vessels as well as selective investments in process
industries, particularly oil and gas. Base orders grew across all
industries, with double digit growth in service. At the end of the
second quarter, the order backlog was 4 percent lower (1 percent lower
in US dollars) versus the prior year period. Revenues were stable in the
quarter, reflecting revenues from strong product orders offsetting the
lower opening order backlog. The operational EBITA margin improved by 70
basis points, supported by a positive mix and strong project execution.

Robotics and Motion

Third-party base orders increased 16 percent (20 percent in US dollars)
and total orders increased 11 percent (15 percent in US dollars) in the
quarter. Order growth was achieved across all business units and
regions, with demand from process industries continuing the recovery
trend. Revenues increased 8 percent (11 percent in US dollars).
Operational EBITA margin expanded 100 basis points year-on-year to 16.1
percent, due to positive volumes and mix as well as continued
productivity efforts.

Next Level strategy

Since 2014, ABB has been executing its Next Level strategy, focusing on
profitable growth, relentless execution and business-led collaboration.
In the past years, ABB has shaped its divisions into four
market-leading, entrepreneurial units; has driven a quantum leap in
digital through ABB Ability™; has accelerated momentum in operational
excellence; and has strengthened ABB’s brand.

All of ABB’s divisions are driving profitable growth within key markets,
with new and existing end-to-end digital ABB Ability™ solutions, able to
close the loop with connected devices and build on the intelligent
cloud. The divisions continue to focus on relentless execution, building
on existing momentum and continuing to invest in growth, with stronger
links between compensation and delivery of operational performance.

Today, ABB is better positioned in better markets, with a streamlined
and strengthened portfolio that offers two clear value propositions:
bringing electricity from any power plant to any plug, and automating
industries from natural resources to finished products.

Profitable growth

ABB’s digital solutions offering, ABB Ability™, is integral to the
company’s efforts to drive profitable growth. The offering includes more
than 210 ABB Ability™ solutions, meeting the needs of customers in
utilities, industry and transport & infrastructure. During the quarter
ABB received an order from Danish green energy company Ørsted, to
integrate offshore wind power with the UK power grid. As part of the
order, ABB will supply its market-leading ABB Ability™ digital grid
solutions to ensure power reliability and efficiency. As well, for
example, ABB is working with China’s Yitai Group, a chemicals company.
ABB will supply end-to-end ABB Ability™ solutions that will enable
top-tier productivity levels in their new plants. This is the first
order in a series of digital projects for Yitai Group.

During the second quarter ABB announced an investment of €100 million in
an R&D facility and training campus in Eggelsberg, Austria, which will
drive innovation in machine and factory automation including artificial
intelligence and machine learning. ABB also announced an investment of
around $30 million in a new state-of-the-art manufacturing unit for
Power Grids’ transformer offering in Sweden.

Update on the acquisition of GE Industrial Solutions (GEIS)

Through ongoing portfolio management, ABB is shifting its center of
gravity. The Group completed its acquisition of GE Industrial Solutions
(GEIS) on June 30, 2018. By acquiring GEIS, ABB is strengthening the
group’s number two position in electrification globally, and increasing
the group’s exposure to the attractive North American market – already
ABB’s biggest market – and early cycle business. GEIS is being
integrated into ABB’s Electrification Products (EP) division as a new
business unit called Electrification Products Industrial Solutions
(EPIS). Headquartered in Atlanta, Georgia, EPIS has about 14,000
employees around the world.

Approximately $200 million of annual cost synergies are expected by year
five. ABB will realize value through product and technology portfolio
harmonization, particularly from coupling ABB Ability™ offerings with
the extensive installed base. Synergies will also be extracted from
footprint optimization, supply chain savings and SG&A cost reduction. It
is expected that the integration of GEIS will have an approximately 60
basis points negative impact on ABB Group operating EBITA margins in the
second half of 2018 and approximately 260 basis points on the EP
operating EBITA margin. ABB aims to bring the margin for the EP
division, after an initial dampening effect, back into its operational
EBITA margin target range of fifteen to nineteen percent during 2020.
The transaction includes a long-term strategic supply relationship with
GE and allows ABB long-term use of the GE brand.

Relentless execution

ABB continues to benefit from its ongoing cost management and
productivity efforts. During the quarter, pricing action and savings
outpaced raw materials inflation supporting ABB’s ongoing aim of
offsetting three to five percent of the group’s cost of sales each year.

