Driving profitable growth
The ABB Group Annual Report 2013
02 This is ABB .
04 Chairman and CEO letter .
08 Highlights .
10 What ABB does .
14 Our three focus areas .
20 Key achievements of 2013 .
24 Faces of ABB .
28 Executive Committee .
29 Regional and country managers .
31 Corporate governance report
47 Remuneration report .
61 Financial review of ABB Group .
157 ABB Ltd Statutory Financial Statements
177 Investor information .
02 This is ABB | ABB Annual Report 2013
This is ABB
ABB is one of the world’s leading
power and automation technology
We provide solutions for secure,
energy-efficient generation, transmission
and distribution of electricity, and
for increa sing productivity in industrial,
commercial and utility operations.
We are present throughout the entire
renewables value chain, from power
generation to transmission, distribution
and electric mobility.
Our portfolio ranges from switches
and sockets to robots, and from large
transformers to control systems
that manage entire power networks
We help our customers meet their
challenges with minimum environmental
impact. That’s why ABB stands for
“Power and productivity for a better
ABB Annual Report 2013 | This is ABB 03
power and productivity
for a better world1
technologists in R&D
Operations in around
products shipped per day
at December 31, 2013
R&D in 2013
to abb.com in 2013
on social networks
raised for Philippines
spent on community
projects in 2013
04 Chairman and CEO letter | ABB Annual Report 2013
We are pleased to present ABB’s Annual Report 2013, which has been expanded to help
our shareholders, other stakeholders and potential investors to better understand what ABB
does and what makes us successful. We’ve also included new sections to highlight ABB’s
achievements and to introduce you to some ABB people from our businesses around the world,
including our acquired companies. We hope you enjoy reading the new Annual Report.
Record revenues, higher operating profits
ABB turned in a solid performance in a challenging market in 2013. We achieved record
revenues, higher operating profits and met our cost-reduction targets. We accomplished this
during a year of mixed markets and continued economic uncertainty, as well as internal
management transitions, demonstrating the company’s underlying strength and ability to
exe cute. For the fifth year in a row, we will be proposing a dividend increase at our annual
Four of our five divisions performed well, with Power Products continuing to lead the
sector in profitability. Our expanded product and geographic scope enabled us to increase
profitability in automation across our Low Voltage Products, Discrete Automation and
Motion and our Process Automation divisions. We are confident that our Power Systems
division will deliver higher, more consistent returns under new leadership once certain
legacy projects have been executed and actions to improve risk and project management
On the order side, demand from early-cycle industry customers was higher in the second
half of 2013, reflecting some improvement in business confidence, which gives us reason
to be cautiously optimistic for the year ahead. Large orders, however, were significantly lower,
primarily because utilities and industrial customers were still hesitant to make big invest-
ments given the continuing economic and regulatory uncertainty, and this weighed on our
order book. We were also more selective about accepting orders in Power Systems in line
with the reset of this division.
Chairman and CEO letter
Video: Ulrich Spiesshofer
comments on the 2013 results.
To view the clip, install QR code
reader on your mobile device,
scan the code and see more.
Among our best-performing businesses were low-voltage circuit breakers and switches
as well as drives. The robotics business had an extremely successful year and continued
its successful penetration of the general industry sector. All divisions posted revenue increases,
which meant we ended the year with record revenues of nearly $42 billion overall, 7 percent
higher than the previous year, in local currencies. Operational EBITDA for the Group was up a
healthy 9 percent at $6 billion, even after the $260-million charge related to project delays
and operational issues in Power Systems.
Well-positioned for the future
As in previous years, we did not let the economic uncertainty distract us from strengthening
our competitive position and preparing our company for the future. We stayed focused on
tech nology innovation with an investment of $1.5 billion in R&D, and we continued to see the
fruits of our previous investments in products such as the Emax 2, the world’s first circuit
breaker that not only protects electrical circuits but also adapts energy consumption to actual
needs. In 2013, we made significant inroads into new markets and segments, such as
electric- vehicle charging and renewable energy generation, and we continued our disciplined
actions on savings, taking out $1.2 billion in costs for the year, and cash conversion. More
customers than ever tell us that they are satisfied working with us; the number saying they
would be highly likely to recommend ABB to a colleague rose to 35 percent in 2013 com-
pared with 29 percent in 2012.
We made substantial progress on the integration of our two biggest acquisitions, Baldor
and Thomas & Betts, and we are pleased to report that both are well on target in terms of
cost synergies and overall returns on our investments. Business integration will be an important
focus in 2014 and in the future, and to strengthen our institutional capability in this area we
have appointed one of our Executive Committee members, Greg Scheu, to steer the integration
of our acquired companies across all businesses and regions. He will also drive forward our
service business, which had another successful year, accounting for an increasing share of
overall orders, and he will be based in and in charge of North America, our largest single
Last year, we continued to expand our portfolio through strategic acquisitions, the most
significant of which was solar inverter maker, Power-One, which makes ABB the number 2
global player in the most intelligent part of the solar photovoltaic value chain. Through other
acquisitions, we expanded our presence in building automation (Newron), low-voltage
products in Turkey and eastern Europe (ELBI Elektrik), measurement products (Los Gatos)
and service offering for drives and motors (Dynamotive).
Finally, 2013 was a year of internal transition and we are pleased to share with you that
this was achieved smoothly and without any impact on the business, another indication of the
underlying strength and robustness of our organization. The CEO transition from Joe Hogan
to Ulrich Spiesshofer was seamless, as was the CFO handover from Michel Demaré to Eric Elzvik
and the changes in leadership in the Discrete Automation and Motion division, from Ulrich
Spiesshofer to Pekka Tiitinen, and in the Power Systems division from Brice Koch to Claudio
Facchin. We were also very pleased to welcome on board a highly experienced human
resources leader, Jean-Christophe Deslarzes, to succeed Gary Steel, who retired after a long
and successful career.
“We continue to see the fruits of our investments in technology.”
ABB Annual Report 2013 | Chairman and CEO letter 05
06 Chairman and CEO letter | ABB Annual Report 2013
We look back on a solid year in 2013 and say with confidence that, despite weaker than
expected economic growth and lower industrial capital spending, ABB is well-positioned
to drive future growth. We also are humble enough to realize that there is still tremendous
potential to improve and do better in serving our customers around the world.
Taking ABB to the next level
In 2014, a key focus will be to set and implement the direction for the next phase of growth
and improvement on returns. We have already started this process by conducting a rigorous
navigation check on our position in key markets. We now have “heat maps” of customer
sectors and geographies ready, so we know where our growth opportunities are and where
our investments should be prioritized.
At the same time, we defined three focus areas to provide us with a systematic and
robust approach for value creation, enhanced earnings per share (EPS) and cash return on
invested capital (CROI):
1. The first is profitable growth, which we are targe