Abb Ltd (ABB) 2013 Q4 法說會逐字稿

Good afternoon, everyone. I'd like to thank everyone today for taking the time to make the journey to Zurich as well as the ones who are joining us over the webcast.

I'd like to welcome you today to ABB's full year and quarterly results. Today's event will start with presentations from our CEO, Ulrich Spiesshofer, and our CFO, Eric Elzvik. This will then be followed by presentations from two of our executive committee members, Tarak Mehta, who is the Head of low voltage products, as well as Greg Scheu, Head of North America, and is also responsible for business integration and global service.

After this, we will end with Q&A. For those of you who are participating via the webcast, please follow the instructions to line up in the queue for questions.

With that, let me draw your attention to our Safe Harbor Statement on chart two for any forward-looking statements we might make during the day.

With that, I would like to hand it over to Ulrich Spiesshofer, our CEO.

Thank you very much, Alanna. Good afternoon, ladies and gentlemen. On behalf of the entire executive committee of ABB, I would like to welcome you to our annual results conference here. We look forward to share this afternoon with you our strong results that we have delivered in quite challenging times.

We have split the afternoon in an agenda where we on the one hand give you an update where we came out in 2013 in terms of the full year results. And on the quarter, Eric and I will be sharing this presentation. Then we will update you on our expectations against the outlook and the targets of ABB that we have given ourselves.

And you might remember in fall when I set out as the new CEO, we defined three focus areas, profitable growth, business-led collaboration, and relentless execution. And today we want to give you an update what it really means for daily activities, how we are driving ABB now in these three focus areas and how we will deliver on value creation.

So, if you take ABB in 2013, the sum of the parts of ABB has delivered one more time. The revenues are up. We are at an all-time high in terms of revenue, close to $42 billion in the group.

The early cycle business has started to come back. The long cycle business is still slow based on the reluctant buying behavior of our customers on the infrastructure and on the larger project side, mainly in the process industries.

Four of the five divisions performed really well. And I'm very happy that all division heads are here today. If you have later on one or the other question, they might also come in and share their perspective on it.

The operational EBITDA is up by 9%, ahead of revenue growth, which is a sign for very strong execution this year, again, despite the difficult market environment.

The integration of our large acquisitions is on track. And we'll give you today a little bit more flavor where we stand on that one. This is something where we have allocated a lot of capital the last couple of years, and I think it's important to share with you where we are in terms of the integration and how we are going about it.

The service part of ABB is an important one. The service orders are up, especially in the last quarter of the year, very encouraging signals. And you see on the business-led collaboration side really good results from increased collaboration on the account and on the market side. And we will share more details on that one.

We would not be with the margin where we are today if we wouldn't have established our relentless focus on cost reduction. In 2013, we have yet again taken $1.2 billion of cost out, which is an important pattern of ABB.

This is not a one-off program. This is part of our DNA today. And again, we will share more results with you during this afternoon.

The automation side of the business, if you take it together, has delivered a higher margin, which just proves that in difficult times good execution was done.

Power products leads continuously the sector profitability in the relevant sector, which is something that Bernhard and his team have now done for many years consecutively. And it's a very strong part of the ABB portfolio.

And in power systems, you were all around when we came out a couple of weeks ago with the bad news that we had there. We've got clear actions in operation. The action program is being implemented as we speak and with Claudio Facchin, who is here in the audience today, the new leader, is established. He's working already very well with the team and we are making good progress on implementing these actions.

Free cash flow, a very important health indicator of any enterprise, is at 94% in terms of the conversion, a very strong signal that ABB is in good health and execution is in order.

All these results together, when we talked them through with the Board earlier this week, we suggested to the Board and the Board proposes now to the AGM the fifth consecutive dividend increase, in line with our dividend policy of sustainably rising dividends over the time. We are suggesting a dividend of CHF0.70 a share, which is now a nice, steady development.

So that's, in a nutshell, the ABB result for the year. Let me go with you now a little bit more through the details.

ABB, our vision is power and productivity for a better world. And a lot of people say is this marketing rah-rah, or what is it really? We get more and more business on sustainable energy, a significant part of our business portfolio is already there today, and we get externally more recognized.

A couple of weeks ago we received the Zayed Award, which is basically the award of the ruler of the Emirates for sustainable energy companies. We won that, and we see that as a recognition of our very strong track record and our very strong execution on the sustainable energy side.

Now if you go around the world, what ABB has been in 2013, it's a mixed picture. If you go through the different parts of the portfolio, if you go through the different regions of the world, automation trended definitely higher than the power side of the business.

And if you take Asia, for example, China being up altogether about 7%, automation in Asia being up 7%,that shows there is still growth out there, and we work relentlessly to realize it.

In the Americas, we are up on the automation side with about 4 points. We are significantly down on the power side, which just shows the hesitance in investment in large infrastructure that we have observed now for quite a couple of quarters.

Europe, we have a mixed picture, some countries down. The largest economy, Germany, up 7% for us, which is a really good result in that part of the world.

And Middle East/Africa, the overall year is down. But, if you look at Saudi, for example, that is down. The Emirates are up 30%. And especially in the fourth quarter, we had some good momentum coming. So, I am quite optimistic about that part of the world going forward.

If we look at our business portfolio, I could probably spend the next three days talking about all the achievements. We have summarized here a couple of the different divisions.

Let me start with power systems. Power systems, we had the setback in the fourth quarter that we reported to you. And that's something that we don't like, but what we like is the underlying quality of the business.

We had some really good project successes. The connection between Ireland and Wales, which is the largest capacity HVDC connection that was ever built on the subsea side, the offshore wind project that we did in Belgium where we installed an offshore platform on time, on budget, and the customer is really, really happy just shows that in that business we've got great people, we've got a good team, and there is a lot of good projects out there. We have established with Claudio the new leadership, and we have strengthened further the HVDC positioning of ABB.

Power products leading the sector in terms of profitability. Strong cash, strong results, and very good momentum on the service side, which helps us to improve steadily the quality of the business over time.

Process automation, under Veli-Matti's leadership, had the all-time high in terms of profitability, really well done in a difficult market environment. A lot of service activities there also compensating for less large orders. I think that's a good one.

And Tarak's business in low voltage, a couple of good acquisitions, Thomas & Betts being the largest one, integration well underway. We are really happy about that, but also good investment in new technology. The Emax breaker that we have, a great breaker in itself that also drives energy efficiency, a great product.

And then on the DM side, discrete automation and motion under Pekka's leadership, great work on the robotics side, continuous ramp up of the robotics rollout into general industries, and good momentum coming from Power-One, which is our newest acquisition, putting us in the number two position in solar inverters in the most attractive part of the solar value chain.

So, the numbers for the divisions speak for themselves. All divisions' profit is up. All divisions' revenues is up. That basically means we have the house in order regarding execution. And on the PS side, the few projects where we had an issue, we have contained. We are working on it that we really get that also to the quality that we want it to be.

The order side of the business shows the world as it is today. The more you are in the direction of OpEx, repeatable purchases, the better the portfolio has done. The more you go towards large CapEx, large projects, large infrastructure investments, the lower the order intake is in ABB.

And we came out 2013 with $3 billion less backlog than we had previously, which is something that you will see later on will flow into the revenue in 2014.

If you talk a little bit more about the PS situation, we said what it is. We explained it to you. Here are the actions that we are taking. And basically the actions are in two buckets.

On the one hand, fixing the project issues where we have ramped up the team quality. We have invested in more technical and functional expertise. We've really learned in the offshore wind field, which is basically a startup technology that we got into a couple of years ago. We are getting better at it.

And if you look at the Belgium example, I think we have some platforms which are going well. But, overall this is still a pretty new technology that will be still moving up the S curve in terms of experience. This was a pretty expensive learning, but it's also very important technology.

We worked relentlessly to drive the quality of the portfolio both overall and on the order side. The right commercial discipline, the right risk mitigation is absolutely key. Our pricing models need to reflect the intrinsic risk of the business to make sure we are rightly positioned from a commercial situation and also on the commercial terms side.

Power systems is a good business and it's a good opportunity out there long term for ABB. So, we need to invest. We need to get it in the right shape and we need to continue the reset. And I'm very confident that under Claudio's leadership this will continue in a really good way.

Service I already talked earlier about. Service is a key part. It helps us to stay in touch with the customer over the life cycle of the use of our product. It helps us to drive additional value for the customer. It is giving us a balance to our portfolio over the cycle. And it's a profitable business that we really like.

So, we have invested strongly, and today Greg Scheu, who is on the executive committee, responsible for North America, the integration of our acquisitions and service, will give you an update on where we stand in realizing the momentum and getting the results out of our service strategy.

I'm quite optimistic that we will continue the path that we have started in terms of ramping up the service share in our portfolio and basically growing service ahead of the overall portfolio.

A hallmark of ABB is execution. And in 2013, we yet again took out $1.2 billion in terms of cost. Now, how did we do that? First, everybody contributed. You see -- on the left side in front of you, you see the divisional split. Every division has taken out significant cost. It has contributed to cost out.

If you look at the key levers, the levers are not mainly headcount. The levers are really around operational excellence and supply chain optimization. We have more than 5,000 projects in operational excellence running.

Now, you might say this is a lot. Well, we are active in 100 countries. We have many hundred factories. We have a lot of processes out there that we can work on. We have applied lean Six Sigma not only on the manufacturing shop floor but also more and more in the processes on the overhead side, which yields really good results.

We have done a lot of homework in design-to-cost, which is very important, understanding what is the cost base that we can allow and design towards that. It's a key element, the target costing approach, in product design, and also a design for reliability.

The more reliability we have in the product, the better it is for the customers and us, because then that means the customer has less cost to operate and we have less warranty cost on the product, which can be a key differentiator.

On the sourcing side, the best cost sourcing that we have established over many years now is still yielding good results. We enter now more and more joint sales and operations planning where we jointly with the suppliers optimize the whole value chain, the parameters around it, inventory levels, the cost to serve the logistics stream. And if we get better there, we can take costs out on both sides, which is beneficial for both partners in the supply chain area.

A key area that we've focused stronger on now is the indirect area, transport and logistics, overhead cost. There is a lot of third party spending there. And by pooling, by working better together, by making sure, for example, the demand pattern of shipments is better coordinated in key countries where ABB has an operation, we can take significant cost out. And that's an opportunity that will be with us for the years to come.

The integration of our two largest acquisitions, we have picked the two largest, Thomas & Betts, and Baldor is well on the way. Let me first talk about Thomas & Betts. What Tarak and his team, together also with Greg who is deeply involved in the integration of Thomas & Betts, what they have delivered is remarkable in very difficult times out there.

The cost savings are ahead of plan, and I'm very happy about that one. And the Thomas & Betts leadership is so strong that they also took over the responsibility for the overall LP portfolio in North America. It's a strong signal to them and it's a strong signal to us also.

On the Baldor side, time is up. The three years are over that we committed to get -- after three years time, we said we want to have a CROI target above our mark. We have achieved that, and I'm really, really happy to share that with you. That's a key measure of the integration quality that we are delivering, and we have exceeded even the target we have given ourselves.

