CEO interview

Björn, 2023 was an eventful year. What stood out most for you?
I did a lot of travelling and spoke to many of ABB’s customers, employees, investors, partners and other stakeholders around the world. What I heard gave me confidence that our market offering is fully aligned with long-term customer needs and secular trends.

In 2023, it was encouraging to see increases in investments in energy efficiency and decarbonization. That’s especially true across the world’s three largest economies – the United States, the European Union and China.

The good news is that, according to the International Energy Agency (IEA), it is still possible to limit global warming to 1.5°C above preindustrial levels with existing technologies. If the world ramps up renewables, improves energy efficiency, cuts methane emissions, and expands electrification, the IEA estimates that we can deliver more than 80 percent of the emissions reductions needed by 2030.

That, of course, shows that ABB is in a unique position to seize the opportunities ahead. We are working with our customers to electrify, optimize and decarbonize their operations. In the process, we are accelerating the energy transition and helping to build a low-carbon society. Most importantly, ABB is at the heart of developing technologies to enable a net-zero future.

How did ABB perform in 2023?
We delivered a strong performance. Orders were slightly down but up on a comparable basis, and we delivered higher revenues, a record high operational EBITA margin and strong margin improvements in all four business areas. We expanded our Earnings per Share, cash flow and ROCE (Return on Capital Employed).

We were fortunate to be operating in a strong market environment, but I think that this result also confirms that we are in the right market segments and that our ABB Way operating model with its focus on continuous improvement is working.

We also made significant progress towards achieving our sustainability goals. In 2023, we reduced greenhouse gas (GHG) emissions in our own operations by 32 percent and helped our customers avoid 74 megatons of emissions through our energy efficiency and carbon reduction technologies. We also reduced lost time caused by injuries (LTIFR) by 9 percent to industry-leading levels and increased the number of women in senior management positions to 21.0 percent, up from 17.8 percent a year ago.

I am truly proud of the ABB team for delivering such good results and creating value for all our stakeholders. I want to thank everyone for a very strong performance in 2023.

In November, you announced ambitious financial and sustainability targets at ABB’s Capital Markets Day. What makes you so optimistic about ABB’s prospects?
ABB has a clear purpose. We want to use our technology leadership in electrification and automation to enable a more sustainable and resource-efficient future. Over the past three years, we have transformed ABB. Today, our Group is decentralized and purpose-driven – and we have demonstrated to the markets that we can deliver on our promises. We have achieved a lot: we reshaped our portfolio, addressed profitability and embedded a culture of continuous improvement in the company.

These changes put us in a stronger position to address key global trends and opportunities – like the shrinking labor force, the accelerating need for automation, energy security and efficiency, and the energy transition. That is why we have been able to set ambitious new financial and sustainability targets. Among our key financial targets, we have lifted our target for long-term comparable revenue growth to 5–7 percent (from 3–5 percent) and raised our operational EBITA margin target to 16–19 percent (from ≥ 15 percent). For a complete list of our new targets, see chapter Outputs and outcomes. To guide our ambition of enabling a low-carbon society, we have set new 2030 and 2050 net-zero-aligned targets for our own operations and our value chain. We are aiming to help our customers avoid 600 megatons of GHG emissions through products sold from 2022 to 2030. We also expanded our focus on preserving resources to include water, biodiversity and sustainable land-use.

ABB wants to lead with a strong culture of integrity and transparency across our entire value chain. We have now rolled out our updated Code of Conduct and Supplier Code of Conduct, which is part of our procurement terms and conditions. We also updated our Human Rights policy, which reflects our commitment to upholding the highest standards along our value chain.

You like to say that innovation is in ABB’s DNA. Did ABB come up with any breakthrough innovations in 2023?
One that I am very excited about is ABB Dynafin™, a revolutionary new electrical propulsion system for ships that mimics the movement of a whale’s tail. ABB Dynafin™ has a rotating wheel with vertical blades, which makes it possible to propel and steer the ship at the same time.

It is truly ground-breaking both in terms of operational efficiency and maneuverability. And because ABB Dynafin™ is an electrical propulsion system, it can be powered by any energy source, including zero-emission batteries or fuel cells, further contributing to decarbonize shipping.

Another important innovation was our new IE5 SynRM Increased Safety motor for hazardous area industries. This latest addition to our portfolio of energy efficient motors and drives reduces energy losses by up to 40 percent compared to commonly used IE3 induction motors. It also runs at lower temperatures than standard designs, prolonging the life of the motor and reducing maintenance needs; it also does not contain rare earth materials.

Finally, I want to mention the expansion of our large robot range. In 2023, we launched four new models and 22 variants that offer customers superior performance and up to 20 percent energy savings thanks to the lighter robot design and use of regenerative braking.

“Around 55 percent of our R&D employees are focused on digital and software development. We already have more than 100 AI-focused projects across the ABB Group.”

BJÖRN ROSENGREN | CEO

You have chosen a different digital strategy than some of your peers. Why do you think yours is the right strategy for ABB and how will you ensure that as technology evolves you are not left behind?
With our decentralized business model, our divisions have full ownership of their resources and strategies, which also includes their respective digital strategies. This allows them to build on their proximity to customers to develop more customer-focused offerings and gives them the freedom to work with other divisions within ABB as well as external partners.

