ABB Aktie

Greetings, and welcome to this presentation of ABB's second quarter results. You will hear from our CEO, Morten Wierod; and our CFO, Christian Nilsson. And they will talk through the results as per usual tradition. And after this, we will run through the Q&A session. I'm Ann-Sofie Nordh, Head of Investor Relations.

And with that, I will just simply hand over to you, Morten, for the presentation.

Thanks, Ann-Sofie. So let's talk through the building blocks that resulted in another record quarter for both orders and revenues, good earnings growth, a solid margin improvement and good cash flow. In total, things progressed more or less as planned. We delivered on our guidance, so I'm pleased with the results. But I want to start with M&A. You have heard me talk about the teams being active on a good target pipeline. Now we see these efforts result in 3 recently announced acquisitions, which combined would add approximately 3.5% to our 2025 revenues. This includes 2 smaller deals, one being in the Italian company, Specialtrasfo, who is specialized in medium voltage transformers. I want to make it clear that we're not going back into the general power transformer business. Now these are custom engineered components aimed at industrial and energy applications. It fits well in the Motion High Power division as they can integrate these transformers with our large motors and drives into fully optimized powertrain solutions.

The other small deal is in the Marine and Ports division in the business area Automation. Their acquisition of the marine automation specialist, Hoglund, is a nice complement to our existing offering. Hoglund's integrated automation system handles automation, monitoring and control tasks on board of ships. By combining data from engines, power generators and cargo systems, it helps improve safety, energy efficiency and overall operational performance. This will further strengthen our already leading position in marine.

And this morning, we also announced a larger deal, namely our offer to acquire Rotork. We have followed Rotork from a distance for a long while, impressed by their technology. They are a leading manufacturer of actuators and would expand our automation offering. And importantly, timing is good as ABB is in a good shape. We have improved governance and performance of our own company. We are ready to welcome Rotork into ABB. This is an important step to expand the ABB automation offering. It broadens our scope in what we call the sense control act automation loop. We can take these solutions into our extensive market reach and build on our digital and technology capabilities.

We see a strong strategic fit between Rotork and the ABB purpose and our leading position in the electrification and automation. This deal will bring together 2 businesses with highly complementary technology portfolios and similar customer relationships, geographic footprints and strong installed bases. Beyond the strategic fit, we see Rotork's culture and operating philosophy similar to ours. Last year, they generated revenues of GBP 777 million and a high adjusted operating margin of 24.6% Absorbing this into the ABB result for 2025, our revenues would increase by about 3% and operational EBITA margin would improve by about 20 basis points. This acquisition would be accretive to our earnings per share in year 2 as the first year is burdened by certain acquisition-related costs. We have agreed on a price of 503p per Rotork share. In U.S. dollar terms, this comes to about $5.5 billion or in 2025 multiple terms, an EV to sales of about 5.3 and EV to EBITDA of about 19.5%.

This represents a discount in the region of 5% to 25% versus our own multiples. And accounting for synergies, the EV to EBITDA multiple reduces in the mid-teens range. From a timing perspective, we expect the transaction to close in the first half of 2027, post Rotork shareholder vote and customary regulatory approvals. It is our strong view that Rotork joining ABB adds long-term value across the stakeholder groups. The Rotork Board is aligned on the strategic fit, and it is supportive and recommends the offer.

But what do we actually mean when we talk about the sense control act automation loop? I would say that automation is about closing feedback control loops. You are sensing a condition, you take algorithmic decisions in controllers, which triggers an act in, for example, a motor and drive running a fan pump or compressor. First, there is sensing. The sensor feed process signals into the automation system. These are signals of pressure, temperature, flow or level or the chemical composition of gases and liquids.

The automation system controls, monitors and optimizes the continuous production processes. This can be in a pulp and paper plant or on an oil platform. The system uses the sensor signals to infer a process state to analyze deviations and to calculate corrective actions. This takes us to the act phase. The DCS signals the actuators, which triggers, for example, a valve to optimize how much is open in order to adjust the pressure or flow or liquid or gas.

Our position within the automation loop has thus far been biased towards the DCS and sensing. Rotork is a leading independent manufacturer of actuators with a particularly strong position in electric actuators. By adding this to our portfolio, we would improve our offering into the act phase and further strengthen our competitive position. As part of the automation extended platform, it will enhance our ability to help our customers through increasingly digital, connected and autonomous solutions across energy and process industries.

There are, of course, different types of actuators, and Rotork is a leading player across electric, pneumatics and hydraulic actuation. Electric actuators represent more than half of Rotork's sales. From a customer perspective, this come with the benefit of consuming energy only when performing work. This reduces operational costs and improves energy efficiency. They also provide highly accurate positioning and motion control. This is essential for applications requiring multiple points of positioning or precise adjustments. Rotork will be a really strong match, extending our current offering. And in the combined setup, we are better balanced in the sense control automation loop.

As I mentioned earlier, we have followed Rotork for a long time. They have many qualities as the plan is that they will operate as a separate division within the Automation business area, adding about 12% to revenues. By running them as a separate division, we would retain accountability and operational focus, very much in line with the ABB Way operating model. And Automation Products is a profitable business, so our mix improves. In the combined setup, the business area operational EBITA margin would have been 15.2%, 120 basis points higher than reported 2025 actuals. We are very hopeful about what we and Rotork can jointly accomplish. Together, we will be a strong partner to customers as we move towards increasingly digital, connected and autonomous solutions across energy and process industries.

Now let's turn back to Q2, and we delivered new record levels for both orders and revenues. In the order chart, you see that this is the first time we generated about $12 billion in one quarter. The very strong comparable increase of 28% is driven by a broad and good activity across most of our customer segments. And notably, the automation business area even tempered overall order growth for the group. Importantly, their market environment remains strong, so their order decline is linked to the very tough comparable. Christian will talk more about this shortly.

But speaking of strong markets, we had surging order growth of 58% in electrification and a very strong 20% in Motion. In total, the elevator pitch would be that all of our 3 business areas continue to see a robust overall market situation, and we don't see a pattern of prebuys, but demand is rather underpinned by sustained customer investments across the secular megatrends of energy expansion, energy efficiency and energy resilience, areas where ABB's portfolio is very well positioned to deliver.

Looking closer at the different customer segments. Data center stands out with a triple-digit order increase. We had a challenging comparable in the Utility segment but the market is strong with investments in grid build-out, stability and reliability. We also see good demand for upgrades and electrical infrastructure in, for example, tunnels and airports. And linked to transport, marine and rail continue to be strong areas. In the building segment, orders were up in the commercial area, including for HVAC. In the quarter, we got yet another proof point of what we can accomplish with the combined strength of our business areas, the power of ABB. Under the extended partnership with VoltaGrid, Motion and Automation will supply synchronous condensers with the associated prefabricated e-house units. These are systems that act as critical stabilization assets, enabling the voltage stability required by next-generation AI chips. Well done by the joint team.

As I mentioned, revenues were the highest on record at $9.5 billion. You can see in the chart that revenues tend to be sequentially up in the second quarter. But this year, the uptick was larger than usual, in line with our guidance. Revenues increased in both the project and short-cycle businesses and higher volumes was the biggest contributor to the strong comparable growth of 12%. This includes a good pricing contribution of close to 2% with the teams balancing customer relationships and defending our own profitability. As a net total, we delivered a positive book-to-bill of 1.27, and it was positive in all 3 business areas. The backlog is up at a record level of $30 billion, up 28% on a comparable basis. In my view, we performed very well in a strong market.

Looking at the different geographies, orders were up by double digits in all 3 regions. The Americas continued to be the strongest growth driver and orders increased by 52% like-for-like. Looking specifically at the U.S., orders were up by as much as 62%. This high number includes some large bookings, but also base orders were very strong and improved by about 30% Europe was up by 12%. Here, we saw a decline in the largest market, Germany, but this was more than offset by order improvements in several of the other large countries. Asia, Middle East, Africa improved by 12%, with China being up 10%.

Let's turn to earnings, which reflects both favorable market conditions and a strong execution. We converted a 12% comparable revenue growth to a 20% increase in operational EBITA to $1.9 billion. This reflects a margin improvement of 90 basis points to 20.2%. Similar to the prior quarter, we had pressure on gross margin. It dropped by 50 basis points from last year, impacted mainly by unrealized derivatives on FX and commodities. But we also still have a bit of a gap on the price/cost balance. That said, we did achieve a gross margin of 40%, which admittedly is a good level.

The impact from the unrealized derivatives feeds through to income from operations or EBIT, and we had about $130 million of special nonoperational items, partially offsetting a strong business performance. In total, we improved income from operation as well as earnings per share by 8%.

And with that, I hand over to you, Christian.

Thanks, Morten. So let's take a look at what happened in different business areas. As usual, we start with Electrification, which delivered new record highs across virtually all the headline numbers. Comparable orders were up by as much as 58%. And the absolute intake advanced from an already strong trajectory and for the first time, hit the plus $7 billion mark. This is underpinned by strong broad-based sentiment across major customer segments. I actually noted that this was the sixth consecutive quarter with a positive book-to-bill in Electrification. In Q2, it was 1.39, and the order backlog increased by 59% to $13.7 billion.

Looking at the different segments. Data center stood out again with a triple-digit order growth. Still, we see a solid project pipeline with data centers requiring increasingly more electrification content. The market is clearly very supportive, and we are performing well in this strong market. But there are very good developments also in the other markets. If we exclude the data center segment, electrification orders still increased by double digits. One segment to highlight is land-based infrastructure. This is driven by modernizing electrical infrastructure for tunnels, roads or rail. Demand in the buildings segment also improved, driven by commercial activity. The utility segment is another strong market, although in this particular quarter, the order growth was limited due to last year's high comparable.

Now turning to revenues, which amounted to $5.2 billion on a comparable growth of 19%. This was driven by good progress in both the short-cycle and project business. Higher volumes was clearly the main driver, but the team did well also on price management, which added about 2%. And it was encouraging to see the sequential acceleration in pricing in the second quarter. We still have a bit of a gap in price versus input cost to cover in gross margin. And here, we expect to be at least neutral for the full year. But in the second quarter, this gap was more than compensated supported by efficiency improvements and stringent SG&A control.

As a net total, the operational EBITA was up by 26% to $1.3 billion. This reflects a margin of 24.9%, yet another record high from the electrification team. Looking at the third quarter, we expect comparable revenue growth to be at least similar to what we saw in Q2. And operational EBITDA margin should improve from the second quarter levels of 24.9%.

Now let's turn to Motion. Contrary to the usual seasonal trend, orders actually increased sequentially and reached $2.6 billion. This reflects a comparable growth of 20% from last year, driven by improvements in both short-cycle and project business. As Morten mentioned earlier, we see a good demand for our grid stabilization technologies with our industry-leading synchronous condensers. Other positive segments were rail, marine and mining. On the more short-cycle side, there was strength in HVAC for commercial buildings as well as in data centers cooling. Similar to recent quarters, the softer areas are the process-related segments like chemicals and pulp and paper.

Turning now to revenues of $2.2 billion with a comparable revenue growth of 4%, more or less equally driven by volume and price, with an additional percentage of growth derived from portfolio changes. As we mentioned, coming into the quarter, profitability was under pressure. Operational EBITDA margin dropped by 130 basis points to 18.5%, and there are multiple factors to consider. First, the positive impact by operational leverage on comparable revenue growth. This was, however, more than offset by our Gamesa Electric acquisition operating at a loss and diluted margin by around 70 basis points year-on-year. This is similar to what we saw in Q1, and we expect it to be dilutive for the remainder of this year.

Additionally, we still have some operational inefficiencies in our High Power division. These should, however, be resolved during the second half of the year. And lastly, there were some timing impacts in production volumes in the Traction division, which had an adverse impact on profitability. The high-level view for Motion can be summarized as good orders in a solid market, but some challenges on profitability, which partially will linger throughout the year. Looking at the third quarter, we expect comparable revenue growth in the mid- to high single-digit range year-on-year. And operational EBITA margin should be similar to the second quarter.

Now let's turn to Automation, where orders remained sequentially stable on the level of $2.5 billion. These orders actually make it one of their strongest quarters, but still recorded a year-on-year decline of 14%. This is due to last year's high comparable, which includes a very large single booking of $600 million. You can see it in the chart on the left-hand side.

But let's take a look at the order drivers. Demand for marine as well as port automation and electrification continues to be strong. Overall, our performance in oil and gas remained solid with any disruptions linked to the Middle East conflict contained to the local market. Similar to what we see in Motion, the softer demand is noted in the process-related industries of pulp and paper and chemicals. And we still see a muted CapEx environment in the mining segment. Revenues came through slightly better than expected with comparable growth of 7%.

Overall, we generated revenues of $2.2 billion, but it came with a somewhat of an adverse mix. The higher share of revenues from the project and system integration business had a slight negative impact on gross margin. But still, the team improved operational EBITA margin by 120 basis points to 15.4%, supported by stringent cost control, not least, in SG&A. I should also mention that in the quarter, we had about 70 basis points of margin support from a one-timer. This stems from a provision release linked to a project settlement. But overall, another solid delivery from the Automation team. Now looking at the third quarter, we expect comparable revenues to improve in the mid-single-digit range, and operational EBITDA margin should improve year-on-year.

Cash was another solid point in our results. As noticeable in the chart, we didn't have the usual pattern of sequentially higher free cash flows. As you may recall, the first quarter was boosted by about $425 million from a real estate sale. But on a year-on-year basis, we improved slightly to $881 million. This was backed by good operational earnings increase, which offset the impact from higher CapEx spend in continuing operations as well as a lower cash flow in discontinued operations. But all in all, it was a good cash quarter, and we are well on track to improve our free cash flows from last year's strong level of $4.6 billion.

And with that, I hand it back to you, Morten.

Thanks, Christian. So let's finish off with the outlook. As evident in our Q2 results, we play in strong markets. Order backlog is rising and the short-cycle business is clearly supportive. We raised our growth guidance for the year to a low double-digit to low teens increase in comparable revenues. This adds confidence to our current margin outlook, which is to improve from last year, even when excluding the real estate gain in the first quarter of 2026. For the third quarter, we expect a low to mid-teens growth in comparable revenues year-on-year and the operational EBITA margin should show sequential improvement from the second quarter. So now, Ann-Sofie, let's open up for questions.

Yes. Very good. [Operator Instructions]

And with that, let's take the first question, and it comes from Martin Wilkie at Citi.

So the question is on Electrification orders. Obviously, a phenomenally strong quarter even after a couple of very strong quarters beforehand. I mean you said there's no prebuy. But I guess what everyone is trying to work out is whether lead times are extending and this is reflecting deliveries and build out further out into 2028 and beyond or whether this is sort of a near-term driver that's going to get put into the ground in 2027. So just understanding a little bit more about how you see the sort of duration of the backlog that you're building and what it means for sort of demand strength for the overall industry. So is this lead time related? Or is this really a true underlying strength in higher and higher build-outs for your customers?

I can take that. It's -- we see the strong growth here in kind of -- in all sectors. And it is -- the lead times are the same or similar to what they have been before. So we don't see any prebuys. We don't see really any change from a lead time perspective. It's more that we're getting more capacity online. That means also we can take more orders on our side, and you see that also reflected in our increased revenue guidance both for the year or for the quarter now and the year. So that's really the driving factor behind it. Just high activity level and good demand in the market.

Very good. Thanks, Martin. And then Magnus from Nordea. Are you with us, Magnus?

Magnus from Nordea. Staying on the same topic, I think Christian talked about double-digit growth ex data centers and order intake in Q2. I think we were slightly higher than that, like maybe teens or so in Q1. Could you frame a little bit if the order growth ex data centers moderated in the quarter or not?

If you can take that?

Yes, I can take that. No, the double-digit growth outside data center is definitely here in Q2, and it's a similar pattern as we saw in Q1. So let's say, the continuation of that good performance both in Q1 and now as we see it in Q2 outside data centers.

I could add to that...

So no moderation.

Yes, I could add to that also in Electrification specifically in this quarter, we had a very high comp in the utilities segment, which didn't support order growth for that reason. So otherwise, all good.

And then we have a question here from the online tool. It comes from Benjamin Heelan. Could you provide more some color on pricing trends across electrification and automation? Are there differences by geography?

Yes. No, we see for this quarter about 2% increase in price, so up from the Q1. That's also what we talked about after the first quarter. And we also said that we will, because we need some time to get that full compensation of the cost increases we saw earlier in the year, there is a bit of a lag, and that's what we are executing on and according to that plan. So that is still valid. As we said earlier, that it will be more than compensated on cost by the end of the year. Of course, there are differences here in the short-cycle versus the long-cycle. The long-cycle business, you can also do more of hedging when it comes to material and long and fixed contract. Of course, the short cycle, you cannot do that. So there's where you need to be quicker when it comes to adopting more -- being more dynamic in pricing. So we see that more, as I say, on the short-cycle business where you need to do faster updates.

Then on geographies, of course, the strongest, let's say, where we have more of inflation is in the Americas, where we see also the strongest growth. So there is where you have more price effect than, for instance, what we see in China. But also the price decline that we saw earlier, at least a year back in China, that has reversed. So that is also what gives a positive impact on pricing when we're talking about the average. But of course, that difference is still there between the higher price increase markets talking U.S. versus China, but the delta has now been lifted on both sides.

And maybe Europe, we can add kind of in the middle between the 2, I guess, it's fair to say.

Yes.

Thank you. And then we take -- move to the conference call, and we take the question from Andre at UBS.

Yes. Can we just talk about Rotork acquisition? And could you comment on what kind of drove the decision to pull trigger at this stage rather than any sort of point of time in, I think, the last 10 years that we talked about it on and off. And just one specific angle on that. In terms of customer fit, from what I understand, Rotork is obviously very petrochemical oil and gas exposed, but your DCS most natural areas of strength are rather in metals and mining and pulp and paper, wastewater rather than the hydrocarbon. So could you talk about how you can synergize these 2 across the time?

Yes. No, we looked at Rotork for quite some time and been impressed about the performance. And what we really like is the leadership in technology and on market leadership. Those are 2 aspects that we like. And it's a good fit with the electrification and automation focus from ABB and also it's very similar to Rotork. And if you look at end user and end customer exposure, you also see a very good overlap. It adds -- I mean, 40% of the business of Rotork is oil and gas. So that would add -- if you're looking at ABB overall, it's 0.5% more oil and gas exposure to our existing ABB business.

So we see rather this complementing and being able to connect the sensing and the control through our distribution -- our distributed control system, our leadership there and then the actuators, which really the act part coming from the automation system. So combining these 2, we believe, is a great fit for end customers and end users. It gives better service expansion opportunities also for Rotork when they have a wider ABB network to help. So that is where we believe there is good both revenue and cost synergies between us to be able to create that value that we are confident that we will have getting Rotork into ABB. So we are looking forward to that new opportunity.

And I'm going to...

And why now?

Sorry?

I was just -- at the beginning of the question, why now?

I think here, maybe more the timing is from an ABB side. We are running as a strong performing company. We have a good governance model in our ABB Way is well established, and we believe it's the right time also to take in some bigger assets or bigger parts into the company. So our -- this will benefit our automation business. It will benefit the overall ABB business. So we believe now is a good time.

I'm going to tie on to that with a question on Rotork from the online tool from Delphine, which says, what assumption do you have on the midterm revenue growth for Rotork?

Well, I will not comment on the outlook. I think that is something that they have to do as they are still a separate company. So I will leave that with them. And I'm sure there are opportunities to ask that question also.

Good move. We'll take another call from the conference call. Line will open up for Will Mackie at Kepler, please.

I wanted to come back to the data center end market segment and touch on, I'm sure, a subject on everyone's mind, which is the continuity of order intake that you've achieved this year. You talk about a positive price level and a positive pipeline going ahead. But could you comment broadly on how you see that pipeline maturing into orders in Q3 and Q4? And do you see the current levels of demand that you've just booked sustainable going into the next couple of quarters?

Yes. Thanks. We have had seen a very strong comparable growth, of course, coming into these quarters for the Electrification business, reaching the first time about $5 billion in Q4, first time about $6 billion in Q1 and now the first time about $7 billion. Continue always making records in business. I haven't seen that happening kind of that always happen. So we should kind of be a bit also aware, of course, of that one. But in general, we see a very strong pipeline also when we're talking about our large customers in this field.

So the capital allocation and the investment plans are clearly there. It's our ability, of course, then to -- we don't take orders that we cannot commit to the right execution date. And that's why -- but we see -- have a strong and a positive outlook also when you look at the future for the data center sector. But I think we should also recognize there will be kind of a variation in the order intake. We -- you may remember everyone after Q1 last year, where we had kind of less of bookings or large order in that quarter, then now we had some very good quarters behind us. But in general, we're looking at a strong demand and also a good outlook for the data centers. But I cannot promise you that we will continue to make that kind of records that we've done every quarter now. So you will see some variation in the order intake in the -- but the longer-term outlook is still is very strong.

Thanks. And then we have next in line, Max from Morgan Stanley.

Just -- my question is just around the electrification revenues and your capacity. So if orders are running at this sort of $6.5 billion to $7 billion level and we end up, let's say, at $27 billion of orders plus, I'm just trying to understand kind of how quickly that can convert into revenues and kind of how much capacity you have? Because I guess if I look at your sort of sales this year, they're going to be, say, $21 billion. And if we think about kind of a lot of this capacity or a lot of these orders being for delivery in '27, my interpretation would be that there'd be no reason that the growth should slow down. We should be landing at somewhere around $25 billion. I guess I'm just trying to understand how quickly and how high can revenues get up to next year? And can we see kind of $25 billion, $26 billion? Is that realistic with the capacity that you have?

We're quite early here, Max, when it comes to talking about '27 already. So -- and we will get there in January with more guidance for the '27. But what I can...

But you have the backlog, you're kind of locked in for a lot of it, I guess. So yes...

True. And what we will see is more kind of also the short-cycle business, the book-to-bill is where we will see how then the total turns out. What I can talk about is kind of the capacity build-out. You know that we have, over time, invested and increased our CapEx now for many years. It's investments in United States, investments in China, in India. We also announced in this quarter $200 million expansion and additional CapEx into Europe because we see -- we talk now a lot about United States and the data center build-out. But as Christian also referred to, we're seeing a strong demand. Also, we were up 12% in Europe in this quarter, 12% in Asia and Middle East, Africa.

So if you're looking at -- we are adding capacity to be able to deal with the higher order backlog that we now have in place. So of course, our -- we -- as I said earlier, we do not take orders where we don't are fully committed that we can deliver on time. That is a very important part of the lessons learned from the past. And that's one of the things that I think is also helping us winning share, seeing as one of the most reliable partners in this space. So the order intake, what we can show today is based on committed capacity that we have in place or are being built.

And what was -- why we increased the guidance is we see that some of the capacity that is now coming online based on previous year's investments is giving the expected benefits, the expected increased capacity. And this is a continuous job now on expanding more or less every -- especially in Electrification, every unit that we have with more square meter, more robotics, more automation and more people online, which needs to be trained. And we are on a good journey there to be able to execute on this and get that order backlog into revenues.

Maybe just one clarification. Do you have any orders in your backlog that extend into '28 already? Or is all of this now still for '27?

No, we have also for '28, especially if you talk about automation business, there, you will see many -- the pipeline, for instance, in the cruise segment much being much longer.

In Electrification, sorry, in Electrification.

Well, there are also in Electrification, they are also part -- part of the portfolio goes also into these like in cruise ships, into mining and also some of the data centers. So this is not all for '27. It is also into -- some in '28. So that's kind of from all parts of the business.

And I'll take one question here from the online tool, which is linked to electrification orders, but not on a year-on-year perspective, but rather sequentially. Were there sequential improvements across all end markets? Or was this focus largely in data centers? And the question comes from Benjamin.

Yes. We -- in -- as you say, what we looked at now is the year-over-year. If you look at the sequential development, there, the biggest driver was clearly the data center industry. But again, strong performance on the utility sector there, I think we have more of a strong also increase in this quarter because there -- versus Q1, while from last year there, it was more flat. So you have all this -- you're starting to get more complex now with the sequential and the last year. So we need to get all these numbers in place. But sequentially, the main driver for this quarter is in data center, if you look at the big picture for Electrification.

Yes. And then we open up the line for James Moore at Rothschild.

My question is on EL and mix. Could you comment on the share of 2Q orders at $7.2 billion and 2Q sales of $5.2 billion from data centers as a percentage? And within the data center orders, can you comment on customer and product mix, both on customer. Was the colo orders faster than NeoCloud or hyperscaler or the other way around? And on product, is it that you're seeing a much higher growth in medium voltage, say, than low-voltage GPS and PDU or a different view of that, just to help understand the composition.

When you talk about the product mix, there is kind of no -- there's nothing that stands out. It's more kind of you do -- most of the projects we do, we do medium voltage and low-voltage switchgear. Then there are sometimes we do -- I mean, on the UPS side, it's a bit -- there is a difference there. We are much stronger on the medium voltage side. So -- but there is no -- really no shift between them there.

Where we have gained solid traction and market share is in the medium-voltage UPS. I think that is a stronghold that we see more customers who like that technology and that we have booked more. If you look at the percentage of -- for the quarter, I mean, I'm looking at Christian.

On order percentage. I mean, of course, with the triple-digit growth in data centers, it's fair to say that data centers is growing at a faster pace, which mathematically makes the share bigger for electrification in that space.

But there's -- what we don't see is any -- there is no change also in our kind of the mix between hyperscalers and colocation. That is also the same. So it's more that it's just -- it's a higher activity level where it's a similar customer base. It's a similar -- or the same kind of mix of products. So there is no kind of standout. It's just the whole segment is running faster. So -- and that goes also to geographies, very kind of -- if you look at the big picture, United States still driving it, but we also made significant wins in the data center segment, both in Europe and also in Asia this quarter.

Okay. Thanks, James. And then we have next in line, Jonathan at BNP Paribas.

Maybe just on the whole M&A. First of all, trying to understand the synergies. Do you have an idea what the bill of materials for an average Rotork actuator was? I'm particularly interested really in how much of those materials, those subcomponents ABB will be able to make now? And was Rotork a major -- do they buy much from you to begin with? Is there a big cost synergy angle? I'm thinking about motors, controllers, things like that.

Then how much further will you take this? Do you have any interest in moving a layer even lower into valves? Or is actuation as deep as you're willing to go? And then just finally, also on M&A, more maybe on the maybe exit side. I see e-mobility losses now are only $18 million. Are we still on track for, say, breakeven by the end of the year? And if we get yet, does that open up the possibility of an exit in 2027?

Yes. Thanks, Jonathan. On the synergy side, there is -- the synergies really on the revenue side majority where we can combine our offering and coming up, as I say, a stronger end user preference and be able to drive the growth here as a combined offering, but also especially in the field of service with the very wide service network of ABB being present literally everywhere through ourselves or with service partner, I think, opens quite a lot of new service opportunities for that offering.

Of course, there are in the field also on procurement when you talk about component level, it's more -- as always, you will look at where -- what's the best buy between the 2 and how you can leverage that bigger volume as part of ABB. So that would also, as always be part of it. That's kind of how we will always look at to say how we can drive efficiency and competitiveness by also looking at in the field of procurement and manufacturing in all aspects of it.

On the e-mobility side, we see, as we said, much less losses in the Q2 compared to Q1. We are having a plan that gets us to that breakeven by end of the year. If the revenue plan as forecasted now can be met, we are -- we have that kind of line of sight to get there. And that was always the plan, and we are getting there. We will move on, but that is more of a 2027 event because, as I always said, getting the upgraded product portfolio, which is done, getting the business to a breakeven or profitable level, which is ongoing, and then we will take the final step when we are ready to that also, and that's something we will come back to in '27.

Maybe just to clarify, so the breakeven would be at the end of a year for the individual quarter. And then we have, as we said, maybe estimate around $50 million of losses for the year.

Thank you. And then we take the next question from Kari at SB1 Markets.

Yes. Kari at SB1 Markets. Yes. Can you hear me?

Yes.

Yes. Not surprisingly, I want to go back to Electrification and the data center order intake. And the rate of growth, 100% plus for the first half of the year. So can you give us some indication of how much of that is volume -- or the underlying volume for the whole segment? How much of that is market share growth given that you have added capacity and how much of that growth is price. So if you can just rank those and give some indications of ballpark between those 3 drivers, that would be very helpful.

Yes. The price to start there, I say, is in line what we said earlier is about 2% that is for the overall some -- and it's not like it's one segment that is really sticking out. It's that -- so you can use that same but a couple of percent for or 2% for -- on price. When we're looking at the mix, as I said earlier, between geographies, we see good momentum both in Americas, but also Europe and Asia on that side. And from the -- and also the mix between customers, there is no real change there. It's just higher activity level in the segment. So that's -- and I can just also say this, we -- I mean we're working with our -- the large partners that we have and our customers, to say the the outlook when it comes to new projects is strong, and you will see some of the capital commitments that's being made.

And of course, we are -- we believe that we are in a strong future position to win those projects. We have -- if you look back, we have gained share, market share in this segment, at least from the first quarter. I believe that trend will continue in -- also in this quarter. I guess we need to see kind of the full reporting before we can make that claim. But we are on a track where the closeness to customers, the offering we have has been a winning combination. And of course, that is to -- and that's what our ambition is to keep on that journey and winning share in a good market.

But can you help me understand why price is such a modest driver because it seems to be that the costs related to data center build-out are going up quite significantly in pretty much everything. So how -- why is not your gear going up in price more?

Well, when I talk about the 2% increase, there are -- as we said earlier, there are differences between regions, between China being lower than compared to the United States. You also have to remember that many of the hyperscalers are very large customers, and they have also leverage in a price negotiation. So -- but we believe with the pricing and the -- and how we have been running it, we kind of have been able to kind of protect margin, but also winning share, and that has been the formula that we have followed and that we will follow as well. So of course, the -- we're not leaving price on the table. On the other hand, it is -- you have to find the right balance, and we believe that we have a pretty good balance right now.

Thank you. And then we take one question here from the tool. It's from Thomas Jager, who says, your margin guidance for Q3 '26 of sequential improvement versus Q '23, what drives it as historically, margins were largely flat Q3 versus Q2?

Yes. No, it's correct. You would assume they're pretty flat because historically, I think the 4 last year has been very flat between Q2 and Q3. This time, we're guiding for a slightly -- or what we expect is a slightly better or even an improvement in the third quarter, and it really comes from the strong revenue growth that we are guiding for as well and normally a good drop-through of margin in the -- especially in the electrification business or product-related businesses. So that is what is the background for the guidance.

And it also fits what we said the whole time on the price to cost input trend that we saw have a bigger gap in Q1. We shrunk that gap now a little bit in Q2, and then we expect to improve that as we have said earlier, in the second half of the year, too, which is also a contributor to this.

Thank you. And then we take the next question from Sean at HSBC via the conference call line.

I was intrigued to see that you're now specifying data center cooling as one of the order segments within Motion. So just keen to get a little bit more detail here. I mean, how much of total Motion are data center -- is data center cooling now? And what kind of growth rates do you see? Is this also a triple-digit growth area? And specifically, I believe you've talked about being a component supplier to cooling, maybe a little bit where you see the key drivers of your growth ambitions in data center cooling.

Yes, I can start there. Where we play as Motion with our drives and motors is to be the, as you say, component provider to the cooling companies. And we are partnering with all of the major cooling companies in the world who delivers those air cooling or large chiller units that sits in the data centers today. We're also part of the cooling when it comes to the liquid cooling or the units with the -- that is -- in the end, it's a pump that is pumping that liquid into the rack. So you will also see a quite good benefit from us when it comes to -- in the liquid cooling of motors, drives and also electrification products that sits in. So that's kind of what is relevant for us. And we are partnering with all the different cooling companies because we are not a cooling player ourselves. So we are more partnering that -- and then the end user or the hyperscaler will discuss which cooling company do they want to work with and then we can do the electrical part, and they will do the cooling part. That's a partnership how it works for us in cooling.

We -- in Motion, we saw a strong order intake growth also in this quarter, up, comparable basis, 18%. Part of that is also coming from the data center. It becomes more and more an important part through kind of the HVAC or the cooling business of Motion. I don't have the exact -- I don't think we have given out the exact percentage as we have done for electrification, but it is a good part of both the drives and the motor business that goes into these cooling companies. But it's very often a similar unit that sits in a data center that will sit on top of a large commercial building when you need to cool a building. That doesn't really matter if it's data center or a commercial building as an example.

But I think it's fair to say that we don't see -- the growth rates are not as high as you see in Electrification.

No.

And then we take the next question from Daniela at Goldman Sachs..

Hope you can hear me. I was wondering sort of following up on data center more into the developments that are coming up where people discuss a lot of VDC 800. I think we've seen some of your Asian peers starting to sign VDC 800-related MOUs. Do you see any momentum on that? Are any of the orders already related to that? Or should we be expecting them soon? Just curious how you see the development for that if it is still far away or starting to materialize.

Yes. We have 0 order in the backlog for 800-volt DC data centers and nobody has because there is waiting for the kind of availability of components from the NVIDIA and the like. So that's the next step. But of course, what we are working on is building up the complete portfolio, so we are ready to support that 800-volt DC data center architecture, which is coming into -- more into the late '27 or '28 onwards. That's where this will start to have a commercial impact. But the investment we are doing right now is on the technology side. DC has been a high focus and high attention for us for many, many years. We are already a leading player in the field of DC switches, DC breakers, DC components. And then we also see that more of this will move to some of the medium-voltage side with a new architecture, which, again, it will give new opportunities for our medium-voltage UPS.

And so here, this is a field that we are allocating quite a lot of our R&D investment into that area. We're also doing partnership we've made -- and also acquisitions. We announced a couple of days ago an acquisition in France, Advantics that is coming in with DC technology, with silicon carbide technology and joining the Electrification team supporting also here DC in data center.

So it's an area of high attention for us. Most of the development work we will do in-house, but then also with some acquisition and partnership. And that is -- we believe this is a good opportunity for ABB because as you may know, DC technology and DC grid, it's we were one of the first companies here or the first company to talk about DC grids in ships, which is today the standard, and we are using a lot of that know-how and internal development also now into that data center space. And so that is more to come on this topic throughout the year on how we're seeing that future.

Yes. Maybe a bit of a commercial break here for our webcast on the 24th of September on the DC topic. You'll find the details on our -- on the website, ABB Investor Relations.

And then we open up for a question from Kulwinder at AlphaValue.

So my question was also on Rotork, and I wanted to actually just understand the service opportunity a bit better. What is the potential for you to increase the penetration of service within Rotork because as I understand, it's about 24% of 2025 sales and the company was already on a trajectory to increase that. So I just wanted to see where ABB could take it. And then does Rotork also give you a sliver of opportunities on the data center cooling and nuclear side as well?

Thanks. We -- as I say, I will not go into the numbers as that is for a later stage in this process. But what I can say is that service is one of the areas where we believe that the ABB service network can help and accelerate a well-performing service business already, but to expand that even more. We believe that is one of the good opportunities. And then, of course, there are many areas you mentioned, for instance, both data center where you do need actuators for cooling applications, the marine side, there is many -- the nuclear side in power. There are all areas where actuators and electric actuators are needed and beneficial, and that is more of kind of for areas that needs to be, of course, explored, but I will leave that to a later stage when we have closed the transaction and when we take this business together.

Very good. And we have a couple of minutes left. So let's see if we can squeeze one more question in. We open up the line for Alessandro at Octavian, please.

It's on Rotork as well. And I guess you might tell me that you postponed the answer here. But I would like to mark the point, if I look at your indication for the multiple -- acquisition multiple after synergies in mid-teen level, and I make a couple of calculations with a few assumptions on the depreciation, et cetera, I calculate return on invested capital on this $5.5 billion like, I don't know, between 5% and 10%, I would say. So in my opinion, you kind of need to double EBIT on this acquisition going forward. Do you agree with this? And do you have a plan to do that? Can you share some indications?

Well, maybe not to necessarily counter your calculation here, but like we said, if we look at the multiple at acquisition at 19.5%, we do feel that we have synergy opportunities that will bring that into the mid-teens. And those synergies, as we have referred to before, it's going to be both on the cost side, but majority on the commercial and growth side. So I think we certainly don't come to the calculation that we have to double the EBIT if I understood your question right. This is a high-performing business that will be accretive to ABB, second year accretive to our EPS, and it comes in at a high performance level. And we look forward to that -- utilizing these synergies like we said. Yes, I think that's it.

That's it. And that's also it for this call. We're up on the hour. So we close it here. Again, a reminder then about that commercial break for the webcast on 24th of September. I hope to see you there. And until then, have a nice summer.

Thanks.

Greetings, and welcome to this presentation of our first quarter results. As always, we have our CEO, Morten Wierod. And now for the first time, we meet our new CFO, Christian Nilsson. Christian, you may be new in this setting, but you've been with ABB for about 9 years as CFO of Electrification. So by no means a newbie to ABB in that matter. Great to have you here at the quarterly desk.

Great to be here.

I'm Ann-Sofie Nordh. I'm Head of Investor Relations. Morten and Christian will talk you through the results, presentation as per usual, and then we open up for Q&A. And without further ado, I hand over to you, Morten, to kick off the presentation.

Thanks, [ Ann-Si. ] And it was good to see the quarter develop pretty much according to plan. This despite the escalated situation in the Middle East. Our priority has been to support our employees directly impacted by the conflict and do our best to keep our colleagues safe. When it comes to the business and our own operations, it has continued pretty much as normal. And overall, we have so far not seen a material change in general customer behavior.

I would say that our first quarter order intake is evidence of that as we, for the first time, reached orders of more than $11 billion. We improved across all P&L headlines. We had a record cash flow for our first quarter and ROCE was at a standout 27% and about 25% without the real estate gain. I'm pleased with the quarter. In February, we published the 2025 Sustainability Report. This shows a steady progress towards our 2030 targets.

One example is us reaching nearly 23% of women in senior leadership roles. So we're closing in on our 25% target. And we have made strong progress from the 14% level 5 years ago. Looking at our Scope 1 and 2 emissions, we have now virtually reached our 80% reduction target. And another KPI is our waste to landfill, which we have reduced to 5.3% from 8.4% in 2019. And perhaps above all, it is very good to see that our employee engagement score keeps going up every year. For 2025, we reached a score of 80. This is up from 75 when we started the ABB Way journey back in 2020.

We always strive to improve, and this is an important tool for us to capture focus areas to prioritize. The employees are our most important asset. I am sure we will get to the topic of capital allocation at some point today. Outside of investing for organic growth, we distribute $2.1 billion in dividends. This corresponds to about 1.3% in dividend yield based on recent share price. And in early February, we launched an annual buyback program of up to $2 billion. If fully utilized, this is about 1.2% of current market cap.

I've already messaged that we want to allocate more capital to acquisitions. Cash flows should continue to be strong. And with net debt-to-EBITDA of 0.3, we have plenty of headroom. So theoretically, we can make rather sizable deals. But like I've said before, base case is small- to midsized bolt-ons, and then we aim to add somewhat bigger deals on top. And big, to me, would be along the lines of $4 billion we spent on Thomas & Betts and Baldor a few years ago. It would be great if we could get some deals up to that size.

But key for us is the long-term value creation. I would rather make no deals than bad deals. And I have told the team to do the right thing and step away if multiple becomes too demanding. But the teams are active, and I'm feeling hopeful that we will deliver also when it comes to M&A. Another proof point of us spending money in the right places is the automation team's launch of its Automation Extended program. This is a strategic evolution of our DCS systems where we have the world's largest installed base.