We invested a lot in the quality of the business of Baldor to take it even to another level through automation. And the global rollout of the Baldor value proposition of the products that they have, we have executed relentlessly on.

What we have also done is we streamlined the Baldor portfolio. With Baldor came a genset business. That genset business is strongly built around combustion engine technology. ABB doesn't have combustion engine technology at scale, so we decided to divest this business in a regular portfolio pruning approach.

And this is something that will be for us in the years to come, that we regularly look what do we add to the portfolio, but also how do we develop the portfolio by taking out what is not appropriate in our overall business portfolio.

We have not only integrated in 2013, we also went shopping and expanded our portfolio with some targeted acquisitions. Power-One you all know. Power-One integration is well underway. The customers really appreciate the product. I recently was in the Middle East meeting some customers.

And the special cooling technology, for example, that we have on the Power-One large solar inverters is a key differentiator, for example, in very dusty environments. Having encapsulated cooling there differentiates us from some of the competitors. And I think we got really great product there that we now roll out.

Newron is a smaller acquisition in building automation software which really helps us to bring the different building blocks on building automation together. ELBI Electronics is low voltage products in Turkey. Los Gatos is a measurement device acquisition in North America. And Dynamotive was a smaller service acquisition for motors and drives in the UK.

So, altogether we have continuously worked on expanding the portfolio, adding good companies. All these companies are good companies and we are happy to have them on the board. The integration is well underway, and Greg will later on talk a little bit more how we go about these integrations.

So, if you take three steps back, ABB has really a strengthened competitive position. And what are the pillars of this strengthening? A, on the innovation side throughout the cycle, we have invested every year more on the R&D side.

We have a tremendous amount of wonderful new products coming out of the pipeline. And at a time when some others might not have newest technology because they cut R&D through the crisis, we are there with new products. And the customers really appreciate it.

One example, the new GIS range in Bernhard's business on the different voltage level really differentiates us and has a very good response on the customer side.

Talking about the customers, our NPS is up. The customer satisfaction surveys show us at 36%, which is about -- 35%. It's a 6% increase compared to the previous year. And we continue to use Net Promoter Score as a compass to really say, okay, where should we focus the business improvement opportunities?

Our industry sector initiatives, we have changed the leadership there and leadership responsibility there by putting each of the division heads, the executive committee members running the divisions, in charge of one of the industry sector initiatives to really foster more collaboration across ABB and make accountable, visible, on the most senior level of ABB for collaboration.

People are the real core of ABB. And we are working very strongly to improve our people value proposition, which is also being recognized externally. I don't know whether you saw it in the last couple of weeks. We got recognized -- in Germany, which is a market where we are strong in our presence, we got recognized as the top employer, the number one employer in our sector, by one of the most important German magazines. And we are particularly proud about having that in this very important market.

We have worked to expand our geographic scope, sub-Saharan Africa being one, another one being the MINT countries. It's basically Mexico, Indonesia, Nigeria, and Turkey where we're really ramping up.

In Mexico, we built a couple of years a joint plant across the divisions. We are getting good results out of that. Indonesia is a focus market that we invest heavily in on the service side, on the sales side.

And on Nigeria, we have some larger projects that we have conducted there. Turkey is a country that we have been very happy with, good momentum, good investment, and also we have a local footprint that we have invested in.

Altogether we had a pretty smooth leadership transition. You see many new faces here in this room today on the executive committee of ABB. The team has worked together wonderfully. And I can just tell you from my own experience ramping up in the new role, the team supported that in a fantastic way. And I'm extremely grateful for that.

So, if we summarize where is ABB today, it's a resilient, shareholder returns providing Company that is much better balanced than in the past, that has even better execution and provides very strong, even better results than in the past to the shareholders.

With that opening, I would like to hand over to Eric, who will share with you the Q4 results. Eric?

Thank you, Ulrich. So, good afternoon, everyone. And let's now look a little bit more in detail on what we did in the fourth quarter.

So, if we start on the growth side, we had a continued good development on our base orders. They grew 4% in the quarter, same number as the third quarter. So, we are on a better growth trend than in the earlier quarters for all the orders with values less than $15 million.

Also behind that, the early cycle business in low voltage products, in discrete automation, and also in the power division, is on a good trend, also growing in single digits.

The execution on revenues was good. Profitability is up in all divisions. And on the large order side, as Ulrich already talked about, we still see challenges in terms of delay of awards of larger orders.

What is very positive is the service business. You have heard from us over many quarters that we are focusing more on service. The growth in service in the quarter itself was 15%, and on the revenue side up 4%.

Cost savings is not only good for the full year, as Ulrich went in quite some detail, but also in the quarter we have a steady flow of cost savings. So, we recorded some $350 million cost savings in the quarter itself.

On the execution side, cash flow for the year ended up well. I will come back to that a little bit later with more details. But, overall on the cost saving, we have a 4.2% saving in the quarter.

Turning to the regional development, in the quarter itself, if you start in Europe, we were down 9%, mainly due to less orders in the power area. We know that the purchasing decisions are being partly delayed in that area, but automation was balanced, which is again a fairly similar picture to the earlier quarters.

Also on the countries in Europe, you can see we have a mix of positives and negatives. And I would like to point out Italy, which is, from a low level, now stable and growing again.

Looking at Asia and Middle East, they are both positive, up 5% respectively and 9%, and with better numbers in automation in Asia than power. And you see that some of the smaller countries are back to growth, obviously from lower comparables at the end of 2012 than it was in the early part of 2012. But, we are still back to growth, and that is very important.

China was negative in the quarter, but it's very important to see that for the full year China is up by 7%. The reason we are down is one or two larger orders booked in 2012. But, across the board in most of the areas in China, we are pleased with the development also in the fourth quarter.

Middle East booked a couple of larger orders in the United Arab Emirates as well as in Kuwait. And then, on the American side, we have minus 10%, partly pulled down by Brazil. Brazil continues to be a challenging market for us.

But, looking in the US, which here shows a minus 5%, behind that number we actually have a positive development in the automation business in the US. So, there are clear signs of positive development there from an automation portfolio point of view.

Looking then further into the details on the divisions, on the order side behind the minus 4% we had in the quarter on overall orders, we had good development in DM with a positive 10%. That includes the effect of Power-One. But, even if we back that out, we had a positive development with good growth in the discrete automation portfolio.

Revenues across the board is positive 4%. And you can see all the divisions continue to be up. Operational EBITDA as well is up in all the divisions. And on the margin side, we had up for the group and up for four of the divisions. And in discrete, it is slightly down. Again, this can be referred to Power-One, which has a lower margin than the average of the DM division at present.

What I think is important to point out is the good increase we had in process automation, very good execution of projects there. We are up 1.5% in the process automation division.

And obviously in power systems we had a negative result, as you have heard in the announcement two weeks ago, but it is still somewhat higher than last year. Obviously, we had then also a large charge, and we'll come back to that shortly.

If we then walk the bridge, this is the comparison of the profitability in Q4 2012 compared to the same quarter in 2013, the same way as we have done in the earlier quarters. What we see as very positive is that the cost savings I referred to before of $350 million outpaced price pressure. So, we had a positive $67 million from that in the quarter.

Volume effects continue to be positive. Remember the revenues are up by 4%. And out of that, we have a positive effect on volumes, and also the effect of very strict cost management both on G&A and general structure costs, but also careful spending on R&D and sales in the quarter itself.

Mix effects are basically balanced. This is up and down a bit between the quarters, but in the fourth quarter essentially balanced. And on the power systems side, it's a minus 13%.

But, behind that you have to see that there is a $247 million charge in 2012 and a $260 million charge in 2013. So, the power systems charges in both quarters have a major impact on the margin numbers of 12.5% in the quarter. So, all in all, we ended the quarter with exactly the same margin as last year, 12.5%.

There are a lot of questions around the foreign exchange impacts on ABB. I am very glad to report that, on the total group, we have very minimal translation effects. It's actually 1% minus globally despite quite some deteriorations and devaluations of the emerging market currencies, which you have seen also during this year continuing.

So, you can see very big numbers, minus in Russia, in Brazil, South Africa, and Turkey as examples. But, the way ABB is spread around with its global footprint, this is balanced out by a small positive appreciation in China against the dollar.

China is very heavy in the calculation, obviously, because it's our second biggest market globally. And also the European currencies, both euro and Swiss franc and Swedish kroner, goes in the positive direction. And the fact, of course, that we also report in US dollars, the US dollar itself is a major chunk of the equation, makes the net effect fairly small on ABB.

And if you roll this forward into 2014, we expect a similar pattern for the coming quarters. This will not change that much unless we have some massive swings in the currencies.

This is only the translation effect. Important is also, of course, our global footprint and the hedging itself. With the factories and the activities we have in China, in India, and in many other of those countries, we still keep a good competitive position in most of those markets. And there are very few markets where we have headwinds because of the currency where we have more imports. So, ABB's global reach helps us very much in this respect.

Turning to cash flow, we had good development on divisional cash flow. In the quarter, it ended up with exactly the same number in millions of dollars, despite that power systems in the fourth quarter were about $200 million lower than 2012.

So, the divisions overall have done a good job on the cash flow side. Overall for the year we are $150 million higher. And you may remember that in 2012 we had a very big cash inflow in the fourth quarter.

So, in 2013, we have begun the journey to flatten out the cash flow between the quarters somewhat more than before. And that will continue, with a lot of effort in this year and going forward, to show a more balanced cash flow.

Part of the cash comes from net working capital. We came down to 15% net working capital percent of revenues. So, it's at the lower end of the 15% to 16% we had guided to. It is still not a number which we are happy with. We want to get back into our long term guidance of 11% to 14%, and rather in the lower end of that obviously long term.

So, we have a lot of programs going on now down into the detail of the operations to change the operational pattern, mainly on the inventory side but also on the project execution side, to improve further the net working capital percentage in the quarters to come.

You will also ask yourself on the corporate side why we have a big positive in 2012 and a negative this year. The main reason for that is that in 2012 we also had some derivative accounting effects in the cash flow, and this was the last entry from that accounting practice that we had at that time. We created then a positive effect in 2012. So, the swing is -- that effect is now gone and we are back to a more normal situation. We will have negative cash flow on the corporate side in most of the quarters.

Looking at the development and the positions we have between the operational EBITDA and the net income, there were quite a lot of questions on the conference call two weeks ago. So, we decided to put this chart in to show which are the key items we have between operational EBITDA and net income on the group as a whole.

The largest item is obviously the depreciation and amortization, which is all the normal depreciation and amortization from the business and also the amortization from the acquisitions we have done.

So, about $100 million out of the $350 million comes from amortization of acquisitions. Restructuring was $150 million in the quarter. That includes the $50 million of additional restructuring we have taken for the power systems, which we communicated in the call some weeks ago.

On the acquisition costs and nonoperational items, we have the regular things that come with acquisitions. But, in this quarter, we had fairly big numbers from the first accounting effects on Power-One, which is a one-time and will go away.

We also sold some old assets, an airport in South Africa, for instance, which we had on the portfolio for a long time. And we succeeded to get out of it, but it cost us some charges on the corporate side. And also, on discontinued operations we had to take a few charges from some old divested entities that we have.

So, all in all, this is the picture between operational EBITDA and net income.

