Abb Ltd (ABB) 2012 Q2 法說會逐字稿

Ladies and gentlemen, good morning or good afternoon. Welcome to the ABB second quarter 2012 results analyst and investor conference call. I'm Stephanie, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. After the presentation, there will be a Q&A session. (Operator instructions)

At this time, it's my pleasure to hand over to Joe Hogan, CEO of ABB, and Michel Demare, CFO of ABB. Please go ahead, gentlemen.

Hi, good afternoon. Thanks for joining us. Michel and I will be here to walk through some of the slides and to take any questions. As always, the charts and the presentation that we're going to speak from is on ABB.com. I'd turn your attention also to chart 2, which is our Safe Harbor statement, and let's quickly move to chart 3.

So just from a high level standpoint, we announced that both orders and revenues were higher, despite, obviously, the uncertain market conditions that exist around the world today. Currency translation is, I would say, kind of as an overlay, there's a lot of noise in our numbers, and hopefully, this presentation hopes to clear up some of that noise. The two big areas of noise would be the Thomas & Betts acquisition, along with the currency translation piece. And when you look at the currency translation, it reduced reported revenues by about $600 million, and EBITDA by about $100 million. So, you know, substantial, in that sense.

China orders stabilized, particularly in Low Voltage products, where we had some issues in the first quarter. North America is still strong for us. We saw a rebound in the Middle East, and Europe is steady. I'd say there's a two-tier Europe, between North and South. I'll talk about it. But at least it was a positive orders quarter.

Order price pressure in Power is easing, and I say slightly, but we do see that easing. Steady Power project margins over the last three quarters, and Michel and I will explain that. Operational EBITDA decreased versus the second quarter of last year -- some negative mix, and obviously, the US strong dollar translation. But you know, we saw some good progress, quarter to quarter.

The Thomas & Betts acquisition is completed, got about six weeks in, and we'll walk you through how that looks. And in divisions, delivered really strong cash from operations, but we'll talk to you about some of the cash shortfall that we've had, and as to why.

Moving to chart 4, you can see that orders were up too, versus second quarter of last year. And then when you look from an organic standpoint, up 9%, and then plus 6% from an overall standpoint.

Revenues, organic about 3% at $9.7 billion. Our order backlog -- there was some questions this morning on order backlog. If you just -- from a US dollar standpoint, negative 3%, but in local currency, we actually saw an increase in our backlog, close to $29 billion overall.

From an operational EBITDA standpoint, our numbers were $1.471 billion, as you can see. That's about negative 5% overall, but negative 9% from an organic standpoint, when you look at the $60 million that were received from Thomas & Betts in the quarter. That gives us an operational EBITDA percent of about 15.1%, versus 16% of last year.

Net income down 27%, and cash from operations down 33%. That will imply, I guess, some explanation, and Michel and I will walk you through shortly.

Turning to chart 5, steady on higher demand in most regions, and so this is a good chart in the sense when you look around the globe, where we stand. Starting from the left hand side, you can see the Americas are up 20% overall, excluding Thomas & Betts up 10%. And really good progress in both Power and Automation, Power up 26% and Automation up 16%. So we were pleased with what we see in the Americas for this quarter.

Moving to the right, we look at the Middle East and Africa, up 34%, and good progress in both Power and Automation in that area, and it's good that we could drive some good orders realization in that part of the world for this quarter.

Moving more to the right is Asia, negative 1%. And the next page, we'll talk more about how we can dissect Asia for you, and how that works. But overall, Power up 12% and Automation down 8%.

And then in Europe, up 2%, with Automation up 4% and Power up 2%, in that sense, and we're really pleased to see Europe as strong as it was, from an orders standpoint, given the economic uncertainty that obviously existed in Europe right now.

Moving to chart 6, this just breaks down, from a country standpoint, more than how we look at things at regions, so you can get a better look at the business. You see Canada was up 30%, up 10% excluding T&B. United States, up 13% when you exclude T&B overall, and Brazil, 12%. You know, when you look up above on Norway, plus 47%, a lot of that has to do with marine, and then oil & gas that's associated with marine. The UK, up 35%, you can see Russia up 15%, Germany down 10%. We had one tough comparison, Discrete Automation and Motion in Germany. But overall, we're seeing the German side down.

We talk about a two-tiered Europe, though, with Spain negative 30% and Italy negative 13%. We continue to see pressure in that area.

We had strong orders in Oman, up 10x, particularly in our Power Automation business, overall in the Power and Automation businesses. India was up 11%. In fact, we saw good operations turnaround in India, too, which is establishing a positive trend for us. China was down 2% overall, but Low Voltage products, which is our biggest concern in the first quarter, actually came back pretty strongly. And then you can see, Australia is up 49%, and again, that's the mining industry there primarily, and that team is doing a good job of driving our portfolio in that industry in Australia.

Moving to chart 7, and this just takes a quick look at our Power Products and Power Systems' performance overall, you could see that orders were up in Power Products about 5%. Revenues are flat. Operational EBITDA, versus the second quarter of last year, down 15%, at 14.7%.

If you move down to the bottom part of -- what we're trying to show on this chart is that we, over the last three quarters, had pretty consistent margins from an operational EBITDA standpoint in Power Products, and we're hoping that what we're showing here is, we think we've found the floor here, and we're going to fight hard to be able to maintain that, and then bend this curve in the future.

Overall, Bernard and his team have done a good job in Power Products. One of the big things here is, the team is saving about $100 million of costs in the second quarter, in order to counteract the price that we still have in our backlog that's been coming through in that business.

On Power Systems, orders were very strong. Michel and I were pleased with that. Revenues, up 1%, but operational EBITDA down 37% at 6.2%. And if you go down below and look at that, we're pleased about the tender backlog. We like the realization of the orders for this quarter. But the margin slippage had to do with some small projects in different businesses around the world. They had some slippage. And so it's not the kind of operational execution that we want to see in that business. And we're going to make sure that we continue to focus on this business, so we can deliver more consistent results in the future.

Moving down below, when you think -- in chart 8, when you think about the successes and challenges of Power in Q2 2012, and I'm sure there will be several questions about this, we continue to see good orders and tendering activity across both businesses. One of the things we often don't talk about, the restructuring in our Power division, but I can assure you that it goes on all the time. One of the reasons we're quiet about it is because of [union] concerns and different things we want to make sure that we get through as quickly as possible. But one of the things we wanted to make transparent in this announcement was Power Transformer capacity has been cut over the last 12 months. These are large power transformer capacity, primarily by 10%, taking out between 600 and 700 jobs.

