ABB Capital Markets Day 2023: Setting New Standards

The future focus is on maintaining consistency in operational models, accelerating growth and continuous improvement
Raise the long-term comparable income growth target to 5-7%
Raise the target operating profit margin before interest, tax, and amortization to 16-19%
Release more ambitious net zero scientific goals for 2030 and 2050
Today, ABB held a Capital Markets Day event at its electrical business factory in Florence, Italy. During the event, ABB Group CEO Robion, CFO Tianyi, and the presidents of ABB’s four major business units introduced the latest developments in ABB’s successful transformation, financial goals, and how the company can benefit from key long-term trends related to its business. In addition, the head of ABB Group’s sustainable development affairs also introduced the latest developments in the company’s sustainable development agenda, including more ambitious net zero targets for 2030 and 2050.
“During the past three years of transformation, we have adjusted ABB’s business portfolio to align with our goal of empowering a more sustainable and efficient future through our leading technologies in the electrical and automation fields. During this stage, we have strengthened responsibility, transparency, and speed through the ABB Way operating model, making significant progress in financial and sustainable performance,” said Robion
With the setting of new standards, we are stepping out of a transformation period, and most business units are moving towards strategic growth goals. Now, the focus of these departments is to fully tap into market potential, which in my opinion is the core of the transformation towards electrification, energy security, energy efficiency, automation, and digitization. We achieved our profit margin target one year ahead of the original plan and became a more agile and decision-making organization, which gave us confidence to develop more ambitious plans and further improve our profit margin goals. I believe that ABB is in a very favorable market position both now and in the future.
Higher goals after the transformation period
In the latest financial framework, ABB has raised its comparable revenue growth target for the entire business cycle to 5-7% (previously 3-5%). The growth target for mergers and acquisitions remains unchanged at 1-2%. ABB has also raised its annual operating profit margin target to 16-19% (previously ≥ 15%) and adjusted its annual capital return target to 18% (previously 15-20%). In addition, the company has raised its target for basic earnings per share growth throughout the entire economic cycle to at least high single digits (previously, basic earnings per share growth was higher than sales revenue growth). ABB has also confirmed a target of 100% to convert free cash flow into net income.
ABB’s updated growth targets are based on various external and internal factors, including the continuous increase in demand for electrical and automation solutions to promote sustainable development as the world moves towards a common emission reduction target consistent with the 1.5 ° C temperature control target. To achieve higher growth, ABB has also adopted new cooperation methods, with each business unit fully responsible for performance growth, making decisions closer to the market, and readjusting its business portfolio around empowering sustainable and efficient development through electrical and automation.
ABB has increased the proportion of business units in growth mode, currently accounting for approximately 70% of the group’s total sales revenue. ABB focuses on both organic endogenous growth and M&A opportunities to fill technological gaps, supplement the product portfolio provided by business units for high growth markets, provide opportunities to enter new regions, or achieve market integration. ABB’s goal is to conduct 5 to 10 small to medium-sized reinforcement acquisitions annually.
Revenue and cash flow driven by growth goals
Tianyi said, “We hope that higher growth will also bring higher profit margins and cash flows. In order to achieve new financial goals, we will move forward on the path of further improving revenue quality, capital efficiency, and productivity. At the same time, our capital allocation focus will remain unchanged.”
ABB will continue to invest in the digital field to create synergies with the company’s products and solutions. As of 2022, approximately 57% of ABB’s orders are related to software and digital products. About 60% of ABB’s research and development resources are focused on digital solutions, and the company will continue to strengthen its development in this field through reinforcement acquisitions. From 2020 to 2023, ABB conducted a total of 26 venture capital investments in the fields of technology and digitalization.
ABB reiterates its goal of maintaining a strong investment grade rating. ABB’s capital allocation principles remain unchanged: funding the company’s organic growth through research and development, channels, and capital expenditure investments; Long term payment of sustainable growth dividends per share; Implementing value creation acquisitions; And timely return additional cash to shareholders through stock repurchases. Over the past 10 years, ABB has provided shareholders with over $28 billion in returns through dividends or stock repurchases.
Sustainable Development: 2030 and 2050 Scientific Net Zero Goals
ABB’s technology is supporting all related industries to achieve optimization, electrification, and decarbonization, driving energy transformation and moving towards a net zero future. Adhering to this mission, ABB has released new goals and plans today to strengthen and accelerate its sustainable development process.
“For over 140 years, ABB has been committed to improving energy efficiency and promoting electrification. Today, we are leveraging our leading technologies in electrification, automation, and digitization to accelerate energy transformation. Our sustainable development agenda aligns perfectly with this mission, and we work together with customers, suppliers, and partners to empower low-carbon societies, protect resources, and drive social progress.”
ABB is adopting a rigorous science based net zero target approach that meets the net zero standards of the Scientific Carbon Target Initiative (SBTi). The company has submitted new targets to SBTi and is expected to pass validation in 2024. This includes Scope 1 and Scope 2 targets that are consistent with the 1.5 ° C temperature control target, which means reducing carbon dioxide emissions equivalent by 80% by 2030 and 100% by 2050 compared to the 2019 benchmark. Based on a rolling average of 12 months, ABB’s current CO2 emissions in Scope 1 and Scope 2 have decreased by 72% compared to 2019. In addition, the company has set new scope 3 carbon dioxide reduction targets, which are to reduce carbon dioxide emissions by 25% and 90% by 2030 and 2050, respectively, compared to the benchmark of 2022.
ABB uses this stricter approach to achieve carbon neutrality, replacing previous methods such as carbon offsetting.
According to the latest Emission Avoidance Guidelines from the World Council for Sustainable Development, ABB has also updated its goal in this field, which is to help customers avoid 600 million tons of carbon dioxide equivalent emissions through products sold between 2022 and 2030. In 2022 alone, ABB helped customers in industries such as transportation, construction, and data centers avoid 70 million tons of carbon dioxide equivalent emissions.