On the EPS side, we ended the year with 3% up in earnings per share, obviously negatively impacted by the charges we took. And if you look at the operational EPS, which we have reported since a couple of quarters, that's 4% up for the year as a whole.

Turning then to the balance sheet and the strength of the financial position of ABB, we have an excellent position to continue our growth along the lines we have communicated earlier. We produced $2.6 billion free cash flow this year, in line with 2012. And you can see over many years we have been on a relatively good level.

On the debt side and cash, we have at the end of the year some $6.5 billion of cash resources available. We kept the net debt on a negative $1.5 billion, roughly. And this is after obviously paying the dividend and also making the M&A investments, where Power-One was the biggest ticket with about $1 billion.

This is leverage we should have. Could have some more leverage, but it's basically fairly well balanced.

On the maturity profile on the $8 billion of long term debt we have, it's a quite attractive profile with a long maturity. We made a lot of efforts in 2012 to take advantage of the low interest levels, so the interest cost on this portfolio is very attractive.

And finally, the equity has continued up in 2013. And this is obviously before we then make the dividend payment.

Based on this strong financial position, we are well equipped to continue to support the growth, mainly and firstly on the organic side. And Ulrich will shortly come back to talk more about how we'll now drive the new push for further organic growth.

This is investments in capital expenditure, in R&D, in innovation, and further driving the growth, but also the good returns of ABB. And there is no question that item number one gives the highest returns on investment.

Second is to continue our dividend policy and drive the dividend up over time in a sustainable way. It's very close to our heart, and we have continued that obviously in 2013.

The third is to spend money on acquisitions. We have a good track record on the acquisitions we have done, the two big ones which Ulrich referred to, and most of the others are also developing quite well. We do all those acquisitions only in a very disciplined way. We will make no crazy moves when it comes to pricing or conditions around those acquisitions. We want to have good integration plans and make sure that we can take care of those acquisitions and create value for the shareholders.

And finally, if we run out of ideas and we have too much cash, we will return it to the shareholders either as additional dividends or as some type of buyback to the shareholders.

Then finally, the dividend. The Board has decided to propose to the Annual General Meeting to increase again the dividend by CHF0.02 to CHF0.70 a share. That equals a 3% yield. It is in line with the cash flow -- free cash flow increase of about 3% as well as the net income increase of 3%.

Swiss shareholders will receive this in the same way as in the earlier years, as a reduction of capital, which is a tax efficient way of distributing the money. And the whole trend over those years is that we're now in the fifth consecutive year of dividend increase.

So, with that, I would like to hand back to Ulrich again.

Thank you very much, Eric. So, let me just sum up the perspective on 2013 before we start talking about the next steps going forward.

2013 was a solid year. The team has delivered well, as we have said. We are heading into 2014 in good shape. We have delivered growth. We have delivered on execution. And the momentum is quite solid that we have, especially on the execution side in the business.

So, how do we see the world and how do we see the targets and the expectation against our targets? If you look at the development of the world in the last couple of years and the expected development of the world throughout the planning cycle that we have given ourselves, 2011 to 2015, the rebound that was expected did not come out as strong as we thought.

Alone in 2013, the GDP growth of the world is about 1.5 points less than expected, which might sound not a lot, but it's about $1 trillion less growth that is out there.

The investment decisions of our customers are a little bit more hesitant. Projects are delayed. And you don't see that only on the ABB side. You also see it in overall CapEx spending, which is about -- the delta in growth that we expected over the planning cycle is 50% less on the CapEx growth than what was predicted not only by us but by experts at the beginning of this cycle when we put together the plan.

That means also that our markets are being significantly impacted, and the market growth is about 40% below the assumptions that we had. So, that's a fact of reality that we deal with, and now let me just talk about how we performed in this environment.

You might remember the targets that we have given ourselves. And I would like to take a bit of time to comment on one target specifically. In the first 150 days of being the CEO, I have met quite -- a couple of you. Eric and I, we are out there traveling, meeting a lot of you. And there was one common feedback, that the growth target that we have given ourselves was confusing and was not reflecting the like-for-like comparison that you would have liked to see.

In the previous communication, we had a growth target of 7% to 10%, and that included a part of Baldor and Ventyx. And the feedback from you was please take that out and give me a proper like-for-like comparison.

At the time when we announced the 7% to 10%, we had the like-for-like in a footnote. And now we have reversed it, basically. The 5.5% to 8.5% that you see here in terms of a like-for-like organic revenue growth target is the one that we already announced at the time when we came out with the targets.

At that time, it was in the footnote. In the future, we will use this at the main target to make sure we are clear, we are transparent, and you can easily follow up on where we are going.

Against that target, we have performed basically to the lower end of the range despite the significant lower CapEx growth and despite the significant lower market growth over the years until now. So, the CAGR that you see here, the 5.3%, is the CAGR from the start of the planning period until today, end of 2013.

In the EBITDA and on the free cash flow conversion, we are right on target. And that's something that I personally look at very, very closely. The margin and the cash needs to be in order in a business. And if that's in order, then you know from an execution perspective you've got a healthy business. We delivered on both of them, and we are right in the target range that we have committed.

The EPS growth driven by the 2012 and 2013 hits that we had in power systems, we are not where we want to be with the 3% that we have here so far as the CAGR of the growth. The operational EPS, however, is 6%, which looks a little bit better. But, we are no way fully confident -- comfortable with that one.

The cash return on invested capital, at the time when we put together the target, there was the assumption that the acquisitive pattern would slow down. We have bought a little bit more. We have invested in Power-One. And therefore, we are quite happy with the 12% that we have despite a pretty acquisitive pattern in ABB.

So, that's the status check. This where we are today. How does the world look going forward?

Our market outlook has basically two elements. The long term outlook for ABB is good. It's really solid. If you look at the needs of the world on the power infrastructure side, the investments that will be coming, I'm very optimistic that our capabilities around reliable and efficient transmission and distribution offerings will be in high demand by our customers.

The same for the automation side, whether it's in the traditional markets to really make sure we are helping companies to be competitive in the traditional markets or whether it's helping emerging players to improve their productivity, to improve their quality. There is long term a very good market out there and we are right positioned to take these opportunities.

The short term outlook, however, is uncertain. We have some macro indicators that point towards a short cycle upswing. And we have seen a short cycle upswing in some segments of the markets, but it's too early to say there is certainty in this upswing everywhere yet.

And on the long term, long cycle part of the business, the hesitancy on decision making is still around. This is something that we have to deal with. This is something that we have to respect and get our house in order, expecting that, short term, the large infrastructure projects and the large investments on the project side might still be subdued.

So, where does that lead us in terms of our top line development and where is ABB? In terms of the top line development, if you take the revenue trend, on the right side of this chart you see a symbolic graph for the revenue trends that we are seeing.

From beginning of the planning cycle until today, a CAGR of about 5.3%. The remaining two years of the planning cycle, 2014 and 2015, are characterized by the following drivers. A, we have a slower than expected macroeconomic development. I just showed you the facts and figures around it.

Secondly, we are going in 2014 with a $3 billion lower backlog than what we went into 2013 with. Thirdly, there is still delays in large project awards. The customers are hesitant to give these projects out.

And fourthly, we have started successfully the PS reset, and that will take time until it's fully implemented. The sales activity shows in signals of an improved order gross margin. It's too early to call it a full success, but we are in a good swing.

So, if you look at the growth trajectory here, we have a 5.5%, 5.3% CAGR until today. We're going to have a moderate -- more moderate outlook for the next two years. And what it means in concrete terms is, against the target of 5.5% to 8.5%, we expect 2014 to be a challenging year in terms of revenue development. And we expect 2015 to continue with the growth trajectory on the revenue side.

That combined gives us a CAGR over the entire planning cycle, over the full five years, of 4% to 5%. That's the expectation that we have against the target over the planning cycle, the key drivers lower than expected economy and the PS situation that I have explained to you.

A lot of our competitors would be happy to grow revenues at 4% to 5% in a CAGR. Naturally, it's clear we have the ambition to grow strongly in the long term future of ABB.

Also, when you look at it with the recent global economic development, the ambition level compared to the global economic growth is unchanged. So, we are not taking down the ambition. The ambition leads just to a slightly lower CAGR in a market which is not developing as fast.

The two key health indicators that I mentioned before, the margin and the cash conversion, we have the clear expectation to stay within the margin bandwidth and the bandwidth for cash conversion that we have in our targets.

On the EPS side, we will drive hard to get towards the 10% CAGR. And on the cash returned on invested capital, given the more acquisitive pattern, our expectation is that we'll drive the CROI up to mid teen levels by 2015.

So, these are the expectations against our targets. So, we are not changing the targets. We are communicating to you our expectations toward these targets that we have set for this planning cycle.

So, how do we deliver against these targets? And how do we make sure we deliver, even in challenging times, good value creation in ABB?

When you look at ABB, there is -- very often some of you come and say, well, what is this company really about if you would have to describe it in a couple of sentences in a very simple way? And here we have put it together.

Basically, ABB is around power and automation offerings, technology that helps with the electricity flow in the entire electricity value chain, products and technology that help with the automation of industrial plants.

Both power and automation goes into three customer segments, utilities, industry, and transportation and infrastructure. So, there is quite a market out there for automation on the power side, power plant automation as an example.

There is also a significant market for power in industry. And in the past, very often some people confused the power offering with the utility customer space. We have a power offering that we sell in all segments, into utilities, into industry, and also on the transport side.

If you look at wayside electrification of the rail business, basically fixed infrastructure to provide power to the power lines of rail, that's also a power offering that we have. And given the nature of our global footprint, we do this all around the world and in every key market that we are active in, which is now more than 100 countries that we are active.

So, that's ABB in very simple terms, the what, the for whom, and the where. Now let me run you through what does focus areas that we have defined mean for ABB and the development of ABB in the future.

We have committed to profitable growth, business-led collaboration, and relentless execution. And the focus is to drive stronger growth with a stronger focus on organic growth, and to improve profitability of the business. And two key measures that will be much more in the foreground is the earnings per share and the CROI of the business.

So, when we take the profitable growth piece, let me demystify a little bit and share with you what it really means and how we drive that and how do we go about it, and where are we in the journey of ramping up the momentum.

For us, profitable growth is around penetration. That means selling more of what we have to customers that we already serve somewhere. It's around innovation, having new value propositions for our customers. It can be on the process side. It can be on the product side. And it's around expansion, going into new segments for ABB that we see as attractive and we see as value-add for our customers and us.

To get going in organic growth and to understand where we are, we conducted in the first quarter -- under my new leadership, we conducted a rigorous navigation check. And we said, so, where do we stand in the key markets of the world?

We took all business lines in all key countries and all business lines in all key industries, and we mapped where we are in a very honest and transparent way. We challenged each other. We worked it through. And on this traffic light slide here you see basically a conceptual picture how ABB has been assessed.

Green means we are number one or two in a market. Yellow means we are three to five. And red means we are not amongst the top five. And the outcome of this process really helped us now, A, to have good transparency on where we are in the strategic segments that we serve.

But, it also helped us, and we have spent quite a bit of time already together, and we will spend much more time as a leadership team on all levels of ABB, to prioritize and focus, to really say, okay, which of the yellow ones are we taking on? How are we taking them on? How do we place investments? How do we allocate capital?