At the same time, you have to realize that we're repositioning that footprint to lower cost areas so it can be more competitive, too, so we call it the cost/growth paradigm, and we take out capability in some areas, and then we increase capability in different areas, too.

From an M&A standpoint, we did have one small deal, about $35 million, called Tropos, which is a wireless systems and network communications. Actually, this is a small deal, but we're really excited about it. We think we acquired terrific technology. It's right in line with a very good business that we have in Power Systems on communications, and it really -- and it just works well with our Process Automation division, in the sense that the systems work that they drive from a communications standpoint also. So we're excited about that.

Down below, the challenges. I mean, obviously, the challenges are -- have been the challenges we've had in this business, is continuing to take costs down in Power Products, and continue to reposition ourselves to make sure that we can hold the margins that we have out there, so there's no -- going to be no letup, in that sense, at all.

We have a strong in-country, for-country focus, which means trying to make sure that we have the cost and specifications aligned with the countries as much as possible, so we can increasingly become competitive around the globe. And service continues to be an area of leverage for us. We've been thinking a lot of time and resources in services, and our lifecycle services are growing extremely well in that sense, and I'll talk more about that in a second.

So, moving to chart 9, and this is the Automation businesses overall, starting with Discrete Automation and Motion, I know there's a lot of concern in the first quarter about the overall margin of our Discrete Automation and Motion business. But you can see, our orders are down 2%, revenues up 11%, operational EBITDA up 6% and holding, and operational EBITDA up 18.8%, which is a -- I feel, a very respectable margin for the quarter.

We saw lower demand in renewables and rail, and expressly impacting our Low Voltage drives business. Good execution on revenues, led by our Robotics team, and also, Medium Voltage drives.

Operational EBITDA margin in steady, in the face of this, a lot of mix that we have going on. I was starting to mention in highlights that Robotics had a very strong quarter overall, and we had one large order for Ford in the United States too that really helped, from an orders standpoint.

On Low Voltage Products, it is a big turnaround for this division in this quarter, and Thomas & Betts -- obviously, excuse the figures, because you can see how much it was up with Thomas & Betts in six weeks. But if you look at the numbers down below that shows the adjusted numbers for -- just for continuing operations outside of Thomas & Betts, you can see that orders were up 1%, revenues were negative 2%, and overall, an operational EBITDA of about 17.7%.

I'd say, two things to really call attention to here outside of the Thomas & Betts acquisition, would be one, is the China turnaround, and we'll talk more about that, I'm sure, in the Q&A. But we have seen a -- really, a dramatic improvement in the business. And I'd say, it's market-related, from a construction standpoint. It also has to do with our teams making sure that we hit all the channels that we can there, and to push as hard as we can.

The other side is on Low Products has been some -- taking out some costs as quickly as we can in different parts of the world, to help us stabilize that margin, versus what we saw in the first quarter. And Tarak and his team have done a good job there.

Moving to Process Automation, this division has executed extremely well in the last 18 months. You can see their orders are up 3%, revenues up 5%, operational EBITDA up 8%. And really, a good top of the range EBITDA margin on 13.1% overall.

Oil & gas and marine tend to be the real strong areas that we're seeing in the marketplace. We do see weakness in pulp & paper, in some parts of the metal industry overall. Either the higher EBITDA margin is mentioned below. It has to do with cost savings and higher margins in lifecycle services. And our measurement products business has been doing extremely well year to year. In fact, they're driving growth and driving margin, too, so a really good showing in Process Automation.

Moving to chart 10, the challenges in Automation for Q2 2012 overall, it's obviously the rapid margin recovery we saw in Low Voltage Products. It's been a real plus for us in the quarter. Product pricing improvements, we've gotten some net pricing improvements in our Low Voltage Products, about -- everything about 1.5 points, year to year, which is good. And we've pushed price where we can. And Discrete Automation and Motion, the team has pushed it there too where they can, in certain parts of their business.

Obviously, we closed the Thomas & Betts acquisition, off to a good start. We'll talk about that in a moment.

And then we also inaugurated a DC data center here in Switzerland. If you were at Capital Markets Day last year, we talked about, how do we move into the data center marketplace with different and new technology? This is a 1 megawatt data center here in Switzerland, and we've basically shown what our analysis had pretty much anticipated, which is about a 10% to 15% savings in energy, and about 15% savings in real estate and costs. And we're going to push that in different parts of the world, and to show that -- to validate that, and to push more interest in the marketplace.

Down below, challenges and action plans. I mean, we face an uncertain market, as all of our competitors do, too, so we have to continue to be fast and flexible on capacity adjustments with our team, and also with our facilities. We have a strong focus on cost, as you know, and we're ahead on our cost program, and we think we'll be above the $1 billion we originally mentioned as we started the year.

So, moving over to our chart 11, which is on Thomas & Betts, we have the six weeks, as I mentioned before, that's in our income statement since we consolidated the acquisition. We've seen in that, from a steady standpoint, 10% revenue growth on a full quarter basis for Thomas & Betts. Operational EBITDA margin has improved from 16.7% last year to 18.5%, so it shows really good operations execution. So from our income statement standpoint, you'll see $310 million of revenues that are in Low Voltage Products, and $60 million of operating profit.

So the integration is on track. We have some early wins in South Africa, particularly in using the infrastructure and capability of ABB to help some of Thomas & Betts' work overseas. In this case, it was a great example. And our synergy estimates that we had going in have been confirmed. We have really strong actions started around that. And we strongly believe this will be EPS accretive in year one, excluding the one-time charges.

And now, down below also, there's -- just so that you can work the spreadsheets properly, is, you can see acquisition related costs of $70 million, $80 million for a full year. You can see what PPE will be, and $120 million for a full year of 2013.

I'm going to turn it over to Michel on chart 12. He's going to walk you through our EBITDA bridge, which is always a big hit in these kind of conferences, and Michel will take you from quarter to quarter, quarter (inaudible).

Okay, thank you, Joe. I'm afraid I will have to take you to a little bit more excruciating details this quarter, because we have had so many impacts from external factors, that we want to help you also understand the true operational performance of the Group this quarter.

So we start with the chart 12, the operational EBITDA bridge. You can see that overall, the net operational EBITDA is down $76 million compared to the second quarter last year. I think we can break down this EBITDA bridge in three or four components. First of all, the first column, you see that the pricing impact was $235 million this quarter. But the good news is that we will gain, able to generate $277 million of cost savings. And so if you look, in fact, that the pricing pressure (inaudible) margin were totally offset by the cost savings. So far, the strategy has worked again.