These systems are at the heart of industrial operations. But the customer's dilemma is that their control system must evolve to support digital and AI capabilities, but they don't want to disrupt operations in a process plant running 24/7. Automation Extended is our way to help customers solve this problem. To do this, at the customer site, we create an ecosystem which includes 2 distinct yet securely interconnected environments, one being the core environment that controls critical processes. The other is the digital environment, which enables advanced applications, intelligence and real-time analytics.

The secret sauce is that we have connected these 2 environments with external clouds through a unified management and maintenance service systems. And combined, this enables the customer to modernize without touching or disrupting the critical part of operations. In my view, we are uniquely positioned to offer this type of solution. Now turning to Q1 orders. The chart shows the record high bar of $11.3 billion. On a comparable basis, this is up as much as 24% and it is very good that the strong development is broad across all 3 business areas.

But at 44%, I think it's fair to say that the orders surged in Electrification. On top of this strong comparable growth, our total order intake was also supported by a material FX effect of 7% and 6% on revenues, mainly due to the strengthening of the euro against the U.S. dollar. But let's focus on the business and dissect the market a bit. The short version is that we see persistently high demand across most of the main customer segments.

On the positive side, data centers clearly stands out. Other segments to mention would be a strong utilities market with investment in grid build-out, stability and reliability. Customers are also continuing to spend on upgrades of electrical infrastructure for land-based transport. And linked to transport, we still see good market conditions in the marine and rail markets. And the same goes for commercial buildings with a related HVAC market.

Looking at the developments through the quarter, the overall demand remained strong throughout. So for us, the Middle East conflict has not changed the overall demand picture so far. If we zoom in on the Middle East region specifically, there is no pattern of a weak March for neither Electrification nor Motion. It was only in Automation where weaker March was noted. And this only relates to the Middle East region where Automation has an energy-linked customer base.

For the group, the Middle East represents just below 5% of revenues and Automation is about 1/3 of this exposure. Looking instead at the Gulf States as an isolated group, this is about 3.5% of sales. Turning to revenue of $8.7 billion. The usual pattern of sequentially lower Q1 is visible. But year-on-year, the comparable growth of 11% is even a bit better than we expected. The beat is linked to the stronger deliveries in both Electrification and Automation.

Despite the backdrop of high geopolitical tension, there was no change in customers' willingness to receive shipments. And on the flip side, there was also no indication that demand was artificially boosted by customers' stockpiling. Revenue increased in both the project and short-cycle businesses and higher volumes was the biggest contributor to the strong organic growth of 11%. The teams are focusing hard on price management. It is key to balance the trust and long-term relationships with customers, whilst at the same time, defending our profitability.

The price component was close to 1% in the quarter. At a net total, we delivered another positive book-to-bill now at 1.29. The backlog is at a record level of $27.5 billion, up 22%. And in my view, we performed well in a strong market. I mentioned that orders increased across the business areas. The same goes for the different geographies. All 3 regions were up by double digits, led by the Americas at 48% like-for-like. Looking specifically at the U.S., orders increased by 67%. This high number includes some large bookings, but also base orders were very strong and improved by about 30%. Europe was up by 13% with a stable to positive development in all our top 5 countries. AMEA improved by 10%, supported by the 3 largest countries in the region.

Let's turn to earnings, and this chart also shows a record quarter. We delivered operational EBITA of just over $2 billion with a margin of 23.5%. This total was, of course, supported by the capital gain of $377 million from the real estate sale. When disregarding these gains in both this and prior year, the margin was up by 70 basis points. 50 basis points of this was achieved through stronger business performance and the remaining 20 basis points was the net impact from FX and portfolio changes.

I want to talk through the gross margin of 39.4%. This is a decline of as much of 290 basis points from last year. The bigger part of the drop, about 2/3 is due to unrealized FX and commodity hedges. But there were also operational impacts from portfolio changes in Motion with the Gamesa deal now impacting the full quarter. And we had a bit of a price-cost gap. I'm sure you remember that in our Q4 presentation, we talked about the time lag between price adjustment and realized P&L effect.

We highlighted it specifically for Electrification, and we see it in the numbers for Q1. We also have a negative mix effect in both Motion and Automation, a consequence of higher deliveries from the backlog-driven project business. In fairness, 39.4% gross margin is still a very decent level, but I never like to go backwards even if it's mainly due to the unrealized FX and commodity hedges.

On a positive note, we improved operational EBITA margin through stringent SG&A cost management. These costs declined to 19.2% of revenues from 20.8% last year. All in all, operational EBITA increased by 37%, 28% in local currencies and margin was up by 320 basis points, out of which 50 basis points is real business-driven increase. Q1 was a challenging quarter with plenty of external volatility. And in my view, the team has done a very good job managing all of it, and I'm pleased with our results.

And with that, I hand it over to you, Christian.

Thanks, Morten. And let's now take a look at what happened in the different business areas, starting with Electrification. And Morten used the term surging orders. It seems a fair comment considering the comparable growth of 44%. Add to that 7% from FX, and we arrived at a new record order level of $6.6 billion. You see it in the chart on the left on this slide. It is clear that Electrification market remains very strong. The good thing is that there is strength across the customer segments. In fact, all main segments increased at a double-digit rate.

And looking at data centers, it was up triple digits. For this segment, we had an order CAGR of close to 35% in 2019 to 2025. And the data center orders were very strong in both Q4 and in Q1. Pipeline looks good, and we expect this to be another strong year. Another segment I want to mention is Utilities. Investments in the efficient, smart and reliable grid are needed to make power available and accessible. We see this happening, particularly in the U.S. The biggest segment in Electrification is Buildings at about 30% of revenues. 2/3 of that goes to Commercial segment.

And this market continues to be strong. The residential market, on the other hand, remains generally muted. We, however, performed well in the quarter and actually had growth also in the Residential segment. Now turning to revenues. We outperformed our own expectations. Short-cycle business came through stronger. This resulted in comparable revenue growth of 15% and revenues of $4.6 billion. The chart shows the usual sequential pattern of Q1 being slightly lower than Q4 and then growing sequentially into the second quarter. We expect this pattern to be repeated also this year.

Higher volumes drove majority of the comparable growth and price added about 1%. The team is working on price management, but like we highlighted coming into the quarter, we had a price-cost gap. Pricing did not quite fully offset higher costs for commodities and tariffs. We expect that this gradually improve as we progress through the year. But on back of operational leverage and higher volumes as well as good SG&A cost control, Electrification increased operational EBITA by 25% to $1.1 billion.

This reflects an improvement of 17% in constant currency. Margins reached 24% and was up 80 basis points from last year. All included, the team did a good job delivering record orders, record earnings and a record first quarter margin and a strong cash flow. For the second quarter year-on-year, we expect comparable revenue growth in the mid-teens range and operational EBITA margin to improve.

Now let's turn to Motion, which also delivered a record order quarter. 9% comparable growth, plus 3% acquired growth and another 6% from FX. This resulted in total orders of $2.5 billion. The segment pattern was very similar to recent quarters. We had a positive momentum in areas like food & beverage and HVAC for commercial buildings. Similar to Electrification, customers continue to invest in grid stabilization to secure power availability. On the softer side, there are the process industries related segments like chemicals, cement and mining.

Orders in Rail declined in the quarter, but I would say this is more due to timing as we continue to see this as a strong area for us. Revenues of $2.1 billion had multiple drivers, led by comparable growth of 7%, portfolio changes added 3%, and this is the Gamesa acquisition, which is now fully incorporated in the results for the full quarter. But there's also material FX of 6%. All in all, book-to-bill was positive at 1.19 and backlog increased to $6.6 billion.

So based on Q1 revenues, Motion has a full 3 quarters of revenue in the backlog. That's good top line support for this and next year. Operational EBITA was up by 11%, but the margin dropped by 110 basis points to 18.5%. There are several items to keep in mind. While the Gamesa deal comes with revenues of just over $60 million for the quarter, it made a small loss. This is according to expectations for the deal. But right now, the dilution of margins is significant at 70 basis points, and this will be dilutive for 2026 as a whole. Our plans allows for a couple of years to bring profitability to double digits as we embed the offering in our broad leading market reach.

The second point to mention is High Power division, where we had some operational inefficiencies. This diluted the margin by about 15 basis points. The team is on it, and we expect it to be resolved during the second half of the year. And lastly, in the quarter, we had an adverse mix from higher share of revenues from the backlog-driven project business. For the second quarter, we expect comparable revenue growth in the mid- to high single-digit range, and we expect operational EBITA margin to decline year-on-year on reasons we just mentioned for Q1.

Now let's turn to Automation where comparable orders increased by 5%. Morten mentioned earlier that this is where some market disruptions in the Middle East region was noted towards the end of the quarter. Energy plans have been targets for attacks, and these are Automation customers. But so far, any change in demand patterns is contained to the Middle East region, which is less than 6% of Automation's revenues. From a segment perspective, both Marine and Ports continued a strong trend. Oil & gas was down on a challenging comparable. On a high level, this market remains solid, but with the added uncertainty I just mentioned. Customers in the Nuclear segments continue to be active. Mining orders actually increased in the quarter, although in general, this market remains a bit on the muted side for us.

Orders in the discrete market, meaning machine automation, were up strongly on a comparable, which is still at a fairly low level. We see the general market for machine builders still being fairly cautious. Continued soft environments are still noted for chemicals and pulp and paper. Revenues were stronger than expected also in Automation. On a comparable basis, we're up by 10%, with a full 8% in additional support from FX. So in total, revenues accounted to $2.1 billion. These higher revenues came with an adverse mix compared to last year, meaning we had higher share stemming from backlog-driven project business.

This hampered the gross margin, but the team more than offset this with stringent cost control in, for example, SG&A. As a net total, the operational EBITA margin improved 50 basis points to 14.7%. Making the same reflection on revenue coverage as for Motion, the Automation order backlog now sits at $10.4 billion. This covers nearly 5 quarters of revenue using this Q1 as a base. Looking into the second quarter, we expect Automation's comparable revenue to improve in the mid-single-digit range. And operational EBITA should improve year-on-year.

Now let's move to cash, which was another highlight in the quarter. The strong outcome was a result of improved operational cash flow in combination with a larger release on trade net working capital year-on-year. So despite higher paid tax and pressure from discontinued operations, we virtually doubled the free cash flow from last year to $1.3 billion. This includes a contribution of about $425 million from the real estate sale. This makes it a good and improved delivery from the business.

So well done to the team. We had a strong start to the year, and we feel confident in our business performance. So we aim to slightly improve the full year free cash flow from last year's $4.6 billion. This will be supported by higher cash flow in the business and a higher real estate impact. Then we have some anticipated offsets in the bridge.

First, in continuing operations, we assume some headwinds from growth-related buildup of net working capital. Then we have offsets in the discontinued operation linked to the robotics divestment. This includes $300 million of tax cash impact from closing the deal. That's leaving about $100 million for 2027. Then we also have $100 million more in CapEx for the building of the robotics hub in Sweden. So all in all, we should be able to slightly improve free cash flow in 2026.

And with that, Morten, I hand it back to you.

Thanks, Christian. Now let's finish off with the outlook. And we raised our ambitions for the year, both for top line and margin. It may seem bold to do it now when we don't really know the full impacts from the Middle East conflict. And admittedly, the risk for the global economic trading environment has escalated. We base our outlook on what we see and know now and make a judgment call on that.

If there are major changes or disruptions outside of this, we will adjust to that new reality. We have a backlog of $27.5 billion. Markets were overall strong in Q1. And so far, our customer interactions give us confidence for the year. For 2026, we still expect a positive book-to-bill, but we raised our guidance for revenues. We now expect comparable revenue growth to be in the high single to low double-digit range. And the operational EBITA margin should improve year-on-year even when excluding the real estate gain in the first quarter of 2026.

This is up from previous guidance of slightly improved. For the second quarter, we are up against a challenging comparable order intake as last year, we booked the $600 million order in Automation. That said, we expect a positive book-to-bill. Comparable revenue growth should be in the high single to low double-digit range and the operational EBITA margin should improve year-on-year. So now [ Ann-Si, ] let's open up for questions.

Yes. Let's do it. [Operator Instructions] also limited to one question, please. That way, we will allow for as many of you as possible to be heard. You can also put questions through the online tool on the webcast, and I will voice those questions over from here. And with that said, let's open up for the first questions, and we do so with Phil Buller from JPMorgan. Phil, are you there?

I am here. I'd like to dig a little bit deeper on the Electrification performance, please. Do you believe that there is market share gain happening here? This surge in demand, is it company specific? Or is this an end market topic? Can you talk about the book-to-bill, excluding data center? Because you talk about this broadening out of growth, but what's the data point behind that, please, in terms of the book-to-bill? And on the growth that we're seeing in those orders, is it fair to assume that pricing is more than the 1% that's running through the P&L, please?

That's a long one question. Let's see how we go.

Yes, I may start here. If we are gaining market share or not, that is, of course, it's the -- I probably know -- we will all know more about that a few weeks from now. But our focus out in the market and when we look at the customer feedback, I think we are growing probably a bit more than the market these days. So that would be the kind of more of a general statement on that front.

We also see the book-to-bill in Electrification very strong. And I think there also without the data center, data center, we're talking about in Electrification, the triple digit growth, while we're looking at the non-data center business, we're talking about double-digit growth also there. And I think that's important to note, kind of, it goes for as expectation, it goes for the whole company. 90% of ABB is not data center, and that is growing very strongly, but then you put the data center growth on top that is giving the very strong performance of the first quarter.

For price, we see about 1% in the first quarter. There will be -- there is a bit of catch-up, as we said earlier as well, because we have seen raw material pricing coming up with higher volatility and bigger increases. And so there was a bit of delay. We are confident by the year-end, we will catch up also on that front that you have a full compensation between cost increases and the price point. There are -- when I talk about the 1%, that is for the whole company, but it is also relevant for Electrification. We do see more as expected of price increase in Americas and less in Asia due to a bit of, like, China as one example. But that is -- but also we see a positive -- slight positive trend also on price in China. So that's a bit on how we see the Electrification part.

Thanks. And then we open up the line for Anders at ABG. Anders, are you with us?

Fantastic. So I just wondered about your capacity basically in Electrification given this very strong order trend. I mean, previously, you talked about even having some capacity slack in the U.S. And I note that you now add, well, another $100 million to the CapEx budget. So could you maybe just update us on that? And maybe also in connection to that, just the margin potential that you saw, particularly in the U.S. in terms of Electrification, what's the progress report on that given these additional volumes?

We are taking and getting more capacity online in the Electrification, but it's not only Electrification, goes to also Motion and Automation. But of course, the majority of CapEx has been spent in the last few years in Electrification. And we are doing that as well. We've guided also a bit higher CapEx spend this year. And we see that because with the order increase that is also needed.

The capacity expansions that are -- is now coming online, what kind of money that was spent 2 years ago and last year, this is now coming into more capacity. We talked earlier, I can give you a practical example from our smart power unit in Senatobia, Mississippi. That factory is double the size today compared to what it was 3 years ago. But the production line is this year putting it into on place. And that means -- and we are hiring more people, we're training and you're getting capacity kind of month-by-month, quarter-by-quarter up because building new capacity doesn't come in stepwise.

You can complete a building, but getting automatic production line, getting people trained and getting that efficiency gain that you also need month-by-month, it takes some time. So that's what we're seeing happening now. I don't think we are the limiting factor when we're talking about build-out, especially like in the energy expansion. We know the equipment like gas turbines, large power transformers is more of a limiting factor when it comes to than we are on switchgear and the component level.

We're also expanding capacity by appointing new partners, what we call the OEM partners, the ones who will build switchgear and build more of the -- do the system integration on ABB's behalf. And that is also how we can scale up capacity without doing everything in-house, but using that kind of partnership network. We look at the margin expansion in the United States, I mean, first of all, we don't give detail in our quarterly report, but we have said earlier kind of where we are developing.

And this is as we get more capacity online, as we get more efficiency out of that new capacity, we also see that margin, it's going up, but we are still not on the expected level. Our U.S. Electrification business is dilutive to the rest of Electrification, performing much, much better than before, but still a gap up there to the average level. And as you may know that many of our, let's say, peers in this market, the main profit pool comes from the U.S., and that is not the case yet for ABB. So that's the upside we have talked about. So hard work still remains, but making steady progress.

And maybe I can add to the U.S. margin, Morten. As a reminder, this is, of course, good that we see these volumes coming in because that's one driver of the margin. The other one is the continuation of the build-out of the operations in terms of robotization and automation. And that is also, like Morten said, we are expanding that and that also is a good driver of the continuation of the margin expansion in the U.S. with Electrification.

Very good. Thanks, Anders. We take one question here from the web tool, and we have [ Coll Winde ] here who wants to know, I want to better understand the growth in the Short-cycle businesses across the 3 business areas. And if this growth has benefited from large projects?

No, it has not benefited from large projects, that it hasn't because the Short-cycle business is more smaller projects, faster moving. What I can say is that when you're looking at the size, it is in all 3 business areas, Automation and Motion more in the high single digits, while in Electrification, we see double-digit growth on that side.

So it is very much which -- what I like to see. It's a kind of across the board. It's not standing out in one segment or one geography or one division or business area. It is really across the board. And I think that's what was very encouraging to see in this quarter.

Yes. And then we open up for another question from Martin at Citi.

Just to come back to data center. So obviously, across the industry, including for yourselves, Q4 was a phenomenal quarter and you've sort of beaten that again. What sort of drove that beat? Because I'm guessing you have some visibility in the pipeline. I guess it's quite a big uplift relative to what everyone thought sort of 3 months ago. Just to get a bit of an understanding as to sort of what drove that? And how does the pipeline still look when you're looking at sort of customer build and so forth for the remainder of the year?

Thanks, Martin. When we're looking at the data center profile, it was many projects. It's hyperscalers, yes; it's colocation; locators, yes, it is -- it's Europe, it's Asia, but it is a big part. You saw that also with 68% growth in the United States. Of course, a lot of that also sits in -- from data centers. So that's kind of -- so it's really -- also here across the board. There's no kind of call elephant orders. There's no -- there's many or it's just high demand, what we see from -- especially from hyperscalers where we, as you know, work with all of them and making good progress there, but also increasing with scope.

You heard we talk about the medium voltage UPS earlier. It's a product that is gaining also traction and gaining more share in that market. So that, of course, for us, that's a scope expansion that would give us additional growth compared to others as we were historically not that -- didn't have that share on that market. So overall, just a very solid and strong demand in [indiscernible].

So if you look in the outlook and our pipeline, it's still very strong. We have -- that's also the basis of the confidence that we're having when we're talking about the outlook. The discussions, we are more, of course, executing what we're doing, but we're also putting a lot of efforts now into our technology road map into how we are able to supply that 800-volt DC architecture that comes a year or 2 from now. None of the orders what we show today is related to that. This is all new projects to come. But we do see still a very solid -- very strong pipeline and the feedback from the customers in the discussions that we have is very positive and more about how we can do more and how we can help them to expand faster.

Thanks, Martin. And linked to the data center question, here's the one from [ Wrisk ] who asks, do you think the data center market is heading for a more integration one-stop shop model and away from the partnership model? And do we have any white spots?

No, I think the -- when it comes to how data centers are built today. It's always -- you work together, different parties. I mean, first, of course, with the operators, if that the -- one of the hyperscalers who run the data center. But then you have also so much equipment inside there, that be racks, that's been on cooling, that's been both on chip level, but also on the whole facility. So there are so many parties involved.

So what we do is to make more of that partnership thinking and with all the related party on the site that we could be on the cooling side with many of the large cooling specialists that most of them are our customers and partners in there. And then we need to make sure that our solution fits perfectly well with that solution. That's the -- our commitment and therefore, we can work with many. I think that is one of our strengths in this field because as capacity and the build-out has happened kind of now getting bigger and bigger, there is also a risk putting everything, all your eggs in one basket.

And we also see that from the -- especially from hyperscalers that they want to have a technology expertise from us, but they want us also to work with others where we are relevant so that you can come with that combined offering. And that's how I see the market, and that's also part -- a big part of our success here and how we are successful in those discussions.

And then we open up the line for Will at Kepler Cheuvreux, please.

I'm going to go a little off-piste. I would like to ask a question about your Automation Extended commercial model. I thought it was interesting you've put it in the slide deck there, and you've highlighted the scale of the installed base in DCS and your opportunity to grow in software and life cycle, but I don't see any financial targets or scoping.

Could you perhaps give us some guide points or way points towards the size of the market opportunity, the scale that, that might mean for revenue and margin and how the leadership team in Automation is going to track to that new strategy?

Yes. With our Automation Extended model here, it's very much how we can support customers in that journey. They have given us a lot of trust by having us being the provider of their distributed control system, the whole automation system of the plant. And that is why when we are looking at this, it's very much what we're tracking is the service revenue, the -- what we call the upgrades here. This becomes for us like an ARR.

This is when you are on site, this is how we track it. So we do that by customer and looking at also the kind of how we can support customers throughout the lifetime. We often talk about Automation about leading with service, service after sales and sales after service. This is how that whole circle is moving. When we're looking at the margin and the profile of it, we are more still here looking at how can we long term be that technology provider partner for our end-user customers and be able to also be their trusted partners when it comes to specifying all the new equipment that comes in that helps our Electrification and our Motion.

This is what I talk about the power of ABB and how we're able to bring this together. That is also how what we measure about the success rate. So it's not only about measuring Automation of what they're doing kind of with their own developed DCS and their own systems, but it's also what they're able to bring in the rest of ABB equipment and making an ABB or a customer's facility more and higher and higher ABB content on site. So that is our parameters that we measure, of course.

And we believe that this is not only driving volume growth in our Automation and for the ABB, but it also over time, we see that also is the more service content, the more of upgrade content, it also drives margins through because service is normally -- it is a better margin profile than the new sales. So this is how we also then measure our Automation team in as part of their KPI model when we do that.

So -- but the main part here is to be a long-term technology partner for our customers because we believe we see that, that is what creates trust, and that means also we are part when they make new expansion, new project, we are helping them also making their specification and making how it should run. And that's overall what drives performance for ABB in many of these segments.

Yes. And maybe if I add, Morten, there's a little bit of a plug for the CFO of the ABB Way. I mean this is Automation Extension and it's one part that we are looking at. And just -- that's just how we operate. We kind of obsessively love the accountability drive. We set targets and we operate and really measure our business. We talk about it, of course, at the division level and division minus 1. But initiatives like this and when we look at extra areas of investing and so on, we bring the same rigor of accountability and measurement to that aspect, just to add. It's a good example of ABB where it holded up.

And if we stay with you, Christian, here's a question from the web tool from Thomas for the new CFO? Timo has stated that he is comfortable with leveraging ABB to 2x EV [ EBITDA. ] Do you agree? Is that do you -- with this view? And what is the M&A capacity that you see?

Okay. Kind of 2 parts of the question, I guess. So first of all, I would absolutely concur with the prior view of Timo that kind of leveraging up to the 2x give us comfort to do that in the current framework we are in terms of ratings and so on. If I think about that a little bit on M&A firepower, as the question was the second part -- yes, if I think about the run rate of our [ EBITDA ] right now for the last 12 months, rolling will take us to the $7 billion and change, less the current debt and we do that at 2x will bring us to maybe $13 billion and some change.

And of course, on top of that, we have the sale of robotics in the second half of the year. So add $5 billion to that. So in terms of M&A firepower in our current structure, I would be as comfortable as the team was on that 2x, meaning we get to that $18 billion or so. And that, of course, like I said, means that we stay with our current framework of share buybacks of up to $2 billion and so on. And those are things that -- variables that one can always look at to add into that firepower, of course, if so would be needed. But yes, I feel very comfortable with the same 2x leverage.

Thank you. And then we open up the call for Joe at Cowen, please.

Can you hear me?

We can.

I'm just curious, particularly in -- I guess, across the board, but mostly in data center, just given the magnitude. When you say that the order patterns are not really reflective of any sort of overordering or excessively early ordering, how do you really evaluate that? How do you understand if your customers aren't seeing developments in the Middle East potentially spiraling and wanting to just make sure that they're procuring ahead of something that -- I know you're not seeing any behavior changes yet, but I guess what's the thought process in kind of understanding that dynamic?

No, it is based on the discussions we have with all our major customers in this field. That's kind of where our conviction and confidence comes from. We should also remember that Q1 last year was a bit lower in the data center space as we kind of didn't -- yes, that was not the booming quarter. I remember this time 12 months ago, I had a lot of questions that is data center slowing down. And now it's the opposite. So a year can make a big difference.

So that is also we have to take that into account as well when you look back at the -- maybe the transcripts from April '25. But again, our confidence is built on the discussions in the CapEx plans in also, of course, what our customers and partners, what they share with us and what's their need and we -- and we don't see a lot of preordering, but of course, it is about getting -- making sure that capacity will be allocated to them in the right time frame. And that is a high demand and a high concern, of course, on the hyperscaler, but also from others.

And we're having an approach here, especially when you talk about U.S. capacity that we don't want to kind of sell everything we can into data center. We are trying to find a balanced approach serving so many different markets as we are and giving there kind of a fair allocation or a fair treatment into these different segments. So -- and that is what we're also looking at in this year. And for us, as always, the -- I think that really pays dividends what we see now also that we're having a very high say-do ratio that we don't take orders just kind of to boost the order book, but we only take order where we say we will be able to deliver.

We have capacity booked for it. And we are, therefore, able to be kind of give you that confidence and also take terms and conditions for our customers that we are confident that we're going to handle it in a good way. So that's kind of more the thinking behind it.

And I throw in another piece of that is that we -- majority of these orders also come through down payments. So that shows the commitments from the customers that they have -- we have that structure from the terms and conditions, like Morten said. So that's just hard to add.

Yes, so it's...

Okay. Very good. And then -- thanks, Joe. And then James from Redburn. You're next in line here.

Maybe I could follow up on the data center. And just to clarify, you mentioned that the scope of materials increasing, Morten, to more medium voltage UPS. Is there any way you could scale sort of the degree to which the medium voltage UPS business is growing as a share of your data center order cake? And tied to this, in general, the really strong orders you've had in data center in the last 2 quarters, what do you think the duration of delivery of those is on average? And is it changing?

First of all, I talk about the scope expansion, it's what we referred to earlier on the medium voltage UPS side, where you're moving the low-voltage UPS scope instead of doing this power supply reliability on that level, you can take part of it and do it on the outside often part of an e-house as a medium -- on the medium voltage level. That is able to reduce both the OpEx, the run cost because it has better energy efficiency, and it also reduced the white space requirement, which is normally much more expensive to build than the gray space.

So this is how we are able to address market. And as you may know, we are -- our position on the white space is not as strong as it is on the gray space. So that's kind of how we are able to gain some market share in this segment by getting more -- and kind of a different technical solution. And we are the first and the only provider of a medium voltage UPS, which is also one of the building blocks that will fit in our DC 800-volt architecture.

So it's one of the key building blocks. So that's why I'm confident kind of also in this long-term view in that space. On -- I think when we say looking at the different customers, there is no specific kind of no bigger project. It was an overall strong demand across. So that's also -- and that's also how I would see kind of into the pipeline. We're working with a very diverse customer base here in the data center space. And therefore, that also what we would like to see and not being kind of fully dependent on one, but really having as wide customer base as possible.

That's helpful. Just to clarify, if I can, I mean, the orders you're taking in the quarter, would you expect to deliver those in 12 months' time or 24 months' time or?

Most of them would be in the 12 to 24 months' time horizon. And that is because a data center of this size is not being -- you can get some smaller change orders that comes in kind of last minute, but most of them are going into -- when the building and the whole data set is coming up, that takes quite a while. So we're talking about 12 to 24-plus months time span.

Thanks, James. And then we have another question, I hand that over to you, Christian. And I assume that this question is regarding Electrification. It's from Olivier who asks, which quarter do you expect a positive price-cost gap again? Because that's why we...

Yes. So we walked into Q1, as we said, and anticipated that there is a little bit of a gap specifically for Electrification. And as natural, when we put price to offset the cost, a little bit some contractual differences or the timing of that. We expect that gap to shrink. It will shrink further in Q2. And we feel good about this being totally, let's say, closed out in the second half of the year.

Thank you. And then we open up the line for Daniela from Goldman, please. Can you hear us?

I just wanted to ask about oil and gas exposures. I guess there's some hopes now that we will see maybe an oil and gas CapEx sort of diversifying away out of the Middle East after the -- given what has been happening. Can you remind us sort of your exposure and where sort of in the value chains you are more relevant? And also, if we do start to see, let's say, [indiscernible] long does it start? Does it take until we start to see things flowing through in your backlog and P&L, respectively?

I may start here as the -- I mean, overall exposure, of course, as an energy industry sits with our Automation business, for the company, we are at around 4% in overall, but of course, more in the -- I will get here, [ Ann-Si ] probably to help me also with the exact numbers, so I don't -- but I mean also saying here, our exposure and strongest on the oil and gas side in 2 areas is in the North Sea, where we have a strong position and more and more on the gas, especially on the gas side, LNG is in the United States.

Very successful there on the -- when you talk about drilling pipelines and terminals where we are partner in many of the big expansion that's happening already, talking about in Texas and Louisiana, which are the 2 states that benefits the most these days. So those are projects that we are heavily involved in. And I think that was for me also very visible when I was at CERAWeek in Houston earlier this year, talking about this energy expansion and the build-out that is already ongoing, and we see that in some of the orders, especially on the LNG side for United States.

I do believe that we will see an energy expansion kind of building energy resilience in so many countries after now what we've seen. Take Europe as one example, being so in the past, dependent on Russian gas, a lot of that dependency has now been moved to the Middle East, and that's kind of where we are today. So doing a stronger build-out would, in my opinion, be needed in the North Sea to increase, but also with new terminals that has been built, for instance, now, both in Greece and Italy and the north of Germany, so we can receive gas here in Europe from other places that the United States probably as the main part. So this is just -- we will see more of that build-out coming in, I think, in the next years. And I think, [ Ann-Si, ] you have also to correct me if I...

No. No, no. If you look at oil and gas, it's about 9%, 10% of the group level. And if you look at Automation specifically, which you referred to, it's about double that size in terms of share of revenues.

So it's a bit more than I said also, yes. Good.

Thanks, Daniela. And then we move to Ben at Bank of America Merrill Lynch.

We've had some recent updates to the Section 232 tariffs in the U.S. And I was wondering if this is something that could have incremental impact to you, the incremental benefit, if there's any analysis or views that you can share on that topic in the U.S.

Maybe I'll take it on the 232. I mean, as we see it today, right now, there should be a fairly limited exposure for us. And the main driver for that limit is the content where we are most often well below the 15% that is dictated in that 232 guidance. So for us, right now, I would see it the exposure is fairly limited.

Thanks, Ben. And then we move to Jonathan at BNP Paribas, please.

Just really circling back to the balance sheet and the strength, it's really clear there to hear about the firepower. Obviously, that's a lot of cash that can potentially be deployed. What about the pipeline on M&A? Sort of thinking how does it compare to a year ago? What are the regional focuses, the technology focuses and all linked to that, in the absence of deals and with the comment about the money from robotics, do we really need $18 billion of firepower? Is there a reasonable chance of an incremental buyback program after that money comes in?

Yes. If we need the $18 billion, it sounds like it's a big pile of money that I can fully agree to. So let's rather start on the M&A side. I think we have a strong pipeline today when we are looking at deals. We are doing deals as well. I mean we referred to the Siemens Gamesa deal as one example in Motion that was about 3% of their comparable revenue for this quarter, just as one example.

So these deals, which is more of bolt-ons and that those are happening all the time. I know that it doesn't require the $18 billion. But these are important also to know that's how we see that we can have good fit with ABB, either by in technology or in market access. And that's kind of the deals, more of the bolt-ons that is happening every month, and you will see a list every quarter when they come on board. When we are -- on us, we have identified a few areas where we would like to expand also through M&A. And those are markets where either we have a strong position already as ABB or we see an opportunity with a nice adjacency that we can make a relevant offering to our customers in that field.

Of course, the focus here is, as you would expect, we're looking at can we get even more share in the data center space. Can we get more into markets where like North America, where we do see good strong growth, utilities in general, all over the world, grid automation and that builds on grid resilience. These are all areas where we are looking actively into M&As. And that could be -- but one thing always we said at ABB and I've said from -- I started is all about value creation opportunity.

We need to make a solid business plan and having a good payback on those deals that need to be, of course, better than doing a share buyback program on top of it. So it's the value creation that is there. And when we are confident in finding the right assets with also with an acceptable price, then we're going for it. So that's the criteria. As I always say, I would rather do no deals instead of doing bad deals. But of course, our focus is to do good deals. That's the focus. And we have a pipeline there that we are working on, and we will inform you all when we are ready with those kind of announcements.

Okay. Thanks, Jon. We have a couple of minutes left. So we're squeezing in Ben from Oxcap also, please.

I guess my question, maybe a slightly odd one for Morten but we've seen this step change in Electrification and actually on the power side in the last couple of quarters. And I guess when you track your internal metrics, when you look at quotation activity, the kind of list of projects, the list of potential orders, did you see that sort of step change, let's say, back in September, October, you kind of looking at that tender pipeline, you knew it was coming.

And I guess the obvious follow-on is when you look at that tender pipeline today, is it continuing to build i.e., do we feel confident? Or is it beginning to level out? I guess we're trying to figure out, is this the new normal? Or are we just going to continue going up from here, which is pretty incredible.

Thanks, Ben. Would we have forecasted precisely the order intake of Electrification in the last couple of quarters, I would have to say no. I think our hit rate has been higher than we normally would have expected. We have seen a strong pipeline, a strong outlook, and we see that also going forward, but our hit rate has been on a very good level, very strong level.

You also have to see when you're looking at what's the level to expect, I think kind of Q1 is always a very strong if you look at -- kind of total order. Q1 is normally stronger than Q2 in -- not when I talk about like-for-like comparison. So if you look at the historical values, you will see that normally Q1 is a very strong order intake quarter. So we don't give any forecasts on order intake. We do that on revenues and on profits. But what I can say, pipeline still looks very strong. But historically, normally, you have seen a bit of a lower value in Q2 than what you have in [ Q1 ] which is normally order intake one of the strongest.

Thanks, Ben. And with that, we close this session. Thank you very much for taking the time to join us. Much appreciated, and we'll see you in about a quarter's time.

Great. Thank you.

Thank you.

[Presentation]

[Interpreted] Dear shareholders, ladies and gentlemen. Welcome to our Annual General Meeting. I'm pleased to see that you have found the way to Oerlikon. Like in earlier years, this venue means a lot to us. Maschinenfabrik Oerlikon, one of ABB's predecessor companies used to manufacture locomotives and generators in this very hall. And as you may have read, we are investing CHF 80 million in the new corporate headquarters in our historic building right next door by 2031.

As you can see, even though we are constantly reviewing our portfolio and adjusting it where necessary, ABB is committed to Switzerland. Welcome, everybody now in Swiss dialect as well. We're very much looking forward to this meeting. May I also extend a welcome to those of you who are following our meeting via the Internet.

Likewise, I'm pleased to welcome my colleagues from the Board of Directors. Further, I would like to welcome [ Sebastien Tam ] here at the front. He is the representative of ABB's biggest shareholder investor.

We also have a school class with us today, namely students of the fourth grade of the [indiscernible] school, and their focus subject is economics and law. They are accompanied by their teacher, [indiscernible]. You can see them. A warm welcome to all of you from our side. I'm particularly pleased to see you here because I grew up in Baden, [indiscernible] and I know the school that you go to every day very well. So it's fantastic to have you here today.

I'm pleased to see that you are interested in the most important form of Swiss company law, the corporation limited by shares. In addition to the theory you're starting at school, you will experience an important day in the life of such a company in practice with us today. Soon, you will have your final exams. And I wish you every success.

And finally, I would like to welcome the members of our Executive Committee. I address already now my thanks to the entire Executive Committee for their commitment and congratulate them on the success they have achieved for ABB in 2025. It has again become a record year.

Allow me to say a few words about safety. In the event of an alarm, please follow precisely the instructions of the personnel identified with either yellow or orange vests. The emergency exits are indicated and located on the right side of the hall and in the entrance area behind you.

Shareholders, guests, I shall now open our Annual General Meeting with some formal statements. In accordance with Article 14 of our Articles of Incorporation, I, as Chairman of the Board of Directors, shall take the chair of the AGM.

With me on the podium is Morten Wierod, our Chief Executive Officer. For the first time, I welcome Christian Nilsson, he has been our new Chief Financial Officer since the 1st of February this year. Also with us on the podium is Mathias Gaertner, our General Counsel and Secretary of the Board of Directors. Mr. Gaertner will also keep the minutes of today's meeting. Further, I would like to welcome the law firm, Zehnder Bolliger & Partner as the independent proxy. They are represented here at this meeting through Dr. Hans Zehnder.

May I ask all shareholders who wish to speak during the meeting to now come forward and report to the registration desk at the front, to your right. Please give your surname, first name and place of residence, and have yourself entered into the list of speakers on a particular agenda item. I'd like to ask you to speak only about the agenda item you have chosen to speak about and to limit your speech to be fair to everyone else.

Shareholders, we shall conduct all ballots and elections at today's AGM in electronic fashion. This is in accordance with Article 17 of our Articles of Incorporation. Voting procedures will be supervised by Daniel Burkhard, who is a member of the Group Legal Department of ABB and whom I hereby appoint as vote counter. KPMG, our auditors, are represented by Achim Wolper and Mohamad Midani. They are here upfront to the left from my perspective.

The invitation to the Annual General Meeting was published on the 19th of February in 2026 in the Swiss Official Gazette of Commerce and on our website, complying with the statutory notice period of 20 days. Shareholders entered in the share register were also separately notified of the Annual General Meeting on the 19th of February 2026. I declare that no shareholders requests in accordance with Article 13 of our Articles of Incorporation have been submitted for items to be included on the agenda nor have any deviating motions being submitted relating to the items on today's agenda.

The complete ABB annual reporting suite has been available on our website since February 19, 2026. This includes our integrated report 2025 with the management report, financial statements, consolidated financial statements, proposal by the Board of Directors relating to the appropriation of available earnings and related reports of the auditors. Attendance recording will be carried out electronically by means of a QR code on the admission card. If you choose to leave the hall during the meeting, I'd like to ask you to take your admission card and your voting keypad with you. The attendance announcement and information about the voting modalities will be made at a later point in this meeting.

Ladies and gentlemen, I now declare that this Annual General Meeting has been convened and constituted in accordance with the statutory and legal requirements as to form. Other than that, I would like to point out that for the purposes of keeping the minutes, all statements and the meeting are recorded. In addition, today's meeting is being webcast live on the Internet in German and English via ABB's website. After the meeting, the recording as well as the minutes will be available on our website.

This brings me to the reporting for the financial year 2025. I'll start us off by making a few remarks from the Board of Directors' point of view. After my comments, Morten Wierod, our Chief Executive Officer, will report on the business development of ABB Group.

Ladies and gentlemen, the events of the past weeks have once again reminded us that we are living in challenging and often unpredictable times. I'm pleased to report that our employees in the Middle East remain safe, and that ABB is doing everything in its power to ensure their security. Indeed, the world today faces many challenges. War, whether in Ukraine or the Middle East, geopolitical tensions across many regions. And of course, technological upheaval driven by innovations such as artificial intelligence. These are profound transformations that are understandable and give rise to serious concerns for many people. This is precisely why it is so important to build trust and remain reliable, two things that apply equally to ABB and Switzerland.

For decades, our country has been regarded as innovative and forward-looking as well as stable and open to the world, and that must remain the case. Implementing proposals to cap the resident population at 10 million would cause significant harm to our country. Isolating our country won't help us. In fact, the opposite is true. Were located at the very heart of Europe and we have close ties with our neighbors. This is why we also need what is known as the Bilateral Agreements III, and wherever possible, free trade agreements even if achieving them hasn't become any easier in today's world. The goal is to ensure that we remain competitive and continue to have access to the world's best talent.