And how do we work together, because there might be, for example, a distribution opportunity between Pekka's and Tarak's business in a certain market. Now, knowing this here, having it transparent on the table helps us to drive more collaboration. And we have a clear ambition to be number one or two. That means green in the segments that we focus on.

These heat maps helps us also to assess the portfolio quality overall. Where are we weak? Where do we need to add? And where should we maybe not play? You have seen us divesting the genset business of Baldor.

I mentioned that before. We got an airport out in South Africa in the Kruger National Park. That is not really a core business for us. We got that one out. And we will develop the portfolio continuously by adding and by pruning wherever it's appropriate.

So, let me give you some examples around profitable growth and bring a little bit more life into the discussion. And I will give you examples on penetration, innovation, and expansion, and also say whether it's about a new offering, a customer segment that we want to strengthen, or a geography where we want to do more.

And here are the examples. We will not go through all of them. Otherwise, we would be sitting here until tomorrow morning. And I know that you don't want to have that one, so let me take out some highlights.

Localization of footprint, making sure we have a competitive offer locally designed based on local product management in key markets is a key differentiator of ABB. And Bernhard and his team recently opened two new factories in emerging markets, switchgear and transformers.

These factories are producing locally designed to local demands products. They are being sold in the local market in line and based on our global manufacturing processes where we have the rigor, the execution, the quality assurance. And we use these new facilities not only for local supply, but also as export houses.

An example for innovation, better -- doing more on the innovation side for growth is the use of DC technology in new fields. Veli-Matti and his team, together with Pekka, have developed a ship propulsion solution, electric propulsion solution for a ship.

And the benefit for the customer is the propulsion set needs less space on the ship so he can have more cargo, and there is fuel efficiency of up to 20%. On a ship, more than half of the operating cost is fuel. Cutting 20% out of that is a huge gain for the customers. And we are very optimistic that this technology will help us to drive growth by having attractive value propositions for our customers.

You saw in the press release, hopefully, this morning that we came out with on EV charging. Together with Daimler and Build Your Dreams in China, we will revolutionize the Chinese mobility segment. We have teamed up, and we will now establish the first countrywide fast charging network in China together with these partners.

You have seen globally today the press release on the Daimler side. BYD has a press release. We coordinated it. All three of us went out together. This will be thousands of chargers. Historically, the biggest charging network that we had was the Netherlands with 220 chargers, 220, and now we are talking about thousands of them that we're going to do together with these partners.

This is an expansion. This is a new segment. It's a new offering of ABB building on our strengths in power electronics where we have the scale in our drives business on the operational side and the supply chain side. We have the quality and we have now an additional segment. And we are clearly -- this is a breakthrough development not only for ABB but also for the world overall.

Working with customers together will be a stronger element of ABB's future growth, even stronger than we have it already. One good example is the collaboration that we have with Statoil on subsea technology development.

Taking the platform subsea into 3,000 meters of depth, which is 600 kilometers out in the sea, is a technological challenge. And between Statoil and ourselves, we are investing about $100 million over the next five years to really get this technology up to the maturity level that we can really install it at scale.

If that's operational, a company like Statoil can save up to $500 million of CapEx annually by replacing existing technology not with same technology, with new subsea technology.

We should not always talk about large things. Sometimes the small things for the ABB portfolio are also very relevant. If you look at the moment in emerging markets how many diesel gensets are being used to, for example, run irrigation pumps for water supply in farms in remote areas in emerging markets, that is something that is a quite common practice.

And in India, we have now developed a set, basically a solar driven pump solution off-grid where we help farmers to get the water out of the ground. It's a panel. It's an inverter. It is a drive and a pump that basically helps the farmer to pump the water out independent of diesel fuel and independent of the grid.

The government of India was so impressed by that solution, which is really packaged and easy to install, that they have subsidized this now in the fourth quarter of last year. We have the first 500 already out. And I expect many thousands to come over the next years, especially in emerging markets.

Last example that I'm going to give you is an example of market expansion. I mentioned Africa before. Sub-Saharan African is an opportunity for ABB. And recently in a mine in Zambia, in the Kalumbila mine, we installed a substation and a complete power supply. This is the largest copper mine in Africa. ABB is powering it up with very reliable infrastructure and electricity supply.

So, you see there is tremendous growth opportunities out there. These are amongst items well mapped in our heat maps. And now we are going out and invest in them, and drive relentlessly the performance improvement in these segments.

The second key focus area is around business-led collaboration. This is about getting more value out of ABB for our customers by combining and bringing together the strengths of different pieces.

And today I want to show you three examples, one for packaged solutions, bringing the offering of different divisions together to serve the customer; the second one around account management, teaming up to serve an account globally; and thirdly, shared platforms on the operations side, because we have not only collaboration opportunities towards customers, we have a lot of operational improvement opportunities within ABB.

On the packaged solutions, you have seen probably the press release a couple of weeks ago. We won a really great order up in Sweden where we basically a new high speed train without building a new train.

The concept is the propulsion set, all the electronics is being ripped out of the existing tin box, which a train basically is. We are putting the new technology in which, amongst others, was proven in the upgrade of the ICE, one high speed train Germany. We put that in there and the customer basically gets a new train without having to spend the money on the tin box.

On this project, Switzerland and Sweden, the different divisions have worked together in a fantastic way. I was up there together with the team signing the contract with the customer. It was great to see people from all over the ABB world working together across the different divisions to get this order for ABB.

The second example is around account management. Food and beverage is an industry that we are penetrating and where we are working very strongly to get more out of. Here is an example. It's Pepsi.

In Pepsi, we have basically helped them to operate bottling plants, and they have many of them, more efficiently. And really, the target is here to reduce the electricity bill of the plant by up to 10%. Now, if you run a bottling plant, their energy consumption is significant. The investment itself pays for itself in less than two years. So, also for the CFO of Pepsi, this is a great value proposition.

The third example that I'm going to use is a shared platform example. I talked about Africa before, our joint operations in Longmeadows in South Africa where we basically host all the divisions. The common IT platform, common HR will be a model for future market penetration. From there, we are also hosting efforts to tap stronger sub-Sahara Africa. So, this is a great model for us to get more synergies within ABB by operating smoother together.

On cost, I've already talked about the traditional pattern of ABB and cost reduction before. Let me talk about a couple of new areas on cost reduction.

We have committed to take 3% to 5% equivalent of cost of sales out of our cost base every year. And since 2008 when the crisis started, we have done this. And we will do this going forward. We will not give up and we'll keep the momentum.

And how can we keep the momentum? By continuing what I showed before, but then by adding additional areas. One is white collar productivity. ABB has about 150,000 people. Only 40,000 of them are touching the physical product. All the others are some kind of white collar people.

So, can we free up resources for growth? Can we have more sales time focused on serving customers rather than on internal administration? Absolutely yes. And this is what white collar productivity is about.

The second area that Eric has the responsibility for in ABB is to have a stronger focus on cash management. Our inventory turns are today not where we want them to be. We want to drive this harder. We want to free up capital to make sure we use the capital for growth rather than having it locked up in our warehouses.

And on integration, Greg will talk later on more about integration experience that we have now really not only gathered but also institutionalized and personalized. This is an area where we will continue to deliver over the years to come.

So, just to pick on example on the white collar productivity side, this is an example out of our robotics service world. As you know, a robot is a service intensive product that is being used in automotive and general industry. Historically, getting a service contract was a couple of weeks of work going back and forth with quotes and descriptions.

Today the robot service technician walks with an iPad into the factory. The robot speaks to the iPad and tells him his operating pattern. The service salesman talks with the maintenance leader and says, look, here's the operating pattern. This would be the right service pattern that I would suggest to you, which is being supported by a configurator on the iPad.

And if the maintenance leader says, yes, I'm very interested and I would like to have a quote, he says, okay, how many days a week do you operate? He presses a button and he gets the result of it. He can do the quote there. And if the operator and the maintenance leader wants, he can sign the contract there right away. Enormous amount of productivity gain, and also a much better customer momentum.

So, let me sum up the areas, the focus areas. The navigation check is done. We have a systematic approach implemented. We have focused activities on the way, and we have the performance management established. And with these elements together, I'm very confident that we're going to delivery more value in the future. The global team is mobilized and is ready to deliver.

And Tarak will now show you how penetration is being worked on in his business to give you a very concrete example what's happening now today as we speak. Over to you, Tarak.

Thanks, Ulrich. Good afternoon, ladies and gentlemen. It's a pleasure for me to share with you what our low voltage products team is doing in terms of growing profitably in the market, penetrating the market with products and solutions and our partners, which are the distributors.

Let me give you a little bit of a short history lesson on where we are from a low voltage products perspective. If you remember, we started the journey in 2010 as a division.

And over the last four years, we have taken this business, as a collective team, from $4.6 billion up to $7.7 billion, roughly $1 billion of growth each year. Not only has the top line improved, but also we've been able to take the bottom line up correspondingly from $900 million to $1.4 billion.

What I'm particularly proud of that we have managed, thanks to the Thomas & Betts acquisition, is geographically balanced the low voltage products' business in line with the market. So, we were Eurocentric before. We are much more in line with where we see the low voltage products' market.

So, as you can imagine, a growth like this requires an organic component and an inorganic component. So, let me walk you through what we are executing based on what Ulrich just described to you, starting in the third quarter and then moving on forward in the fourth quarter and into 2014.

So, you can imagine the top 15 markets for our business up there. We classify our customers into specific categories; end users, which use our products on a daily basis; original equipment manufacturers that develop machinery equipment solutions for the end users where they incorporate our products into the electrical production and distribution system; then you can imagine control product -- control panel manufacturers, which you'd call panel builders or distribution equipment manufactures. It depends on which geography you're talking about. And all of these we serve through our distribution partners in different relationships we have worldwide.

So, as Ulrich mentioned before, green means we have a position of strength. We are in the top two. So, we map over 60 product lines, 115,000 to 130,000 SKUs globally into the 60 products lines, and we map those 60 product lines' strength in each of these 15 markets by customer type and by our relationship with our distribution partners.

And based on what we see as the inventory, we have put together a project execution plan for growth. And it's a project because we have 470 individual projects to grow. I will take you through a few of them so you get a better idea of what we mean.

So, the X's represent a targeted attention on a specific customer type in a particular market with either a product, a solution, or a distributor relationship that we will leverage to grow.

And let me walk you through a few of those examples to give you a better feel for exactly how we are executing in low voltage products as a team in this market, to really penetrate the market in a profitable way from an organic perspective.

So, if you look, these are typically the products that you would imagine that we would use to grow the business. So, what Ulrich mentioned before, we are very proud of the Emax 2 circuit breaker, which actually acts as a power manager. So, it actually helps with load shedding and managing the consumption of power and energy for our key customers.

That product particularly has a great opportunity in Germany and the US to gain market share and allow us to grow organically. It's one of our best products in terms of the operational performance, and we believe it is targeted in the right segments for growth.

A second example I can share with you is the Welcome 8 door entry system. Imagine this inside your apartment. If you happen to have one in China, you would be a potential customer for us.