Then you can take a second groups of analyses, where you say that we have continued, although at a little bit slower pace, our investment in selling and R&D, a net increase of $135 million. But that has also, since we are doing that now since three or four quarters, helped to generate a volume gain that produced an additional EBITDA in the range of $120 million.

So with these factors offsetting each other, what we are left with is basically an impact of the business mix, about $60 million. And the Other column that you see, it's negative $64 million, which includes this $100 million of translation losses due to the high dollar, which was so -- about $100 million partly offset by gains in the G&A, and a little bit of positive commodity impact as well.

And then you -- finally, we have T&B, that's added almost $60 million for the quarter. We get to this net result of $76 million lower than a quarter ago.

Moving to chart 13, in terms of the cost savings updates, so you see about $280 million this quarter. Half of it comes from sourcing, 45% from operational excellence, and about 5% from global footprint. What is interesting to see, so is where it comes from. The Power divisions have generated about two third of these savings, 65%. Automation, 25%, but I also want to emphasize that the part coming from indirect sourcing is actually improving quarter after quarter. It was 8% last quarter, it is 10% this time.

So if you look at it year to date, after two quarters, we have taken out about $540 million of [prior offer] savings, and against that, we estimate we have lost a little bit less than $500 million in pricing. So the strategy still works there. We are also happy to see that we are running at a run rate which is actually higher than the $1 billion target that we have fixed ourselves in terms of savings, and so we are pretty confident now that we will be able to exceed this $1 billion target by the end of the year.

Moving on to chart 14, that is not an easy one, but we are really here trying to help you a little bit get to a true assessment of what has been the operational earning per share. And why do we do this? It's because, this quarter, we have really two very important influences. One is the currencies, and the other one is the accounting related to our M&A activities.

Just in terms of currency, let's start first by reminding that if we compare the average exchange rate of last quarter -- of the second quarter last year to the quarter this time, the US currency is basically revalued by more than 20% against the Brazilian real and the Indian rupee, by 12% against the euro, 11% against the Swedish krone, 8% against the Swiss France, and it has devalued against the Chinese renminbi by 3%. So you see, it's a huge volatility, which obviously, in a company like ours, has a huge impact.

So Joe mentioned it before. We have seen that our top line was affected by about $600 million in reporting translation, because we report in US dollars. We estimate at EBITDA level, the impact was $100 million, which if you calculate after tax and earnings per share, represents about $0.03 a share. But it has also, obviously, a side effect.

For instance, on the results of all the derivatives which do not apply for hedge accounting, which you know that every quarter, we take these derivatives away in order to give you a true picture of operational EBITDA, the same quarter last year, we and a $58 million positive impact from these derivatives. This time, it was a negative (inaudible) too, so there again, because the dollar was higher, we have a negative delta of $140 million.

So keep these amounts in mind for a while. I will come back to it.

The second impact, as I say, is all the accounting related to M&A. Joe mentioned that we did about $17 million of one-offs linked to the T&B acquisition. We have another $20 million of other one-offs related to other acquisitions, so the total there was $90 million. And in terms of the amortization of PPA, which is a question that you also often ask, the total for the quarter was $82 million, out of which T&B was $33 million, and [the $82 million] correspond to -- compare to $51 million in the second quarter last year.

So now I have given you all these numbers on the pretax basis. Now we go on an after-tax basis in the table. So we start from the top there. You see the reported net income and the reported earnings per share. The earnings per share was $0.29, compared to $0.39 last year, so it's a 27% change in US dollars.

We have then made the corrections the same way that we correct EBITDA to operational EBITDA. So correcting for restructuring-related costs, which are not really significant here, correcting for this impact of derivatives due to hedge accounting or non-hedge accounting treatments, on an after-tax basis, that is $100 million, which means $0.05 a share. And finally, the impact of the one-offs, the $90 million, which after-tax, represents $65 million, which is another $0.03 a share.

So that is obviously a big difference, when you [have at least three points] to try to come to an operational net income that correspond to the operational EBITDA that we always report. You see that in terms of earnings per share. We are comparing now the $0.38 of last year to $0.35 this year, which is a change of 9% in dollar terms, but of 3% in local currency. So basically, if we say, the local currency translation adjustment was $100 million, which is $0.03 a share, you see that comparing the two equation net income, in fact, we come to the same bottom line of $0.38.

And even on top of that, some of you also like to deduct the PPA amortization related to all the acquisitions we have done so far. Once we do that, we basically compare $0.40 last year to $0.37 this year. And if we add to this $0.37 the $0.03 of translation, in fact, we have unchanged operating earnings per share from one year to the other.

I hope I have not all lost you. We can for sure take more questions on that. The differences this time were so important that we saw it was crucial that we gave a good explanation to it.

The strength of the US dollar, going to chart 15, has not only impacted the balance sheet, it has also impacted our cash flow. As you can see from the chart, the cash flow measures here, as the cash flow from operations from the divisions, has in fact been good. It has increased by $40 million from $862 million to $902 million. But on the other side, the corporate cash was a big outflow. And what do we have in corporate cash? We obviously have the normal corporate outflows like corporate costs, and the central research costs, which is usually between $130 million and $150 million of outflows a year. But then we have also a lot of cash generated of spend from hedging, corporate exposures, which can be, for instance, the operational dividends coming from (inaudible) in another currency, or the balance sheet exposure that we have too.

And as a general rule, at the corporate center, we always long (inaudible), so when we hedge, we sell dollar forward. And so clearly, when the dollar goes down, these hedges generate cash. When the dollar goes up, the hedges consume cash. And you can see last year that we had, in fact, a positive corporate cash flow of about $30 million, which means that we had probably $150 million of corporate costs, offset by $180 million of cash generation from hedges. This time, we have a $300 million outflow, which means that on top of the $150 million of corporate costs, we had another $150 million of negative cash from the hedges.

It makes it very complicated, but I think it's worthwhile to explain the difference. So the net cash flow from operation is about $300 million lower than the same quarter last year, but the cash from the divisions, again, is up $40 million. And with that, I pass it back to Joe, and --- also, I see we have another slide to cover, chart 16.

Let's also quickly review how we are doing compared to the targets that we have fixed ourselves at our Capital Market Day back in 2011. So this is an 18-month assessment, and as you can see, we have three green lights. The organic revenue growth after 18 months is at 11%, annualized, compared to the range of 7% to 10%. Our operating EBITDA, at 14.7%, is still well within the corridor that we have fixed ourselves. And our earnings per share growth, after 18 months, is growing at an annualized rate of 11%, which is also within the band.

