ABB Q3 – “Moving in the Right Direction”

Yesterday ABB shared its Q3 results.  Being such a large and diverse company, it is difficult to ascertain much to provide electrical industry insights other than an affirmation of a slowdown in the US electrical industry and particularly in the industrial space.

So, with that as a caveat …

Input from ABB Q3 analyst call and slides

• Globally, orders were down 1% and revenues were steady at $6.9B in the “face of weaker economic conditions”
• Orders in the Americas were down 1%
• Steady performance in the Electrification division (the division that contains GE Industrial and T&B)
  • Order growth was “robust” apart from large orders, which had a tough comparison base
  • Orders up 1% YoY and order backlog up 4%
  • Margin improvement drive by Thomas & Betts and integration of GE Industrial
  • “Product business benefited from positive pricing actions.”
• Integration of GE Industrial Solutions is on-track.
• The US was weaker in Motion and Robotics but up in Industrial Automation.
• Globally, Electrification orders were $3.188 billion and revenues were $3.161 billion
• The company will be finalizing its transformation to being “Country-managed” by the end of the year. “All employees were provided their new roles in October.”
• New CEO, Björn Rosengren, coming effective March 1, 2020 (Which will be interesting as, is he subtly involved in the current changes or could he make changes upon joining the company and making his own evaluation?)

Analyst Questions

• Seeing positive trends (question was margin related) in Thomas & Betts as well as GEIA
• ABB switchgear (GE) according to NEMRA data is gaining market share
• Seeing some slowdown in the industrial short-cycle business in the Motion business
• Otherwise “faring quite nicely in the US in Electrification”.  Base business is doing well and moving in the “right direction.”
• Regarding the oil / gas markets, and this is for ABB’s Industrial Automation business, “good pipeline in upstream and midstream oil and gas with smaller CapEx, service and OpEx.  Also, good pipeline in LNG.”  Reasonable pipeline in mining and metals.
• Data centers is a core growth area for Electrification and is “growing strongly”
• See buildings market as strong for Electrification, especially in Germany, “but also in the US, we had good performance.” But commented that the buildings market is “volatile”. (The sense in reading is that there is little commentary on the commercial construction market and ABB Electrification’s product offering / success in this market.  A very high percentage of commentary is tied to the industrial space.)
• ABB has an analyst “Electrification Day” on November 5^th to share insights (“color”) on the different business lines with Electrification.

In ABB’s Q3 press release, Peter Voser, Chairman and CEO of ABB, was quoted as saying “We are holding course and pursuing long-term growth, staying firmly focused on managing costs in response to softer demand while progressing our transformation agenda. We continue to drive the strategy forward while instilling a culture of empowerment and high performance.”

The press release also shared:

• Macroeconomic indicators are mixed in Europe and China, while they weaken in the US.
• Compared to the macroeconomic indicators the end-markets ABB operates in are showing resilience, with headwinds in some markets, particularly discrete industries.
• The transformation of ABB into a simpler, agile and more customer-focused organization is well underway.

Takeaways

• ABB feels it’s “moving in the right direction”
• The GE integration is occurring somewhat quicker than originally projected
• The industrial market is slow and ABB’s performance is flat
• Its expectation is that it will be a “simpler, more agile” company
• That it is instilling a culture of empowerment

The question to distributors is, “are you seeing the benefits of these changes?” How is ABB performing for you?