And this product was designed with support from the German colleagues and the Chinese colleagues in the Genway business which we acquired about three years ago. And this product now in 2013 has won many design awards and has been one of the fastest growing products we have in China in terms of year-on-year growth.

So, these are two illustrative examples of how particular products targeted on a specific geography to a particular set of customers result in a significant amount of growth for us on the organic basis.

The last one you see, the Smissline socket system, it's particularly designed for critical power applications, hospitals, data centers, that allows you to, on a hot basis, on a touch safe basis, add electrical circuits and remove electrical circuits.

And that you can do while the electrical system is operating in the hospital or in a data center. And you can realize the value of having a very high uptime in those particular products in these segments which are of extreme interest.

If you move from products to solutions, here is a solar offer, solar solutions offer from a product of view. All these products of ABB work together. We've put them in a package that we deploy on a global basis to a system integrator or an OEM, and we try to provide the logistical support through our distributor partners.

And the goal of an offer like this is to be global and provide a solution for people who are doing commercial scale solar power plants almost anywhere in the world.

This business has grown extremely well for us in the last two to three years. I'm very pleased to see that we have been able to replicate the model not just in one geography, which was Europe to start with.

But, this is also extremely successful for us in the United States, also in India, and particularly very strong performance in China in the fourth quarter for us in 2013. So, we're offering this across the world. And it gives us a great leverage from an organic growth point of view.

If you move on from product solutions to our distribution partners, you remember with the Thomas & Betts acquisition we got great access to distributors and the Thomas & Betts relationship with distributors. That relationship now is being leveraged to pull through. With the Thomas & Betts team running our business in the United States, they're helping us pull through the ABB low voltage products in North America.

Correspondingly, our strong relationships in China, in Western Europe, we are using those relationships to pull the Thomas & Betts products through our distribution partners to the end customers.

So, that's one example of how we are working with distribution channel partners. On the line below the yellow line, you see countries where we have invested actually in a different way to partner with distribution partners, channel partners. There we have put 400 salespeople out on the street.

The idea is to create demand, generate the value propositions for the local markets that convince the end customers that we were just talking about to use our products. And then, we service that demand from a logistics perspective through our distribution partners in order to deliver the kind of performance that allows us to scale up very quickly in a geography using distribution partner relationships that we have.

So, these are three examples of how we leverage what Ulrich just talked about; do an inventory, take a focused effort, figure out exactly where we want to dedicate our resources, either on a product side or on a solutions side or a partnership side.

And in many of these examples, because we had a common view thanks for the view of pie across the different divisions, we're able to compare notes between different business segments within ABB and say, okay, in this particular market, if you have a strong distributor relationship, Pekka, why don't I help you sell some more of your products in that market, because we're able to work together, team together.

It's the common view that allows us to collaborate at the business level. And I'd like to hand it over to Greg, who can probably go through a little bit more in detail what does business-led collaboration mean.

So, with that, I thank you for your time and hand it over to Greg. Thank you.

Thank you, Tarak. Good afternoon, everyone. So, I will cover a topic that Ulrich underlined as a very important area, focus area for us, and that's business-led collaboration.

And in business-led collaboration, what we're really doing is we're focusing on certain topics that can create even more value for us from a growth perspective. That could be looking at it externally with our customers and saying how do we grow, how do we deliver even more value to our customers or to our shareholders in terms of greater growth, better returns.

So, what I'll do is walk you through a couple of areas now and maybe talk a little bit about how we go about business-led collaboration within the management team and across the Company. And we really break it down into three areas.

One, it's the spirit of really working naturally together. Tarak hit on it, when we find opportunities to collaborate where we can help each other. How do we do that to create more growth? We look at our customers' needs and make sure that our organization is not a limitation to getting the right solutions in front of the customers, selling products as bundles, packages.

When you look at the objectives here, it's really to drive that cross BU and cross division interface on how we bring the whole solution together. And what we've done, and Ulrich working with the entire EC, has tasked the EC members to take these different areas of business-led collaboration and really drive it and lead by example.

In my case, it's in the area of service and also integration. How do we bring companies in, collaborate with acquired companies to create even more value together?

And really, the underlying cornerstones are to take this learning and these examples and really drive a collaboration process that is really permeated across the whole Company. And we can take it not only on a global basis, but in our local countries and our local businesses.

So, let's take a look at two areas where we're doing exactly this and talk a little bit more about how we're doing it and what we expect to get. The first would be in the area of service. And service and integration are really the ones that I want to go into more deeply.

In service, about 2.5 years ago we kicked off a service strategy. And with that, we set a goal to say that we can grow our service business even faster than the group in total. We thought this would be very good not only for us financially, because our service margins exceed that of the group, but we thought this would be good from a customer standpoint because our value proposition with our customers is really a long term commitment to our customers.

Our customers are making investments in buying products and systems and services that are 20, 30, 40 year investments. And it's really important of a supplier like ABB to be there along the entire life cycle of that investment so that we can not only help them install, we can help them maintain. We can train new people as they come on. We can refurbish and we can upgrade that equipment.

And that's a great revenue stream for us, and we wanted to get even better at doing that. So, as we kicked that off 2.5 years ago, we've found that we are generating that momentum, that additional growth. But, what we also have found is the installed base is a huge opportunity for us.

We've identified around the world $300 billion of actively running products, systems, software that's out there in industry. When Ulrich talked about how we are from the grid all the way through to the factory, on those grids, in those factories, $300 billion worth of equipment.

And so, with that now we've cataloged where does it sit. Over the last four or five years, we've built an internal database of which customers have which equipment and where are they. And we have about $200 billion of that $300 billion now cataloged to know where they sit by address, what type of equipment, GPS coordinates, and that allows us to work that installed base and really mine that for additional revenue growth.

Today we think we're capturing a little better than 25% of the annual opportunity on that. We would like to take that to a higher level where we could capture about 40% of that installed base opportunity as an annual annuity that comes in.

So, how have we gone about that? We've gone across the entire organization and we've found the best practices, and we've looked at those to say which ones can we productize as services products. We've done it in each of the five divisions, very collaboratively working across.

We've done it out in the countries to say which countries have those great innovative ideas. How do we catalog those? How do we put product management behind it? And how do we roll it out to the countries that hadn't seen it before? And this is really the engine behind how we're driving that growth.

In addition, what we've done is we've added additional people to cover that installed base, service sales, dedicated service salespeople, service engineers that can go out and be there not only for reactive service but proactive service, to go out and work with customers, talk about how we can help them stretch their assets and get greater return.

So, we went about this two years ago with launching what we called how to wins. Sure, it was about adding more service sales, and you see that on the vertical dimension. It was adding more product management with the 400 product managers. But, it was also about how do you grow a service business culturally? How do you put the right building blocks inside the business division by division, business unit by business unit, and really continue a journey to drive a culture around service?

And that's what you see here. In each of these boxes are different elements of what makes a successful service business. And we simply call these how to wins. These have been rolled out now. We took the first set of countries on wave one two years ago. The second set, which covers now 50 countries, in the last year. And we think this is going to give us the ongoing momentum in terms of how we collaborate and bring ABB together for our customers to drive even more growth.

So, let me take the next example of what is underway on business-led collaboration. And I think it's an excellent one for us to talk about here today. It's acquisitions and the post merger integration.

This is very much about driving growth. How do we take companies that have cultures of their own, bring them inside ABB, and create an even better company together than what we had before we started?

And so, having been personally involved with this, being the integration manager on Baldor, working closely with the DM division, with Ulrich, having been personally involved on T&B, on Thomas & Betts, being the integration manager working closely together with Tarak, what we've done is taken all those experiences that we've had over the last four or five years as we've bought companies large, medium, small, and take that as learning.

And how do we start to break it down now and create the next level of excellence in terms of how we do integration, the things that can drive an institutional knowhow so that we can take people that are strong and leaders and have great capability, but also put them through the things that we've learned so we don't have to do this one by one? Because there is fantastic work that's gone on here.

And of course, every acquisition's slightly different, but there are some basic components that come back over and over again as we look at these acquisitions. So, what are those?

It's aligning. And it's aligning at the time of the due diligence to make sure that you know what you're buying and why you're buying it, and you start to think ahead of how you're doing to integrate the Company.

And so, that's really the beginning. And we take it through retaining, really creating a space for the new company's management team not only to breath but to thrive inside ABB and to really feel connected to a new company as strongly as they felt connected to the company that they were with at the time of acquisition.

To support, to support those teams, really encourage; Ulrich talked about Baldor, adding some automation, adding some capital, doing the things to help them grow. And we've done that over and over.

Enhance, now we have to look for the cost synergies. How do we do that in a smart way? Sure, at the time of alignment we had a business plan. But, now engage the team together and say here were our assumptions. Do you have ideas that could make this even stronger? What should we do together, driving out costs in supply chain, overhead G&A?

But, the best practices, this is where things start to take off. When a team is being listened to that's a newly acquired team to say we have some good ideas of what we could do, we grab those ideas. Also, the best practices can come from either side, either the owner, ABB, or the acquired company.

Creating this culture is very unique, and I think it's a real differentiator for ABB, because if you look at ABB we're in many places around the world and we're extremely multicultural. Why not take that same respect and cooperation that we have within the Company and apply it to acquisition? And that's exactly what we've been able to do to create this kind of momentum.

Grow, of course this ties back to pie. And as we think about how we do things, a lot of it has to do with penetrating deeper into markets. Tarak has a great example in T&B. T&B is helping us in the US and in Canada and Mexico in a great way with Tarak's business.

Let's have that same help when we go to China where we have 20,000 people in ABB, and I think T&B had a couple of dozen. And we say okay, now what can you do when you bring ABB and T&B together in China to get that growth? And that's really the growth plans.

And of course implement, but it's implement not just to create results. It's implement to have credibility. You're building trust when you bring companies together. And it's this say/do ratio of what we commit to and what we deliver in terms of how we work together that's as important as driving the results.

We do drive the results with concrete actions, clear accountability, and we report that back into the EC on a regular basis and coming back to make sure we're on track.

So, with that, let me summarize two key points. One is business-led collaboration is alive and well. And I think it's unlocking huge opportunities for us to go to the next level inside the Company. And I think, number two, this will drive additional value as we continue to do this and build upon the concepts that you see here.

So, thank you very much. Let me turn it back over to Ulrich.

Thank you very much, Greg. So, in the last two examples, we wanted to demonstrate to you what this focus area as an action really means and that we are really living it every day. We have changed the pattern of ABB.

We are working differently together, building on what has worked very well in the past, taking it to the next level of performance and really make sure that out of collaboration, out of the next level of execution and profitable growth we can drive more value creation.

So, to sum up, let me just share with you what we expect today and what will come. Today we shared with you where we are in the year, what the quarterly results were, the expectations against our 2011 to 2015 targets that we are not changing, where we are telling you the expectations against these targets, and the three focus areas and actions.

We have embarked -- now that we kicked off the three focus areas, we have embarked on the journey to formulating the ABB long term strategy. And when we are together in September at the Capital Markets Day, we're going to give you the comprehensive strategic outlook of the ABB of the future long term beyond the current planning cycle.