When it comes to free cash flow conversion, we are a little bit above 60% after 18 months, so that is on the weak side. I should point out, in any case, that it's not the right thing to look at in the middle of the year, because that is usually where the working capital is at the peak. You know that the fourth quarter is also very strong. But this is also a year where obviously we will be impacted by the ForEx, by the high dollar, as well as by an unusually high capital spending program, especially with the two cable factories that we investing in, in Sweden and in the US. So that's still a target that should improve over time.

And then finally, the cash return on invested capital, it is yellow, it could even be orange, because we are, at this stage, in the low teens, so pretty far away from the 20%. But there, as well, it's a matter of timing. We have made two large acquisitions, Baldor and Thomas & Betts. One we've had since 16 months, the other since six weeks, and obviously, we can't expect this capital to yield the long-term IRRs that we have targeted for this acquisition, and it is clear also that because of where we are in the cycle, even the organic business is not, for the moment, generating the cash returns that we used to have a couple of years ago. But again, that is a target by 2015, and I will take some time at the next Capital Market Day to explain to you in more details of how we built this target, and what are the recipe that we intend to use in order to reach it by 2015.

And with that, I pass it on to Joe for the conclusion.

Thanks, Michel. Coming to chart 17, which is the summary. So, from a short-term standpoint, I mean, we -- all of us see the macro indicators around the world, in the United States and Europe, and emerging markets remain mixed. But again, we were pleased with how the business performed in the face of those macro indicators, and so, we're hopeful that that will continue, going forward.

On Q2, you know, stability and operating profits and margins in PP in recent quarters are good. We want to keep that trend going. Price pressure, again, we think is easing again. Remember, we have a -- this is a long cycle backlog, and so it doesn't mean that this will quickly materialize. And that's, again, why this cost out piece in both the Power businesses is so important that we address that.

We are pleased about the resilience of orders in Europe, that is -- it's a two-tiered world between the South and the North, but we were pleased with being able to strengthen -- we did see, in the North, to able to [calm a] down cycle in the South.

From a Chinese standpoint, I'd say the biggest variable that we saw was the Low Voltage Products turnaround. We do tie that to a better demand pattern in the construction industry, and we also would take -- you may ask about our July orders in Low Voltage Products. So far, it's continued on a trend, and that gives us a certain amount of confidence that that could possibly continue through the quarter.

In the sustained order growth across the portfolio in the United States, that's been going on for a while, and we would expect that to continue. We don't have any data that says that it should stop.

And down below, management focus for the rest of 2012, it shouldn't be a mystery. We have a lot of focus on cost, we have a lot of focus on finding growth areas around the world and driving that. Acquisition integration and focus in making sure in both Baldor and also in Thomas & Betts and the other acquisitions that we've done, that we continue to bring those together, and bring the most value out of those that we possibly can.

And so, with that, we're cautiously optimistic about the second half of the year. And out of that, we'll end the presentation, and now we'll turn it over for any questions that Michel and I can handle.

We will now begin the question and answer session. (Operator instructions) First question from Mr. Mark Troman, Bank of America Merrill Lynch. Please go ahead, sir.

Yes, good afternoon, Joe -- good afternoon, Michel. It's Mark at Bank of America.

By the way, Mark, can you turn up your volume? We can't quite hear you.

Oh, right. Okay. How's that? That better?

Much better, yes.

Okay, thank you. Yes, just first question, I guess there's always one on pricing. Interesting comment you're making about it leveling out, etc.

Of the $235 million you put in your bridge of pricing, how much is in Power Products? Or roughly, how much -- or, how is it roughly distributed, I guess? And in Power Products specifically, what are the order -- what is the percentage change in orders looking like relative to what's going on in sales?

And I guess finally, just to go full circle on that, I mean, what is the typical lead time we're looking at now for the newly priced orders to go through the sales line in that division? That's the question on pricing.

And then secondly, on China, sort of intriguing comments. You've seen the pickup in Q2 versus Q1, particularly in Low Voltage. I was wondering if you guys can just go through that in a bit more detail, because you know, based -- I know it's maybe specifically for construction, but we're generally not seeing that in other companies. Was there a destocking in Q1 and this is a correction, or how would you read it? A bit of color on that would be very helpful. Thank you.

Okay, maybe I start with the pricing? Yes. So, the pricing impact obviously, as in the other quarters, PP has been the one that has the biggest proportion of this pricing impact. I would say about two thirds of that total is from Power Products. And actually, if you take the total, I would say that more than 90% comes from the Power divisions, the Automation divisions are a bit better in Power, (inaudible) Products a bit less good than Systems, so they kind of offset each other. So most of this pricing is really in the Power divisions overall.

In terms of the rate of pricing and orders versus revenues, as we see -- as we said, we have seen certain improvement in the pricing on orders this quarter across all the business units, but obviously, a major difference compared to last quarter is for sure in Medium Voltage, that had suffered as well from a mix issue in China in the first quarter that was corrected. And so obviously, that has helped.

At this stage, I would say that the pricing pace in orders trailed the revenues by 1% or slightly more, so that -- so the kind of improvement that we have tried to (inaudible) you.

Yes, Mark, you also talked about, you know, how long does it take for things to bleed through from an order, to a backlog, to -- into -- in Power Products, it's all over the board. In Medium Voltage Products, it has a very short cycle, medium cycle business to it. Large power transformers are really large, and so it takes a long time, 18 months to 12 months. Same way with gas insulated switchgear.

And so, I think you have to look at the portfolio itself. When we talk about price, obviously, the large power transformers have been the most challenged part of the portfolio. I'd say, in general, it takes 12 to 18 months for that to come through.

But Mark, you said something, and I want to make it very clear. You said we -- price was flattening out. We didn't say that. We said that margin was flattening out, and as we're driving this margin piece by the cost down, that we've been having in this business. But we continue to see price-down in the Power Products marketplace. It's just not as severe and is not in line with revenue, like Michel (multiple speakers) --

Right.

The pace of price decline is slowing down, (inaudible).

Yes. And Mark, your last question on China, Low Voltage Products, I'll tell you, our clarity on this isn't complete, but here's what we see. Was there some destocking and restocking between the first and second quarter? I'd have to say yes, absolutely. There's no way you would see that kind of a turnaround with some aspect of stocking and restocking.

But at the same time, you know, that's almost a discrete event, so -- but between June and July, we have seen a pickup in construction orders, and those construction orders have continued into July.

And so, I'm not making a forecast for the Chinese construction market. I'm only reporting on what we're seeing on the ground there. It's been favorable to this business. It's helped that turnaround between those two quarters. And Michel and I just want to report that as accurately as we're seeing in the marketplace right now.

