ABB is constantly monitoring the pandemic situation around COVID-19 (novel coronavirus). The health and safety of its employees, customers and partners remains the company’s number one priority and we are working hard to assess and mitigate any risks.
Guidance issued on February 5, 2020, did not include impacts due to the coronavirus, the effects of which were mainly limited to China at that time. We have subsequently experienced a decline in trading conditions due to the outbreak, further impacted by a weakening oil price.
Q1 2020 impact
Although it is not yet possible to determine the exact impact of COVID-19 on ABB’s first quarter results, ABB expects revenues to decline in all its businesses relative to a year ago, while orders are somewhat less impacted. The Robotics & Discrete Automation business, which was already facing significant end-market headwinds from the automotive sector, remains challenged, with first quarter orders and revenues both expected to decline by more than 20 percent year-on-year.
Operational EBITA margins are also expected to decline in all ABB’s businesses, burdened by lower volumes, partly offset by self-help efforts. Self-help initiatives are aided by the framework ABB already has in place to implement ABB’s Operating System (ABB-OS). At the same time, the company is significantly intensifying mitigation measures and actively reducing all non-essential costs, and all of ABB’s businesses are rigorously focused on serving their customers while sustaining cash flow.
2020 outlook
Each of our businesses are closely monitoring current and potential effects of the outbreak. Currently, the majority of ABB’s production facilities remain fully or partly operational and supply chain impacts have been minimal. However, the outbreak is expected to continue to have an impact globally, potentially creating disruption across production sites and further curtailing product demand, project and service activity.
In addition to short-cycle headwinds impacting all our businesses, we expect project business to be dampened by the weaker outlook for oil and gas capital expenditures and a fall-off in cruise ship activity. By contrast, transport projects look more resilient and the outlook for select high growth areas, such as data centers, remains robust. Systems and service activity is curtailed by restrictions to cross-border travel for specialized sales and service engineers.
ABB is accelerating and extending its mitigation measures ahead of what looks set to be a difficult second quarter, with a focus on adjusting capacity to meet reduced demand.
Given continued uncertainty, including the recent oil price decline, ABB is no longer providing financial guidance for full year 2020.
ABB continues to work toward the delivery of transformation milestones, including the divestment of Power Grids which is targeted for completion at the end of the second quarter.
Despite short-term disruptions, ABB is confident in the underlying resilience of its businesses and operating model, and that its short-term liquidity needs are well covered by the financial framework it has in place.
“I would like to take this opportunity during these extraordinary times to thank the whole ABB team for sticking together and handling this global pandemic with the highest level of professionalism,” said ABB CEO Björn Rosengren. “The health and safety of all stakeholders, above all our employees, remains our number one priority at this moment in time, while we also try our utmost to secure business continuity. We remain prepared for any scenario and will take strong action to mitigate the impact for our customers, shareholders and employees,” said the CEO.
“After many of my first meetings since joining ABB earlier this year, my impressions of the company and its people are very positive. ABB is a strong company, with a tremendous spirit and the right products and technology to drive the positive and sustainable development of the world in the future,” Rosengren added.
ABB plans for virtual communication
In light of the current situation around COVID-19, ABB plans to make more use of virtual media to facilitate continued communication with the financial community.