So, to sum up, today ABB has delivered a solid year. We have executed well. We took cost out. We have grown revenue to an all-time high. The team is working extremely well together. The leadership transitions have been done in a very smooth way.

We are facing an interesting market environment where the long term perspective is strong and the short term perspective is still uncertain. And we have the right measures in place to navigate through these times and deliver continuously value.

The priorities are clear. The team is ready to act. And we are committed to deliver more value to our shareholders in 2014.

Thank you very much for your audience. And now I hand over to Alanna to manage us in the Q&A session.

Okay, just a few -- a couple of rules before we actually start. We'll take some questions here from the room, and then we'll take a couple that are on the call right now.

Please do not ask a question until you have a mic in your hand so that everyone on the phone can actually hear you. We have two people on either side here with mics. If you have a question and you're on the Internet or on the webcast, there are instructions on the side and to how you can ask to be put into the queue.

So, with that, we start with the first question. Andreas? And please when you start, can you say your name and the company you're from so that everyone on the phone can actually hear you?

Yes, thank you very much. Andreas Willi, JPMorgan. First question on your comment on the outlook, you said it's a challenging year for revenue growth. Do you expect to make progress on the underlying EBITDA margin excluding the charge of 13? And to what degree do investments for the growth focus impact or not impact 2014 in terms of sales or R&D you may plan to increase?

And the second one on the larger orders, the customer hesitance. At the Q3 results, you kind of indicated that you would expect that to kind of reverse or start to come through in 2014. What's your view now? Is this a first half, second half year event in terms of some of these larger order bookings you have been waiting for? Thank you.

Okay. Before I get started, Andreas, if I have done my navigation check right, happy birthday and all the best to you.

In terms of the outlook for revenue growth that we have given you, look, the CAGR that we have formulated is 4% to 5% over the planning cycle. That is including the previous years and 2014 and 2015.

If you look at a business that has a $3 billion lower backlog compared to the previous year, and if you have a business where the large order intake is still slow, we cannot expect a huge revenue growth in 2014.

However, we are optimistic that, with all the efforts that we are taking now on creating additional orders, we will get back to the revenue growth trajectory in 2015. So, that's the pattern that you can expect in that context.

On the EBITDA side, we have committed to stay within the range and work on that point continuously. It's very clear that we will work very hard to avoid additional changes like we have had this year and avoid the one-offs.

And if that all comes through, is there room for upside potential? Yes. Am I committing to deliver on it? No. To date, this is what we will report on throughout the year. That was the second point.

The third point on the investment pattern and the investment focus, look, the long term strategy of ABB at the moment, to become stronger and stay a leader in power and automation is unchanged. The heat maps help us really to identify where are areas for growth.

Now, the first priority, as Eric has laid out, is organic growth. And we will fuel this organic growth. It can be investment in salespeople. It can be investment in market intelligence. It can be investment in local product management. It can be investment on the service side. It can be investment in CapEx in certain areas.

So, we have a clear path now and we have clear priorities defined how we allocated the capital, how we allocate the time to really make sure that we get the biggest possible result out of our investments there.

On the order side, let me hand over to Eric. You want to take a hit at that point?

Yes. So, on the larger orders and the pattern, if I understood your question correctly, Andreas, we have still a big tender backlog, mainly in power but also increasingly so on the automation side. But, the awards of those projects is as slow as it has been in the earlier quarters.

So, it's hard to predict when that will tick up. But, for sure we see that there should be a bigger award of projects in 2014 than in 2013 from what we see today.

How much we will be able to get out that, we will see when we get to the specific tenders. But, the activity is very high.

Michael Hagmann at HSBC. If you look at what you've been talking about today, if you look at the penetration and expansion and operational excellence or relentless execution, as you call, it none of that is new. We've been hearing that for about 15 years in various guises. Your competitors are doing the same.

So, what are the one or two key attributes in your value proposition and/or what are the one or two key competitive advantages which actually allow all of those initiatives to lead to higher profitability?

I think that one is, on the growth side, we do it together as a team. So, we really sit down as an executive committee. We have a monthly growth broad where we bring all the perspectives in and then we discuss where should ABB focus on.

And we help each other with our experiences. We jointly define where we should focus on. We discuss large innovation projects jointly and see how do we kind of run that. On expansion moves and acquisitions, we go through jointly. So, I think that's one of the differentiators.

And the term -- the second one on the execution side, I think we do it better than most others. I don't want to be arrogant here, but if you look at the track record of cost reduction since 2008, every year relentlessly taking out the cost, last quarter again $350 million. That's basically where you can set the clock, and we have a good process going.

We are continuously also expanding the scope of these cost reduction exercises. And we do it in a smooth way without business interruption. We don't have large layoff programs where we have problems with the unions on a large scale. We don't have business interruption from a quality side. We are really running that in a relentless way.

And I would call these two of the key differentiators. So, the teamwork and the way we implement these activities clearly differentiates us from others.

Good afternoon. It's Andrew Carter from Royal Bank of Canada. I had three questions, please. The first one was just looking at the backlog, and obviously that's down 10% year-on-year. I wondered if you could actually give us an idea as to what the number would be if it didn't include power system. Perhaps obviously because you decided to walk away from some orders there, it might give us a better feel for what the other businesses are going to do.

The next question was just on the base order trends. And I think when you were presenting, you suggested that the number that you gave for Q4, I think the 4% growth, was adjusted for Power-One. And I think the number is unchanged from what you presented last quarter, which you said had got -- didn't adjust for Power-One. I just wanted to make sure that there was -- that those numbers were like-for-like and consistent, and that we could be confident about that being organic growth in the final quarter.

And just sort of really carrying on with base orders, would you mind just sort of running through what you're seeing on a geographic basis on terms of base orders, because I think that would be quite useful.

Look, if you allow me, I will take the last one first and then hand over to Eric for the two other ones.

If you go around the world at the moment, it's a really interesting situation. Take, for example, Japan. We see in Japan a ramp up of our own orders and we see a ramp up of our business activities there, which is really great.

The reason for that is not great. It was the very unfortunate incidence around Fukushima. But, Japan is investing in infrastructure side, and we see good business coming out of that one. They are also rebuilding some automation and we are participating in that one.

Korea is another one in Asia that we are quite happy with the development. There is quite a strong partnership between the local team. Veli-Matti has there a strong business in Korea serving the customers very well.

India, at the moment they are waiting for the elections which come in May. So, we have to see. At the moment, the investment climate is a little bit moderate.

And that's something that we also see in the China side. The automation piece on China side, automation base orders are really coming up, and we are grateful to that point. I think we are pretty well positioned. Mind you, also our robotics business is being reported on the base orders, which is growing very well in the trend of more qualitative growth in China.

If I go then to the Americas, in Brazil at the moment there is really not the momentum anymore that we saw a couple of years ago, and it will probably take a little bit more until it comes fully back. I'm in Brazil in a couple of weeks' time. We are opening a new factory there, and we are still committed to the investments in that market.

In North America in the US, the more towards OpEx the order goes and the more towards consumables the order goes, the better the momentum is. On the power infrastructure side, we don't see yet a large momentum. We see a good tender backlog.

And if you go then on the automation side on the large process investments, there is a lot of process capacity being built or being initiated at the moment in North America. It takes a while until we get the orders there. But, that's the picture there.

And then you go over to Europe. We had a really good year in Germany, which is the largest European economy, and that has grown quite well. And I expect that our very good positioning there, also the employer positioning, the way we work in the channel, the way we bring new products out, is really good results.

In Spain, part of the markets have picked up again. So, we are cautiously optimistic on that one.

So, those are just a couple of snippets. If you take three steps back, you will say the more OpEx oriented the spend is, the more likely it is that we get growth going. The more large CapEx and up the value chain it is, the more hesitant customers are.

So, with that said, I'll hand over to Eric on the order trends and the backlog.

Yes. So, on the backlog, it's about $3 billion that is out of the backlog. A little bit more than $2 billion comes from power systems. So, the other divisions, including process automation, also has a reduction in the backlog. So, if you refer to the 10%, you can say that two-thirds comes from power system and the rest comes from the other divisions.

Obviously in the product divisions, in low voltage and the two largest, MT and DM, the numbers of the backlog are not that big because it's a higher turn rate on the backlog to orders.

On the base order trend, you are correct that the 4% includes the effect of Power-One in both quarters, but it's not a major effect on the number.

Thank you. It's Martin Wilkie from Deutsche Bank. A couple of questions, firstly on power systems. You commented that you like the underlying quality of the business. And so, given what we saw obviously a few weeks ago when you talked about some of these problematic contracts, does that mean that the reset that you did last year stepping away from these EPC contracts, is that the only stepping away from businesses in power systems that we should expect you to do? So, essentially what you have now is what you intend to continue with.

And the second question relates to that across power more generally, so including power products. You showed us a heat map with the greens, reds, and yellows in terms of businesses where you're number one or number two or lower, and that might be used for divestments. As part of that, do you also think about where those businesses might be five years from now in terms of competitive dynamic in pricing? And is a similar process going on around that? Thank you.

Thank you, Martin. I think they are two excellent questions.

On the power systems division, look, we have to live with 5% margin this year despite the setbacks that we have had. So, a lot of EPC companies would be very happy or a lot of system companies would be very happy to have 5%. And you deliver that because you've got your house in order in quite large parts of the business.

If you look at the HVDC subsea connections that we have delivered, great execution of the team. On time, on budget, customer is happy, and there's a lot of business out there. If we look at the way the global power grid is developing, systems becomes one of the key issues. And we are the company that can help with the distance.

If you have a renewable plant, a large wind power plant in northeast of Japan and you have the power consumption in the southwest, who helps? That can be ABB. If you go to the US in some of the large power connections taking hydropower down to New York, if you look over in Russia, if you look here in Europe, so there is a tremendous amount of opportunities around long distance.

And we are the right guys for long distance power transmission at very high voltage levels with good technology, highly reliable, and low losses. So, this is a business -- I like it, and I think we should continue the investment and go in it.

The specific issues around offshore wind, we have entered that market a couple of years ago because we are committed to help the world to develop a stronger renewable energy pattern. So, in that, it is a startup technology that was started a couple of years ago. And unfortunately, the ticket that you have in that startup technology is not five bucks. It is 500 million bucks or a billion bucks.

We are learning it. We have become much, much better in understanding the key requirements there. And this is something, when you start something up, you have that. We are getting better at that.

From a portfolio perspective, our low value-add EPC contracts where we don't pull through anything for ABB and just do a little bit of construction for somebody, that's not our business. And we have really in the reset exited most of the activities there. And we will continue to do so.

The offshore wind, we get that better and better established, and the operational approaches are becoming better. The technology is mature. For example, how do you build this platform out there? Do you jack it up with a crane, or do you get a floating platform where you take a very end the air out and let it drop on the ground and it sits there? There are different risk profiles in that one, and we have had some very good learnings around that.

Now on the portfolio, look, the heat map is one piece of portfolio assessment. And if you do it on different aggregate levels, you can do that for power overall and say how are we positioned.

And I mentioned sub-Sahara Africa before. That's one where the heat map shows very clearly that we have tremendous opportunities and we should invest there. And we are investing now. Bernhard is investing. Claudio is investing down there. Veli-Matti and Pekka are driving that.