Switzerland has one great strength in this regard. This country has always managed to seamlessly combine tradition and openness to the world. This is also reflected in ABB's investments, not least in the construction of our new headquarters here in Oerlikon, where we will fully renovate the landmark ABB historic building and construct a new modern office building alongside it.

There is no question in my mind, ladies and gentlemen. In times like these, your company's flexibility, agility and focus truly pay off. Our well-known local for local strategy means proximity to our customers, short supply chains and the ability to make quick decisions. That proximity to our customers is more than an advantage just in terms of efficiency, it is also an advantage in terms of resilience. And precisely because the world is becoming more predictable, it is essential for your company to remain predictable in its purpose, in its values and in its strategy. ABB remains firmly on course. Obviously, we're making tactical adjustments. And of course, we're remaining flexible. But from a strategic perspective, we're focused on consistency and long-term objectives.

This naturally also includes the forward-looking management of ABB's portfolio. With the announced divestment of our Robotics business last year, we took an important decision, one that not only creates value for ABB but one that will also allow the business itself to benefit under its new owner, SoftBank. Our approach is working. Morten will provide you with a more detailed overview shortly. But ABB's performance over the past year clearly shows that we are on the right path.

For that, ladies and gentlemen, I would like to thank all our employees, our CEO, Morten, and the entire Executive Committee. During our Capital Markets Day last November, we were able to raise several of our ambitions. This was possible because your ABB is well positioned and because we provide critical solutions for the major economic and technological trends shaping the world today. The first of these trends is energy security. This has become one of the most important political issues worldwide. No matter what region, there is an urgent need to upgrade and expand energy systems to meet the growing demand for electricity.

At the same time, a rapidly diversifying range of energy sources must be integrated into infrastructure in a safe and reliable way. The slogan, electrification of everything, which means the electrification of all systems as the foundation for productivity, resilience and decarbonization, this slogan remains as relevant as ever.

The second major trend is automation, another pillar of ABB's business. Our automation solutions help ABB's customers improve efficiency, enhance quality, strengthen safety and use resources more productively. And here at ABB, our strength lies precisely in our ability to effectively combine electrification and automation. The reason for this is clear. Electrification without automation is often too expensive. The other way around, automation without electrification is often unsustainable. But together, they are our sweet spot.

Our 3 business areas: Automation, Electrification and Motion are closely interconnected. Our customers know that this combination makes us the right partner to help operate the facilities and systems more reliably, more energy efficiently and more productive. Ultimately, our performance reflects the solutions we deliver to our customers every day across a myriad of industries from distribution grids and infrastructure to industry and mobility to ports and buildings. And our shareholders, ladies and gentlemen, you benefit from these achievements as well because we want you to continue sharing in our success.

As you might have read, we are proposing an increase in the dividend to CHF 0.94 per share, in line with our long-term policy of paying a rising sustainable dividend per share over time. As usual, you will have the opportunity to vote on this later in the meeting. This year, we'll also intend to continue our share buyback program and plan to spend up to USD 2 billion on it. Our strong order backlog is also clear evidence that innovation remains at the center of what we do with our customers and for our customers.

Since 2022, we have increased our spending on research and development by around 30%. Today, 7,800 employees in our research centers are working to ensure that our technologies remain at the forefront of our industry. Digital systems and services and especially new ways of applying artificial intelligence are playing an increasingly important role in our product portfolio. These capabilities help us address pressing challenges for our customers whether that means improving maintenance, optimizing energy flows or taking out complexity.

And we take a very pragmatic approach to this work. After all, AI is nothing new for ABB. For more than a decade, we've been working with analytical AI and now increasingly with generative AI. Reliability, security and robustness always come first. For us, there is no such thing as move fast and break things. We're not racing ahead at top speed while knowingly accepting mistakes along the way, no.

AI is not a magic wand anyway, but it is a very useful power, a very powerful lever. And when the lever is applied, responsibility must always remain with people. Things are no different when it comes to innovation, which brings me to another point. A misconception that innovation no longer takes place in Europe. Yes, the EU is sometimes too bureaucratic and not agile enough. I give you that. There's clearly a need for greater momentum. Neither I nor anyone else here at ABB has ever hesitated to voice an opinion on this subject. But there is also no doubt that this continent remains one of the world's major drivers of innovation, be it in Switzerland, Sweden or across the European Union as a whole. And it's up to us to ensure that this remains the case in the future as well.

Let me add a few thoughts on one of the most important issues for everyone here at ABB, sustainability. This has been one of the most highly discussed topics over the past years, and that's understandable, especially in times of major disruption like this. But there's one thing I want to make crystal clear. ABB remains fully committed to sustainability. For us, sustainability isn't simply nice to have. And it's not an ideological stance either. Sustainability creates real value, both for ABB and our customers by strengthening productiveness, improving efficiency and enhancing competitiveness. We have continued to build on this progress towards our sustainability targets in most areas. And by combining electrification and automation, we help our customers reduce both emissions and costs. In a nutshell for us, sustainability isn't a project. It is an integral part of our business model.

None of this would be possible without the right team. And we have that team at every level of the organization, from our apprentices to our leaders and our Board of Directors. We invest in development, lifelong learning and personal responsibility to address the shortage of skilled talent and the impact of demographic change. Many of our new leaders have emerged from within the company, including our new Chief Financial Officer, Head of Finance, in other words, Christian Nilsson. I would also like to take this opportunity to offer my sincere thanks to his predecessor, Timo Ihamuotila, for his outstanding work as CFO.

And incidentally, this strong talent pipeline is also an intentional result of the ABB Way, when employees are giving responsibility, they learn and grow quickly. And soon, they're ready to take on the next challenge. This is not just one more of ABB's strength. Strategies can be copied, but culture and a strong talent pool cannot.

I'd also like to briefly recognize the excellent work of our Board of Directors, the colleagues that are here with us today. We have a diverse, broadly positioned Board of Directors that brings together the expertise and industry experience your company needs to face challenges that may arise. I'd like to say it once again, ABB is poised for success today and in the future. In conclusion, I'd also like to express my gratitude to you, the owners of ABB. Thank you for your trust in us and your support. ABB remains firmly on course, and we look forward to continuing this journey together. Thank you very much.

Following these remarks from the point of view of the Board of Directors, I call upon our CEO, Morten Wierod to speak and to dig into the nitty gritty of ABB's business. Over to you.

Thanks, Peter. Dear shareholders, this is the second time I have the honor of speaking to you as the CEO of your company. And I can report ABB is doing well. I'm sure many of you will agree that 2025 sometimes felt like a rollercoaster ride with geopolitical uncertainties, tariffs and trade nationalism. Still, the trading environment proved robust, and we continue to see strong and rising demand for our electrification, automation and digital solutions. I'm pleased to report that 2025 was ABB's best year yet. Our team of about 110,000 employees pulled together to deliver an all-time high financial performance. Orders were strong, and the order backlog now amounts to $25 billion. Our free cash flow is strong, too, at $4.6 billion. And the operational EBITA margin stands at 19%.

It was not only our financial performance that stood out. We also made progress on sustainability, having already almost reached our 2030 reduction target in our Scope 1 and 2 emissions. As our integrated report for 2025 shows, we continue to receive top sustainability ratings across the board from climate and water to governance. That's because we put both financial and sustainability targets at the core of ABB's planning and strategy.

We know that automation and electrification hold the key to a more competitive and sustainable industrial future. And we remain committed to reducing our Scope 1 and 2 emissions and are now forecasting a reduction of 86% by the end of this decade compared to our 2019 baseline and to achieving net zero emissions by 2050. For ABB Scope 3 value chain emissions, we continue to work with our suppliers to reduce emissions, and we continue to make progress against these and our other sustainability commitments.

Across the world, ABB is going strong and is well prepared for the future. Our local-for-local strategy where we design and produce our technologies close to our customers continues to be a key to ABB's resilience. In the United States, around 80% of our revenues are now generated from locally made products, solutions and services. In China, it's about 85%. And here in Europe, more than 95%.

But we must not stand still. We keep evolving the business, both to stay ahead of the competition and because there are many opportunities to improve, grow and outperform, not least by continuing to embed AI into our solutions and processes. One lever is pushing our decentralized ABB Way operating model even deeper into the organization to increase accountability, transparency and speed across all our business areas, divisions and business lines.

You just heard Peter speak about innovation, and I would like to briefly share one example of how we are investing to create value for our customers, very much in the spirit of the ABB Way where research and development happens close to our customers. The growing use of artificial intelligence is driving sharply the power demand for data centers. These power needs, expected to be 4x higher in 2030 than they were just 2 years ago, are driving a shift to medium voltage solutions in the electrical infrastructure. You may not be aware of all this, but ABB is the market leader in medium voltage technology, and a standout product in our portfolio is our HiPerGuard Uninterruptible Power Supply, which ensures continuous 24/7 power availability for these critical facilities. HiPerGuard was the first of its kind in the market, and it demonstrates our innovation strength. And we continue to see strong demand for this technology and innovation within our medium voltage portfolio remain one of our highest priority because data centers are our fastest-growing segment.

But we do much more for this segment. ABB provides electrification and automation solutions to build, run data centers that are more reliable, more efficient and more scalable. And we help data centers provide a digital infrastructure for everything from education and health care to AI and digital commerce. Data centers are essential to how the world works, and ABB is essential to data centers so they can outrun. Let's have a little look at a video describing this.

[Presentation]

So let's change gears. Let me speak about how we continue to manage our portfolio actively in 2025. Later this year, we expect to complete the sale of our Robotics division to SoftBank. The sale will combine the leading technology and industry expertise of ABB Robotics with SoftBank's excellence in AI and next-generation computing. For you, our shareholders, the transaction will create immediate value. We will use the proceeds of the sale in line with our well-established capital allocation principles.

When it comes to additions to our business, our future focus will continue to be on bolt-on acquisitions to fill gaps in technology and geography, build economies of scales and move into adjacent segments and markets. As always, we remain laser focused on strategic fit and the potential for value creation. While overall, the deal size is still small, our teams are fully focused on capturing opportunities and embedding MI integration into our performance culture.

ABB, we now have 3 business areas: Electrification, Motion and Automation. And they have all sales and technology synergies between them. We call this the power of ABB because our value proposition to customers is grounded in a combined electrification and automation offering supported by embedded software and AI. Let's have a look at how these 3 business areas performed in the past year.

Our Electrification business is a global technology leader that enables the efficient and reliable distribution of electricity from source to socket. In 2025, comparable orders increased 13%, supported by a positive development across all customer segments. Demand was particularly strong in data centers, but also in the areas of utilities, land-based infrastructure and also in commercial buildings. Comparable revenues also grew double digits, while the operational EBITA margin increased to 23.5% with a profit increase of 16%.

Our Motion business is the leading supplier of drives and electric motors globally, and position at the core of accelerating a more productive and sustainable future. Comparable orders increased 6% and reflected growth in most divisions. Revenues from Motion advanced by 4% on a comparable basis, and the operational EBITA margin remained stable at 19.4% with a profit increase of 5%.

And finally, our Automation business enables the operation of large and complex industrial infrastructure that delivers essential resources from energy and materials to water and manufactured goods. In 2025, the Automation business recorded a 30% increase in comparable orders, thanks in part to several large orders. But even excluding the impact of these large orders, the underlying market activity remained robust. Comparable revenues were 3% higher than in 2024 and the operational EBITA margin remained stable at 14% with a profit increase of 5%.

Speaking of Automation, I would like to give you one example from our marine and ports division that shows both our potential for growth and how our solutions come together to deliver the power of ABB. In 2025, marine was one of our most dynamic customer segments with more and more ships being equipped with our unique Azipod propulsion system. Azipod propulsion featured an electric drive motor housed in a pod outside the ship's hull. Not only does it make ships more efficient and reduce noise and vibrations, it also cuts fuel consumption by up to 20% compared with conventional systems. Azipod is a solution that is both powerful and efficient, and combined with the complete onboard power setup, brings together various technologies from Automation, Motion and Electrification businesses. Because vessels equipped with the Azipod systems are built to operate for decades, it also brings in valuable service business, supporting our long-term customer relationships and delivering stable revenue streams for ABB.

And at ABB, we have plenty of success stories like this. And that's why we are -- we were able to update our targets during our Capital Markets Day in November last year. We have raised the target range for our operational EBITA margin to 18% to 22%, and now also have specific targets for each of our business areas. We continue to aim for 5% to 7% revenue growth through the cycle, complemented by 1% to 2% acquired growth that I spoke about before. We also upgraded our target for return on capital employed to a best-in-class or more than 20%. And we are set to achieve all of this while returning cash to you, our shareholders, by delivering a rising sustainable dividend and share buybacks.

Looking at 2026, we expect our 3 business areas to continue to benefit from their leading positions in strong electrification and automation markets. We expect a positive book-to-bill and comparable revenue growth in the range of 6% to 9%. And the operational EBITA margin should slightly improve year-on-year even when excluding the announced real estate gain in the first quarter of 2026.

So let me summarize. Today, I'm more confident than ever about the prospects of ABB. I'm convinced the best is yet to come.

[Interpreted] Dear shareholders, on behalf of the entire ABB team, I would like to thank you very much for the trust you've placed in us.

[Interpreted] Many thanks, Morten. Ladies and gentlemen, we now have the attendance announcement. We have 728 shareholders present at today's Annual General Meeting. Adding in the represented shareholders, we have the following attendance. Altogether, 1,173,177,070 registered share with a nominal value of CHF 0.12 each, and with a total nominal value of [ CHF 140,740,781,248.40 ] that's equivalent to 85.82% of the share capital.

Shareholders wanting to have themselves represented at today's Annual General Meeting were able before the meeting to appoint a third party or the independent proxy, Zehnder Bolliger & Partner as their proxy. Mr. Zehnder is representing 1,171,370,851 registered shares with a total par value of CHF 150,564,502.12. In accordance with applicable laws, the independent proxy informed ABB on Monday, 16th of March 2026, about the yes, no and abstain votes per agenda items handed in by the shareholders represented by them. The data was shared in aggregated format only so that no conclusions about the voting behavior of the individual shareholders where possible.

In light of the above, I declare that this Annual General Meeting has a quorum with regard to all items included on the agenda. The AGM decides on the motions before us today in accordance with the law and our Articles of Incorporation with the majority of the represented share votes. Further, the results of all ballots and elections will be recorded in writing by our Secretary.

I would like to ask you to retain your admission card for the duration of the meeting. This is in case the electronic voting system breaks down and a card ballot or election needs to be held. I would also like to point out that for all today's ballots and elections, anybody who would like to have their no votes or abstentions recorded can give their surnames, first names, place of residence and the number of no votes or abstentions to the vote counter, from your perspective, at the front on the left to be available for the minutes.

Ladies and gentlemen, this brings us to Item 1 on our agenda. Item 1 is the approval of the management report, the consolidated financial statements and the annual financial statements for 2025. The consolidated annual financial statements of the ABB Group, that is to say the group accounts as well as the annual financial statements of ABB Ltd. can be found in the annual report. KPMG has audited both financial statements and their report likewise forms part of the annual report. KPMG, our auditors, informed me prior to the Annual General Meeting that they have no further comments on either of the consolidated financial statements or the annual financial statements for 2025.

I hereby open the discussion. The subject for discussion is the management report, the consolidated financial statements and the annual financial statements for 2025. I'd like to ask the speakers to come forward to the microphone and give you surnames, first names and place of residence. And I repeat my request that you confine your comments only to the items under discussion.

Who can I call upon to speak? Okay, we have the first speaker. You have the floor, please.

[Interpreted] Yes. My name is [indiscernible] from Baden. At such an Annual General Meeting, I think this is a very dry matter, so I thought I'll add some spice to it. I'll start with a song because this is all about the dividend, and the interpreters will leave you to the beauty of the original.

I'll skip the second part.

Ladies and gentlemen, I'm welcoming you all. You all come here to the honey pot, CHF 0.94 dividend per share and then the buyback program, all shareholders will be happy with that because at the end of the day, money is taken out of the company. Yes, we're celebrating our success, but outside, the foundations are crumbling.

We've got 10,000 engineers out of work at the moment. The trend is going up. There's an increase of over 25%. It's great, isn't it? What happens with the money? It is invested into real estate. But this is not the engine that drives that country forward, rather the opposite happens. Well-paid jobs disappear and people have to have 2 to 3 jobs to being able to pay their g****** rent. So our country, despite the beautiful new headquarters, our new country goes down the drain.

A young family, how do they want to finance their future without great engineering job? Is this the kind of society want -- do we want to be a country that lives on renting out flats to each other apartments and delivering pizza? I don't think so. We need the engineering knowledge. We need the people. We have to give them an opportunity. And I think this would be much more worthwhile to invest the profit in. We're paying out CHF 3.8 billion, ladies and gentlemen. With this money, we could employ and retrain every single unemployed engineer in Switzerland for years. These engineers, statistically speaking, would generate 2 to 3 new jobs, each one of them. But what do we do? We decide to go for the short-term return, a short-term benefit.

We have unlearned to think in the long term because more and more money is taken out of ABB. They claim they think in long-term perspectives. But is it really the kind of long-term thinking we want? Is this the kind of society we want? People who really have knowledge, who really have expertise, who drive the country forward, they are sent into unemployment and get paid by the unemployment office. Thank you.

[Interpreted] Thank you very much. It's great to have you back, Mr. [indiscernible]. Thank you very much for coming here. Let me try and comment on what you pointed out. You particularly highlighted the profession of the engineer. And I will also give the floor to Morten for a moment because he is an engineer himself, so he knows what he's talking about.

Right, I agree with you that every country has an ecosystem. The ecosystem in Switzerland and Europe is marked by innovation. Innovation can only happen if we have enough clever people, enough talent to drive this innovation forward.

What about ABB itself? ABB also has its social responsibility. And this applies to the community and the environment we work in as well. But let me tell you, ABB is a company that has committed also to its shareholders, and we're committed to delivering long-term profit and to pay out a good dividend in the long term.

Let me remind you of this. Morten made a point earlier, and I did as well. We clearly have 4 capital streams, 4 ways for -- to use our capital that we generate every year. The first one is organic growth. This is what happens within ABB itself, the kind of growth we can achieve with our people, 110,000 people. Many, many engineers. Our sales organization works together closely with clients, our research and development activities and places where we employ more than 8,000 staff and develop innovation on a daily basis. This is organic growth that we, ourselves, generate.

Number two, we pay out a dividend. We pay out a dividend, which has been going up over the years. I think 2 years ago, we had a similar discussion here. What is the appropriate level of a dividend. Both the management and the Board of Directors believe that we want to pay out a constantly increasing dividend and not a dividend that fluctuates with high points and low points. This is what we need organic growth for.

Number three, company acquisitions, that's inorganic growth. Morten also referred to this in his presentation. It's important for us that 1% to 2% of our growth, it comes from acquired companies. What does this mean? It means we invest the money we have from inorganic growth into inorganic acquisitions, and we can then also continue paying out an increasing dividend.

The fourth aspect is share buybacks. If we still have money available, which is the case, and Morten pointed out why that is the case from the point of view of profitability, then we also invest in share buybacks. The [ 3.8 billion ] you're referring to is [ 3.2 ] in share buybacks and [ 1.8 ] in dividend, just to make it clear for everyone else.

Now let me talk about organic growth. How do we achieve that with our engineers? About 60% of the people that we hire every year, our engineers, that's a global figure. 2025, it was roughly 9,265 in Switzerland. So for us, engineers are absolutely indispensable for our business because we are a technology company. Switzerland as an industrial location is extremely important. We have a big research and development center in [indiscernible] outside [ Baden. ] But we also have global locations in traction systems, for example, our division for trains, that's in [indiscernible] Turgi.

So for Switzerland, we need engineers to drive the innovation and the development, and we employ them, we hire them to take ABB further. The same applies to the situation worldwide. Perhaps Morten can go into more detail there. So what I'm trying to say is that I think we found an excellent mix between organic growth on the one hand, inorganic growth on the other hand, payout to shareholders on the one hand. But at the end of the day, also to shareholders, to give shareholders a little bit more of the big pie because we also repurchased shares.

Now you talked about increasing rents. And here, I'm giving you my personal side of things. This is a social problem in Switzerland that needs to be tackled. I personally don't think that all the dividend -- the dividends will end up in real estate properties. I think we have many industrial investors, small-scale investors, large-scale investors. And I don't think that we are making a contribution to exacerbating the situation in the real estate sector. In other words, we don't add to the scarcity of residential space. I wouldn't really agree with you there. But I agree with you that it is a problem. No doubt about that.

Morten, around your profession.

Well, thanks, Peter, and I can fully agree to the statement that kind of -- or that engineers are the unsung heroes, being one myself. So I think I often say in speeches or in discussion around the world, I think -- I do think the world needs more engineers and probably less influencers. So especially for the students here on the front row, I hope that you take that advice.

And that's why we also had ABB, when we're working at the local level in every country or every market where we operate, we try to invite kind of -- or not only customers in, but we also invite friends and family to come to the site so they can see what ABB and engineering is all about to create -- so the family days is something which is very common if you are here in Switzerland, if you are in Europe, in Americas or in Asia. And this is an important thing, I believe, also to attract more talent into the areas of technology because the world does need more engineers, and it does need more technology to solve some of these big challenges we have in front of us as a global society. And the only thing that can solve these problems is technology. And therefore, I really believe in engineering, in technology where kind of when this comes together with these challenges we face, there is still hope for the future.

So I can only echo the need for getting more engineer in every country, in Switzerland, but also in every country we operate. And at ABB, we do hire them, and we give them very interesting tasks and challenge to deal with early on in their career, and then you can also come up through the ranks. And I think many here on the road show and myself, one of the examples that engineering is also a way of making a career, but it importantly is that it's the way to solve some of our world's biggest challenges today. So I fully agree with you about that the world needs more engineers, and I hope our students here on the front row take the challenge. Thanks.

[Interpreted] Maybe just 2 things [indiscernible] to conclude. There are some studies that show how many millions of engineers we will be losing over the next 10 years in Europe because we have this demographic issue. So from my perspective, as Morten already said as well, we're going to have this issue in Europe as well. We are not going to have enough engineers in the next few years. This is one of the points. And the second point is, I've seen that you've brought your guitar. So I was thinking that you're going to sing your song playing the guitar as well. So let me express my wish for next year. Maybe you can bring it again and then sing your entire song. Thank you very much for your speech.

Are there any more speeches? Anyone else who would like to take the floor on agenda Item 1?

[Interpreted] Ladies and gentlemen, chief members of the Board of Directors, members of the EC. I would like to thank you for your foresight, foresight of the Board of Directors, of the EC when it comes to social commitment, you keep jobs, you create jobs. This is to all of our benefits, us as shareholders -- I'm very sorry, I will be speaking standard German now. So it's to the benefit of us as shareholders. It's a dividend policy with foresight, dividends are being paid out and they are adjusted to the profit that was made. And I would like to thank the leaders of this company and the Executive Committee for doing this.

The dividend policy as such that the shareholders who purchased their shares in time are being compensated for the capital they invested and they can count on a company that will persist. And engineers, as you said, are sought after. I do know some companies who are looking for good engineers, and becoming an engineer means that you will have a future. And after all, Alfred Escher founded ETH in Zurich, because at the time we lacked engineers here in this country.

So I'm very grateful that ABB is working in a [ farsighted ] manner. And I do hope that we, as shareholders, support the company so that jobs can be kept, maintained within the company. So thank you very much for your excellent work and have a lovely day, ladies and gentlemen.

[Interpreted] Thank you very much indeed, and thank you for your support to the Executive Committee and the Board of Directors. With regards to ETH, I would like to say something. We work together with that university closely. We have acquired startups from ETH. And in EC, we have at least one member who has obtained their degree from ETH. So we're very grateful to the university. We have 10 technical universities in total in Switzerland, and the talents that are being educated there are to our benefit absolutely.

Is there anyone else who would like to take the floor? This does not seem to be the case, which is why it suggests that we are going to vote on agenda Item 1.

Ladies and gentlemen, when you cast your vote, please press on your voting keypad, either the green yes button to vote in favor of the resolution, the yellow abstain button to abstain, or the red no button to vote against the resolution. If by mistake you pressed the wrong button, you can correct your vote directly by pressing the button of your choice.

Shareholders, are there any questions about the voting procedure? This does not seem to be the case. Let us proceed with the ballot. Should you have any questions at any point in time, please contact our help desk, which is at the back of the hall.

Ladies and gentlemen, the Board of Directors proposes to approve the management report, the consolidated financial statements and the annual financial statements for 2025. I would like to ask you to show your approval, abstention or rejection regarding the motion of the Board of Directors by pressing the appropriate button on your keypad.

Ladies and gentlemen, please cast your vote now.

[Voting]

[Interpreted] Ladies and gentlemen, we are now closing the ballots in 3 seconds time. And we now close the ballots. Let us wait, the result will be available shortly.

Ladies and gentlemen, I declare that you have approved the management report, the consolidated financial statements and the annual financial statements for 2025, with 98.09% yes votes. Thank you very much on behalf of the Board of Directors and the Executive Committee.

Ladies and gentlemen, we now move on to Item 2 on the agenda, which is a consultative vote on the compensation report 2025. As in previous Annual General Meetings, we hold a separate consultative vote on the company's compensation report. The compensation report contains the principles governing the compensation page to the Board of Directors and the EC. It is also a piece of information about the components of such compensation and the amounts which were paid to the members of the Board of Directors and the EC for 2025. Compensation of the members of the Board of Directors and EC was determined by the Board of Directors, taking into account the recommendations of the Compensation Committee.

In this context, I would like to highlight that our compensation programs are closely linked to our sustainability strategy. There was a sustainability KPI for all EC members, which is assessed with 20% for their long-term incentive plan. Likewise, 2 sustainability targets were defined for all EC members as part of their individual incentive plan component, so an individual component of their annual incentive plan.

If you would like further explanation about any points covered in the compensation report, I will now take your questions and hereby open the discussion on the compensation report before we proceed to vote.

Please remember that we will take comments and questions on the maximum aggregate compensation of the members of the Board of Directors and the Executive Committee, respectively, under agenda Item 6.1 and 6.2.

I would like to ask speakers to come forward to the microphone and to give their surname, first name and place of residence. Does anyone wish to speak on the compensation report? It does not seem to be the case. Nobody wishes to take the floor, which means that we will now move on to the consultative vote.

Now the Board of Directors proposes to accept the compensation report 2025. And according to what we did before, I would now ask you to cast your vote.

[Voting]

[Interpreted] Another 3 seconds to cast your vote. And I now close the ballot. Let's just wait for the result.

Ladies and gentlemen, I declare that you have accepted the compensation report 2025, with 95.28% of yes votes. I would like to thank you for accepting the compensation report and for the confidence that you have thereby expressed in us.

We therefore now move on to Item 3 on the agenda, the consultative vote on the sustainability statement 2025. Ladies and gentlemen, by means of our sustainability statement, our report on sustainability, we inform shareholders about nonfinancial matters. We, however, do not limit ourselves to the information required by law, rather our sustainability statement comprehensively informs about ABB's sustainability agenda, its targets and the progress achieved. We present this report to you for a consultative vote and are looking forward to your feedback.

If you would like further explanation about our sustainability statement, I will now take your questions and hereby open the discussion. Does anyone wish to take the floor on this topic? It does not seem to be the case. So nobody wishes to take the floor on this topic, which means that we can move on to the consultative vote.

The Board of Directors proposes to accept the sustainability statement 2025. Shareholders, please cast your vote now.

[Voting]

[Interpreted] Ladies and gentlemen, I am going to close the ballots in 3 seconds. Let's just wait for the results. Ladies and gentlemen, I declare that you have accepted the sustainability statement 2025, with 95.18% yes votes. We would like to thank you for accepting the sustainability statement, and express our a gratitude for your support in this important matter. As I already said before, it's a fundamental part of our strategy and agenda, and I would very much recommend to read the comprehensive report to see what work we have been doing at ABB over the past year.

The Board of Directors proposes that its members as well as officers entrusted with managing the business will be discharged from their responsibilities for the financial year 2025. For the sake of completeness, I would like to mention that the discharge resolution shall also cover Board members and persons entrusted with management who left or were appointed during 2025.

So again, the question, does anyone wish to comment on the proposed discharge? This does not seem to be the case, so that we can move on to the vote.

I'd like to point out at this stage that members of the Board of Directors and anyone who has participated in any way in managing the business are excluded from voting either with their own shares or with shares represented by them. The votes of the persons concerned will not be taken into account during this ballot. The number of represented votes is correspondingly reduced. Ladies and gentlemen, please cast your vote now.

[Voting]

[Interpreted] I intend to close the ballot shortly. I hereby close the ballot, and we'll now wait for the result.

Ladies and gentlemen, I declare that you have granted discharge for the financial year 2025 to the Board of Directors and the officers entrusted with managing the business with 97.37% yes votes.

Shareholders, on behalf of all the members of the Board of Directors as well as the officers entrusted with business management, I would like to thank you for granting discharge to them for their responsibilities.

We now move on to Item 5 on the agenda, appropriation of available earnings. Ladies and gentlemen, earnings are available to the Annual General Meeting 2026, amounting to CHF 4,974,599,295. Our Board of Directors proposes to pay a dividend of CHF 0.94 out of available earnings for the financial year 2025. This means an increase of CHF 0.04 compared to the previous year. The proposal is in line with the company's dividend policy to pay a rising sustainable dividend over time. Payment in Switzerland is scheduled for the 25th of March, and the distribution will be subject to Swiss withholding tax in the amount of 35%. The Board of Directors finally proposes to carry forward the remaining amount of available earnings 2025 to new account.

For the sake of completeness, allow me to mention that ABB Ltd. will not pay dividends on own shares held by the company and its subsidiaries and on shares that participate in the Dividend Access Facility as per the Article 8 of the Articles of Incorporation. Shareholders who are resident in Sweden who participate in the Dividend Access Facility will receive from our subsidiary, ABB Northern Holding AB for each registered share amount, an amount in Swedish krona that corresponds to the resolved dividend. This amount, however, is subject to taxation according to Swedish law. The auditors confirm in the report that the Board's proposal relating to the appropriation of available earnings is in accordance with the law and our articles.

Does anyone wish to comment on this proposal relating to the appropriation of available earnings in 2025? We already talked about this and we discussed about the business in total. Any other questions, comments? This doesn't seem to be the case.

We proceed to the vote. Ladies and gentlemen, please cast your vote now.

[Voting]

[Interpreted] I intend to close the ballot. Now I close the ballot, and we'll now wait for the result. I declare that you have approved the proposal of the Board of Directors relating to the appropriation of the 2025 total available earnings with 98.20% yes votes. Thank you very much indeed, and thank you also for believing that we are following the right sustainability strategy and sustainable balance sheet appropriation strategy.

This brings us to Item 6, approval of the compensation of the Board of Directors and the Executive Committee. Ladies and gentlemen, pursuant to applicable laws and our Articles of Incorporation, the Annual General Meeting of Shareholders shall approve the maximum aggregate amount of compensation of the Board of Directors and the Executive Committee. The principles of compensation are specified in Article 33 of the Articles of Incorporation. Details on the proposed compensation are described in the annex to the invitation as well as the compensation report.

We now come to Item 6.1, approval of the maximum aggregate amount of compensation of the Board of Directors for the next term of office, that is to say from the Annual General Meeting 2026 to the Annual General Meeting 2027. Ladies and gentlemen, the Board of Directors proposes that the shareholders approve the maximum aggregate amount of compensation of the Board of Directors covering the period from the AGM 2026 to the AGM 2027 in the amount of CHF 5.1 million.

Does anyone wish to take the floor on this agenda item? This does not seem to be the case. So let's proceed to the vote. Ladies and gentlemen, please cast your vote now.

[Voting]

[Interpreted] 3 more seconds, and then I'll close the ballot. Thank you very much for casting your votes. I'll close the ballot. We now wait for the result. Ladies and gentlemen, I declare that you have approved the proposed total compensation for the Board of Directors covering the period from the Annual General Meeting 2026 to the Annual General Meeting 2027 in the amount of CHF 5.1 million with 96.94% yes votes.

Ladies and gentlemen, on behalf of the Board of Directors, I would like to thank you for your trust. Now this brings us to Item 6.2 on our agenda, 6.2 is about the approval of the maximum aggregate amount of compensation of the Executive Committee for the following financial year. That is to say for 2027. This is different from the Board of Directors.

Ladies and gentlemen, the Board of Directors proposes that shareholders approve the maximum aggregate amount of compensation of the Executive Committee for the 2027 financial year in the amount of CHF 40 million. Hence, the proposed amount is CHF 4.5 million lower than the amount approved last year for 2026.

Does anybody wish to take the floor on this agenda item? This doesn't seem to be the case. So we proceed to the vote right away. Dear shareholders, please cast your vote now.

[Voting]

[Interpreted] I intend to close the ballot. I hereby close the ballot, and we'll now wait for the results. I note that you have approved the proposed maximum aggregate compensation for the Executive Committee for the financial year 2027 in the amount of CHF 40 million with 93.33% yes votes. On behalf of the Board of Directors and the Executive Committee, I would like to thank you for your trust.

This brings us to Item 7 on the agenda, the elections to the Board of Directors and the election of the Chairman of the Board of Directors. Ladies and gentlemen, the term of office of all members of the Board of Directors ends with today's Annual General Meeting. As you could see from the invitation, all previous members of the Board of Directors are standing for reelection, and no additional members will be proposed.

The candidates standing for election to the Board of Directors thus are David Constable, Frederico Fleury Curado, Johan Forssell, Denise Johnson, Jennifer Li, Geraldine Matchett, David Meline, Claudia Nemat, Mats Rahmström, and myself, Peter Voser. The election will be effective for a term of office until conclusion of the Annual General Meeting 2027.

Considering the number of election matters, may I ask you to bring up your comments on the individual candidates now before we move on to the vote. Does anybody wish to take the floor? This does not seem to be the case. Nobody wishes to take the floor on this agenda item, which is why we move on to the ballot.

Ladies and gentlemen, we will conduct the elections of all members as well as of the Chairman of the Board of Directors individually, but in one go. For that purpose, you will see all candidates individually on your screen. However, since it is not possible to display more than 3 candidates at a time, please scroll through the list of candidates by using the arrows at the bottom of your screen. And again, here, you can change your selection until the expiry of the voting time. The election results for agenda Item 7 will be announced together on the slide in the background.

Ladies and gentlemen, the Board of Directors proposes that David Constable, Frederico Fleury Curado, Johan Forssell, Denise Johnson, Jennifer Li, Geraldine Matchett, David Meline, Claudia Nemat, Mats Rahmström; and myself, Peter Voser, as members of the Board of Directors, as well as to elect me, Peter Voser, as Chairman of the Board of Directors.

Ladies and gentlemen, please cast your votes now. You have 30 seconds of your time then for the other votes. I'm going to tell you before I close the ballot. Please go ahead and vote.

[Voting]

[Interpreted] I am now going to close the ballot in 5 seconds time. And now I close the ballot. Let's wait for the results to be available for all of the candidates. We will be displaying 2 slides, so 2 tables with all the candidates. There is a lot to be counted. Ladies and gentlemen, I hereby declare that you have elected David Constable, Frederico Fleury Curado, Johan Forssell, Denise Johnson, Jennifer Li as well as Geraldine Matchett, David Meline, Claudia Nemat, Mats Rahmström, and myself, Peter Voser, and each case with a large majority as members of the Board of Directors as well as myself, Peter Voser, for the Chairman of the Board of Directors.

Esteemed shareholders, on behalf of the members of the Board of Directors, I would like to thank you for the trust you've placed in us, and in particular, on behalf as the Chair of the Board of Directors, thank you for your trust. We're going to make sure to continue our positive path in next year for ABB.

Let us move on to Item 8, which is election to the Compensation Committee. Ladies and gentlemen, our Board of Directors proposes to elect the following Board members to the Compensation Committee: David Constable, Frederico Fleury Curado, Jennifer Li and Mats Rahmström. The election yet again will be effective for a term of office until conclusion of the Annual General Meeting 2027. We will again conduct the elections of all members individually, but in one go. Again, you have the option of scrolling back and forth between the pages on your voting devices using the arrows. We will present the election results in one go all together.

If you wish to make any comments on the present agenda item, I would invite you to come to stage right now. Is there anyone who wishes to take the floor? This does not seem to be the case. Nobody wishes to take the floor, which means that we can move on to the vote. Ladies and gentlemen, the Board of Directors proposes to elect David Constable, Frederico Fleury Curado, Jennifer Li and Mats Rahmström as members of the Compensation Committee. Please cast your vote now.

[Voting]

[Interpreted] I'm now closing the ballots. Let us wait for the results to be available. Ladies and gentlemen, I declare that you have elected David Constable, Frederico Fleury Curado, Jennifer Li and Mats Rahmström as members of the Compensation Committee with a large majority each. Thank you very much for your trust.

We're now moving on to Item 9 on the agenda, election of the independent proxy. Ladies and gentlemen, the Board of Directors proposes to elect Zehnder Bolliger & Partner, attorneys-at-law and notary office in Baden as the independent proxy. They are represented here at our meeting by Dr. Hans Zehnder, and they have confirmed that they are prepared to accept the mandate again. Thank you very much, Mr. Zehnder. The election will be effective for another term of office until the conclusion of the Annual General Meeting 2027.

If you wish to make any comments on the present agenda item, I would invite you to join me on stage. Since there doesn't seem to be anyone who wishes to take the floor, we're going to move on to the ballot now. Please cast your vote now.

[Voting]

[Interpreted] I'm closing the ballot. Let us wait for the results together. Ladies and gentlemen, I declare that you have elected Zehnder Bolliger & Partner with 99.93% yes vote as independent proxy. Thank you very much. And I would like to extend my thanks to Dr. Zehnder for this result as well.

This now brings us to Item 10 on the agenda, the election of the auditors. Ladies and gentlemen, the Board of Directors proposes to elect KPMG Ltd. as auditors for the financial year 2026. KPMG Ltd. has announced that it will accept the mandate again for the financial year 2026. Thank you very much to the two gentlemen in the front row who represent KPMG.

Would anyone like to take the floor on the mandate of KPMG Ltd. as auditors? This does not seem to be the case, which means that we can move on to the ballot.

Ladies and gentlemen, shareholders, please cast your vote.

[Voting]

[Interpreted] I am now closing the ballot, and the result will be displayed in a moment. Ladies and gentlemen, I declare that you have elected KPMG with 99.56% yes votes to be the auditors yet again for the financial year 2026. Thank you very much. We're looking forward to cooperating with KPMG again.

Now, ladies and gentlemen. This now brings us to the end of our meeting. I would like to thank the executive committee on behalf of the Board of Directors as well as all employees of the whole ABB Group, most sincerely for their great commitment, as well as you, dear shareholders, for expressing your confidence in us.

The next Annual General Meeting will take place on the 25th of March 2027. I would be very pleased to welcome you again in this historic building.

Please leave all electronic devices on your chairs. They will be collected later on. Your personal data will be deleted and can no longer be accessed by anybody.

And now I change to my dialect as I usually do at the end of the Annual General Meeting. Thank you very much for turning out in such great numbers, for placing your trust in us. And as ever, I'm always very much looking forward to having this meeting. It's one of the most important days for us as the Board of Directors and also for the EC. And we're always very much looking forward to discussions with our shareholders.