Okay, that's very helpful. Thanks, Joe. Michel, just very quickly, on orders, did you say the orders were 1% better, pretty much, than what you see in sales? Is that how it's -- is that correct?

Yes, that's right.

Yes, okay.

About 1 -- roughly, about 1%. A bit different in each unit, but roughly about 1%, indeed, yes.

Okay. Thank you very much.

Okay, Mark.

Next question from Mr. Andreas Willi, JPMorgan. Please go ahead, sir.

Hi, good afternoon, gentlemen. Two questions, please, the first one to follow up on the outlook. So we have seen some improvement in maybe in some of the early cycle businesses, but we have seen order growth flowing in some of the mid cycle Automation businesses. So if you balance that, where do you think overall base order trends could move now that's kind of moved down to around 1% growth? Is that the level we should expect, or should we read your outlook (inaudible) base orders have troughed in Q2, if you look across your board -- across the board?

The second quarter on cash flow. Obviously, you -- I understand the currency impact on the quarter and the seasonality that Q4 will be stronger. But if we look at cash conversion for the last six quarters, which is just above 50%, it's still lower than what we have seen at ABB in the past, even taking into account a higher CapEx. Are you happy on how inventories, payables, receivables, and so, are developing? Or is there a more fundamental problem at cash conversion at ABB?

Andreas, I'll take the first one, on the base orders piece, and I'll give Michel the cash flow. You know, I'm not going to project what I think our base order rate is going to be going into the third quarter. But if I use just a rational expectation model, I mean, the 0% to 2% base order growth that we've seen, if you look at our base order growth by region, we had about four of them up and four of them down, in that sense, and correlating pretty strongly with what I read on the orders chart overall.

I think if you get behind just raw base order numbers, Andreas, you take a look at China in itself, is -- there's certain segments of the marketplace, like in LP and construction, we talked about were much better. But if you look at Discrete Automation & Motion, particularly in the renewables industry in China and our sales to that have been down in that marketplace, quarter on quarter, so that hasn't (inaudible) by itself. Transportation orders across both of those businesses that we reported were down in the first quarter, continue to be down, and the nuclear industry hasn't come back yet either.

Our Medium Voltage business in Power Products in China, which we reported as affected by the nuclear piece, and also by the transportation piece, what our sales teams what have effectively done is to, really, recatalyze that business around some industrial channels, and then push our products through those, and they've been very successful in doing that over the last 90 days, and it really helped overcome that piece.

So I think that's the kind of color -- if you move through our other businesses, too, on the base side, again, as I mentioned before on the marine side, which we see in base orders, and larger orders have been good, and that's been -- it's really been marine associated with oil and gas, when you look at the PA piece. That's been a big part of that, and the mining and minerals piece continues to be strong also. And automotive, really reflected through our Robotics business. It's changed, and we continue to be pretty strong geographically (inaudible).

Yes. Now, also, the two Power businesses had a base order increase of about 5%, roughly 6%, as well as service. And service, actually, we were not happy with the increase this quarter at 5%. So if you look at all that, we think, indeed, that there is a good base here to work from, and that dictates the sort of -- the reason why we are a little bit more optimistic now.

With regard to the cash, no, I'm not happy with the cash, for sure. You know, it's -- we are trying, since a few years, to try to have a much better cash flow spread over the year, instead of having always this concentration in Q4, but that's -- a part of it is also due to the nature of the industry, especially with utility customers.

We are working -- we have really launched, a few quarters ago, a long-term program, which is really working together with operational excellence people, to try to work on the root causes also of this high net working capital, on quality, on documentation, etc. And obviously, that takes a little bit more time to be produced.

Meanwhile, we are more or less at 16% (inaudible) of our net working capital. Our target is still to be in range of 11% to 14%. I would say, realistically, if we reach 13% at the end of the year, I would already be very happy.

Now, you know, 3% on $40 billion, that is $1.2 billion improvement that you can just get there. Whether we're going to reach 90% this year, I think that's going to be sharp, especially due to the currency effects. But again, if you look at it over five years, you know, the last five years, we achieved a conversion of 100%, and that was a combination of years where we had 70%, and years where we had 130%. So I think we have to look at it a little bit more from that perspective, but I am still quite confident that we're going to have a very strong second half, and especially, a very strong fourth quarter. That should get us much closer to the standard that you have been used to.

Thank you.

Next question from Mr. Ben Uglow from Morgan Stanley. Please go ahead, sir.

Afternoon.

Hi, Ben.

Hi. I had a few questions. One was just, within the Power Products area, are there any products categories where you are actually, definitively, seeing sort of increases where, rather than just getting less bad, you're actually seeing a changing customer behavior where they are more willing to place orders at a higher price. So that was question number one.

Question number two, and I'm sure Michel won't forgive me for asking this, about the margin bridge. But when I look at the margin bridge, and I sort of try to index all the rough numbers that have been coming out, when I look into the second half of this year, am I right to think that the pricing impact, if things stay where they are, should get a lot, lot less onerous for you? Because it was the fourth quarter of last year where you had a very, very tough pricing experience. So that's an unfair question, number two.

And then finally, in North America, very strong performance still in Automation, and obviously, confident statements about the order situation. Listening to Rockwell yesterday, they appeared to see some sort of change in trend during the quarter, and lowered some of their revenue expectations. Did you see any change in pattern of your orders or your, sort of industrial demand on the Automation side in North America during the quarter?

Hey, Ben, I'll take your first one, Michel will take the margin bridge, and then I'll come back to North American Automation, okay?

On PP, I don't want to walk through the 13 product group categories within PP and what we see and what we don't, but I'd say, if you take from the high points is, substations in the Middle East and large power transformers, right? Since the duties that have been assigned on Korean large power transformers in the United States, we have seen a price -- the market actually increase, in that sense. Even though it had really nothing to do from a governmental standpoint in the Middle East, at the same time, we saw prices rise for Korean transformers in the Middle East also, and that's helped.

But there's something that we have to explain in that sense, Ben. A lot of those, we weren't even quoting on, because the prices were too low. And so, the prices have come back. They begin to come back in the range we consider to be what we would want to quote on. They're still not perfect margins, in that sense, but there's something that puts back in the range with the right kind of cost control and focus and productivity in our sense, that we could be more competitive in there. And I would keep that conversation really around a large part of power transformers right now.

There's been no real change from a Medium Voltage standpoint, our Medium Voltage business. And for High Voltage gas insulated switchgear, it's still competitive. But it's hard -- it's not as uniform of a market. We've introduced some new products in gas insulated switchgear that are significantly lower in cost and a better form factor that we'll be sending into the marketplace, and we'll be driving that, really, the later part of this year and the beginning of 2013 it should help.