Doing this together and mitigating the risk of entering a new market subscale, getting rather coordinated in there as ABB, will help us to have a higher likelihood of success.

In terms of the portfolio optimization, yes. Look, you have seen us investing in certain pieces that might have been a surprise. The investment in Power-One, a lot of people said why do you go into that. And that's exactly one of these five years decisions, or five to 10 years decision where we said okay, at the moment the market is down, great opportunity to buy a good asset, to integrate it. And when the market comes back, then we are well positioned with a number two position.

So, yes, absolutely we are doing it that way, Martin.

Okay. We're going to take two calls -- or two questions from the I guess conference call. First one?

Mr. Simon Toennessen from Credit Suisse.

Yes, good afternoon, everybody. My first question is with regard to your organic revenue growth targets. I still find this quite confusing why you're still sticking to the target of 5.5% to 8.5% growth when you actually do expect 4% to 5% over the period, and particularly that you've given -- that you don't provide any more of the organic growth numbers on a divisional basis.

But, more specifically, I'm interested in, on the basis of that, your organic sales growth in 2014 looks slower. Let's call it low single digits. What kind of order intake or maybe even book-to-bill do you need to see in 2014 to get to your revenue expectation that is currently implied for fiscal 2015?

The second question is -- maybe Eric, could you give a bit more color around cost savings expectations for 2014? Is it okay if we model sort of the $1.2 billion that we see now in 2013 going forward? And should we expect pricing pressure to remain at the levels that we've seen, i.e., model in the bridge a similar net savings amount of the quarters?

And then lastly, on free cash flow guidance for 2014, maybe you could -- I mean, you talked quite a bit about net working capital expectations and you target this to come back to your historic range. There were some press articles stating that you're looking potential into divestments of non-core businesses. Is that something you'd consider going forward?

And, I mean, in that regard, you talked about -- in terms of capital allocation about special dividends or potentially buybacks, which is something that is new. Which ones would you prefer? And given that if you continue to flag, at least historically, that the M&A pipeline looks good, is it ever likely that we could see ABB doing a share buyback? Thanks.

Okay. Thank you very much, Simon. I'll take the last one and the first one and leave the others to Eric. Let me start on the last one, on the divestment and acquisition pattern of ABB.

Look, we will develop this portfolio going forward. That's our job. That's the job of a good leader, to take a portfolio and continuously develop it. That means we will expand the portfolio. We will add new attractive segments, be it a customer segment, be it new technology, and we will keep doing that.

But, what we will also do is we will regularly look at the portfolio and see what does not fit into the direction or the current situation of ABB anymore. We have done that in the past. We have done it in the last couple of quarters. And we will do this in the future. And at the moment when there is time -- something to announce, we're going to talk about more details.

On the use of the cash, look, I'd love to grow this Company. And I think the best one would be if we reinvest.

The good news is, with all the work that we have done in the navigation check, we see tremendous opportunities to invest capital into the future organic growth of ABB. This is a low risk, high return investment if you do it right.

The service piece that Greg has laid out is a very attractive one, and we will keep investing in service in a very strong way. You will see us really continuing to push it. And we will also make acquisitions to continuously expand the portfolio.

So, there is quite a lot of opportunity to spend or invest the capital that we are creating. And if we would run out of ideas on the organic growth side, if we would run out of the ideas on acquisitions, and if we would have served the shareholders with the right dividend, then we would absolutely consider share buybacks. But, it would be the fourth priority, and this is unchanged as we have talked about.

Let me go back to the organic growth pattern. Yes, look, there -- we probably can never get it right for you, because if we would have issued new targets today, then you would have said why do you issue new targets in September again.

Given the pattern that we wanted to give you an update today and really issue targets -- long term targets in September, we decided that we'll go now with our expectations. We shared with you where are we against the targets that we have defined a couple of years ago.

And in September, we will then issue the long term targets for ABB both in terms of the quality of the targets and the quantification and ambition level against these targets.

Now on the organic sales growth, to give you a little bit more flavor, I think you call it right. The backlog going into 2014 is lower than the previous year's backlog. That means we need to work really hard to get additional orders. This is what we are doing.

The pie approach has helped us to really focus and identify opportunities. This is not a one-off exercise. This is continuous work that basically now every country, every business unit, is working on. And when you travel around the world in ABB countries, you find now basically in every office somebody working somewhere on a heat map, which is great because it really helps to allocate the funds and the resources.

We need to have a good book-to-bill in 2014. And we need to have a good emphasis and good delivery on the short cycle business, and then we will be in line with the expectation of 4% to 5% CAGR of the cycle that we have communicated before.

With that, I'll hand over to Eric on the other two questions.

Yes. So, you also asked about the divisional targets, and they are in the pack. We didn't have them in the presentation today, but they are in the pack which is on the Web. So, we'll continue to disclose the divisional targets as well as the achievement against those targets until the end of 2013.

On the cost saving, the guidance remained the same as we have had in the earlier years, 3% to 5% of cost of sales. It is a wide band, but that's what we guide to. The achievement in 2013 is somewhere in the middle of the band. So, that's where we stand.

The pricing pressure continues. In many areas of ABB, there is a slight constant pricing pressure. And we will have to live with that, and the cost savings is the main lever to counter those price pressures.

On the free cash flow, yes, we expect to have an improvement in free cash flow this year, partly from the efforts on net working capital and also obviously seeing a year without as big charges as we have had for the power division or systems division.

And when it comes to the non-core divestments, if they will come we will announce them when they come like we did last year with the genset business in the US. Those will impact the balance sheet if we get cash back, which obviously improves our financial position. But, we don't see them as a core part of the free cash flow communication and guidance.

Okay. Next question from the conference call?

James Moore from Redburn Partners.

Good afternoon, everyone. Thanks for taking the questions. I have two, one on the PS margin and one of the organic sales growth. On the PS margin, if PC sees a $1 billion or $2 billion revenue decline in 2014 from the reset, won't fixed cost absorption knock the EBITDA margin down to well below 9%? I'm thinking this because nearly half of the PS revenues are product-based grid systems and network automation. And I know you've walked away from the 9%, but could you say if you're confident of reaching, say, a 7% operational EBITDA margin in 2014?

The second question is on organic sales growth. Can I pick up on your organic sales growth transparency, because neither the 5.3% status check nor the 5% FY 2013 are actually organic numbers? You've not stripped out the $1 billion Power-One, but you have committed to stripping out acquisitions over $50 million in 2011 and again today on page 35 in your targets. And you say it's not a major effect, Eric, but I calculate it's about 1% of sales for 2013 and over 2% to the quarter, and even 8% to 9% to DM in the quarter. So, please can we have the actual correct 2013 organic sales growth and the correct three year status growth compared with the target? And I get to 3.5%, not 5%, for the year. Is that about right?

Okay. Thank you, James, for your questions. Let me take the PS one first.

If you look at the PS situation, we have clearly communicated in a conference call a couple of weeks ago that we aim towards the 9% to 12% margin range. That's what we said, and that's what we will continue to work on.

Now, when you have a business where you have a lower order intake and where you might have a negative development in parts of the portfolio on the revenue side, then you need to manage the cost. And we have done that very successfully in the past, and we will take the right measures to manage the cost. Whether it's a third party cost, whether it's our own cost, that's something that we have, I think, addressed very responsibly.

I will not give you further guidance on concrete numbers for the PS situation. We're going to stick with what we said before. We aim to get as close as possible to the 9% to 12% margin over the remainder of the planning cycle.

With that, I'll turn over to Eric on the organic sales growth side.

Yes. Thank you for the question, James. The 5.3% accumulated target for the first three years, so it's the planning period, is on a like-for-like basis. There the acquisitions are out and we are committed to report that with acquisitions out, except for the very minor acquisitions.

The 4% base order growth in the 4th quarter includes the effect of power systems. That's the way we have reported the quarters earlier this year, and we stay with the same pattern on the quarterly reporting. Oh, sorry, Power-One. Sorry, excuse me, that is obviously Power-One and not power systems.

Okay. With that, I'm going to take one of the questions that we got in over the Internet. It was from Nick from Blackstar Opportunities Fund.

Is the 10% EPS growth forecast based upon your 2013 earnings base that includes and excludes the $260 million wind charge, or is it based on something else?

The base for the EPS is the EPS of 2010 on the basic side. And we have then for the first three years a 3% increase on the basic EPS. And the basic EPS includes everything. That is the bottom line you see there including all the charges which ever year you look at.

We have also shown you in the same table a 6% target on operational EPS. Operational EPS excludes restructuring and some of the one-time charges that are below the line. That starts from a higher base in 2010, obviously, because it is a like-for-like comparison with the same definition. But, that is up by 6%.

Okay. We'll take a question here.

Olivier Esnou, Exane. Three questions, please, the first one on power products. It was never really guidance, official, but you were sort of guiding last year about 14.5% to 15% EBITDA margin range, quite precise for that division. Is that still valid going forward, or actually do we get some improvement because of pricing being not as bad as before? Just asking your view on that.

Secondly, on the issue of how the large orders translate into sales, right now we have projects above $15 million of sales which are about 12% of orders for 2013. What is it for sales would be my second question, if you can help us assess the downward risk?

And maybe the last question, when you answered previously on the guidance, you said you're going to update us in September now. What actually leads you to be willing to wait until September? Is there something specific you want to check out there before updating us? I mean because you could have done it now, basically. So, that's my third question. Thank you.

Look, let me take the last question first on the September piece. We need to do homework. To develop the long term strategy of ABB, that's a team effort and we kind of take our time.

At the moment -- there is no reason to be nervous about what we are doing at the moment. Developing the long term strategy many years out for ABB, I want to do this together with the team and we're going to take the time.

We took the first quarter to do the navigation check and get going. Now we are implementing the focus areas. We'll get the momentum going. And in parallel to that, we are embarking now on the strategy exercise. And we plan to give you the plan then in September.

On the power products piece, look, on the power products guidance, the official guidance is 14% to 20% EBITDA margin. And on the target, that stays unchanged. Bernhard and his team have done an absolutely wonderful job over the last couple of years to navigate this business.

Some of you were very nervous about price pressure. That was addressed with very good execution, new technologies. Because it's not only cost cutting, it's also new technologies that really help us to differentiate with the customers.

And I will not continue giving you a guidance on a 0.5% margin bandwidth. But, what we will do is we will work relentlessly to keep the strong focus on power products and making it continuously a better business. That means we want to grow it and we want to grow it profitably within the bandwidth that we have given.

Eric, you'll take the large order piece?

Yes. So, large orders, you are right. Everything above $15 million are large orders. It's about 12% in 2013. Given that it had been a higher share earlier, it is likely also higher share in sales. But, we are not tracking and communicating how big a share we have on large orders in revenues.

And I would say also on the targets, if I may add to the question on the targets, the targets remain the same. We set targets from a 2011 to 2015, and that's why we are not changing those targets. That's the target that we set. And what we do, we guide you with expectations where we will end up.

And what we are going to do in September is for a period beyond 2015. We will say exactly how far it will go, but that's the new set of targets that is valid for the longer term. So, for us, it is very clear logic in how we do it.