Let me ask you to be careful on your way home, make sure you're safe. And I'm very much looking forward to see you again next year. Thank you very much, and I close the meeting.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Greetings, and welcome to this presentation of ABB's Full Year and Fourth Quarter Results. As usual, we have our CEO, Morten Wierod, here. And now also for the last time in this forum, our CFO, Timo Ihamuotila, I'm Ann-Sofie Nordh, Head of Investor Relations. And as per tradition, Morten and Timo will talk through the results, after which we open up for Q&A. So now I'll leave it up to you, Morten, to kick off the presentation with some comments on '25 as a whole.

Thanks, Ann-Si. Yes, 2025 was our best year yet. We delivered an all-time high financial performance, and we also continue to be recognized with good sustainability ratings. I want to thank and give credit to the team who worked hard to achieve this. Through the year, we saw demand for electrification and automation solutions continue its overall strong trend.

From a top line perspective, I would say that we have performed well in a strong market. Add to that, our internal focus on continuous improvements. And putting it all together, we reached new record levels in orders and across most P&L metrics, including an operational EBITA margin of 19%. The margin of 18.2% on income from operations or EBIT was only 80 basis points lower, in line with our ambition to keep the gap at about 100 basis points.

The strong order intake resulted in a book-to-bill of 1.11. This leaves us with a record backlog of $25.3 billion to support future revenues. Another highlight is the strong free cash flow of $4.6 billion as well as the outstanding return on capital employed of 25.3%. We ended the year with a strong balance sheet with net debt-to-EBITDA of 0.3. The teams are active on the M&A pipelines, but admittedly, valuations have been demanding in some cases, and we have chosen to step away. I want to make good deals that create long-term value for our shareholders. So while we want to be active on the portfolio and we have financial headroom, we will continue to keep a firm grip on the calculator when screening deals.

So balance sheets allow for M&A, dividend as well as buybacks. We steadily reward shareholders with an annual increase in dividend. And for 2025, we propose a dividend per share of CHF 0.94. If approved, this would be an annual raise of CHF 0.04, which is higher than the CHF 0.02 to CHF 0.03 in past years. We will also run a new and larger annual buyback program of up to $2 billion. This is an increase from the 2025 program of up to $1.5 billion under which we spent about $1.3 billion. So a good utilization in my view, and the equivalent of about 1% of market cap, which adds to the yield of about 1.6% from the proposed dividend.

Let's now turn to the fourth quarter, where one highlight was the very strong increase of 32% in comparable orders. With growth this strong, it is reassuring that it wasn't a one-dimensional driver. Instead, we were up in most segments and had double-digit growth across all business areas, led by electrification and automation at the standout levels of 33% and 41%. We continue to improve our operational performance. And to make a long story short, we expanded on most lines in the P&L, generated high cash flow and capital returns.

This is the strongest fourth quarter we have delivered so far. But in the long run, we wouldn't be anything without our leading technology, the foundations for helping our customers. Our medium voltage power technology is at the forefront of the industry. It puts us in the front row for future data center architecture. Building on this, the electrification team has extended its partnerships with Applied Digital, and we introduced new power designs for large-scale AI-ready data centers.

Another future potential demand driver is our cutting-edge direct current and solid-state electronics technology. We were the first in the market introducing a solid-state circuit breaker, the SACE Infinitus. And in the DC field, we run a collaboration with NVIDIA and hyperscalers supporting their 800-volt DC architecture. This is focused on power solutions needed to create high-efficiency, scalable power delivery for future AI workloads.

But why DC technology? Well, it comes with the customer benefits of higher power density and lower conversion losses. It also requires less raw materials, for example, copper as the cable can be thinner and fewer compared with alternate current. In our minds, the electrical distribution in future data centers will have much more DC technology combined with traditional AC technology, let's call it beyond 2028, 2030. And in my view, we are very well positioned to lead this evolution.

The transition from AC to DC could be that about 40% to 50% of the installed data centers capacity in 2030 is in DC electrical distribution. I earlier talked about M&A, and the Motion team has now closed the acquisition of Gamesa Electric's power electronics business. This fills a gap in our product portfolio. We add power conversion products such as certain wind converters, targeting industrial battery energy storage system as well as utility scale solar inverters.

I keep saying that the best is still to come for ABB. And to back it up, we have updated our long-term financial targets. So far, we have a good track record for delivering on our commitments. I expect this to continue also for these new targets, which I see as both ambitious and realistic. Starting with comparable growth, the 5% to 7% range is unchanged. This is a long-term through-cycle target with a corridor as an average of what we will deliver over the next, let's call it, 8 to 10 years. This means that we can be above or below in individual years. But over the time, the average corridor is what you should expect from us.

On top of this, we look to add an average 1% to 2% of acquired growth. Turning to the raised margin target, we now aim to run operational EBITA margin in the range of 18% to 22%. So from the 2025 level, which is the best ABB has delivered so far, we see further upside of 300 basis points. The new higher margin range also means that worst case, should we face a softer cycle, we will protect margin to only 100 basis points below the record 2025 level, ambitious in my view.

We have also set external target ranges for each business area. The high end of these ranges varies, but all represent best-in-class performances and fit within the ABB Group. Backed by our growth and higher margin ambitions, we increased the ROCE target to about 20%, and we aim to stay at this high level even as we pursue higher M&A activity. To support growth, we have slightly turned the free cash flow conversion target to above 95%. And finally, we continue to expect average EPS growth to be at least high single digits.

Setting new targets is one thing, but delivery is one matters. I see both internal and external building blocks that position us well to accelerate operational performance. First, we aim to drive additional accountability and speed in the business as we embed the ABB Way operating model deeper into the organization in our across 70 business lines.

Secondly, we can do better in what I refer to as the beauty of mix. What we have done is to deploy a more rigorous and transparent internal KPI framework. This framework more clearly defines expected performance by mandate. It also links remuneration closer to mandates. Another important point is that we will continue to stay laser-focused on our annual 5% gross profit productivity target, and I already mentioned more M&A. I want this to become part of our culture ingrained in everyday business. We're not quite there yet. But lastly, we play in strong secular markets. Cycles come and go, but I'm convinced about the long-term electrification and automation trends. Electricity demand is forecast to double by 2050, and we are positioned at the core of this energy expansion. ABB, we're set to capitalize on this.

Now let's turn back to the fourth quarter, and I don't think I'd be overstating it by saying that we had fantastic orders. In the chart on the left, you see the comparable growth of 32% and total orders of $10.3 billion. We see persistently high customer activity across most of the key segments. Yes, there are some soft spots, and I would say that the process industry-related markets remain generally cautious. Orders in pulp and paper were down from last year. Mining was actually okay in the quarter, but in the big picture, we don't see yet the big CapEx coming online.

I can also mention residential buildings, particularly China is weak, and the discrete market remains a challenge. So what was it that helped drive our orders? Some of the segments to mention would be the continued strong utilities market. The same goes for land-based infrastructure and transport, where we see upgrades of electrical infrastructure in, for example, airports and tunnels. Commercial building is positive, supporting demand for HVAC solutions and marine as well as rail continues to be very strong segments for us.

In total, orders were supported across the project, service and short-cycle businesses and by all 3 business areas. Order intake from good underlying demand was further fueled by timing of some project orders. Both electrification and automation had several large bookings above the $100 million mark linked to the data center, marine and ports segments. The data center segment was particularly strong also when looking beyond the large orders just mentioned. We expect this to persist, and it looks like the market could grow into the teens near term.

In the revenue chart, you see the high level of $9.1 billion, up 9% on a comparable basis. This was stronger than we originally expected, and it was particularly electrification that outperformed with a strong finish to the year. Similar to the order profile, revenue growth was supported by a positive development across service, long and short-cycle businesses. While revenues were record high, orders were even stronger. On a book-to-bill of 1.14, the backlog was up by 18% to $25.3 billion.

I usually don't talk about FX, which is largely a translation impact for us. But this time, it had a meaningful top line contribution of 4%, mainly linked to the recent swings in dollar-euro rates. In total, revenues were up by 13%. I mentioned that orders progressed across the business areas. The same goes for the different geographies. All 3 regions were up by more than 20%, led by Americas at 43% like-for-like. Looking specifically at the U.S., orders increased by 57%. This high number includes some large booking, but also base orders were very strong and improved by 20%.

Europe was up by 25% with a mixed picture between countries. If we look at Germany, our largest market in Europe, it was broadly stable at plus 1%, and as of yet, we don't really see a material impact from stimulus packages. AMEA improved by 23%, supported by the 3 largest countries in the region. Let's now look at operational EBITA, which we improved by 19% to $1.6 billion, and we expanded the margin by 100 basis points to 17.6%. Operational leverage on higher volumes was the main factor in earnings growth. Add to that, a positive price component and efficiency gains through improved operational excellence. We more than offset tariff impacts and higher expenses linked to commodities. We also offset a higher spend on SG&A, which, however, reduced slightly in relation to revenues.

The team did a good job, but we have to remain focused and manage, for example, rising input costs. We are primarily an assembly business, so our biggest raw material exposure is in the components we buy, predominantly in Electrification and Motion. We estimate the total exposure to commodities to be about 7% of revenues. And out of this, about 2/3 sits in copper and silver as well as in e-steel for our motors. We have been successful in managing these swings in the past and continue to balance market position with defending our long-term profitability. Overall, the strong performance in our businesses more than offset the $37 million higher expenses on the corporate and other line. And as a net total, we increased earnings per share by 30% to $0.70. I'm pleased with our results. And with that, I hand over to you, Timo.

Thanks, Morten. And let's take a look at what happened in the different business areas, starting with electrification. I have to say that the order level of $5.3 billion is a job well done. The market trend for electrification of things is buoyant, and the team performs well in this very strong market. The data center segment stood out with the timing of some large project orders adding to an already strong trend. These larger bookings at the plus $100 million level totaled about $600 million.

Looking ahead, the project pipeline remains good. And as Morten mentioned, we remain confident about the market. In such a strong environment, it is important that we remain honest with our customers, careful not to overpromise on our ability to deliver. This is key in our customer conversations. But electrification is not all about data centers. Orders increased at a low double-digit rate, also excluding data centers. I would mention a continued strong customer activity in utilities as well as for land-based infrastructure.

Buildings is the biggest single segment and was overall positive. This is net of support from the commercial business, while residential remains challenging. Turning to revenues. The chart in the middle shows the record high level of $4.7 billion. The 12% comparable growth was primarily due to higher volumes with a positive development in all divisions, and we were up in all regions. So while revenues were all-time high, Electrification still reached a positive book-to-bill of 1.13, increasing the backlog by 21% to $9.4 billion.

Operational EBITA was up by 23% to $1.1 billion, supported mainly by operational leverage on higher volumes as well as by efficiency gains. These positives more than offset growth-related higher spend on R&D and SG&A, but also inflation linked to tariffs as well as rising input costs from raw materials. The team is taking mitigating actions to offset higher commodity prices. And considering timing between price action and full realization, the sequential margin improvement into the first quarter may be a bit lower than what we have seen in the last 2 years. But with the expected Q1 comparable revenue growth at a high single to low double-digit rate, we should still see operational EBITA margin increase year-on-year.

Now let's turn to Motion, where comparable orders were up by 13% and total orders reached $2.2 billion, in line with recent quarters. Just like in Electrification, there was contribution across the project, service and short-cycle businesses. And looking at the different customer segments, I would highlight on the positive side, areas like HVAC linked to commercial buildings. I would also mention power generation, which benefits from grid modernization and distributed energy systems.

On the more muted side of things, there are process industry segments of Pulp and Paper and also chemicals, where, however, orders were up in this specific quarter. In the revenues chart, you see that Motion delivered a new all-time high. The 6% comparable growth was mainly due to higher volumes with some further contribution from price. We also added about 1% from M&A, which includes the closing of the Gamesa Electric deal in early December. On an annual basis, this adds about $170 million to Motion. And all included, revenues reached $2.3 billion, leaving book-to-bill at slightly negative 0.97.

As most of you are familiar with, we have a pattern of a negative book-to-bill in the fourth quarter. Operational EBITA improved by 8% to $412 million. The margin, however, was down by 40 basis points to 18.3%. This was mainly down to 2 factors with broadly similar dilutive impacts. One being that we have some operational inefficiencies in the recently formed High Power division. It is taking some time to get the new setup fully oiled and up to speed. The team is on it, but it will most likely take a few quarters to get fully resolved.

The second point to mention is the margin dilution from the acquired Gamesa business, I just mentioned. In this quarter, with only 1 month inclusion, it weighed on margin by about 20 basis points. The business is currently making a small loss, and we expect it to be dilutive for 2026 as a whole. Our plans allow for a couple of years to bring profitability to double digit as we embed the offering into our broad leading market reach. It should also add cross-divisional benefits with potential for the services business. For the first quarter, we anticipate comparable revenue growth towards the high single-digit level and operational EBITA margin to improve slightly from the fourth quarter.

Let's then turn to Automation, where this was the first quarter in the new structural setup with Machine Automation division now part of the business area. Automation also delivered a fantastic order inflow. You see in the chart on the left that the $2.8 billion, up by a comparable 41% is on par with the similarly high Q2. This has clearly been a strong year for automation orders. And like for Electrification in Q4, we had some large bookings at the above the $100 million mark. These were linked to the marine and port segments and contributed to a total of close to $600 million.

In addition to strong marine and ports, I would mention oil and gas as a generally solid market, although orders declined in this specific quarter. There was also an increased activity among nuclear customers, albeit a small part of the total. Machine builders remains a challenging area, but due to the low comparable from last year, orders increased sharply. And lastly, mining orders were up in what we otherwise continue to see as a bit of a muted segment.

Turning to revenues. Comparable growth was stronger than expected at 9%. Execution of the backlog as well as good deliveries in service and short-cycle businesses all supported revenues to the record $2.2 billion. Operational EBITA was up by 27% to $311 million and key level to the higher profitability was the gross margin increase of 140 basis points. This was due to leverage on higher volumes, some positive pricing and the team delivering productivity enhancements. Add to that, a stringent management of SG&A, and we arrived at the 150 basis points increase in operational EBITA margin to 13.9%.

Looking at the first quarter, we expect Automation's comparable revenues to improve at broadly a mid-single-digit range and operational EBITA margin should improve slightly year-on-year. [Technical Difficulty] which was another highlight of the quarter. The strong outcome was a result of [Technical Difficulty] in combination with a larger release of trade net working [Technical Difficulty] higher paid tax and CapEx expenses, we improved free cash flow by 17% to $1.5 billion, a good outcome, in my view.

Given the strong cash performance already in the prior quarters, in total, for 2025, we generated free cash flow of $4.6 billion, and I really want to give credit to the team for achieving this. We have now consistently run at a free cash flow margin between 12% to 14% over the last 3 years. And I'm really pleased about both the level, but also the margin stability.

Looking forward into 2026, we expect free cash flow to remain broadly unchanged at the $4.6 billion level. This would be the net outcome from a higher cash flow in the businesses and real estate gain with an offset mainly from the expected cash impact from the closing of the Robotics divestment. It looks like this tax impact will be about $400 million with approximately $300 million in '26 and the remainder in '27. And with that, I hand it back to you, Morten.

Thanks, Timo. Now let's finish off with the outlook. We expect to continue to perform well in a strong market and foresee another year with a positive book-to-bill. Comparable revenue growth should be in the range of 6% to 9%, and we aim for a slight increase in operational EBITA margin even when excluding the real estate gain in the first quarter of 2026. For the first quarter, we expect comparable revenue growth in the range of 7% to 10%, and the operational EBITA margin should increase year-on-year, excluding the real estate gains. Last year, the Q1 margin was supported by about 190 basis points to 20.3%. So excluding the gain, the margin was 18.4%. So now, Ann-Si, let's open up for questions.

[Operator Instructions] And with that, I suggest we open up for the first question, and it should come from Max at Morgan Stanley. Max, are you with us?

I just wanted to ask around pricing and the raw materials comments you made because I think if you look at the moves in copper and silver, kind of it looks to me that most of the electrical equipment companies from this alone will have to put up prices by about 2% in 2026. So I guess I wanted to understand how much of those price rises are already captured in your Q4 numbers? Roughly how much price are you embedding in the guidance? And maybe just talk us through actually the mechanism here in terms of how it works. Do you hedge? Will we see those prices come through gradually? Have you put them through already? And should we be worried at all about sort of any pricing exhaustion in the industry given how much pricing has already risen in the past kind of 3 to 5 years?

Thanks, Max. First of all, we will, of course, reflect the, I would say, quite rapid changes in raw materials. Some of that we even saw late December and starting of this year when you're talking about silver at all-time high, I think, $120 per ounce this morning. So we are, of course, always passing on some of those raw material changes out to the market. That's very common in the industry, and that will happen again. The -- in general, we are also -- and I think Timo can give more color to that when it comes to hedging. We are hedging for both on our raw materials. But of course, hedging doesn't fix the long-term issue. You have to do work on prices as well.

Rapid changes will -- like what we've seen now, this fluctuation will take -- will go into current pricing. All of that is not covered. And therefore, you may see some delay getting that out. On an annual basis, this will be fully covered. That's our -- always our commitment. So therefore -- and I'm not worried about the industry being able to deal with it. This is another point that will be transferred out in the market.

Yes. Maybe just on the hedging and guidance. So yes, we hedge commodities, but it's actually, as Morten said, we do that really to buy time to react in the business side. And in that way, when you look at our Electrification guidance, where we are saying that we expect it to go up year-on-year, but then sequentially, maybe up a little bit less than we have had in the previous year. So that is actually taking into account this small time lag, which we would have there. But yes, we would expect Electrification pricing to be up a bit more than it was last year. Last year, it was maybe full year about a point, so it could be a bit more than that this year.

Okay...

And sorry, just maybe embedded in the guidance, what have you put in for price within the 6% to 9%?

For the year, as Timo said, we had -- last year, we had about 1%. We have put in a bit more north of 1% for this year. And that's -- but then, of course, this is something we also would need to look at throughout the year, depending on if this very high level now on copper and steel will remain, then it may be a bit -- even a bit more with kind of numbers that you referred to earlier in your question.

Thanks Max. And we open up the line for Magnus at Nordea.

Along the same lines, you're talking about a slight increase on EBITA margins year-over-year this year. So in the context of 6% to 9% like-for-like growth, it looks a tad light. Could you talk through the sort of the various components which goes into that assessment, please?

Yes. You want to -- I mean, we can -- I will try first and then Timo...

Go ahead...

Because what we said is that last year, we had a significant real estate gain, and that is -- that we ended up at 19.0% for the year. When we're looking at the outlook for 2026, we said that, that will be a slight improvement on that number. And then you can put -- announced the real estate gain, what we announced last night on top. So that's kind of we are going to do operational improvement to cover the real estate gains from 2025 and then we have to do a bit more. That's in layman's terms, the best way to explain it, but I'm sure the CFO have a better -- maybe have a better explanation.

Yes, maybe throwing a couple of numbers in there. So the real estate gain last year, which we first have to cover in the margin is, if I remember correctly, $140 million, and that's about 40 basis points lower starting point. So you first cover that and then you move slightly up is the way of thinking. And then if we look at sort of the components here, so first, if you look at the business areas, we would expect Electrification to improve. We would expect Automation to improve. Motion is a little bit trickier with all the dynamics going on there.

And then also when you look at Corporate and E-mobility combined, we would expect that to be also a slight positive because in E-Mobility profitability, we expect quite significant improvement to this year. So the, let's call it, full year loss clearly less than $50 million and then Corporate up $50 million from $300 million to $350 million, driven mainly by just an FX move. So those are sort of the puts and takes in the margin guidance.

Thank you. And I will throw in a question here from the -- from those that came in online. And this, I think, is aimed to you, Morten. Could you give some qualitative feel on the large $100 million DC contracts in electrification orders. Are these long-term framework agreements over a few years? Question is from Ben.

Yes. No, thank you. The Data Center -- kind of, first of all, Data Center developed very strongly overall for '25. Q4 was extremely strong due to we got some significant large kind of call-offs on long-term frame agreements. So these are in the $100 million of dollar tickets. That is quite common. We had that discussion during '25. Some quarters are -- has been lower. Q4 was very, very high. This is more when you get that call off.

The lead time of this is really dependent on the project when the customer wants, you know, the site is ready for installation. So that is what is driving the lead time. Most of this project that we got now has -- is kind of needed on site from 12 to 24 months from now. That's kind of the lead time when we're talking about the further deliveries.

Also, you talked about the kind of what -- is this the new normal? I say, yes, when you're looking at this volatility, you will still see that there are quarters where you come in high bookings when it really depends when the sites are ready, and that's where we -- kind of when we get the deliveries going in this space.

Okay. And then we take a question from the conference call, and we open up the line for Martin at Citi. Martin?

Martin from Citi. I wanted to ask about the Automation business. It seems like the discrete business, it's still at a relatively low level, even though it's improved in the fourth quarter. Just to get some sense as to what you're hearing from the market there and regionally, is that something there are some green shoots that we can see progressing through the early part of 2026. I'd say speaking to other companies, it does seem there are some signs of recovery there, but maybe still a little bit mixed. So keen to hear what you're seeing in that business in terms of an uptick over the course of the year.

Yes. No, thanks, Martin. We do see a recovery, but we have talked about here is that step by step recovery. So it's not kind of a very steep curve. We are looking at improvement, but from a very low comparable level, but we do see an improvement, especially first, of course, in the order intake and then we're building. This is not where you don't have a large backlog. Normally, this is a book-to-bill within weeks, not in quarters. So we do see an improvement.

When you look at geographies, I would say also there that we have seen a bit more recovery or stronger markets in Asia. Europe has been still relatively slow, to say, based on an improvement, but from a very low level. Americas, also there not a rapid or not a big change, kind of improving, but sideways to improving, that is kind of how I would describe it. We do expect to see this trend continuing by a step-wise improvement, that's why we're also taking corrective actions as we have talked about before in that business, reducing the cost base, not waiting for kind of the market to quickly come back. It's really that -- by being ready and do the self-help that is needed in the business, and that's what the new management is now executing within that Machine Builder division.

Can I just throw in something here? So when you look at Automation and you look at their annual margin, 14% versus 14%, 24% versus 25%. So this is all driven by this. So if you look at the Process Automation without Machine Automation, that thing actually went up like the old Process Automation, some 50, 70 basis points. So that gives you a feel. And now as Morten said, this year, we would expect a positive impact, a little bit of positive impact also from Machine Automation.

Okay. Thanks, Martin. And we open up the line for our next caller, which is Mattias from DNB Carnegie.

Great. I would like to ask if you could help us frame the recent strength in the data center-related orders a bit. In particular, if you could clarify whether the current order momentum already includes any of the next-generation power architecture that you've been -- I think you press released some collaboration with NVIDIA's 800-voltage target current, or if we should view this rather as a more medium-term opportunity that could come on top of the current sort of strength in run rate? And if it's the latter, when would you expect this opportunity to start to translate into orders?

Yes. Thanks. I can confirm, Mattias, that the current offering what we have is fully based on, let's say, the legacy or the current architecture. That's why we -- so there is no 800-volt DC architecture in the numbers what you see now, and it will not be either in 2026. This is why we're working on a technology development with companies like NVIDIA, who is the leader in this field, looking at that new architecture, moving it up to 800-volt DC. It will change the architecture from -- not that much on the medium voltage side on, let's say, on the outside is more what you're looking at the inside on power distribution units, busways, UPS, this is where we see the changes.

We believe this is a great opportunity for us at ABB. We are one of the leaders in DC technology, for instance, with DC grid in the marine business with our drives business and also the medium voltage UPS, which has technology which can be used and will be used in this kind of new architecture. So this is future business. If you ask about when, I mean, just to NVIDIA will start kind of releasing the 800-volt DC chips and the components in 2027 and will be able to deliver that to the market in '28. That is onwards. And that's where we, of course, need to be ready on our side so we can build those new data center with those new racks doing that at 800-volt DC. So that's 2028 onwards is when we will see -- start to see a pickup in that part of the business.

Okay. Thanks. And we'll throw in another question here. It's about China and in this specific case, linked to Electrification, is from [indiscernible] who asked, could you please talk about the double-digit decline in Electrification in China?

Yes. It was in Q4, we had -- overall in China, we had for the group, we had plus 25%. But for Electrification, it was down in the quarter. It was due to some also very high comparable from last year in the data center space in China. That's why you need to look at some of this quarter. I think the -- as already said, the residential -- the building market, it's still slow in China, and I will predict that it will remain slow also for this year.

We don't see any kind of rapid recovery there, but there are other opportunities in China. I mentioned already data centers, the whole integration of renewables and larger project, both in what we saw now in Motion, Automation in this quarter. So therefore, if you look at 2025, the full year, it was 8% growth -- in order growth in China. So that's kind of the what we leave 2025 with. And I think that when you're looking at '26, we are going to see, as I say, building being still slow, and that's not -- but there are other opportunities, and that's kind of the team is focusing on to take our China business forward. So therefore, we are still investing in China because we believe in the long-term growth and the opportunities in the Chinese market.

Very good. And then we move to Phil at JPMorgan on the conference call.

And also congrats on the strong Q4. The question is on M&A. It's obviously great to hear that you're disciplined on price and prepared to walk away. My sense is that some of those assets are not too far above your own valuations. The observation just being that great assets with attractive outlooks do deserve a premium.

So the question is, how is the pipeline looking now? Are there still plenty of targets in Data Center for you to go for? Are you becoming more open to paying slightly higher prices now? And also, given what appears to be this broader-based pickup in demand outside of electrical, are you inclined to broaden out the net a bit and look for other end markets or geographies where there might be some slightly lower-priced assets?

Yes. No, thanks, Phil. We are not kind of limiting ourselves on the M&A pipeline only to Data Centers. Yes, that's one area of interest. I mentioned earlier also, we're looking at the utility business, grid automation. We did make an acquisition now in the fourth quarter of Netcontrol, which is a Finnish company working as a specialist in the grid automation. It's a technology we believe can help utilities to be more reliable and more effective in managing their grids. So that is one example of bolt-on acquisitions that we are doing, I would say, more of a constant basis.

When we're looking at -- so we are open absolutely to do it. I do agree also that there are premium to -- that we also have to accept to pay premium for premium assets. But there is limits also to that. And that's what I also want to be kind of clear to -- that our thinking is that we need to be convinced and confident in the long-term value creation. That is what's the decisive factor. So we are looking very wide. We are not limiting ourselves to any technology or any single segment market. We are looking on a wide scale and see how we can do. And we do have a strong pipeline in all our 3 business areas in the divisions we have there. We have a strong pipeline. So therefore, we are confident that we will see more deals coming through also in this year.

And I will -- yes, I will -- you mentioned data centers. And there's one question here. We mentioned the importance of being honest with customers and making sure that we can deliver on our promises. Are we turning some business away? Question from Sean.

Yes. We have done that in the past, and we will do it again if we cannot -- we can say, not be confident that we will reach the milestone that are required. There are projects we say with very short lead times. And if you don't have the capacity, we would rather say no than to say, grab the order and then disappoint the customer and maybe pay a lot of liquidated damages on delays later on.

So I think this is just the for us have been especially in our medium voltage business, and I'm talking here, especially in the United States, where there has been -- this dynamic has been there in the market. We have said that we want to be the most credible partner in this business. We want to always deliver on time. And that's the feedback we also got from some of our major customers telling us, that's why we give you more orders because we are confident that you can deliver on site when we need it because if you don't, the whole project is delayed. And as we all know, that has massive consequences.

So there are times where we could have grown even more than what we show in our numbers, but I believe turning these -- taking these orders, but turning them into solid revenue with the right margin and avoid disappointing customers has been for us, one of the key priorities over the last years. And I think that is really what we see now also, it pays dividends.

And then we take the next call from the -- a question from the conference call, and that will be from Alex at Evercore. Alex, please.

I wondered if you could talk a little bit about the electrical demand picture outside of data centers. And I'm thinking in particular about utility demand and the development in terms of broader grid expectations, I guess, in the U.S., in particular, given the very obvious focus of the administration and the impact of storms, et cetera. But it's something that I think has been -- it seems like -- it feels like it's accelerating again. And I wondered if you could just expand on that for us. And if I could throw in a cheeky little follow-up on commercial. It sounds like you're a little bit more optimistic around commercial construction than perhaps we've been over the last 12 to 18 months. I wondered if you could just touch on that as well.

Thanks, Alex. On the energy expansion, as you know, there is declared kind of an energy crisis in the United States. So that is putting more energy online. So we see a very strong build-out on -- especially on the LNG side. So that's kind of power generation, getting more energy online in the grid. So -- and that's where we are involved in drilling pipelines, terminals, all to make that happen. And then you have the new power plants where you're turning gas into electricity because in the end, that's the outcome you want.

So this is the -- from power generation, but then you have the whole transmission or the distribution where we are involved as well, which is where utilities need to have greater grid reliability. And just what we see now with the storms of the last week is where, of course, American grid companies or utility companies are struggling with a lot of their overhead lines with are filled with ice and fall to the ground. And then you are out of power for days, and worst case for weeks. So with all the consequences that has.

So this is where we help with our underground switchgear, underground cabling, all that equipment that is needed for power utilities to keep electricity flowing in cold weather, but also in all the industries that need it. So this is the trend of what we see everywhere that kind of as we turn to electricity as the main source of energy, just you also need to fill on the power side and do that energy expansion.

It's the same what we see, and I was happy to see also talking about Europe that Germany approved also the building of new gas-fired power plants next to the nuclear plant that was closed a few years ago. And now we are building new gas-fired power plants next because there is already grid infrastructure to connect it. And of course, these are projects that we would be involved. Very often, there is plans for a data center next door to that power plant. And again, that is where we would help to make all that happen.

So this is the whole energy expansion that is going on one side, more power generation, but then more of the consumption and data center, of course, being one, but not the only one. I think it's important to look at the whole demand for electrification outside data center. We still have double-digit growth at the electrification business even without data center. So it's a very strong trend that is there. The data center really the icing of the cape, but these underlying fundamentals happens everywhere.

You asked -- your second question was around the commercial buildings. And I think what we see here, that is a better market in general than residential. So that is what's reflected both through our Motion and our Electrification business. Our [Technical Difficulty] as a company. And therefore, on that side, that we see really especially both in Europe, Middle East, but also in Americas is where we see the strongest commercial build-out. A lot of focus here is around energy efficiency of those buildings, not just the new build, but upgrade of existing facility, commercial buildings, reducing energy cost and footprint. That is where we come in and help on the commercial building side. So it's not just new build, it's also about making those buildings more efficient and more comfortable to work and to live in.

And then we open up for the next question from James at Redburn.

Wondered if I could just follow up on -- my line was dead for touch. Sorry if this is a repeat question. But fantastic data center orders for the year, you must be close to $4 billion and over 20% of EL. But just in terms of mix, like is it all low voltage, medium voltage in UPS? Or are there any other categories? Any chance you could pie chart? I'm really trying to get to the UPS piece and how big it is now. And within that, is it all medium voltage or is still the bulk of it low voltage? Just trying to understand that because I see you having a significant potential there.

Well, we don't classify all the breakdown of the data center revenue or the orders that we take. But what I can say is that it's -- when you need -- when you normally do these packages, you do medium voltage and low voltage, that's part of -- switchgear is part of the package because you don't do one without the other. So that goes normally for us also hand-in-hand.

When we're looking at the best success we have had as a company is on the UPS side, is on the medium voltage UPS because that's a technology that is really a game changer in the market. So we used also here on this call, I talked about the Applied Digital, which is one customers that -- customer we didn't have 3 years back, which is now a large customer and are really standardized on medium voltage UPS as they way -- their way of giving backup power to that -- those facilities. So this is where we have seen a significant growth, more also growing on the low voltage side, but the majority of the growth comes on medium voltage UPS.

And that is also a part when we're talking about this future architecture, we believe that more of that protection and that support will be done, a lot will be done on medium voltage, and more and more use of power electronics. And that's what gives us confidence in the starting point for those future data centers. So that's kind of what the team is working on, both from a research side, from a development side, but of course, also then on engineering on the ground level. And that's how we work close with customers, both on the NVIDIA being one, but of course, also with the hyperscalers who is one who will operate these new large AI data centers in the coming years.

Just to clarify Morten, of the UPS orders in the year, is medium voltage now more than half of it? Or is it still the minority?

That would be -- yes, that I will not give kind of a rough answer. I think Ann-Si need to come back if you have any statement there.

You can talk later. And here's one -- I know you mentioned E-mobility earlier, but here's one question. Can you talk about what to expect from the E-mobility business during 2026?

Sure. Happy to. So if we look at E-Mobility, we are looking at a significant reversal on the profitability performance, still, as I said, being negative. So we say under $50 million on EBITA level impacting the group. But then when you look at the important items, why are we having this about $100 million improvement there, it really is driven by expected gross margin improvement from the better product portfolio. So we are expecting double-digit growth on orders and revenue. But the main item is the gross margin, which last year was hovering around 20%. So there should be really a significant improvement there, combined, of course, with tight cost management. So that's sort of the equation for E-mobility.

And then we take the next question from Will from Kepler Cheuvreux.

Congratulations on the results, and thanks for everything over the last 9 years. Timo, I'd like -- just a question on housekeeping. I mean, if you can be specific on the E-mobility, just to clarify, is it $100 million improvement from the base? Or do you think that you'll actually reach breakeven this year? But more importantly, when we come to the corporate line, can you just talk us through how you expect the corporate line to develop into '27? When will the stranded costs drop out? And when should the corporate level normalize?

Yes. So on E-mobility, as I said, we expect sort of less than $50 million impact negative on ABB's overall profitability. Last year, we had about $150 million negative. So that's where the $100 million comes from. And we are expecting that towards the end of the year, it should -- could turn positive. That's kind of like where we are on that.

And then on the Corporate line, so there are like 2 items here now excluding the $350 million real estate gain. So our Corporate line, we are saying we are expecting it to go up from $300 million to $350 million because we have so much corporate cost in Swiss francs. So it's almost all driven by the FX conversion situation. So if that reverses, I would let my successor decide what to do there on the Corporate line. And then on stranded cost, this $125 million, that's a full year estimate. Now we would expect the Robotics transaction to close, as we have said, sometime during second half. So we would expect that to start to decrease rapidly after the closing. And hopefully, for 2027, we wouldn't see any of that stranded cost there.

Thanks, Will. And then we open up the line from Andre at UBS. Andre?

Yes, can you hear me?

Yes.

I just wanted to circle back to the bigger picture and think about the 6% to 9% growth guidance that you gave. You've given some indications on end markets and pricing, but can we just kind of think specifically about maybe Data Centers and Grids and Process, Industrial Automation as 3 chunks. What kind of growth rate ranges do you expect for those 3 within the 6% to 9%? And maybe just to anticipate a little bit the answer on Data Centers, it's double digit, but is it starting with 1%, 2% or 3%?

We're not going to go there...

Yes, yes, exactly.

Tricky question. So on the data center side, what we have said before is also last year on the Capital Market Day was that we have a CAGR of 25% since 2019. And therefore -- and that was the same -- also on -- yet another year for that in '25, '26, we are -- say we are in the teens, so it's a -- and we are -- as you heard me say already, we are very confident about the outlook of the Data Center market. So of course, that will be one of the growth drivers. That's why we also upped the guidance today for the quarter.

For our utility, our grid business, that's another example of, I think, also what will be, again, growth above average. We've also -- it's a very solid and a good market. And then we have some other pockets. We talked already about on the discrete side, we had in some of the process industries, where we don't see yet that market is coming fully back. And we think that will -- residential, I mentioned as well, that's kind of this balance that brings us to the guidance of the 6% to 9% for the full year. We are also -- when you're looking at the -- we have 7% to 10% for Q1 because we have some kind of -- we have very high comparable now in the Q3 and Q4. And that's why we are also, let's say, even more optimistic for the first coming quarters, which we also, of course, have more visibility to.

And I think time flies when you're having fun, and I see we're sort of coming up to the hour. So Morten, do you want to finish off with some words?

Yes. No, thank you, Ann-Si. It has been -- this is -- we're closing out 2025, already feels a long time ago, but it -- for ABB a good year. As you all hear, we have a high confidence level for 2026. It was a record year, and we are predicting also for '26 to be a new record year. But it's also a bit special -- special for me, but I know it's even more special for Timo today, because Timo, as of tomorrow will be his final kind of active working day as a CFO and be my right hand at ABB.

It's been a pleasure working with Timo for 9 years, I had that pleasure. Of course, it's been very close now the last -- since I started last summer. But Timo has -- is leaving a big footprint at ABB with a strong finance organization behind him, but he's been part of this journey now for 9 years. So I really want to say a big thank you also from my side in front of everybody. I know also the banking community and everyone has been enjoying working with Timo, but we know at ABB, we have really enjoyed it, and you will be missed. And we're looking forward to welcoming Christian on -- in Q1. But today, it is the final time we do this. So I just wish you all the best in your new nonexecutive roles. And again, thank you for everybody from everyone at ABB for your fantastic work here.

Yes, yes. And I want to say to everybody, to the whole community here that I just want to thank you for the good cooperation. It's been a really, really nice ride, good learnings as it is. And I think there is a lot more opportunity still for ABB, and it's a good time for me to hand over to my very capable successor, Christian Nilsson. So thanks again for a great cooperation over the years.

And with that, we close the session. We'll see you in about a quarter's time.

Thanks, Timo.

Thanks.

I wish it was like that every morning when I get to work. Welcome, everybody, to this ABB Capital Markets Day. We have a big crowd joining us virtually, and we have a full house here in New Berlin in Wisconsin, wherever you are, thank you for choosing to spend the day with us. You should know that it's appreciated. At this motion site, we actually host 3 divisions in motions. The biggest one being dry products, but then we also have system drives and service. It's a little bit of a nice proof point of ABB leaders actually collaborating where it makes business sense. It's brand new. I realize I'm biased, but I think it's beautiful. You will see it later on. You will meet the people, those of you who are in the room when you go on the tour. I hope you agree about the beauty.

And you will also get to see a little bit of the value creation that Motion generates here on its own, but also together with some of the other businesses within ABB. I know the local team is really excited about showing off their new home. I want to take this opportunity to extend a big thank you to the team. I couldn't have done it without you. Really, really thank you. We want you to be safe when you're with us today. Those of you who join us virtually. I hope you all safely buckled up in your seats. In the room, if for any reason, you don't feel well or 100% today, please reach out to any of the ABB people or reached out to the reception desk and we'll make sure you get the help you need.

You saw before on the screen, there was a little noticing Phone is Not Allowed. We actually mean it. We kindly ask you to respect that today, whilst on the premises and a small but important point about restrooms. You find them as you leave this room, both right and left, you'll find them there. Some of you joined us for dinner last night. Thank you very much. You got the chance to meet with the whole executive team of ABB.

Today, you will meet with the 3 BA leaders. We have Giampiero, Brandon and Peter. You will also meet with Tuomo who -- this is his home turf, he will proudly present the site later on because he head the Dry Products division. But first of all, we will kick off with our CEO, Morten and CFO Timo. They will talk about the full power of ABB. They will talk about why lean and clean makes sense. And they will talk about why we think that ABB can deliver even stronger performance in the future. First of all, we will kick off with a little bit of a video, but I should also mention that we have a little special feature during the day. Every now and again, the light may go off at full blow Don't worry. We're just making sure you're awake. They will go back to this little cool mellow lighting within short, don't worry. But now we kick off with a little bit of action from ABB.

[Presentation]

A warm welcome also from my side, and I think it's great to be here in New Berlin in Wisconsin. This was one of the times when I was in Motion back in '22 before I moved over to Electrification. One of the last things I did was to approve the investment here, which was north of $100 million. So we were a bit kind of even uncertain at the time if the -- because that was a lot of money on one site. Looking back, I think it was absolutely the right decision. We are very proud to show you also where capital -- when we talk about CapEx and capital allocation, what you will see here today is how money is being deployed into United States and around in many of our sites.