And I think it's fair to say as well that we keep expecting these price declines to come, because of the debt issues to all the competition has put. And so, maybe there is a bit too much focus on the price, too, because what is important is to counter this price pressure by coming with products that are designed for cheaper costs overall, so at the end, even if the price goes down, we can maintain the margin, and that's a little bit the ingredients that we are trying to use there.

So, and that gets me into your second question on the margin, which -- I hear what you say. It is quite possible, although because of just what I said, you know, some products are just not sold anymore in the same prices than they were sold two, three years ago, but also, now, designed and manufactured at a cheaper cost, so you can have a price pressure but still an acceptable margin.

It is a certain likelihood, it's possible what you said, because the price pressure was extremely strong in Q2 -- in H2 last year. I would say, though, that we are not going to speculate on that, and that's why we keep going at full speed on the cost savings, and that we have really this intention that we confirm today to even exceed the $1 billion of savings that we had announced at the beginning of the year.

And Ben, lastly, on North America Automation, I can tell you that our -- you know, if you take our Low Voltage business, which I would align with some of the Automation business, and this before T&B, we actually saw an upturn in orders in that business in the quarter. It could have some indirect relationship with T&B in the sense that (inaudible) channels, whatever, but I wouldn't necessarily think that that's the case, yet.

When you look at our drives business, which is sold through Discrete Automation & Motion, we've actually seen an increase, a continuing increase in our drives and sales in that marketplace. And so, that's a really good sign for us.

If you take Baldor itself and just their motors business in the United States, it's still positive growth. It's just slower growth, quarter to quarter, than what we saw last year. But look, there's some really tough comparisons, because Baldor was running at -- you know, at high double digit rates last year, compared to this year.

So I would -- look, I read -- Ben, I didn't listen to the Rockwell announcement. I wouldn't do that. But I actually read the transcripts from the Rockwell discussion. It looked to me like they were talking more about some currency translations issues in Brazil. And also, some issues in China. And I didn't see that much attention to the US marketplace as you mentioned, so I was really surprised with your question.

Brilliant. Thank you. Thank you very much indeed.

Thank you, Ben.

Next question from Mr. William Mackie, Berenberg Bank. Please go ahead, sir.

Thanks for the question, and good afternoon. A couple of questions. First, on Power Systems, could you just drill down on -- a little more behind the weakness in the operating result? And at least, how you sort of aim to rectify the underperformance on a number of contracts across the world that you seem to have had there recurring in a couple of quarters now. And then, secondly, coming back to Low Voltage, and perhaps tying that up with order intakes across Europe, we've had the mix effect coming up on a number of occasions there and in Discrete Automation with regard to Italy.

So perhaps, could you just highlight how you've seen demand trending within Italy and some of the other parts of Germany affecting those businesses?

Okay, yes. On the PS side, I would say that these continuous project slippages that you see would also be the result of the work we are doing to try to address these issues. A lot of these projects (inaudible) all projects. It's also important to specify that there is actually very little in the business units' grid systems, which makes this a larger offshore wind connection that we always mentioned. There, the charges were less than $10 million, but we have had a few other -- all the projects we take care of in the area of Power Generation, Automation and in the area of substation.

What we have done, really, is that the new management here in PS has really now created a new job that really looks inscrutably at all these excellence issue around project management and trying to address that. We also are even using our internal audit to review the work in progress, which sometimes also forces us to take some corrections to it, make sure that we put all the cards on the table and can address that from the right perspective.

So obviously, it's disappointing. We're disappointed too. We're not giving up on the target of PS to get back within the range. If, in fact, if you look last year, the last two quarters, PS had an EBITDA margin that was very close to 10%. We don't see any reason that they couldn't repeat this performance this year. But at the same time, as we say also every quarter, we remind that this is a project business with a lot of projects with high risk, and that unfortunately, from time to time, there are some risks that come true.

But I can reassure you that we are really very forcefully addressing it, and I hope that we can stabilize these project issues in the short term.

And William, when you talk about LP, I just -- you know, looking to get some data overall. (multiple speakers), show you that?

In fact, overall, LP was still quite down in Italy for the quarter. It was, I think, something like 20%. But it was also because of some large order comparison, the base orders actually were down 7%, compared to the same quarter last year.

So, still weak, but at least not in the kind of dramatic proportions that we have seen in the first quarter.

Well, William, I think what's worth mentioning in that business too is our Systems business that we talked about, you know, a negative mix in that business in the first quarter and fourth quarter last year. Actually, the orders were down about 4% on the quarter, too.

And so, that's kind of in line with what we normally see in this business. It's more of a -- kind of a mid-cycle business. It's not a real short cycle business. And so, that was -- it wasn't really necessarily a phenomena in the quarter like we saw in the first quarter too.

But I think one very positive development we have seen this quarter, compared to the previous quarter, is that all the product division, all the product units, have shown a positive order increase, while last quarter, in fact, the product units were down, and the system unit, which carries much less margin, was up.

It's not yet the case in revenues, so despite the better margin that you see this quarter in Low Voltage Products, it's actually still the result of a pretty weak product mix, where revenues in the product divisions is down, and revenues in the system divisions is up. But since there the cycle is pretty short, next time we should get more of a positive mix now as these orders will translate into revenues.

That's great. Could I just follow up quickly on a separate topic, which is relating to wind and renewables? Specifically, you know, there's been a strong surge in volumes and the renewables wind market, perhaps in the first part of this year, but a lot of concerns over the US specifically next year. I think Brice Koch has aggregated a business with $1 billion plus of revenue there. How has it trended so far this year, and where do you see the potential risk as we run into 2013?

You know, when you talk about Brice aggregating a $1 billion business in wind, what are you referring to?

Because he is not in the US. You are talking of (multiple speakers).

You're talking about the offshore wind market in Europe?

The business that you operate within renewables in wind, in conjunction with inverters, Medium Voltage equipment --

Oh, I see.

-- drive equipment. So --

(multiple speakers).

Yes, but that's very different. Is your question, William, about what we're seeing by geography based on wind?

Yes.

Look, I think the US market's at a standstill right now until the whole -- the TPA piece is worked out, and that's -- I think that's still to be decided.

We don't have a large wind exposure in the United States, at least not a material exposure. We participate from an inverter standpoint, from a transformer standpoint, whatever, but I wouldn't say it's material in any sense.

You know, our biggest participation from a wind standpoint right now are the offshore wind jobs that we have that are booked and being executed through Power Systems. I think you saw in the news today that TenneT was going to delay one of those -- the bidding and execution of one of those large offshore wind farms. That just has to do with the execution cycle, I think, being so large, and some questions around the execution of those farms.