Hi, Sebastien Gruter from Societe Generale. Two questions on the targets and one question on the heat map. First question on the target about the large orders. We understand that revenues from these large orders will go down next year or this year in 2014. What's your plan for 2015? Do you expect to catch up fully that decline, or do you still see the revenues from the large orders being down in 2015 again?

Second question would be on the EPS growth target of 10% on the -- or the 10% CAGR. If I calculate, you have -- you forecast about 3%, 4% top line growth on average for 2014, 2015. If I exclude the charge you have in 2013, that's about a 15% CAGR expected for 2014 and 2015 at the EPS level. So, a much stronger growth at the EPS line than at the top line. So, some margin gains, I presume, here. And I would like to know if it's like the revenues, backend loaded towards 2015, this earnings growth.

And final question on the heat map. Could you share with us how much of the group portfolio is green, yellow, red, and gray? And where do you want to be in five years' time, let's say?

Okay. I can start with the last one. That's a very easy answer. No, but I can give you the clear hint that there is enough yellow and red to keep us busy over the next couple of years. And that's all I'm going to say about that one.

On the EPS growth, if you look at it, we had, 2012 and 2013, some special impacts, as you know, as you are well aware. We have 2014, a year where I said in terms of revenue it will be a challenging year, and 2015 we want to be back at the growth trajectory. And that means clearly back at the profitable growth trajectory. So, your assumption that it's more backend loaded is probably correct.

On the targets, I'll let Eric comment. You want to take that one?

On the large orders?

Yes.

Yes. So, on the large orders, obviously they come in big chunks. And it is not so that the large order in 2013 would generate the revenues in 2014 necessarily. It all depends on the timing and the loading in the factories. A large cable order could be taken in 2013 for the delivery in 2016 or 2017. So, it all depends on how this backlog times out.

But, it is equally clear, as you say, that we expect to have more large orders in 2014. And that will be needed for the continued growth into the future.

But, it is not so predictable, and that's I was -- so we'll avoid to talk about how revenues we have in large orders because it's extremely difficult to track that on a consolidated basis. Obviously order-for-order you can do it easily, but on a consolidated basis that is meaningful to you to listen to.

Good evening. Alessandro Foletti, Bank am Bellevue. Just a very simple question. Your growth targets for the service business, can you -- I imagine you have given to your internal team a growth target. Can you share with us more or less the range of that target?

No. No, the growth ambition that we have is to grow the service activities faster than the rest of the portfolio. And we're going to stick that.

We have delivered on that the last couple of years. If you look at the service growth in the last quarter, you see a really nice pick up in all the initiatives that Greg has mentioned that we have out there. The investments in salespeople and the platform has really paid off nicely.

And we will continue to grow faster in service than the rest of the portfolio. How much faster we will not guide on.

All right. All right. You don't want to say that. Okay.

And can we take one from the conference call?

Daniela Costa, Goldman Sachs.

Thank you. Good afternoon, two quick questions. One, I noticed that you did a small acquisition in the building automation space. Is that a lead in to bigger ambitions in building automation? Just your views there, and if so, given there are some large -- some of your competitors are quite large in the field, how do you plan to expand there?

And then second, just wondering on your returns target, on the CROI target, it came down this year. Is that entirely due to the Power-One deal or to M&A in general? What would have been the trajectory? Where would you have been if you hadn't done M&A this year? Would it have been -- have improved, and by how much? Thank you.

Look, I'll let Tarak answer the first question in a minute. Just some comments in general.

I showed before what ABB is really about. It's about power and automation for utilities, infrastructure -- utilities, industries, and transport and infrastructure. Buildings is a part of infrastructure.

And yes, absolutely there is an automation space out there. We are already active in that and want to do more. And Tarak will now comment a little bit more on that one.

Thank you. As Ulrich said, we have a building automation business. That's not that small. And the acquisition of Newron allows us to really combine our actuation building automation business with software.

We're combining hardware and software with Newron acquisition. We have to see how, from a business model point of view, we operate in the building automation space. As you said correctly, the big automation players are extremely big.

At this point, we want to understand the market first, see how the hardware and software work together in a way that's a little bit different than the current solutions in the market today. And once we have some real results, we can probably come back with a clearer guidance, especially in September, about what our intentions are in the building automation space. Thanks.

Eric, you want to take the CROI?

Yes, I can take the CROI. So, Daniela, with regards to the CROI, it is correct that Power-One obviously weights a bit on the CROI.

As we all know, the CROI is a very demanding definition because we add up all the money we have invested. We add back all the depreciation we are taking on those assets. So, it's basically all the cash that has gone out the door for those investments on the asset side. And against that stands the cash flow that we have coming in. It's the cash flow return on investment.

So, the largest negative weight on the CROI in 2013 is actually the negative cash flow in the power systems division. Power systems was negative close to $200 million for the year. And if you would assume they would have been on a normal level, that would have been quite an effect on the group CROI.

Okay. With that, I'll take one of the Internet questions here from [Rameau Rosineau from Noihaiwatchi] Bank.

Good afternoon. Given the short term worries you mentioned about the growth outlook in 2014, i.e., the $3 billion lower order backlog, the rather low book-to-bill, won't it be difficult to achieve any organic growth for the full year 2014, and even more so in US dollars, given the strong devaluation of many currencies in emerging markets? Does that not imply that ABB could well post a lower turnover in 2014 versus 2013, whereas consensus is still around 3% growth for 2014?

Okay. That's an interesting question. Look, we like difficult tasks, and this team is good at taking them on. So, we are fully committed to do our utmost to get the best possible revenue outcome for 2014.

That was the first part. In terms of the currency, Eric, you want to take that one?

Yes. As I reported on 2013, we have a very small negative effect overall for 2013 on translation effects. When we roll that forward into 2014, even with the present currency rates, we expect that not to be so significant.

And when we make the like-for-like comparison on the growth that Ulrich discussed earlier during this call, it is always done on a like-for-like also with the currencies. So, it could be that on the reported dollar number, it will be impacted somewhat by the currencies. But, on the like-for-like, it is on the same currency level.

Let's take some from the room here.

Good afternoon. Will Mackie from Berenberg Bank. Two questions, please. First of all, sticking with the currency, we've talked a number of times about the translational effects. Could you walk us through the transactional exposures that ABB has cross border, and how you can manage those in the years ahead.

And second, we've talked about the outlook across the power products business or power systems for large projects. Perhaps you could throw a little color onto the prospects within process automation. You highlighted some of the pressures around mining in the release. We've seen a number of majors in the oil industry cutting CapEx right upstream. How does that affect your outlook for that part of the business?

Let me take the second one first and then I'll hand over to Eric on the currency piece.

Look, on the process automation side, if you look at the markets that we are active in, ranging from pulp and paper over the marine part into the process industries and the metal part and in the oil and gas side, when you meet with these customers out there, it's an interesting world.

On the aluminum side, for example, the aluminum processing, there is significant overcapacity still out there. So, you would not expect that there is major investments coming.

If you look at the big miners, they are cautious about the spending. And if you look at the oil and gas part, in terms of new large greenfield investments, some of them have been more cautious. But, the absolute amount of money that's still being spent every year is huge.

So, there are still a lot of opportunities for us to grow. So, altogether for Veli-Matti's business, I think hopefully on the process side we'll see a little bit more appetite to start spending money again.

On the oil and gas side, this is something where the investments level are very, very high. They have come down a little bit. The absolute amounts are still attractive enough that we should be able to get the business going. But, I'll let Veli-Matti maybe make some comments on the market situation there.

First of all, I have to confirm that the mining side is really the one which has been fairly low activity level over the last, say, six months. And I would be a bit surprised if it would change very quickly.

Looking at what's going on in the mining companies, though, I think there's a little bit of sign that something will start to happen. But, I guess that that will be on the second half rather than first half.

On the process side, I would say that there's some positive signs in Asia for pulp and paper. So, those two industries seem to start to work again. And I would say it's not on the graphical papers, but it's more on the hygienic part and the packaging part. So, those two seem to be quite okay.

Aluminum, as Ulrich said, the companies are prepared to invest. So, they have the plans in their drawers, but I don't expect that to happen very quickly.

Marine, which in our case has two main parts, one is the offshore and one is the propulsion business, which is partly to LNG and partly to the cruising business, that has been pretty active. So, I would say that we expect marine to continue to be on a high level.

And as Ulrich said before, upstream oil and gas is still very strong. There is some projects which have been delayed. But, on the other hand, there is quite a lot of new exploration going on in new areas like Africa. We are very keen in looking at Mozambique, then Zambia, other areas where we haven't traditionally been in so strongly.

So, I would rely on oil and gas as the biggest segment followed by marine, and then some better news for the mill centric industries from Asia.

Thanks, Veli-Matti. Eric, you want to take the currency piece?

Yes. So, on the transactional side, as I said in the presentation, we have basically a fairly good natural hedge. We have a lot of value added in the big emerging markets, in China, in India, but also in many of the medium sized emerging markets.

And on the European side, where obviously we have some exports out of Europe, we also have a lot of sourcing from lower cost areas, in Eastern Europe, also in Asian countries. And that, of course, helps to lower the cost there.

We also exporting out of India, for instance, where of course we are taking benefit of the low cost, selling that into other areas of the world. So, that goes both directions.

There are a few countries, Brazil is one example, where we don't have as much footprint as we need compared to the moves of the currencies. So, I will not say that there is no negative effect, but overall it is not such a big effect in ABB.

And obviously we are hedging all the large transactions and also quite a bit of the standard products for quite extended periods. So, this is also coming step by step. It's not coming to a situation which changes from a day to another, the whole pattern.

Okay. The last call goes to the conference call.

James Stettler, Barclays.

Yes, good afternoon. Thank you for taking the question. Just longer term, based on what we're seeing in power, so lower than expected demand, rising competition, new entrants, do you expect the weight of the power business to decline from the 46% level in 2013? Can you also talk a bit about how big high voltage is within both power products and power systems, or how big it was in 2013?

And then finally, in terms of pricing, how did pricing for base orders in power develop throughout 2013? Can you see any trend there?

Long term, I love the power business, absolutely. And I think there is a very bright future for it. If you look at development of the world over the next decades and what needs to happen on the power side, it's amazing. If you look at the difference technology really can make to fulfill the ambitions on the power side, it's a great business to be in. And I'm very, very happy to have it.

We don't disclose details at BU level. So, we have a good high voltage business. We love it, but we will not talk about more details on that one in that context.

On the pricing side, look, I know there is a little bit of nervousness historically around pricing. I'm not nervous about that. Bernhard and his team have delivered in an excellent way to compensate pricing with new technology and cost take out.

And that's quite a normal pattern in an industrial business, that you have price pressure. And if you're the market leader, some others try to attack you. We will stay the course. And we'll manage the business, as we have done successfully in the last years, also in the future.

We put a lot of money into technological innovation to stay ahead. Bernhard is continuously optimizing with his team the footprint and is driving that forward. The cost out is going very well. If we manage continuously to have a good service journey that we have had in power so far, I'm very optimistic about this business and its quality within the ABB portfolio.

And with that, I would like to close today's session. Thank you very much for joining us on the webcast and here in Zurich. So, have a great day, and we'll see you in September in London.

Thank you very much.

Bye-bye.