So I think we were 2 years ago, many of you were with us in Frozen in Italy. Today, we're hearing in the Motion -- one of the Motion diamonds here in the U.S., and I think it's another great example on how really we help customers outrun as you saw in the video, coming up with great technology. So it's good to be back again. 2 years later, for me, the first time here by looking at -- in this role, looking at the performance we've had over the years. But being in the Executive Committee since 2019, both in Motion we've been all kind of part of this journey that we've been on as ABB. And I think one of the key elements, and what we should be proud of, when you're looking at the financial performance is the high say-do ratio. For me, this comes very much from the ABB Way operating model. The ownership to performance, the ownership to an accountability to taking the [ best ] Swiss forward to the next level.

So we have been on a good journey, and we have added some of the charts here. You see some of these elements. I could have added also gross margin or order backlog or a strong balance sheet, but we selected on these 6. And what does for me is important. It's about record breaking, doing better than ever before every year, year after year and having an ambitious team that own the performance that each division today, we have 16 operating divisions who owns their own performance, and they work together where it makes sense for customers or where it makes sense, like on this site where you work together under the same roof. That is what drives performance over time, having that ambition always to do better than you did last year. always looking at what's the next step we can make. So that kind of record-breaking attitude I think is one of the key elements to say about the ABB Way and the culture of what we also want to foster in the company. And that's what I do also when I look at selecting leaders.

And I know also my team when they select the right division precedents, and the right leaders down in the organization. It's the ones with ambition who wants to achieve and don't take just the short-term view of doing a quarter or a year, but driving performance year-over-year. So this is the financial performance we've had, but it's not the only way how we measure success. We also made ambitious targets back in 2019 on how we drive our sustainability agenda. And I think this site is a great example of how technology can help reduce emissions in manufacturing. This is one of the net mission to 0 and net zero site, that is by using our own technology. And we have here, you will see later on, we do a tour. You see that room up there with a lot of the orange and blue equipment. That is our own technology from electrification, motion and automation that is bringing -- being kind of enabling that low carbon emission site that we have here.

So a great example, and already now, we are -- this year, we'll be able to be closed already over 2030 ambition of 80% reduction of our own scope 1 and 2. The journey continues, of course, when you're looking at how we continue to help our customers reduce their emissions. And that is really how we drive our business, and that is our ABB business today. Another area that I think we've done really well is also around the employee engagement. Because I believe that success comes from people who have ambitions and have our teams with high engagements. So therefore, we also measure this every year. And we did that also since 2019. Both the engagement score, but also the number of respondents goes up year by year.

We are now here at the 85% of our 110,000 people answer the 37 questions about how they feel about ABB, how they feel valued and if they are motivated to get up in the morning and contribute to ABB's success. And we are now at the 80% mark, which is above the high in the industry. And you can always argue a bit of the chicken and egg discussion. Does it come -- does engage people create success? Or is the success also creating engagement.

And I think this is just a positive spiral that you're working together. So highly engaged teams and people is creating the success today of ABB. So we don't really well. And it's something I always say we should be super proud at ABB and what we have done over the last year is a great journey, but we should never be arrogant always proud that never arrogant, is somebody who will -- internally, they will know that phrase very well because I believe we can do much better than what we're doing today. And we have identified 6 areas that I would like to talk about where I believe we can use these 6 elements or areas to continue to drive the performance of ABB to the next level, doing well, but more to come. Let me go straight into the first area. And many of you who have worked with me or talk with me over the last year, we have often heard me talking about the beauty of mix. And that is because I believe this is a driver for performance. It's how we use the ABB Way thinking of stability, profitability and growth about driving performance of the company.

Today, out of the 16 operating divisions, which then we put robotics and e-mobility on the site. With our 16 operating divisions, we have only one in stability. And that's our machine automation business and Peter, who will be up on stage later on we give more clarity or more color to how we are also improving that business. If you look at profitability and growth. That is about the 2080 mix. And again, the beauty of mix is that everybody focused on their own mandate and they got targets and they got incentivized according to those, which means that the profitability teams are looking at how do I reduce cost, how do I improve the performance of my division and the target is then also less on growth and more on profitability improvement.

While on the growth team, are -- it's all about how do we continue to drive that performance at the same or a bit higher level on profitability but focus both investments and on the growth side. And that is also reflected, of course, the same targets, but also in the incentive plans. And this is what we have taken also to the next level in an even more systematic way. But it doesn't stop here. We want to take this 1 level further down in the organization. because under these 16 operating divisions, we have around 75 business lines, which is the subgroup inside the divisions. And even taking in electrification, who has 5 divisions in growth mode, they also have business lines with profitability or even stability mandate.

So this shows the kind of -- but using that methodology using the thinking that the business line managers and the team knows what's our strategic mandate that target is set accordingly and also their incentive plan are following this way is what drives performance. We know that this is working very well in ABB. And it's important just to they use the same methodology also on the next level because I believe and I will that this will drive the performance of the company also for the coming years. Right now, all these 75 business lines know their mandate, they have targets for next year setup, but this will be the first year that you will see also this comes through in the next level of the organization. So this is -- I mean, how we kind of use the beauty of and using the whole ABB was thinking. But another area where I believe we can do even better, it's in the field of M&A. You've heard -- you know that we had an ambition of 1% to 2% of bolt-on acquisitions to the company. We have so far not been able to deliver fully on that commitment.

So this is an area where we also we agreed that between the division presidents and in the leadership teams we have to step up and putting more focus around pipeline building, looking at what are the targets and the comp technologies or channels that would kind of help us accelerate growth in our business. We have a scoring system with about KPIs that it goes through, so we can do a real valuation. But long disease down to the divisions now to come up with these bolt-on acquisitions because they are the one who knows the business and know what can help. Larger deals will also, of course, be considered, but that is more with the business area presidents and Timo and myself in over roles when we're looking at the bigger targets. And here, we believe that we can really make this also part of the performance culture of the company because the say-do ratio, what I say in many of the other fields has kind of shows that ABB can deliver on our commitment. So this is another way.

We work the same way. We build this into business reviews. We have more of the board discussions and there is a firepower. You know that already when I have a balance sheet that can clearly justify more investment into M&A. And especially with the robotics divestment happening next year, I guess sometimes the question, will you have a $5 billion check in your pocket, burning a hole in it? And I say, absolutely, no. Therefore, I also want to underline for us, the value creation is key to any M&A decision we do. It has always to beat the alternative of share buyback to do an acquisition. So that is kind of, let's say, just a fundamental. Let me come back to also how we want to use M&A as a real value creation opportunity in the time to come. But this is one way to create value for the company.

Another very important part is what we call the power ABB. We are today three business areas. And you may see and also describe one change from what we had earlier. The business area of process automation is renamed to automation, and we will do that from the beginning of next year. It just shows also the whole -- now when we take machine automation together with process automation, we believe automation is a good name. Automation has a special role in ABB because they -- the automation business is very often the ABB ambassador, the one carrying the ABB flag at end user as large end users. It also pulls more than $700 million of business from electrification and motion as a package deal when they go out. So this -- that's why we also see later on the expectation to margin is different to our automation business than it is to electrification and motion.

It's a bit how we have set up the business model internally at ABB in this business. It -- so therefore, world-class performance is a bit different when it comes to numbers, but they -- our automation basically plays an extremely important role being that ABB ambassador out there. And I think now we have a very balanced company, which looking at with electrification, motion and automation, they share often technologies. They share about products that be used in each other systems take large motors from motion that is used as part of the propulsion system of Azipods in the Marine business but there comes also medium voltage and low voltage switchgear from electrification. These are examples of how you pull technologies together and come to customers with one offering. Because at ABB, we want to serve customers as they -- how they want to be served. It's not an inside out that we define how customers need to work with us.

We adopt how customers want to be served from their side. And that is the guiding star for how we organize ourselves, how we work internally with account management, with contracts and how we are able to serve customers in a way they want to be served. That for me is a super important part and that also goes into what [ Ansi ] already talked about that smart leaders collaborate in ABB. This is how you set it up as long as you make customers in charge of these decision that then we line up at ABB and serve them in that way that they want to be served. And I -- also, we have good opportunities between this business area when it comes to technology. There's a lot of common technologies. There is a lot of common procurement activities as well. And this is covered in what we call today our community, so practice where experts are connected throughout our organization, not in a matrix model because that's something we discontinued, but we let the business take the lead. And normally, it's the one with the broadest shoulders who bear the heaviest backpack.

That means that those with having highest revenue would take the lead towards the customer and bring the other colleagues with them on project as an example. This is how we are able to work well together inside the company, supporting customer better or reducing our own cost, that be in procurement, that bidding quality being in any aspect of the business. And I think to show this with an example on how we work together, it's a project I know really well because it's in Sweden, where SSAB as putting in their new mill on the new steel mill in the north of Sweden. This is that complete upgrade on their old facilities where they're able to put it up just kind of the new facilities, we are able to reduce the emission for the whole country of Sweden by 7%. So it's a massive -- when I'm talking about making things cleaner, this is a fantastic example how one plant can reduce a country's submission of 7%.

But as importantly, they are able to reduce their operating cost and drive productivity in the new facility. And that is where we come with ABB, with the all control system from our automation business, but also all the electrification from medium voltage to low voltage and all the equipment there. And then you have to work also with the OEMs of -- in the steel industry for a hot and cold rolling mill. And this is where our motors and drives goes in there and the electrification so that you have everything on site is ABB, which means we have a service opportunity and that's what SSAB want as an end user, they want ABB to be there and service all the equipment on site even some comes direct and some comes indirect through OEM. This is the true power of ABB. And here, we are one of the very few or maybe the only one in our industry who have this one-stop shop and one complete offering of this space.

And I have another example, we also like to show which comes from Shell and how we work with them and we can listen to the customer and how they are seeing us as a partner for some of their large projects.

[Presentation]

And I think it's a great example and a testament from Shell and how we can partner with them to help many of their offshore installation become both more productive and better and safer, but also helping them also reduce emissions in what they do offshore, this one coming from the North Sea. I think this kind of lines up a bit what does customer like about us. This is one of the things where I get really proud when I meet customers, tell kind of -- and I ask the simple question, kind of why do you buy from us. And normally, these are the two things that come back. It's how you're able to use technology by great product systems, services solutions, and it's about your people, the know-how, the skill sets.

Because we have been in this industry for 140 years, and we plan to be that also for a long, long time in the future. And we know that the technology is what is the partnerships that customer need. Always using the new technologies that's available. We talked 10 years ago, it was all about IoT, the Internet of Things. Then we talked about digitalization. Today, it's all about AI. And I think today, it's all about using the best technologies that are available always and being the first company to deploy those new -- that new technology at the customer site. That's what customers are looking for. Are you able to help me becoming more productive, being leaner, helping reduce my emission being cleaner that is the objective.

The technologies we use is a bit kind of it's a second, it's not that important for the customer is how -- what's the outcome? How do you help me? And that is the ambition for us. We want to be perceived as the technology leader by our customers in the industries always being the first mover. So you see, you will see also here today many good examples of how AI is applied within ABB, but more importantly, as our customer site, making the skill set and the know-how of ABB available at the fingertips at our customer side. So we make their life easier and better. That's our main goal. So I think this is one good example of how again Shell, you heard it, but we could have many other examples and the feedback were very much. So that's also why you see our investments in technology and being that technology leader together with also continued investment in our people and making that domain expertise available is key for our future success.

And when we -- you heard me talk about now a lot about the -- how we make sustainability part of our business, but it's again, back to what I say here is about how we make our customers helping them to become leaner and cleaner. And this is an end equation. It's not an or. You don't have to choose. That's the nice thing about it. If -- because the whole part of decarbonization, which is often comes out with electrification, it's the better way to operate. It's lower CapEx and it's lower OpEx. And that's why electrification business will be a long-term solution for industries. Because we see about the power of the future is all about electricity. And here, just to show it, it's kind of three takeaways is that the electricity demand will outpace the energy consumption, electricity will be the #1 source that is growing.

And that goes across segments, talking about buildings, industries or transportation and it's all over the world. It's not the U.S., Europe or Asia or China, India, phenomenon, it's everywhere. So that's kind of the whole backdrop of the energy equation. Because we need more energy, and we talk today so much about energy expansion, making more energy and more electricity available now. And therefore, we have to use all the tools in the toolbox to make that happen. And that's what we can do as ABB helping both on power generation, but also about on the demand side, driving energy efficiency, you will see many examples here today about also not just using motors and drive for things to work well, but it all can work even better with better energy efficiency because being able to reduce driving energy efficiency will drive kind of reduce some of the energy expansion that we will face.

And on top of that, we have the energy transition, which when you look at the curve here on the lower part, you see that today, the electricity coming from fossil-based power generation is the same as in 2019. So the big kind of takeaway is that the energy transition hasn't even happened. All the additional energy we need comes from renewable sources. But the underlying equate still, the energy transition globally has not even started. So that's a further upside for the future. So if you look at the one -- and we all talk about this today, the size of data center, and Giampiero will share more about data centers in his electrification presentation.

But it's a kind of from 23% and up to 2030, we are looking at in 7 years, a quadrupling of the electricity used in data centers. In the past, we're talking about like a 200. That was a large data center, now we're talking in the 1 to 1.5 gigawatt data center, which means that you need a nuclear power plant in your backyard, firing and giving electricity today. So that's kind of the enormous use of new power that is coming. And of course, also other industries is benefiting just from that ramp up, if that talking about in the mining sector on the whole utility buildup, but also on the semiconductor side. So if you look at this kind of from an overall perspective and looking at all markets, we're looking at from a 3% on the lower side and up to the 12 or double-digit growth on data centers, many of the faster-growing markets.

And we're looking at these for -- over the cycle here, we're talking about from around 4% to 6.5% of growth in the market that we address as ABB. So kind of the whole takeaway of this we are in really good markets. And I believe we have the right setup as ABB today. And with the ABB Way, we can do even better this way. I think we have or really have a right starting point to continue the journey of improvement, breaking new records and doing better than ever before. That momentum will continue in ABB. And therefore, what better than today, we are here also looking at it, what should be the future ambition for ABB. And we have looked at both our growth and margin side because the 16 to 19 million margin range that we had up to now, we will -- we are at the end of that journey.

And as ABB, we always say, what's the next step, what -- how do we want to go forward. Starting with the growth side, we have kept over 5% to 7%. What I want to say there that this is what we've always said is over the cycle. This is not a midterm target when we meet 10 years from now, you can hold me and the team accountable, we are committing to the 5% to 7% over a long cycle, not about what's about a few quarters or a couple of years. So this is why I believe that the 5% to 7% is a good range for us at ABB, and then we're adding another 1% to 2% of acquired growth on top of that from bolt-ons. And larger deals would come in addition. And when looking at the profitability, there, we have also now made a change on that when it comes to the business areas.

Because I said earlier, what is world-class in our automation business is a different business model and a different setup than for instance, in electrification. So therefore, when you see here also the electrification where we define the range from '22 to '26, where I believe the world class of '26 would be at comparable numbers when I look at the automation business on the 14% to 18% because of the business mix and the business model that we have because automation is purchasing at market pricing from motion and electrification. And I believe that is the right way to do it because then they need to create value by themselves in what -- how they are pricing and how kind of the value they create for the customers on their side.

So I believe that's the right setup for us at ABB to do it, but then it will also be a bit of a different margin. So therefore, we need to recognize that when we do targets so that we also -- for the people who works in these different businesses will be, again, targets and incentive plan will follow in the same direction and Motion, we have at 18 to 22 as what we would define there. The upper end is what I believe is kind of the ambition over time is where we need to work to. And then on return on capital employed, we want to continue to be also here on a very high level as ABB. We have now increased that from 18% to about 20%. And that also taking into account the acquisitions that we are planning to do in the time to come. So that should also be taken into -- in that picture.

So I believe ambitious targets, and we have a strong commitment from myself, from the three Business Area presidents and the Executive Committee and the division leadership team that sits below here that these are ambitious, but a strong commitment targets from all the leadership team that this can be fully achieved in the time to come. And I think with that Timo, I'd like to invite you up to give a bit more color to some of the targets that I haven't talked about. So please.

Thank you, Morten, and good morning, good afternoon for everybody in the audience from my side as well. Now Morten introduced the overall targets, and we really think this is an ambitious and balanced set of targets. Now we have strong targets for growth and profitability, and we aim to grow EPS faster than revenue. And if we would operate at the higher end of these targets, that should also lead to a double-digit EPS growth. So let's see how it goes. On top of that, we have also best-in-class targets for return on capital employed and also for, let's call it, cash drop-through. So as said, ambitions, balance that of targets, driving value creation. Now let's talk a little bit more about how we are looking to achieve this because we really think they are well achievable in the ABB Way operating model.

So let's start with this higher target margin range. Now First, good to remind that all our target setting happens through our bottom-up long-range planning process. So our leaders are really committed to these targets on a group level. business area level, on division level and so forth. Now if we kind of like look at where we are at the moment, and we take the last 12 months, margins, and we take out robotics. We put corporate cost to 300 million. And also, let's put for this example, e-mobility to break even. So whether we can compare. So with that, you come to current margin level of about 193,194 that kind of number. Then if you would take the business area midpoints and do weighted average on revenue, you come to a margin of about 2.3%, 2.4%. So there is kind of like from where we are now, about 100 basis points upside to the midpoint and further maybe 160 million or so to the high end. So that's kind of like how we look at this overall situation. Equally important is that even on a down cycle, as Morten said, this is through cycle targets. We have no intention whatsoever to drop below 18.

Then how are we making this happen? So the strategic mandates play a really important role here. And as Morten said, we are taking this to the business line level. This is about 75 business lines. But let's look at some examples on what has happened here in the past. So when we look at the divisions, which had growth mandates 2023 and then we compare against to the last 12 months, these divisions have grown about 2.6% faster than the other divisions. They have higher margin, so good for mix. Then when you look at the profitability mandate, it's a little bit more difficult because some of the divisions have moved around here. But again, if you take 2023 and you look at the profitability improvement of the divisions, which had profitability mandate at that time. They're up about 370 basis points comparing to the current last 12 months. So clearly, the system for us is working.

And there are two things to further improve. It's actually quite interesting when we introduced the strategic mandates. It was a like everybody in the growth, good in growth, bad not in growth. And that we are really changing now. Because if you look at ABB's overall performance and supporting ABB's overall performance, it is actually equally good to be in profitability or growth. supporting the total. And that we have changed now, let's call it, in an educational way, of course, led by Morten and the Business Area leaders, and this is yielding results. And I also think taking mandates to the 75 or so business lines will drive further optimization on this area.

Then to one of my favorite topics, which we have been talking about some, whatever, 6, 7 years now, is this quality of revenue topic. And we really have a balanced situation between short cycle and service and long cycle business, as you can see. We also now after COVID, are in a situation where we have growth on both short cycle as well as long-cycle orders. And on the balance, I would say, most importantly, even if the gross margin of the short-cycle business orders have improved the gross margin of the long-cycle system and project business has improved even more. So we expect it to continue to have lower earnings volatility coming from mix. And then equally so, you see that our backlog has actually normalized after COVID. So we have kind of like same type of backlog on long-cycle service. But then when you look at the backlog gross margin we actually have a really, really good development, and it really shows that ABB's project and solutions business is really driving real value to our customers. which was also clear from more intense examples from the customer side.

And I mean, improving backlog gross margin, 12% in 5 to 6 years is not kind of like a small feat. It's quite an achievement in my book. And it really is a testament to driving a better quality of revenue. And this really is coming from better pricing better content, ABB content in our project business and also really better focus on project management. So I think this is really a fantastic job done by ABB teams on this area. Then on productivity. This is the other one which we are sort of quite proud of. So first of all, since we introduced ABB Way, we also had productivity on all our business leaders targets. So we don't believe this stuff actually kind of like happens automatically. And 2020, we introduced revenue productivity. And then maybe even more importantly, 2023, we introduced gross profit productivity.

And if we look at this, since 2020, our revenue per headcount has increased about 25%. And maybe even more importantly, since 2022, when we look at gross profit per head count is a move from about $90,000 to about $120,000. So that's about 30% improvement in gross productivity in a bit over 3 years. And I think that really is a testament to the efficiency of our operating model. And this can, I think, come even better when we have better support from our systems landscape. So you all see from our disclosures that we have been investing into this ABB Way transformation programs. And this is basically wiring ABB HR systems and finance systems to the ABB Way operating model. And we have done a lot of work and our business areas have done a lot of work on making stuff better, for example, looking at this SKU by SKU, gross margin development, that kind of stuff. But that has required quite a bit of manual effort.

Now going forward from about early mid next year, onwards, we will be having a system where basically every oneness of a button, we will get the P&Ls of group of business areas, of divisions of business lines and that will make this work a lot easier. We will have a drill-down capability, as you can see on this analytics cloud, even to a transaction level data and we can really sort of automatically then slide and dice, for example, these gross margin components we have been talking about. We can also, with this easily compare performance of businesses which have similar business model, say, somebody is performing really well, somebody is a little bit lacking behind. So we can then check in the spirit of good leaders collaborate what could be done better in the other place. So I think this is going to be a really, really powerful set of tools for business performance management. And as we are now coming kind of like to end of these programs and we move from development mode to run mode.

We are expecting that the difference, the delta between EBITDA and EBITDA will, going forward, be on this around sort of 100 basis points. area because, of course, it has taken money to invest in this. Then on gross margin. I mean, Morten has spoken about this. I have spoken about this quite a bit. And our aspiration is really to be an over 40% gross margin company. And this, I think, is a good level for an industrial tech company because it really shows that you are driving value to your customers. And we have achieved this by mix optimization through strategic mandates, quality of revenue in many ways, driving that concept, higher backlog gross margin focusing on gross profit productivity as we discussed, and also building these systematic data analytics tools making sure we're really wired to drive ABB Way operating model in the best possible way.

And we firmly continue to think that we are going to stay above the 40% level going forward as well. which will then always allow us to invest where it matters, which basically is mainly R&D and CapEx. And when we look at our R&D to revenue ratio, excluding robotics, at the moment, about 4.1%. So we are a little short of our 4.5% to 5% target level. So we have sort of more investment to go. And we also take into account on this figure, the venture investments. This is kind of like externalized research for us because we all know that driving any kind of disruptive innovation inside a big company is really, really hard. Because you have these big labs and then these become kind of like pet projects and what have you, and they are difficult to sort of redirect I see this in my history as well. And it's kind of like difficult to see the business benefit and then somebody starts from scratch and kind of like runs past due.

So that's why we really think this is an integral part of this. And we have actually two examples where we have sort of first invested and then bought the whole company. One is this $0.07 in robotics, another one, actually, where we invested 23 and bought the company this year is a company called Lumin in electrification, smart buildings. So we think that's important. And we also really think about this investing where it matters. And just an example of that this year is little sort of pluggable MCB, Miniature Circuit Breaker. Now our solution is such that you can just stick this in there and take it out and take Giampiero word for that. and you don't need any adaptation layer. So basically, when you run the process, you don't have to do anything. So just a small example of investing where it matters. And we are here at the motion side now. So we continue to be, to my understanding, the only company which really only with software platform can change a use case of a drive in the same power or the voltage level.

And that, of course, gives us a huge scale advantage on our Drive business. So just a couple of examples on this investing where it matters. So we continue to believe that driving our embedded software strategy to drive customer value is really the right way to go for ABB. And then on CapEx, I mean, this is a fantastic new site. But of course, CapEx is also making our current stuff better. And I think Giampiero has some examples on that as well. Overall CapEx for us, maybe sort of after robotics, I think we can continue to drive this kind of growth well on sort of framework of about 800 million of CapEx also. Then a couple of words on the BA specific margins. So I mean, Morten spoke quite a bit about this. Now we have been driving ABB Way operating model now for about 5 years. So kind of like we think this is a good time to introduce these.

And yes, we spoke about this 22 to 26 for EL, 18, 22 for motion and 14 to 18 for automation. I think the important point here is that all the business areas have upside on their margin ranges. And as I said already earlier, for the group, there is also a clear upside going towards the 22% margin. And you will, of course, hear from the business area presidents later how they look to drive both growth and profitability to be operating at those higher margin levels. So then a couple of other favorite subjects here, cash and return on capital employed. So I think we can be really proud of our consistent cash delivery.

Now clearly, this is driven a lot by improved operating performance, but also, we have changed our net working capital measure to trade net working capital so that these are really the components which our businesses can control. So that was an important change. And another change, what we have done to drive better cash performance is that we changed our KPI especially for the divisions to 13-month rolling average improvement. And that means that you can't meet this figure if you do some kind of last quarter wonder like ABB was quite famous of 18, 19, all the cash came Q4, boom. Now you can't do that. You have to work on this systematically throughout the year, and this is really an important change. And I think there actually is still more upside here because when we now take this to the business line level, we can even more focus kind of like those areas where the net working capital improvement can be the biggest, and also with these new tools, we have, for example, defined something what we call harmonized sales orders and purchase orders by data elements.

We have better data quality. And already this year, actually, our days of sales outstanding has improved. So it's a driver for this year quite good cash performance, so knock on wood, let's see where we end up. But I think we are on a good track here. And we continue to drive good drop-through. That's why our new 95% conversion target is higher than, for example, 1 minus growth. So we, of course, want to become more and more efficient on this all the time. Yes, then on ROCE. So we want to drive best-in-class return on capital employed. That's why this new 20% target is important. And as Morten said, we are looking to meet this target also including inorganic growth, i.e., we have some room to stick goodwill and PPA into this equation. And also, we measure return on operating assets, i.e., without goodwill and PPA. And here, we are at the moment at over 50% levels. So really, really strong number. And of course, we continue to invest behind the organic growth as much as we can because the payback is really, really strong. Now I've gone through all the targets what we put out today.

So I think it's a good time to hear from the new CFO, what he thinks about the targets. So let's run a little message from Christian.

Hi, everybody. This is Christian joining from Zurich, and I hope things are good in New Berlin. Regarding the new financial targets for ABB, I think they are a good reflection of how we challenge ourselves towards continuous improvements. They are realistic, they're bottoms-up driven, and they're supported by strong market fundamentals. I support these higher ambitions, and I look forward to working with our teams to deliver on them. And with that, I'll turn it back to you, Morten, and to you, Timo.

Okay. So looks like both the outgoing and incoming CFO are pretty well aligned on this stuff. So we feel good about it. Then just a couple of words about our capital allocation principles. I mean you guys are familiar with this, but I think it's still worth repeating because these are really cornerstones of systematic long-term value creation for ABB. Now of course, first, we want to invest in organic growth because that gives the best risk return. And with this 50% return on operating assets, that's kind of like a no-brainer to have there on top.

Second, we want to continue to pay sustained growing dividend per share. And as you can see, after the Power Grids transaction, we had a fairly high payout ratio, which was actually planned by the model. But then I think since 2021, we have been systematically increasing dividend and the payout ratio kind of is now around 50% of net income. So let's say that there is good room there as well. Third, we want to drive value-adding acquisitions. We continue to think that small to midsized deals are really best value for the buyer. But of course, as Morten discussed, we don't rule out other kind of stuff as well if it's really driving good value for our shareholders.

And then finally, we do share buybacks. And we think that our business performance will allow also going forward us to operate on all of these components in this capital allocation framework. And then finally, to wrap this up a couple of words on sort of forward-looking stuff. So we really think that ABB Way operating model supports systematic business execution, short, medium and long term. And this is a really important balance because, of course, it is all about long-term value creation. But kind of like if there is no good short term, there is kind of like no good long term either. So you really have to drive all. And based on our financial framework and our capital allocation principles, we should be in a really good place to support double-digit TSR growth through cycle.

Now our EPS growth has been 17%, 22%, 25%, excluding divisional exits. So let's see if we get quite to those levels, but our organic revenue growth and also continued margin expansion in line with our new target framework should drive strong earnings performance and also good [indiscernible]. So it should really be -- or we should be in a good place to drive further value creation for our shareholders. And maybe to finalize this as this is kind of like most likely my last ever capital markets presentation. So I want to thank everybody in the audience for your interest and support towards ABB. It's really been, for me, a fun and energizing ride, and I'm sure it's going to be like that for my colleagues in the executive team for my successor, Christian, and also for other folks at ABB as well. Thank you Okay.

So now Q&A, I like it, many hands in the air already love it. I hope I don't promise too much now, but microphone is on, no need to tap, no need to blow into it. You can just talk. Okay. Lucas and Beat will help with questions. So we start over here with the #1. And then we have here as #2. Don't worry about the camera. We're fine.

Lucky positioning. Thank you. I wanted to ask firstly about large M&A, I think, one of the key topics. Is there a pipeline for that? And will such deals be subject to those 20 KPIs that you mentioned?

Yes. No, thanks. First of all, the -- we're building a pipeline of M&A, both from small, mid and larger targets. That's kind of the -- so there is everything included. Yes, we are using also the framework when we're looking at because it has to be value creative for ABB. As team also underlined in his presentation, that's kind of how we look at it. So we are not desperate to make any big deals. That's kind of -- but we are looking at -- if these are good opportunities, and we really believe that we could get the right synergies and the right setup.

Yes, we are able to do it. I just maybe also to highlight, when we talk about big deals, the largest deal ABB ever made was Baldor Reliance Motor business for $4.3 billion. Thomas & Betts was $3.9 billion, GIS [ $2.6 billion], just to give you -- that's the three biggest deal we have made as ABB. So I see a lot of kind of big numbers flying around, but I think we should also put that in perspective. And we were confident to making those or bigger deals than that, but that kind of sets more of the framework.

And if I may ask a second one, probably more to team or to both of you, that change in attitude or approach towards profitability versus growth mandate and saying that it's not necessarily growth, good, everything else bad. Could you just explain a little bit more what you talked about that both can be accretive to the final outcome? And how does that translate into actually change to day-to-day operations and how those businesses prioritize?

Yes. Maybe if I kind of like throw a couple of words here. So I think this is really, really important because we have margins, divisional margins, which can be sort of, I don't know, low double digit to clearly over 20%, like way, way up there. And of course, you can't necessarily expect that somebody who is on those kind of, let's say, lower double-digit levels will suddenly get to group average. And that's why we have created this framework where we take into account both the capital intensity of the business. So if it's very low, then you can drive a little bit lower margin if it's very high, then of course, you should be on higher margin as well.

And in that way, it is totally okay to continue to improve profitability as part of the overall mix setup for ABB. And that's why I really want to give message also to our business leaders that having a profitability mandate for a longer time is totally okay to support ABB's over our performance.

That's really the thing. Maybe to give you a bit of insight in the house, so to say, of how we do this. Every year, we have a President Seminar, where we have our operating division presidents in the same room. And there is a small it's one of the elements we're looking at, we do a scoring from last year. That means if you had a gross mandate, did you grow. So we gave a little green, yellow and red marking on performance. And that is kind of -- and the whole point is that if you are in profitability and you are improving profitability, you can still be green because you're adding value to the company. So it's not like the growth people are the heroes in the corner and everybody else should be ashamed. You are all adding value to the company if you're delivering on your mandate. So that's kind of how we sit in practice.

Thank you. Daniela?

Two questions as well. So first on the free cash flow target on moving to 95, and I think you say because of stronger growth, but you didn't upgrade the growth and you're not doing more CapEx as a percentage of sales, I guess, you're doing better on the working capital. So can you elaborate like sort of what is the -- what else are...

Yes. That's why it's not a range. It's higher than but I said already, I think, 2 years ago in my presentation that the toughest target for us of those would have been cash conversion at about 100 if we kind of like improve our core growth performance and that we have done. And sort of, let's say, of course, our aspiration is get closer to the higher end of these ranges. And in that situation, kind of having that approximately 100 is just like not through cycle target, which is overall may be achievable. But that's -- we always try to do better than, let's call this 1 minus growth. So we really want to drive really, really good cash drop through all the time.

And I guess you had a very interesting chart on revenue per employee and then the gross profit, and you mentioned a 25% increase versus pandemic. Can you help us understand within that, how much was the cumulative net pricing you got that helped on that equation versus the really underlying changes in the business?

Do you want me to? I can start and maybe -- yes, I think this is like a really important point because that is exactly why we changed to gross profit productivity. Because we were kind of like saying, wow, there is so much revenue coming from inflation, maybe somebody will get a free ride. We don't like that. And then we look at different options on how to measure productivity. And then we came into, okay, the inflation is both sides of gross profit. It's also kind of like on the input cost and it's, of course, on our pricing. So we think that this new measure where we actually have improved even more is really a better measure for ABB because it drives focus on really invest where it matters, drives better gross margin. And on that measure, we actually, as I said, we have improved like from 90,000 to 120,000.

And about sort of 30% improvement. Of course, it can't continue forever like that. I mean -- but it's really, really, I think, a good measure, and that's exactly why we changed it. So in the new measure, there is like no special component, which is just coming from inflation.

Thank you. And then we have one -- we go to Martin here first, and then there was someone else. Yes, Joe down there, please, Lucas.

It's Martin from Citi. The question is on the 5% to 7% growth target. So since last time we had the Investor Day, you've got more business units in the growth mandate than you had before, but you've kept that target unchanged. I mean you did mention that's a long-term target. But just in terms of how we think about the next few years, arguably, the end markets are stronger than they were last time around, particularly in electrification, more business units in the growth mode. So when we think about the time scale, how do we think about that 5% to 7% over the next sort of 2 or 3 years?

No. What we said is that 5% to 7%, I said it already, it's more 10 years from now, that's what you should hold us accountable for. It's the 5% to 7% range over a longer period. So we don't give like a 2 to 3 or 3 to 5 or all these different. So that's a long-term ambition with the market exposure we have today. And there, I think you will see that there are business areas that will be above also the 5% to 7%, and there might be some years, and there might be some below. But that's why we say that this is over the cycle on a longer horizon. So -- and I think that's the -- if you look at the numbers back from 2019, that's what we have been able to do at 6. Of course, there is still then up -- some room up to the 7% that we argued. But that's kind of what we -- where we are.

And as a follow-up, when the business units are in a growth mandate are in a fast-growing market, they could also get a almost like a free ride from being a very good market at that particular point in time. How do you make sure that they gain their fair share or more of a growing market to make sure that ABB is at least in line with the peers or gaining market share.

I mean, we measure not only the financial performance of the BAs and the divisions, but also the market share gain or loss that may also happen because I think that those -- you need to look at both. But in the end, we measure success in dollars and not in market share. So you have to -- should gain market share. You have to strengthen your market position, but then that needs to come out as money and dollars in the end because that's kind of what -- when we create value for the company. That, in the end, will be the ultimate test. But maybe to complement this here. So clearly, we can have divisions which have higher growth target than 7.

Absolutely. So of course, they have to be best-in-class. That's the whole idea of our portfolio metrics on the other axis. So we measure if you are best-in-class in growth, profitability and return on capital, that's how we sort of evaluate. So kind of like that we have this range for the group doesn't mean that we can't have businesses inside ABB, which have clearly higher targets. So there is no ceiling. I think -- I mean and also there are areas here like we talk about this stability mode. There is -- we say you're not allowed to grow, you need to get your act together and fix your kind of clean your own house. And that means, of course, that the other team members of the other divisions need to grow more to compensate because 5 to 7 is for the whole company. So there's clearly others who need to be at times to double digit in the market, but we have not.

Thank you. Joe?

I just wanted to talk about like the interplay of some of these targets related to M&A. So you're narrowing the focus of the company a little bit into areas at least for now, are high multiple expensive acquisitions like are you willing to acquire something that might hurt your ability to hit some of these profitability targets, but might be a higher return based on what you pay? And how do you think about the interplay of those 2 things?

I think, again, you're back to the value creation opportunity we have in front of us. Would I do another GIS? Yes. I think it's one of the best acquisitions ABB ever made. It was highly dilutive at the time but we've been able to bring it up to a level today that has shown kind of the value of the whole electrification business. So similar targets, yes, we would do again, which would hurt us, you could say, short term where they will be dilutive to margin, but the in maybe 3, 4 years, we'll be getting back to the -- in 3 years, we get it back to the level that we have today, yes, I would be ready to do that. As long as we have kind of strong confidence that we can bring it up to the same level, and that you get of course at the price that you see that we -- because we are the 1 that have to do all the work, and therefore, we should also keep most of the value creation and not give that away to the seller.

Okay. It's a little bit hard to see. We have George here as #1, and then there was someone else here.

Thank you. George Featherstone from Barclays. Just coming back on M&A a little bit and just to talk a bit about data centers. A few of your peers have made a lot of progress on acquisitions into areas like liquid cooling and more in the white space. Is this a focus area for you to capitalize on the opportunity of that market?

Yes. We're looking at the -- I mean, data center is fast-growing area. You saw that already, Giampiero will talk more about it. So it is clearly a great interest is where we allocate a lot of our organic investment. You can see that when, for instance, with the medium voltage UPS system, which I think is a fantastic story, how we bring a completely new and innovative technology to the market. And we're looking at that, for instance, with the technology collaboration we do with NVIDIA when it comes to the 800-volt DC infrastructure. And we're not excluding also to do M&A. I mean we're happy to look at M&A in this field.

But we're back to the same thing that we -- it needs to be a strong value-creation opportunity for ABB. And we don't want to kind of pay out completely, let's say, outracious prices to be there. And I think that's a bit of -- it's the approach we have taken a more kind of we need to be convinced about also the long-term value creation of this and not just jump on a bad wagon. That's just a bit kind of my feeling on it.

Okay. One more question just on e-mobility. It's obviously quite a bit of a drag to you guys today. Can we have a bit of an update on the plan there in terms of is it an asset that will stay with you? And when should we get breakeven?

It will -- we are looking now at the -- we're targeting getting kind of the losses out, which will be a focus again for '26, and I think our original plan remains, which -- but there will be more into -- it will not happen in '26 and doing the IPO. So that is still the end result, the end target for our mobility business. So first is about getting -- running the business well and getting it at least to a breakeven even level, and that is ongoing. Then it's about also the markets, the e-mobility, the charging market need to be ready. I think here in the United States and North America, it's better at the moment. Europe it's kind of been very slow. So when the market is ready, we will also proceed with the original plan.

Yes, fire away.

It's Ben from [indiscernible]. My question is just about the divisional growth. I'm sure we'll get on to it in the divisional sessions. But qualitatively, how do you think about the 5% to 7% between those different divisions. And the reason why I ask is, obviously, some of your peers are seeing outsized growth in electrification, energy management, whatever you want to call it, and then basically subpar growth for one of a better word, in the other areas. So in terms of your targets and how you're thinking about it, how should the 3 divisions compare?

Yes. There will be different growth rates between Electrification, Motion and Automation. That's clear. Because as we see, they are exposed to a lot of the Electrification trends, but I mean there is some market volatility that which also reflect, I mean, just looking at our Q3 numbers, where we had very strong growth rate in electrification and not as strong in some of the others. So -- but this is why we say this is over the cycle. And therefore, to get to that average of 5% to 7%, they all need to perform in the markets where they operate. And we will have -- hear more about the growth rates or the -- from Giampiero, Peter and Brandon in their sessions about how they kind of see the market from their side.

Understood. And then one more, which is for Timo. In your presentation about an interesting comment about I don't know how it was uncalled at 1 point to be profitability and then it's cool to be growth. What do you kind of mean by that? And is there any difference in the actual incentivization between profitability and growth, i.e., do I get paid more to be growthy?