The group focus on Quality and Operations is building on ABB’s 1,000-day
programs completed in 2017. Gaps in performance, informed by customer
feedback, are rigorously identified and addressed using Lean Six Sigma
methods. ABB currently has 1,500 continuous improvement projects
underway, led from within each division.

Business-led collaboration

Strategic partnership developments in the second quarter include the
formation of a global strategic alliance to provide industrial grade
edge data center solutions between ABB and Rittal, building on the
success of prior co-operation and a software alliance for collaborative
robotics with Kawasaki Heavy Industries.

ABB continues to build strategic brand positioning through its
partnership with the ABB Formula E electric car racing championship
series, which provides a unique platform to demonstrate e-mobility
leadership.

Short- and long-term outlook

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

The attractive long-term demand outlook in ABB’s three major customer
sectors – utilities, industry and transport & infrastructure – is driven
by the Energy and Fourth Industrial Revolutions. ABB is well-positioned
to tap into these opportunities for long-term profitable growth with its
strong market presence, broad geographic and business scope, technology
leadership and financial strength.

More information

The Q2 2018 results press release and presentation slides are available
on the ABB News Center at www.abb.com/news
and on the Investor Relations homepage at www.abb.com/investorrelations.

ABB will host a media call today starting at 10:00 a.m. Central European
Time (CET) (9:00 a.m. BST, 4:00 a.m. EDT). The event will be accessible
by conference call. Lines will be open 10-15 minutes before the start of
the call. The media conference call dial-in numbers are:

UK +44 207 107 0613Sweden +46 8 5051 0031Rest of Europe, +41
58 310 5000US and Canada +1 866 291 4166 (toll-free) or +1 631 570
5613 (long-distance charges)

A conference call and webcast for analysts and investors is scheduled to
begin today at 2:00 p.m. CET (1:00 p.m. BST, 8:00 a.m. EST). Callers are
requested to phone in 10 minutes before the start of the call. The
analyst and investor conference call dial-in numbers are:

UK +44 207 107 0613Sweden +46 8 5051 0031Rest of Europe, +41
58 310 5000US and Canada +1 866 291 4166 (toll-free) or +1 631 570
5613 (long-distance charges)

The call will also be accessible on the ABB website at: https://new.abb.com/investorrelations/second-quarter-2018-results-webcast.
A recorded session will be available as a podcast one hour after the end
of the conference call and can be downloaded from our website.

ABB (ABBN: SIX Swiss Ex) is a pioneering technology leader in
power grids, electrification products, industrial automation and
robotics and motion, serving customers in utilities, industry and
transport & infrastructure globally. Continuing a history of innovation
spanning more than 130 years, ABB today is writing the future of
industrial digitalization with two clear value propositions: bringing
electricity from any power plant to any plug and automating industries
from natural resources to finished products. As title partner in ABB
Formula E, the fully electric international FIA motorsport class, ABB is
pushing the boundaries of e-mobility to contribute to a sustainable
future. ABB operates in more than 100 countries with about
147,000 employees. www.abb.com

Important notice about forward-looking information

This press release includes forward-looking information and statements
as well as other statements concerning the outlook for our business,
including those in the sections of this release titled “Short-term
outlook”, “Cash flow from operating activities”, “Next Level strategy”
and “Short- and long-term outlook”. These statements are based on
current expectations, estimates and projections about the factors that
may affect our future performance, including global economic conditions,
the economic conditions of the regions and industries that are major
markets for ABB Ltd. These expectations, estimates and projections are
generally identifiable by statements containing words such as “expects,”
“believes,” “estimates,” “targets,” “plans,” “is likely”, “intends” or
similar expressions. However, there are many risks and uncertainties,
many of which are beyond our control, that could cause our actual
results to differ materially from the forward-looking information and
statements made in this press release and which could affect our ability
to achieve any or all of our stated targets. The important factors that
could cause such differences include, among others, business risks
associated with the volatile global economic environment and political
conditions, costs associated with compliance activities, market
acceptance of new products and services, changes in governmental
regulations and currency exchange rates and such other factors as may be
discussed from time to time in ABB Ltd’s filings with the U.S.
Securities and Exchange Commission, including its Annual Reports on Form
20-F. Although ABB Ltd believes that its expectations reflected in any
such forward-looking statement are based upon reasonable assumptions, it
can give no assurance that those expectations will be achieved.

Zurich, July 19, 2018Ulrich Spiesshofer, CEO

ABB
CEO Ulrich Spiesshofer discusses the company’s second quarter 2018
results.

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