But we expect those investments to go forward. We expect to participate in those. I think they just might be staged differently, depending on how the execution around the offshore goes.

I hope that's what you're looking for.

That's great. Thanks very much.

Next question, Mr. James Moore at Redburn Partners. Please go ahead, sir.

Hi, there, Joe. Hi, Michel. Hi. Some questions across the businesses, actually.

In the Power Products business, I know there's been some questions on order pricing, and I get the sense that maybe that's down 3%, 4% year on year. I'm just trying to get a feel for the sequential picture, and wondered if you could help us a little bit there on the regional side of the sequential picture, tying into the answer you gave earlier.

On the Low Voltage business, you kindly gave us an order number for Italy. I wondered if you could do the same for China, against the down 20% that you saw in the first quarter, just to see how that's moved.

And then in the Process Automation business, you've talked about what seems to me to be a better performance in the products side of the business, which makes a decent margin, and we heard last time around some difficulties in the turbocharging side of that business over a couple of quarters. Is this turbocharging got better, or is it just that measurements in other pieces have offset continued turbocharging weakness?

While Michel works on the sequential picture by region, (multiple speakers) --

(multiple speakers) pricing trend by (inaudible). (laughter)

Okay, just let me go to the Process Automation piece. Turbo orders actually weren't any better in the quarter than they were before. They were relatively flat to down. You know, obviously the service part of that business is a good part of that business for us, and that continues and it's very robust in that sense.

But those margins, actually, you can really take turbo out of it. The margins itself have to do with really good project execution around the teams, too, so no surprise, in that sense. And then some of the areas like measurement products has had some good sequential increases in margin from quarter to quarter. Our 800xA business, too, we continue to improve in 800xA in the sense of the software margins in that business (inaudible).

The shift in service we saw with the --

(inaudible). (multiple speakers)

Yes, you know, Process Automation is also in the process of cleaning up or upgrading its service portfolio, or getting out of some of the full service contracts that we have made, and so, you see here a positive service goal, but it is, in fact, much more lifecycle service that we are taking on now, and that obviously is a much better margin for us. Profit levels are more open to effects for the rest of the business, so that helps quite a lot as well.

The improvements in Process Automation are more sustainable ones, rather than just a favorable quarter? What you see is, well, it's really a gradual improvement that you see almost quarter by quarter nowadays, so it's really a combination of cost takeout, of portfolio enrichment with more products, better quality services, and a bit less systems and [most] activity on the system (inaudible).

And that's a very conscious effort, James, from our standpoint, building that (inaudible) standpoint over the last, really, 18 months. On the LP China orders?

I'll [handle LP] if you want. So, LP China orders were actually up 23% for the quarter. So there was really a very strong rebound from that, obviously, yes?

Yes, I have the same thing, yes.

I saw Joe being skeptical, so (inaudible) check the numbers.

No, no, I --

Michel Demare We were not used to this number anymore. So, up 23%. Then your question regarding sequential pricing on orders in PP, so indeed, it's an improvement compared to last quarter of a little bit more than 1% on average. Obviously, each business unit has a little bit different one, but the best improvement is in Medium Voltage, for the reasons I mentioned already before. So that is indeed encouraging. We see, really, some price improvement in areas like US or China. But I won't go in more details on that. I think it gives you an overall trend of what you need to know here.

That's very helpful. Could I just follow up with one other? On currency, you kind of gave us the $100 million translation number, and I suppose the hedging [minus 82] is the hedging side of it. And you guys don't talk much about transaction. Given your cost and revenue slight mismatch, do you also have a significant transaction negative going on in the quarter?

No, in fact, the transactions, we are hedging them, because they are shorter in nature. So in the balance sheet, we are hedging the balance sheet. So that is part of this cash effect that you see in the corporate hedges, for instance.

So you know, really, it's also something I will develop a little bit more on the Capital Market Day in September, but you could really say we have a structural foreign exchange exposure one side, which is just where we sell some parts and where we manufacture. We have cash flow exposures, which we always hedge, for instance, when we take a project. Just as soon as the project is awarded, we hedge all the cash flows.

And then we have this translation exposure, which is just simply all the translation of reporting all the revenues and profits that we have made in non-dollar countries, and reporting that into a US dollar income statement.

So these are the three. The transactions that are in the balance sheet, we fully hedge everything, and so there is no impact on that one.

Okay, thank you very much.

You're welcome.

Next question from Mr. Frederic Stahl from UBS. Please go ahead, sir.

Yes, hi, gentlemen. I just wanted to know, if we look at your order intake across Northern Europe, and considering that Germany is down a bit here, is it still fair to -- is it fair to assume that the boost you had in Norway and the UK is a bit more lumpy, even if base orders were up as well, just by the nature of those end markets, and that we maybe should be a bit more in a balance when we look at our models here in the coming quarters?

Well, obviously, there are sometimes some large orders, but let me check here, two minutes, see if I can find some information on that. You know, from what I recall, as I'm looking for -- you know, Norway has had a very good performance -- [well, it seems] quite a while, because this is a very important country both on the marine side and on the oil and gas side, and that obviously helps with it. Actually, all the Nordic countries in the first quarter, they performed very well this time, and Sweden is a little bit down. But still, quite constant.

So what you see, in fact, is the southern countries are really down, but we have seen a number of these countries like Norway, like UK, but also some Eastern European countries, also Russia, that have really more than offset that.

So yes, it can be a bit more lumpy, because oil and gas is obviously larger orders, but it has been really quite stable over quite a while now.

Okay, great. And then if you could give some -- could you maybe give some examples on what's driving your US growth at the moment, what kind of industries are still propelling, doing well for you?

Well, you know, our Power business continues to expand there. And so, I'd say both on a transmission and somewhat on a distribution side, that continues to go well. I think these are not large jobs, necessarily. I think they're just upgrades in different areas around the country that we've (inaudible) announced a big order with AEP, and just enhancing the grid over the quarter also. It's big, from an automation standpoint in the United States.

You know, we -- this has continued, the mining part in the US has been -- isn't very strong. And I think we've had a residual effect on the fracking that's been going on in the United States, too. And I'd say it's not just fracking for gas, if you look at a lot of the drill rigs that were gas, and as the gas price has gone down, you probably know a lot of those rigs have been moved over to really frack for oil. And there's a huge amount of motors and drives and different things that are associated with that industry, so we indirectly benefit from that also, and I'd say that's been one of the --

(inaudible).