You don't get paid more, but you get paid on different KPIs. So that's how it works. It was kind of like what Morten said. So if you are a stability, you will not have a growth no matter what. If you have profitability, you could have a little bit of growth, but your main targets will be improving margin, driving good cash and productivity. You might have 0 growth, you could have a little bit. And then if you are in growth, of course, your targets will be like, I don't know, 40% growth, and then the rest is like the other KPIs. So there is a big difference on this.

And because in our system, just a reminder, we don't have like that much common targets. So we have 20% 1 level up target. So already, if you take a division president, for example, in Motion business, that person will have 20% common target from motion level, nothing from group and 80% is the division own targets. So we really believe on this kind of accountability model. And that, of course, means that divisional results can vary quite a bit come year-end, and that's fine. Okay.

Then we have two here, I think, we go Magnus, one, and then we have Jonathan and behind.

Magnus from Nordea. First of all, can I ask you when the prior margin target was set 16 to 19, there wasn't kind of underlying expectations that we will track towards the upper end of that range within few years. How should we think about this new margin target in that context?

I would I mean we're setting target because we want to reach them. So that's the -- but we would need some time. And I think we needed a few years for -- to get to the 16 to 19, and we need a few years also to get to the upper end of. But that, of course, is the ambition now. As I said in my presentation, this is not dreams. These are bottom-up commitment in our own planning with each division, we add this together with this is what we are very confident about telling also here today. Because we set targets and then we deliver on them and -- but we will need a few years.

Got it. And the second one, I think you moved from about 55% growth mandates 4 years ago, so to -- was it 80% now or close to what would the steady state be there between growth and profitability, like over time? Obviously, it will vary from year-to-year, but what's realistic to reach?

Yes. I if I'll just start on this one. So we don't kind of like look at it that we have a target. That's exactly the point on this. Profitability is good. Growth is good, kind of thing. It can vary sort of. But I think maybe if it will be this sort of 70, 80 type of area that would be a good area.

I don't think we will ever be in the on stability profitability and 100% of growth. There will because you also have to remember, we have raised the target to be on -- because being in 2020, you could be in a growth where if you stand still, you would now be in profitability or even a stability because we raised the bar all the time And that is also true because I always say nobody should be below average, and that's a bit -- of course, a challenging part, but that's what happened when you move the average. Everybody has to move up.

Okay. Thank you. And we'll finish off this Q&A session with Jonathan.

It's Jonathan Mounsey from BNP Paribas. Just going back to -- when you're answering George's question about e-mobility, we've got new targets today for margins. And I remember the almost IPO of 2022 free mobility. And I think the targets it have been. I know at the moment, the job is to get to breakeven. But back then, its targets were quite a long way below what the groups are today. And you said the plan is to IPO it not next year, maybe 2027, who knows. But back then, I think you were going to IPO it and continue to consolidate. With the -- probably the potential for profitability in that business, are we saying that the plan now is to IPO it and say goodbye to it?

I think the plan was always to IPO and reduce over time the ABB holdings mistake in it. So that was always the plan, and that plan hasn't changed. So that's still what we're planning to do. Let's say, when the business and the market is ready for it.

Okay. And as a follow-up, today also you've mentioned a commitment to consider buybacks, and you said the money won't be building a hole in your pocket, but you will get quite a bit of cash in from robotics and the pipeline is building for M&A. But if we get to that disposal and the cash comes in and you haven't bought anything, is there a kind of commitment to start buying back more stock? Or I mean, are we going to build a kind of war chest here in anticipation of potential M&A?

I think we need to deal with that topic when we get there. I mean, there is still quite a bit of time before the money comes in. And as we said, we will continue to systematically operate within the capital allocation principles and that framework. So let's see how goes. But maybe the final -- we're not going to waste the money. That's our commitment here from states. We'll make good use of it and or the best use of it. That's kind of -- that's what we have to do what we want to do.

Okay. With that said, take of a little breather. Coffee and refreshments are available in the where you had breakfast and we'll meet back here at quarter to 11.

[Break]

Feeling fresh? Ready for the next business area, automation, formerly known as process automation. I'd like you to welcome up on stage Peter.

Thank you, Ansi, and good morning. Let me start our session on automation with a quick reflection of where we're coming from as process automation. We're a $7 billion business. And for those of you who've been in 22 Helsinki 23 Frosinone, Capital Markets Day, you recognize, we've also reached and passed our strategic ambitions that we raised last time. That's one of the factors here, and Morten mentioned it already, we're an important conduit and I'll talk more about it in this presentation, also for electrification and motion, we benefit from them, they benefit from us.

And that is also one of the factors that allows us to actually have the trade net working capital that you see here, so lean, which helps us excel on the return on capital employed, KPI that stands strong. In terms of content, that's, of course, all based on what we're doing for customers. We have a leading position in price control and in a number of industry specialties largest of them being Marine Electrical Propulsion, where we're really strong, but also, for instance, process analytical. If you saw the drone in the image video earlier, it's actually a real thing. This drone is sniffing methane, and that's both from a sustainability perspective, quite important because it's a potent greenhouse gas, but also from a safety perspective. If you have methane concentrations, those could lead to explosions. So people producing oil producing gas, but also in city gas networks are actually using are analyzers, sometimes deployed on drones, sometimes on cars, sometimes stationery, together with our digital solutions to pinpoint leakages.

So, just wanted to highlight that not all our analyzers are flying around, but also this is not just pure fiction, but it's actually what we do for a living. And then there's a lot of further industry-specific anchors, and we call them anchors because they anchor ABB first in mind, when you're thinking about, for instance, doing a new mine, a new paper mill, an offshore rig, a marine vessel, we've got the equipment that you really want to think about first because it's performance critical, it's differentiating, and that helps us start the conversation of what else we can do for you in terms of the electrical, in terms of the motion content of the solutions we provide. We do that with 87% direct sales.

So we have a great degree of customer intimacy that is very important for us. And we do that in a sales after service serve is after, say, this kind of way. So we are convincing with customers at the capital project phase when it comes to cost schedule and risk being the main criteria. But then also, as these assets that we have built, get used over decades of life cycle, we basically help them manage those for safety, productivity and sustainability. Still as process automation. We've had a pretty decent run in recent years. So we're looking back at 20 straight quarters of positive book-to-bill of more orders than revenues in each of the last 20 quarters. That's provided us to quite a level of order backlog. And definitely, without compromising margin because the margin is also up by more than 500 basis points since 2020.

So we look at that as a good starting point also when you have volatilities, when you have different cycles in the different industries that we serve, that provides us with resilience, short of being able to make really accurate forecasts, which are, I think, in volatile and uncertain times, not so easy. Actually having a backlog provides resilience and gives confidence in where you're going. Now we have called a session automation, and Morten already talked about that bringing process automation and machine automation together, we call the whole thing automation.

I'm excited about it. Machine automation is really a high-technology strong in customer and industry and domain knowledge, just like process automation, actually. And they're really very well differentiated through their competence, through the engineering. It's a niche business, but it's a niche business that brings opportunities to process automation where we will be able to tap into certain technology synergies, and at the same time, some of the things we are strong in, in process automation will -- and I'm convinced of that, also had the machine automation business beyond that.

And I think that's further out on the horizon in the hybrid industries, if you really think the strengths that we have on the process side in industries like, for instance, the pharmaceutical industries or parts of the food and bev together with the secondary that they bring more on the machine level. I think if you look at long-term trends like personalized medicine, personalized nutrition. I really think there's opportunities there, but they're not for this strategic period, they're rather for us to lay the foundations now. If we do the translation from process automation to automation as the combination of process automation and machine automation.

You have the numbers here. So we're looking at a $7.8 billion business in terms of revenues. The margin was -- were machine automation right now is a little diluted, but we're still looking at $1.1 billion annual profit here. And on the net working capital side, we clearly have room to apply some of the recipes we successfully applied in process automation, also more strongly in machine automation so that the 22% return on capital employed that you see there right now, can basically make their way back towards the 30%.

I mean we've been performing at more than 30% ROCE. I think that will not happen so quickly, this will take time. But clearly, we also don't just want to sit where we are right now. Now as automation, what are we actually doing for customers? And this is independent of what we've been calling process automation, which also in fairness, if you think of container ports in the marine and port called that process called that discrete. I mean we do automation across a broad range of industries that we serve. But basically, automation is always about closing feedback control loops, like you're sensing a condition you're taking algorithmic decisions in controllers. You're then acting through, for instance, the motors and the drives when we're talking here in a motion facility through switching electrical equipment that you're taking action on this process or a machine that you want to control, where we are really feeling unrivaled is the integration of process and power from an automation point of view that you control process and power under a single pane of glass and really, really quickly.

That's of growing importance to the industries that we serve. Why is that? So -- if you think of a growing share of renewables in the grid, then basically that comes with a certain amount of intermittency and at the same time, when I studied electrical engineering admittedly a few years ago, you wanted stable baseload power for reliable industrial production. But that's not the reality of the electricity supply today. So our quite differentiated competence is to combine the control of process and the control of power so that basically was in milliseconds. So very, very quickly, you can decide, let's focus the electricity on keeping that compressor running while, for instance, shutting down the seater really, really fast because it doesn't actually matter to the process. If it goes down for 5, 10 minutes, there's enough some capacity here at the process can continue to run.

So that's one of the areas in which we differentiate really well. Another that we look at as a strength is really the process unit and in the future, the machine, so basically the plant all the way up to the cloud. We're also having a strong integration between our automation and our digital offering. All of that serving the interest of our customers to drive safety, productivity and sustainability or to be -- to help our customers be leaner and cleaner as we say these days in. For those of you who've not been so exposed to automation, it's really the backbone, the nervous system and the brain of industrial operations. And reliability is super important. We're talking about 99.999% availability here. So you're way beyond what you would normally get out of normal computers or service level agreements out of the cloud. This is really high criticality equipment. And if you think of the consequences of a shutdown be that on an offshore rig, be it in a refinery, be it in many of the other processes that we're serving.

Basically, immediately, you have to deal with a complicated situation where your revenue starts and so you're not producing and you have to take care of, for instance, a material that's building up if you're in a petrochemical plant and it goes down. You have to actually put a lot of your product to the flares. It takes you often a day until you're back to full production. So the reliability, the dependability of these technologies is really essential and our customers value that both from a safety and sustainability and productivity perspective. Now how we're organized is we're organized in divisions, each of them fully accountable for their profit and loss. At the same time, of course, working together with each other and working together with our sister divisions in motion and let like we heard from Morten already.

So what we do there is in three of them were basically organized by industry verticals. So in energy industries, we have both the conventional hydrocarbon kind of industries. We have renewables. We also have power and water there in process industries, mining, minerals, paper, those kind of industries. And then marine imports is quite self-descriptive. Whereas measurement and analytics is basically a technology offering across. And also if you look where those machine automation solutions are deployed, it's actually across a range of industries.

So that's how you can picture that. We've also indicated the strategic mandates here for you. So you can see we have profitability mandates in energy and in process industries. If you look at them, they're both actually grown quite a bit also over the years, but we've always said before we take projects that basically dilute our margin and we compromise on the risk/reward curve, we rather want to stay selective, either we're really adding value and customers are willing to pay for that also or then we're not actually able to add sufficient value, and then we will also say no to a bid. So that selectivity remains in place with up both the margin and the volumes in both. So we've kind of straddled nearly the edge of that.

And underneath energy, under nice process, there's different business lines that then have some of them gross mandates, others, more profitability mandates. Marine imports really been on a super strong growth journey as of lately. We've really had a lot of orders in this field. It's a cyclical business. It's a very long-cycle business also. So some of the orders we've been booking lately they will only be delivered 3, 4, even 5 years out. So it's good to have the resilience of an order backlog here also in the measurement and analytics growth mandate, I mentioned the process analyze leading position that we have, for instance. So clearly, we have great technology there, and we're certainly aiming higher with that. And machine automation as the newest addition to automation now.

That one is clearly on a stability mandate. It's seen quite some shocks from the markets it's serving from the supply chain. And I think we want to put that back together and really bring it to its full potential. So for the time being, we're on a stability mandate there. If you look at them, we share certain capabilities across them, not in a way to dilute the full P&L responsibility of each division. But more in the sense of competence pools, we're commonly using R&D and engineering capabilities, operations centers in just poor location where everybody still has control over their part we have the same processes. We have some of the same locations. And the same is true for digitalization.

At a megatrend level and not all synchronous in terms of their cycles, you see the big trends for us. Energy growth and transformation is clearly big for us, security of supply, both on the energy side, but also the critical raw materials is essential process electrification as a way of bringing to those material and energy-intensive industries that we serve more renewables as a electrification is a conduit there for renewables for decarbonization. And then, of course, digitalization and AI is a big driver for us. Across all of that, how do we win? And you have the wheel here, and we heard it from Morten also earlier, technology leadership and domain competence for us really two main drivers for that. And then we're basically able to integrate automation electrical and digital elements into solutions for our customers with an ability to execute anywhere in the world. So we have a local presence. We have a global reach we're able to serve that over a long life cycle. So sales after service, service after sales to help our customers out run leaner and cleaner.

So that's recipe for success. We've been at this for quite some time. And if we want to look at specific examples, and we saw the left-hand side of this chart also already, then very often, I mentioned automation often gets decided early and at senior levels. industry anchor products that we have for the different industries that we serve like the mine hoist or the Giles Mill Drive, the paper quality scanners, the [indiscernible] propulsion in Marine. Those are the things that really get you in the conversation early and that allow us to then say, in order to really do the best solution, let's bring in these drives, these motors and generators, let's bring in this differentiated switch gear, for instance, maybe on a marine investor. What are the advantages of going to direct current to DC where the colleagues great technology. So we often win together.

We're sometimes first through the door, especially with industrial customers, and then we check, is this is a solution that the customer is looking to procure in an integrated way and have service in an integrated way. Or is it more we make an introduction and people actually want to buy separate lots. You have to be selling the way customers want to buy. So that's clearly our mantra here, but it's a great collaboration. And it helps us in process automation, the credibility that comes with the ABB NIM and the strength of electrification, the strengths of our Motion businesses also helps us with credibility because customers also know we have a competence to integrate these things will be interoperable and will be coming together for solutions that will then also be supported over long life cycles.

So I think it's a strength that plays both ways for ABB. Specific examples here in the U.S., ongoing Rio Grande LNG, we really have the automation, the electrical, the digital scope. We have the motors, the drives. We've got the switch gear. We've got 800xA on the process automation side and digital solutions on top of that. So it's really quite comprehensive. And if you look on the second example shown here, Northern Lights first commercial location where you can actually bring your CO2 in order to have that sequestered, we're basically here again with the motion, the electrification and the automation content as part of an integrated solution and then providing the services along.

So quite proud of that and also actually the first commercial CO2 tanker for that purpose is actually also equipped with our technology. So there's real opportunity in this integration, not everywhere. But there is, and then we're very happy to take this business. If you look from a strategy point of view, our strategy is fairly simple. It's about strengthening the core, it's digital and AI and its energy and sustainability plus some inorganic across. So that's the strategy we've had at Process Automation. It served us really well also in not only meeting but beating the ambitious targets we had set at previous Capital Market Days. So we'll stay with the structure of this strategy. Obviously, some of the individual items will keep evolving. And you can see on the left-hand side in gray and the black where we were able to get to with executing just the strategy and then the restatement with the addition of machine automation, what you see in red here, that's where we now start from as automation.

And we see more potential to unlock further value. And if you look in terms of strengthening the core. What do we mean by that? We, of course, mean being systematic with the mandate at the level of each business line so that we strengthen it from a numerical perspective, if you want to look at it this way. But also in terms of content, we continue to invest in our leading technologies. We continue to drive our service value proposition, our market penetration of our own installed base and then also beyond our own installed base. In digital and AI, clearly, automation has like a blurry top, if you want to look at it this way.

So above automation, there's clearly a growing space for digital solutions. And as presented in previous Capital Market Days, we've decided to go about that largely organically, but with some bolt-ons. And then, of course, in the energy and sustainability space, there's always movement between the three corners of the so-called energy trilemma between the security of supply, the sustainability, the affordability. So there's constant movement, there's movement as a function of where you are in the world of industry but clearly, a lot of things for us to do.

Let's have a quick look one by one. In terms of leading with technology, one of my challenges is always how do I depict software because 80% of our R&D teams are actually working on software, both embedded as well as automation software and then digital solutions. So that's kind of in some sense, pictured on the left-hand side with automation extended. Easier to picture and always quite impressive for those of you who are in Helsinki 22 Capital Markets Day, in the Azipod factory. I mean these are electric hybrid solutions and for those of you who haven't seen them, they're quite large.

And basically, what they do is they help marine vessels, especially those that have dynamic load and maneuvering schedules, save something like 15% of the fuel bill simply by taking the big diesel engines to generate electricity and decoupling the RPMs of that diesel engine from the RPMs at the propeller. So that's an example and a prominent one of an industry anchor product. We have many more. We've launched [ Dynafin ] as an innovative propulsion concept. We continue to invest on the analyzer side, so this gas chromatograph that is pictured here, for instance, is able to pick up a single molecule in 1 million. So it's doing PPM parts per million level accuracy, while at the same time coming with built-in cybersecurity coming with WiFi also.

So it's pushing the boundaries here. And on the machine automation side, some really fascinating things with Becatronics in the development and productization pipeline. On strengthening the core, I mentioned service as the other one. And here, you have some numbers how we've actually not only grown on the project and new business side, but also grown on supporting our customers' installed base once you've made this initial investment and you're operating those assets over decades of life cycle, then basically keeping them up to date, modernizing, extending, future-proofing them, including from a cybersecurity perspective. All of these are important, and that's why this sales after service, service after sales model is so crucial for us. If we support your installation really well, you will also consider us for your next project.

And if we wouldn't that next project, there's an installed base to be supported. So it's really a virtuous cycle that we're benefiting from, and we see significant further potential as this large installed base continues to both grow, but also the older parts, age and need modernization. On digital and AI, on a high level, this is basically about the journey towards autonomous operations. When you look on the left-hand side there, it's a real picture from our archive. One of our customers in Sweden in 1890. And you can see probably a dozen, 2 dozen signals that this operator is handling. And then sort of in the 1980s, they started having color screens, pretty small screens, quite a lot of people still.

And then in the collaborative operations, which is roughly where we are today with technologies on average, that's where you actually collaborate between different functions in the customers' enterprise. So for instance, between driving operational performance and looking at maintenance, looking at managing the asset working across different locations potentially also. And we are talking about this trend towards autonomous operations, which doesn't necessarily mean total lights-out factory sort of production as the Japanese were envisioning in the 1980s, but it does mean a lot fewer people in difficult dangers hard-to-access areas.

And if we look at specific examples, we find them on the right-hand side here, the upper one, for instance, when you have mines that are above 4,000 meters in the end, it's some pretty harsh environmental conditions there. You won't find a lot of people who want to work there. So if you have technology, it will allow you to actually put some of your key operations people far away from the action, but relying on technology and far fewer colleagues who are locally on the ground that gives you safety. It gives you productivity. It also gives you better sustainability and on a smaller level, not here on the slide, let's also if you would go into a container port today. Basically, there's not the crane driver cabins anymore where every crane has a crane driver who's sitting up there in scorching heat or cold.

And with the vibration 50 meters above ground with all the challenges that brings if you need a break, but it's basically jobs that have been concentrated to control rooms where basically technology and people work together to move those containers around the yard where more than one crane can be operated by an operator, while at the same time actually making these jobs much more broadly accessible to Vedanta and others lately. And then finally, strategy and sustainability. It's really -- the energy expansion and the energy people are increasingly concerned about how do we produce. At the same time, in many of the processes that we serve, there is electricity brought in as for renewables as a conduit for decarbonization and you see that symbolize in the pictures here. So actually, some of the very material and energy-intensive industries use electricity, and that's also why electricity is growing faster as part of the solution then the overall energy demand is expected to grow.

Finally, the inorganic side, we're actively building pipeline, but we're also executing on some of it. there's the industrial software and AIP I talked about earlier. In this one, actually, middle of last year, we closed the acquisition of the weather-based routing business from DTN, that today is part on our marine business on the digital solutions for the Voyage solution suite that we have there. So we've got Voyage and Vessel kind of services. One is more process performance, the other is asset performance in generic terms, and that's going ahead really well. So that's in this category. We are generally looking at decarbonization of hard-to-abate industries that goes well with our themes of anchor products. So we're always scouting the market for what's next in this area, be it through more venture participation, but also outright acquisition if we see the right target.

Advanced sensing, we did two actually last year. We acquired Dr. Fortis as a continuous emissions monitoring technology on the process analyzer side, but also water analyzers Dr. Fortis in Germany and Realtech Water, actually a Canadian company, mainly a technology that we're adding to our portfolio to be sold through our existing sales force. And of course, we continue to develop that pipeline, be it on marine, be it for segment leadership in general. Let me wrap it up here. In terms of where we start from is automation. I think we've come a long way as process automation. We now have this opportunity to bring machine automation to its full potential. So we stand on a stronger basis than we did maybe at the '22 Capital Markets Day, we did specifically for PA, quite proud of the team that achieved that with our 26,000 people, we have an easy-to-remember strategy.

I talked about it a moment ago, strengthening our core, including the technology, including the digital aspects of it, the digital and AI basically as part of our journey towards autonomous operations and the energy expansion and energy transformation topics in energy and sustainability. On the gross and margin improvement side, we're basically at a point as automation where a point of growth and a point of margin if you do a valuation sort of contribute similarly to value. So we're taking a balanced approach. You saw different divisions. And underneath them, different business lines, some on this mandate, some are on the other and really pleased to see automation at the heart of ABB's purpose and contributing to it. The pictures that you see there, all those photos are actually the real thing.

This is things we're doing for a living. And over the cycle, we're looking at a 5% growth ambition over the cycle. We'll have years that will be above, some that will be below depending on the cycle goes. But again, here, resilience from a strong order backlog will, for sure, help us. And we have the margin corridor of 14% to 18%. You saw that was machine automation initially. We're to work our way towards the 30% ROCE again. And that's [indiscernible].

[indiscernible] procedure as last time. Hands up in the air. We start with Max, yes, we have two there actually next to each other.

Yes. I think we used to talk about this being quite a good margin at 15%. That was a good level. yet you're kind of showing us two quite big pieces, which are still in kind of profitability improvement. So maybe if we were thinking in kind of old terms of where could that division go to, maybe just sort of what would we think about for process automation? And for those two big pieces, what are you really doing in them? Is it about selectivity of projects that you're taking? Is it about cost efficiency? Is it pushing price? Maybe help us understand those big two pieces where they're in profitability mode and what you're doing?

Yes. So we're talking about the energy industries and process industries. Those are the two that are in profitability mode. And underneath that, there's clearly parts that are margin accretive and that we would drive with a strong focus more on the growth side. I mentioned service as an example, it's clearly important for our customers that we service them over a long life cycle. And we have further headroom in this area that we will continue to drive with a lot of focus. At the same time, when you look at greenfield projects around the world, you always have to ask yourself, okay, how is this something that still makes sense for us also considering ABB overall.

Is this something where we do an integrated automation and electrical solution including managing the cost schedule and risk consequences for the customer? Or is this something where the customer is really saying, "Look, if I buy this and that from maybe before electrification or motion colleagues as an example. So, not your focus. Of course, you can also buy the pieces individually. That's what is under the profitability mandates here.

Okay. Maybe just a very quick follow-up. I've always thought your division is one of the ones where you could also do larger M&A. May be in the sort of valves or actuator space. Do you see those as white spots? And would that be something you would be kind of interested of proposing maybe sort of similar to Emerson have done?

I mean you would always have to look at what position could you acquire for yourself? And would you be spot fish in a big pond or would rather be a big fish in a small pond. And it's the second. We'd rather be. So I don't think we would want to copy the model of one of our competitors where they've established themselves very strongly and sort of come late to that party. We'd rather find our own party.

Please go ahead.

I have 2, maybe 3 questions on the mission automation part of the business. Sorry, I'm here.

Yes. Sorry. Yes, it's very hard to see the lights are quite blinding on the stage.

Based on the numbers you provided, so it seems that Mission Automation had $600 million of orders last year, $800 million [indiscernible] again, so that's question number one. Question number 2 is more on the M&A side, maybe a follow-up to Mark's questions. I guess your business today is obviously skewed towards process. From a strategic perspective, on the M&A side, would it make more sense to double down on process, we invest more in your core or actually make acquisitions potentially on the discrete side, expanding your positions into mission builders recs, semis, whatever.

Yes. Okay. If I start with the machine automation question, and you mentioned $600 million, roughly speaking, on orders and $800 million on revenues. There's been, in parts order cancellations and that also, if you think of the Bulwer effect that travels through the machinery OEMs, the component producers, supply chain. So both from the customers as well as the supplier side that led to some sort of transient effects. My sense right now is we're probably at a point where this is starting to stabilize more, but then I've only taken this business [indiscernible] from October 1.

So that's an early and preliminary and specifically the machinery OEMs market in the way we're serving them there. But I think in the coming weeks, in close dialogue with our customers. And I think more of that bolt-on type of deals would fit our logic here.[Presentation]

So good morning. Good morning, to all of you and for sure, electrification make it all possible, in particular, make everything possible. I started my career 30 years ago in ABB just after the graduation as electrical engineer, and I knew it that it was an important industry, but I couldn't believe or imagine at all that electrification was becoming one of the most important and critical sector in our era.

Today, we are in the middle of a big revolution. We are in the revolution where hundreds of billion dollar flowing inside of our business, inside the electrification business because electrification is going to be the energy of the future. And in particular, it's going to create the possibility to sort it out one of the biggest challenge that our planet has to create more power with lower emission.

Today, I would like to guide you through 3 major topics. The first one, how our market will grow, our segment will grow in the future and for the next cycle. The second is related to how we were successful versus the last Capital Market Day that we did the -- that we did in [indiscernible] a couple of years ago. And the third one, we will show you how we will continue to grow in sales and in profit margin.

So let's start with the market. This is the segment that we are doing business in electrification. This picture is related to the revenues of 2024. And today, we will go through the 3 major sectors that represent about 70% of the total business electrification. That is the building sector, the utility and the data center that is, of course, the most growing sector.

So let's start with the building. Building for sure is the biggest sector where we do business, and we are very strong in the building sector. We're doing more than 1/3 of our sales, and we do believe that in the next 4, 5 years, the growth of this segment is going to be in the low single -- low mid-single digit, creating additional $20 billion of additional market in 2030.

One of the big things that sometimes we underestimate is how the building sector is in transformation. Within 2050, the additional consumption of the building sector is going to be like 13,000 terawatt hour. What does it mean, 13,000 terawatt hour? It means twice time the entire consumption of United States today. Just because there are going to be a conversion from the fossil fuel to the full electricity, just because there will be more cooling in order to adapt to the climate change. And just because electricity is going to be the primary source for all the HVAC system inside of our building.

We are very well positioned in this market also because this -- you win in this market if you have a great network of channel partners and distributors on a global scale. And we have more than 12,000 of those. And 90% of the business through this segment is passing through distributors. On top of that, more consumption, more electric consumption is going to happen in the building and so large building, a large hotel chain that will focus more and more on automatize, the electrical system to reduce the energy consumption. That one of the clear example that is reported there, for example, is Sokos Hotel is a chain in the north part of Europe, where we enabled them to reduce by 50% their HVAC energy consumption, connecting our ABB automation KNX system with the reservation system. The data has changed among the reservation system and the energy and electrical system. And so based on the guests that are in or out, based on the comfort that we want to provide to them, we could be able to reduce such a team.

You know, what does it mean 50% of less energy for the HVAC system, roughly 25% of the energy bill of the hotel chain. So it's a big, big reduction. And this is going to happen everywhere in particular for all the energy for all the hotel chain and the large buildings.

We were talking about, Morten this morning, I guess, during all the presentations so far, we're talking about a lot of demands of power. And for that reason, the utility is super important. Much, much more demand and all of us knows that we are trying today to run a 21st technological economy on a grid infrastructure built up last century. There is no way. We need to change, and we need to update all the electrical infrastructure in the world. That's why the IEA has foreseen that within the next 15 to 20 years, almost 50 million miles of transmission distribution line need to be upgraded, just because there is the aging of the components. Most of these grades were built up in the year 60, 70. They start to have 70 years old, the components are already beyond their respect of life.

We need to be upgraded because the electrical grid were established when there was no renewal energy. And so they are not adopt to that. So they need more control function. They need more grid automation. They need more possibility to be resilient. Nobody want to have the experience that happened already in some countries. This year up and already in Europe, if you remember, in Spain, it happened in Portugal. It happened in Mexico for a big portion of the country. And unfortunately, it could happen again. But many, many investments are going on that. And ABB is very, very well positioned to support all the utility with all of our component with our medium voltage, in particular with our relay with our grid automation system and our balance of the entire network.

We talk about balance of the entire network. This is a clear example that is in synergy. Synergy is -- in particular, this project in Western Australia was done to try to build up one of the biggest campus in the world with better energy storage system. We talked about almost 0.5 gigawatt. So like the power generated by a nuclear reactor for 6 months. Half gigabits massive. This is done in order to compensate the peak of generation of the sort of power plants that are happening in that area. What we did for them. We built a massive, gigantic, e-houses. We're talking about e-houses long 130 feet. So like Boeing 737, where we built up in-house in our factories with our control system, all the low voltage and media voltage switch gear with the automation grid, we tested. We have done all the quality check, we ship, we plug in and it works.

This was helping the customer to save almost 25% of the project completion. And such e-houses, we are doing every day for data center for any kind of application in order to support the customer to make them faster implementation.

We will talk about data center. Of course, data center is the big role. We are talking about a growth of double-digit market growth. We have a big portfolio of solution from the electrification businesses, from the motion businesses and from the automation business. I think that a couple of days ago, there was a big announcement. I think that is a great things that Peter did with this team here in U.S., where they sold the synchronal condenser that is a great device, a great technological device in order to balance the power generated by the gas to buy. And the [indiscernible] today, they are mainly used for data center. It was 2 gigawatts. It was a big project and for -- saying that, we also sold a lot of switch gear and a lot of components to the VoltaGrid.

In the meantime, one important thing that I would like to underline that sometimes we underestimated is this one. Of course, most of the data center grow is happening here in U.S., right? 60% today of the business of the data center is happening in United States. But one important thing that I would like to underline is that in 4 years from now, it is foreseen that the same investment in data center, like the ones that happened this year in the United States, will happen in Europe and in China. We are already strong in the United States. You can imagine how we're going to be stronger with our position on the market that we have in Europe and in China.

One other thing that is super important is 1 out of 4 data centers today, they are using our technology. What does it mean? We have a great market access to hyperscaler, to co-locators, to OEM, to liquid cooling or air cooling OEM that are supporting the data center. So we have great assets with our technology because, of course, the data center are super important from the group perspective. And we are foreseeing that this market for the electrification business is going to be $25 billion, they create additional $25 billion for the electrification market in 2030.

Roughly, to give you an idea for the electrification every investment in data center every $100 of investment in data center is about $7 at the moment today with the -- with the potential market for electrification. Of course, we are continuing to invest. We are continuing to grow in the data center space. But at the moment, this is the picture that we are doing. An important piece that where every data center builder and every hyperscale that is looking for today is power density, much, much more power density because the data center are becoming bigger and bigger. And on top of that, they are consuming much, much more power. So they need a lot of efficiency.

That's why Morten has already mentioned this morning, three years ago, we launched in the market. We launched it in the market, the medium voltage UPS called HiPerGuard. It's a big success at the moment. We are doing installation in U.S. and Europe, in Southeast Asia. And why we are doing that? Simply because it is creating a huge amount of value for our customers. Today, we are the only one to have such a solution. And today, the most of the hyperscaler data that are using SaaS solution is because it's going to reduce the CapEx investment by almost 20%, they'll just need less copper and less component. It's much, much more simple. This architecture with the medium voltage UPS. The efficiency of this medium voltage UPS is more than 90%, the highest in the market.

And with this architecture, just to the fact that it's much more, more simple, they're going to create a bigger model. Therefore, the giga-scale data center is important to reduce by 20% the time of completion of the project. I think it is a great product, but I wanted that also one big partner that is using this data center here in U.S. is going to provide you now in this video some of the key value of our partnership collaboration. This is applied digital and is going to have the Chief Technology and Innovation Officer that is going to talk about this collaboration.

[Presentation]

As Todd was saying is like the space race, and it's exactly what's going on. And this is what's going on for the AI data center, but we'll love technology. That's why also with developing technologies that help our customers to succeed and to make it better. This is our focus for today and for the future. And that's why developing new solution and technology was enabling us to grow for -- during the last 20 quarters in a row. We were growing the last 20 quarters in a row with an average CAGR of 8% since 2019. And in the meantime, we were able to grow substantially our profit margin, reaching more than 23% that is higher than the target that we were setting during the Capital Market Day 2 years ago.

How we did it? I think that the most important part for any kind of business is always the people. And we don't not talk so much about the people. I think we have a great team of people. We have a great team of professionals that know what they are talking about, and they know the technology. That's always important. And if you combine a great team with one of the best operating system that is the ABB Way where you try to embed the culture of empowerment, accountability, ownership at the divisional level and the business line level, and we aim to do it at any level inside the organization closer to the market, you have great results. It's always our appetite to do great business.

On top of that, of course, this thing was creating one important fact. 4 out of 5 divisions that were growing profit margin during the last couple of years. And on top of that, we were able to make and manage between divestments, investments inorganically and in investing more than $2.5 billion in research and development during the last 5 years, we managed in a very, very good way our business portfolio. That's enabled us to grow in a great way also in terms of profit margin. And other big things that we were able to do it, it was 2 of the division like distribution solution and the installation product that we were talking during the last Capital Market Day that we're growing in a tremendous way during the last 2, 3 years.

U.S. turnaround. You remember, we were talking about in [ Frosinone ] about that U.S. need to improve. This is what it was done. We walked the talk. We improved substantially. There's still significant room for improvement, but a lot of improvement were done in U.S. in profit margin, but also in market position. We grew substantially also in many product lines here in the United States from the market standpoint.

Local-for-local strategy, that was our long-term strategy. And it's there, was always there, and we will continue to aim to invest in order to reach 90% of what we sell in every region to produce inside this region. There was a strategy that we have since many years and in particular this year -- we were -- it was helping us also to get out or to guide us among the tariff and the trade risks. This is what we did.

But now looking forward, let's see, because the best is yet to come, we do believe. And the best yet to come, and we will work now for the next cycle on the 4 area that is reported on the screen. The first one is related to the continuous improvement with the U.S. focus again. The second one is related to continue to invest and keeping our leadership position in the market that we serve. The third one is related to the big investment in innovation for the future technology. Remember what I said at the beginning, we are in the middle of a revolution. So we need to invest much, much more than in the past on the innovation to create the future technology. And the fourth one, we will have much more focus also in the M&A and inorganic growth.

Let's go 1 by one, U.S. U.S. is our largest market. It's where we're growing the most and where we, in particular, during the last 2, 3 years, we were growing with an average of 20% every single year. We invested during the last 5 years, $0.5 billion. And this -- just this year, we announced $130 million of additional investment. Why we did it? Local-for-local strategy. It's always our strategy. We aim always to reach 90% of what we sell, we need to produce inside the region.

Of course, one other important thing is this one. We improved substantially our profit margin in the United States, but we are still below the average of the electrification, operational EBITA. So what we aim during the next strategy period is that we would like to reach at least the electrification average and go beyond of that, because there is big room for improvement.

How we could improve it -- how we could improve here? I think many of you that were in Frosinone in the Capital Main Italy, 2 years ago when there was the last Capital Market Day. I think you saw a beautiful factory, also because I grew up there, so there is also my heart there a little bit. And there's a beautiful factory, very lean, not vertically integrated, great productivity. That's a number. Every year, 20% of productivity improvements. This is what we need to learn, and we are bringing here in the United States, where today, we have just -- the robot density in our factory here in U.S. is roughly 1/3 of the robot density that we have in other places in the world.

Why we didn't -- we have not done before? Because you cannot do everything in one step, that simple as that. We did big capacity improvements. And now what we are working is fine-tuning and go step by step in order to improving continues to the profit margin. So these are one of the biggest area that we will need to do it, and we will have a plan to do it during this strategic period.

The second one is keep the leadership position and make it better. This is a one-tier example. There is a beautiful product. It's one of the most successful or better, I can say -- the most successful product line that we ever done in the electrification business -- in the history of the electrification business. We launched in 2013 [indiscernible] and this one has become the market leader, worldwide business. We have more than 5 million of product installed base. This is the most profitable product line inside of our company. We are launching in July in Malaysia. We did a new launch, and we created the Emax 3. Why we did it? Because we are -- we were a market leader and we want to make another -- we want to make another leap forward versus our competitor.

And now we introduced more digitalization, more controlled aggregate, more automation and more control of the power needed. And there is a full compatible -- full backward compatibility. So if the customer want to make an upgrade, he can rack out the product, racking the new one and you have upgraded. That's one clear example of the big investment that we are doing in order to keep our leadership position. You can find those products, a huge amount of those products you can find in data center. You can find in hospital, in airports, in all the critical applications in the big industry.

We were talking about how we're investing to keep our leadership position, but as I said, when it invests also for the future technology because we are in the middle of a big revolution. DC and so the direct current, DC distribution is here and this time is here to remain. We talked about this since many, many years. We are in this industry since many, many years. And why is important.

Let me talk about one thing also because why the direct current is important. You saw the benefit is enable higher power density. It can reduce the cost because you can use less raw material, for example, very simple, in AC distribution you use 3 or 4 cable. If you're in DC, you use 1 or 2 cables. And after that, here, we are more than 100 people in this room. Everybody of us here has a laptop, has a mobile phone, we are having LED, so lighting, TV screen, projectors, air conditioning, all of those are working in DC. But due to the choice down at the end of the 19th century, the standard became the AC. But today, the power electronics enable the possibility to move part of the distribution network in the DC.

Today, every one of us has a charger or have a converter, it's a small one stuff. All of the things that are hitting and when you plug it in is there are a lot of hits. There are conversion. There are a lot of losses in hit. Every one of us is wasting a lot of -- a lot of energy during the conversion. But what if we can distribute with the direct current. That's why the importance why the data center provided, why Nvidia, why every single data center provider, they want to invest in DC. We need more power density with the easiest way, arrive with the medium voltage -- with the medium voltage power as close as possible to the rack and afterwards go direct with the DC. That's the strategy if you want to have that the data center are becoming bigger and bigger. That's the only way to do it.

And that's why for who of you were in Frosinone 2 years ago, I think that you saw the gray box that is called there solid state [indiscernible]. We launched it during the Capital Market Day. And you were seeing these big great boxes. We were the first one in the world to launch. It was done for the DC application. Why we did it? With a great collaboration that we are having with process automation because in the DC vessel, the DC is already a reality. And we tested, we already use it together with the process automation colleagues in many electrical vessels around the world. Same type of grid is going to be implemented or the data center, exactly the same LEGO blocks will be implemented for the data center.

The second big investment that we are doing, of course, the DC is the research and development. We are in the DC since many, many years. We have more than 700 patents, and we will continue to invest. We're making a lot of partnership. One month ago, we announced also a great collaboration that we are doing with the NVIDIA in order to build up the future DC architecture that is not available yet. But we are working with many other peers to build up this DC architecture. We did equity investment like Digi Matrix to build up another LEGO block that is a solid state transformer. So there are many lego blocks that need to build up in order to arrive -- to have data and bolt to DC that is going to happen.

We are making a lot of course, working with many of our peers also to build up the new standard with Current OS and ODCA, one in United States, mainly for the Americas and the other one mainly for the rest of the world in order to build up the future -- the future standard.

