Chairman’s letter

Dear shareholders,

The past four years have been a transformative time for ABB. While dealing with some of the biggest challenges that a business can face – the pandemic, supply chain disruptions and wars in Ukraine and the Middle East – we have put in place a new operating model, improved our performance and prepared our company to help address humanity’s biggest challenge, climate change.

As Chairman, I am extremely proud of what we have achieved. We are delivering on our commitments to stakeholders. We have strengthened our technology leadership in electrification and automation with many new innovations. And we are operating in a more efficient and transparent way, thanks to our decentralized operating model, which gives our divisions full ownership for their respective businesses.

Thanks to our market and technology leadership and our new ways of working, we are able to play an important role in helping to meet the energy and resource needs of a growing global population while preserving the natural environment for future generations. As a global leader with a strong presence in local communities, we are also promoting social progress around the world by being an exemplary employer and responsible corporate citizen.

Delivering on our commitments
Our achievements show that we are heading in the right direction and that we have the right people and organizational structure to take us forward. In 2023, we took advantage of the positive market environment and strong secular demand drivers to further boost our order backlog while delivering record levels for revenues, Operational EBITA and margin with a significantly improved cash flow delivery. In light of this strong result and in line with our policy of paying a rising sustainable dividend per share over time, we will be proposing a dividend of CHF 0.87 per share to be voted on at the Annual General Meeting on March 21, 2024.

We are confident about ABB’s prospects, hence our ambitious new financial and sustainability targets that we presented at our Capital Markets Day in November 2023. Our purpose of enabling a more sustainable and resource-efficient future through our technology leadership in electrification and automation fits perfectly with the needs of our customers and society. We are ideally positioned to support the energy transition and help our customers move to low-carbon and circular business models.

Creating value now and in the future
We are actively managing our business portfolio to ensure that our divisions fit with our company purpose and deliver on our commitments to stakeholders. Our divisions must also be able to create more value by being part of ABB than they would elsewhere and serve markets that are profitable and growing.

Divisions that do not fulfill these criteria – even if they are strong businesses – are either restructured or earmarked for exit. In the past three years, we have sold two high-performing businesses and spun off our successful Turbocharging division (Accelleron). This has allowed us to more closely align the group with our purpose and position us in higher growth  markets.

We have also transformed the way that mergers and acquisitions are done at ABB, empowering our divisions to go out and find targets that will defend their leading market positions and performance. In the past three years, we have seen several small division-led acquisitions. Going forward, we aim to make five to ten small to mid-sized bolt-on acquisitions per year, with six transactions closed in 2023 and several further that we could announce in early 2024.

“As a technology leader in electrification and automation, ABB is ideally placed to support the energy transition and help our customers move to low-carbon and circular business models.”

PETER VOSER | CHAIRMAN

Leading by example
ABB’s primary contribution to a low-carbon, resource-efficient future is developing and deploying leading technologies to help our  customers optimize, electrify and decarbonize their operations. We owe our success to our people, suppliers and the communities in which we operate. We have more than 105,000 employees around the world and a supply chain consisting of thousands of companies, each of which has its own suppliers.

To secure ABB’s long-term future, we need to lead, both in the market and by example. As a business that means reducing our own greenhouse gas emissions and adopting circular business practices. As an employer it means providing a safe, fair and inclusive working environment, in which our people can build their careers and are able to contribute to a better future. As a customer, it means helping our suppliers adapt to the fast-changing economic, regulatory and social environment that has driven ABB’s own transformation. As a leading global company it means being actively engaged in our communities through projects and programs that provide education and training, support diversity and inclusion, and help communities to develop, thrive and contribute to wider societal goals.

Committed to ethical business practices
Underpinning everything we do is our commitment to embedding a culture of integrity and transparency throughout our value chain. In 2023, we updated our ABB Code of Conduct and our Supplier Code of Conduct as well as our Human Rights policy, which reflects our commitment to upholding the highest standards along our value chain. We also enhanced our anti-bribery and corruption controls in line with a three-year Deferred Prosecution Agreement (DPA) with the United States Department of Justice and Securities and Exchange Commission. ABB’s Board of Directors is responsible for overseeing compliance with the requirements of the DPA, instituted a year ago, which include the engagement of an independent Board counsel expert.

Facing the future with confidence
In 2023, we have made strides in many areas. As Chairman of ABB since 2015, I am convinced that our company is better prepared for the future than it has ever been. On behalf of the Board of Directors, I want to thank our customers, employees, investors, partners, suppliers, and other stakeholders for your commitment and trust. You give us the confidence to strive for success, overcome adversity and contribute to a more sustainable, prosperous society. We look forward to continuing the journey with you in 2024 and beyond.

Best regards,

PETER VOSER
Chairman of the Board of Directors