Faster growth: ABB sets more ambitious financial targets

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ABB wants to grow on a similar basis in future at “5 to 7 percent annually over the economic cycle,” it announced at capital markets day on Thursday. Additionally, acquisitions are expected to contribute 1 to 2 percent to growth, as before. In general, a 6 to 9 percent annual increase in sales should be achieved.

To date, ABB has targeted average annual sales growth of 4 to 7 percent on a comparable basis. Of this, 3 to 5 percent should be provided internally and 1 to 2 percent through acquisitions.

The future target for operating profit margin (EBITA) is between 16 and 19 percent. Previously, there was a target of “at least 15 percent” for 2023. The annual return on capital (ROCE) target will also be updated to “above 18 percent” from the previous 15 percent to 20 percent.

Underlying earnings per share are expected to grow “at least in the high-single-digit range” over economic cycles. It should increase significantly more than sales so far. The target of around 100 percent for the ratio of free cash flow to consolidated profit is maintained.

CEO Björn Rosengren now thinks ABB’s transformation phase is over. “We have set new standards and are now exiting the transformation phase,” the statement said. The majority of divisions now have the strategic mandate to grow.

In particular, 70 percent of group sales come from divisions in growth mode. The focus is on both organic and acquisition-driven growth. Acquisitions can be accomplished by closing technical gaps, adding high-growth segments, or gaining access to new geographic markets. ABB confirms its target of 5 to 10 small and medium-sized acquisitions per year.

Strategic use of generated funds has also been verified. The focus is on financing organic growth through research and development as well as investments. A sustainable dividend that increases over time must also be paid.

Next on the priority list are value-enhancing acquisitions, and then, if necessary, funds should be returned to shareholders through share buybacks. ABB estimates that distributions to shareholders through dividends and share buybacks over the last decade totaled over 28 billion francs.

Investments in digitalization should continue. According to ABB, approximately 57 percent of orders in fiscal 2022 were for software and digital offering-related solutions. Digital solutions will continue to be strengthened through additional acquisitions in the future.

(SDA)

Source :Blick