The last point is related to the M&A. We did $800 million investment in the last couple of years for between equity investments or acquisitions. And I think that we did it in a very disciplined way because our ROCE was improving from mid-teens to more than 30%. So I think that when we do -- already Morten and team were talking about that, when we do acquisition, we try to do in a very disciplined way in order to see if we are creating value for our shareholders. And this is what we did during the last few years. But now we're already also for a larger deal. We have a pretty big pipeline and the 4 areas where we're going to focus is related to the -- to improve the grids and to improve the reliability and the stability of the grid on the high-performance data center on the smarter building and of course, to spend from the geographical standpoint in higher growth geographies.

In conclusion, as it was already mentioned before, we are thinking that we are well established. The market is growing. We are very well positioned to grow in terms of revenue towards the high end part of the range that it was mentioned this morning by Morten and Timo. And in the meantime, we are very confident and we have planned to reach a profit margin between 22% and 26% over the cycle. And we will continue to invest in innovation and create the best experience for our customer. We have a clear path. I'm very confident and super confident that we will reach this plan. Thank you so much.

Alright. A few questions before we head out for lunch. We have 1 question here at the front. We start here, and then we continue on the second row there with yes.

Just a question regarding sort of how you think about like liquid cooling and if you would think that would be something complementary that could add something to the portfolio, your thoughts on that, please?

Yes. liquid cooling, there is -- there is no doubt that if the AI is going to grow, there will be a growth in liquid cooling, and we are working already with many manufacturers of the liquid cooling to try to help them also from the electrical standpoint in order to optimize and to make a better efficiency also for their system. So we are already working with many of them on such part. And for sure, we are investing a lot, as I was saying. At the moment, we are 7% of the investment in data center, and we are mainly present of the gray space where we are -- where it is our strength. But if there is value creation, we could spend further also in the white space.

Sean from HSBC. On your margin range, I mean the progression has been impressive over the last few years. And I'm particularly surprised at hearing about how important this U.S. story is that it's been sub margin. And now in theory straightforward, it is for you to catch up. I mean looking also at the growth targets, I mean, why should the bottom end of that range given also where you are today be something you're even considering?

You mean for the growth or the profit?

For the margin.

For the margin. I mean, over the cycle, we fix the range. It doesn't mean that we cannot go beyond that for sure. And it doesn't mean that we will be able to do beyond that. Over the cycle, we do believe you can have ups and down. And so that's why we did -- we will have also a range. I think that is pretty fair also as a range.

Then maybe just a follow-up on the U.S. I mean -- are we at peak CapEx now for U.S.? Or do you still see further acceleration?

At the moment, no. I don't -- I think that what we did to the $230 million that we announced this year, we're going to be good enough in general, making -- we will not foresee for the next future to make some other big investments.

Thank you. Do we have any -- yes, we have 2 analysts here on this side, if we start with Anders Idborg and then we have Anders Roslund following after.

Anders Idborg from ABG. Just an interesting comment you said about the potential growth in data centers in Europe and China and your higher market share there. Could you give us some numbers on that differential? And also, in terms of the profit pool, it has been very attractive here in the U.S. What do you see there in Europe and China?

Let's say this way, in China, we're already growing significantly data center because the data center market in China is growing very nicely. And I can tell you that the profit margin for the data center or the data center in China is in accordance to the profit margin that we have normally for that market. We are not providing data for any single market. But we can say that if we are the growing China data center is providing the same profit margin that normally we could have for the rest.

The same for Europe. It's very similar to the profit margin that we have for the rest of the business in Europe. For sure, the growth perspective is very interesting because the -- for many years, the growth was up in [indiscernible] here. Now we start to open in Asia starts were up substantially, and now it's going to make a boost also for Europe and in China. And that's -- we are much better positioned there for sure.

Thank you. And if we could just pass the microphone to Anders further down there, too.

Andres Roslund from Pareto. I have a question regarding the data center and the smart building. I mean those are focus areas for all your competitors as well. And [indiscernible] seems to have been growing the last 5 years, the percentage point faster than you, and how will you catch up and they have a growth target of 7% to 10%. What are the key reasons for you to catch up? Is it M&A or organic growth or both?

I take that. First of all, when we talk about our growth, we always talk about through the cycle, when we talk about 7%, 10% of -- or number 6 to 9 of some of our period I talked about midterm. So there is significant differences of those numbers. I think that Morten and Timo were already explained before.

I think that we are very satisfied on our growth. I think that if we are looking at the growth that we are having data center is comparable to our peers. But by the way, remember always the data center, it's just 12% of our growth. There are much, much room for improvement in all the rest of the 88% of our business.

Yes, I mentioned smart building, for example.

Yes, the smart building, the building sector is an area where is 1/3 of our market. For sure, the grow will not have most probably the same trajectory of the data center, but it's significant for us. And as I was mentioning to you, if I look to the -- through the next 10 to 15 years, the area for improvements of this market is significant. We are investing on -- today, we are mainly focused on the KNX part, but we cannot exclude also to try to expand our portfolio for the future.

Okay. Do we [indiscernible] Martin here at the front, and then we'll have the second one from Andres at the end.

Just coming back to the DC technology that you mentioned. Obviously, the penetration of that today is relatively small. What's your positioning there? I mean, obviously, technologically, you've got a lot of products. But if that was to develop, will your market share be similar in that market? How should we see you versus peers in your offering in D.C.?

You know, the DC, as I was saying, we were the first in the world to develop the solid state you could break that is the basic LEGO block for any kind of electrical architecture. So I do believe that we were very well positioned. We started earlier on that just because we used to have in the Marine & Port division on Process Automation, they were already working in the DC vessel since 2013, if I'm not wrong. And so that's why we start to work there. After that, there are many other Lego blocks of the data center of the -- sorry, of the DC distribution that are not available yet.

Everybody, including us, we are working hard to develop those lines. I'm going to mention one, solid state transformer. We have in our laboratory. We have a prototype of that. We have an internal incubator, where we invest a lot of our resources. We invested in an external company to build up this kind of, in a faster way the solid state [indiscernible] but nobody has it at the moment. So it's still in the early stage, but it's going to be a super important future technology for the future.

Now of course, we are in a hurry because there is a data center, but we have done just to give an idea, the solid-state breaker that I mentioned before, you can find today in the vessels, in the DC vessel, you can find today, for example, even in the building. We were the first one that last year we did -- we enable a big industrial site with offices in Germany for a primary automotive industry where we help them to build up the first hybrid distribution network where you can have the AC distribution and the DC distribution, solid State breaker were there.

And we have Andre here at the end.

Sorry, I'll keep going on data centers. Could you give us an idea of your dollar per megawatt in data centers. And I think you mentioned some number of 7%...

7% of the total investment. If we talk about dollar per megawatt, close to $2 million, right, roughly like that for the electrification part.

Great. 9 And that $7 per million invested number that you mentioned...

7%.

Okay. So you get 7%...

We get -- the market potential for us is 7% of any dollar that is invested.

Perfect. And one other question I want to ask is about that kind of DC microgrid infrastructure. Is there a point in the rack density where it just becomes a must, a bit like with the latest NVIDIA chips of 1.2 kilowatt you have to liquid cool. Is there a -- is it 100, 200, 500?

Yes, we have talked about now at this stage with the new chips, the plan of NVIDIA is to reach 1 megawatt per rack. Rack is like the switchboard, right? And today, until last year, it was 30 kilowatts. So it's 30x. You need to bring the 30x the power of last year -- 30x the power that we were using last year inside the same box. It's going to become no alternative.

But is that at 1 megawatt, is where it's an alternative? Or because it 100, you can still [indiscernible]?

I think that the strategy, and that's why we were developing a medium voltage UPS is to try to arrive as much as possible with the medium voltage distribution as much as possible closer to the server. And after that, you need to go with the DC. Otherwise, it's going to become the block of copper. So that's what it is.

Do we have any more questions for Giampiero? Yes, we have one at the back, Lucas, if you may, please.

[indiscernible] Trust. Pretty philosophical question here. The growth drivers are really obvious, but here in the West, we're seeing more pushback on power prices, electricity prices from consumers. How is ABB helping to lower electricity prices for consumers?

Yes. I think that, as we said, one of the examples that we were -- I was showing, for example, one of the buildings and the hotel that I was showing before. One of the things that we are trying to help is to try to reduce the energy bill of the hotel chain. The auto chain that I was showing you before that was able to reduce 25% of their energy bill. That is significant, particularly if you're using all the -- where all the HVAC system and the lighting for an hotel is about roughly 50%, half of the energy bill. This is something that we are doing well then.

We acquired, for example, a company that is called [ sensor fact ]. It's a Dutch company. We acquired this company in February of this year, is software as a service company that the major focus of them is try to work on the middle size -- from the small mid-sized enterprises and the midsized building in order to help them to reduce the energy consumption. So we have many solutions to help them to reduce the energy consumption. Because we -- many times, we are talking about more power, more tanks. But the best way to have more power is to reduce the energy consumption, as it was mentioned by Morten this morning.

Yes. And we have one final question here at the front.

[indiscernible] The profitability upside in the U.S. market, 1/3 of the business there. What is the time line of that?

Yes, we were able to improve the profit margin during the last 2, 3 years from low single digit to ITs. I think that we could have the same type of time on that in order to arrive to the electrification average. After that, more we grow here, of course, more we grow the electrification average. But then so to catch up, it's going to be raised, but that's for sure, something. That's why also the $230 million investment that we did this year, it was not just for capacity expansion. It was also to build up. One of the biggest things you can build up a factory. Great. You have a great building, you need to fulfill with people. You need to train them. You need to have molding. You need to have a supply chain that in U.S., unfortunately, it was not existing.

So we are, in some cases, asking to our suppliers in India or in Europe if they open their -- all their own facility here in order [indiscernible] because if we're doing that, we are much faster instead of trying to search others. So it's something that you need to work every day on such a thing. But 3 years time, during the next strategic period, that is 3 to 5 years.

So thank you guys very much. It's a pleasure to be here. We'll bring you home with motion and then we'll put you in motion, and we'll walk around the facility, kick the tires and see some of the toys that we have to show you guys. So hopefully, you can continue to learn more about ABB, what differentiates us and kind of why we think we're on the mission that we're on.

So I'm incredibly proud to stand here on behalf of my colleagues, 23,000 strong around the world. Market leader in what we do around having the most comprehensive portfolio in drives, generators, motors, power conversion and then the services that complement that. So we've been on a really great journey. I'm pleased to stand up here as the market leader. Certainly, that differentiates by portfolio, by geography. We'll step you through a little bit of that of where it's most relevant. But certainly here in the U.S. can stand here confidently with what our position is, the strength of our go-to-market, our customer intimacy and really the results that we've been fortunate to deliver thanks to the teams across the U.S.

So how are we set up? We're set up with 6 divisions now. One of the changes that I made coming in that I'll touch on a little bit more is combining 2 of our largest long-cycle divisions. And so I'll touch on why we did that and what that means for our customers because that's why we do everything that we do. We have 3 businesses that are short cycle. If you think about our low voltage drive products, our low-voltage motors here in the [ NEMA ] market and then our low voltage motors all the rest of the world.

We then have 2 long-cycle businesses, which is high power. So that's large motors and generators combined with our high-power drives. And really bringing those things together because that's how we see customers buying across industries, marine industries, LNG industries, carbon capture example that was mentioned earlier. All those are great combinations of that portfolio. The traction business might be interesting for some that have a long history with ABB that we don't have a train there. Obviously, we're known for that in the rail industry of what we do in propulsion. But now we're taking that propulsion and as another growth vector, we're going towards off-road. So we call it rail to wheels. And so what can we do in order to drive off-road growth for mining, for construction, buses, other types of transportation and even into the marine industry, where we're having some successes. So that's why we've got a different picture up there for traction.

And then we pull it all together with service. Our attachment rate to our high-power division is where it's the strongest, but there's also upside and headroom for us to move across the short-cycle businesses. Whether that comes in actual service business, or whether that comes in replacing the equipment, it's a great opportunity for us to continue to grow. The widest portfolio in terms of motors and drives from the lowest kilowatt [indiscernible] and everything in between. And then you heard Peter talk about it. You heard Morten talk about it in terms of having software and the importance of software.

Some of our differentiation comes through the software applications that we have across our drive solutions and how we exercise both control and efficiency. So you've heard all of my peers talk about the importance of not just doing it the most efficient way, but also doing it with the most control, and that's where ABB differentiates itself, especially in terms of our drive technology.

The business is running at an all-time high from an absolute side and in some of the KPIs from a percentage side. So you can see what our growth has been across the cycle from 2019 to now, a little bit of a lull there in '23 and part of '24, and now trying to return that to growth and deliver where we're going to be across the cycle, certainly across profitability as well. So my peers, as you know, Morten was here. We had another gentleman running the business, and then I've been here since March of -- or since August about 1.5 years ago. And so really running well in terms of productivity, in terms of what our manufacturing footprint is, making sure we can stay competitive, keeping gross margins where we think they should be and pushing towards that 40% that Timo talked about earlier being an elite industrial company. And certainly, we're trying to have -- make sure that we contribute to that from the motion standpoint as well.

So what are the industries that we play in, $57 billion or so industry. Industrial part, the heaviest side of that, you can see what's happening in transport, power generation, a huge topic with electric expansion, which you've heard about as a theme all day to day. And then certainly, buildings being relevant for us.

What are we doing in those spaces? We're protecting the operations. We're improving grid stability. Giampiero talked about it, but let me give you a little bit more color, the VoltaGrid project in Texas. We're taking synchronous condensers, which is our technology, our large motor technology within my high-power business. We're working together with process automation and the Energy Industries business to package a solution around it that includes stuff from Giampiero's business and core offerings from Peter's business. And we're delivering a value to the customer at a speed, reliability and execution and service package that our peer group can't match, and that's why we've been selected to execute that project.

It's a great opportunity for us, not only here in the U.S. to provide grid stability. We're doing it in Central Europe. We're doing it in the Middle East. We're doing it in Australia. And so this is a really nice growth vector that's come in, I would say, in the last year or so where we see the pipeline really growing around the synchronous condensers.

And then lastly, renewables. Morten talked about, the energy transition hasn't begun yet. It is -- renewables is expanding. And so we like that in the medium term and long term, which is how we think about these cycles. And certainly, our power conversion technology play a role in that. We like the renewable space and what we can add and offer value there.

Local-for-local, you've heard about it from my peers. Let me show you what it looks like for Motion. In the U.S. market where we're standing, that was part of the investment decision that Morten made when he was back in the role. Now in fairness, we're a very selfless executive committee. So I got to cut the ribbon and be in the pictures and everything when we opened this facility. So Morten was very gracious to allow me to do that even though it was his decision to make the investment. But it was a great investment and it supports our local-for-local strategy.

You can see 80-plus percent here in the U.S. of what we sell here we make here. India 85, China 90, Europe 95-plus, and we'll continue to drive this investment. That doesn't only account for our brick-and-mortar our factories within motion. It also accounts for our service footprint. And that's critically important. You heard Peter talk about service in his presentation and the importance of that and what it offers. It's the same thing for Motion. We're running really critical assets for these LNG plants, the marine industry, the data centers that we're doing for the cooling and the importance of that.

So having a service capabilities, whether that's replacement, spare parts that can come quickly from our footprint here, our channel network and distribution that we have with inventory that sits close to our customers and their needs, all that is part of the differentiation. So when you think about competitors coming into certain markets, there are barriers to entry into coming into these markets because of the footprint that we have, the go-to-market that we have and the relevance that we have, not only with our customers through motion, but through my brothers in Electrification and in Automation.

The macro trends are the same for us in Motion that you saw from Peter and Giampiero. The amount of data that's moving around the world continues to grow. Electricity demand continues to grow and then energy transition. Whether it's energy expansion or energy transition, it's a growth driver for us in Motion. All of these businesses require motors, drives, generators. And that's what we're world-class at, and then they require the services to support it, which is where we deliver extra value. And so all of these are really nice drivers for us fueling growth.

Regionally, of course, it matters a little bit, but if you talk in India, we're seeing growth in India. China, in my heavy industries businesses, we've continued to see growth there, while there was a little bit of a slowdown in some of the commercial and res, where we see some positive signs there. So I think it really does -- it does move around a bit, I'd say, geographically, but we really see a tailwind and ability for us to grow across these sectors.

One thing that's probably the most important of my presentation today is to talk about energy efficiency. This is not a brand-new topic. But the relevance of it is gaining more and more importance. We talk in ABB all the time about the greenish unit of energy is the one you don't consume. This needs to become more meaningful in our industry. As Giampiero talked about the challenges that exist to add enough power to the grids, what it costs -- what you need in transmission lines, what you need on investment, all these sort of things.

With energy efficiency, we can put 10% capacity back on the grid today with technology available right now. So that means no new transmission lines, no new substations that you have to build. It's just doing more with the technology that's available now. And I'm going to walk you through a couple of examples and also show you a customer so that you can hear from them and not just from us.

When we talk to energy efficiency, we talk high-efficiency motors. So let's use the most efficient products that are available. Right now, majority is still what's being bought on the market is kind of in this IE2 efficiency. We have IE5, moving to IE6 On the efficiency side and then the use of drives. And we're going to show you in the facility that we're standing in what the benefits of that is. When we take a drive motor and attach it to a pump for our geothermal system, what does it save us in electricity?

We didn't build this facility just to bring customers in here to show them something that we don't believe in ourselves. We built it because there's a business justification for the return on investment of spending some more money on the CapEx side and benefiting from it in the OpEx side, and we'll show you that on the tour.

So what does it mean in terms of a specific example? This is an IE2 motor that you see on the left-hand side. So you can see the size range of it, call it, $15,000. And then we say, okay, Mr. Customers spend 3x that amount of money. So first response is 3x, that's crazy. Why would we spend that much more money. The return on investment is 9 months for that 1 motor and drive. It will use $1.3 million less electricity across the lifespan of that motor. And that's assuming, by the way, 25 years, our customers run these motors for 30, 35 years. So make the numbers even more in terms of what the savings is.

And this is, again, technology that's available today, proven, reliable, robust service capabilities, all those things there. So don't just take my word from it. Let's listen to a customer and what they have to say about how they view energy efficiency for their business.

[Presentation]

I think it's a real appreciation to them for doing the video. And I think it's a great example of making it real, 6,000 households, 25-plus percent less energy consumption, associated electric bill that, moving from 40-plus vendors to 1. And so at dinner last night, I talked to certain people and they asked questions about will companies go retrofit their plants and these sort of things, all the motor, some of the motors. So this is a great example of just moving the motor efficiency up. Not adding drives and those sort of things, just moving the motor efficiency up. So there's then a need another level of this that we can move to. And so really proud to see what we're doing there and trying to make this real and relevant.

R&D, investing organically in the business, really important to us. We're spending a little bit more money right now because we're updating some of our motor portfolios that have been around for several versions of those product families, and we want to make sure that we can drive competitiveness, drive efficiency and really compete around the world. And so both in our Nema business and our IEC business, we're also doing some things where we're spending for specific markets to take here in the U.S. we've lagged in the U.S. on medium voltage air cooled drives. That market was predominantly driven by others. Now we have a factory footprint here that you'll see. We've come out with some technology that's really, really impressing our customers, and we're starting to take market share in the medium voltage air cool space, and we will build it and deliver it, service it from here with those R&D innovations coming from here. So that's again part of our local for local.

Three examples here, really cool the first one. Whenever you're the world record holder and you break your own record, that's a great day. And that's what you see is this first one. This is a customer in India for a steel mill application, a large motor. It will consume $6 million less electricity in costs across its lifespan and a 3.5 month payback for the customer. And this is the highest efficiency motor in the world. And so a great job by the team.

AI, you've heard about it as a theme throughout. And what's cool here is we've taken an internal example to show you of how we're driving it to use efficiency internally. We get stacks of specifications from customers this big about what they need from an application, what they need from a motor these sort of things. We've now created a tool internally where we take this, use the AI tool that we've created and through the innovation and entrepreneurship that we have within one of our communities of practice around AI. And they've condensed that into instead of days, they've convinced it in the minutes and it creates a proposal and a bill of material for that motor. And so that's a great way for us to be responsive to customers, speed matters. We learn from all these specifications, and we continue to improve. So a cool example there.

And then something from Timo's business on the machinery drive side. This is an innovation where we didn't have a product to serve this market. It opens up a machinery market to us, which is a very large market for us and allows us to go play in that space. Highest cybersecurity in the industry, most connectivity in terms of protocol, in the industry. And so we're really excited about kind of a homegrown innovation that opens up a market for us to go play in and to grow.

In addition to organic, we talk about inorganic. And so I would say we've probably lagged here a bit in motion, and we want to be a strong contributor to the group in terms of the 1% to 2%. And the role that Motion can play in that. And so we think there's some great opportunities. We do have a really nice acquisition that we just -- that we closed earlier and that we just officially integrated into ABB about 4 weeks ago, which is BrightLoop, company out of France. They made DC/DC converters, which can be used in a lot of industries, a lot of applications from F1 to Formula E, to the marine industry, to the mining industry. And when we did this acquisition, I got several personal e-mails from some of our largest customers that said, this is a fantastic technology that we're happy to see come inside of ABB for you guys to help us scale.

For me, that's the most rewarding kind of e-mails you can receive as validation from your customers, that you're spending money in the right ways. And so we're happy to have these guys on board.

We also do the equity investments. So we invest in the different companies, partial investments with the potential to take larger roles in those companies or completely acquire, like happened in Automation or electrification as well as companies that are helping us with our manufacturing. So one of the companies is here in the U.S. that we're using to help with smart manufacturing for us to become even more efficient, more productive. And so we're trying to come at it from all angles of how we serve customers, but also how do we do things the best way. And so inorganic is a big push for us. This is done at the division level. So I had some discussion at the dinner last night as well, and I want to be clear.

The mandate for acquisition, for building the pipeline, identifying the targets, these sort of things is done at the division level in ABB. That then comes to the business area and we look at overall capital allocation and how does it make sense and those sort of things, and then we make recommendations to the group. And so this is now reviewed quarterly with my businesses at the global level of what are they doing on their pipeline and what are we advancing through that funnel. And so really important for us as we look at how do we grow inorganically.

So let's take 2 examples of why it matters being part of ABB. This is something that's near and dear to my heart. I've been here for 20 years. I started as a front-end sales person, down in Houston, which is where I'm still based out of. And so serving the LNG business, I've had a pleasure being a part of these things. I worked for Peter directly for 8 years. So I think I can speak pretty credibly about what happens in Automation, Electrification and Motion and how that comes together at the coal phase, which is the customer.

The value here is tremendous for us to help them optimize from the beginning, how they design these facilities, optimize them to operate with the highest efficiencies that we can and the highest reliability. On the Electrification of LNG, we have customers that are telling us they're going to build an eLNG, to electrify the trains. They're going to build that and assume that 1 day green electrons will flow to it. So instead of building in a conventional way, they're going to build it from an electrification path forward. And so we're helping them from the beginning of that.

Also on data centers. So data centers plays a key role in my business in HVAC on the drive side, we're the leader here in the U.S. We're very strong around the world. And so it's a great opportunity for us to tap into some of the growth that's happening in that industry. Same with motors that we're providing to the OEMs, that are going into these facilities. And then a lot of the companies that are doing the backup generation, you have to have 100% redundancy on these data centers. So the companies that are doing the backup generation are using ABB generators, that they're attaching to their turbines and generation. So a great opportunity for us.

And then we're looking at how do we continue to drive some of the questions around cooling, electrification and the trends that are happening there. Where is the best trade to capitalize? Is it organic? Is it inorganic? What do those options look like and how we best work together with EL to influence specifications and really help drive efficiency. Efficiency matters tremendously in the data center because of the amount of power they're consuming. So every bit that we can open up in percentages is value for ABB and value for the customer.

So 3 things that myself and the leadership team have taken on in the last year that have all gone live now. First is implementing business lines all the way down into each of the divisions. So we've got 6 divisions. We have 25 business lines. Some of those are in profitability. Some of them are in stability and about 65%, 70% are in growth. And so we've got a mix within those businesses. We incentivize based off that. We performance review based off that. We set annual targets based off that. And we govern based off that. So we've implemented that as of July 1 across motion. So that's now got a couple of months of run time in terms of how that's working.

Creating customer value and being kind of customer-centric. This was combining large motors and generators with our medium voltage system drive business. And that is purely a revenue play. That's about going after the markets and selling solutions, deeper penetration of share of wallet and penetration into certain OEMs that are buying both or might be buying one and not the other. And really gives us a value proposition to focus on applications and how do we bring this technology together, how do we innovate this technology together with our customers in order to grow.

And then the last one for about 45% of the revenue base, we've changed the go to market towards the ABB way. So we previously had a matrix structure in how that was set up. And it was not clear accountability, not clear empowerment, and so now we've changed that. And we have that by division in the countries, people that represent motion there and really are purely accountable for delivering on the business targets per the mandate that they have. And so these are 3 changes that went alive November 1. And so that's only got a couple of weeks underneath this belt. But certainly, myself and the leadership team fully confident that this will have the impact we're looking for to make sure that we stay at those thresholds that we've committed to from the ABB group side, full confidence there.

When we talk about priorities, I talk to my team about something called big rocks. You might have heard of that analogy before, but it's really about driving focus. There's lots of things to distract us and lots of things to take away from what our peer mission is. Our big rocks are here in terms of the business lines and the mandates of how we want to drive and govern this business. M&A that we want to strongly contribute to the group, and we want Motion to play a role there because we think we've got value to add independently as Motion, but also to my brothers in Electrification and in Automation.

We want to strengthen the service attachment. Our service attachment is probably in about the 40% range of our installed base. We've got upside, and we get to Peter service attachment. And we have upside for us to have penetration in the industries to take better care of our customers and really add value to ABB. Work together across the industries and across our business areas critical for us. And then lastly, we're not going to stop innovating. We can't be comfortable as the market leader. We have to continue to spend money. We have to continue to come out with new products, new offerings that push the limits, push our industries forward and really help drive value for our customers and for ABB.

And so with that, this is a perfect picture of what I just said. A lot of you might not have seen a motor before. If you haven't seen a motor before, I got bad news for you because that's the most beautiful motor you're ever going to see in your life. So this is a product that we developed that we're the market leader on. That product has a different technology where we don't use rare earth minerals. It has the highest efficiency. It changes the game for us in ABB. And we will continue to drive business towards that.

So 25% attachment just so you know, on motors, where it drives attached to them. As we can drive the efficiency message, and we can look at business models and profit pools, we think there's a way for us to push that forward. So we like to have a motors in our portfolio. We like having the best drives in our portfolio, you bring those things together, and we think we can move the market.

We like our structure in Motion. We like our strategy in Motion. So I would expect some consistency in that in 2026 and for us to go have a high safety ratio. What we commit to the EC and to the board is what we're going to go deliver. And that's what the commitment is for myself and the management team. You've seen the ranges there, 5 to 7 of 18 to 22. We're somewhere in the 19.5 range. And so there's upside for us on margin. That can come from our footprint. That can come from productivity, product innovation. We do variances local for local in order to make sure that we're competitive while also maintaining margin. So there is headroom for us to move further up in that quarter that you see there.

And then we're going to invest organically, and we're going to push to make sure that we find those value-accretive things inorganically. And so really proud to have you guys in this facility to do the tour that we're going to go on here in a few minutes and see the technology and most importantly, meet the people. In Motion, we talk about people, customers and results, and we start with people because that's what we rely on. That's who drives this innovation, that's who delivers the results. And so I'm humbled and proud to stand up here and represent the 23,000 strong in Motion and also commit on their behalf that we're going to go do what we said we're going to do.

And so with that, I hand it over to Tuomo.

Thank you, Brandon. Yes, very good afternoon, everyone, and warm welcome to our brand new ABB Drives U.S. campus. This campus has been designed, built and engineered to outrun. And we are very proud to say that this is the first one-stop shop for all the customer needs and drives whatever a customer needs and how this value proposition is made. Morten mentioned earlier that we want to serve the customers how they want to be served. So we acquired a land, a good customer in the middle, which is pretty much the area where we are now. And we define the story what the customer needs here. And when customers come to this building, first, they see the portfolio, which is usually available here. Behind is the wall, which shows our building automation system, how this building is controlled with all the ABB products.

But what is very unique thing, we have here the HVAC mechanical room visible on this side. Usually somewhere hidden in the basement. We made it visible. It's full of ABB products, our drives, motors, but a lot of electrification products to run the pumps, sands, chillers. And you also see here the green color pipes, our geothermal system.

Now even more unique is that customer can enter this area while the building is in operations. And also all of you today, you will see this HVAC, the mechanical room with your own eyes while we run all operations. And this is, by the way, the hundreds of participant remotely good showcase and reason to visit here in New Berlin, Wisconsin to see all that.

Now the customer journey continues. We think about the value proposition. Our products are quite complex technical products. Our customers really want to pay the training. And now we continue the journey with our training area, our hands-on training classes and our remote class, the places, and we provide there multiple different locations, the continuous different type of training practices for our customers and our partners. And what we need then, we need very strong presales support for our customers.

So what you're going to see after that is the application laboratories. Whatever customer needs, we tested in the real product here. We designed the application, and before we go to commissioning, we make sure, together with our customers that everything works. And actually, this is a very unique value proposition because often the customer sites are in the complex locations. And if you can save time for the commissioning, have low risk, make it much faster. That's a big value add for our customers. And now you will see all this today after the break.

But then we also have a factor here. By the way, this is becoming one of the largest drive factory in the world, and it's brand new. So you will see that we are just now in the commissioning phase. So we will see a lot of opportunities to optimize that. But at the same time, we need to remember that this is the industrial electronics factory. So many of you were 2 years ago in Italy, our Capital Markets Day, and you saw the beautiful electrification factory, very high-volume products for electrification. Now, you see this larger industrial electronics products, which are often configured to order or even engineered to order. But the common thing is both our best-in-class, state-of-the-art facilities.

Now what else we see here, we combine the warehousing. So all the warehouse supply activities are interconnected, same building and the flat floor, which enables unlimited automation opportunities. And on top of that, we have a very large R&D center. More than 100 R&D and application engineers can develop a very complex new product. They help us to be local. We have a lot of different local needs in the U.S. and our team here help to make the perfect fit for our customers. But what we need to remember, the R&D is a lot more than development. Our customers have a very demanding question. So while we have here the tech suppert available. If they need some help, we don't need to go back to Europe or other region. We have the highest level expertise of R&D here, and we serve our customers in minutes and hours, not days or weeks.

And when we combine all this technology together with all the services, the service workshop and life cycle management, we can say that we have the one-stop shop for all customer needs in the same place here, and it's a very unique value proposition. Customers are willing to really focus on that needs here. And if you still talk a little bit this investment, this $100 million single investment this facility, but 20% out of that, so $20 million is ABB products, meaning that when we count all the electrification, automation here, we have around 20% of ABB products. There are a lot of opportunities for facility investments. And when you see any of this kind of facility investment, at least 20% is a great opportunity for ABB.

We see here, this is a large-scale R&D center, the office, also the office part, we have right now around 700 people, but we are hiring more why we grow very fast in U.S. for U.S. market. And we have here all kind of discipline. So we cover all the functions and create this highly skilled workplace. And people really appreciate this modern office, which is really fit for purpose also working here.

But then if you think about the warehouse and [indiscernible], we used to have 6 facilities here, 4 warehouse locations. Then we had 2 other facilities, factory and office. We combine all the 6 as a 1 here. If you think about the example of the warehousing instead of 4 all the shadow trucks, massive complex setup, everything is one, which is interconnect that directly here. We already optimized a lot of inventories and still serve the factory much faster. And at the end of the day, our customers.

Yesterday, I had a question about that, what is the output of the factory. Next year, we target to deliver 350,000 drives. But what is even more excited 350,000 drive next year out here will save more than USD 2 billion of our customers' electricity bill. And I really want to repeat the story because, the output of this factory in 1 year, U.S. for U.S. saves more than USD 2 billion of our customers' electricity bill. And this is counted with the industrial standard as an average in a conservative way. So in many cases, it's much more than that.

But overall, summarizing that this value proposition is such an incredible and amazing the customer really appreciate this. Now I want to share 3 examples about this case and starting first, the global climate player and innovator wanted to make a step change for the product. Now the outcome was that they want to have this high speed, which means that from typical 1,000 to 2,000 RPM have like 10,000 RPM or even beyond, which means that the product is smaller and also higher efficiency. But at the same time, it's very complex and demanding development. We took the challenge together here and realize what we need to do our product, develop that. We also realized that it's so demanding for the cooling that we need to use our technology development and have a new cooling system that's, by the way, presented and make the solution for our customer. And at the end of the day, we see the picture here.

Instead of any external cabin, it's highly integrated solution as a high-speed compressor, having drives and every ABB component building, it's smaller than before, it's higher efficiency than before, but it's still better serviceability. And we guarantee the life cycle management over the years in future for that solution. Very close collaboration. And at the end of the day, the customer is most happy with the fast support with the speed and agility of what we can provide. And this particular business is starting to grow very fast.

We take another example, data center part. It requires a lot of know-how and expertise. So we will see in here that we learn and have a high knowledge of data center cooling. And now together with the [indiscernible] Technologies, which is one of the leading company for this cooling applications, the -- we sit down here that there is a long list of requirements. What we do? We want to meet all those requirements, make highly advanced, highly optimized and customized the chiller for data center cooling. A lot of innovation behind there, but it was really a mandatory that our both customer and our side, the experts sit down together and understand each other. But at the same time, the speed is so important that we need to count days, not months or quarters.

And also the train required that this has to be brand labeled, meaning that it's ABB inside, but then we also have the brand label for that. And we combine all the needs and make it on time, and also we see that this business is really start to catch up fast.

Now third one is we deep dive under mine. So we go the underground mining with a long list of requirements and very, very special restrictions. This major automation player needed a bigger drive. So this is coming from our high power division side. But the key was the speed and engineer to order. We deliver this 10x faster than typically before. We understand the needs. We work together all the details, and if you think about a loan the logistics from 2 months to 2 days here locally. And at the same time, we meet all the tax incentives for the customers and also minimize the tariff impact. And so well known the [indiscernible], the built-in and also the buying in America requirements. We met all those.

But at the end of the day, the customers said that the most important thing was that they get the direct access for our local engineers because it's a demanding application that they want to get the engineers available right away with their needs. And we were able to provide that because we have so high-level expertise for R&D and engineering here. So combining these 3 examples, these are very unique value propositions for our customers. What we built here with our people, the customers and the new facility here. All those are very fast growing. Our customers are very, very happy for that. At the same time, we grow faster with our -- the growth mandates and our growth with this nicely profitable businesses.

But then I want to enter facility because, it's important that we serve the customers. But now this is the first largest scale our motion, the mission to Zero site. On top of that, everything is controlled with ABB building automation system. And then we made because we are cold area, very thick insulations around here. But on top of that, we built this geothermal heating. So we are not using gas at all anymore. We have 24 kilometers, which is equal to 15 miles of geothermal pipes around here. And wintertime used the [indiscernible] mirror from the soil and helped to decrease a lot of electricity bill. And summertime, it's opposite. When we do the air conditioning, then we use a lot at the cold area from the ground.

So amazing story how we can save a lot of energy and have the zero emission, which is combined with the solar panels on top, and we also have a lot of EV charging stations. And if something goes wrong, even our backup generators use biodiesel so that we are super green here.

So a very unique value proposition for our customers. And then I want to summarize that this is the first real one-stop shop for all the drives need for customers and partners in U.S. And this complete campus is designed, build and engineered [indiscernible]. Thank you very much.

So Q&A. Put Brandon and Tuomo on the spots. Is there anything that didn't come across. Here's the chance. We start, I think, ladies first, Daniela, and then we have Martin here on the front row, please.

I thought it was interesting that you mentioned you did that motor without rare earth. So I was wondering if you could give a little bit more color into that? And how dependent the business is on rare earths, how is your supply chain given that's a big topic at the moment?

Yes. And I probably can't answer the technical question on how we solve that riddle. I don't know if my colleagues know. But the rare earth metal is a low intensity for us. So it's not a huge bottleneck or a supply chain topic for us. It is an issue, obviously, in general. But also now we're found a way to engineer our way out of it. And so that's a great development for us and not have to deal with that.

And it goes along with doing things the right way. So we always say that the [indiscernible] matters as much as the what it's an opportunity for us to do it the right way. If I can get some answer the question for you.

If I still add a little bit that there are a lot of high-efficiency motor called permanent magnet motors available in the market, but they need those very available materials and are much more expensive. So this means that the availability is so much better, and then the cost is much more competitive, meaning the value proposition for our customers.

Is this an ABB unique thing or the peers without motors without rare earth?

There are available those in the market, but we are, by far, the forerunner of that. So if you talk about the portfolio, also the efficiency, then we are by far the forerunner this industry -- in this industry.

Just a question on the adoption of the technology. You mentioned about this fantastic payback in terms of the save energy, but obviously, not every customer is buying it overnight. So what's the catalyst for the customer to make the investment? And is that changing either because of high electricity prices or maybe even shortages, can something really accelerate that adoption?

Yes. I think there's probably several things that are catalysts. I mean, sustainability is more in the front ground now than it was previously. So people have footprints and KPIs that they're trying to reach a corporation. So that's one topic that drives electricity prices, obviously makes the return on investment shorter. And so that helps drive it. And then the regulatory environment. So as we -- as different countries, governments, different things push the regulatory environment higher, that obviously can also be a catalyst to it.

And then lastly, education. I mean there's a lot of people in the value chain. So there's an end user, but then there's an engineering company. There might be a system integrator and OEM, the original equipment manufacturer. And so getting that through the value chain because the savings ultimately are for the end customer. And so how do you get that through the value chain? What's the business model there. So we certainly believe that the adoption will continue to pick up because the need for power is so great. The capacity can be online and there's good for the wallet, good for the planet. So we think that the -- all these things come together as a catalyst for it to move faster.

Thank you anymore. We have Max. We go first with Max and then we have Joe as #2.

Max from Morgan Stanley. I noticed when Morten was talking at the start in his opening speech, he talked about kind of Motion being the one area where he thought you could get to the upper end of the target range.

I don't hear him say that.

I heart him say that. I was just wondering why sort of -- was there any reason you particularly mentioned your division? Is there anything felt like maybe there's something kind of outstanding in terms of a single division or a unit where there's a real opportunity? Is there anything in particular like a 1 underperforming business that still turn around or really big opportunity that you'd highlight in your business?

I mean, I don't want to put words in our CEO's mouth so you can ask them on the tours, I would say. But I think there's a belief in the capabilities of where we were, where we are and where we can get to. So I think we've proven that we can continue to drive profitability and growth. So it's not an ore equation, it's an and equation. And so I think if you look at our productivity and our footprint, that we're doing are design variances that we do in different countries to be local for local, our strength in go-to-market and our channels that we have and these sort of things and then growing our service business, growing Tuomo's business, some other ones that are accretive in the upper end of that. I think it provides an opportunity for us to reach into that headroom.

So ITT, I know is making a big deal about selling like pumps that they make that are fully integrated with their own motors and their own drives is like a single solution. I know you guys mentioned integrated pumps and motors at a CMD a while ago, I kind of -- but I haven't really heard about it since then. So just curious what that has looked like? And if is that a way like what could help manufacturers kind of disintermediate a little bit by installing these products themselves rather than meeting like -- separate motor and drive manufacturing?

Yes. I think it's more an opportunity for us, especially in the North American markets, say, because it's certain size ranges, certain applications that, that could make a big difference to have an integrated motor drive. And so Tuomo can maybe give a little color on it, but I think it's more of an opportunity and upside for us. But if we have the right technology that fits those applications at the right price point, we can grow in that space. And so there's always organic activity going on to say what kind of white spaces do we want to close the gap on? And does it make sense for AV. And so we certainly look at that maybe you want to add a little.