We create customer value through embedded software in our products. The majority of our products are digitally enabled, as well as almost half of our services. Around 55 percent of our employees in research and development (R&D) are focused on software development and our ABB Ability™ portfolio of digital solutions is continuously expanding.

How are the rapid advances in artificial intelligence affecting ABB’s business?
We are certain that generative artificial intelligence (AI) has tremendous potential for our business. We have already identified more than 100 AI-focused projects across our Group. For example, our Robotics division produces AI-enabled robots with integrated vision, which can work safely and autonomously in warehouses. In our Process Automation business area, we continue to progress towards autonomous operations, for which AI is an important enabler. We also use AI for preventive maintenance and are working with our long-standing strategic partner Microsoft to unlock further customer value from operational data.

Looking at the global market environment, how concerned are you about the weakness of the Chinese economy?
Unfortunately, China did not develop as we had hoped in 2023. We had expected that the lifting of COVID-19 restrictions would trigger a recovery, however, that did not materialize. One key reason is the continuing decline in the country’s property market, which hit residential and commercial construction hard. On top of that, order growth in China was hampered by customers normalizing order patterns in response to a normalization of supply chains during the year. This impacted several of our businesses, most notably Robotics & Discrete Automation.

While it is difficult to predict how the Chinese economy will develop, we are convinced that China will remain an important market for ABB. China is our second-largest market – we employ 15,000 people there, covering the full range of our business activities, from R&D and manufacturing to sales and service. Our technology has an important role to play in addressing some of China’s most important challenges. We can help the country meet its dual-carbon goal, further decarbonize industry and transport, and address labor shortages with our robotics and automation solutions. We will continue our strategic focus of serving our customers in the country with locally manufactured products and solutions, as we do in all our markets.

Last year, you carved out E-mobility as a standalone business. Are you still planning an initial public offering?
Our ambition to separately list ABB E-mobility remains unchanged. The new management is currently concentrating on driving performance, including some reorganization to deliver a more focused portfolio. We expect to be in a position to move ahead with a potential initial public offering (IPO) when these measures have been implemented successfully and the financial markets are constructive. Most importantly, we remain confident about the growth prospects in this field.

ABB continued to buy businesses last year and sold the Power Conversion division, marking the end of the announced divisional exits. How have these portfolio moves worked out?
We have a clear strategy for our active portfolio management: we regularly assess our business portfolio to ensure that our divisions fit with our company purpose and strategic focus. We acquire businesses to secure a continued leading technology and market position. In 2023, we made six acquisitions across our four business areas. The divisions continue to build up their acquisition target pipelines and during 2023, we completed the acquisitions of the Siemens low-voltage motor business led by the NEMA Motors Division, strengthened our smart home technology portfolio with the acquisition of EVE systems led by the Smart Buildings Division, and completed four other smaller bolt-on acquisitions primarily related to software and AI technology.

We also made a number of venture capital investments, which can be seen as an extension of our R&D. One is WindESCo, a US-based analytics software provider that is improving the performance and reliability of wind turbines. ABB is a leading supplier of wind converters for medium and low-voltage turbines and thanks to our investment, we will be able to offer customers a package that combines converters with performance monitoring. Another investment was Pratexo, an edge-to-cloud platform innovator that is improving the security, autonomy and resilience of decentralized electrical networks.

We also completed the sale of our Power Conversion division in 2023, which completes all divisional divestments announced at the end of 2020. We now have 19 high-performing divisions, and approximately 70 percent of our revenues come from businesses with a growth mandate. We will continue to optimize the businesses and product groups within our divisions. We aim to make five to ten small to mid-sized acquisitions a year and target to add 1–2 percent growth from acquisitions through the economic cycle.

In 2023, you delisted ABB securities from the New York Stock Exchange. Has that had any impact on your business in the United States?
The delisting from the New York Stock Exchange (NYSE) had no impact on our business or operations. With 26 percent of annual Group revenues and more than 40 manufacturing and distribution facilities, the United States continues to be our largest market.

We remain fully committed to our US customers, employees, investors, partners, suppliers and other stakeholders. We are investing $170 million to increase capacity in the US to continue to grow our local-for-local footprint and serve our largest market.

We took the decision to delist from the NYSE because ABB’s shares are mostly traded on the SIX Swiss Exchange and via electronic trading platforms. Consequently, we considered it excessive for ABB to have three stock exchange listings. ABB’s shares are still listed on the SIX and Nasdaq Stockholm, which reflects our Swiss and Swedish heritage. ABB securities in the US are still traded on the over-the-counter (OTC) market. Once this trade falls below a certain level, we intend to apply for deregistration with the US Securities and Exchange Commission (SEC) and for termination of our equity reporting obligations under the US Securities Exchange Act.

You have now been ABB's CEO for four years. What are you most proud of and what's next for you personally?
What’s important is that our ABB Way operating model is here to stay. With our performance improvements over the past four years, we have demonstrated that the ABB Way is the right model for our company and that the way forward is to continue to drive a decentralized culture.

From my side, I am happy with the changes and progress made at ABB so far and I am keen to continue the improvement journey. Working for ABB has been one of the best experiences of my life. We have a great team of talented and motivated people, world-class businesses, fantastic technologies and we are making an important contribution to a sustainable future. I want to thank the entire ABB team for their commitment and strong performance in 2023, and also all our customers, employees, investors, partners, suppliers, and other stakeholders for their continued trust and support. We all are looking forward to deepening our successful collaboration in 2024.