Yes, that's true. Automotive, Michel just mentioned that automotive robotics has continued to do well for us also, and as I mentioned in the introduction, we had a large order from Ford for robotics that really helped Discrete Automation and Motion in the second part.

Okay, and that's great color. Thank you.

Thank you.

Next question from Mr. Olivier Esnou, Exane BNP Paribas. Please go ahead, sir.

Yes, hello, good afternoon, Joe and Michel.

(multiple speakers).

(multiple speakers).

Two questions, please. First, on the foreign exchange impact. I mean, a good granularity from you. I'm just wondering, with the info you have now, is it possible to say, if currencies stay where they are now, what is -- what would be the impact in H2, in terms of the P&L.

No, you always compare to the same quarter last year, so we would have to make -- you would have make analysis to see what was the average dollar rate in the third quarter last year, to understand a bit what it is on there.

And so, let's say, if the currency doesn't move, we will obviously have less impact on the hedges, so the cash part of the hedges and the derivative part, but the translation that one will have to go back, which I haven't done, to the average rates of last year.

And maybe --

We see it more as the direction. I mean, you know, obviously, the impact when the dollar goes up, it's a negative for us, so based on that, you can try. The problem is a bit that there is such a discrepancy of our variation versus different currencies that the two together, it's really difficult to do.

There again, Olivier, I really will try to spend some time about that on the Capital Market Day to really explain a bit in more detail these exposures, and I hope that can help as well. But understand what is behind the numbers.

Okay, thank you. And maybe a follow up on the reinvestment piece in the bridge. If I look at it, it kind of continues to accelerate. At the same time, orders are up, but they decelerate. So I was wondering how you think about it, and you know, what's the outlook for that part, really --

I don't think it really --

(multiple speakers) --

I don't think it's really accelerated, because in the first quarter, if I recall, the reinvestment was [$145 million], so it's $10 million less. And obviously, it's a lot of people, so you cannot change the pace from one month to another. We have also, with the work on the number of technology projects, you know, like we have talked about this 1100kv HVDC transformer that we just finished (inaudible), it is already a pretty sizable investment that you can't change very fast.

So we are, obviously, trying to slow down some programs to adjust to a slightly slower growth, but as I found out when I explained the bridge, I think that as long as these sales and R&D investments are taken care by the EBITDA coming from marginal volume, you can say that, in a way, they are kind of self-financing themselves.

And (inaudible), I think it's buried in the other -- on the bridge side. Our G&A costs were actually down. And when we take those G&A costs and we recycle them back into that part of the business, it helps us grow, too.

Yes.

Yes, I was looking at it on a 12 month following absolute. But you know, I understand you're trying to slow it. How do you measure the actual volume contribution of that specific investment? Are you able to separate out the volume bridge, what's the investment?

No, we don't go into -- we don't go in that details on the volume bridge, but let's say, when Joe and I have a business review, you know, for instance, to evaluate the return on selling expense, you have to really see in which country people invested in salespeople, and start seeing the kind of growth rate you have in these countries compared to where the effort has not been made. And I think that one is quite easy to measure.

The return on the research is always a bit more complex, and has also a bit of a longer payback, but that is the price to pay to remain competitive here. And part of it is also investing in research to get to cheaper design and offset the price pressure.

So if we -- so as a kind of bottom line, how much of that piece do you think has to happen anyway, and how much is flexible depending on the very uncertain outlook we have?

To be honest, I have never asked myself this question, so I can't really answer.

And if Michel asked himself, then I never asked either. (laughter)

All right. Next for the Capital Market Day, maybe.

Thank you.

Yes, thanks, Olivier.

Thanks, Olivier.

The last question for today is from Mrs. Daniela Costa, Goldman Sachs. Please go ahead, madam.

Thank you. Good afternoon. Three points. The first one, on market share, is really -- you seem to have some underlying evolutions which are better than some of the competitors that reported recently in terms of orders. Can you comment if you think some of this is related to market share changes by segment?

And the second one, slightly related to that but more focused in US, Power Products. Have you started seeing some impacts from the anti-dumping rule against the Korean companies? What's the status there?

And then finally, I think Michel mentioned in the presentation what was the CROI level at the moment, but I couldn't understand it, so if you wouldn't mind repeating what's the present number. Thank you.

I think on market share versus competition, I wouldn't say that we have taken any kind of excess market share versus competition in any meaningful way. You might be referring to one of our competitor's announcements, and you saw what their T&D order growth rates were, and if you look at the margin of that business, at the same time, it was kind of down. I can't explain that, okay? I can only explain that from a Power Products standpoint, the team has been executing well. We have a broad portfolio.

But I don't see us out there in -- I can tell you, in any direct way, trying to gain share through price in any way, shape or form. Our teams have been very good. I think you've seen that in the sense of the 14.7% margin capability within Power Products, is to be able to find business out there that we feel is reasonable from a margin standpoint, and then drive costs as hard as we can to make sure that we maintain that capability.

From a US Power Products standpoint, anti-dumping, remember, the anti-dumping has to do with large power transformers over a certain size. We have, obviously, seen our competition respond, in that sense. But we're much more in the US to large power transformers, and when we do our -- you know, air insulation switchgear, there's a big distribution transformer side that has not been addressed at all by the anti-dumping piece, and we don't have a case, in that sense. And -- but we continue to drive productivity in that business, and we can tend to be very competitive.

With regard to the cash return on invested capital, I say that we were low teens, so close to 10%. And again, if you look in the last 18 months, we have spent about $11 billion of acquisitions, so these acquisitions for the moment have a low single digit return. If you go back before this time, when we started getting more acquisitive, so that the sales, see how our ROIC was above 20%, and so the timing is an important role here, and I will develop that more at the Capital Market Day in September.

And so, with that, we'd like to thank you for joining us. And again, Michel and I, we're pleased with the progress that we saw in the second quarter versus the first quarter. We know we still live in a time, from a macroeconomic standpoint, there's a lot of questions out there, but we were pleased with the orders that we saw around the globe, the rebound in China, the continuing strength in Northern Europe and the United States, and we're going to push like crazy to continue that trend going into the third quarter, and we'll come back and report to you on it.

And in the end, I'll again reference the Capital Markets Day that Michel talked about. That's going to be at September 12th, and it's going to be held in London, and invitations are going to come out shortly with the agenda. And so we'll hope that as many of you as possible can join us, and we look forward to seeing you then.

So with that, thanks again, and I know many are going on holiday. I hope you have a good holiday, and we'll check in with you again in the third quarter. Thanks again.

Thank you. Bye bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing the Chorus Call facility, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.