Maybe I'll add a little flavor. Because of technical reasons, those are usually the very small power range, which is really a lower part of our offering. And we see opportunities to grow there, but that is kind of a little bit below our typical core. So it's more like additional offering, not necessarily a big driver for the industry today.

Okay. We have one question here on the front, please. And do we have any other hands in the air? No, there is 1.

It's Will from Kepler. Two questions. First one comes back to your motors business. I think it was in 2022, '23, there was a huge surge in electrical steel prices, which have been collapsed. How did you respond with your pricing? And how much did you give back? So how does the price dynamic relative to the input costs on some of the core biller materials cost structure work? I'll come back to the second one.

Yes. So I mean, I think we've been able to do pretty well in terms of holding price, holding margin and managing on the cost side. So our local-for-local plays a role in that. Some of the modularity that we do plays a role in that. And then even in the tariff situation, because of our footprint and our supply chain, some hedges that we've done and different things, we've been able to remain pretty competitive in that without having to do big price drops. Now we have seen price compression, certainly competitive pressures in India and other markets where price compression has pushed things down 5%, 7%, maybe even 10%. And in some of the markets, and we're able to combat that with working on our bill of material and some of the organic development that we're doing to take cost out.

So I think it's something we always have to manage material costs are the biggest cost, obviously, that go into building a motor. And as you go towards more high efficiency, it's more metals, which is how you get to that efficiency. So it plays a really important role in our supply chain management.

And the second question comes to the drives business. I mean it's been an incredible growth story from a small beginning over the decade or so that you've started here. I mean how much further have you got in the journey with regard to expanding penetration, gaining share and further growing the business and the utilization in these facilities?

Yes, it's a very good question. To be honest, we are in different geographical areas, strong with the different segments. We offer the full portfolio globally everywhere, but it's variating still quite much where we are very strong and where we are strong. So that means that when we go through all the different segments, subsegments and applications, we still see a lot of growth opportunities. And what we've done in this year along this -- the overall leadership, the development and the overall, the Motion development that Brandon mentioned that we go even more granular level of every segment, subsegment and application. And now we have a great plan that how we will penetrate more on the different applications. But also geographically, even broader. So we are very confident that we continue to drive this also several years ahead.

Tuomo set his business lines up from a geographical perspective versus a product perspective because there's differences in each market, what the offerings are, where we are relevant in the industries and these sort of things. And so now there's very specific mandates for those geographies of where they can excel. So maybe it's HVAC here, it's industrial there. It's water, wastewater there, whatever may be. And so that's how we've broken down the business in order to put the right growth targets on to Tuomo's business overall.

Thank you. And we'll have the microphone pleased to go all over here.

I think you said you wanted to contribute strongly to the group's 1% to 2% M&A growth. But you're already, by far, the #1 player in both motors and drives with what I think are pretty high market shares. So can you grow organically in motors and drives? Or shall we think about you moving into adjacent areas?

I think all of the above. So adjacent areas, if it makes sense and kind of along with what my peers and what Morten has said, is that if we can see it being accretive, fits our purpose and kind of aligns with what [indiscernible] we have in also can expand in-house. Then adjacency is certainly something that we're interested in. I also think the rules of the game are a little bit different now with some of the regulatory environments where we could have more favor to move up in terms of market share, even in our core offerings around motors and drives. And so I think there's opportunity right now for us to be specific and to try and play offense in this category.

Thank you. And then we'll finish off with a question here at the front, please, with Magnus.

Magnus from Nordea. I think you mentioned that the price point of a very efficient motor could be up to 3x less efficient one. Is there any way you can sort of slice the revenue mix that you have in your motors sales at the moment. Is it a relevant way to look at potential growth opportunities?

It's definitely a growth opportunity. The predominant amount of motors that we sell are still in the mid-level efficiency. So in the IE2, IE3 range, and that's common across the industry. So it's an upside as we push efficiency standards up as the prices of electricity and demand restrictions exist. It's an opportunity for us to push into the IE4, IE5 plus category. So majority of the share is still in those kind of mid-level efficiency classes.

Greetings and welcome to this presentation of ABB's third quarter results. Next to me here is our CEO, Morten Wierod; and our CFO, Timo Ihamuotila. I'm Ann-Sofie Nordh, Head of the Investor Relations team. Morten and Timo will talk through the results and then we will, as usual, open up for Q&A.

And with that said, I hand over to you, Morten, to kick off the presentation.

Thanks, Ann [ Sie ] and welcome also from my side.

Summarizing the trading climate in the third quarter, I would say that this was very similar to what we saw in the second quarter. When I talk to our business leaders and when I meet with our customers, there are no material differences in what they say and do. So despite continued news flow and uncertainty related to U.S. tariffs, our customers continue to invest behind electrical power and automation. There are, of course, differences between segments. Some are very strong and some still challenging and I will come back to these details. But overall, we see good demand for our offering. The high order level with 9% growth is one key highlight in the quarter. Another strong point for me is the free cash flow of $1.6 billion. In total, I'm pleased with the quarter. We keep moving ABB in a positive direction. We improved on virtually all lines of the income statement, strong revenue growth, improved earnings, margin and EPS.

I want to give credit to the team for a job really well done. I also want to mention the robotics announcement. Last week, we informed about our decision to sell the Robotics division to SoftBank Group. This is a change from our original plan to spin the business as a separately listed company. But first, let's focus on the quarter and then come back to robotics at the end. So let's look at what drove our orders to increase by a comparable 9%, reaching $9.1 billion. This time, all 4 business areas improved comparable orders in the range of 4% to 17%. We had a stable to positive development in most of the customer segments and we were up in our service, short and long-cycle businesses. I mentioned that there are differences between the customer segments. Data centers continues to stand out on the strong side and orders increased at a double-digit pace. The utilities market remains strong and land transport infrastructure continues to benefit from upgrades of electrical equipment.

The buildings segment was positive, helped by the commercial market. In the energy-related area, there was a positive development in the oil & gas segment. The demand in renewables declined but we see increased activity in our nuclear business. Similar to previous quarters, the process industry area was slow. And within discrete automation, it is still challenging in the machine builders segment. That said, we saw a sharp order growth in the quarter but this is more linked to the low comparable when customers were holding back orders after earlier prebuys. Robotics orders were broadly stable. If you look at the right-hand chart, you see that revenues hit an all-time high of $9.1 billion, up 9% like-for-like. This was supported by all business areas with improvements in both the short- and long-cycle businesses as well as in service.

In total, revenues were high but orders even higher. So with book-to-bill at 1.01x, we add to the already record high order backlog, which amounts to $25.1 billion. If we instead look at the order intake from a geographical perspective, the Americas was again the main growth engine and increased by 19% like-for-like. Looking specifically at the U.S. market, orders were up 27%. This high number includes some large bookings but the improvement was a strong 9% also for base orders. Europe was up by 9% and there was a mixed picture between countries. If you look at Germany, our largest market in Europe, it declined by 4% due to the impact of large bookings from last year. However, base orders in Germany were virtually stable to somewhat positive in all business areas. AMEA declined by 1%, hampered by weakness in China. The general market in India remains strong, although order growth in this quarter was impacted by large bookings last year. Base orders were up 9% also in India.

Backed by higher revenues, we improved operational EBITA by 12% and I'm pleased that we start to build a pattern of gross margin above the 40% mark. We have become more efficient in our execution. And as we get higher volumes and some positive pricing, we more than offset the increased spend for R&D and SG&A. You have heard me talk about our local-for-local footprint. And as we have mentioned before, our setup has left tariff-related impacts limited to the tens of millions. All in all, we improved operational EBITA margin by 20 basis points to 19.2%, which was even a bit better than what we originally expected. It was good to see that our improved business results more than offset the higher corporate and other costs. The corporate line was higher than what we guided for and this is due to FX hedges on intracompany transaction. Looking at the underlying corporate cost, it was as expected. E-mobility reported a loss of $26 million, which is a step in the right direction and we expect them to sequentially improve going into Q4. All in all, we improved our net results and EPS was up by 29% to $0.66.

I'm pleased with the third quarter. And now I hand over to you, Timo.

Thanks, Morten. And since we are on the topic of earnings and you also touched on the sale of robotics, I will just quickly mention the upcoming impacts to our reporting.

From Q4 '25 onwards, we will report the robotics business in discontinued operations. This change triggers some stranded costs until the deal closes. The net effect, however, is close to margin neutral but let's still go through some specifics. My third point is that in the last 12 months, robotics had orders and revenues of about $2.2 billion and $2.4 billion, respectively. They had operational EBITA of about $300 million reported in the ABB structure. This will shift to discontinued operations. Secondly, there will be an impact of stranded costs reported in corporate and other until closing of the deal. If we calculate this based on the last 12 months, it represents a negative impact on ABB operational EBITA margin of about 40 basis points. However, the offset comes from moving robotics to discontinued operations, which will have a positive impact on group margin of similar magnitude. As you know, the robotics business runs at a margin level below group average.

To help out, at this time, you'll find the guidance framework based on both old and new reporting structure and we will put restated numbers on the IR website in early December. And with that, let's take a look at what happened in the different business areas, starting with Electrification, where we continue to see a strong market environment as customers invest in electrical power. Orders were up 10% on a comparable basis, reaching $4.5 billion. It's encouraging that the strong order growth was supported by a stable to positive development across all customer segments. Data center stands out on the positive side and was up by double digit. Utilities is another strong market, although in this quarter, orders were broadly stable with last year's high comparable. Buildings is the largest segment for electrification. And here, we see the positive order development driven by commercial buildings in the U.S. and Europe. China, however, remains weak.

Looking at the residential piece, it was broadly stable in the U.S. and Europe with continued weakness in China. Other positive areas are infrastructure related to land transport as well as the oil & gas segment. Geographically, the U.S. continues to be the fastest-growing market, increasing 23%. But it was also good to see 15% growth in Europe with a good momentum across most of our large markets. This more than offset the decline in the AMEA region, where China dropped 12%. Then turning to revenues, which improved in virtually all divisions and amounted to $4.5 billion, up by 13% like-for-like. I want to highlight the book-to-bill of 1.01x, which was achieved on record high revenues, a good delivery by the team and a proof point of a strong market environment. The strong revenue growth was primarily driven by higher volumes as we convert the backlog related to medium voltage and power protection and by improved activity in the short-cycle business.

We also benefited from a slightly positive price impact. Earnings again exceeded the $1 billion mark, reaching $1.1 billion and was up by 17%. This was mainly driven by operational leverage on higher volumes, which more than offset the growth-related higher spend on R&D and SG&A. Looking into the fourth quarter, we currently expect comparable revenues to grow at a mid-single-digit rate. And for the operational EBITA margin, we anticipate it to sequentially soften, which is in line with the normal seasonal pattern.

Now let's turn to Motion, where the strong order intake was driven by good momentum in both the short cycle and project and systems businesses. In total, orders reached $2.2 billion, which is up 17% on a like-for-like basis. From a segment perspective, rail has been and continues to be a strong market for Motion. Another good area is HVAC for commercial buildings and data centers. Oil & gas, power generation, water and wastewater as well as food and beverage are all segments in the positive. The softer areas included the project-related segments of chemicals, pulp and paper and metals. Shifting now to revenues. Motion delivered just under $2.1 billion. Higher volumes and pricing both supported the comparable increase of 3%. This year-on-year growth was slightly below our expectations as the deliveries in the project and systems-related businesses were somewhat lower than anticipated. On the other hand, it was encouraging to see the good momentum in the short-cycle business.

Total earnings improved by 4% from last year's high level, reaching $421 million. The margin, however, slipped by 60 basis points to 20.1%, in line with our guidance going into the quarter. For the fourth quarter, we anticipate comparable revenue growth in the low to mid-single-digit range and the operational EBITA margin to sequentially soften, which is in line again with the normal seasonal pattern. Also in Process Automation, the market profile remains similar to what we have seen recently. PA now has a positive book-to-bill for 20 consecutive quarters and backlog sits at $9.4 billion, quite impressive. Orders amounted to $1.9 billion, up by 4% like-for-like. We saw good order momentum in the energy-related segments of oil & gas and conventional power generation. And there was also an increased activity among nuclear customers. However, demand was lower for renewables.

The market for marine and port automation and electrification remains strong, even if order intake remained stable in this quarter. On the software side, we still have the process industry-related areas of chemical, pulp and paper and mining. Revenues of $1.8 billion was seen a bit better than we expected, increasing 7% on a comparable basis. Execution of the high backlog was the key driver with additional support from price/mix development. The impact from higher revenues supported the earnings growth of 10% and the higher spend mainly linked to R&D was offset. All in all, operational EBITA margin improved by 30 basis points to 15.5%.

As from the fourth quarter, Process Automation will include the Machine Automation division. I would assume that most of you have not yet rebuilt your models to match our new reporting structure, so we will help with guidance both for old and new PA setup. For PA as is, we expect comparable revenues to improve in the mid-single-digit range and the operational EBITA margin to sequentially soften, which is again in line with the seasonal pattern. For PA, including Machine Automation, we still foresee comparable growth in the mid-single-digit range. But given that Machine Automation is running at more or less a breakeven level, we expect operational EBITA margin in the new setup should be somewhere between 13% and 14%. As I mentioned, we will present restated numbers by early December.

And now for the last time, let's turn to Robotics & Discrete Automation as we going forward, will report based on 3 business areas. Overall, the quarter developed largely as expected. There was a slight sequential order increase, reflecting a year-on-year improvement of 13%, up from last year's low comparable. Orders in the Robotics division remained broadly stable as weakness in the automotive and general industry segments was offset by a positive development in areas like consumer electronics and logistics. Orders in the Machine Automation division increased sharply from a low comparable. However, the absolute order level is still low as the market remains challenging.

After 7 consecutive quarters of revenue decline, it was nice to see both divisions returning to positive growth. Combined, revenues improved by 5% and reached $807 million. This was driven by higher volumes, supported mainly by backlog execution but also slight positive pricing. Operational EBITA margin of 9.2% was up 90 basis points year-on-year and 10 basis points sequentially. As in recent quarters, the Robotics division's margin remained in the double-digit territory and actually improved slightly from last year. And as mentioned earlier, the Machine Automation division is at a breakeven level as the volumes in production have not yet recovered enough to cover the cost of under-absorption.

Now let's move on to cash flow, which, as Morten mentioned, was definitely one of the highlights in the quarter. All business areas reported an increase in free cash flow. This was driven by improved operational performance as well as a larger release of trade net working capital compared with the last year. We improved free cash flow by 32% to $1.6 billion despite the higher cash tax expense and higher CapEx spend. As you can see on the chart, we are at the year-to-date free cash flow of over $3 billion. And in my view, we are well on our way to deliver on our ambition to improve our annual free cash flow from the $3.9 billion we generated last year. It is great to see that our focus on trade net working capital as a cash KPI for our businesses and ABB Way finance system transformation are likely starting to have an impact on our cash performance.

And with that, let me hand it back to you, Morten.

Thanks, Timo. And now let's talk about the change in the way forward for our Robotics division. The reason for the change is that in parallel to us working towards the earlier announced spin-off, we received an inbound bid from SoftBank based on an enterprise value of close to $5.4 billion. When such bids come in, it's our fiduciary duty to review. And we have evaluated this carefully and concluded that it reflects the long-term strength of robotics. Looking at the 2 different companies, it is our firm belief that the robotics business will benefit from combining its leading technology and industry expertise with SoftBank's state-of-the-art capabilities in AI, robotics and next-generation computing. We think this will create a very strong platform for the future and expect the deal to close in the second half of 2026.

Now let's finish with the guidance, which is based on the new reporting structure. Turning to comparable revenue growth, we expect it to be in the mid-single-digit range. Those of you who know us are well aware that the Q4 margin tends to be sequentially down. This pattern should repeat and we expect the margin in the fourth quarter to sequentially soften by about 150 basis points, in line with the historical average. We leave our 2025 revenue guidance unchanged but have updated the full year margin guidance. We now expect operational EBITA margin to be broadly at the higher end of our long-term target range of 16% to 19%. And as a final reminder, the pattern here is that in the fourth quarter, we normally have a negative book-to-bill.

And there is one more item to mention before we move to the Q&A. We announced an upcoming change of the CFO this morning. In his close to 9 years with the company, Timo has played a key role in transformation to a more focused and better performing ABB and he has ensured that our finance function can best serve our businesses in a decentralized organization. Soon, he will move to focus on his nonoperational commitments but not yet. Timo, he will be around for another quarter, be part of the Capital Market Day and deliver the fourth quarter results in January. Timo will also be available to support a smooth transition to his successor, Christian Nilsson. Christian has been with ABB for 9 years as CFO of the Electrification business area and I'm very pleased to see that we have a strong internal candidate to succeed Timo.

So now Ann [ Sie ], let's open up for questions.

[Operator Instructions] And with that said, we'll open up the line for the first caller, and that's Martin from Citi.

It's Martin from Citi. So the question I had was on electrification and data centers. You talked about double-digit growth there. Last time, we talked about lead times shortening. Just to see where we are in that. Are they now normalized? And how is capacity keeping up with that growth in demand? And related to that, on pricing, obviously, there was some increased pricing in that area over the last couple of years. Just to understand, are we sort of plateauing at a high level? Or how are you seeing pricing with inside that data center vertical?

Thanks, Martin. We -- when I look at the data center business, as we said, it's about up more than double-digit growth in this quarter. The lead times is, I would say, on a similar level that what we had last year because even if we have a higher demand, we also put more capacity online. And here, I'm specifically talking about North America, where we see the biggest growth in this field but also where we have the biggest capacity expansion. Pricing remained overall, as we said for this quarter, around 1%. But there, of course, there are quite big differences between regions. As you would expect, U.S. has a much higher price increase than China as 2 ends of that scale. So -- but pricing in the data center market has been stable when we look between the quarters this year. So that's a bit how it works.

Just maybe also to mention this -- even the data center is a very important part. Electrification is about now 15% of the revenue. On the other hand, I think I also have to mention that it is 7% of the whole company of ABB. So just to show a bit of that balance, which means that the rest of the business, the non-data center business like in electrification is also closest to double digit. So I think the overall market for electrification is running very well and then it's even better in the data center market. That's just a bit of an extra caveat to it also.

Thanks, Martin. And we move to Max from Morgan Stanley. Are you with us, Max?

Yes. I guess I just wanted to touch on your M&A strategy. Obviously, you'll have kind of, as you said, $5.4 billion coming in next year. So maybe just to sort of walk us through a few points. I mean, how do you think about the share buyback in that context? Is there room to do more? And I guess we saw some headlines relating to sort of ABB looking at Legrand. That seems like a bigger deal than some of us would have expected if that was the case. So would you look to do something that involved raising equity? Or is there a kind of limit to where you would releverage the group to? And maybe just sort of if you can also walk us through which divisions or regions or how should we think about kind of priorities for M&A? Would it be instrumentation, in process? Would it be data centers, is the key to broaden the offering there? Just a way to help us think about what you would look at out there in the market.

Thanks, Max. And maybe it's a bit of all of the above, when I talk about lots of interest. I mean, application and automation are both, I mean, it's strong markets. And as we want to grow and really take those growth opportunities that are ahead of us, we will do more M&A. That is a -- so that's kind of the starting point. We don't -- we haven't made kind of that it has to be that country or it has to be this segment. We have identified a multiple of segments. I mean, data center being one but also the utility business, the overall need for automation. These are just 3 examples and we have more where we believe that we can build on the strength of ABB in electrification, automation and in motion. Those 3 areas now as kind of the new ABB post robotics, all have opportunities to grow on the M&A side.

So that is one of the key priorities going forward. When it comes to the -- how to use the incoming funds on the robotics, that will go in line with those capital principles, more organic investment, both in technology and capacity, more focus on M&A as we had the last year. So that is where we now have that firepower to do it. And then we will also use our kind of well-established capital allocation principles around also increasing dividends and share buybacks. So we will find the right balance here over time. So -- but I'm not sure, Timo, if you would have any other comments to it as well.

Well, maybe just to add that, of course, like any M&A transaction needs to be evaluated on its value creation merits, be it sort of small one or a bigger one. And in that sense, I don't think we would, as such, rule anything out. But of course, the bigger a transaction would be, the more you have to be absolutely sure that the pricing is right and whatever synergies would be there then really cover the money equation. So that's how we look at the deals in general and that's how we have done it, I think, all the time during the last years.

Thanks, Max. And I'll just link to that with a question that came in here through the online tool. And that relates to one other question is, would you rule out software like your predecessor, I guess, it means big software platform deals? And what is maximum leverage acceptable? Maybe you can think about that for a while, Timo.

I'll start with the software and then -- no, I don't see large software deals as a target for ABB. We are looking at software as an enabler for our hardware to be kind of -- to give a better customer experience and support the need of our customers. But we are not kind of fixated that it has to be software as a stand-alone software. It's really about -- Timo said already, it's the value creation for ABB and how we support our customers with better -- offering better solutions. That's what driving the value creation. So it's not like it has to be software or it has to be in a single geography. So we're taking a pragmatic view with value creation for the company in the center. And I think the...

Yes. I mean we have -- we don't have a leverage target as such. But of course, we kind of like where we are at the moment on the rating, of course, for a really, really, really good proposition, maybe we could go down a bit. But if you look at kind of like staying at this rating level, I think we could still be like 1.5 to 2 net debt-to-EBITDA. So there is ample room in the balance sheet if we then would have something which is really, really value creating for the company and our shareholders.

Okay. We take the next question from Will at Kepler.

My question is -- one question would relate to the upside potential for operating profitability across the divisions within the group. And so specifically, where is there now scope to outperform with a focus on electrification at record levels? What is the plan to improve the profitability in the EV charger business? And how long do you envisage it will take to return Machine Automation towards its medium-term target potential?

Thanks, Will. And just to clarify, do you mean the -- our 4 different business areas in this question? Or do you mean divisions?

I think for the group as a whole, you're now at a very high great level of profitability and return on capital employed. And the question I'm asked often is where is the potential upside? So where is the self-help improvement within the divisions? And how is the plan to improve those? And then where you're at peak performance, is there more upside?

Yes. Thanks, Will. I can -- I'll take that. I mean you're right that today, more than 70% of ABB's division are in growth mode. So we are in a much kind of better place than earlier about where we stand. But that means also we have quite a few divisions who have a profitability mandate and even one as we had on stability mandate, as you mentioned, Machine Automation. So those are clearly opportunities that can go up. But if you take it one step further down in the organization, which is the business line, that's the level below our divisions, there is -- we have the same now mapping of strategic mandate. And you will find a similar setup there with a profitability mandate or a growth mandate. And that means -- so that's kind of how we drive the company forward now, looking at each of these smaller -- that's about 8 business lines in ABB. And that's how they run it when it comes to the focus and how they put their strategy, how they are -- we do target setting and how we also do incentive plans accordingly.

So that's 2 of the upsides of where just to -- and I've said that many times, we are not firing on full speed as ABB. There are individual opportunities in all the business areas, in all the divisions of ABB. And again, you mentioned electrification. I think the best example there, as we have also showed earlier, we've done really well in North America and the United States, moving up the margins of electrification, but it's still not on the, let's say, average electrification level. And that's a future upside. I know Giampiero and his team is working hard to continue that improvement journey that we have in the United States. For most of our peers in the industry, it's the best -- kind of the highest profitability market, for ABB, it's not. And that is one another significant opportunity as we see when we go forward.

Yes. Maybe just to -- if I comment quickly on the E-mobility as that was also a part of the question. So kind of like '24, I think we had about $270 million drag from E-mobility. We said it will about half going into '25. That will happen. And let's hope that we kind of like wouldn't have much of that drag left next year. So that's clearly going to be another positive impact. And then in M&A -- in MA, Machine Automation, which was also part of your question, clearly, we expect to improve and there actually has been some changes on some of the divisions. I don't know, Morten, if you want to comment on it.

I can do that. We are, of course, as you say, moving -- looking at each of the division. And some also -- I think that's important also we look at when we move in between different mandates, there might also be different capabilities that are needed. And then -- so we've also seen just in the last quarter and the last few months, we have 4 new division presidents in our businesses. All internal recruitments. We have strong pipeline of talent coming through. But that also -- so like in the Machine Automation, we also have a new division President on board that will take that business forward. Unfortunately, it has taken longer time to come up to the -- let's say, meet the expectations that we have. We made a change and therefore, it will still take some time but we are confident that this is a business that will come back to former levels. And so -- but we need to give some patience on the results. But as you see, we are kind of driving the actions and the activities forward at high speed. And therefore, we are also confident that result and the outcome will be what we expect but it still will take some time.

And then we open up the line for [ Ben at Vox Cap ]. Ben, can you hear us?

It's really a sort of follow-up to Martin's question about pricing within electrification up 1%. Morten, I think you gave us the sort of regional color, i.e., that there are some big differences between the different regions. But could you give us a sense of what's going on in the pricing kind of within the division? So if we think about -- I don't know whether we want to call it medium voltage, low voltage or distribution solutions installation products, are they all moving in a similar way? Or are there sort of big differences within those separate divisions?

Yes. Thanks, Ben. Good question. Yes, there are differences between regions and countries. There are also differences within the offering. As you say, there is a different pricing when you're talking about kind of the very high demand, talking about like in medium voltage or in the switchgear business that goes into data center. Of course, it's a different pricing environment that, for instance, in the residential markets where you see significant lower growth. So -- but that is the -- and then you have the whole tariff impact as well in some of these businesses that comes in that would give, as I say, U.S. will have a higher pricing situation to mitigate some of those tariffs impact that we have seen. And that's kind of the -- for me, the good news, we have been able also in the third quarter to mitigate all of those impact with our local-for-local strategy but also with pricing and continuous improvement, been able to bridge some of that impact that we have seen of tariffs in the third quarter.

Yes. Maybe if I chip in one more thing on the pricing. So the pricing, this 1% price positive is, of course, it's a global number. And we have, like most other people, I'm sure, a little bit of deflationary environment in China. And our pricing also in China is down a bit. So it means that then by definition to come to [ 1 ], it needs to be up a bit more somewhere else.

And is it fair to say, listening to the answer that we're not seeing a huge -- there hasn't been a step change in what's going on between the different businesses. It's kind of the same as it was before. There hasn't been a sea change in medium voltage or anything like that, right?

No, no significant change, no. Yes.

Yes, Morten confirmed, no significant change.

And then we open up the line for Andre at UBS.

I wanted to ask a broader one on data centers and now in the context of you having had a close look at Legrand, I just wondered if you could share your views on maybe advantages or disadvantages of being in gray space versus white space versus cooling and in terms of having a broader end-to-end offering versus being kind of a select supplier in discrete pieces of the value chain. Yes, I'd just love to hear how you think about this.

Yes. No, in the data center space, of course, you are -- if the -- if data centers are being built, you need both the gray and the white space. You need incoming power and you need to have -- and racks and all the equipment and cooling inside. So there is not really -- when you look at the growth that follows hand-in-hand inside the data center space. When we're looking at the market, especially with the hyperscaler, we don't see how a big -- we don't see any big difference if you are a one-stop shop or -- because normally, how the hyperscalers work is they divide this into different packages. And it's not like you have -- you get a switchgear and therefore, you also get the white space delivery. So that's not how the market works. So therefore, we don't see any large benefits of being this one-stop shop.

So we are -- we will rather partner on projects and make sure that we are relevant. You need to be best-in-class in the different packages that are being awarded. And that's kind of always the challenge in this business to be that technology partner. And therefore, I'm also happy to see on Monday, we made the announcement on the NVIDIA technology collaboration agreement that we signed that we are also helping NVIDIA in the new 800-volt DC chips and the new racks they're building on the new AI data centers. You also need a complete new technology or an architecture of those data centers. And that's where we, as ABB will also be a partner and design those new 800-volt DC data centers. So we're able not -- because having only the racks doesn't help, you need to have that whole infrastructure around it. So that is one of the key topics for us when you're talking about increased investment in R&D and technology, that is one example where we want to be here the first mover and then making sure that this is an opportunity for us to gain even more traction in the data center segment.

That's really helpful. And actually, dovetails [ nicely into ] my second question, if I may. On the 800-volt DC, how do you view the value of your content per megawatt evolves as you move to that type of infrastructure? And is that kind of more medium voltage, less -- low voltage or more of both, less of both?

It will not really change the mix between medium and low voltage. It is more the -- and to be honest here, when we're looking at -- this is really also far ahead. These are chips and components that are not available yet in the market. So we -- this you will see as a stepwise approach over several years of this new design coming in. And therefore, it's important -- and we don't know exactly even how it's going to be. That's why you need this kind of collaboration agreement. We know how the data centers will looks like in '27 and also in '29. But when we're talking about post 2030, I think there will be -- there are new opportunities that we are looking into. And of course, therefore, what we are interested to see how can we take an even larger scope. Today is about -- we -- the electrification part of it is around 7% of the total investment in a data center. With this, we believe it may go even higher. And that's -- but I cannot give you a new number today. But there is so important to be part and be that technology partner when we design the future of this large AI data center, the gigawatt sites.

And then we go to James at Redburn.

I wondered if I could ask about the sustainability of growth in EL with respect to grid and general capacity in EL. On growth, grid flat but as you said the underlying market is still pretty good. A lot of people think that global medium voltage grid growth could be high single digit for the balance of the decade. But we have a lot of moving parts and in the U.S., an ITC, PTC sunset '25 to 2030. Do you foresee like a good 2-, 3-year prebuy in the world of grid because renewable and grid is connected? And do you see -- or do you see some risks from that? And what gives you conviction on the duration of growth? And tied to that is, on capacity, could you just help us with what your global and U.S. capacity growth has been in the last year -- 3 years? And what you expect it to be in the next 2 to 3 years? And has utilization broadly stayed the same through this growth period?

Thanks, James. On -- first of all, the trend of electrification is growing fast. That's why I also see from 2010 to '19, it was pretty flat, like 1% per year when talking about the electrification increase. Since 2020, you've seen that this really picks up. And now we're talking about first 3% to 4%, even up to the 5% to 6% of electrification consumption that is increasing. This puts much bigger pressure and stress on the power grid. That's why utilities need to invest and they need to preinvest so they can deal with that new demand that is coming online now in the next year, not just from data center but also from industries that is putting more of their operation, I mean, replacing fossil fuels or, let's say, outdated technologies with electrical solutions. That is why the increase is coming.

So we are in this super cycle and it's not like a 3 to 4 years. This is -- we're talking about a couple of decades or from 10 to 20 years investment that is needed. Looking at -- we've used the examples earlier of the underground cabling. Here, that is a 20-year program in California and in -- on the East Coast of U.S. because just the capacity to do that is not there. So that goes a bit into the investment what you're asking. We have invested in the electrification about $300 million in new capacity in North America in the last year. But that -- only this year, we have announced investment in ABB of more than $250 million only in the United States and another -- an additional $100 million up in Canada. So this is the expansion that we do in our facilities to meet -- and it's a twofold, it's to increase -- to meet the increased demand in the market. And of course, also it's part of our local-for-local strategy to -- that we can support customers locally with that new capacity.

So this is kind of how this is hanging together. The utilization rate in the factory today is running most of them at pretty full speed as with the current capacity. But what we do is with this additional investment, we're not just putting more square feet or more bigger factory floor, we're also putting in more -- investing more in robotics and automation, new machinery because we see that the robot density, especially in North America, is so much lower than our Asian or European plants. So we have a big opportunity for more productivity, as I mentioned earlier, also in the United States and our -- especially our electrification facilities there. That's a bit of how we are looking at today, if that answers your question, James.

And then we open up the line for Ben at Bank of America Merrill Lynch.

I had a couple on electrification. So first of all, the guidance and color you gave for Q4. It seems quite a slowdown versus what you've seen over the past couple of quarters and the comps don't seem materially more challenging. So is there something specific that's weighing on Q4 that you'll only do mid-single digit? And then in terms of data centers, obviously, continues to grow double digit. Just kind of more intangible, what have you seen in terms of customer discussions over the past few months? We've seen obviously a lot of very large announcements. Just interested if there's been any uptick in interest? Or just generally, what are you seeing in the conversations with customers?

Yes. Maybe I'll start and then I give the data center question to Morten. So kind of like on the guidance going into Q4, I mean, we have, in particular, in electrification, if I now remember these numbers correctly, we have like 11% growth last year on revenue. So that is a pretty high comp going into the quarter. And if we look at the other business areas, which now in the new structure when we report 3 business areas, I think Motion had 6% and maybe PA had 4%, something like that. And overall, the group is 5% but these 3 combined is a little bit higher. So we have a little bit higher comp. And let's see how it goes now during the quarter. So we have a strong backlog and of course, depends on the book and bill business as well. So if that goes really well, maybe there could be a bit of upside on the number but we'll see when we come out from the quarter.

Yes. And on the data center question, yes, there are -- I think you read the same news as I do that -- more or less every day, you will see new announcements of new capacity being announced, new projects. And that's also why we saw this strong order growth in Q3. And we are expecting also -- we have a very solid pipeline when it comes to data center also for the future. So -- but what Timo talked about was very much kind of the revenue forecast. But on the outlook, it is -- we see the same as what you will read with these announcements in the paper, high customer activity, high interest of getting more capacity, more AI computing online and we're one of the key partners to make that happen.

Okay. And then we open up the line for Delphine at ODDO.

Maybe one clarification before. Do you confirm that your book-to-bill at data center is -- was above 1?

Yes.

Okay. And then can you provide some color on your base order trend that did well this quarter? What are the segments and regions that have driven this growth? And how do you see the growth in Q4 for these base orders?

Yes. First of all, we don't guide on orders for the fourth quarter. But what I can say is a bit kind of give color to what we saw in the third quarter. The base orders, we had a positive development in all 4 business areas and also in all 4 kind of our major geographies. So we had some very large orders, as you saw also in the presentation, like take the United States where we have 27% overall growth but also the base or what we define there as base order growth is 9%. So that gives you a bit of color and that's kind of why you've seen some markets where it has -- when we take out some of this large order effect, we see a strong underlying market, both for electrification and automation really across the board. So -- and that's as I said earlier a couple of times, it's just the speed of electrification of the world that is continuing and it will continue for many, many years to come. So that's what I always say it's good markets to be in.

Yes. Maybe just throw in a couple of more countries where we had this situation. So in India, we had a negative overall order growth but I think base orders was actually up quite nicely, 9%. So it seems to be coming back on the underlying business. And then also in Germany, I think we had minus 4% but the base orders was plus 4%. So that's another market where actually when we look at all of our business areas on the base order basis, they all actually were performing quite well.

And then we open the line for George at Barclays.

Another great orders quarter for electrification, obviously, book-to-bill is now 1.04x, I think, on a trailing 12-month basis. It sounds like you guys are growing in confidence on market demand. So just wondered a little bit of follow-up to the questions, how you could help frame that visibility that you have and maybe where you expect that book-to-bill to evolve on a 12-month forward basis? And then just another quick follow-up just to add to that. On China electrification, I guess that was the only sort of weak area. Data center market there appears to also be quite strong. So just wondered what other color you can give us on what was driving that deterioration?

No, you're right that the China data center market is growing very well and we also grow very well in that segment and market. What we do see is that the -- especially residential building market in China is still soft and we also forecast that, that will remain soft for quite a while as the overcapacity kind of historical build-out of residential capacity is still there. So even though we had a bit of a -- or has a bit weaker Q3, I think we should -- in China, I think you should also remember that for the year-to-date number in order intake in China is plus 4%. So we are growing in China this year.

And that is also -- and a lot of that comes from -- it's 2 sector really. It's the data center, as you mentioned and it's also the integration of renewable energy into the grid. Those are 2 fast-growing markets in China but then I guess the -- as I say, the residential building. When it comes to order, we don't give any guidance here on this call on the order. We will come out more with -- on that after Q4 when we're looking into the longer cycle of our kind of the 2026. This will be part of our January call, we'll come back to that. And the long-term trend, of course, we will also cover in our upcoming Capital Market Day that comes now in November.

Okay. And then we'll move to Jonathan at BNP.

Just maybe thinking about Chinese competition, the China market in general. It feels to me that competition has obviously been rising in China for some years. And it looks like that market, I mean, obviously, it's down again for you. It's pretty tough volume environment and probably pricing as well. Are you starting to see the Chinese looking elsewhere for their growth? I'm specifically thinking about Europe. Is Chinese competition in Europe beginning to rise? And if not, are you expecting it to do so? Would there be a time line for that maybe? And what are the barriers that you have to kind of protect yourself from that? I'm just thinking you mentioned that probably large software is not of interest to you. But I think, obviously, a number of your peers have gone down that route. And I've always thought part of the strategy is to embed digital into the hardware attempting to sort of -- no one's going to buy Chinese product with digital technology embedded in it. You kind of lack that. If the Chinese are coming to Europe, do you think you can defend your market positions?

No, yes. Let me first correct you there. I mean a lot -- big part of what we do is software or embedded software or firmware. More than 55% of our R&D engineers are software engineers. So when I say making larger software deals is to make stand-alone software, which is not related to the offering we have today. So software and hardware of ABB is a very strong combination and that's what customers appreciate and what they like. And so that is just to clarify on that point. When we talk about China, we see there of increased competition, especially in the field of robotics. I think we covered that quite many times also before. That is -- has been one of the 5 areas where the Chinese government -- was part of the 5-year plan where they wanted local champions and we have seen that happening over the last 5 years.

When you're looking at the electrification, automation, there are also, of course, local competition. We have not -- but we have not seen the same. There are some significant differences also when we're looking at the type of business we do. Take our electrification business. You need a very large offering to be a relevant player in that field. And that is something that has been built up over, I would say, even tens of years and with hundreds of millions of dollar in R&D investment year after year after year, building that very wide portfolio. So that is a bit of the -- it's not that simple to enter this market without a very large upfront technology investment and being able to come into the market. We're also serving the market through distribution, which is a channel that, of course, we don't always kind of, let's say, appreciate to carry too many brands because that drives their inventory and their capital efficiency.

So this is -- there are a few parameters here that it is not that easy. And then it comes to the whole regional differences when we're talking about the long trade but also the self-sufficiency of regions and especially in the field of firmware and software coming from outside. I think they're being local, the same as it's important to be local in the Chinese market with our R&D capabilities in China and with local software and local support setup. It is also important to be local in Europe and it's important to be local in Americas. So this is kind of how we're building up our structure at ABB. And it's not that easy to come in and copy or compete with it.

So therefore, I'm -- that's kind of where we will continue our investment, especially around the technology and the local technologies, local support but also local service and being able always to help customers knowing we don't need to fly in from far away. We are kind of around the corner or next to our customers. That's where we provide service at the spot. And this is where -- what customer really appreciate from ABB is one of the key arguments for our success. So it should always be -- and I don't want to come across as arrogant on this point but it is one that is appreciated by our customers and therefore, we need to continue and we will continue to invest in this field because we believe that will keep and we can build on that strong local position.

Yes. If I can just throw in still a couple of numbers in China. So again, as Morten said, year-to-date, 4% growth in China. And also this quarter, Motion actually grew. We have localized quite a few, especially on the drive products. So a very competitive position there also locally. And also robotics grew actually in Q3 now where we also said that we have introduced local products. So I think exactly this local-for-local strategy also works for us inside China. And of course, those data center deals can be there more lumpy, which can be kind of like showing in the electrification number Q3.

Okay. And we're coming up to the hour. So we're going to say thank you very much for joining us today and we'll see you -- well, some of you, will see in November in the U.S. at the Capital Markets Day. If not, we'll see you in January.